The Bank of Queensland Ltd (ASX: BOQ) share price is up more than 8% after the regional bank revealed its FY22 result.
BOQ operates three different brands: BOQ, Virgin Money and ME Bank.
FY22 result
The bank told investors how it performed for the year ended 31 August 2022. It reported:
- Cash profit/earnings per share (EPS) rose 5% to 78.4 cents
- Statutory net profit after tax (NPAT) increased 15% to $426 million
- The net interest margin (NIM) fell 12 basis points (0.12%) to 1.74% – this shows how much profit it makes on its lending
- Housing loan growth of 7%
- Business loan growth of 7% too
- Final dividend of 24 cents per share, up 9% – this was a payout ratio of 65% of the second half earnings
BOQ’s managing director said that the result demonstrated the “disciplined execution of our strategy, the digital transformation program and ME integration and represents another period of improved underlying performance.”
ME Bank’s loan book has returned to growth, while BOQ and Virgin Money saw growth that was faster than the banking system.
FY23 outlook
The regional bank believes that Australia remains “relatively well-placed for continued economic recovery, with low unemployment, high level of built up household saving, strong business order books, robust growth in capital expenditure plans and high terms of trade”.
But, it also pointed to negatives like elevated inflation, rising interest rates and a weakening global economy to be mindful of.
The bank is still focused on quality, sustainable, profitable growth. Growth across all of its brands in FY22 provides a revenue tailwind moving into FY23.
BOQ said it has positive lending margin momentum, with tailwinds from rising interest rates. However, this is somewhat offset by headwinds of rising funding costs.
Inflation and the costs of the new digital bank create near-term headwinds for expenses, however these will be partly offset by ongoing benefits from the integration and productivity programs.
It intends to operate with its capital ratio (CET1) above the target range of 9% to 9.5%, while the dividend payout ratio target range is 60% to 75% of cash earnings.
Final thoughts on the BOQ share price
I’m not surprised to see that it has risen nicely in response to this update. Profitable growth and a good dividend are an attractive combination. I think it’s more of a dividend play than strong capital growth, but its efforts to improve the bank should help in the longer-term.
For now, there are other ASX dividend shares that I think could deliver better total returns.
