Suncorp share price lifts on demerger plans

Suncorp shares extend a relief rally today.

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AMP share price demergerThree zigsaw pieces pulled apart to symbolise a demerger

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Key points

  • Suncorp shares got a lift this morning following reports it may be divesting its banking arm 
  • The move could increase the bank's profitability, reports say 
  • In the last 12 months, the Suncorp share price has held a 1.3% gain 

The Suncorp Group Ltd (ASX: SUN) share price has started the day well, now trading up 3% at $11.20.

Investors are bidding up the Suncorp share price amid reports the company is pushing to spin out its banking unit to focus on its insurance arm.

In broad market moves, the S&P/ASX 200 Financials Index (ASX: XFJ) has also jumped from the gate on Wednesday and trades 2% higher.

Suncorp to push for demerger

Growing evidence suggests that Suncorp is making a push to spin off or sell its banking division.

The bank’s board and management have been weighing up options to split Suncorp’s “bancassurer” model, The Australian Financial Review reports.

The move would allow it to focus on its more profitable insurance segment, reports say.

“A demerger could see Suncorp retain and focus on its insurance arm, which is now Australia’s second-biggest offerer of [general insurance products], behind IAG,” The AFR wrote.

Chief to the debate is Suncorp’s share price, reports say. Deliberations are focused on creating more value via a demerger, if that were the case.

Suncorp released a short statement today in response to the “media speculation”.

It said that “[a]s previously advised, Suncorp, from time to time, reviews its strategic alternatives in relation to all of its businesses and is currently doing so in respect of its banking operations.”

Nevertheless, the market certainly isn’t reacting in a negative way during early trade on Monday, leading us to believe investors could be pricing in the non-sensitive news.

The market now values Suncorp on a fully-diluted market cap of $13.64 billion, according to ASX data. That’s down from more than $15 billion on 27 May.

In the last 12 months, the Suncorp share price has held a 1.3% gain. That’s despite trading more than 7% down this past month.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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