BOQ has released its full-year results for the 2019 financial year (FY19), reporting a 14 per cent fall in its cash earnings after tax, down from $372 million to $320 million.
The decline was driven by a 4 per cent increase in the bank’s operating expenses ($527 million) and a 2 per cent decline in its total income ($1.1 billion).
BOQ’s home lending woes continued over FY19, with its retail bank reporting a $1.4-billion contraction in its mortgage portfolio, offset by portfolio growth of $914 million via its subsidiary Virgin Money Home Loans.
The bank’s net interest margin dropped by 5 bps to 1.93 per cent.
According to BOQ, the FY19 results reflect a “challenging operating environment” characterised by “slowing credit demand, lower interest rates, a rise in regulatory costs and changes impacting non-interest income”.
Reflecting on the results, newly instated BOQ CEO George Frazis said he is committed to addressing the causes of the bank’s weak FY19 performance.
“These results are disappointing, and the management team recognises this,” he said.
“As CEO, I have a clear directive and mandate to take decisive action and improve our performance for both customers and shareholders.”
Mr Frazis said he believes BOQ is “fundamentally a good business” but added that he has identified areas for reform, which include an overhaul of the bank’s lending processes.
“It has a solid platform for differentiation through the niche business segments and Virgin Money Australia.
“Underlying asset quality is sound, and our balance sheet is solid.
“Our bankers, importantly, care for our customers and the bank, but there are some clear areas requiring attention.
“[The areas for reform include] turning around the retail bank’s performance, fixing our onerous lending processes, addressing our rising costs – given the revenue challenges in the current environment – closing the digital gap between BOQ and our peers [and] building on our people skills and capabilities, particularly when it comes to execution,” Mr Frazis told investors.
Mr Frazis said the bank would conduct a “detailed review” to forge a strategy to help execute the bank’s key objectives over the coming year.
Looking ahead, Mr Frazis said he is expecting subdued growth in FY20.
“We expect lower year-on-year cash earnings in FY20 with revenue and impairment outcomes in line with FY19, higher post-Hayne regulatory and compliance costs, and increased operating expenses related to our investment in technology,” he said.
“I am very focused on delivering sustainable growth and improved shareholder returns.”
[Related: BOQ appoints new CFO, COO]
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Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.