The bank, at its AGM today, highlighted its comprehensive transformation. With its focus on improved returns, this could be the best growth stocks to buy now.
Bank of Queensland Limited (ASX: BOQ)
Bank of Queensland Limited (ASX: BOQ) is focused on becoming a simpler, more agile specialist bank that can differentiate itself from larger competitors. The bank is positioning itself to take advantage of its smaller size to disrupt traditional banking models, which are seen as structurally challenged. BOQ is making strategic decisions aimed at improving customer service, reducing operational costs, optimising capital use, and ultimately increasing returns on equity. The bank’s future strategy focuses on digital retail banking, building deep relationships in specialist business sectors, and leveraging its strong Queensland heritage.
For FY24, BOQ, one of the high quality dividend paying stocks, reported cash earnings after tax of $343 million and a statutory net profit after tax of $285 million. The bank has been focusing on more profitable lending, such as specialist business banking, while reducing less lucrative home lending. Its net interest margin stabilised after a decline over the previous periods. The bank has also worked to control costs, with underlying expenses growing by just 2.9% despite inflationary pressures. Furthermore, BOQ’s financial resilience remains strong, supported by healthy capital levels and low loan impairment expenses.
BOQ is among growth stocks making good progress on its four key strategic pillars: strengthening its financial resilience, simplifying operations, digitising its services, and optimising its business for better returns. The bank has simplified its operating model and is in the process of transitioning its branch franchise system. In terms of digital banking, BOQ has made significant strides with its new platform, which now has over 400,000 active users. The bank is also working on migrating ME customers and decommissioning legacy systems. Notably, it has launched its first digital mortgage, which offers a better customer experience, faster processing, and lower costs. As part of its efforts to optimise performance, the bank is targeting a return on equity of 8% and aiming for a cost-to-income ratio of 56% by FY26.
BOQ expects some economic improvement in Australia for FY25, with lower cash rates and strong fundamentals supporting growth. However, there is uncertainty, particularly due to geopolitical risks and consumer caution. The bank remains positive about the outlook for Queensland, planning to reallocate capital and expand its team of business bankers to support growth in the region. BOQ expects stable margins and an increase in loan impairment expenses due to the high-interest rate environment. The bank is committed to maintaining capital within its target ratio and paying dividends within its target payout ratio. While the transformation has been challenging, BOQ is confident in its strategy to improve customer experiences and shareholder returns, and is optimistic about meeting its FY26 targets.
Source: Company’s Report
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