Bank of Queensland has lifted its full-year cash profit five per cent to $378 million delivering shareholders a surprise special dividend on stronger second half lending growth.
CFO Anthony Rose said on Thursday that BoQ's improving mortgage broker volumes helped drive home loan lending up two per cent in the second half despite competition for principal and interest loans and a changing regulatory landscape.
BoQ's first full year of its Virgin Money mortgage offering "exceeded expectations", opening another demographic channel and helping the bank's geographic diversification, Mr Rose said.
In the second half of 2016/17, Virgin Money's loan book grew by $490 million taking the portfolio to over $700 million.
The majority of customers were based outside Queensland, which now accounts for just 46 per cent of BoQ's mortgage book, down from 56 per cent in 2013.
Citi analyst Craig Williams said the bank's underlying trends look positive with second half net interest margins (NIM) up by 5 basis points and bad and doubtful debts well below consensus expectations.
"BOQ was always going to be the biggest beneficiary from mortgage repricing and improvement in funding costs, and this has been reflected in this result," Mr Williams said.
Earlier this year Australia's four major lenders began lifting interest-only and investor loan rates after the prudential regulator told banks to limit new interest-only lending to less than 30 per cent over concerns of an overheating housing market.
However according to Australian Bureau of Statistics data released on Thursday, the value of housing finance nationally in August rose 2.1 per cent to $33.9 billion.
BOQ's statutory profit for the year to August 31 rose four per cent to $352 million after a one-off $16 million gain on the disposal of the bank's interest in a vendor finance business.
Full year cash profit improved by one per cent to $362 million.
Mr Rose said while second half cash profit was up seven per cent on the first half to $187 million, non-interest income was only "stable."
"Strip out the $16 million and it was another tough year for non-interest income with reductions across most categories - banking fees continue to reduce as customers opt for low fee products," Mr Rose told an investor briefing.
BoQ Managing director Jon Sutton said disciplined growth was behind the bank's strong capital position, allowing it to declare a flat final dividend of 38 cents and a special dividend of eight cents, both fully franked.
"We have seen return to growth in the second half which gives us confidence going into FY18 and we are laying the right foundation for outperformance" Mr Sutton said.
BoQ shares finished the day up 15 cents, or 1.2 per cent, at $13.09.
BROKER LOANS BOOST BANK OF QUEENSLAND'S BOOKS
* Cash profit up 5pct to $378m
* Net profit up 4pct to $352m
* Net operating income down 0.8pct to $1.08b
* Final dividend flat at 38 cents, fully franked
* Special dividend of 8.0 cents, fully franked
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