Bank of Queensland to pay special dividend

Bank of Queensland will hand out a special dividend after a recovery in lending, as it lifted full-year cash earnings 5pc.

Bank of Queensland CEO Jon Sutton. Pic: Peter Wallis

Bank of Queensland expects additional flow-on benefits from the repricing of investor home loans and will reward shareholders with a special dividend after booking a lift in cash profit for the full year.

For the year through to August, the Brisbane-based bank (BOQ) logged a 5 per cent increase in cash profit, to $378 million.

The result was driven by margin improvements and lending growth in the second half, as well as the sale of a vendor finance unit. Statutory net profit rose 4 per cent to $352m in the year.

“The second half largely played out as we said it would,” CEO Jon Sutton said.

“Lending growth improved in both the housing and commercial loan portfolios. The Virgin Money Reward Me home loan portfolio has grown ahead of expectations.”

He added the bank had confidence going into the new fiscal year, although the industry faced challenges from low housing-credit growth, low interest rates, regulatory uncertainty and increasing consumer expectations.

After a challenging first half, the bank’s net interest margin increased five basis points in the second half to 1.90 per cent, as a result of driven by improved funding costs and repricing of investor home loans. For the full year its net interest margin was down seven basis points to 1.87 per cent.

The lender expects additional flow-on benefits from the repricing of investor loans in the first half of 2018.

Efficiency remained a primary focus, and the bank was seeking to further improve productivity, Mr Sutton said.

The bank will pay a special dividend of 8c per share, as well as the final dividend of 38c per share. It has suspended a dividend reinvestment plan until after dividends are paid in late November. The total payout for the year is 11 per cent higher than last year, at 84c a share.

Bank of Queensland said it achieved a 2 per cent rise in lending growth over the latest year, despite flat annual mortgage growth. Its loan impairment expense fell by 28 per cent over the course of the year to $48m, and the bank said it strengthened its balance sheet to end the period with a common equity Tier 1 capital ratio of 9.39 per cent.

In July, the Australian Prudential Regulatory Authority said “standardised” banks, such as Bank of Queensland, needed to raise minimum capital by 50 basis points.

At 11.25am (AEDT), Bank of Queensland shares were 1.62 per cent higher at $13.15, after earlier jumping as much as 3 per cent.

With Dow Jones Newswires