Financial Services

Bank of Queensland sees revenue growth and margin momentum heading into FY23

Wed 12 Oct 22, 10:26am (AEST)
REIT 6 Residential Property Housing View Aerial
Source: iStock

Key Points

  • Bank of Queensland shares rallied 5% as the market opened
  • Net interest margins fell 12 basis points due to ongoing competition, higher fixed rate lending volumes and higher liquid assets
  • The bank expects positive margin momentum heading into FY23

Bank of Queensland (ASX: BOQ) posted a -5% decrease in FY22 cash profits reflecting industry wide net interest margin pressures.

The bank said it has positive margin momentum moving into FY23 thanks to rising interest rates. Although ongoing investments into digital capabilities and inflation is expected to create near-term cost headwinds.

Bank of Queensland shares rallied 5% as the market opened.

Results at a glance:

Full year

2022

2021

% change

Total income ($m)

1,682

1,673

1

Underlying profit ($m)

745

740

1

Cash earnings after tax ($m)

508

532

-5

Statutory net profit after tax

426

369

15

Final dividend (cps)

24

22

9.1

Full year dividend (cps)

46

39

18

Source: Company data | Table: Market Index

FY22 highlights

Housing loan growth momentum: "ME returned to growth during the year and the Group delivered housing growth of 1.0x system for the year."

Business loan growth ahead of system: The Group posted $1.2bn of SME lending growth over the year. Small and medium business lending grew at 1.5x system to $600m but lending to large corporates lagged at 0.6x system or $500m.

Margin pressure: Net interest margin was 1.74% for the year, down 12 basis points. This reflected "continued competitive pressure in home lending and customer preference for fixed rate lending in a period of increasing swap rates."

Stable loan arrears: Arrears in both the 30 day and 90 day categories fell -12% and -25% compared to a year ago. "Loan growth, low unemployment and the general strength of economic conditions in FY22 have contributed to the reducing levels of arrears. To date, interest rate rises have had no material impact on the level of arrears," the company said in a statement.

Cautiously optimistic outlook

"Growth across all brands in FY22 provides a revenue tailwind moving in to FY23," said CEO George Frazis.

"We have positive NIM momentum, with tailwinds from rising interest rates partly offset by headwinds from rising funding costs."

"Inflation and the costs of the new digital bank create near term headwinds for expenses, however, these will be partly offset by ongoing benefits from the integration and productivity programs," he added.

At the end of the financial year, Bank of Queensland maintained a CET1 ratio of 9.57%, down 11 bps compared to the first-half. The capital position is below Big 4 peers that recorded a CET1 ratio between 10.75% to 11.5% in FY22.

Bank of Queensland acknowledged the ongoing risks for its upbeat outlook for FY23.

"Uncertainty remains given elevated inflation, rising interest rates, geopolitical tensions ... Housing and business system growth expected to slow in FY23 and both residential and commercial property prices expected to fall."

Bank of Queensland Ltd (ASX BOQ) Share Price - Market Index
Bank of Queensland share price chart

 

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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