Suncorp-Metway Ltd group chief executive Patrick Snowball says the company’s underlying banking business is sound, with declining bad and doubtful debt charges and healthy deposit growth.

Mr Snowball on Tuesday talked up the “excellent prospects” for the banking arm, adding that Australians had shown appetite for second-tier banks.

He again rejected on-going speculation in financial markets that the asset could be offloaded.

“The core assets of Suncorp group are sound and worth retaining within the organisation,” Mr Snowball told an investor briefing.

“The biggest threat to its prospects has been the continued speculation around the sale.

“We have all no doubt read the tea leaves that suggests that further consolidation in banking is unlikely to achieve regulatory and government approval, at least in the short term.”

The bank’s lending portfolio has been separated into two parts, core and non-core, with the core operation focussed on personal banking, mortgages and lending to small and medium sized businesses.

Head of banking David Foster said the core business was in very good shape, with non-performing loans continuing to improve and the number of loans past due declining.

In the September quarter, Suncorp’s core bank impairment loss was $9 million, compared to $18 million in the June quarter.

Mr Foster said Suncorp was well positioned to capture more deposits to support lending growth, despite “aggressive” competition in the marketplace from building societies, major banks and other regional banks.

“We do continue our conservative approach to lending growth, with core lending assets remaining flat over the quarter,” Mr Foster said.

“Success in deposit accumulation now presents an opportunity to increase the rate of core lending growth.”

Retail deposits totalled $24.2 billion at 30 September, up from $21.8 billion in the prior corresponding period and from $23.6 billion in June.

In terms of the company’s general insurance division, Mr Snowball said plans were underway to merge the back office operations of Suncorp’s various retail brands such as AAMI, GIO and APIA.

It was too soon to predict how may jobs would be lost in the process, Mr Snowball said, but added that he was “sensitive” to the issue and would keep the market and unions updated.

“Not surprisingly for a company that has evolved from multiple integrations, the organisation is in my view overly complex, with duplicate systems and complicated processes,” he said.

Gross written premium (GWP), a measure of revenue in the insurance business, had shown solid growth amid higher premiums, better weather and stable credit markets, he said.

But Mr Snowball cautioned that it was about to enter the most volatile weather period across eastern Australia.

“So it’s still far too early to be quantifying this benefit. As you know it can be washed away with one significant storm,” Mr Snowball said.

He said it was too soon since taking the chief executive’s job in September to offer earnings guidance, which he said would come in February.

“It’s really not in my DNA to give guidance, I guess I’d rather be focusing on delivering results,” Mr Snowball said.

Meanwhile, Suncorp was continuing to gradually run off and dispose of it non-core bank assets including lease finance, structured finance, development finance and property investment.

Mr Snowball said there were “positive signs in the market regarding opportunities for divestment”.

Impaired non-core assets rose to $1.599 billion at the end of September, from $1.33 billion in June, primarily due to the reclassification of four large accounts that had been on the bank’s watchlist.

“The transition to impairment for those loans has been well understood and has occurred either as a result of a crystallising event or a further deterioration in the underlying collateral,” Mr Foster said.

The non-core impairment loss for the September quarter was $126 million, compared with $200 million in the previous quarter.

Suncorp shares closed up six cents, or 0.69 per cent, at $8.78 on Tuesday.

AAP