BOQ Results, page-5

I agree with some of the sentiment on this thread... This looked like quite a weak result to me and I guess the market reaction is consistent with that, but I thought the market was expecting a weak result judging on the share price.

NIM down 3bp, despite two rate cuts during their financial year (always a positive for NIM because they don't pass on the cut straightaway) and the margin expansion on back book investor loans (they increased investor home loan rates earlier this year).

Loan impairments remain at very low levels and are lower than they have been in the past 5 yrs. I find this interesting given their QLD non-metro (aka mining) exposure and if you look closely at their most recent REDS securitisation vehicles arrears have been increasing. You can find the securitisation reports on their website at: https://www.boq.com.au/shareholder_REDS_securitisation.htm
For various reasons, many banks typically securitise assets that are slightly better quality than what remains on their balance sheet, so if arrears are high in these, then I suspect they are higher on the bank’s balance sheet. This will be something to watch in 2017.
I couldn't find a single mention of LCR in their presentation and the only mention of NSFR is on slide 27 with no relevant information on the impact to BOQ. I notice that elsewhere in their pack they mention NSFR impact on competition for deposits, but with their funding mix and in particular their retail deposit mix (heavy tilt toward potentially "heavily rate driven" TDs and online savings accounts) I don’t think the NSFR ratio will be a walk in the park for BOQ. This means that in the next 12 months they will need to raise more long-term wholesale funding, securitisation funding and/or good quality retail deposits to comply. All of these will negatively impact their margins because the new funding will have to replace cheaper forms of funding such as short-term wholesale funding in order to improve the ratio.

I think it’s hard to see much profitable growth in this business in 2017… margin, regulatory and potentially higher impairment headwinds on the way in my view.
The main caveat to that is the share price is not super expensive, but I think it is probably headed toward $10 and potentially lower.