BOQ mulling ‘strategic’ options as profits slide
Bank of Queensland has flagged “bold” strategic initiatives under consideration to improve shareholder returns, as it reported a 33 per cent decline in cash profit and lower dividends in the first half of the year, with competition, inflation and higher funding costs hurting margins.
Unveiling the result, chief executive Patrick Allaway flagged further “bold” strategic moves the bank was considering to address the structural challenges the lender is facing.
Those included a change in its business model, pursuing a bolder simplification program, and capital optimisation initiatives, he said. Mr Allaway declined to clarify whether the possible strategic initiatives included selling off parts of its business portfolio.
In October 2022 BOQ said it was working to improve its cost to income ratio (CTI) – which at the time was around 55.7 per cent – to less than 50 per cent by the 2026 financial year. It was also targeting an improvement on return on equity (ROE) from 8.4 per cent to above 9.25 per cent in the same time frame.
On Wednesday, the lender unveiled a ROE of 5.1 per cent for the first half of the 2024 financial year, a deterioration from the 6.2 per cent posted in the previous half and far from its target.
It also said its CTI ratio had been 65.9 per cent in the half, up from 61.3 per cent in the second half of 2023.
“We are addressing new pathways and additional initiatives to ensure that we meet those targets,” Mr Allaway said.
“We certainly recognise that we need to lift our way.”
The bank has stepped out of the mortgage market, with home lending volumes shrinking by $411m during the half, as Mr Allaway said the bank was still not “getting an acceptable economic return”.
BOQ also wants to grow its business banking book in key industries such as among medical practices, where it says it has competitive advantages. It also plans to grow non-interest revenues through its thirdparty credit card and insurance business.
BOQ said it was on track to deliver $200m in productivity benefits by 2026.
It has cut more than 220 fulltime employees from its ranks, reduced about 6000sq m of corporate property space and consolidated its five contact and support centres into a single shared service model for all its brands.
Cash profit for the six months to February 29 fell to $172m, compared to the $256m reported for the first half of 2023. That was also lower than the $194m reported in the previous half.
Dividends fell to 17c a share, down from 20c last year.