Industry-wide challenges have hurt the Bank of Queensland (ASX: BOQ) during the first half of the 2019 financial year.
The bank saw cash earnings after tax down 8 per cent to $167 million and statutory NPAT down 10 per cent to $156 million.
Revenue was down slightly by 2 per cent to $544 million.
Interim CEO Anthony Rose blamed the industry-wide impact of the Royal Commission as well as some BOQ-specific problems.
"Across the industry, there have been significant changes in the banking landscape which has created revenue headwinds for the sector," says Rose.
"We have welcomed the work of the Royal Commission and its focus on delivering improved customer outcomes. Although the Royal Commission made no express recommendations or referrals against BOQ, implementation of the Commission's recommendations will clearly have long lasting and industry-wide implications."
"Regulator expectations are also shifting in response to the Commission's findings. Making the changes necessary to ensure compliance with these new regulatory obligations and expectations will increase costs for all banks."
"BOQ also has challenges that are specific to our business, particularly in the Retail Bank, where our lending processes, digital platforms and the ability to attract new owner managers in an environment of regulatory uncertainty, have hampered customer acquisition and returns."
A new provisioning model for BOQ resulted in the company recording a $30 million impairment expense. The company says despite this its portfolio "remains sound with no significant areas of concern emerging".
The company saw growth in its Virgin Money Australia subsidiary as well as its Finance and Specialist businesses.
BOQ Specialist contributed strong growth in its housing and commercial loan portfolios of $287 million and $70 million respectively.
Virgin Money Australia achieved $469 million of housing loan growth from the half, and Finance delivered growth of $303 million.
Rose says that the bank is continuing to invest in other projects due to be completed in 2019/20.
"Once these critical projects are delivered, BOQ will be more competitive on a number of fronts, including a refreshed digital offering for BOQ customers and lending processes which will improve customer experience," says Rose.
Though he is confident about the future of some of its niche products like Virgin Money, Rose says that investors should expect 2H19 earnings to remain around the level that they are at the end of 1H19.
"Although the current earnings profile is not at the level that we aspire to, there is a lot to be optimistic about in terms of the progress made through the niche strategy, Virgin Money Australia, and the opportunity of reinvigorating the retail banking business in the coming 12 months," says Rose.
BOQ has declared a fully franked dividend of 34 cents, down 11 per cent from 2H18, to be paid on 22 May 2019.
These results come a year after the company sold its St Andrew's Insurance business to Freedom Insurance Group for $65 million.
Shares in BOQ are down 4.68 per cent to $8.97 per share at 10.57am AEST.
Business News Australia
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