Bank of Queensland shares drop after flagging weaker H1 profit
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More news: Shares in Bank of Queensland fell in afternoon trade after the company recorded a 20% drop in statutory profit for the half year, citing tougher economic and competitive conditions.
Shares had fallen 8.53% to $6.65 at 1:31pm AEST.
UBS analyst John Storey said that while the half-year results were lower than market consensus, the bank’s stronger capital position, digital channel growth and clearer economics on the equipment finance forward flow agreement were significantly positive. He holds a buy rating with a price target of $7.50.
Bank of Queensland cash profit falls, braces for slowdown
The news: The Bank of Queensland has recorded a half year $176 million cash profit, 4% down on the prior first half, as it warns of a tougher economy and an increasingly competitive banking landscape.
The numbers: BoQ statutory profit fell 20% to $136 million, partly owing to the $3.7 billion sale of its equipment financing business to Challenger.
The bank’s net interest margin shrank 3 basis points on the prior half to 1.67% “reflecting a highly competitive environment”.
Home lending growth shrank to $2.24 billion, down 4% on the second half, while commercial lending was up 7% to $934 million.
Cash earnings per share narrowed 4% to 26.8 cents while cash return on equity was down 10 basis points to 6.1%. Operating expenses jumped 6% to $553 million.
Despite the pressures, the bank’s capital position improved as common equity tier 1 rose 24 basis points to 11.18%.
What they said: BoQ managing director and chief executive Rod Finch said the result reflected the bank’s transformation.
“We now have an end-to end digital banking customer proposition in market. We continue to focus on simplifying our business and have delivered another period of disciplined cost management,” he said.
“We enter a period of economic uncertainty with strong financial and operational resilience, a well-diversified and prudently provisioned portfolio of assets, and expect to optimise our balance sheet and funding position post completion of the capital partnership transaction with Challenger.”
Looking forward, the bank said economic growth would moderate in the second half of 2026, with consumer and business confidence weighed down by elevated inflation, the prospect of more rate hikes and and the uncertainty of the Middle East conflict.
Citing tough competition in lending and deposits, BoQ said it would instead target growth in commercial lending. Following its transition of customers to its digital platform, the bank said it hopes it can grow home lending from FY27. Cost guidance remains unchanged and its expected to come in under inflation.
The context: Announced earlier this month, the sale of BoQ’s equipment financing business to Challenger is expected to complete between late April and early May, and is due to return approximately $300 million in capital to shareholders, as the bank chases capital light earnings.
The source: ASX
