SUN’s Banking Division has been struggling recently, and we believe this is likely to continue, whereas its insurance earnings have remained strong; hence, not surprisingly, we would rather invest in a pure bank or insurance stock as opposed to a mix of the two unless it’s overly cheap. This stance may change if ANZ successfully challenges the watchdogs’ ruling over the $4.9bn purchase of SUN’s banking arm, but this decision could go either way, and an outcome is unlikely until well into 2024.
If the decision was to be upheld, and SUN can’t sell to ANZ, the loser here is Suncorp which has been re-rated higher on the expectation of becoming a pure Insurance business.
- We can see SUN squeezing above $14 into Christmas, but we see better opportunities elsewhere.
MM remains neutral towards SUN ~$13.75
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