Queensland recovery to boost BOQ loan book

Research by Morningstar estimates the lender will see average net loan growth of seven per cent per annum for the next five years.

“Like other regional banks, BOQ is expected to continue to win business as it differentiates itself on customer service and often prices more attractively than the major banks to compensate for weaknesses,” Morningstar analyst Nathan Zaia said.

“While our forecast is well above the 3.3 per cent per annum achieved during the past three years, we have a far more optimistic outlook on Queensland residential property prices, loan approvals and residential and non-residential building work,” Mr Zaia said.

“Greater utilisation of broker and online origination channels should provide an easy uplift,” he said.

While the BOQ has made progress in tightening lending standards and de-risking its balance sheet, its next task will be addressing below-system mortgage growth.

APRA figures for the 12 months to 31 May reveal the BOQ’s loan book increased 0.4 per cent, well below system growth of 6.7 per cent.

“The divergence is lessening, but BOQ's growth is still sub-par,” Mr Zaia said.

“In May, the bank’s credit growth of 0.3 per cent was half the size of system growth, and the 0.5 per cent for the three months to May was only 0.3 times system,” he said.

However, while Queensland’s weak finance approvals have weighed heavily on the lender, Morningstar forecasts a turnaround over the next five years following promising government projections.

“The Australian government and Queensland Treasury and Trade forecast Queensland gross state product of 3 per cent in 2014 to 2015 and 6 per cent in 2015 to 2016, ahead of average Australian growth of 2.5 per cent and 3 per cent in the same periods,” Mr Zaia said.

The sunshine state is also expected to benefit as liquefied natural gas projects begin exporting, supporting low unemployment and a recovery in residential construction and business confidence, he said.