Suncorp Group Ltd (ASX: SUN) shares have come under pressure with the rest of the banking sector this week.

This means that the banking and insurance giant’s shares have lost almost 8% of their value since this time last week.

In light of this decline, investors may be wondering if now is a good time to pounce on Suncorp’s shares. Let’s take a look.

Is it time to buy Suncorp shares?

One leading broker that thinks investors should be snapping up shares is Goldman Sachs.

Earlier this month, the broker retained its buy rating with a $14.47 price target. This implies potential upside of almost 21% for its shares over the next 12 months.

In addition, income investors may be pleased to learn that some very attractive dividend yields are expected in both FY 2023 and FY 2024.

Goldman is forecasting fully franked dividends of 78 cents per share and then 79 cents per share, respectively. Based on the current Suncorp share price of $11.98, this will mean yields of 6.5% and then 6.6%.

Why is the broker bullish?

Goldman revealed that it is feeling bullish on Suncorp shares due to the company’s favourable outlook. This is being underpinned by a number of tailwinds in the general insurance market. It commented:

We are favourably disposed to Suncorp noting in large part the tailwinds that exist in the general insurance market i.e., very strong renewal premium rate increases and the benefit of higher investment yields. We think the strong rate momentum that SUN is getting should likely offset volume pressures as they optimise their risk exposures in certain portfolios such as home but also likely policy lapses / buy downs.

And while it acknowledges that its underlying margin is facing pressures, it sees scope for price increases to offset this. It adds:

We note that SUN is putting through significant price increases to reflect these pressures but these benefits will flow through with a lag. Further, we note that we could start to see benefits of underlying claims inflation abating into FY24E.

Overall, the broker believes Suncorp shares look cheap compared to peers. It also sees potential for a capital return when it sells its banking business. Goldman concludes:

Despite reflecting some of these pressures in underlying margins, we think SUN trades relatively cheap compared to IAG hence we have a relative preference for SUN. We also see possible catalysts on the horizon for SUN including capital return post the bank sale and the possibility of a whole of account quota share arrangement similar to IAG. We are Buy-rated on SUN.

The post Are Suncorp shares a cheap passive-income buy after diving 7% in a week? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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