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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Bank of Queensland (BOQ) credited a reduction in bad debts and a review of its home loan book — which led to tighter lending standards and improved risk management — along with gradual improvements in the state's housing market for the strong 2013 result.
BOQ lifted cash earnings to $251 million for the year to June 2013, up from $31 million in 2012. Statutory net profit for 2013 was $186 million, following a $17 million loss in 2012.
BOQ declared a fully franked dividend of 58 cents per share for 2013, which was up 6% from the prior period.
Stuart Grimshaw urged the government to address regulatory 'imbalances' that favour the major banks, saying majors only have to hold less than a third of the capital that BOQ is required to hold — a difference that can translate into up to three times the return on equity for the big banks.
BOQ shares rose, closing 6.7% higher at $11.17 after the results. Shaw Stockbroking analyst David Spotswood said the market had previously doubted BOQ's forecasts but was starting to believe them, and there was a chance the bank could exceed those forecasts.
Following the 2012 loss, BOQ underwent a restructure and management reshuffle and conducted a review of its home loan book, which resulted in tightened lending standards and strengthened risk management.
Management remained cautious: domestically small business and retail were still struggling and not expected to change significantly over the next 12 months. They also flagged external market and economic volatility as ongoing challenges, while saying the foundations were in place for sustainable growth in shareholder returns.
According to BOQ's chief, heavier capital requirements on regional banks versus the majors limit the smaller banks' ability to take on risk and can reduce their return on equity. Grimshaw argued the government should level the playing field so smaller lenders aren’t disadvantaged compared with major banks.
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