Bank of Queensland shares tumbled after the lender posted a weaker-than-expected first-half result and flagged tougher conditions ahead for the rest of 2026. The bank reported cash profit of $176 million for the six months to the end of February, down 4% on the prior comparable period while statutory profit slumped 20% to $136 million.
Shares were down about 9% to around $6.61-$6.65 in afternoon trade, reversing gains of almost 7% made over the previous month. Analysts pointed to the profit miss and ongoing competitive pressure in mortgages and deposits as key drivers of the share price slide.
Behind the headline numbers, the result reflects both margin pressure and a structural reshaping of the business. Net interest margin eased 3 basis points from the previous half to 1.67% which the bank links to an intense battle for loans and deposits.
Home lending growth slowed to $2.24 billion, a 4% decline on the second half, while commercial lending expanded 7% to $934 million as the bank leaned into business customers. Cash earnings per share fell 4% to 26.8 cents and cash return on equity dipped by 10 basis points to 6.1%, even as operating expenses climbed 6% to $553 million.
Part of the statutory profit decline stems from the $3.7 billion sale of the bank’s equipment finance business to Challenger, a move designed to pivot towards capital-light earnings. That transaction, announced earlier in April, is expected to settle between late April and early May and return roughly $300 million of capital to shareholders once completed.
Despite weaker earnings, the balance sheet looks stronger, with the common equity tier 1 capital ratio up 24 basis points to 11.18%. The bank says it now offers a fully digital end-to-end banking platform and continues to prioritise simplification and disciplined cost control, with cost guidance still expected to land below inflation.
Management is bracing for a softer economic backdrop in the second half of 2026, pointing to elevated inflation, the risk of further rate rises and geopolitical uncertainty as headwinds for confidence. In response to fierce competition in mortgages and deposits, Bank of Queensland plans to prioritise commercial lending growth in the near term while aiming to reignite home loan growth from the 2027 financial year once more customers are migrated to its digital platform.
Analysts have pressed the bank on why it is not increasing provisions for bad debts in line with some peers, highlighting concern over credit quality in a downturn. Investors are watching the bank’s ability to execute its transformation as the share price falls and the business model shifts.
