Bank of Queensland is targeting profitable growth in the current fiscal year after posting a jump in first-half cash profit, after keeping a lid on costs as loan impairments fell.
The Brisbane-based regional lender bank, which operates more than 160 branches across the country, reported net cash earnings of $268 million, up 14 per cent from the prior corresponding half.
Its bottom line result was a net profit of $212 million, up 38 per cent.
"This has been achieved during a period of ongoing economic uncertainty from COVID, and at a time of notable change as we bed down the integration of ME and upgrade our digital capability," CEO George Frazis said on Thursday.
BoQ's loan impairment expense was a credit of $15 million for the six-month period, as a result of a more favourable economic outlook and a strong housing market.
Customer deposits expanded by $1.8 billion in the half.
But its net interest margin - the earnings on loans versus interest paid on deposits - was down 12 basis points to 1.74 per cent, due to ongoing competition, higher fixed rate lending volumes and other factors.
Shares in the company tumbled on the news. At 1155 AEST, Bank of Queensland shares were down 5.3 per cent at $8.08
The lender expects this pressure to abate in coming months.
"We expect to see NIM headwinds reducing and the continued benefits from our integration and productivity programs driving a cost reduction of at least 1 per cent," Mr Frazis told analysts after the results.
The bank has been bedding down its $1.3 billion acquisition last year of the online-based ME Bank.
It is forecasting synergy benefits to increase from between $70 million and $80 million to $95 million in fiscal 2024 and beyond.
Bank of Queensland saw housing loan growth of $2.6 billion in the half, a 9 per cent increase from a year ago, while business loan growth increased 8 per cent.
Looking ahead, the lender is cautiously optimistic that Australia remains well placed for economic recovery, but says there may still be uncertainty associated with COVID-19 over the next year..
"We will continue to maintain a prudent approach to provisioning," Mr Frazis said.
BoQ expects its CET1 capital ratio to sit comfortably above the 9.5 per cent benchmark, while its target range for dividend payout ratio remains at 60-75 per cent of cash earnings,"
The bank declared an interim dividend below that range, though, at 22 cents per share, representing 53 per cent payout of the cash earnings.
Most BoQ branches are run by local owner-managers.
BOQ H1 PROFIT JUMP
* Cash earnings up 14pct to $268m
* Net profit up 38pct to $212m
* Revenue up 44pct to $833m
* Fully-franked interim dividend 22 cents/sh vs 17 cents year ago.
