BOQ Withdraws FY26 Targets Amid Market Uncertainty, Launches Major Strategic Initiatives

Strategic Capital Move

Bank of Queensland (BOQ) has announced a significant strategic initiative involving the potential sale of up to $3.8 billion of its equipment finance loan portfolio. This move is designed to optimise the bank’s balance sheet by recycling capital from lower-returning assets into higher-returning business lending. If completed, the transaction would transfer the economic risks and rewards of these loans to a capital partner, allowing BOQ to generate capital-light earnings while continuing to serve its small and medium enterprise customers with specialised expertise.

Digital Transformation with Capgemini

In parallel, BOQ has entered into a strategic partnership with global technology leader Capgemini to enhance its artificial intelligence (AI), information technology, and business processing capabilities. This partnership aims to simplify BOQ’s operating model and digitise processes, improving customer experience and supporting scalable growth. A notable initiative within this collaboration is the creation of an AI academy to upskill BOQ employees, preparing the workforce for an AI-driven future. The bank anticipates this partnership will deliver annualised cost savings of at least $30 million starting from FY27.

Financial Performance and Outlook

BOQ provided an update on its unaudited FY25 performance, expecting cash earnings after tax in the range of $375 million to $385 million, representing a 9% to 12% increase over FY24. The bank also anticipates a 50 to 70 basis point uplift in cash return on equity (ROE). However, BOQ has withdrawn its specific FY26 ROE and cost-to-income (CTI) ratio targets, citing ongoing market unpredictability and accelerating industry headwinds. Despite this, the bank remains confident in its strategic transformation plans, including portfolio mix shifts, digital bank development, and distribution model changes, to drive long-term performance improvements.

Navigating Challenges

BOQ’s transformation journey is marked by restructuring costs and compliance-related provisions, including a $14 million post-tax increase linked to its Remedial Action Plan with AUSTRAC. The bank is managing these challenges while focusing on simplifying its operations and enhancing capital efficiency. Managing Director Patrick Allaway emphasised the bank’s commitment to disciplined execution of its plans to deliver sustainable shareholder returns amid a structurally challenged market.

Looking Ahead

The proposed equipment finance sale and the Capgemini partnership represent pivotal steps in BOQ’s evolution into a simpler, more specialist bank. While the sale process is subject to board approval and market conditions, these initiatives collectively position BOQ to improve its return metrics and cost structure over the medium term. Investors will be watching closely for updates on the transaction’s progress and the realisation of digital transformation benefits as BOQ prepares to release its full FY25 results in October.