The counterparty credit ratings on Bank of Queensland Ltd. (BOQ) reflect its continued sound asset quality, low-risk funding profile, and strengthening franchise. The relatively low credit risk inherent in BOQ's largely mortgage-secured loan book, which exhibits little sectoral or size concentration, as well as the bank's sound capitalization ratios, are also reflected in the rating. The bank, however, remains challenged to improve profitability and manage its recent above-peer loan growth in a weaker economic cycle. BOQ's success in managing these challenges will be key to any future movement in the rating. Offsetting factors are the bank's continued geographic concentration within the Queensland market, relative lack of operational diversity, high expense base, and the small absolute size of the capital base.
