The Bank of Queensland Limited (ASX: BOQ) share price has drifted 4 cents lower $11.70 after the regional bank released its half-year results to the market.
Key takeaways from the release include:
- Revenue fell 5% on the prior corresponding period to $532 million.
- Cash earnings after tax fell 2% to $175 million.
- Diluted cash earnings per share of 43.7 cents.
- Fully franked interim dividend of 38 cents per share.
- Net interest margin down 5 basis points to 1.85%
- Common equity tier one capital ratio up 29 basis points to 9.29%.
According to the release the weak first-half performance was the result of strong competition for loans and deposits in a low interest environment.
Furthermore, the bank has prioritised margin and credit quality over growth during the half with the belief that a higher quality and higher margin portfolio will deliver more sustainable long term profits.
This led to Bank of Queensland finishing the period with a flat loan balance and the five basis point drop in its net interest margin.
What next?
Managing director and CEO Jon Sutton feels confident that the bank is positioned for a much stronger second-half.
He expects lending application volumes to pick up as the calendar year progresses. Stating that:
"In a rapidly changing operating environment where regulation, competitive dynamics and customer demands are shifting. A number of the headwinds that emerged in 2016 abated late in the half, which saw mortgage application momentum return and deposit spreads improve."
Should you invest?
While at 13x trailing earnings Bank of Queensland certainly looks to be better value that its larger rivals Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA), I still feel the current share price means its shares are fully valued with limited upside potential.
In light of this I think it would be best to give the regional bank a miss and focus on other areas of the market.