Bank of Queensland Earnings: Getting Worse Before It Gets Better

Bank of Queensland's fiscal 2023 cash profit fell 8% to AUD 450 million, around 6% below our forecasts. As expected, the bank's funding cost disadvantage, with very little sourced from cheap transaction accounts compared with peers, has weighed on margins and resulted in the bank being less aggressive in chasing loan growth. However, we underestimated the financial impact. Net interest margins fell to 1.69%, well short of our 1.75% forecast, as second-half NIM tanked to 1.58%. We reasoned the declining loan book, as market share in housing fell to 2.81% from 2.92% just six months prior, would have offered more margin protection.