BOQ profit plummets to just $4m as retail banking assessment reveals shortfall

Bank of Queensland (ASX: BOQ) December half profits have plunged from $212 million down to just $4 million in the space of a year, after a retail banking assessment revealed a shortfall in recoverable cash to the tune of $200 million which has been recognised as an impairment. 

The headline profit figure was diminished further by a $60 million provision for additional expenditures associated with an Integrated Risk Program (IRP) to keep up with demands around compliance, anti-money laundering and counter-terrorism financing, risk culture and operational resilience.

This expected increase in spending on risk management follows internal and external reviews that identified a "material uplift" was required to address these issues.

BOQ's numbers would not have looked so depressed if it weren't for this $260 million hit to the bottom line, as cash earnings after tax stood at $256 million, supported by a margin tailwind that was reduced in the last 2.5 months of 2022 due to heightened mortgage and deposit competition.

The banking group reports that margin uplift was partially offset by a 7 per cent growth in expenses, while total income rose 9 per cent year-on-year in the half to reach $902 million.

"BOQ is in a strong financial position as we enter this more challenging economic cycle," says the recently promoted managing director and CEO Patrick Allaway.

"We are well positioned to continue to invest in our transformation to deliver a stronger and simpler low-cost digitally enabled bank.

"We have made significant progress since announcing our strategy in 2020 across digitisation; improving our strategic position through the ME bank acquisition, achieving growth across our brands and strengthening our financial resilience."

BOQ's deposit to loan ratio was 80 per cent for the half with total customer deposits of $65.5 billion, and housing loan growth was up marginally by 0.6 per cent at around $200 million. This compares to a 6 per cent rise in business loan growth - primarily focused on SMEs, healthcare, agriculture and equipment finance - to $509 million for the period.

Between August 2022 and February 2023, the total amount of loans in arrears rose 27 per cent to more than $1 billion for 30 days past due (dpd), and was up 15 per cent to $512 million for 90 dpd.