Interim dividends are back at Bank of Queensland after first-half profits rose 9% to $165 million, led by a turnaround in its retail banking arm.
The Brisbane-based lender on Thursday said its earnings had benefited from wider margins, strong loan growth and a focus on limiting expense growth.
In light of this improved performance, the bank’s board okayed a 17 cents a share interim to be paid on May 26.
Bank of Queensland deferred last year’s interim dividend as the Covid lockdowns closed down the economy, forced millions out of work or on short hours and saw programs to allow bank customers to der loan repayments.
Improving conditions from mid 2020 onwards saw BOQ pay a 12 cent annual – 6 cents from the first half and the same amount from the second.
Its net Interest margin rose 3 basis points during the half to 1.95% (normally a positive).
This improvement was largely due to lower funding costs from reduced deposit rates and lower wholesale funding costs. This was partially offset by asset pricing and mix, and the ongoing impact of the low cash rate.
CEO George Frazis highlighted the performance of its retail bank, a key area of focus for the lender.
“During the half, the BOQ retail business delivered a strong turnaround, contributing to the group’s third consecutive half of improved performance, and demonstrating that our strategy and transformation are heading in the right direction and delivering results,” Mr Frazis said.
Mr Frazis said the $1.3 billion purchase of ME Bank, announced in February, remained on schedule.
“We anticipate the acquisition to be completed by the end of our financial year (in August).
“The acquisition is expected to deliver material scale and doubles the size of our retail bank as we bring together trusted and complementary brands,” he said.
The outlook was positive with the bank guiding to a solid second half performance.
“We expect to deliver positive jaws of around 1% in FY21, driven by above system growth in lending, NIM positive in FY21 and broadly flat half on half, and cost growth of approximately 3%.
“BOQ Group remains prudently provisioned for any potential losses arising from the outcomes of COVID-19. We remain committed to sustainable profitable growth, supporting returns to shareholders and a dividend payout ratio target range of 60 – 75% of cash earnings,” directors said.
That was all the right words for the market but investors couldn’t quite get a real handle on the figures. At first they bid the shares up to a day’s high of $9.13 at the opening, then second thoughts emerged and the shares made a long slide to close down 0.7% at $8.83.
Perhaps there’s underlying worry about merger and implementation costs from the company changing takeover of ME Bank – at a $1.3 billion cost, there’s a a huge company risk riding on a low cost easy transition and merger.
