Interest rates stress on the rise, warns BOQ chief

“Certainly money is being lent below banks’ cost of capital. We don’t think that’s sustainable in the long term,” he said.

BoQ shares, which had fallen when the result was pre-announced last week, gained 1.1 per cent to $6.36. The company will pay an interim dividend of 20c a share, which is 9 per cent lower than the same half last year.

Citi analyst Brendan Sproules noted the increase in arrears across the bank’s loan portfolio, pointing out the largest rises were in asset finance and commercial loans. Sproules said that with asset quality getting worse, margins having peaked, and the bank’s costs rising, there was a risk of return on equity being squeezed.

UBS analyst John Storey also highlighted an increase in early-stage arrears, and said core operating trading for the bank were “worse than expected”.

The results come after a tumultuous period for BoQ, which suddenly dumped its former chief executive George Frazis in November, with Allaway, the former chairman, subsequently stepping in as CEO until the end of next year.

Improving risk management has been a key focus since Allaway stepped in to run the bank. On Thursday, the bank said an “uplift” was needed in its operational resilience, risk culture and anti-money laundering/counter-terrorism financing compliance.

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