What made Bank of Queensland (ASX:BOQ) raise first-half dividend

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Image Source: © Moth | Megapixl.com

Highlights

  • Bank of Queensland’s first-half profit increased by 38% to AU$212 million.

  • Net interest margin (NIM) fell 12bps to 1.74%.

  • Home lending was up 9% to AU$2.6 billion.


Bank of Queensland Ltd (ASX:BOQ) on Thursday announced a hike in dividend after its first-half profit increased 38% to AU$212 million despite uncertain conditions. The bank’s board announced an interim dividend to be paid on 26 May 2022, of 22 cents per share, representing 53% of cash earnings in six months to 31 December 2022. The distribution is 29% higher compared to the corresponding period.

Bank of Queensland provides financial services and products in Australia. It runs its operations in mainly two segments -- insurance and banking.

Meanwhile, BOQ’s net interest income (NII) fell to AU$741 million, down 2% from 1H21, driven by a decline in net interest margin (NIM) on account of rising competition in the housing sector.

NIM fell 12bps to 1.74% during the period. It included 7bps of underlying dip “primarily due to industry dynamics, including ongoing competition, higher fixed rate lending volumes and volatile swap rates, and a further 5bps relating to increased liquidity during the period.”

BOQ’s net profit

Statutory net profit after tax rose 38% to AU$212 million. Home lending was up 9% to AU$2.6 billion, business lending was up 8% to AU$600 million and deposit balances rose to AU$1.8 billion.

On the other hand, cash earnings per share rose 16% to 41.1cps in the first half, while CET1 stood at 9.68%, down 12bps than 2H21, but above the target range of 9 to 9.5%.

What does the management say?

Commenting on the results, BOQ's chief executive officer George Frazis said that the latest earnings highlighted the bank’s “disciplined execution” of the ME Bank integration. The results also demonstrate the bank’s digital strategy to move operations onto the cloud, Frazis also said.

“This has been achieved during a period of ongoing economic uncertainty from COVID-19, and at a time of notable change as we bed down the integration of ME and upgrade our digital capability for customers and our people,” Frazis noted.

Outlook

BOQ’s integration of ME Bank is expected to cost in the range of AU$130 million to AU$140 million (pre-tax) over the life of the program. The majority of integration is expected to occur in the first two years. BOQ acquired ME Bank last July.

“There may still be uncertainty associated with COVID-19 over the next year. We will continue to maintain a prudent approach to provisioning. We have a strong capital position and expect CET1 to remain comfortably above 9.5%,” the bank said.

Meanwhile, by 10:30 AM (AEST), the stock was trading at AU$8.19, down 3.99%.

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