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BOQ share price slumps after it warns of high-single-digit profit falls

This morning regional lender Bank of Queensland Limited (ASX: BOQ) warned investors profits for the six-month period ending February 28 2019 could fall close to 10% as “non interest” income is expected to be $8 million to $10 million lower than the prior corresponding period.

This will translate into an interim profit between $165 million to $170 million compared to $182 million in the prior corresponding half-year reporting period. That would equate to 9.4% profit fall if BOQ comes in at the bottom end of guidance.

The bank blamed the fall on “continued downward pressure across fee, trading, insurance and other income lines”. This may come as a surprise to the market as consensus is that Australian banks’ core interest income (that earned on its assets such as home loans) is most vulnerable to tougher times due to slowing credit growth and falling house prices.

However, the bank confirmed its net interest margin remained steady between 1.93% to 1.95% (compared to 1.97% in prior peri0d) which is lower than its big 4 rivals like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), and more in line with European peers that operate in more competitive markets.

Investors will probably take the pressure on non-interest income as a negative given the known headwinds facing credit growth and lending markets, with the BOQ share price potentially under pressure later in seeing how its latest guidance compares to analysts’ forecasts.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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