Good time to be exposed to building blocks THE AUSTRALIAN MARCH...

Good time to be exposed to building blocks

• THE AUSTRALIAN
• MARCH 27, 2015 12:00AM

Tim Boreham

Criterion Columnist - Melbourne


Bank of Queensland Source: TheAustralian

Bank of Queensland (BOQ) $13.89
When you’re a bank it’s hard to be loved by everyone, which the old St George Bank tried to do before being skewered by the evil red saveloys.
We can’t speak for BoQ customers, but the enduring regional bank’s shareholders should be enamoured of how new CEO Jon Sutton’s strategy is evolving.
BoQ posted record first-half cash earnings of $167 million, up 19 per cent, with a much needed fillip in lending volumes not detracting from net margins and impairment performance.
Overall lending grew by $1.3bn, or 7 per cent compared with nil growth in the previous half.
The financial picture is muddied because the period included the first full contribution from BoQ Specialist, the old Investec asset financing business acquired for $440m last year.
Another feature of the result is that 57 per cent of home loan applications and 14 per cent of settlements now are sourced outside of Queensland.
This is the result of the bank lovingly embracing mortgage brokers, a channel it went cold on a decade ago.
Given the sunshine state’s fortunes can change with a puff of breeze — literally and metaphorically — this makes for a sensible diversification even though competition in this channel is red hot.
And as Sutton concedes, customers are going to brokers and not branches for loan inquiries.
BoQ trades at a substantial discount to the big four and offers a high yield, because its capital position isn’t as robust.
Criterion last rated BoQ a hold at $12.10 after last October’s full-year results. While broker Paterson says the bank was “appropriately vague” on outlook, we nominate a long-term buy.

Fairly positive appraisal from The Australian