SUN announced this week that they were more than open to selling off their banking arm to focus on the insurance business – nothing new this has been raised a number of times over the years. We have no doubt SUN would love to sell its banking arm but this is not a sellers’ market and like many things it all comes down to price plus of course the mountains of legislation/compliance that will have to be overcome if someone were to absorb this Queensland entity. During the GFC the Bank of Queensland (BOQ) attempted an opportunistic bid which I don’t think even they felt would be successful, the other obvious tie-up being with Bendigo Bank (BEN).
SUN has suffered from elevated claim levels and low-interest rates over recent years however we now believe that both insurance margins and investment returns will become tailwinds going forward. When we combine this with a strong banking division that has the prospective divestment able to unlock value for shareholders, the stocks looking attractive hence we are considering switching from BOQ to SUN.
MM likes SUN around $11
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