Bank of Queensland's (BOQ) stock was downgraded by Nomura Australia, Morningstar, and Bell Potter after bad debts cut its annual profit by 14 per cent.
Bank Of Queensland.
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The three brokers downgraded BOQ from a Buy to Neutral or Accumulate after the Brisbane-based bank on Thursday reported that bad debts had almost doubled to $200.5 million because of natural disasters and exposure to three property developers.
BOQ expects bad debts to fall in fiscal 2012.
Net profit fell to $158.7 million for the year to August 31, but underlying cash profit jumped 18 per cent to $447.4 million on strong performances from the non-bank units.
BOQ's shares gained 11 cents on the announcement but lost 23 cents, or 2.84 per cent, to $7.87 on Friday, as other regional lenders lost up to two per cent.
Most brokers are still relatively positive toward the stock, with Goldman Sachs, RBS Morgans, Deutsche Bank, and Credit Suisse on Friday reiterating either a Buy or Outperform rating.
JP Morgan, UBS and Commonwealth Bank reiterated their Neutral or Hold ratings.
"While BOQ looks inexpensive, it faces serious challenges and is high risk," UBS analyst Jonathan Mott told client.
Brokers are likely to be sceptical toward the bank's asset quality, City Index's chief market analyst Peter Esho says.
"It all comes down to arrears against what they're actually guiding.
"It's very hard to see a fall in bad debts if your arrears continue to rise and the rise is increasing towards the end of the (reporting) period."
BOQ's arrears, or missed debt repayments, that are less than 30 days past due, fell during fiscal 2011 from a year earlier.
But BOQ's full profit announcement showed arrears that are between 31 and 90 days past due surged 82 per cent to $253.9 million for retail banking customers over the same period.
Those more than 90 days past due jumped by 71 per cent to $318.3 million.
Thirty-day and 90-day arrears for commercial loans fell during the year but those that are more than 90 days past due increased by 16 per cent to $164.6 million.
Not all of the loans with arrears of more than 90 days past due have been written off or impaired, Mr Esho says.
This means they have yet to become an expense for BOQ, which has just $253.8 million of specific and collective provisions, or money set aside to cover bad debts.
"They got caught out this year," Mr Esho said.
Brisbane-based RBS Morgans director Bill Chatterton said the broker's clients have been long-term holders of BOQ shares and had been rewarded over the past decade.
"(Management) know the issues - it's not as if something unknown is going to come and bite them," he said.
"It could be exposed to these (property) one-offs ... but most of their (loan) book is pretty safe."
The three brokers downgraded BOQ from a Buy to Neutral or Accumulate after the Brisbane-based bank on Thursday reported that bad debts had almost doubled to $200.5 million because of natural disasters and exposure to three property developers.
BOQ expects bad debts to fall in fiscal 2012.
Net profit fell to $158.7 million for the year to August 31, but underlying cash profit jumped 18 per cent to $447.4 million on strong performances from the non-bank units.
BOQ's shares gained 11 cents on the announcement but lost 23 cents, or 2.84 per cent, to $7.87 on Friday, as other regional lenders lost up to two per cent.
Most brokers are still relatively positive toward the stock, with Goldman Sachs, RBS Morgans, Deutsche Bank, and Credit Suisse on Friday reiterating either a Buy or Outperform rating.
JP Morgan, UBS and Commonwealth Bank reiterated their Neutral or Hold ratings.
"While BOQ looks inexpensive, it faces serious challenges and is high risk," UBS analyst Jonathan Mott told client.
Brokers are likely to be sceptical toward the bank's asset quality, City Index's chief market analyst Peter Esho says.
"It all comes down to arrears against what they're actually guiding.
"It's very hard to see a fall in bad debts if your arrears continue to rise and the rise is increasing towards the end of the (reporting) period."
BOQ's arrears, or missed debt repayments, that are less than 30 days past due, fell during fiscal 2011 from a year earlier.
But BOQ's full profit announcement showed arrears that are between 31 and 90 days past due surged 82 per cent to $253.9 million for retail banking customers over the same period.
Those more than 90 days past due jumped by 71 per cent to $318.3 million.
Thirty-day and 90-day arrears for commercial loans fell during the year but those that are more than 90 days past due increased by 16 per cent to $164.6 million.
Not all of the loans with arrears of more than 90 days past due have been written off or impaired, Mr Esho says.
This means they have yet to become an expense for BOQ, which has just $253.8 million of specific and collective provisions, or money set aside to cover bad debts.
"They got caught out this year," Mr Esho said.
Brisbane-based RBS Morgans director Bill Chatterton said the broker's clients have been long-term holders of BOQ shares and had been rewarded over the past decade.
"(Management) know the issues - it's not as if something unknown is going to come and bite them," he said.
"It could be exposed to these (property) one-offs ... but most of their (loan) book is pretty safe."
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