The Bank of Queensland Ltd (ASX: BOQ) share price will be on watch on Wednesday.
This follows the release of the bank's full year results for FY 2022.
Bank of Queensland share price on watch following results release
- Statutory profit after tax up 15% to $426 million
- Cash earnings after tax down 5% to $508 million
- Net interest margin down 12 basis points to 1.74%
- CET1 ratio down 11 basis points to 9.57%
- Final dividend up 9% to 24 cents per share fully franked
What happened during FY 2022?
For the 12 months ended 31 August, Bank of Queensland reported a 5% decline in cash earnings after tax to $508 million.
This was driven by a 12-basis points reduction in its net interest margin, which reflects the impact of increasing competition and swap rate volatility. This offset flat operating expenses and a 7% increase in both housing loan growth to $4.4 billion and business loan growth to $1.2 billion.
In respect to the latter, housing loan growth was 1x system for the year, whereas small and medium (SME) business lending grew 1.5x system.
Bank of Queensland's softer earnings didn't stop the board from increasing its final dividend by 9% to 24 cents per share. This brought the bank's full year dividend to a fully franked 46 cents per share, up 20% year over year from 39 cents per share in FY 2021.
How does this compare to expectations?
According to a note out of Goldman Sachs, its analysts were expecting the bank to report a modest 0.5% increase in cash earnings to $534.5 million.
This means that the bank's cash earnings of $508 million has fallen well short of its estimates, which may not bode well for the Bank of Queensland share price today.
Though, positively, the broker was only expecting the bank to declare a final dividend of 23 cents per share. So, it has beaten on that metric.
Management commentary
Bank of Queensland's managing director and CEO, George Frazis, was pleased with the bank's results. He said:
BOQ's financial results for FY22 highlight our progress on delivering quality sustainable profitable growth and reflect the sharp focus on the execution of our strategic plan. Today's result demonstrates the disciplined execution of our strategy, the digital transformation program and ME integration and represents another period of improved underlying performance. This has been achieved during ongoing economic uncertainty, and as we bed down the integration of ME and upgrade our digital capability for our customers and our people.
We have advanced our strategy and have a clear pathway to 2025 which builds on the success of our execution to date on the digital transformation and the ME integration. We are a step closer to building a truly multi-brand, cloud-based, digital retail bank with the launch of myBOQ joining VMA on the new common core digital banking platform to enhance our customer experience. The integration program is well progressed with synergies ahead of plan and key milestones delivered during the year.
Outlook
While the bank acknowledges that it is operating in an uncertain environment, it still spoke positively about its prospects in FY 2023. It stated:
BOQ remains focussed on achieving quality, sustainable, profitable growth. Growth across all brands in FY22 provides a revenue tailwind moving in to FY23. We have positive NIM momentum, with tailwinds from rising interest rates partly offset by headwinds from rising funding costs.
Inflation and the costs of the new digital bank create near term headwinds for expenses, however, these will be partly offset by ongoing benefits from the integration and productivity programs.
The integration of ME is well progressed and we continue to execute against our strategic transformation roadmap. We have a clear pathway to the inclusion of ME on the digital bank platform and a plan to launch the new ME digital transaction and savings product and migrate existing ME deposit customers by the end of calendar 2023.
