BOQ profit hits skids

Bank flags ‘bold’ strategic initiatives to spark recovery

Bank of Queensland 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, with competition, inflation and funding costs hurting margins.

Unveiling the result, chief executive Patrick Allaway flagged further “bold” strategic moves to address the structural challenges.

Those include 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 pervious 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 and it’s not sustainable at current levels. We will continue to look at our portfolio of assets to ensure we get appropriate returns”.

The bank has stepped out of the mortgage market, with home lending volumes shrinking by $411m during the half, as Mr Allaway says the bank is still not “getting an acceptable economic return”.

BOQ said it was on track to deliver $200m in productivity benefits by 2026.

It has cut over 220 full time employees from its ranks, reduced about 6000 square meters 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 $256m in the first half of 2023. That was also lower than the $194m reported in the previous half.

When asked if the potential strategic initiatives being considered involved selling off or divesting certain parts of the company’s business portfolio or assets, Mr Allaway declined to provide any details or confirm whether divestments were on the table.

“I’m not going to speculate on that,” he told analysts at the briefing. “We are looking at multiple opportunities to pursue additional pathways to get to where we need to get to. If we have anything to tell you, we’ll certainly tell you at the appropriate time.”