Bank of Queensland has started the financial year with solid growth in both its home and business lending portfolios

Investors jumped on BOQ shares after the bank said “growth momentum’’ had continued in the first quarter of fiscal year 2022.

Bank of Queensland CEO George Frazis. Picture: Richard Walker

Bank of Queensland has started the financial year with solid growth in both its home and business lending portfolios.

In a trading update released ahead of its annual general meeting held online Tuesday, BOQ said “growth momentum’’ had continued in the first quarter of fiscal year 2022.

Its shares jumped 4.2 per cent, or 32c, to $7.92 on Tuesday.

The housing portfolio across its BOQ and Virgin Money brands increased by about $1 billion during the quarter.

ME Bank, which BOQ acquired for $1.35bn in July, returned to growth last month, with application volumes up 62 per cent compared to the prior year’s average.

Business banking lending grew by about $200m during the first quarter, with the asset financing arm also performing well.

The bank also reconfirmed its profit guidance, tipping at least 2 per cent “positive jaws,’’ meaning gross income growth will exceed expense growth.

Bank of Queensland CEO George Frazis. Picture: John Feder/The Australian.

“BOQ continues to execute on its strategy, digital transformation and the ME Bank integration,’’ chief executive George Frazis said.

“We remain firmly focused on delivering against our strategy to transform BOQ into a digital bank with a personal touch.”

On a slightly sour note, BOQ revealed that net interest margin “headwinds,’’ partly caused by “tougher trading conditions,’’ will lead to a lower result than previously advised.

To compensate somewhat for this setback, the bank now expects fresh productivity gains will help trim expenses by about 1 per cent this year.

In the last financial year, BOQ delivered a better-than-expected net profit of $369m, up from $115m.

Cash earnings after tax also soared to $412m, an 83 per cent improvement mainly as a result of home lending growth. Total lending growth lifted to $3.5bn.

Chairman Patrick Allaway warned that the year head has many pitfalls as the nation slowly emerges from under the shadow of Covid-induced pressures.

“Our operating environment remains uncertain with the ongoing pandemic, structural headwinds, increasing competition and high leverage and asset prices at the low point in the interest rate cycle,’’ he said.

Mr Frazis vowed to keep progressing a “strategic transformation program,’’ which kicked off in early 2020 and includes a sweeping upgrade of the bank’s much-maligned digital platforms.

But he was taken to task on that initiative by an investor, who asked why the bank had failed to update its “pathetic’’ Android app since 2018.

Mr Frazis did not respond directly to the question but said BOQ had already tipped in about $200m into its digital upgrade scheme and another $300m would be spent in the next few years.

He noted that a new Virgin Money app will be released next year.

Another shareholder took aim at the bank for its alleged disenfranchisement of some BOQ investors who lost out on an opportunity to participate in a rights issue as part of the $1.35bn capital raising to acquire ME Bank.

Mr Allaway pinned the blame on a failure of mail delivery.

“Due to unforeseen delays to Australia Post’s delivery times, some of our retail shareholders missed the cut-off date for the acceptance of the rights issue offer,’’ he told the virtual meeting.

“On being alerted to these delays, we extended the time frame for further acceptances to be received as long as feasibly possible. We sincerely apologise to those shareholders who were unable to participate.’’

BOQ investors were rewarded with a 39 cent dividend for the year.