Bank of Queensland is now expecting its earnings for the half year ending 28 February 1H19 to drop by up to 10 per cent from 1H18, citing a number of reasons including higher regulatory costs following the royal commission.
Following its downgrade, BOQ saw its shares experience a week low, from its closing on Friday at $9.95 a share to landing on $9.34 on Monday morning.
The bank said, based on its January year-to-date performance, it anticipates its cash earnings after tax to be in the range of $165-170 million, compared to its earnings in the prior corresponding period of $182 million.
“Looking forward to the second half, market conditions are expected to remain challenging,” BOQ said.
“We expect regulatory costs to increase as BOQ adapts to changes in regulatory requirements and expectations, including the impacts of the royal commission.”
BOQ said its reduction in income from the prior corresponding period (pcp) has been driven primarily by a decrease in non-interest income, which is expected to be around $8-10 million lower than the previous year’s level of $75 million.
The company cited continued downward pressure across fee, trading, insurance and other income lines.
BOQ expects its net interest income to be broadly in line with the pcp at $475 million, with the net interest margin predicted to be in the range of 1.93 per cent to 1.95 per cent, compared to 1.97 per cent the year before.
The fall in NIM is said to be due to continuing fund cost pressures, including the elevated bank bill swap rate and price competition for new loans.
Also mentioned by the bank to negatively impact the half year result were non-recurring costs.
BOQ will release its half year results on 11 April.
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