Bank of Queensland grew share in the mortgage market during the six months to February – the first time the underperforming bank has increased its mortgage share in years.
The bank’s mortgage book grew 3.9 per cent to A$32.1 billion over the half, compared with system growth of 2.4 per cent (based on APRA data).
Stronger performance in mortgage lending was the highlight for BOQ in the six months to February 2021. It made a net profit of $154 million – an increase of 66 per cent over the previous corresponding period.
All the earnings growth came from the retail banking division. The business banking division suffered a 7 per cent fall in earnings.
After adjusting for a number of one-off items, including $6 million resulting from an employee pay review, it reported cash earnings of $165 million – an increase of 9 per cent over the previous corresponding period.
Net interest income rose 6 per cent year-on-year to $512 million, while non-interest income fell 2 per cent to $57 million.
Operating expenses rose 4 per cent to $306 million. The cost to income ratio came down 50 basis points to 53.8 per cent.
The bank’s net interest margin rose from 1.89 per cent in the six months to February 2020 to 1.95 per cent in the latest half. Most of the gain came from lower funding costs and changes to the product mix.
The bank repriced at-call and retail term deposit rates, and deposits flowed from TDs into lower cost at-call accounts. The bank used its term funding facility allocation for the full six-month period.
The loan impairment expense was $24 million, compared with $147 million in the six months to August and $28 million in the February half last year. The loan impairment expense as a proportion of gross loan and acceptances was 10 bps, compared with 62 bps in the August half and 12 bps in the February half last year.
Return on equity (on a cash basis) rose 30 bps to 7.8 per cent.
BOQ chief executive George Frazis said the improvement in home lending was the result of mortgage process simplification, improved lending capability and improvements to the customer experience.
The bank’s investment in its Virgin Money Australia brand appears to be paying dividends. Virgin accounted for $449 million of the total $997 million increase in mortgage lending over the period.
Commercial loan volumes grew 1 per cent year-on-year to $9.4 billion. The bank said COVID resulted in lower settlements and higher run-offs in the corporate portfolio and contractions in small business lending and BOQ Specialist.