Half Year 2025 Bank of Queensland Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John Storey - UBS - Analyst : (technical difficulty) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00AM, BOQ.AX - Half Year 2025 Bank of Queensland Ltd Earnings Call

Question: John Storey - UBS - Analyst : (technical difficulty)

Question: Andrew Triggs - JP Morgan - Analyst : Excellent. Okay, thanks, Patrick. First question, I think in the slide you say you have a clear path to the FY26 ROE target of 8%. Still struggling to see how you do get there given that the ROE for the first part was 6.2% on what was a negligible loan impairment expense and If you read between the lines of the guidance around, margins and mortgage book runoffs, assume there won't be much if any revenue growth in, into the second half. So, I guess what are we all missing on that? I think you previously said that does assume a loan impairment expenses is well below, the historical level, but in the slides, you also say you do expect loan impairment expense to rise. So just squaring all those things up, please.

Question: Andrew Triggs - JP Morgan - Analyst : Nice, Patrick. And it's an interrelated question, but the CT1 ratio looks a little tight, sort of back into the top end of the range, I guess, when you factor in the branch conversion impact. Just your thoughts around -- I mean, you referenced both business lending growth above system and a recovery in housing volumes, but you do have quite a high power ratio for your current ROE. So just managing that, I mean, are you just happy to use the DRP in future in order to drive that sort of revenue growth that you need to achieve those targets?

Question: Andrew Triggs - JP Morgan - Analyst : Okay, thanks, Rachel. Thanks, Rachel.

Question: Tom Strong - Citi - Analyst : Good morning, and thanks for taking my questions. Firstly, I just want to follow on the previous question just around the revenue outlook. I mean, if I look at your economic forecast, it looks like you're assuming in the base case about two rate cuts from here. Is that sort of what you've got factored into your ROE ambitions, the '26?

Question: Tom Strong - Citi - Analyst : Okay, that's fair. And the second question then just around the business banking side, if we look over the last four halves, I mean you've had a solid turnaround to growth on the asset side, but we've seen the deposit funding contract from $10.7 billion down to $10.1 billion. I mean, how should we think about growing the funding side of the business going forward to support that run rate of 10% year on year?

Question: Tom Strong - Citi - Analyst : Okay, thanks very much.

Question: John Storey - UBS - Analyst : Congrats on good set of results, too. Just wanted to ask you, just on the margin guidance that you provided, that 12 basis points. Obviously, the 12 basis points I would assume basically takes into consideration that all the OMBs actually convert, all the 114 branches. Maybe if you could just give us a little bit of a sense in terms of how we should think about it if they don't, if not all the OMBs convert, how we pro rata that 12 basis points? That's the first question I have. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00AM, BOQ.AX - Half Year 2025 Bank of Queensland Ltd Earnings Call

Question: John Storey - UBS - Analyst : So there's no risk around litigation or anything like that, any of articles that we've seen over the last few days.

Question: John Storey - UBS - Analyst : 12 basis points effectively locked in, right? Yeah.

Question: John Storey - UBS - Analyst : Okay. That's very helpful. And then just on my second question, just on business banking, you're going to have a look at bottom line growth is obviously incredibly strong, right? But actually, if you go and have a look at some of the underlying revenue trends, there's definitely a decline in margin sequentially that's starting to come through. So maybe if you could just provide a little bit of context on what -- which levers is effectively using to drive growth? Is it a function of price or risk appetite? And then just maybe linked to that, which sectors in particular are you going after?

Question: John Storey - UBS - Analyst : Thank you, Patrick.

Question: Jeff Cai - Jarden - Analyst : Another question on business lending. Can you talk a little bit about the source of growth for this half? How much of that was driven by commercial property? And then looking forward, I mean, you flagged that you want to materially accelerate growth in this segment. Does that sort of suggest that we should expect volume growth to be at least 10% for the next 18 months?

Question: Jeff Cai - Jarden - Analyst : In terms of you flagged material acceleration in growth. Just interested in your view, does that mean acceleration from the 10% or more of a continuation of that volume growth that you saw -- that we saw for this half?

Question: Jeff Cai - Jarden - Analyst : Got it. Great. And then a question on costs. I mean lots of positive progress on cost management and seemingly some of some of the projects tracking above expectations. Is the target still for FY26 total costs to be broadly flat to '23? And to what extent can that be a little bit better?

Question: Jeff Cai - Jarden - Analyst : Thank you.

Question: Jonathan Mott - Barrenjoey - Analyst : Checking you can hear me this time, Patrick?

Question: Jonathan Mott - Barrenjoey - Analyst : Great Yes, sorry, apologies I asked the first question. I wasn't -- then the line cut off. Did you get that or should I reask?

Question: Jonathan Mott - Barrenjoey - Analyst : Okay. Well, I apologize if this has been asked because I was off for a bit. With the relationship with the owner managers at the moment or store owner manager is in great, and you have to expect that a lot of them are now going to be competitors of BOQ, either as brokers or bank as with other organizations. So I wanted to get a feel not just the [mortgage book] but also the deposit book, what runoff assumptions are you assuming from those former owner manage branch books? And because obviously are assuming that the mortgage book is going to start growing again and as you're right, the digital product, what are you assuming for the runoff versus the growth of a new product?

Question: Jonathan Mott - Barrenjoey - Analyst : Okay. And if I can ask a second question, just following on from Richard Wiles' question earlier on. As you grow the business book, especially in small businesses, you have to start putting aside larger collective provision given the growth. So I wanted to get a feel for your expectation of the collective CP growth in the business bank as you rapidly expand this. Is that going to lead to a higher budget charge or impairment charge over the next few halves just from the mix change and the growth in the small business book?

Question: Jonathan Mott - Barrenjoey - Analyst : Thank you.

Question: Matthew Dunger - Bank of America Securities - Analyst : Yes. I wonder if I could follow up on the strong growth that you delivered as promised in the commercial division. And just wondering, with business confidence taking a bit of a recent hit on the tariff news, particularly given those health care agri and commercial real estate sectors you're growing in. What impact are you expecting on growth within those channels? Are you seeing any slowdown in demand for credit?

Question: Matthew Dunger - Bank of America Securities - Analyst : Great. Thank you very much. And if I could just follow up on your CET1, the impact from the owner manager an impact conversion. You previously said 30 basis point impact. You're calling out 6 basis points in the first half, 15 in the second. What am I missing? Is there more to come in FY26?

Question: Matthew Dunger - Bank of America Securities - Analyst : Excellent. Thank you.

Question: Carlos Cacho - Macquarie - Analyst : I was wondering if you could give us any color around how you're seeing the Virgin Money mortgage book and BOQ specialist mortgage books progress since you made the decision to not pass on the rate cut there. Have you started to see an accelerated amortization -- or sorry, accelerated attrition in those books?

Question: Carlos Cacho - Macquarie - Analyst : Right. And then just secondly, it'd be great to hear your thoughts on the investment outlook. You've obviously you're at the tail end of a significant period of investment. But as you noted at the beginning, we're in a pretty dynamic environment with rapid technological advancement. So just REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 12:00AM, BOQ.AX - Half Year 2025 Bank of Queensland Ltd Earnings Call wondering how sustainable is the reduction in investment which we're seeing this year and does that potentially increase again down the line to keep up with that rapid technological advancement?

Question: Ed Henning - CLSA - Analyst : Just following on from the last question on the investment spend to start with. Just to clarify, did you say the ['25] investment spend is now back at normal levels? Or will that reduce going forward?

Question: Ed Henning - CLSA - Analyst : Okay. No, that's great. Thank you. And then just a second question on the margin. Apologies if I missed this because I dropped off for a little bit. But can you just run through what you're thinking of on deposits. You ran down your deposits a little bit and got a bit of a mix benefit there. Do you the growth you're anticipating in the business lending and hopefully seeing some mortgage lending start to come through a little bit? And then also, can you just touch on what you're seeing on wholesale costs at the moment? And are you assuming any basis risk change in your margin guidance, please?

Question: Ed Henning - CLSA - Analyst : Okay. That's great. Thank you very much.