Joint Statement by Baillieu Limited Chairperson David Trude and Managing Director Gavin Powell

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Bank of Queensland (BOQ) | SNAPSHOT

Profile: Bank of Queensland (BOQ) is an Australian regional bank with c.58% of its branches located in QLD. It operates under brands including BOQ Finance, BOQ Specialist, Virgin Money Australia and St Andrew’s Insurance. Most BOQ branches are operated by owner-managers or franchisees. BOQ provides retail banking services, commercial banking solutions and insurance products.

History: BOQ was the first permanent building society in QLD, established as The Brisbane Permanent Benefit Building and Investment Society in 1874. In 1887, BOQ was converted from a building society to a bank. In 1970, the name Bank of Queensland was adopted and in 1971, BOQ was listed on the ASX. In 2013, BOQ acquired Virgin Money Australia, before it acquired Investec Bank Limited in 2014.

Earnings composition: $189m (59%) of BOQ’s FY19 cash Net Profit After Tax (NPAT) came from the BOQ Business segment. Retail Banking constituted 41% of cash NPAT with $133m.

Most recent result – FY19: BOQ’s full-year (2H19) dividend declined 18% on the prior corresponding period (pcp) to 31 cents. Consequently, total FY19 dividends declined 14% YoY to 65 cents. NPAT declined 14% on the pcp to $320m as BOQ faced several challenges during the period. Net interest income declined to $961m, from $965m in the pcp, due to competition and lower interest rates. Its net interest margin (NIM) was down 5bps to 1.93%, from 1.98% in FY18. The NIM is a bank income measure which is largely the difference in the interest banks receive for loans and the cost of its funds (such as interest on deposits) as a percentage of its loan book. Non-interest income declined to $128m, from $145m in FY18, driven by the impact of lower fees and reduced insurance income. Operating expenses increased 4% to $550m due to increased regulatory and compliance costs. Loan impairment expense (a provision banks take on loans which are unlikely to be repaid) increased to $74m, from $41m in the pcp, as the bank implemented a new risk model which factored in higher arrears and greater economic uncertainty.

Company outlook: BOQ expects cash earnings to be lower YoY in FY20, with revenue and impairments in line with FY19 unable to offset higher regulatory and compliance costs and increased operating expenses.

Important dates: Ex-dividend date is 6 November 2019. The payment date is 27 November 2019. AGM is scheduled for 10 December 2019. 1H20 results are scheduled for 8 April 2020.

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