2024 HALF YEAR RESULTS
For the period ended 29 February 2024
BOQ Group 2024 Half Year Results
Bank of Queensland Limited | ABN: 32 009 656 740
ASX Appendix 4D
for the half year period ended 29 February 2024
Results for announcement to the market (1)
$ million | ||||
Revenues from ordinary activities (2) | Down | 12% | to | 796 |
Profit from ordinary activities after tax attributable to members (2) (3) | Up | 3675% | to | 151 |
Profit for the year attributable to members (2) (3) | Up | 3675% | to | 151 |
Dividends | Record Date | Paid or payable on | Amounts per security |
Ordinary shares (BOQ) | |||
Full year ordinary dividend - fully franked | 27-Oct-23 | 16-Nov-23 | 21 cents |
Interim ordinary dividend - fully franked | 3-May-24 | 27-May-24 | 17 cents |
- Rule 4.2A.3. Refer to Appendix 7.1 for the cross reference index for ASX Appendix 4D.
- On prior corresponding period (six months ended 28 February 2023). Based on statutory profit results.
- $150 million profit attributable to equity holders of the parent and $1 million profit attributable to other equity instruments.
Contents
1 | Financial highlights | 4 |
1.1 | Reconciliation of cash earnings to statutory profit | 4 |
1.2 | Financial summary | 6 |
2 | Group performance analysis | 9 |
2.1 | Income statement and key metrics | 9 |
2.2 | Net interest income | 11 |
2.3 | Non-interest income | 12 |
2.4 | Operating expenses | 13 |
2.5 | Capitalised investment expenditure | 14 |
2.6 | Lending | 15 |
2.7 | Customer deposits | 17 |
3 | Business settings | 18 |
3.1 | Asset quality | 18 |
3.2 | Funding and liquidity | 22 |
3.3 | Capital management | 26 |
3.4 | Tax expense | 27 |
4 | Divisional performance | 28 |
4.1 | Retail income statement, key metrics and financial performance review | 28 |
4.2 | BOQ Business income statement, key metrics and financial performance review | 30 |
4.3 | Other income state and financial performance review | 32 |
4.4 | Outlook | 32 |
5 | Appendix to financial performance | 33 |
5.1 | Cash EPS calculations | 33 |
5.2 | Average balance sheet and margin analysis | 34 |
6 | Consolidated half year financial report | 35 |
Directors' report | 35 | |
Lead Auditor's Independence Declaration | 36 | |
Consolidated income statement | 37 | |
Consolidated statement of comprehensive income | 38 | |
Consolidated balance sheet | 39 | |
Consolidated statement of changes in equity | 40 | |
Consolidated statement of cash flows | 42 | |
Notes to the financial statements | 43 | |
6.1 | Basis of preparation | 43 |
6.2 | Financial performance | 44 |
6.3 | Capital and balance sheet management | 47 |
6.4 | Controlled entities | 54 |
6.5 | Other notes | 55 |
Directors' declaration | 58 | |
Independent auditor's report to the shareholders of Bank of Queensland Limited | 59 | |
7 | Appendices | 61 |
2024 Half Year Results | 3 |
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
1. Financial highlights
1.1 Reconciliation of cash earnings to statutory profit
Note on cash earnings to statutory profit
Statutory profit is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS). Cash earnings is a non-accounting measure commonly used in the banking industry to assist in presenting a view of Bank of Queensland Limited and its controlled entities' (BOQ or the Group) underlying earnings.
Figures disclosed in the Financial Performance report are on a cash earnings basis unless stated as being on a statutory profit basis. The non-statutory measures have not been subject to an independent audit or review.
Cash earnings excludes several items that introduce volatility or do not reflect underlying performance of the current period. This allows a more effective comparison of performance across reporting periods.
The exclusions relate to:
- Sale of New Zealand asset portfolio - this represents the impairment loss on sale of a portfolio of assets held by BOQ Finance (NZ) Limited and the New Zealand branch of BOQ Equipment Finance Limited, including incurred and estimated future transaction costs;
- Amortisation of acquisition fair value adjustments - arise from the acquisition of subsidiaries; and
- Hedge ineffectiveness - represents earnings volatility from hedges that are not fully effective and create a timing difference in reported profit. These hedges remain economically effective.
Reconciliation of cash earnings to statutory net profit after tax ($m)
172(19)
1 | (3) | 151 |
Cash earnings | Sale of | Amortisation of | Hedge | Statutory net profit |
after tax | New Zealand | acquisition fair | ineffectiveness | after tax |
asset portfolio | value adjustments |
In the financial tables throughout the Financial Performance report, 'large' indicates that the absolute percentage change in the balance was greater than 200 per cent or 500 basis points. 'Large' also indicates the result was a gain or positive in one period and a loss or negative in the corresponding period.
4 Bank of Queensland Limited and its Controlled Entities
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
1.1 Reconciliation of cash earnings to statutory profit (continued)
- Reconciliation of cash earnings to statutory net profit after tax
Half year performance | |||||
Feb 24 | Aug 23 | Feb 23 | Feb 24 | Feb 24 | |
$m | $m | $m | vs Aug 23 | vs Feb 23 | |
Cash earnings after tax | 172 | 194 | 256 | (11%) | (33%) |
Sale of New Zealand asset portfolio (1) | (19) | - | - | large | large |
Amortisation of acquisition fair value adjustments | 1 | 3 | 4 | (67%) | (75%) |
Hedge ineffectiveness | (3) | 2 | (1) | large | 200% |
Goodwill impairment (2) | - | - | (200) | - | (100%) |
ME Bank integration costs (3) | - | (44) | (13) | (100%) | (100%) |
Remedial Action Plans (4) | - | - | (42) | - | (100%) |
Restructuring costs (5) | - | (35) | - | (100%) | - |
Statutory net profit after tax | 151 | 120 | 4 | 26% | large |
- The New Zealand asset portfolio sale completed on 31 March 2024. Further detail has been provided in Note 6.4 Controlled entities to the financial statements.
- In 1H23, the Group recognised a goodwill impairment of $200 million. Refer to Note 4.1 in the 2023 Annual Report for further detail.
- ME Bank integration costs associated with the restructure and integration of Members Equity Bank Limited (ME Bank or ME). The program closed in FY23.
- In 1H23, an after-tax provision of $42 million was raised for the estimated cost of multi-year Remedial Action Plans. Further detail has been provided in Note 6.5.3 Provisions and contingent liabilities to the financial statements.
- Restructuring costs incurred as a result of a Group operating model review to simplify the business.
- 1H24 Non-cash earnings reconciling items
Amortisation | |||||
Cash | Sale of New | of acquisition | Statutory | ||
earnings | Zealand asset | fair value | Hedge | net profit | |
Feb 24 | portfolio | adjustments | ineffectiveness | Feb 24 | |
$m | $m | $m | $m | $m | |
Net interest income | 725 | - | 5 | - | 730 |
Non-interest income | 70 | - | - | (4) | 66 |
Total income | 795 | - | 5 | (4) | 796 |
Operating expenses | (524) | (18) | (5) | - | (547) |
Underlying profit | 271 | (18) | - | (4) | 249 |
Loan impairment expense | (15) | - | 1 | - | (14) |
Profit before tax | 256 | (18) | 1 | (4) | 235 |
Income tax expense | (84) | (1) | - | 1 | (84) |
Profit after tax | 172 | (19) | 1 | (3) | 151 |
2024 Half Year Results | 5 |
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
1.2 | Financial summary | |
Cash earnings after tax ($m) | Statutory net profit after tax (NPAT) ($m) | |
Down 33% | large |
268 | 223 | 256 | 194 | |
172 | ||||
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Common equity tier 1 ratio (CET1 ratio) (%) (1) |
Up 5bps
9.68 | 9.57 | 10.71 | 10.91 | 10.76 |
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Cash basic earnings per share (EPS) (cents)
Down 33%
41.1 | 34.2 | 39.0 | 29.5 | |
26.2 | ||||
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Cash cost to income ratio (CTI) (%)
large | ||||
55.5 | 57.6 | 54.9 | 61.3 | 65.9 |
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
212 | 197 | 151 | ||
4 | 120 | |||
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Dividends per ordinary share (cents)
Down 15%
22 | 24 | 20 | 21 | 17 |
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Cash net interest margin (NIM) (%)
Down 24bps
1.74 | 1.70 | 1.79 | 1.58 | 1.55 |
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
Cash return on average equity (ROE) (%)
Down 260bps
9.1 | 7.2 | 8.4 | ||
6.2 | ||||
5.8 | ||||
1H22 | 2H22 | 1H23 | 2H23 | 1H24 |
- During 1H23, Australian Prudential Regulation Authority's (APRA) new Basel III capital framework came into effect. The impact of the changes to the measurement of credit risk and operational risk contributed a 120 basis points increase to the CET1 ratio. Periods prior to 1H23 are as previously reported.
6 Bank of Queensland Limited and its Controlled Entities
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
1.2 Financial summary (continued)
Net profit after tax | $151m |
$172m | |
Cash earnings | Statutory NPAT |
Down 33 per cent on 1H23. | Up on 1H23 |
Cash net profit after tax (NPAT) decreased by 33 per cent on 1H23, driven by competition for lending, higher funding costs, inflation and investment in risk, compliance and technology.
Cash net interest margin
1.55%
Decrease of 24 basis points on 1H23 driven by competition for lending and higher funding costs mainly in 2H23.
Cash operating expenses
$524m
Up six per cent on 1H23, reflecting inflationary pressure and investment in risk, compliance and technology.
Cash loan impairment expense (LIE)
$15m
Loan impairment expense of $15 million in 1H24 compares to a loan impairment expense of $34 million in 1H23 due to a lower collective provision expense.
CET1 ratio
10.76%
Decrease of 15 basis points on 2H23 driven by higher investment spend, lower securitisation benefits and the New Zealand asset portfolio sale.
Cash ROE
5.8%
Decrease of 260 basis points on 1H23, driven by lower cash earnings.
Cash earnings after tax for 1H24 of $172 million was 33 per cent lower than 1H23. The decrease was driven by a 13 per cent reduction in net interest income and six per cent expense growth, partly offset by a decrease in loan impairment expense. Statutory net profit after tax of $151 million compares to $4 million in 1H23. 1H24 includes a $19 million loss due to the sale of the New Zealand asset portfolio as the business continues to simplify.
Operating expenses
Total operating expenses of $524 million increased six per cent on 1H23. This reflected continued inflationary pressure and investment in risk, compliance and technology. This was partially offset by lower marketing spend, lower amortisation and savings from productivity initiatives.
Net interest income
Net interest income (NII) of $725 million decreased $107 million or 13 per cent on 1H23. This was driven by a 24 basis points decrease in net interest margin (NIM) to 1.55 per cent, partially offset by one per cent growth in average interest earning assets (AIEA). The reduction in NIM reflected continued competition across both lending and deposits and higher wholesale funding costs as the Term Funding Facility (TFF) was replaced. NIM contraction in 1H24 moderated with a decline of three basis points on 2H23.
AIEA increased one per cent on 1H23, predominantly driven by growth in asset finance and commercial lending and higher liquid assets partially offset by contraction in the housing portfolio. The housing contraction reflects a decision to prioritise economic return over volume growth in a competitive market.
Non-interest income
Non-interest income of $70 million was flat on 1H23. Higher income from third party credit card and insurance products and trading income was offset by lower banking fee income.
Loan impairment expense
The loan impairment expense of $15 million decreased by $19 million on 1H23. Collective provision expense was lower than in 1H23 reflecting higher house prices, partly offset by the impacts of cost of living and interest rate pressures.
The specific provision expense was $13 million in 1H24. Specific provision activity remains low.
Capital management
The CET1 ratio of 10.76 per cent was 15 basis points lower than 2H23. The capital generated through cash earnings net of dividend was offset by higher investment spend, run off in capital relief securitisation trusts, lower available for sale reserve, higher capital deductions and the sale of the New Zealand asset portfolio. At 10.76 per cent, the CET1 ratio is above the management target range of 10.25 - 10.75 per cent.
Shareholder returns
BOQ has determined to pay an ordinary dividend of 17 cents per share, which is 65 per cent of 1H24 cash earnings. The Board has committed to a target dividend payout ratio of 60-75 per cent. (1)
- The amount of any dividend paid will be at the discretion of the Board and will depend on several factors, including a) the recognition of profits and availability of cash for distributions; b) the anticipated future earnings of the company; or c) when the forecast timeframe for capital demands of the business allows for a prudent distribution to shareholders.
2024 Half Year Results | 7 |
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
1.2 Financial summary (continued)
Remedial Action Plans update
In 2023 BOQ established two multi-year programs of work (the Programs) to uplift operational resilience, risk culture and governance (Program rQ) and address compliance weakness across the Anti-Money Laundering and Counter-Terrorism Financing operating model (AML First Program). Subsequently in May 2023, the Bank entered into a Court Enforceable Undertaking (CEUs) with each of the Australian Prudential Regulation Authority (APRA) and the Australian Transaction Reports and Analysis Centre (AUSTRAC).
BOQ established Remedial Action Plans (RAPs) as required by each CEU that set out the actions the Bank must take and the timeframes necessary to address the underlying weaknesses outlined in the CEUs. The RAPs were approved by APRA and AUSTRAC on 30 November 2023 and 20 October 2023 respectively.
BOQ's initial focus was on establishing the Programs, including significant activity to establish sound governance structures, project management and workstream operating practices across the Programs, as well as the mobilisation of resources. BOQ has also executed, and continues to execute, the actions and deliverables required by the RAPs, with numerous deliverables in design, implementation or embedment phases.
An Independent Reviewer has been appointed to oversee the Program rQ RAP and an External Auditor has been appointed to oversee the AML First Program and the RAP. The first reports from these parties have now been submitted to APRA and AUSTRAC respectively. Reports will continue to be produced and submitted to APRA and AUSTRAC every four months in accordance with the conditions of the CEUs.
A provision of $60 million was recognised in 1H23 to improve operational and financial resilience, and risk culture and to address weaknesses in AML compliance practices. The provision excluded the cost of activities related to improvements beyond the matters identified in the CEUs and costs associated with identifying and remediating any potential new issues.
8 Bank of Queensland Limited and its Controlled Entities
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
2. Group performance analysis
2.1 Income statement and key metrics
Half year performance | |||||
Feb 24 | Aug 23 | Feb 23 | Feb 24 | Feb 24 | |
$m | $m | $m | vs Aug 23 | vs Feb 23 | |
Net interest income (1) | 725 | 768 | 832 | (6%) | (13%) |
Non-interest income (1) | 70 | 72 | 70 | (3%) | - |
Total income | 795 | 840 | 902 | (5%) | (12%) |
Operating expenses (1) | (524) | (515) | (495) | 2% | 6% |
Underlying profit | 271 | 325 | 407 | (17%) | (33%) |
Loan impairment expense (1) | (15) | (37) | (34) | (59%) | (56%) |
Profit before tax | 256 | 288 | 373 | (11%) | (31%) |
Income tax expense (1) | (84) | (94) | (117) | (11%) | (28%) |
Cash earnings after tax | 172 | 194 | 256 | (11%) | (33%) |
Statutory net profit after tax | 151 | 120 | 4 | 26% | large |
(1) Refer to Section 1.1 Reconciliation of cash earnings to statutory profit for a reconciliation of cash earnings to statutory net profit after tax.
Half year performance | ||||||
Feb 24 | Feb 24 | |||||
Key metrics | Feb 24 | Aug 23 | Feb 23 | vs Aug 23 | vs Feb 23 | |
SHAREHOLDER RETURNS | ||||||
Share price | $ | 5.90 | 5.76 | 7.06 | 2% | (16%) |
Market capitalisation | $m | 3,892 | 3,786 | 4,607 | 3% | (16%) |
Dividends per ordinary share (fully franked) | cents | 17 | 21 | 20 | (19%) | (15%) |
CASH EARNINGS BASIS | ||||||
Basic earnings per share (EPS) | cents | 26.2 | 29.5 | 39.0 | (11%) | (33%) |
Diluted EPS | cents | 23.9 | 26.3 | 35.2 | (9%) | (32%) |
Dividend payout ratio | % | 65.2 | 71.0 | 51.0 | large | large |
STATUTORY BASIS | ||||||
Basic EPS | cents | 22.9 | 18.1 | 0.2 | 27% | large |
Diluted EPS (1) | cents | 21.3 | 17.3 | 0.2 | 23% | large |
Dividend payout ratio | % | 74.4 | 115.3 | large | large | large |
- 1H23 diluted EPS has been restated to exclude the impact of the Capital Notes, Capital Notes 2 and Capital Notes 3. These notes were anti-dilutive during the period and as a result, their impact has been excluded from diluted EPS.
2024 Half Year Results | 9 |
Financial highlights 4 | Group performance analysis 9 | Business settings 18 | Divisional performance 28 | Appendix to financial performance 33 |
Financial performance
For the half year ended 29 February 2024
2.1 Income statement and key metrics (continued)
Half year performance | ||||||
Feb 24 | Feb 24 | |||||
Key metrics | Feb 24 | Aug 23 | Feb 23 | vs Aug 23 | vs Feb 23 | |
PROFITABILITY AND EFFICIENCY MEASURES | ||||||
CASH EARNINGS BASIS | ||||||
Net profit after tax | $m | 172 | 194 | 256 | (11%) | (33%) |
Underlying profit (1) | $m | 271 | 325 | 407 | (17%) | (33%) |
NIM (2) | % | 1.55 | 1.58 | 1.79 | (3bps) | (24bps) |
Cost to income ratio (CTI) | % | 65.9 | 61.3 | 54.9 | 460bps | large |
Loan impairment expense to gross loans and advances (GLA) | bps | 4 | 9 | 8 | (5) | (4) |
Return on average equity (ROE) | % | 5.8 | 6.2 | 8.4 | (40bps) | (260bps) |
Return on average tangible equity (ROTE) (3) | % | 7.2 | 7.5 | 10.6 | (30bps) | (340bps) |
STATUTORY BASIS | ||||||
Net profit after tax | $m | 151 | 120 | 4 | 26% | large |
Underlying profit (1) | $m | 249 | 217 | 131 | 15% | 90% |
NIM(2) | % | 1.56 | 1.60 | 1.81 | (4bps) | (25bps) |
CTI | % | 68.7 | 74.5 | 85.6 | large | large |
Loan impairment expense to GLA | bps | 3 | 9 | 8 | (6) | (5) |
ROE | % | 5.1 | 3.9 | - | 120bps | large |
ROTE (3) | % | 6.3 | 4.8 | - | 150bps | large |
ASSET QUALITY | ||||||
30 days past due (dpd) arrears | $m | 1,552 | 1,262 | 1,146 | 23% | 35% |
90 dpd arrears | $m | 851 | 736 | 592 | 16% | 44% |
Impaired assets | $m | 116 | 114 | 133 | 2% | (13%) |
Specific provisions to impaired assets | % | 51 | 54 | 53 | (300bps) | (200bps) |
Total provision and equity reserve for credit losses (ERCL) / GLA | bps | 41 | 44 | 45 | (3) | (4) |
CAPITAL | ||||||
CET1 ratio | % | 10.76 | 10.91 | 10.71 | (15bps) | 5bps |
Total capital adequacy ratio | % | 15.17 | 15.64 | 15.89 | (47bps) | (72bps) |
Risk weighted assets (RWA) | $m | 40,702 | 40,680 | 41,020 | - | (1%) |
- Profit before loan impairment expense and tax.
- NIM is calculated net of offset accounts.
- Based on after tax earnings applied to average shareholders' equity (excluding preference shares and treasury shares) less goodwill and identifiable intangible assets (customer related intangibles/brands and computer software).
10 Bank of Queensland Limited and its Controlled Entities
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Bank of Queensland Limited published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2024 10:04:14 UTC.