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Bank of Queensland posts 14% decline in FY 2019 cash earnings

The Bank of Queensland Limited (ASX: BOQ) share price will be on watch this morning following the release of its full year results.

How did Bank of Queensland perform in FY 2019?

For the 12 months ended August 31, Bank of Queensland posted cash earnings after tax of $320 million. This was a 14% decline on the prior corresponding period and has fallen short of expectations.

Based on the Bloomberg consensus estimate, the market was expecting the regional bank to report cash earnings of $330 million.

The bank also reported an 11% decline in statutory net profit after tax to $298 million. Which led to the Bank of Queensland board cutting its final dividend down to 31 cents per share. This brought its full year dividend to 65 cents per share, which is an 11 cents or 14.5% reduction on FY 2018’s dividend.

It wasn’t just its earnings and dividend that were heading in the wrong direction.

Bank of Queensland reported a 300 basis points increase in its cost to income ratio to 50.5% and 7 basis point lift in its loan impairment expense to $74 million.

Further, the bank’s CET1 capital ratio fell 27 basis points to 9.04% and its return on average ordinary equity dropped 160 basis points to 8.3%.

Management blamed the disappointing result on a challenging operating environment characterised by slowing credit demand, lower interest rates, a rise in regulatory costs, and changes impacting non-interest income.

Outlook.

The bank’s new managing director and CEO, George Frazis, remains optimistic on the future.

He said: “Our capital is well positioned for ‘unquestionably strong’, we have a good funding position and our underlying asset quality is sound. There are numerous opportunities ahead for a revamped BOQ and I will be working closely with the executive leadership team to complete our strategic and productivity review, with a market update on our plans in February 2020.”

“We expect lower year-on-year cash earnings in FY20 with revenue and impairment outcomes in line with FY19, higher post-Hayne regulatory and compliance costs, and increased operating expenses related to our investment in technology,” he added.

Beyond that, Mr Frazis is “very focused on delivering sustainable growth and improved shareholder returns.”

Whilst expectations were low for this result, it appears to have still fallen short of them. 

I'm not confident that things will improve in the near term, so I would stick with Australia and New Zealand Banking Group (ASX: ANZ) or these top dividend stocks.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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