BOQ Sets Fully Franked 5.77% Annual Distribution on Capital Notes

Distribution Details and Timing

Bank of Queensland Limited (ASX:BOQ) announced a fully franked quarterly distribution of AUD 1.4859 per Capital Note (BOQPF) for the period ending 16 August 2026. The distribution will be paid on 17 August 2026, with the record date set for 29 July and an ex-date on 28 July. This payout reflects the bank's ongoing commitment to rewarding holders of its Capital Notes amid a period of strategic transformation.

Calculation Methodology and Yield

The distribution rate is tied to the 3-month Bank Bill Swap Rate (BBSW) plus a margin of 3.8%, adjusted for franking credits, resulting in an annualised rate of approximately 5.77%. Specifically, the total distribution rate for the period is calculated as (BBSW + margin) multiplied by (1 minus the corporate tax rate), with the tax rate set at 30%. This approach aligns with the terms set out in the Capital Notes 2 Prospectus dated November 2020, ensuring transparency and consistency in income for investors.

Franking and Payment Conditions

The distribution is fully franked at the corporate tax rate of 30%, meaning investors receive a credit for tax already paid by BOQ. Importantly, payment remains at the bank's absolute discretion and is subject to satisfaction of certain payment conditions outlined in the original Capital Notes 2 Prospectus. These conditions include regulatory and financial requirements, so while the distribution is announced, actual payment is contingent on BOQ's capital position and compliance as of the payment date.

Capital Management in a Transforming Bank

This distribution announcement arrives in the wake of BOQ's recent strategic moves, including the sale of its $3.62 billion equipment finance portfolio to Challenger Limited, which aims to streamline BOQ’s balance sheet and enable capital returns to shareholders. The sale, completed earlier in May, is a key part of BOQ's shift toward becoming a more specialist bank, with proceeds expected to support initiatives such as share buybacks and special dividends. The distribution on Capital Notes complements these capital management efforts, reflecting BOQ's balancing act between rewarding investors and maintaining financial flexibility. The bank’s ongoing transformation and capital strategy were detailed in prior updates including the $3.62 billion equipment finance sale and capital partnership with Challenger.

Investor Considerations

Investors should note that while the distribution rate is attractive and fully franked, the payment is not guaranteed and depends on BOQ meeting its capital and regulatory requirements at the time of payment. This introduces an element of uncertainty typical for hybrid securities like Capital Notes. The terms also specify that the distribution is non-cumulative and perpetual, meaning missed payments are not accrued. This latest distribution is higher than the previous quarterly payout of AUD 1.3218 announced in March 2026, reflecting changes in the BBSW and margin environment over the quarter.