BoQ H1 Profit Slides

Bank of Queensland (BOQ) has held hits interim dividend steady at 38 cents, fully franked after reporting a less than stunning interim profit.

The regional bank blamed strong competition for both loans and deposits for a 2% decline in first-half cash profit to $175 million.

Cash profit for the six months to February 28 fell from $179 million in the prior corresponding period, while statutory net profit dropped 6% to $161 million.

Its net interest margin – the difference between the interest it earns from loans and what it pays to fund them – fell by five basis points from the prior half to 1.85%.

“We have prioritised margin and credit quality over growth in this half, in what has been an intensely competitive period, not just in lending but also in retail deposits,” Jon Sutton said in a statement accompanying the results. "A higher quality, higher margin portfolio will deliver more sustainable profits longer term and this has guided our response to a number of industry headwinds."

Mr Sutton said the outlook for the second half was brighter, with lending applications picking up since the turn of the year.

"We have seen a 30 per cent uplift in mortgage application volumes in recent weeks which gives us confidence of a return to growth in the second half," Mr Sutton said.

Operating expenses fell 2% on the prior corresponding period, while the loan impairment expense dropped 25% to $27 million which helped reduce the size of the fall in both profit measures.

Some commentators see the BoQ result as a sort of advance warning for the bigger banks interim and full year results with its month earlier balance dates (February 28 for this result).

But because of its much narrower geographic and spread of products (and its lack of the international operations the bigger banks have, mostly in NZ), the BoQ isn’t always a good guide.

The NAB, Westpac and ANZ rule off their interim books tonight.

Bank of Queensland shares rose 2.5% to $12.04.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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