Bank of Queensland (ASX:BOQ) share price on watch after solid half year update

The Bank of Queensland Limited (ASX:BOQ) share price will be on watch on Thursday following the release of its half year update…

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The Bank of Queensland Limited (ASX: BOQ) share price will be one to watch on Thursday.

This follows the release of the regional bank’s half year results this morning.

How did Bank of Queensland perform in the first half?

During the first half of FY 2021, Bank of Queensland achieved a 9% increase in cash earnings after tax to $165 million. This was driven by balance sheet growth, improved net interest margin (NIM), disciplined expense management, and lower loan impairment expense.

In respect to its NIM, the bank’s NIM increased by 3 basis points during the half to 1.95%. This improvement was largely due to lower funding costs from reduced deposit rates and lower wholesale funding costs. This was partially offset by asset pricing and mix, and the ongoing impact of the low cash rate.

Other metrics of note include a CET1 ratio of 10.03% (up 12 basis points) and its housing loan growth of 1.6x system.

This solid performance led to the Bank of Queensland board declaring a 17 cents per share interim dividend. This was up 11 cents per share from the prior corresponding period.

The bank’s CEO and Managing Director, George Frazis, said: “In the first half of our 2021 financial year, the BOQ Group has produced another strong performance and is building momentum, demonstrated by an uplift in statutory profit and cash earnings. This has been driven by above system asset growth, NIM improvement, cost discipline, and a strong capital position. These results reflect the Group’s sharp focus on our strategic priorities and the disciplined operational execution of our transformation plan.”

How does this compare to expectations?

The good news for shareholders and the Bank of Queensland share price, is that this result appears to be in line with expectations.

According to a note out of Goldman Sachs, its analysts were expecting a 9% increase in cash earnings to $164 million and a fully franked interim dividend of 17 cents per share.


Also potentially giving the Bank of Queensland share price a lift today was its positive outlook commentary. Management appears optimistic on its future and notes that the economic outlook appears more positive and is showing encouraging signs of improvement. In light of this, the bank is guiding to a solid second half performance.

It commented: “We expect to deliver positive jaws of around 1% in FY21, driven by above system growth in lending, NIM positive in FY21 and broadly flat half on half, and cost growth of approximately 3%. BOQ Group remains prudently provisioned for any potential losses arising from the outcomes of COVID-19. We remain committed to sustainable profitable growth, supporting returns to shareholders and a dividend payout ratio target range of 60 – 75% of cash earnings.”

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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