Challenging Economic Conditions Impact Bank of Queensland’s Performance
Bank of Queensland (BOQ) has reported lower-than-expected annual earnings for fiscal 2023, with Chief Executive Patrick Allaway attributing the disappointing results to challenging economic conditions rather than recent management changes that unsettled some analysts. According to data compiled by FactSet, BOQ’s cash earnings fell 3.8% short of the average analyst forecast, and the full-year net interest margin of 1.69% was also lower than market expectations.
Factors Influencing BOQ’s Earnings and Margins
Allaway highlighted several factors that contributed to BOQ’s underperformance, including high funding costs, increased operating expenses, and heightened competition in the mortgage market. In an interview with Dow Jones Newswires, Allaway dismissed the suggestion made by Citi analysts that management instability had negatively impacted the company’s financial performance.
“I have a different perspective on that. The turnover in management occurred during a peak in the market cycle,” Allaway explained. “Margins across the industry have declined during that period.”
Leadership Changes at Bank of Queensland
Allaway, who previously served as the bank’s chairman, assumed the position of CEO in November 2022 on an interim basis following the departure of George Frazis. In the following month, Allaway informed investors that BOQ required a different leadership style and capability compared to what was demonstrated by the former Westpac executive.
Bank of Queensland Appoints New CEO
Bank of Queensland (BOQ) recently announced the appointment of its new CEO and managing director, Allaway, just three months after expressing that it may take up to nine months to find a suitable candidate. This sudden change in leadership has had repercussions on the business, with investors’ confidence in management credibility being affected. Citi analysts commented on this matter in a note on October 6th.
When asked about the leadership change, Allaway declined to provide specific details, emphasizing instead his focus on positioning the lender for when the macro cycle turns. He mentioned that in order to achieve this, they had to make some sacrifices, including sacrificing short-term volumes and continuing investments in productivity. Allaway emphasized that they are being cautious about responsible lending requirements while also ensuring an appropriate return.
Although business lending experienced a modest growth of approximately 2% over fiscal 2023, Bank of Queensland’s home-loan portfolio declined by 1.1%. Allaway stated that despite these challenges, they remain committed to investing through the cycle and have made strategic decisions during FY23 that will benefit the bank in the medium and long term.