Suncorp's stalled Oracle core banking replacement disappears from view

A stalled $300 million Oracle-based core banking system replacement at Suncorp now looks unlikely to be extended across deposits and transactions and will remain limited to writing mortgages after the regional bank and insurer buried all reference to the hobbled build in its half-yearly results.

In a challenging set of numbers with investor interest dominated by insurance claims from recent fires and floods, a final decision on the fate system - rather unfortunately named ‘Project Ignite’ and based on Oracle Flexcube - has been kicked into touch for another six months.

Despite a positive headline number of net profit landing at $642 million – propelled by selling off two insurance related businesses for $293 million, underlying profit from continuing operations sagged 6.2 percent to $396 million during the first half.

As a regional bank faced with the same compliance requirements as the big four, Suncorp has been under unrelenting pressure to optimise its retail banking business or risk being eaten away by leaner neobanks, with the new core meant to have been a differentiator.

Started in 2016, the system was meant to replace the ageing Hogan platform that is still used by ANZ, Westpac and St George but has instead visibly frustrated two successive chief executives, Michael Cameron and Steve Johnston, who have both questioned its functionality.

Cameron, in particular, called out Oracle, demanding the US giant needed to show Suncorp the system worked at scale in another bank before the Brisbane-based bancassurer flicked the switch.

In August last year Johnston went as far as to liken the frustrated deployment to a hostage scenario where Suncorp was dependent on another institution going first.

"To some extent we are a bit of a hostage to someone else doing it, I think that’s a better way for us to consider it, "Johnston said at the time.

“I don’t think there is any benefit in us being the first mover in deploying a deposit module onto a new core banking system, it’s not within our risk appetite to do that.”

Investors for the main waved through the lack of action on the new core on the back of a horror summer that will require Suncorp’s insurance brands focused on processing claims.

Helping that is the fact that Johnston has poached NAB online pure play UBank’s chief executive Lee Hatton to head Suncorp’s banking and wealth division, a move that will parachute a digital banking native into the organisation.

Like Suncorp, NAB has also had its fair share of frustrations with Oracle, especially prior to that bank’s massive cost cutting exercise.

Johnston is certainly talking up Hatton’s potential.

“Lee is the ideal leader for Suncorp Bank as we continue to transform the experience our customers have with us,” Johnston said in December 2019 upon Hatton’s appointment.

“Her track record of building customer-focused, digital banking offerings and ability to positively influence organisational culture means she is the ideal candidate to lead Suncorp Bank in the rapidly evolving and highly competitive environment we are in.”

Until that happens, Johnston is taking a more meat-and-potatoes view of digital and IT, especially around delivering cost reductions and efficiencies.

While most insurers are actively experimenting with artificial intelligence, Johnston mooted that the technology could be put to work to look at varying grades of housing stock to price more effectively against water damage from broken waterpipes, a significant item for Suncorp.

Another major headwind this period has been an increase in “regulatory project costs” – usually compliance related software that generates no income – that came in at $155 million, in line with forecasts.

The bad news is those costs will stay elevated a bit longer than the bank had previously said, with Johnston blaming poorly drafted regulations that were taking longer to arrive than anticipated.

“We anticipated these costs to decline more gradually than expected,” Johnston said.