BOQ Sets the Foundations for Growth Despite Interim Loss Confirmation
- Statutory Loss of $91m for first half 2012
- Normalised underlying profit before tax, $222m, up 3% on 1H11
- Balance sheet strength – $450m equity raising to place BOQ’s Pro-forma Core Tier 1 capital position at top end of peer range at 8.6%
- Strong Normalised Cash Net Interest Margin (NIM) performance, 3bps improvement on HY11
- Cost-to-income ratio (normalised cash) maintained at 45.0%
- Deposit growth above system for past 12 months, fully funding asset growth for the half
- Specific and Collective Provision charges totalling $328m (inclusive of a $160m overlay charge) has resulted in a statutory loss after tax of $90.6m ($72.4m normalised cash net loss after tax)
In line with guidance provided to the market on 26 March 2012, BOQ today confirmed underlying profit growth, but increased provisioning for troublesome property loans, which resulted in a statutory loss after tax of $90.6m for the first half of FY2012.
In announcing the result, BOQ Managing Director and CEO Stuart Grimshaw said the foundations had now been set for promising organic growth for BOQ.
“Our prudent and robust approach to collective loan provisioning will enhance protection against any further deterioration in the Queensland economy; and the recent $450m capital raising is on track to position BOQ as one of the strongest Core Tier 1 banks in Australia today,” Mr Grimshaw said.
“We’ve maintained discipline in expenditure, bucked the industry trend with improved NIM performance in a tough funding environment and taken a responsible and conservative approach to management of our loan book.
“With a new executive team at the helm, we look forward to getting on with the job of delivering our strategy for growth,” he said
On Monday, 26 March BOQ announced a $450m capital raising. The institutional component was successfully completed on 28 March with $288m raised through the Placement and Institutional Entitlement Offer. The Retail Entitlement Offer opened on 3 April 2012 with an offer price of $6.05 per New Share and will close on 24 April 2012. The retail component is expected to raise approximately $162m.
“BOQ’s capital position will be significantly strengthened following the capital raising,” Mr Grimshaw said. “BOQ will have one of the soundest capital positions of banks in Australia. This reflects a greater level of conservatism at BOQ when it comes to our balance sheet, while also recognising the significant opportunities for organic growth that additional equity provides,” he said.
Strong capital base and liquidity
BOQ’s Tier 1 and total capital levels will be increased to market leading levels post the recent capital raising.
“BOQ is ideally positioned to take advantage of future opportunities,” said Mr Grimshaw.
BOQ has also seen deposit growth, 1.3 times system over the past 12 months, which has fully funded asset growth for the half.
Mr Grimshaw said BOQ would continue to focus on growing its retail funding base with a goal to reach 63% by competing strongly for ‘sticky’ deposits.
“Arrears appear to be stabilising and we are making good progress on managing our impaired assets. We are also well provided for in the portfolio,” said Mr Grimshaw.
A high exchange rate and weakened confidence has created a difficult economic environment, particularly notable in SE Queensland. Credit growth has been subdued and BOQ expects this to continue through to 2H12.
“We see opportunities in our core geographical markets (extractive industry, downstream small business and logistics) of Queensland and Western Australia,” said Mr Grimshaw.
“BOQ will focus on our relationship based businesses of business banking, agribusiness and our core retail customers and will target growth above system over the long term whilst maintaining costs at or under inflation.
“We will focus on productivity improvements and being there for our customers when they need us,” he said.
Mr Grimshaw confirmed a half year dividend of 26 cents per share.
“The Board has approved a 26 cent per share dividend for the first half 2012. Increased provisions have diluted earnings per share for the period, but our strengthened balance sheet provides a platform for future growth,” he said.
The following dates apply to this dividend:
- Ex-dividend date: 2 May 2012
- Record date: 8 May 2012
- Payment date: 25 May 2012