BOQ releases lukewarm results
(5 October 2016 – Australia) Bank of Queensland (BOQ) has announced a 6 percent increase in full-year profit to A$338 million, in spite of market headwinds in the second half of the year.
Cash profit increased by just one percent to A$360 million over the last year, and remain in line with market expectations.
Over the same period, difficult market conditions and increased competition delivered a five percent growth in lending, however, that slowed down in the second half of the year. Business lending grew by seven percent, while housing increased by eight percent.
According to East & Partners’ Deposit Funding Debt Index, BOQ’s current ratio of total deposits to loans sits at around 0.77. Non-big four banks such as BOQ, ME and Suncorp have a much higher reliance on domestic deposits for funding retail and business lending activities. As a result they generally display higher DFDI ratios.
The bank said its decision not to match aggressive prices in the market contributed to the slowdown in lending. Additionally, increased competition for new loans and deposits impacted the bank’s overall margins.
The bank also said that increased funding and hedging costs accelerated the margin decline over the year.
Overall, costs increased by four percent, driven in part by in part the acquisition of the Virgin Money business.
The bank said that the quality of is loan book improved across all units, highlighting that loan impairment expenses fell by 9 per cent to A$167 million.
"Strong credit performance in the vast majority of the portfolio was offset by elevated loss experiences in the exposures relating to the mining and associated sectors of the economy," the bank said in its earnings statement.
BOQ’s tier one capital reserves increased by nine basis points to 9 percent.
Chief Executive Officer Jon Sutton said: "BOQ has delivered increased cash earnings after tax for the fourth consecutive year, a significant achievement in an environment of low interest rates and intense competition.
"Expectations of lower interest rates in Australia for longer has meant a lower rate of return on capital and low cost deposits.
"While some of the headwinds experienced over the past year may be one-off in nature, there are a number which will continue through 2017."
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