Bank of Queensland has lifted interim payout to shareholders nearly 30% to 22 cents a share after recording a solid rise in cash earnings in the six months to the end of February.
Half-year cash earnings of $268 million were up 14% for the first half of 2020-21 and came despite the rise in market volatility with higher inflation, the prospect of higher interest rates and the Russian invasion of Ukraine late in the half.
BoQ spent much of the half integrating the ME Bank acquisition and from comments on Thursday, that seems to be still on track with so-called ’synergy’ benefits upped to $95 million in 2024 from the previous forecast of $70 million to $80 million.
BoQ on Thursday reported growth in both home, business lending and customer deposits had contributed to improvement in earnings as well as a 3% cut in costs in the half.
The big negative was a sharp slide in its net interest margin to 1.74% – 12 points lower than the final half of the previous year but a huge 21 point down from the $1.95 figure in the February, 2021 period.
That will worry some investors.
The bank will, like its larger peers, be hoping rate rises from the Reserve Bank later this year will allow it to reprice variable interest loans to stop the rot in its NIM, while holding back any rise in deposit rates.
A small positive offsetting the fall in the NIM was a cut in the bad debt provision by $15 million in the latest half year.
Home lending was up 9% to $2.6 billion, business lending was up 8% to $600 million and deposit balances up $1.8 billion over the period, contributing to a statutory net profit after tax increase of 38 per cent of $212 million.
BoQ acquired ME Bank last July after decades of ownership by industry superannuation funds. BoQ reported growth in ME Bank’s home lending portfolio turned positive, growing by 2% over the half after falling for the prior two halves.
CEO George Frazis said the integration of ME Bank had progressed well amid mixed economic conditions.
“Australia remains well-placed for continued economic recovery, with low unemployment, high terms of trade and a large pipeline of residential construction and infrastructure work to be done,” he said.
“However, uncertainty remains given geopolitical tensions, elevated inflation, rising interest rates, supply chain and labour disruptions,” he said in the statement.
