Equity raising might get business done for BOQ

Bank of Queensland has gone backwards in the second half of the year.

The $3.8bn Bank of Queensland is not thought to be about to raise equity, but some market observers believe the latest result demonstrates that soon it could be close to being in that position.

The result delivered on Wednesday showed that the business bank has gone backwards in the second half of the year and the bank has been unable to deliver on its aspirations of growing that arm of the lender.

It saw a 4 per cent lift in business loan growth and total business income growing 14 per cent, but earnings were 14 per cent lower in the second half than the first half, which is what was concerning.

It’s further evidence that its $1.33bn acquisition of ME Bank in 2021 has been a major distraction and has not been as successful as hoped.

Whether BOQ gets bought because it becomes so cheap (it’s trading at 9.1 times its net profit expected for this year) mostly hinges on whether ANZ Bank is able to gain approval to buy Suncorp, with the large candidates in a position to buy the business on the sidelines playing a waiting game.

The thinking is that members of management could need to be replaced but the challenge is finding top staff to fill their positions.

So really the ideal outcome for Bank of Queensland would be a takeover, but there’s no obvious suitors.

One could be a hard-nosed private equity firm like Kohlberg Kravis Roberts, but the banking APRA takes a dim view of private equity owning banks.

Yet if the situation becomes dire, there could be a case for it.

One only needs to look offshore with the recapitalisation of Metro Bank in the UK, where private capital stepped in to assist the embattled lender.

While some caution BOQ could soon need to raise some cash, analysts spoken to by this column did say that they believed its capital levels were fine right now, with ratios in that area coming in better than expected and it paying dividends in the second half.

Bank of Queensland’s cash net profit of $450m for the 2023 financial year was described by analysts at UBS as a poor result but largely expected.