Bank of Queensland to pay lower dividend after stress test

Bank of Queensland still intends to pay dividends, subject to completion of stress tests with the prudential regulator.

Bank of Queensland says it will update shareholders on the interim dividend after completing stress tests with APRA

Bank of Queensland intends to pay dividends, subject to the completion of stress tests with the prudential regulator, and said it is confident its capital buffer can withstand an extremely adverse scenario.

In a letter to shareholders, chairman Patrick Allaway said BoQ would update shareholders on the interim dividend after stress tests with the Australian Prudential Authority were completed. “If we resolve to pay an interim dividend, we anticipate a lower payout ratio than the target 70-80 per cent range previously disclosed,” he said.

“We consider this a sensible approach along with other capital management initiatives at this time to maintain our strong capital position.”

BoQ said at its interim result last week that it would defer payment of an interim dividend until the economic outlook was clearer and required stress tests were considered by APRA.

The regulator asked banks and insurers to limit dividends in future months, or consider deferral of the payments in order to conserve capital and support the economy.

Mr Allaway said BoQ had entered the uncertain period well capitalised with a good liquidity position and sound asset quality.

“Through our risk management framework we have conducted early stress testing of our business against a range of potential future economic scenarios,” he said. “In scenarios tested to date, our capital remained above APRA’s mandated levels.

“We note that we are at a very early stage of scenario testing, with insufficient clarity on the severity or length of the credit cycle at this time to determine whether the range of scenarios we have tested are either appropriate of adequate.”

The BoQ chair said the bank would be sharing the stress testing scenarios and outcomes with APRA, and hoped to get further clarity on the future outlook for the economy.

BoQ, he said, remained focused on its positioning for a return to growth when the economy recovered.

BOQ reported cash earnings for the half-year to February 29 of $151m, down 10 per cent on the first half of 2019 and broadly in-line with market expectations.

The bank booked a $10m overlay in the first half to cover the impact of COVID‐19 pandemic, which was part of a total collective provision for the 2020 year in the range of $49m-$71m to recognise the cost of the crisis.