BoQ faces up­hill bat­tle say an­a­lysts

The Courier-Mail - - BUSINESS - LIAM WALSH

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.

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