Bank of Queensland (BoQ) has delivered a 6 per cent increase in full-year profit to $338 million, weighed down by increasingly difficult conditions in the second half of the year.
Cash profit, the bank's preferred measure that strips out one-off gains and losses, was essentially flat, up just 1 per cent to $360 million and in line with market expectations.
Tougher market conditions and increased competition saw lending grow 5 per cent over the year but lose momentum in the past six months.
Housing lending grew 8 per cent to $27.7 billion over the year, while business lending grew 7 per cent and personal loans fell 6 per cent.
BoQ said its decision not to match aggressive prices in the market contributed to the slowdown in lending, particularly with mortgages.
Margins decline as costs rise
Margins also contracted as the fight for new loans and deposits heated up.
The bank also said that increased funding and hedging costs accelerated the margin decline over the year.
Costs also increased 4 per cent, although that was in part due to the acquisition of the Virgin Money business.
The good __news was that, unlike its larger peers, asset quality improved across the loan book.
Loan impairment expenses fell by 9 per cent to $167 million.
"Strong credit performance in the vast majority of the portfolio was offset by elevated loss experiences in the exposures relating to the mining and associated sectors of the economy," the bank noted.
BoQ also strengthen its balance sheet marginally, with its tier one capital reserves edging up 9 basis points to 9 per cent largely on the back of increased cash earnings and a stronger participation in its dividend reinvestment plan.
Headwinds to continue into 2017: CEO
Chief executive officer Jon Sutton described the result as pleasing in tough conditions.
"BoQ has delivered increased cash earnings after tax for the fourth consecutive year, a significant achievement in an environment of low interest rates and intense competition," Mr Sutton said.
"Expectations of lower interest rates in Australia for longer has meant a lower rate of return on capital and low cost deposits.
"While some of the headwinds experienced over the past year may be one-off in nature, there are a number which will continue through 2017."
The full-year dividend was increased by 3 per cent to 76 cents per share.
Investors did not like the look of the BoQ's second-half loss of momentum, with shares tumbling around 4 per cent on opening to $11 against a generally strong performance by the other banks.
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