BoQ chief urges level playing field for lenders as earnings rebound
The lender revealed a huge turnaround in earnings for the 2013 financial year, as it reduces the number of bad debts on its loan book.
The bank lifted its cash earnings to $251 million for the year to June, up from $31 million in 2012. It declared a fully franked dividend of 58¢ a share, up 6 per cent.
The result was a departure from a year earlier when the bank became the first Australian lender to post a loss in two decades.
Mr Grimshaw said a review of the home loan book, which led the bank to tighten lending standards, was behind the improved earnings.
"There's no doubt we've tightened our risk management systems," he said.
"Hindsight's a great thing ... some of the loans were riskier than we should have taken on board."
The bank also benefited from gradual improvements to the state's housing market. However, he remained cautious about the outlook for the year ahead.
"Domestically, small business and retail is still doing it tough and we don't expect things to change significantly over the next 12 months," he said.
"While challenges remain, particularly around external market and economic volatility, the foundations are firmly in place for sustainable growth in shareholder returns."
The results follow a restructure and management reshuffle after a $17 million loss in 2012. Statutory net profit for 2013 was $186 million.
Mr Grimshaw called for the government to address the "imbalances" that existed in regulatory standards for the big banks and smaller lenders.
"If any customer walks into a major bank for a home loan, that major bank only has to hold less than third of the capital that we are required to hold," he said. "This means the majors have up to three times the return on equity."
Bank of Queensland shares closed 6.7 per cent higher at $11.17 on Thursday.
"The market didn't believe the company's forecasts, and now they are starting to," Shaw Stockbroking analyst David Spotswood said. "Now there's every chance they're going to exceed their forecast."
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BOQ's 2013 earnings rebound was driven mainly by a reduction in bad debts after a review of its home loan book and tighter risk management. The lender also benefited from gradual improvements in Queensland's housing market, which helped lift cash earnings to $251 million for the year to June 2013.
BOQ declared a fully franked dividend of 58 cents a share for the 2013 financial year, an increase of about 6% from the prior period.
BOQ's cash earnings rose sharply from $31 million in 2012 to $251 million in 2013. Statutory net profit for 2013 was $186 million, following a $17 million loss in 2012.
Stuart Grimshaw argued there are regulatory 'imbalances' where major banks are required to hold less than a third of the capital that regional lenders like BOQ must hold. He warned this can allow majors to achieve up to three times the return on equity and called on government action to level the playing field.
The market reacted positively: BOQ shares closed 6.7% higher at $11.17 after the results. Shaw Stockbroking analyst David Spotswood said the market previously doubted the company's forecasts but now thinks BOQ may even exceed them.
BOQ went through a restructure and management reshuffle after the 2012 loss, and tightened lending standards and risk management systems following a review of its home loan book—steps the bank says helped restore profitability.
BOQ expressed a cautious outlook: the CEO said small business and retail remain under pressure and they don't expect significant change over the next 12 months. He did note, however, that foundations are in place for sustainable growth in shareholder returns despite external market volatility.
BOQ acknowledged that some previous loans were riskier than they should have been. As a result, the bank tightened lending standards after reviewing the home loan book and improved its risk management systems to reduce future bad debts.
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