Profits of major Australian bank fall by 98 percent
- Bank of Queensland wrote off $260 million in charges
- Move the reduced profit to just $4 million for this year-to-date
The Bank of Queensland has revealed a massive 98 per cent profit drop but insists it is well placed to survive the dramatic drop.
After-tax profits slumped to just $4 million in the first half of its last fiscal year after the bank was hit by two large one-time charges, totaling $260 million.
The bank insisted that revenues were actually higher, rising nine percent to $902 million, allaying fears for the bank’s long-term future.
Over the past year, Bank of Queensland’s share price has also fallen, down more than 20 percent year-on-year and almost 40 percent over the past five years.
But it rose even after the latest numbers were revealed, rising two percent to $6.40 within hours of the announcement as the market rallied around the bank.
The Bank of Queensland has revealed a massive 98 per cent profit drop but insists it is in good shape to survive the dramatic drop
Over the past year, Bank of Queensland’s share price has also fallen, crashing by more than 20 per cent year-on-year (pictured) and falling almost 40 per cent over the past five years
Despite the 98 percent earnings crash, cash receipts fell just four percent to $256 million and interim dividends were cut 9 percent to 20c per share.
“BoQ is in a strong financial position as we enter this more challenging economic cycle,” said CEO Patrick Allaway.
Bank of Queensland CEO Patrick Allaway (pictured) insists he is in a strong financial position despite the huge profit drop
“We are well positioned to continue to invest in our transformation to deliver a stronger and simpler low cost digital bank.
“Since announcing our strategy in 2020, we have made significant progress on digitization; improving our strategic position through the acquisition of the ME bank, achieving growth in all our brands and strengthening our financial resilience.’
The bank’s profit was lowered by a $200 million goodwill write-down — when an acquisition hasn’t delivered as expected — and a $60 million pretax charge for an integrated risk program to “reinforce its commitment to risk management.”
The bank reassessed its goodwill value on its 2007 acquisition of Home Building Society Limited based on the gap between its market capitalization and asset values.
Mr Allaway said the $60 million investment in risk management was for a three-year program to strengthen processes, including against money laundering and counter-terrorism.
Analysts at UBS said the market and key stakeholders are likely to welcome the bank’s investment to strengthen its risk management capabilities.