The Bank of Queensland (ASX: BOQ) has blamed a challenging operating environment and rising regulatory costs for its weak FY19 result.
FY19 cash earnings after tax were down 14 per cent to $320 million, while statutory NPAT was down by 11 per cent to $298 million.
Despite the weaker FY19 result, BOQ's new managing director and CEO George Frazis says the business will push through the challenges of FY20.
"Our capital is well positioned for 'unquestionably strong', we have a good funding position and our underlying asset quality is sound," says Frazis.
"There are numerous opportunities ahead for a revamped BOQ and I will be working closely with the executive leadership team to complete our strategic and productivity review, with a market update on our plans in February 2020."
During FY19 total income decreased by $21 million, and net interest income decreased by $4 million for the company named number seven in Brisbane's Top Companies 2019.
The bank says the reduction is attributable to the declining interest rate environment and continued strong competition for loans and deposits.
Banking income was also reduced by $11 million primarily because of lower fee income and a change in arrangements to BOQ's merchant offering.
The group saw growth in its niche offering Virgin Money, with the portfolio growing by $914 million to over $2.5 billion, while the BOQ Retail bank saw a further contraction of $1.4 billion in its residential housing loan book.
BOQ will invest $30 million of capitalised investment to complete the build of a new Virgin Money digital bank in FY20, which the company says is an investment in a long-term project.
"This is an investment in long term value creation for this iconic brand which has demonstrated success in attracting customers across its existing product suite," says BOQ.
Looking forward, Frazis says the bank is focusing on returning to profitable and sustainable growth.
"We expect lower year-on-year cash earnings in FY20 with revenue and impairment outcomes in line with FY29, higher post-Hayne regulatory and compliance costs, and increased operating expenses related to our investment in technology," says Frazis.
"I am very focused on delivering sustainable growth and improved shareholder returns."
Shares in BOQ are down 3.26 per cent to $9.34 per share at 10.03am AEDT.
Business News Australia
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