The Bank of Queensland Limited (ASX: BOQ) share price is up by 3.15% so far today after the ASX bank provided a strategy update to the market and revised its guidance moving forward.
Refreshed 5-year strategy
This morning, Bank of Queensland unveiled details of its refreshed 5-year strategy which combines traditional banking with contemporary digital capabilities. The bank believes that this new strategy will better serve its customers, deliver better products and services, improve productivity and allow the bank to be nimbler.
Bank of Queensland has built its new strategy around 5 pillars:
- An empathetic culture
- Distinctive brands targetting attractive niche customer segments
- To become a digital bank of the future with a personal touch
- Being a simple and intuitive business
- Maintaining a strong financial and risk position, while still maintaining attractive returns
Bank of Queensland noted that it is continuing its capital investment of approximately $100 million per annum in order to deliver against these priorities. This capital investment is scheduled to reduce to approximately $80 million per annum in FY23 and around $60 million in FY24.
The ASX bank also noted that this investment uplift will be partly financed through efficiency and productivity benefits. These benefits are expected to deliver anticipated annualised savings of approximately $90 million by FY23. Bank of Queensland further added that these savings will hold expense growth at less than 1% per annum to FY22.
Key targets moving forward
The refreshed strategy will support mid-term goals that include growth above system from FY20, achieving positive jaws (i.e. gross income growth exceeding expense growth) in FY21 and return on equity (ROE) of around 8% by FY22.
Bank of Queensland is also targetting organic capital generation of around 100 basis points per annum from FY21 and sustainable growth in earnings per share (EPS) and dividends from FY21 onwards.
Upgraded FY20 guidance
Along with the refreshed strategy, Bank of Queensland also announced an update to its FY20 guidance. The bank had previously guided that FY20 would be a challenging year with lower year-on-year cash earnings.
With improved momentum since its capital raising at the end of last year, FY20 cash earnings is now expected to be 4% to 6% lower than FY19. This is being driven by better than expected income growth and improved impairment outcome.
Additionally, the bank is targetting a dividend payout ratio of 70% – 80% of cash earnings.
Commenting on today's update, Managing Director and CEO George Frazis said:
"The work is underway and we are starting to see improvements across key metrics including customer satisfaction, home lending and business lending growth. Bank of Queensland is moving with pace and will build on this early momentum in the months ahead."
