Bank of Queensland Limited

Retirement & Appointment of Chairman: Bank of Queensland Limited (ASX: BOQ) is one of the leading regional banks in Australia, which is involved in banking and financial services. Its market capitalisation stands at ~A$3.74Bn as on 4 June 2019. Recently, by release dated 29 May 2019, the bank announced that Mr Roger Davis would retire as Chairman after the release of BOQ’s full year results in October 2019. Additionally, Mr Davis would also retire from the Board at the end of October 2019. Patrick Allaway has been appointed as Chairman Elect.
 
Mr Patrick Allaway had joined the Board from 1 May 2019. He has extensive senior executive, non?executive, and corporate advisory experience throughout the financial services, property, media and retail sector.
 
Chairman’s Half Year Letter: BOQ had published the Chairman’s letter dated 22^nd May 2019. The Chairman stated that the asset quality and capital position had remained strong and there was good progress in the niche business strategy. The bank stated that this half year had been filled with significant changes for the industry with the Final Report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry handed down in February.
 
With regards to the performance overview, the bank mentioned that cash earnings after tax had declined 8% from 1HFY18 to $167Mn in 1H FY 2019. The cash basic earnings per share stood at 41.8 cents per share, which reflects a decline of 10% from 1HFY18. The cash return on equity witnessed a fall of 110 basis points to 8.8% in the half.
 
The net interest margin decreased by 4 basis points from 2HFY18 to 1.94% because of intense competition for new lending, a higher bank bill swap rate, and associated impact on hedging costs.
 

  Profit Results (Source: Company Reports)
 
There was a 13% reduction in non-interest income which has been a common trend throughout the industry. The Operating expenses increased by 2% due to continued investments made by the BOQ to set the business up for the future. Additionally, the Impaired assets have been declined by 12% and loan arrears had remained low.
 
Future Aspects:  BOQ is focused on its strategic initiatives related to improving its branch network and investment in the digitisation of the bank and modernising technology architecture. The bank is making significant improvements in its lending processes and digital platforms which would deliver better outcomes for its customers.
 
The management team had continued to remain focused on the delivery of critical infrastructure and technology investments.A segment by segment analysis is also going on to recognise the opportunities that would sharpen its focus.
 
Stock Recommendation: The bank capital position had remained stronger with a common equity tier one ratio of 9.26%. The Board had announced a dividend of 34 cents per share, which reflects a decline of 4 cents per share in comparison to previous periods. On the stock performance front, it had witnessed a rise of 4.16% and 1.76% in the time span of one-month and three months, respectively which can be considered at decent returns considering broader industry-wide challenges. Hence, by looking at above-stated facts, decent outlook and current trading level, we give a “Buy” recommendation on the stock at the current market price of A$9.260 per share (up 0.543% on June 4, 2019).
 

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