United front for new Suncorp boss

New Suncorp chief Steve Johnston is adamant there is no need to split the $18bn bank and insurance major in two.

New Suncorp chief Steve Johnston Picture: AAP

New Suncorp chief Steve Johnston is adamant there is no need to split the bank and insurance major in two, insisting that the Brisbane-based company should be playing to its strengths.

Johnston, a one time top political adviser to former Queensland premier Rob Borbidge, was named on Monday as the new chief executive of Suncorp, taking the role on a full-time basis after being named acting CEO in May.

The Queensland-born Johnston is the fourth CEO for Suncorp in a decade, following the sudden exit of Michael Cameron, overseeing brands including GIO, Suncorp Insurance, AAMI and Vero, as well as the Suncorp banking. He also takes charge of an $18 billion business which has faced perennial questions about its structure, particularly as banks have been shedding their insurance and wealth management arms over the past year.

Johnston, who stands to earn up to $5.4m a year in the new role, says the two businesses can work together and the bank — through its digital channels — is now better placed to compete on the national stage.

“There have been questions around what benefits the bank gathers from being part of the group: now obviously we have scale as a business so we can invest in digital in our bank to a far greater extent than any of our ­regional competitors can do. We also have an A+ credit rating and that’s very important because if the bank were standing on its own it would be BBB-rated and its cost of funding would increase. Its resilience would fall away because we’ve got access to a wider funding pool,” he tells The Australian.

Johnston, an avid cricket fan who admits to being tired on Monday after staying up late to watch Australia retain the Ashes, says spinning off the banking arm will not improve the outcome for the group.

“I would describe the bank as being core and strategically important and if we can ­demonstrate that we’re improving the strength of the bank and the quality of the its earnings, then that issue won’t be one we’ll have to deal with — people will just accept it,” Johnston says.

Johnston, Suncorp’s former chief financial officer and previously the group corporate affairs executive, takes on the top job at a very fraught time, with twin headwinds of increasing regulation and a fragile economy clouding the outlook for the banking sector, which has come under intense scrutiny in the wake of the Hayne royal commission.

As the government prepares to introduce legislation to implement Commissioner Kenneth Hayne’s recommendations, including a ban on hawking insurance products, there are growing doubts Suncorp can continue to cross-sell to customers. But Johnston is convinced a digital platform is the answer.

“In the current environment some elements of being able to sell products may be impacted by the regulatory changes, but that doesn’t stop us from doing it digitally and creating a digital platform to offer products and services to customers.

“I don’t think we’d stop cross-selling. There are always opportunities for us to showcase our products to customers but we have to do it consistent with the regulatory regimes as they’re described. And we won’t be doing anything differently,” he says.

A digital platform would allow customers to choose what products to buy and how to buy them and they would then be rewarded for their loyalty, Johnston says. “A digital platform is very resilient to regulation, it’s putting power in the hands of the consumer, it’s providing access to them in a very efficient way …

“So that’s still available to us, even if some of the more traditional means of what they call cross-selling are becoming more difficult in the emerging regulatory environment,” Johnston adds.

As the Reserve Bank grapples with the prospect of interest rates falling to zero, Johnston ­acknowledges the strain lower rates would put on the bank’s bottom line but says Suncorp wouldn’t face the same “margin challenge” as the big four banks would when rates fall.

“Obviously for banks and insurance companies lower yields do have an impact on profit, we have to accept that, but beyond that it creates competitive differentials between some of the banks … The volume of low-cost deposits in our book is significantly lower than CBA’s, for example. So if rates move lower it’s going to be less of an issue for us than it will be for the major banks,” he says.

He called for fiscal policy to play a part in jump-starting the sluggish economy, suggesting that creating more resilient communities would have both short and long-term benefits.

“Improving the quality of our housing stock, giving people incentives to upgrade their roofing … A national program of resilience mitigation would have a dual effect: it would be stimulatory to the economy, it would create jobs in the short term but longer term it would create a more resilient Australia,” Johnston says.