2 Regional Banks – BOQ And BEN

Building and sign bank (done in 3d)

The banking industry in Australia faced a tough operating environment during the financial year 2018 with effects of Royal commission and increased regulatory oversight. However, below mention, two regional banks have delivered solid results in FY 2018 despite facing a difficult operating environment. Let us take a closer look at these Regional Banks –

Bank of Queensland Limited (ASX: BOQ)

One of Australia’s leading regional banking group Bank of Queensland Limited (ASX: BOQ) was able to deliver good operating result in FY 2018 despite facing a significantly difficult operating environment. BOQ achieved lending growth of $1.5bn which was around $800 million higher than FY17. In FY 2018, BOQ also delivered an improvement in net interest margin to 1.98 percent. The cost to income ratio of BOQ increased by 20 basis points to 47.5 percent in FY 2018 as compared to FY 2018. During the financial year 2018, the BOQ’s business increased cash earnings by 10 percent with revenue growth of 5%. Recently, the bank terminated its agreement to sell St Andrew’s Insurance to Freedom Insurance Group after it became clear that the conditions of the transaction would not be satisfied within the time limits contained in the sale agreement. On the other hand, the bank announced the resignation of Mr. Jon Sutton who is the Managing Director & CEO of the Bank and also announced the appointment of Mr. Anthony Rose who is currently BOQ’s Chief Operating Officer as an interim CEO of BOQ. Meanwhile, in the last one year, the share price of BOQ decreased by 25.10 percent as on 27 December 2018 and trading at reasonable PE multiple of11.10x. BOQ’s shares traded at $9.690 with a market capitalization of circa $3.81 billion as on 28 December 2018.

Bendigo and Adelaide Bank Limited (ASX: BEN)

Australia’s fifth largest retail bank Bendigo and Adelaide Bank Limited (ASX: BEN) is known for its ability to listen and to understand what the customers need and expectation from it. BEN’s total cash earnings increased by 6.4 percent to $445.1 million and cash earnings per share increased by 4.1 percent to 92 cents per share in FY 2018 as compared to FY 2017. In FY 2018, the bank maintained a payout ratio of 77.9 percent which was higher than the payout ratio of 74.8 percent in 2017. On 28 September 2018, the banking group paid a final dividend of 35 cents per share fully franked, taking the full year dividend to 70 cents per share.  In November 2018, the banking group announced that it is going to redeem all of its AUD$300 million Subordinated notes on their first optional redemption date of 29 January 2019. Meanwhile, in the last one year, the share price of BEN decreased by 10.42 percent as on 27 December 2018 and trading at reasonable PE ratio of 11.48x. BEN’s shares traded at $10.570 with a market capitalization of circa $5.05 billion as on 28 December 2018.


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