Subdued Outlook Shades Bank Of Queensland

Issues for Bank of Queensland (BOQ) are taking another tack after the company’s first half result release, as the bank flags a re-pricing of its mortgage book. Heightened concerns regarding margin pressure have abated somewhat, as margins were flat in the half, and this latest round of re-pricing should provide support. Most brokers were disappointed at the headline numberss, nevertheless, with revenue growth lower than expected.

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BoQ Hikes Loan Rates

The Bank of Queensland has gone down the greed route by boosting home loan rates, despite reporting a 7% rise in cash earnings for the six months to the end of February and a snazzy 6% rise in interim dividend to 38 cents a share.

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BOQ – Macquarie rates the stock as Underperform

Ahead of Bank of Qld’s result on Friday, the broker suggests the market is pricing in system growth ahead that isn’t coming, impairment reductions that are unlikely and margin improvement that is far from certain. There will be improvement in these areas but not significantly, and the broker has trimmed forecast earnings to reflect lower revenue expectations.

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It’s Virgin Money For Bank Of Queensland

It was, on first view, underwhelming. Bank of Queensland ((BOQ)) announced the acquisition of Virgin Money Australia and received a cool reception from brokers. The underlying problem is that Virgin Money is loss-making at present and comes via previous ventures with Westpac (WBC) and Macquarie ((MQG)). Venturing deeper into the benefits of the acquisition provides a better view of how the bank can leverage the business.

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This Week At A Glance

If the protagonists in the US Cliff discussions have no other incentive to reach a resolution, it is to be able to enjoy a Christmas break. Hence while many in the market are confident an agreement could be reached before year-end, others suggest the incentive to not be stuck in Washington from Christmas to New Year is enough to encourage pre-Christmas success.

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BOQ – Citi rates the stock as Hold, High Risk

Bank of Queensland issued a profit warning and Citi analysts were already prepared. After all, the floods in Queensland have been difficult to miss even if one tried. Having said so, the analysts seem to disagree with management that it was all related to the floods. They suspect that’s merely a convenient excuse, there’s weakness and vulnerability in BOQ’s SME/Commercial book, they point out instead.

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BOQ – RBS Australia rates the stock as Hold

No matter how hard management is trying to convince the market there’s good news to be found inside the organisation, RBS analysts believe questions surrounding the bank’s model remain and this will keep a lid on the share price. Until the key question -how is this model going to perform during an economic downturn- is being answered, negative sentiment is going to prevail, predicts RBS. Target lowered to $7.85 from $8.69 previously. On current RBS estimates dividend payouts will dive in each of the next two financial years. Sector: Banks.

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