Owning Bank of Queensland Ltd (ASX: BOQ) stock has been a rough ride for most of the last few years. However, the recent FY25 half-year result was inspiring for the market.
Banking has gone through a few challenges since the onset of COVID-19, including elevated competition and the risk of rising arrears following numerous interest rate hikes.
BOQ investors may be seeing light at the end of the tunnel after this difficult period, which has been painful for both profit margins and lending growth.
But, with the ASX bank share possibly turning a corner, it's worth looking at the bank and considering a few interesting points.
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The highest BOQ stock price since 2022
As the chart below shows, the bank has been slowly but steadily climbing since the 2023 low. Pleasingly, it has now reached a level the market hasn't seen since November 2022.
The recent jump in the BOQ stock price was spurred by the ASX bank share announcing profit growth in the HY25 result.
For the six months to 28 February 2025, it reported that cash operating expenses reduced by 1% year-over-year to $520 million. This helped cash earnings after tax climb 6% year over year to $183 million, while statutory net profit after tax (NPAT) grew by 13% to $171 million.
Investors are usually focused on the profit generation of a blue-chip business like BOQ. Pleasingly, the direction of profit now seems to be headed in the right direction. It also hiked its interim dividend by 5.9% to 18 cents per BOQ stock.
Focused on business banking
The home lending space is a very competitive market, so BOQ has been willing to recycle its capital towards commercial lending. The bank said it is repositioning its retail bank as a scalable, low cost-to-serve digital bank.
In the HY25 period, business lending grew 10% on an annualised basis, with a focus on healthcare, agriculture and owner-occupied commercial property. Growth in asset finance was driven by "strong relationships in novated leasing offsetting seasonal contraction."
Compared to the second half of FY24, business lending growth was 3%, or $371 million in dollar terms.
In the second half of FY25, it's expecting mortgage contraction to continue as it "continues to shift its portfolio towards higher returning business lending".
Profit growth forecast
One of the most important factors for BOQ in the next few years is whether it's able to grow profit in a (presumably) lowering interest rate environment.
The broker UBS is forecasting that BOQ could generate higher profits in the next few years, which could be very positive for market confidence in the business, if that happens. Changing economic conditions could impact those projections, of course.
UBS predicts that BOQ's cash profit could rise to $393 million in FY25, $408 million in FY26, $416 million in FY27, and $438 million in FY28.
If that occurs, I think BOQ's stock price could rise over time and there may also be a rising dividend. Time will tell whether the optimism is well-founded.
