Bank of Queensland Ltd.

BoQ has invested heavily in digital transformation, which should support lower cost of origination and price competitiveness. We expect growth for the bank to remain below system over the next two years as it remains focused on the digital uplift amid continued competition in the sector. The negative outlook reflects a one-in-three likelihood that BoQ's operating performance could become structurally weaker than similarly rated Australian regional banks. This could happen if BoQ is unsuccessful in achieving its operating cost savings target via its ongoing technology upgrade and simplification of its processes and product suite. We could lower our ratings on BoQ if we consider the bank is unlikely to restore its earnings and lending growth to levels broadly in line

...Bank of Queensland Ltd.'s (BoQ) lending portfolio will remain constrained by competition in Australia's residential mortgage sector. Pricing competition and product commoditization have reduced returns for traditional mortgage origination. This adds pressure to banks such as BoQ to write sustainable business in their bricks-and-mortar operations. BoQ has invested heavily in digital transformation, which should support lower cost of origination and price competitiveness. We expect growth for the bank to remain below system over the next two years as it remains focused on the digital uplift amid continued competition in the sector. Operational risk will remain elevated. BoQ plans to move its various products and systems to the cloud and integrate backend processing. These initiatives will increase operational risks, in our view. We believe the bank has the capabilities to manage the resulting elevated risks....

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