Two very different statements and market reactions for Queensland’s last two important financial institutions this week.
The Bank of Queensland reaffirmed its earnings guidance for the financial year that ends on September 30.
CEO, David Liddy told the ASX in a statement that: “Our financial year ended on 31 August and we fully expect to hit our guidance to the market of 10% normalised cash EPS growth".
He also confirmed the Bank’s recent success in raising $309.5m through a 2.5 year syndicated loan which he said had wide support from Asian and European institutions.
Mr Liddy said the Bank has no exposure to Lehman Bros Holding International, and no exposure to Merrill Lynch or AIG.
"AIG Australia is an underwriter of a number of insurance policies held by the Bank for its protection in relation to dishonesty and fraud, professional indemnity and director’s and officer’s liability.
"Furthermore, Bank of Queensland has no exposure to any troubled Gold Coast based property development groups."
That means it has escaped Raptis, unlike St George, Westpac, ANZ, HBOS Australia and others.
From that you’d have to say there’s been plenty of prudent banking at B0Q and that it has ducked most of the nasty bullets flying around at the moment and could produce earnings growth superior to what we see from the likes of the ANZ, NAB and even Westpac.
BOQ reported in April that first-half normalised cash earnings per share (EPS) rose 110% to 43.4c.
Net profit rose 19% to $57.8 million for the half year to February 29, 2008.
The market liked the news on what was a miserable day of trading.
Bank of Queensland shares finished down 23c at $13.27, but they had been as low as $12.53 in early trading, so there was a noticeable rebound as the day went on.
But for cross town Brisbane rival, Suncorp it was another miserable day.
It might have missed exposure to Lehmann Bros or AIG and had its rating affirmed by Standard and Poor’s, but investors didn’t want to know.
They sold: the shares plunged more than 16% to a low of $7.15, a loss of more than $1.60. It ended down 5.7%, or 51c at $8.35, after a 29c loss on Wednesday.
In an extract from the Standard & poor’s ratings statement, Suncorp said the ratings group had said that while the rating had been affirmed "at the same time, the rating outlook has been revised to stable from positive reflecting continuing financial market disruption".
But Standard & Poor’s went on to rule out the chances of an upgraded rating for Suncorp for the time being by saying in its statement on the SUN website that the continuing financial market disruption had "lessened the likelihood of a rating upgrade on the Suncorp group of companies".
Suncorp quoted Standard & Poor’s as saying that "Suncorp’s banking business and the underlying insurance business continue to perform solidly, in line with their expectations, and that Suncorp management continues to respond prudently to difficult financial conditions".
But the ratings group also said in its statement that this outlook revision reflects continuing financial market disruption.
”The continuing and worse-than-expected financial market distress has reduced the chances that Suncorp’s earnings profile will rebound materially enough in the short term for a rating upgrade to be considered."
"Standard & Poor’s credit analyst Mark Legge said.”In particular, the weak global debt and equity markets may challenge the extent of profit growth of the group’s wealth-management business and returns on its insurance technical reserves and shareholder funds."
"Nevertheless, we note that Suncorp’s banking business and the underlying insurance business continue to perform solidly and in line with Standard & Poor’s expectations.
“Moreover, Suncorp management continues to prudently respond to the difficult financial conditions, including the recent re-weighting of its general insurance shareholder funds toward a greater fixed interest and cash composition.
"The stable outlook reflects an expectation that Suncorp’s success to date in integrating Promina will continue and that earnings will improve as weather volatility subsides.
“The outlook also assumes that the bank will further strengthen its liability maturity profile in a cost-effective manner, maintain its robust liquidity position, continue to appropriately price its loans, and retain the very strong credit quality of its assets.
"Although downside risks could occur if severe financial market and/or climatic conditions were to continue and the group were to perform below peers, downward rating pressure is less likely, as it is anticipated that risks will continue to be prudently managed."
Late yesterday Suncorp moved to try and convince markets that it in good shape
It said its underlying business "continued to perform well despite challenging market conditions" and reaffirmed its guidance for this financial year.
Suncorp said it was is on track to grow its banking profit before tax and bad debts in the high single digits in the year to June 30, 2009 and an insurance trading ratio of between 10% 12% is also expected for the year 2009 as well as a flat underlying profit for its wealth management division, compared to 2007-08.
