This business is a tale of two cities at present.
On one hand the company improved its underlying earnings which supported solid volume growth and improved margins. With a better cost to income ratio.
There is the expectation that revenue growth could surprise to the upside which is drive by acquisitions plus volume growth in loans and term deposits. As they are based mainly in Queensland there is the expectation that they will receive a boost from the recent natural disasters suffered by the state.
On the flip side the company posted a Net Profit after tax fall of 10%; bringing the net profit in at $176.6 million. This saw a 92% increase in bad debts to $200 million which was well flagged but still disappointed the market.
The write off reduced the earnings per share to $0.69, with the loan quality risk increased due to diversification into non-traditional lending sectors BOQ is a stock to watch carefully for now.
With a new CEO on board I would like to make sure he is on top of the issues before making any investment in this business.
If you have some, hold, if not I would look at one of the big four instead.
For more information on Bank of Queensland (BOQ) please contact us on 07 4771 4577.