Low interest rates and intense competition kept the Bank of Queensland’s annual cash profit at $360 million, a rise of just 1%.
The result was in line with forecasts but compares to a 7% rise in cash profit to $179 million for the first six months of the financial year.
“BOQ has delivered increased cash earnings after tax for the fourth consecutive year, a significant achievement in an environment of low interest rates and intense competition,” says CEO Jon Sutton.
Revenue was up 3% to $1.117 billion. Statutory net profit after tax rose 6% to $338 million.
Net interest margins were down by 3 basis points to 1.94% but loan impairment expenses dropped 9% to $67 million or 16 basis points of gross loans.
The result includes a one-off $15 million to refine the bank’s operating model. The bank is reshaping its organisational structure and delivering a number of key initiatives including the launch of Virgin Money Australia mortgages.
“The bank has come a long way in recent years and we are confident that we have the right strategy in place and are well positioned for the future,” says Sutton.
The bank has long been pushing out of its home state to the rest of the Australia, with 52% of its lending now outside Queensland.
He says a number of headwinds emerged in 2016, including fierce competition for deposits and pricing for new lending.
“Expectations of lower interest rates in Australia for longer has meant a lower rate of return on capital and low cost deposits,” he says.
“We have taken steps to adapt to this low interest rate environment. Given the expensive funding environment and increased competition, we slowed asset growth in the second half, following a strong period of growth in the first half.
“During this period we have focused on deposit gathering and growing in niche segments where we believe specialisation can deliver superior returns.”
A final fully franked dividend of 38 cents a share was declared, taking the full year payout to 76 cents, up 3% on the previous year.
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