Bank of Queensland reports $372m full-year cash profit

Bank of Queensland has reported a full year cash profit of $372 million, a 2 per cent decline for the year, as the lender managed to maintain its lending margins despite rising funding costs.

The regional lender reported a cash earnings per share of 94.7¢ ahead of consensus forecasts of 90¢.

Shares of Bank of Queensland opened 1.62 per cent up at $10.95 on Thursday.  

Chief executive Jon Sutton said that the bank had grown its revenues by 2 per cent, despite “significant headwinds facing the sector” by growing its loan books and improving its margins.

“We have managed for the environment we are faced with, prioritising margin over growth,” Mr Sutton said.

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Mr Sutton said the bank continued to geographically diversify its business while its business division had grown to the point where it now contributes 60 per cent of cash earnings.

The bank, which was among the first to lift interest mortgage rates in response to higher funding costs, said its net interest margin had increased by five basis points to 1.98 per cent over the year.

Over the half year, the net interest margin increased by one basis point, better than the three basis point decline some analysts had forecasted.

Bank of Queensland grew its lending book by $1.5 billion driven by “targeted niche commercial lending segments, as well as increasing the mortgage book for both Virgin Money Australia and BOQ Specialist”.

Bank of Queensland’s statutory net profit after tax fell 5 per cent to $336 million.

The reported cost to income ratio increased by 90 basis points to 47.5 per cent. Asset quality showed an improvement, the bank said, as impaired assets by 15 per cent to $164 million while the loan impairment expense also fell 15 per cent to $41 million, or nine basis points of gross loans. Return on equity fell 50 basis points to 9.9 per cent.

The bank’s common equity tier one ratio stood at 9.31 per cent which it said “provided the flexibility to consider how best to deploy capital for long-term shareholder returns.”

The lender flagged an increasing in capital expenditure relating to digital banking, and to “create headroom” for the investment, future earnings would be impacted as the 2018 full year result included a $16 million accelerated amortisation charge.

The board maintained the final dividend at 38¢ per ordinary share.

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