Tuesday 17 October 2017 by FIIG Research Company updates

Company updates – Bank of Queensland, Mackay Sugar and QBE

This week, Bank of Queensland released its FY17 results presentation, Mackay Sugar provide an update on the $2 grower contribution and QBE ratings affirmed by S&P and Moody’s 

Bank of Queensland – FY17 results presentation 

Bank of Queensland released its full year 2017 results presentation on 12 October 2017.

Main points:

  • FY17 cash earnings after tax increased 5% from prior year to $378m. The return on equity was 10.4%
  • Net interest margin fell 7bps to 1.87% due to higher funding costs (partly due to the S&P ratings downgrade) and highly competitive market
  • Lending growth was soft and deposits growth fully funded lending over the year. Deposit to lending ratio was 69%
  • Asset quality remains stable with good provision coverage. Loan impairment expense was down 28% to $48m compared to FY16
  • Housing portfolio quality was similar to the previous year but there is now a higher proportion of broker originated loans in the pool (28% of settlements)
  • CET1 ratio of 9.39% was up 39bps compared to a year ago. The improvement was through strong organic capital generation. BOQ’s new Common Equity Tier 1 target is 9.25% which sufficiently meets APRA’s ‘unquestionably strong’ requirement

Mackay Sugar update

On 9 October 2017, Mackay Sugar (MS) provided an update on the $2 grower contribution and on the progress of the potential sale of the cogeneration plant. MS’ management is actively pursuing a number of strategic business initiatives that include asset sales, recapitalisation, improving profitability and reducing debt. If management’s plans are not completed in a timely manner, then there is a possibility that bonds may be not repaid in full at the 5 April 2018 maturity date.

The full report on the update is available here.*External link - opens in a new window

QBE ratings affirmed

On 12 October 2017, QBE ratings were affirmed by S&P and Moody's. The ratings affirmation comes after QBE’s recent announcement, noting that the company had increased its large individual risk and catastrophe claims allowance following Hurricanes Harvey, Irma, and Maria (the Mexican earthquakes), as well as Cyclone Debbie in Australia earlier this year.

The full report including current ratings is available here.*External link - opens in a new window

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