The Bank of Queensland Limited (ASX: BOQ) share price is on the move on Wednesday following the release of its full year results.
At the time of writing, the regional bank’s shares are up 0.5% to $6.44.
How did Bank of Queensland perform in FY 2020?
For the 12 months ended 31 August 2020, the regional bank reported cash earnings of $225 million. This was down 30% on FY 2019 and driven largely by a $133 million COVID-19 collective provision.
This was better than what the market was expecting. Goldman Sachs was forecasting cash earnings of $210 million and the market consensus stood at $204 million.
On a statutory basis, Bank of Queensland’s net profit after tax decreased by 61% to $115 million. This was due to previously announced restructuring charges and its intangible asset review.
What were the drivers of its result?
Had it not been for the one-offs, Bank of Queensland would have handed in a reasonably solid result.
The bank’s net interest income increased 3% to $986 million in FY 2020. This was driven by lending growth and an improving net interest margin. Bank of Queensland’s net interest margin increased by 3 basis points in the second half.
Things weren’t quite as positive for its non-interest income. It decreased by 14% over the year. Management advised that this reflects industry trends towards low and fee free banking products, as well as a ~$10 million impact from COVID-19 related fee reductions.
At the end of the financial year the bank was in a strong financial position. Its CET1 stood at 9.78%, which is well above APRA’s unquestionably strong benchmark.
This strong position has allowed the bank to declare a full year 12 cents per share fully franked dividend.
This comprises 6 cents per share from its first half profits and 6 cents per share from its second half profits.
The company’s Managing Director and CEO, George Frazis, commented: “We remain focused on executing on our strategy and maintaining momentum in our business. We have a clear transformation roadmap and are delivering against it.”
“Although difficult to predict in this environment, we expect to broadly deliver neutral jaws in FY21 driven by above system growth in lending, margin management to within 2-4bps decline, and cost growth of c.2%. Our prudent collective provision sees us well placed to withstand anticipated lifetime losses arising from COVID-19,” he added.
Mr Frazis concluded: “Our capital position is strong and organic capital generation will provide us with the ability to invest in and grow our business. We are committed to delivering long term shareholder value through sustainable, profitable growth and attractive returns. We understand the importance of dividends for our shareholders.”
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