Suncorp's banking CEO has resigned, as the group announces it expects to take a $133 million COVID-19 hit

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Bancassurer Suncorp Group has revealed it is expecting to take a $133 million hit from COVID-19, confessed to underpaying its staff to the tune of $70 million and announced the surprise resignation of the recently appointed CEO of its banking and wealth arm.

Suncorp CEO Steve Johnston said the outbreak of the virus would have a wide range of impacts across its insurance and banking business ranging from mildly positive to overwhelmingly negative in its quarterly update.

Mr Johnston said there would be fewer automotive claims but expected a uptick in the loss of rent claims from landlords while “the precise impact will be hard to predict. The bank has around half a million in-force landlord insurance policies with the majority through market leader Terri Scheer.

“We have already received thousands of requests for financial hardship from both our bank and insurance customers and have provided discounts and premium waivers to 12,300 insurance customers in Australia and New Zealand and approved $4.05 billion in loan deferrals.”

Mr Johnston said as a result of the underpayment of employees costs with be slightly higher than $2.7 billion for the upcoming full year.

In a separate announcement, Mr Johnston announced that newly appointed CEO of its banking arm and former Ubank boss Lee Hatton was leaving the bank at the end of May after starting in February.

Ms Hatton, who had long been associated with NAB’s digital only banking arm UBank, will be replaced on an acting basis by Suncorp executive general manager of deposits and payments Bruce Rush who has been with the bank for a decade. Ms Hatton is returning to Sydney to work for an unnamed fintech company.

The $133 million in COVID-19 provisions is equivalent to 23 basis points of gross loans and acceptances and takes the total provisions to $234 million or around double the size of provisions for bad and doubtful debts seen in the first half.

The bank provided guidance on its net interest margin (the difference between its cost of funds and what it can charges customers) towards the top end of the 1.85 – 1.95 per cent range.

Mr Johnston also revealed Suncorp’s investment portfolio sustained mark-to-market losses of $205 million over the quarter but CFO Jeremy Robson said the group considered the portfolio conservatively positioned.

Suncorp began an investigation of of employee pay and entitlements in November last year and after analysing the data available the board agreed on a range of costs flowing the problem of between $40 million and $70 million.

“We have identified some inconsistencies in both our rostering system and pay system leading to incorrect overpayments and under payments,” Mr Johnston said.

The early stages of the investigtion revealed incorrect payments of overtime, shift penalties and public holiday loadings. The company has self-reported to the Fair Work Ombudsman.

“As a Suncorp employee of long standing I am incredibly disappointed that we have let our people down – there is no excuse and we need to get this right,” Mr Johnston said.

The investigation has thus far been restricted to the Australian insurance business with further updates on the company’s progress to be announced as they come to hand.

This story originally appeared in the Australian Financial Review. Read the original story here.

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