The Bank of Queensland Ltd (ASX: BOQ) share price jumped 6% after the bank reported its FY24 result.
Bank of Queensland has a number of brands within its business including BOQ, Virgin Money and ME Bank.
FY24 result
Here are some of the highlights from the bank’s 2024 financial result:
- Cash earnings after tax down 24% to $343 million
- Statutory net profit after tax jumped 130% to $285 million
- Net interest margin (NIM) down 13 basis points (0.13%) to 1.56%
- FY24 annual dividend down 17% to $0.34 per share
There were issues for the ASX bank share for both its lending/revenue and costs. Its housing lending declined by 2%, though the business lending increased by 2% (but this was smaller, so it didn’t offset the housing lending decline).
Total income declined 8% because of the “highly competitive environment”, while expenses increased 6% because of inflation and continued investment in “transformation, technology, risk and compliance.”
BOQ said as pressures in the home lending market continued through the year, management decided to use lower-returning home lending capital and shift the portfolio mix to higher returning assets.
Customer deposit balances increased by 1% year on year, thanks to an increase of $1.5 billion in digital deposits.
The bank said it had made progress in a number of areas, including the delivery of FY24 risk programs, validated by independent reviewers. It has identified and executed on further initiatives to deliver $250 million in productivity benefits by FY26. BOQ has started the simplification of its distribution channels (including buying back franchisee branches). The ME Bank deposit migration has started. Finally, it has delivered the origination of the first digital mortgage.
Pleasingly, the NIM improved to 1.57% in the second half of FY24, up from 1.55% in the first half in a sign the worst of the profit margin impacts are over.
Loan book quality
The bank said the portfolio quality is “sound” with a low loan impairment expense and “prudent provisioning coverage”.
However, BOQ did show that its percentage of housing loans that are at least 90 days overdue increased from 0.87% at August 2023 to 1.12% in August 2024, which isn’t a welcome trend.
Outlook for the BOQ share price
The bank said it’s “optimistic” about the long-term and that the Australian economy is likely to improve in the coming financial year.
The bank expects stable margins and revenue benefits from business bank growth in specialist areas and branch conversion, partially offset by further reductions in mortgage balances.
It’s also expecting broadly flat expense growth due to simplification initiatives offsetting inflation, higher amortisation and branch conversion costs. The transformation investment spend will “reduce materially”.
However, while asset quality remains “sound, diversified and well collateralised”, the loan impairment expense is expected to increase from current low levels.
The situation is better than investors feared with BOQ shares, it seems. But, I’m not sure what would reduce lending competition in the country, so I’m not wanting to invest in the bank.
There are other ASX dividend shares I’d rather buy for my portfolio with a stronger growth outlook.
