The Bank of Queensland Limited (ASX: BOQ) today announced the completion of its Capital Notes 2 offer. This has raised $260 million through the issue of 2.6 million Capital Notes 2 for $100 each. At the time of writing, the BOQ share price has fallen by 3.02% to $7.72, amid a broader fall in banking shares on the ASX today.
More about the bank’s Capital Notes 2
The bank says strong investor demand saw the size of the offer increased from $250 million to $260 million. The note was priced at 3.8% above the benchmark BBSW (bank bill swap rate) paid quarterly, and the first payment in February 2021 has been fixed at 3.82%.
BOQ did not issue a statement today about the capital’s usage but in general, banks may issue capital notes to cover short-term financing – such as meeting minimum regulatory capital requirements under Basel Accords. Bank capital notes have no fixed maturity date, and are usually unsecured and subordinated.
The Capital Notes 2 are expected to begin trading on the ASX at approximately 10am Sydney time on 1 December 2020 under the ASX code “BOQPF”.
Quick take on Bank of Queensland
BOQ is smaller than its regional bank rival, the Bendigo and Adelaide Bank Ltd (ASX: BEN), and is considerably smaller than the four major banks.
After the recent CEO appointment of former Westpac Banking Corp (ASX: WBC) executive George Frazis, the bank said its strategic plan would centre on a digital transformation of its core banking offerings. It hopes this will lead to better operational cost efficiencies. The regional banks, including BOQ, usually struggle to compete with the four major banks on price, primarily because of higher wholesale funding and operational costs due to their lack of scale.
In October, the BOQ reported that its full-year 2020 cash profit fell 30% to $225 million. The drop was largely attributable to a $101 million rise in loan impairment expenses to $175 million. Statutory profit was reported at $115 million, reflecting amortisation of intangibles and restructuring.
At that time, the bank also said that in 2021, it expects net interest margins (NIM) to fall by between 2 and 4 basis points, highlighting the cost cutting efforts made recently. It also said that 12% of its home loan book and 16% of its SME loan book were in deferral as at 31 August 2020, as the COVID-19 pandemic affected its customers’ ability to keep up with loan repayments.
About the BOQ share price
The BOQ share price has gained 6% in 2020, and is now closing in on its 52-week high of $8.00. The bank’s share dropped to a 52-week low of $4.51 in May. The BOQ currently commands a market cap of $3.6 billion.
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