BoQ faces uphill battle say analysts
ANALYSTS are warning BoQ faces an uphill battle in the lending market, and have cut earnings forecasts for the 180branch lender.
BoQ on Tuesday unveiled half-year profits of $182 million, up 4 per cent from the same time 12 months earlier, but lending growth remained below industry averages.
Its managing director Jon Sutton pointed to lifts in areas such as Virgin Money, a brand aiming at a younger demographic, and a division lending to medical specialists. “We are getting ourselves back to growth” across the business, Mr Sutton said.
But UBS analysts said the result was weak and revenue was “still likely to go backwards”. They agreed BoQ’s more rigorous standards had resulted in lower lending volumes than rivals, and said royal commission pressure on responsible lending would likely reduce borrowing limits from major banks.
“Although this brings the majors in line with BoQ, we believe this may lead to a sharp reduction in system (industrywide) housing finance and if the ‘animal spirits’ turn, could result in a credit crunch,” UBS said. UBS cut BoQ earnings forecasts for the full year by 3.4 per cent to $370 million.
Morgan Stanley analysts predicted BOQ margins would face pressure from greater competition for new loans and higher funding costs.
Morgan Stanley cut BoQ earnings estimates by 3 per cent to $365 million. Both analysts highlighted BoQ’s low level of bad loan problems, with the bank only suffering a $22 million hit from problem debts in the result. Shares in BoQ closed 8¢ lower at $10.58.