Bank of Queensland shares in focus amid strong first half profit growth

Here’s how Bank of Queensland is performing in FY 2022…

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Key points

  • Bank of Queensland has released its half year results
  • The regional bank reported strong profit growth
  • This appears to have smashed what analysts at Goldman Sachs were expecting

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

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

Bank of Queensland share price on watch after earnings beat

  • Total income up 1% to $831 million
  • Housing loan growth up 9% to $2.6 billion
  • Business loan growth up 8% to $600 million
  • Statutory net profit up 38% to $212 million
  • Cash earnings after tax up 14% to $268 million
  • Fully franked interim dividend per share of 22 cents
  • CET1 ratio of 9.68%

What happened during the first half?

For the six months ended February 28, Bank of Queensland delivered a 14% increase in cash earnings to $268 million. This appears to have beaten the market’s expectations, which could bode well for the Bank of Queensland share price today. Goldman Sachs, for example, was forecasting cash earnings of $222 million for the period.

Management advised that this was driven by lending momentum, higher non-interest income, carefully managed costs, and a loan impairment expense credit in the half.

One thing that weighed on its performance was its net interest income. It decreased 2% to $741 million due to a 12 basis points decline in its net interest margin (NIM) to 1.74% and the impact of an ME Bank decline in average interest earning asset balances prior to ownership.

Management advised that its NIM weakness reflects industry dynamics including ongoing competition, higher fixed rate lending volumes, and volatile swap rates.

Management commentary

Bank of Queensland’s Managing Director and CEO, George Frazis, was pleased with the half. He said:

“Today’s result demonstrates our disciplined execution of the ME integration and digital transformation program and represents our fifth consecutive half of improved underlying performance.

This has been achieved during a period of ongoing economic uncertainty from COVID, and at a time of notable change as we bed down the integration of ME and upgrade our digital capability for customers and our people.”

Pleasingly, Mr Frazis is positive on the bank’s outlook. The CEO commented:

“We are a step closer to realising our bold strategy of building a truly multi-brand, cloud-based, digital retail bank with the launch of myBOQ joining VMA on the common core banking platform which enhances the customer experience.

We remain firmly focussed on executing on our strategy to transform BOQ into a digital bank with a personal touch to create a compelling proposition for our shareholders, customers, people and the community.”

The bank also suggested that margin pressures could be easing.

The release states that management expects “to see NIM headwinds reducing and the continued benefits from our integration and productivity programs driving a cost reduction of at least 1%.”

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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