By Stuart Condie
SYDNEY–Bank of Queensland’s disappointing annual earnings and lending margins were affected by challenging economic conditions rather than management changes that unsettled some analysts, Chief Executive Patrick Allaway said.
BOQ on Wednesday reported fiscal 2023 cash earnings that fell 3.8% short of the average analyst forecast, according to data compiled by FactSet. A full-year net interest margin of 1.69% was also lower than the market had anticipated.
Allaway pointed to an environment of high funding costs, increased operating costs and heightened mortgage competition. In an interview with Dow Jones Newswires, he rebuffed a recent suggestion by Citi analysts that management instability had affected the company’s performance.
“I’ve got a very different perspective on that. Management turnover happened at a time when the market cycle peaked,” Allaway said. “We have seen a decline in margins across the industry through that period.”
Allaway, who was previously the bank’s chairman, replaced George Frazis as CEO in November 2022, initially on an interim basis. The following month, he told investors that the bank needed a different leadership style and capability to that demonstrated by the former Westpac executive.
Allaway said at the time that BOQ was looking at internal and external candidates, and warned that a new CEO may not be appointed for nine months. The lender announced Allaway as CEO and managing director just three months later.
“The impact of top leadership changes over the last year has spilled over to business. Investors’ faith and management credibility appeared to have suffered,” Citi analysts wrote in an Oct. 6 note.
On Wednesday, Allaway declined to discuss the leadership change in detail and said he was focused on positioning the lender for when the macro cycle turned. This meant sacrificing some short-term volumes and continuing productivity investments, he said.
“We are being very prudent about our responsible lending requirements but also ensuring that we get an appropriate return,” Allaway said.
While business lending rose about 2% over fiscal 2023, Bank of Queensland’s home-loan portfolio fell 1.1%.
“We continue to invest through the cycle and traded some performance in FY23 for medium and long-term benefits,” Allaway said.
Write to Stuart Condie at [email protected]
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