The Bank of Queensland Limited (ASX: BOQ) share price will be on watch on Thursday following the release of the regional bank's half year results.
Here's how the bank performed during the six months to February 28 compared to the prior corresponding period:
- Cash earnings after tax down 8% to $167 million.
- Statutory net profit after tax fell 10% to $156 million.
- Net Interest Margin down 3 basis points to 1.94%.
- Cost to Income ratio up 190 bps to 49.5%.
- Loan Impairment Expense of $30 million or 13 basis points of gross loans.
- Common Equity Tier 1 (CET1) capital ratio of 9.26%
- Basic earnings per share down 10% to 41.8 cents
- Return on average ordinary equity down 110 bps to 8.8%
- Fully franked interim dividend down 10.5% to 34 cents per share.
Why were its profits down?
Interim chief executive officer Anthony Rose explained that the poor performance was due to the challenging revenue and cost environment that Bank of Queensland and the rest of the industry face and company specific factors.
He said: "Across the industry, there have been significant changes in the banking landscape which has created revenue headwinds for the sector."
Before adding: "BOQ also has challenges that are specific to our business, particularly in the Retail Bank, where our lending processes, digital platforms and the ability to attract new owner managers in an environment of regulatory uncertainty, have hampered customer acquisition and returns. We fully acknowledge there is significant room for improvement and we are working on a number of key initiatives to address the challenges we face."
How does this result compare to expectations?
According to a note out of Goldman Sachs last week, its analysts were expecting first half cash earnings of $168 million. This was at the upper end of the guidance range of $165 million to $170 million given in February. So, whilst it has fallen short of the broker's estimate, it is within its guidance range.
The broker also forecast the bank to pay a fully franked interim dividend of 34 cents per share, which Bank of Queensland delivered on.
Outlook.
Management warned that second half earnings "were unlikely to improve from the 1H19 level." But it remains optimistic on the future due to the progress it has made on its niche strategy, Virgin Money Australia, and the opportunity of reinvigorating the retail banking business.
Should you invest?
I didn't see a great deal in this result to make me want to buy shares today.
In light of this, I would sooner buy Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) shares at this point.
