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Highlights
- Bank of Queensland share price rose after FY24 results
- Statutory profit jumped significantly while cash earnings dropped
- NIM showed slight improvement in the second half of FY24
The Bank of Queensland (ASX:BOQ) experienced a rise in its share price, up 6%, following the release of its FY24 financial results. This performance reflects a mixed bag of positive and challenging elements for the bank, which operates under several brands including BOQ, Virgin Money, and ME Bank.
For FY24, Bank of Queensland saw its statutory net profit after tax surge by 130%, reaching $285 million. However, cash earnings after tax fell by 24%, down to $343 million. The net interest margin (NIM), a key indicator of profitability, slipped by 13 basis points to 1.56%. However, the NIM saw a slight recovery in the second half of the year, rising to 1.57% from 1.55% in the first half.
The annual dividend for FY24 also experienced a reduction, down by 17% to $0.34 per share. A challenging lending environment impacted the bank's overall revenue, with housing lending down by 2%. Despite a 2% rise in business lending, it wasn’t sufficient to offset the decline in housing loans.
Revenue and Expenses
Total income for the bank declined by 8%, which the bank attributed to a highly competitive market. At the same time, expenses rose by 6%, driven by inflation and ongoing investments in transformation, technology, risk, and compliance initiatives.
The bank made strategic decisions during the year to improve the balance between lower-returning assets in home lending and higher-returning assets, which helped to stabilise some of the pressures. Customer deposits increased modestly by 1% year on year, including a $1.5 billion increase in digital deposits.
Operational Highlights
Bank of Queensland made notable progress in a variety of areas throughout FY24. It advanced its risk management programs, which were independently validated. The bank also initiated actions that are expected to generate $250 million in productivity gains by FY26. The simplification of distribution channels continued, with the bank buying back franchisee branches. Additionally, the migration of ME Bank deposits commenced, and the bank achieved the origination of its first digital mortgage.
Loan Book and Asset Quality
The bank indicated that its loan book quality remained sound with low impairment expenses. However, a slight increase in housing loans overdue by more than 90 days was observed, rising from 0.87% in August 2023 to 1.12% in August 2024. While this trend raises some concern, BOQ maintained a cautious and prudent approach to loan provisioning.
Looking Ahead
The bank expressed an optimistic view about the future, suggesting that the Australian economy is likely to improve over the coming year. Bank of Queensland expects stable margins and growth in its business banking sector, particularly in specialist areas and branch conversions. However, it does anticipate further reductions in mortgage balances and a modest increase in loan impairment expenses.
The outlook for Bank of Queensland includes steady margins and potential productivity benefits, driven by continued simplification initiatives. While challenges remain, particularly in the competitive lending environment, the bank appears positioned for steady progress in the near term.
