Bank of Queensland Limited

BOQ Details

Resignation of CFO: Bank of Queensland Limited (ASX: BOQ) provides banking and financial services. The market capitalisation of the bank stood at ~A$3.81Bn as on 17^th July 2019. In the release dated 20^th June 2019, the bank made an announcement regarding the resignation of the Chief Financial Officer, Mr Matt Baxby. BOQ further stated that he will remain with the bank until the full-year results in October 2019. However, it would conduct a comprehensive search for Mr Baxby’s replacement.

In another update, Bank of Queensland announced that Mr Roger Davis would retire as Chairman after the release of full-year results in October 2019. Mr Roger would also retire from the Board at the end of October 2019. Additionally, it was mentioned that Mr Patrick Allaway had been appointed as Chairman Elect. The bank reported net interest income amounting to $261 Mn in 1H FY19, reflecting a rise of 4% in comparison to 1H FY18 for its BOQ business, which got offset by lower non-interest income and higher operating and loan impairment expenses.

 
Segment Performance (Source: Company Reports)

What to Expect:The bank would continue to manage its liability base to optimise margin. BOQtook the conservative approach to manage itself by maintaining high risk standards and focusing its strategic initiatives towards improving branch network, investing towards digitisation of the bank and modernising the technology architecture. BOQ is expected to release its full-year results on 17^th October 2019 and its annual general meeting would be held on 10^th December 2019.

Stock Recommendation:  The common equity tier 1 ratio stood at 9.26% in 1H FY19. It is expecting a reduction in CET1 over 2H FY 2019 and FY20 on the back of increased capitalised investment spend. Coming to the stock’s past performance, it generated returns of 7.19% and -8.57% in the time span of three months and six months, respectively. Currently, it is trading at close to 52-week lower level of $8.70 with PE multiple of 11.56x, indicating a decent opportunity for accumulation. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$9.210 per share (down 0.325% on 17^th July 2019).           


BOQ Daily Chart (Source: Thomson Reuters)
 

Australia And New Zealand Banking Group Limited

ANZ Details

Revision of Ratings Outlook: Australia And New Zealand Banking Group Limited (ASX: ANZ) provides banking and financial products and services to individual and business customers. The market capitalisation of the bank stood at ~A$77.3 Bn as on 17^th July 2019. Fitch Ratings announced that it has revised the outlook for Australia and New Zealand Banking Group Limited’s Long-Term Issuer Default Rating to Negative from Stable. Australia and New Zealand Banking Group Limited’s (or ANZBGL) IDR was reaffirmed at AA- with all other ratings unchanged.

In the release, it was also mentioned that the outlook is consistent with the other three major Australian banks. Fitch Ratings also mentioned that the main driver for the rating action was the APRA’s announcement on 11 July 2019 that it was applying additional operational-risk capital requirements to three major Australian banks, which includes ANZBGL.  The bank reported a statutory profit of $3.173 Bn in 1H FY19, reflecting a rise of 3% from 2H FY18.


Financial Summary (Source: Company Reports)

Future Prospects: The return on equity increased to 12%, which can be considered at respectable levels. ANZ stated that its sustainability framework supports the business strategy. In a recent release, it was mentioned that ANZBGL is having robust risk and reporting controls around other risks, which includes credit, market and liquidity risk, as reflected by the conservative underwriting standards as well as a very high degree of asset quality stability.

Stock Recommendation: CET1 ratio (APRA) stood at 11.5% in 1H FY19, reflecting a rise of 45bps from 1H FY18. In the half-year ended March 31, 2019 results presentation, it was mentioned that the bank is possessing a robust balance sheet. The bank’s CET1 happens to be well above APRA’s 10.5% unquestionably strong ratio. These factors might attract the attention of the market players moving forward. Additionally, as per ASX, the bank’s annual dividend yield stood at 5.93%, which can be considered at respectable levels. With respect to the stock’s past performance, it yielded returns of 4.80% and 7.49% in the time span of three months and six months, respectively. Hence, considering the above-stated facts, we give a “Buy” recommendation on the stock at the current market price of A$ 27.190 per share (up 0.741% on 17^th July 2019).


ANZ Daily Chart (Source: Thomson Reuters) 

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