• Cash Earnings After Tax: $343 million.

• Statutory Net Profit After Tax: $285 million.

• Business Lending Growth: 7% annualized.

• Cost Growth: 2.9% excluding investment and amortization.

• CET1 Ratio: 10.66%.

• Dividend: $0.17 per share, payout ratio of 65.4% on cash earnings.

• Net Interest Margin (NIM): Improved by 2 basis points to 1.57%.

• Total Income Reduction: 8% decrease, with net interest income down 9% and non-interest income down 4%.

• Loan Impairment Expense: $20 million or 2 basis points to GLA.

• Deposit Funding: 71% of total funding, deposit to loan ratio increased to 84%.

• Investment Spend: $257 million in FY24, down 21% from FY23.

• Asset Finance Portfolio Growth: 1.6% in FY24, 4% in the second half.

• Digital Platform Customer Growth: 34% increase, with $7.2 billion in savings balances.

• Warning! GuruFocus has detected 5 Warning Signs with BKQNY.

Release Date: October 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bank of Queensland Ltd (BKQNY) reported $343 million in cash earnings after tax, demonstrating disciplined execution despite elevated competition.

• Business lending grew by 7% on an annualized basis, indicating strong performance in targeted segments such as healthcare, agriculture, and diversified business lending.

• The company has largely completed the foundational build of its end-to-end digital retail bank, which is expected to improve customer experience and reduce operational costs.

• The CET1 ratio stands at 10.66%, at the top end of the target range, reflecting strong financial resilience.

• The bank has announced a strategic decision to convert all 149 manager branches to corporate branches, expected to be completed by March 2025, which should align with its digital and specialist banking strategy.

Negative Points

• Total income reduced by 8% with net interest income down 9% and non-interest income down 4%, reflecting challenges in the current competitive environment.

• The home lending portfolio contracted as the bank prioritized economic return over growth, impacting overall revenue.

• Operating expenses increased by 6% due to continued inflation and investment in business transformation.

• The bank faces potential legal challenges from owner managers regarding the conversion of branches, which could impact future operations.

• Loan impairment expense, while improved, remains a concern with expectations of higher arrears due to sustained high interest rates.

Q & A Highlights

Q: How does Bank of Queensland plan to achieve its FY26 ROE target of 8% given the current revenue and mortgage balance expectations? A: Patrick Allaway, CEO, explained that revenue growth will come from accelerating business banking growth, with a 70% increase in bankers. The conversion of the owner manager network will also uplift revenues. Additionally, the rollout of digital mortgages and restructuring distribution channels will return the retail bank to growth by FY26. A $250 million productivity target is also a key driver for achieving the ROE target.