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.