BOQ CEO Patrick Allaway
A goodwill impairment, remedial and restructuring costs have smashed the full year profit of Bank of Queensland.
A high cost operator with an improbable productivity agenda, BOQ reported that its net profit fell to A$124 million over the year to August 2023 from $409 million in 2022.
Cash earnings fell to $450 million from $491 million.
BOQ’s net interest margin fell to 1.69 per cent from 1.71 per cent over the year. Over the half it fell 21 basis points to 1.58 per cent.
The bank’s cost to income ratio increased to 58.0 per cent in 2023 from 56.5 per cent. Before it bought ME Bank in 202, its CTI ratio was in the low 50s.
“Our cost base is not sustainable, and we have started work on the simplification program,” CEO Patrick Allaway conceded in the investor briefing yesterday.
“We’re very focused on costs, our cost growth is not sustainable
“We’re making the decision to invest today to deliver a lower cost bank in the future” he said.
In April 2023 the bank announced a $60 million provision to fund two Remedial Action Plans, one following regulatory intervention by APRA and the second by AUSTRAC.
“Following the identification of risk weaknesses in our business in 2022 and closely working with regulators, we conducted independent reviews and a root cause analysis,” Allaway and chair Warwick Negus told shareholders in the annual report.
“We commenced the planning for a multi-year scope of work to address these findings and uplift BOQ’s operational resilience and risk culture.
“We recognise that we have material improvements to make and are using the Court Enforceable Undertakings as a platform to address our risk management and compliance weaknesses.
“We have scoped and submitted these remediation plans with our regulators and are committed to this multi-year program of work” they said.
Thanks to the $200 million impairment of goodwill in the retail bank, the net profit of the retail bank was a mere $3 million in 2023, down from $232 million in 2022.
In a further pointer to operational weakness at BOQ, home loan arrears of 90 days or more jumped materially in the second half to 87 basis points from 66 bps. This is the only marked rise in mortgage arrears reported all profit season.