Loss of Equity

Using debt to bolster your investment portfolio means the effect of rises and falls in security prices is magnified.  In a falling market it is possible to lose some or all of your equity.

It is also possible to lose more than the equity you originally invested, in which case you are required to repay any outstanding balance.

To assist you to manage this risk, it is important that you invest at a Loan to Value Ratio that reflects your risk appetite. We recommend you discuss this with your financial adviser.

Margin Calls

Margin calls occur when your loan balance exceeds the borrowing limit set for your account.  This is because the value of your security has fallen, so while your loan balance remains the same your Loan to Value Ratio has effectively increased beyond the approved limit. 

In a margin call, you would need to reduce your loan balance back to an acceptable limit. To do this you may:

• deposit more security;
• pay down your loan with cash; or
• sell security to cover the margin call.

Margin calls can happen at any time so it is important to keep a close eye on your account balance.  While Suncorp Bank may try to contact you or a person you nominate to assist with this process, if your account is not brought back to approved limits, Suncorp Bank margin lending may sell securities in your portfolio to reduce the balance for you.  It is important to be aware that if we do sell securities to reduce your balance, the securities we sell will be at our discretion and may not take into account your tax position or investment strategy.

To give you a little extra flexibility, Suncorp Bank gives you an initial buffer of 5% on all stocks and 10% on all managed funds over the limits set for your account before we enact the margin call process.

Interest Rate Changes

Interest Rates are likely to change over the period of your margin loan.  When interest rates go up, your variable interest expenses increase and may exceed the returns on your account.  In addition, interest rate charges do not always coincide with dividend payments so if interest is capitalised to your loan, an increased interest rate may cause you to exceed your credit limit.  In this situation, you will have 5 business days to reduce your loan balance.  If you can’t reduce your balance within this timeframe, we may sell securities or take other steps we are entitled to take and/or consider necessary to reduce your balance.

View our current interest rates

Equity Loss

While history has shown that investing in shares and managed funds may provide better returns than other asset classes over the long term, share markets can be volatile.  This means the value of your share portfolio can go down as well as up. Share prices are determined by the market and managed fund distributions are not guaranteed. 

While all investments carry some risk, the risks associated with margin lending mean that it is not suitable for every investor. This is why it is important to speak to your financial adviser, stockbroker and/or accountant to ensure that you understand the risks of investing in shares and managed funds, margin lending and the terms and conditions of your facility.

Other Risks

It is important to understand the terms and conditions of a margin lending facility and the associated risks, so speak to your financial adviser to find out whether this product is suitable for you.