Bank of Queensland is on track to deliver a bumper full year profit as the domestic economic recovery stokes loan volumes and eases provisioning pressures.
In a filing to the ASX on Tuesday the bank revealed that its bottom line earnings could be sweetened by a A$75 million release from its collective provision, which stood at $271 million at the end of February.
The decrease in provisioning could have a material impact on the full year performance of the bank after it reported a 66 per cent leap in first half profit to $166 million.
BoQ told the ASX that the decision to reduce collective provisioning reflected the improved economic outlook and improvements in data quality relating to collateral.
“Today, Australia is experiencing strengthening business and consumer confidence driving our economic recovery, supported by strong housing growth, lower unemployment rates and increasing business investment,” said chief executive, George Frazis.
“The reduction in the collective provision during the quarter reflects this improvement in the current economic environment.
“We continue to prudently manage our provisions to ensure we are well covered for any potential lifetime losses arising from COVID-19.”
In the last three years BoQ has been an underperformer in the banking sector, posting an average annual decline in earnings of 11.6 per cent compared to average profit falls of 2.6 per cent for the rest of the industry.
However, the most recent APRA data indicates that the bank is poised to report a significant increase in interest income in the second half as it regains momentum in its mortgage lending business.
According to APRA, BoQ expanded the size of its mortgage book by $1.4 billion or 5 per cent in the six months to the end of April.
While its rate of growth was dwarfed by the double-digit expansions at CBA and Macquarie in the same period, BoQ is now increasing its book faster than ANZ (up 1 per cent) and NAB (up 1.4 per cent).
A key to BoQ’s volume recovery in the mortgage market has been its concerted campaign to rebuild its profile with broker networks.
But there are indications that the bank’s systems are now struggling to cope with the increased demand from third parties.
At the end of March BoQ notified brokers that it was taking up to five days to start assessments on loan applications from wage-earning borrowers.
That wait time has since blown out to 12 days.
For loan applicants who are self-employed the bank is now taking up to 20 days begin assessments – up from 7 days in March.