BoQ hit hard by bad debts
(14 October 2011 – Australia) The Bank of Queensland’s (BoQ) annual profit slid by 13 percent to A$158 million it was reported yesterday.
The Brisbane-based bank cited a near-doubling of impairment charges caused by its exposure to the ailing regional commercial property sector which saw bad debt charges jump from A$104 million just over a year ago to A$200.5 million.
BoQ, which recently appointed the former Commonwealth Bank senior executive Stuart Grimshaw to take over from the long serving David Liddy, blamed the rise in bad debts on "poor economic conditions", in particular their impact on commercial property valuations.
The Queensland property market took a huge hit in the wake of the local washout of the global financial crisis, especially on the Gold Coast and the southern-eastern region of the state.
Along with Suncorp in its home territory, BoQ is one of the major lenders in the state despite the presence of the big four banks who have sought to take away market share from the pair.
As well as the increased charge for bad debts, the bank’s list of impaired assets also jumped sharply – from A$147 million last time to A$444 million by the end of the latest financial year.
That represents 1.71 percent of the bank’s non securitised loan book as compared to just 0.6 percent a year ago.
BoQ has made specific provisions of A$173 million against those impaired assets.
The increased bad debt charges and the fall in profit – from A$182 million in 2010 – took the gloss off the last year in charge of Mr Liddy whose ten-year reign as chief executive at the bank saw it transformed from a small player in the regional sector to a mainstream operator now represented across the country.
The results showed that profits before impairment charges and tax had actually risen by 17 percent during the last year, from A$362 million to A$422 million on the back of a 12 percent jump in income to just under A$800 million.
However, cash profit – the major measure of earnings in the industry – dropped 10 percent from A$197 million to A$176 million as the impact of the bad debt and impairment charges flowed through to the bottom line.
On the lending front, that dropped back by A$700 million to A$11.8 billion overall as the economy slowed and fewer people and businesses chose to take out new credit. The 6 percent slide was a further sign of falling credit growth which has been replicated across the banking industry and has hit the profits of BoQ’s big four competitors.
On the plus side, retail deposits rose strongly, up A$2.2 billion or 12 percent, to A$20.3 billion from A$18.1 billion the year before, helping to reduce the bank’s overall cost of funding.
BoQ, which recently appointed the former Commonwealth Bank senior executive Stuart Grimshaw to take over from the long serving David Liddy, blamed the rise in bad debts on "poor economic conditions", in particular their impact on commercial property valuations.
The Queensland property market took a huge hit in the wake of the local washout of the global financial crisis, especially on the Gold Coast and the southern-eastern region of the state.
Along with Suncorp in its home territory, BoQ is one of the major lenders in the state despite the presence of the big four banks who have sought to take away market share from the pair.
As well as the increased charge for bad debts, the bank’s list of impaired assets also jumped sharply – from A$147 million last time to A$444 million by the end of the latest financial year.
That represents 1.71 percent of the bank’s non securitised loan book as compared to just 0.6 percent a year ago.
BoQ has made specific provisions of A$173 million against those impaired assets.
The increased bad debt charges and the fall in profit – from A$182 million in 2010 – took the gloss off the last year in charge of Mr Liddy whose ten-year reign as chief executive at the bank saw it transformed from a small player in the regional sector to a mainstream operator now represented across the country.
The results showed that profits before impairment charges and tax had actually risen by 17 percent during the last year, from A$362 million to A$422 million on the back of a 12 percent jump in income to just under A$800 million.
However, cash profit – the major measure of earnings in the industry – dropped 10 percent from A$197 million to A$176 million as the impact of the bad debt and impairment charges flowed through to the bottom line.
On the lending front, that dropped back by A$700 million to A$11.8 billion overall as the economy slowed and fewer people and businesses chose to take out new credit. The 6 percent slide was a further sign of falling credit growth which has been replicated across the banking industry and has hit the profits of BoQ’s big four competitors.
On the plus side, retail deposits rose strongly, up A$2.2 billion or 12 percent, to A$20.3 billion from A$18.1 billion the year before, helping to reduce the bank’s overall cost of funding.
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