Last month, the bank announced its FY22 first half result for the six months to February 2022. Let’s have a look at some of the numbers that BOQ reported to investors:
Half-year earnings recap
A lot of investors like to pay close attention to the results that businesses report every six months. It can give an indication of profitability as well as the outlook.
BOQ reported that it generated $212 million of statutory net profit after tax (NPAT). This was an increase of 38%. Cash earnings after tax rose by 14% to $268 million. Profitability can have an influence on companies’ share prices.
Meantime, the bank’s operating expenses declined by 3% to $461 million.
However, the net interest margin (NIM) declined 12 basis points to 1.74% in the second half of FY21. The bank said the majority (seven basis points) of the decline was due to “industry dynamics including ongoing competition, higher fixed rate lending volumes and volatile swap rates, and a further five basis points relating to increased liquidity during the period”.
BOQ managed to grow its housing loans by $2.6 billion and business loans by $0.6 billion.
The bank’s common equity tier 1 (CET1) ratio declined by 12 basis points from the second half of FY21 to 9.68%.
BOQ said that the result demonstrated the “disciplined execution of the ME integration and digital transformation program” and represented the fifth consecutive half of improved underlying performance.
It said that key integration milestones for ME Bank have been delivered on the accelerated timeline and within the committed expense profile, with $33 million of run-rate synergies delivered during the half. Synergy benefits have been increased from a range of $70 million to $80 million to the new goal of $95 million in FY24 and beyond.
Management noted that its asset quality remains “sound” with “prudent” collective provision levels.
The challenger bank’s board decided to pay an interim dividend of 22 cents per share, representing a dividend payout ratio of 53% for the first half of FY22.
Investors may take the outlook into consideration when it comes to the BOQ share price.
It said that Australia is well placed for a continued economic recovery though there is uncertainty with elevated inflation, rising interest rates, and other disruptions.
BOQ is focused on delivering 2% positive ‘jaws’ in FY22. It also noted that momentum continues to build, with BOQ and Virgin Money Australia gaining market share.
It’s expecting the NIM headwinds to ease while the continued benefits of its integration and productivity programs should reduce costs by at least 1%.
What do brokers think of the BOQ share price?
Citi thinks that BOQ is a buy, with a price target of $10.25 but noted it may have been revenue growth that disappointed the market.
Morgans is more optimistic, with a price target of $11 – that implies a potential rise of more than 30%. This broker’s numbers put the BOQ share price at nine times FY23’s estimated earnings with a potential grossed-up dividend yield of 9.5% in the 2023 financial year.