BoQ scraps guidance, dividends exemption

Bank of Queensland has scrapped its profit guidance for the year and will no longer seek an exemption to pay out excess dividends.

BoQ shares jumped yesterday despite the apparent pressure on its dividend payout

Bank of Queensland has scrapped its profit guidance for the year and will no longer seek an exemption to pay out more in dividends than its profit, but says its capital position remains strong and it will go ahead with the strategy refresh it unveiled last month.

The “highly uncertain environment” and challenges in providing accurate forecasts amid the coronavirus crisis led the bank to pull its guidance on Monday, just weeks after it was handed down by CEO George Frazis.

“Despite the significant shift in the economic environment, BoQ remains focused on executing its refreshed strategy, and importantly retains the flexibility to respond to changing market dynamics,” the bank said.

Mr Frazis, who has been in the top job at the bank for six months, in February unveiled a five-year plan aimed at consolidating the bank’s core systems, slashing products and jobs, and positioning the regional lender for growth. BoQ last month flagged a dividend payout ratio of between 70 per cent to 80 per cent of cash earnings, which it expected to come in between 4 and 6 per cent lower than the $320m it booked in 2019.

Due to a number of one-off items expected to drag on its statutory profit, the lender would have had to seek approval from the banking regulator to pay out dividends within the 70-80 per cent range. By scrapping those plans, it signalled a downgrade to dividend guidance, analysts said.

In its update on Monday, the bank said its capital position and funding were strong and that it had a pro forma fiscal 2019 CET1 ratio of 10.07 per cent following its capital raising late last year. “BoQ’s funding position will also be further enhanced by the provision of the RBA term funding facility to support customers with new lending,” it said.

The bank said it would continue to work with the federal and state governments and regulators to support its customers, employees and the wider community through the period of disruption caused by COVID-19.

“We have a strong balance sheet with solid capital and funding, and robust risk management. We will support our customers in any way we can, especially at a time when some are feeling at their most vulnerable. We are here for our customers and will work with them through the challenges ahead,” Mr Frazis said.

BoQ’s shares jumped despite the apparent pressure on its dividend payout, up 4.4 per cent at $5 in late afternoon trade.