The
Bank of Queensland (BOQ) has rejuvenated its home loan growth through the third party channel after a period of less than stellar performance.
A research note released by independent investment firm Morningstar on Tuesday (6 June) referred to claims by BOQ management that tighter standards and reduced lending via the broker channel had actually resulted in below-system residential loan growth.
“Ironically, tougher regulatory lending criteria announced during the past six months has helped Bank of Queensland as competitors have had to slow loan growth for investor loans and interest-only loans,” Morningstar analysts wrote.
“The problems with the broker channel have been fixed and Bank of Queensland expects to grow its residential loan book broadly in line with system in fiscal 2018.”
Brokers as well as business specialists have played a significant part in the bank’s recent push for interstate expansion, analysts wrote.
Morningstar met with BOQ prior to writing the released research note and said the key takeaway from the meeting was “the bank’s cautious approach to residential lending, both lending to developers and buyers”.
Analysts praised the bank’s high credit quality and loan loss rate of 0.13% in the first half of the year.
“Strong loan impairment expense improvements in the BOQ finance and commercial loan books was (sic) partially offset by a modest tick up in retail loan losses. Impaired assets continue to decline.
“Despite considerable media speculation of highly geared households about to implode, there are no signs yet of any deterioration in Bank of Queensland’s housing book with 90-day plus arrears 0.04% lower at 0.41% of gross home loans and 30-day plus arrears 0.02% lower at 0.98% at 28 February 2017.”
After reducing exposure to the overheated Brisbane CBD apartment market as well as the strongly performing markets of Sydney and Melbourne, BOQ has reduced its residential loan portfolio by approximately 3% during the 12 months prior to 31 March.
BOQ says it has no exposure to foreign residential apartment buyers. It says its limited residential development exposures are with long-standing clients with strong records in building high quality apartments presold to local buyers.
However, Morningstar analysts have taken a more cautious position, maintaining that “these exposures would not be immune in a down market”.
While BOQ should have theoretically benefited from the government’s bank levy, any positive effects have been offset by S&P’s recent ratings downgrade of 23 Australian financial institutions, analysts said.
Discussing the state of BOQ’s lending portfolio, Morningstar said that home loans represented over 69% of total loans at the bank with non-performing loans tracking at around 0.49% of total loan book.
Finally, analysts said that while stewardship at the bank had initially been poor, BOQ has come a long way in tightening lending standards, cost controls and capital allocation.
“Improvements in loan arrears and decreased impaired assets in business and commercial lending illustrate asset-quality improvement. All these initiatives bring a tangible benefit of credit-rating upgrades.”
Related stories:
Commission changes could hammer mortgage franchise
Macquarie may relocate offshore
Brokerage doubles loan writing team
.jpg)
