BOQ) profits stifled as inflation, higher funding costs shred margins
Regional lender Bank of Queensland will shift its focus away from growth to improving returns for shareholders after reporting a 33 per cent slide in half year cash profits and a cut to its dividends.
Inflation, stronger competition and higher cost of funding has continued to stifle BOQ’s bottom line, and it declared an interim dividend of 17¢ per share, down from 20¢ last year.
However, investors rewarded the mid-tier bank on Wednesday after its half-year results beat analyst expectations of a 40 per cent crash in profits. BOQ shares jumped over 8 per cent in early trade, before closing 5.26 per cent higher at $6.10.
Inflation, competition, margin pressures and the bank’s higher cost of funding has continued to stifle BoQ’s bottom line, according to chief executive Patrick Allaway. Credit: Dan Peled
Chief executive Patrick Allaway said the regional lender was committed to delivering better outcomes for shareholders despite continuing to contend with a raft of structural challenges.
“These are all industry headwinds so many of them we can’t control, but the big message today is we’re focused on what we can control, and we’re delivering on our commitments in relation to our key strategic [decisions],” he said.
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“We’re very focused on strengthening the bank, meeting our obligations under enforceable undertakings, the simplification program we committed to at the end of last year to deliver $200 million in productivity, which we’re halfway through, digitising our bank … optimising our return and shifting the focus away from asset growth to return equity.”
BOQ unveiled a cash profit of $172 million in the six months to February 29, down 33 per cent compared to the first half of last year. Its net interest margin – what it charges for loans compared with funding costs, a key measure of bank profitability – decreased 24 basis points to 1.55 per cent compared to the same period last year.
Its operating expenses rose 6 per cent to $524 million due to inflationary pressures, as well as investment in risk, compliance and technology. While its loan impairment expenses fell by more than 50 per cent to $15 million reflecting higher house prices, that was partly offset by the impacts of cost of living and interest rate pressures.
