Bank of Queensland Ltd (ASX: BOQ) shares are moving higher on Thursday following the release of the bank's full-year results.
The shares are up around 1% to $6.56, with investors seemingly encouraged by the progress being made across the business.
But is the latest update enough to make Bank of Queensland shares worth buying? Here's how I see it.
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Some encouraging progress
One thing I liked about the bank's results was the progress it is making towards becoming a simpler, more efficient bank.
The company has completed the migration of ME customers onto its new digital banking platform, removing an important obstacle in its transformation.
It has also continued investing in technology and improving its operations, with further productivity benefits expected in FY27.
I think these changes could help Bank of Queensland become more competitive and reduce costs over time.
There was also encouraging growth in business banking. Commercial lending increased 16% during FY26, supported by demand across sectors including healthcare, agriculture, and other industries.
This is an area where Bank of Queensland has established expertise, and I think it could become an increasingly important source of growth.
Another positive was the improvement in its net interest margin, which increased six basis points to 1.70%. Combined with continued cost discipline, that suggests management is making progress on some of the issues that have weighed on profitability.
Why I'm still cautious on Bank of Queensland shares
Despite those improvements, I think Bank of Queensland has more work ahead before it becomes a particularly compelling investment.
The bank reported cash earnings of $358 million for FY26, down 7% on the previous year. That decline is disappointing, particularly when the larger Australian banks have generally demonstrated stronger earnings resilience.
Bank of Queensland's mortgage business also struggled, with home lending contracting 8% during the year.
Management is targeting a return to home lending growth in FY27, supported by its digital platform and expanded distribution. I would want to see evidence of that recovery before becoming more positive.
The economic environment could also make things difficult. Interest rates are expected to remain elevated, with further increases possible as the Reserve Bank attempts to control inflation.
While higher rates can support banking margins, they also place pressure on borrowers and can reduce demand for new lending.
For a smaller bank competing against much larger rivals, I think that creates additional challenges.
What about the dividend?
One reason income investors might remain interested is the bank's dividend.
The bank declared a fully franked final dividend of 20 cents per share, bringing its ordinary dividends for FY26 to 40 cents.
At $6.56, that represents a dividend yield of approximately 6.1%.
Shareholders also received a fully franked special dividend of 15 cents during the year, although I would not assume that payment will be repeated.
I think its dividend yield is attractive, but maintaining it will depend on the bank delivering more consistent earnings.
Foolish takeaway
I would rate Bank of Queensland shares as a hold following these results.
Management is making worthwhile improvements, and the dividend provides a reason for existing shareholders to remain patient.
For me, though, I would like to see stronger earnings and a return to mortgage growth before putting fresh money into the bank.
Until then, I think there are better opportunities elsewhere on the ASX.
