Squeeze on BoQ profit
Regional lender’s shares hit after warning
BANK of Queensland has warned profits are shrinking, making it the third regional bank to detail an earnings bite in seven days.
Shares in the 176-branch BoQ slumped 62¢, or 6.2 per cent, in morning trade to $9.33 after the warning yesterday. It creates another headache for BoQ, whose chief executive cer suddenly resigned last year.
Stockmarket watchers had already been jittery about Brisbane-based BoQ. Morgan Stanley analysts last week flagged “challenges at BoQ’s retail bank, given stalling volumes and falling margins despite consecutive repricing”.
The bank yesterday morning then said that cash earnings for the half year were likely to land between $165 million and $170 million. In the first half of financial year 2018, earnings were $182 million.
Several factors were blamed: revenues had fallen up to $10 million in areas such as fees, trading and insurance.
The insurance fall comes after the bank tried to offload its St Andrew’s Insurance arm. That deal collapsed amid pressure on potential buyer Freedom Insurance following a horror appearance at the banking commission.
BoQ said its net interest income – the difference between funding expenses and revenues from lending – would be flat compared to a year earlier at $475 million. But margins would be squeezed, which was linked to higher funding costs and competition for new loans. Coca-Cola Amatil CEO Alison Watkins after the firm slashed the value of Shepparton-based SPC to zero
It also said “non-recurring costs” would have an effect. Those were not detailed, but when Jon Sutton resigned as CEO in December, blaming heart surgery, the company said he would receive nine months’ pay, which the annual report indicates would be about $975,000 and accrued entitlements.
Further squeezes were in sight, BoQ warned yesterday. “Looking forward to the second half, market conditions are expected to remain challenging. We expect regulatory costs to increase as BoQ adapts to changes in regulatory requirements and expectations, including the impacts of the royal commission.”
BoQ releases audited results on April 11. Just last week, fellow Brisbane-based lender Suncorp detailed a 4.7 per cent drop in half-year profits.