...banks are way overvalued.
...flight to perceived safe haven and yearning for dividends, unmatched to potential mean reversion (soon). BoQ earnings drop
Lucas Baird
Cash earnings at regional lender Bank of Queensland have fallen by a third to $172 million in the six months to February.
The company, which revealed its result to the market on Wednesday morning said the big fall was due to “competition for lending, higher funding costs, inflation and investment risk [and] compliance and technology” costs as speculation mounts about the future of regional banks due to an outsized regulatory burden and smaller scale compared to bigger competitors.
Net-interest margins – a core measure of profitability – fell 24 basis points in the half to just 1.55 per cent. BoQ also jut its interim dividend to just 17c per share from 20c per share last financial year.
“The result has been impacted by continuing industry headwinds, with heightened competition for lending and deposits and higher funding costs,” CEO Patrick Allaway said.
“Real progress has been made against our strategic priorities. We have made a good start to our simplification productivity agenda and have agreed to remedial action plans with our regulators.“
“Our digital transformation is progressing to plan. We have built and tested both our digital mortgage and legacy migration infrastructure, with these key milestones moving to delivery stage in the second half.“
BoQ said it was grappling with higher funding costs as it replaced ultra-cheap capital from the RBA’s COVID-era Term Funding Facility with more expensive wholesale funding. While it recorded higher income from “third party credit card and insurance products”, this was offset by far lower returns in its core banking business.
Operating expenses also kicked up 6 per cent year-on-year to $524 million, largely off the back of higher employee costs and administration expenses
