BOQ 1H earnings slide
(30 March 2017 – Australia) Bank of Queensland (BOQ) has recorded a slight drop in first-half earnings as “intense competition” impacted margins.
In the six months to the end of February 2017, the bank’s cash earnings slid by two percent to A$175 million. The slide follows net interest margins decreasing by 5 basis points to 1.85 percent, with the group detailing a robust competitive environment in both loans and deposits.
“We have prioritised margin and credit quality over growth in this half, in what has been an intensely competitive period not just in lending but also in retail deposits,” BOQ’s Chief Eexecutive Jon Sutton said.
Adding: “A higher quality, higher margin portfolio will deliver more sustainable profits longer term and this has guided our response to a number of industry headwinds.”
However, Sutton’s second half outlook provided better outcomes. He said “a number of the headwinds that emerged in 2016 abated late in the half, which saw mortgage application momentum return and deposit spreads improve.”
BOQ retail deposit to lending ratio rose by three percentage points to 71 percent.
Meanwhile, a number of out-of-cycle rate hikes in the sector — largely targeting investors — has hinted at a cooling off in competition in the home lending market.
BoQ said it had benefited by the less intense competition as lending volumes jumped this month.
“We have seen a 30 per cent uplift in mortgage application volumes in recent weeks which gives us confidence of a return to growth in the second half,” Sutton said.
“Even though it has been a tough environment, we are at a turning point. Our increased mortgage momentum, outlook for revenue growth and capital optionality all provide a strong framework to deliver on our full year targets.”
Importantly for the bank, there was a 25 percent decrease in charges for bad loans to A$27 million. New impaired loans fell to A$57 million for the half compared to A$80 million in the same period last year.
Sutton said although there were pockets of weakness across the economy, there are no signs of deterioration in the bank's loan portfolio.
The group’s tier-one capital ratio improved 29 basis points to end the half at 9.29 percent.
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