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Date : 04/07/2023

Bank of Queensland (ASX: BOQ): Charting a Course Through Challenges and Opportunities

Bank of Queensland Ltd (ASX: BOQ) has faced a challenging period, witnessing a significant decline in share prices since February, which has sparked concerns among investors. As the new Australian financial year commences, it is crucial to assess the factors that could shape the future of this ASX bank share. This article will delve into the key aspects affecting BOQ’s performance, potential challenges it may encounter in FY24, and the factors that could drive its recovery.

BOQ: Financial Performance Review

BOQ shares are trading at $5.9 apiece and have been a roller coaster ride, as shown in the following chart. The current market cap of the company is approximately 3.16 Billion AUD.

ASX BOQ Share Prediction

  1. Bank of Queensland (BOQ) faced a tough first half of FY23, drastically declining statutory net profit by 98% to just $4 million.
  2. Two non-cash items, a $60 million provision for its integrated risk program and a $200 million impairment of goodwill, contributed to this decline.
  3. Despite excluding these prime factors, cash earnings after tax still experienced a 4% drop to $256 million.
  4. The decline in cash earnings was mainly due to a 7% increase in operating expenses, which reached $495 million.

BOQ: Factors Influencing FY24

BOQ’s FY23 annual result, yet to be reported, will be a significant determinant of its performance in the upcoming months. The bank has acknowledged the highly competitive mortgage market during the first half of the financial year. To safeguard shareholder value, BOQ refrained from participating in mortgage deals priced below the cost of capital. Consequently, its mortgage growth remained relatively flat during that period.

BOQ anticipates heightened mortgage and deposit competition, driven by term funding facility refinancing. The competition will likely compress the interim margin, presenting a challenge for the bank. However, BOQ aims to offset these headwinds by streamlining its operations, eliminating redundant technologies, and focusing on process improvement and automation.

BOQ: Impact of Inflation and Interest Rates

Australia’s annual inflation rate stands at 5.6%, exceeding the target range set by the Reserve Bank of Australia (RBA). This inflationary pressure indicates a potential rise in interest rates, which could pose challenges for lenders. As interest rates increase, borrowers may need help meeting their obligations, leading to arrears and reduced cash flow. BOQ has already observed an increase in overdue housing arrears of at least 90 days, from 0.55% in August 2022 to 0.60% in February 2023. If this trend persists, it could adversely affect the BOQ share price.

BOQ: Net Interest Margin (NIM) and Competition

Like other ASX bank shares, BOQ expects its net interest margin (NIM) to face headwinds due to intensifying competition. The rise of online banking and digital loan processing has enabled lenders to compete effectively without relying on a physical branch network. To counter this, BOQ is implementing an organizational restructuring to reduce duplication through a ‘horizontally integrated model’ and leveraging automation. Nonetheless, sustained competition in the sector could continue to challenge BOQ’s profitability.

BOQ: Earnings Projections and Market Sentiment

Based on current estimations, BOQ’s earnings per share (EPS) for FY23 are projected to reach 67 cents, placing the bank’s valuation at just 8 times the estimated earnings. However, FY24 forecasts anticipate a 12% decline in profit, primarily driven by higher arrears and intensified competition. This decrease in earnings could negatively impact the BOQ share price, with the bank’s shares valued at slightly over 9 times FY24’s projected earnings.


Bank of Queensland Ltd faces an array of challenges as it enters FY24. Increasing competition, potential higher arrears, and the pressure of rising interest rates pose significant hurdles for the bank. However, BOQ’s efforts to streamline operations, enhance processes, and leverage automation offer a glimmer of hope. While the next 12 months may be turbulent, the end of the period could signal a recovery in earnings and market sentiment. With the potential for a rise in the share price to a price-to-earnings (P/E) ratio of around 10 by the end of the Australian FY24, investors can anticipate a 10% increase over the year. Nonetheless, the bank’s future performance will greatly depend on how it navigates the challenges ahead and capitalizes on the opportunities in the evolving financial landscape.

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