The Bank of Queensland Limited (ASX: BOQ) share price will be one to watch today.
This follows the release of the regional bank’s full year results this morning.
Bank of Queensland share price on watch after strong profit growth
- Statutory net profit after tax up 221% year on year to $369 million or 206% to $352 million excluding ME Bank
- Cash net profit after tax up 83% to $412 million or 73% to $389 million excluding ME Bank
- Net interest margin (NIM) of 1.92%
- CET1 ratio of 9.8%, up 2 basis points and ahead of 9% to 9.5% target
- Final fully franked dividend of 22 cents per share declared, bringing full year dividend to 39 cents per share
What happened in FY 2021?
Bank of Queensland returned to form in FY 2021 following a difficult and COVID-impacted 12 months in FY 2020.
The bank reported a 13% increase in total income to $1.26 billion for the year including the ME Bank acquisition or 5% to $1.18 billion excluding it. Management advised that this reflects growth in its net interest income thanks to quality asset growth and NIM improvement.
Things were even better for its cash earnings, which grew 83% year on year. This was driven by the ME Bank acquisition, increased net interest income, and a credit to its loan impairment expense. The latter reflects sound credit, a $71 million reduction in its collective provision from the improved economic outlook, and improvements in data quality relating to collateral.
Another positive from the result was its lending growth. Housing growth (excluding ME Bank) was 1.7x system with growth delivered across all channels. Its Business segment also delivered growth of $0.6 billion for the year as market conditions improved.
This ultimately led to the company finishing the period with a CET1 ratio of 9.80%. This was up 2 basis points compared to FY 2020 and is comfortably ahead of the target range of 9.0 – 9.5%. Management notes that this strong capital position leaves the bank well placed to support future growth and its transformation investment.
It also allowed the bank to declare a final fully franked dividend of 22 cents per share. This brings its full year dividend to 39 cents per share. Based on the current Bank of Queensland share price, this represents a fully franked 4% yield.
What did management say?
Bank of Queensland’s Managing Director and CEO, George Frazis, commented: “BOQ’s financial results for FY21 underscores the Group’s progress on strategic execution with strong cash earnings, an increase in NIM and cash EPS growth.”
“Our refreshed strategy announced in February 2020 set out a clear path to return the Group to sustainable profitability and today’s results show our momentum with four consecutive halves of improving performance. We have achieved this during a period marked by uncertainty, and also in a year where we executed the transformative acquisition of ME Bank. This transaction delivers further scale in retail, enhances our portfolio diversification, and we have accelerated capturing synergies from the integration,” he added.
No earnings or dividend guidance has been given for FY 2022 due to the uncertain environment.
However, management advised that it is cautiously optimistic that Australia remains well placed for economic recovery, characterised by further house price rises and solid growth in consumer spending and business investment.
“BOQ remains focused on achieving sustainable profitable growth. In FY22, we are expecting at least 2% jaws, driven by above system growth in our BOQ and VMA brands, and by returning ME Bank to around system growth by year end. We expect NIM to decline by c.5-7bps in FY22, as competition continues and the low interest rate environment remains. We expect expenses to grow by 3% on an underlying basis to support business growth, which will be offset by accelerated integration synergies,” management stated.
The Bank of Queensland share price is up 29% in 2021.
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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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