The future independence of Brisbane-based Suncorp Metway is in doubt after it revealed a sharp drop in profit, a cut in dividend, a plan to raise about $900 million by selling new shares and the departure of its chief executive, John Mulcahy.

Suncorp plans to sell the new shares at $4.50 each, a huge 37% discount to its last traded price of $7.13. That will mean its shares will drop further when trading starts, just as Qantas shares hit a 13 year low after trading resumed this morning after its capital raising yesterday.

A surge in bad debts and poor business returns (unlike the Commonwealth Bank earlier in the week and even Macquarie Group this morning) has seen Suncorp’s board go for the big decisive fund raising and management changes in a final bid to remain independent in its present form as an insurer/bank/wealth manager.

Suncorp dumped plans to sell its Metway banking business last year when it couldn’t find a real buyer at the right price. That didn’t help with first-half profit after tax dropping to between $250 million and $270 million, down at least 30% on the previous year’s reported profit, which in turn represented a fall of over 50% on the 2007 result.

Suncorp’s news came an hour or so after Macquarie Group updated the market and revealed 1,047 members of the Millionaire’s Factory were no longer with the bank, earnings would be down around $900 million and revenue for the year to March would be off 15% or more.

Macquarie Group shares fell, then rose on the news. The CBA, Westpac and ANZ share prices all fell on worries from the US about banks, then Macquarie, and finally the shocker from Suncorp.

Suncorp has been thought to be the most vulnerable of the country’s banks with its underperforming insurance business hurting group results last year.

There has been media speculation that Suncorp was the biggest beneficiary of the move by the Rudd Government to guarantee bank deposits and debts early last October, after Ireland set off the silly bank bidding war internationally.

Trading in the company’s shares were halted this morning at yesterday’s close of $7.13, which valued the company at $7.225 billion.

That value means the bank has destroyed all the $7.9 billion it paid for Promina two years — a move that was championed by the departing CEO, John Mulcahy who had come to Brisbane from the Commonwealth.

A series of bad storms around Australia and New Zealand increased losses in Promina and the two other insurance businesses owned, Suncorp and GIO and despite raiding the insurers reserves for hundreds of millions of dollars of benefits over the past two years, Suncorp couldn’t get earnings drive.

A well connected market analyst says the departure of Mulcahy has improved the chances of Suncorp remaining independent for a while. Westpac and the Commonwealth both looked at Suncorp last year, but Westpac went after St George and the CBA after Bankwest.

QBE might be interested in some of the insurance businesses after trying to get IAG to the starting like last year, but failing.

The insurer said its bad debt expenses for the half year to December 31 would rise to $355 million — “significantly above forecasts”, it said — on specific provisions and write-offs.

Suncorp also cut its dividend and forecast flat lending growth for fiscal year to June, so the second half will show no improvement.

The Suncorp news overshadowed Macquarie’s update which reported a halving in full year earnings as a result of an additional $900 million in write-downs and other charges during the second half, after its listed funds slumped, particularly its property assets.

The larger than expected charge will take total write-downs for the year to $2 billion.

And for the first time, the investment bank revealed the extent of its jobs purge late last year, confirming some 1047 staff have been cut from the bank

Macquarie now expects a full year profit of $900 million for the year to end March, down sharply on last year’s $1.8 billion profit. However Macquarie said it had been able to strengthen its balance sheet in recent months, raising some $21 billion in new funding and deposits.

The bank said cash and liquid assets on its balance sheet totalled $32 billion, almost three times the size of its holdings of short term issued debt of $12.7 billion.