BOQ Boosts Cash Earnings 12% Amid Strategic Shift to Commercial Lending

• Statutory net profit down 53% to $133 million due to goodwill impairment and restructuring
• Cash earnings up 12% to $383 million driven by revenue growth and cost discipline
• Commercial lending grows 14%, home lending contracts 7% reflecting balance sheet shift
• Net interest margin improves by 8 basis points to 1.64%
• Final fully franked dividend declared at 20 cents per share

Strategic Transformation Drives Financial Results

Bank of Queensland (BOQ) has delivered a mixed but ultimately encouraging set of financial results for the full year ended August 31, 2025. While statutory net profit after tax plunged 53% to $133 million, largely due to a $170 million goodwill impairment and restructuring costs, the bank’s cash earnings told a more positive story, rising 12% to $383 million. This divergence highlights the impact of one-off charges on headline numbers but underscores the underlying operational improvements BOQ has achieved amid its ongoing transformation.

Central to BOQ’s strategy has been a deliberate shift in its lending portfolio, moving away from lower-return home loans towards higher-yielding commercial lending. This repositioning is evident in the 14% growth in commercial lending, which contrasts with a 7% contraction in home lending balances. The bank’s management has prioritized economic returns over volume, recycling capital to more profitable segments, a move that has contributed to an 8 basis point improvement in net interest margin to 1.64%.

Digital and Branch Network Overhaul

BOQ’s digital transformation efforts are gaining traction, with 44% of retail customers now migrated to its new digital banking platform. The launch of a digital mortgage product, capable of delivering conditional approval in under 90 seconds and same-day unconditional approval, marks a significant step towards a fully end-to-end digital banking experience. This digital push is complemented by the conversion of all owner-managed branches to BOQ’s proprietary channel, which has enhanced margins by 12 basis points in the second half of FY25 and allowed for a more targeted physical presence, particularly in Queensland.

The bank’s simplification program has also yielded tangible benefits, with underlying expenses down 4% excluding branch conversion costs, and a productivity target of $250 million annualized savings by the end of FY26. These cost efficiencies have helped maintain flat operating expenses despite inflationary pressures and ongoing investments in technology and risk management.

Resilience and Outlook Amid Economic Uncertainty

BOQ’s capital position remains robust, with a Common Equity Tier 1 ratio of 10.94%, comfortably above management’s target range. The bank also reported a strong liquidity coverage ratio of 143%, underpinning its financial resilience. Loan impairment expenses rose modestly by 5% but remain below long-run average loss rates, supported by sound asset quality and strong property valuations.

Looking ahead, BOQ anticipates continued modest contraction in its mortgage book as it maintains its focus on higher-return business lending, which it expects to grow broadly in line with the market. The bank forecasts sub-inflation expense growth in FY26 and expects further benefits from its branch network conversion and simplification initiatives. However, it acknowledges risks to margin outlook from uncertain cash rate movements and competitive pressures in lending and deposits.

CEO Patrick Allaway emphasized the bank’s progress in strengthening operational resilience and scaling customer growth through improved digital experiences. He remains optimistic about BOQ’s transformation journey and its ability to navigate emerging challenges in the evolving economic landscape.

Bottom Line?

BOQ’s FY25 results reveal a bank in transition, balancing one-off setbacks with strategic gains that could reshape its competitive edge.

Questions in the middle?

• How will BOQ sustain commercial lending growth amid rising competition and economic uncertainty?
• What impact will further cash rate cuts have on BOQ’s net interest margin and loan portfolio mix?
• Can BOQ’s digital transformation and branch simplification deliver the projected $250 million in productivity gains by FY26?