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Bank of Queensland FY20 results: everything you need to know

We examine the highlights from the Bank of Queensland’s 2020 results, including the bank’s FY21 outlook and Macquarie’s thoughts on the full-year release.

BOQ Source: Bloomberg

Bank of Queensland share price rises on FY20 release

Despite noting that ‘good progress’ had been made on ‘delivering strategic initiatives' – the Bank of Queensland (BOQ) still reported an 82% lower FY20 dividend and substantially weaker earnings as part of today’s full-year release.

The bank’s 'FY20 result reflects the challenging environment and a year of transition,' BOQ's MD and CEO George Frazis said. 'Our FY20 financial performance has been impacted by both COVID-19 and by a number of strategic foundational investments.'

Of course, there were some positives from today’s release, with the regional bank reporting:

  • Customer deposits rose $2.3 billion, coming in at $35 billion.
  • A Common Equity Tier 1 ratio (CET1) of 9.78% – above APRA's unquestionably strong benchmark.
  • Improved net interest income, rising 3% year-over-year to come in at $968 million; while the bank's net interest margin (NIM) improved 3 basis points between H1 FY20 and H2 FY20, though fell 2 basis points between FY19 to FY20.
  • Robust lending growth, noting that ‘momentum increased across both the housing and business lending portfolios during FY20.'

Investors responded positively to today’s full-year release, bidding the Bank of Queensland's stock up 20 cents or 3.12%, to $6.60 per share by 11:19 AM.

Mind you, despite trading well off the lows recorded in March, BOQ remains somewhat below the levels it achieved in January – starting the year off above the $7 per share mark.

Key FY20 figures in focus

Despite a number of positive developments, as noted at the start, BOQ reported broad declines in its earnings and dividends as part of its FY20 results.

Here the bank reported after-tax cash earnings of $225 million, down 30%; against after-tax statutory net profits of $115 million, down a more substantial 61%.

Overall, while total bank income increased 1% – to $1,096 million – driven by lending growth across the bank's housing and business portfolios – it was partly offset by a 7% increase in costs, with operating expenses reaching $594 million in FY20.

Likely to the disappointment of income-focused investors, BOQ today revealed that its full-year dividend would come in at 12 cents per share, a move that the bank said was made in line with APRA's recently updated capital management guidance. The 12 cent dividend represents a 92% decline from the dividends BOQ paid in FY19.

Elsewhere, the regional bank said it was 'well provisioned for potential losses', booking $133 million in COVID-19 provisions across fiscal 2020.

Looking forward, Mr Frazis said: 'Although difficult to predict in this environment, we expect to broadly deliver neutral jaws in FY21 driven by above system growth in lending, margin management to within 2-4bps decline, and cost growth of c.2%.'

'Our prudent collective provision sees us well placed to withstand anticipated lifetime losses arising from COVID-19,' Mr Frazis finished.

Analysts from Macquarie Wealth Management reacted constructively to BOQ’s FY20 report, saying that:

‘While BOQ remains exposed to tail risk losses should economic conditions disappoint, BOQ’s 2H20 result was better relative to MRE and consensus expectations.’

Despite those positive comments, Macquarie analysts remain Neutral on the stock, with a price target of $5.50 per share. Even so, the investment bank conceded that there is ‘scope for near-term rerating on the back of the better-than-expected FY20 result.’

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