BOQ posts cash profit of $378m

  • By Elizabeth Fry
Jon Sutton

Bank of Queensland has lifted full-year cash profit by 5 per cent to $378 million on lower bad debts and stronger lending growth in the second half of the year.

Importantly, second-half earnings jumped by 16 per cent, on the first first six months, to $203 million boosted by a $16 million gain from the sale of a vendor-finance unit.

Excluding this item, cash profit increased 1 per cent to $362 million which was in line with expectations.

After stripping out the sale profit, second-half cash earnings rose 7 per cent on the prior half, to $187 million.

“The second half largely played out as we said it would,” said chief executive Jon Sutton.

“Lending growth improved in both the housing and commercial loan portfolios."

Strong broker flows

The regional lender reported a 2 per cent rise in lending growth in the second half due to a strong increase in broker flows.

Broker-sourced home loans rose to 28 per cent,  up from 15 per cent in the first half of the year.

Net interest income though was down 1 per cent to $926 million for the year.

Sutton expressed confidence about 2018 despite facing challenges like low housing-credit growth, low interest rates, regulatory uncertainty and increasing consumer expectations.

"Our niche strategy is delivering and our distribution channels are giving us a greater reach than we have ever had before,' he told an analysts' briefing.

The full-year profit was also struck on falling bad debts which fell by 28 per cent over the course of the year to $48 million.

Sutton delivered on cost cutting targets with BOQ's cost-to income ratio down 20 basis points to 46.6 per cent.

"Efficiency remained a primary focus, and the bank was seeking to further improve productivity," he said.

Net interest margins fell over the full year - from 1.94 per cent to 1.87 per cent -  although better funding costs and repricing in the second half meant margins rebounded to 1.90 per cent.

Strong capital

The regional lender said the bank’s common equity tier one capital ratio stands at 9.39 per cent.

BOQ’s robust capital position allowed it to declare a flat final dividend of 38 cents and a special dividend of eight cents, both fully franked.

According to UBS banking analyst, Jon Mott the special dividend will attract some attention.

"Is BOQ now flagging a permanent higher payout ratio given its strong capital position?"

The BOQ chief once again lobbied hard for a level playing field as it is still tilted towards the major banks.

"More regulatory attention should be focused on the smaller lenders," Sutton argued.