Bank of Queensland Limited

Good morning and welcome to BOQ's financial results presentation for the half year ended 28th of February, 2026. My name is Jessica Smith. I am the General Manager, Investor Relations and Corporate Affairs at BOQ. On behalf of the management team, I would like to acknowledge the traditional custodians of the land we are meeting on today, the Gadigal people of the Eora Nation. We pay our respects to elders past and present. I'm joined in the room today by BOQ's Managing Director and Chief Executive Officer, Rod Finch, and our Chief Financial Officer, Rachel Kelleway, who will present the results. We are also joined by BOQ's Executive Team. Following the briefing, there will be an opportunity for questions. I will now hand over to Rod.

Thank you, Jess. Good morning, everyone, and thank you for joining us today. Our first half 2026 results reflect disciplined execution against our strategy and ongoing delivery of the group's transformation. Over the half, we've strengthened resilience across the bank and worked to position BOQ to deliver more sustainable earnings through the cycle. We continue to deliver against the milestones and initiatives we have previously outlined, making further progress simplifying the group, strengthening our operational foundations, advancing our digitisation agenda and reshaping the balance sheet to optimise returns. At the same time, our focus on customers and communities remains central. In an environment that continues to test households and businesses, we provided targeted customer support, invested further in fraud prevention and financial crime capability, and maintained a strong and visible presence in our core markets, particularly Queensland. The operating environment remains complex, with geopolitical uncertainty weighing on consumer and business sentiment. That said, our approach has not changed. We continue to prioritise resilience and sustainability of earnings while progressing our transformation to improve returns and ensure the bank is well positioned for future growth. From a financial resilience perspective, BOQ remains in a strong position. Capital and liquidity levels are robust, asset quality remains sound and our balance sheet provides the flexibility to support customers, navigate uncertainty and continue investing through the cycle. I'll now turn to performance for the half, beginning with our financial results. For the first half, cash earnings were $176 million, down 4% on the prior comparative period. Underlying profit increased by 2%, reflecting revenue and expense growth associated with the completion of the branch network conversion in March 2025. Loan impairment expense was $20 million compared to $3 million in the prior comparative period. which contributed to the 4% decline in cash earnings. We have maintained a strong capital position, which remains well above our management target range. This provides the group with flexibility to support future growth and capacity to absorb potential economic shocks. Reflecting this position, the board has declared a fully franked interim dividend of 20 cents per share, representing a 75% payout ratio for the half. Rachel will provide more detail on the financial performance shortly. Turning now to the key drivers of our strategy and the strong execution during the half. The digital platform remains a core enabler of our retail strategy, supporting customer growth, improving customer experience and progressively enhancing the economics of the retail bank. Following the launch of term deposits during the half, the core build is now complete and our focus is shifting to ongoing enhancements that further extend our proposition. To date, we have migrated more than 300,000 customers with over 70% of active retail customers on the platform. Growth and engagement are particularly strong across younger demographics, which was a key strategic objective of the digital bank. From a funding perspective, the digital bank is supporting lower-cost deposit growth. The majority of new personal deposits are now originated digitally, supporting higher transactional balances and stronger customer engagement than our legacy platforms. This is also translating into improved lending outcomes. The platform is scaling mortgages in line with plan, with 75% of group home lending originations processed through the platform in March, supporting lower origination costs. As scale increases and enhancements are delivered through the second half of 26 and into FY27, we remain confident in achieving an improved time to decision and a 50% reduction in origination costs. Overall, this progress reinforces our confidence that the digital bank is delivering on its role, materially improving customer experience, enabling scalable growth and improving retail banking economics. Our productivity program remains a critical enabler of our strategy, reducing complexity, strengthening operational resilience and reducing our cost to serve. Since FY23, we have delivered tangible productivity benefits through a simpler operating model, exits from non-core activities, technology rationalisation, a reduced property footprint and continued simplification of our distribution and processing environment following the branch conversion. Our strategic partnership with Capgemini is delivering efficiency through the business processing arrangement. More broadly, we continue to evolve the use of AI across the business with the establishment of a central AI hub to drive adoption and deployment of use cases, including near-term opportunities in the contact centre, commercial lending and technology development. When we set out to deliver the $250 million program, we recognised it was ambitious and that the pathway to the delivery was unlikely to be linear. As priorities and initiatives have evolved, we expect the full run rate benefits to be achieved on exit of FY26, with the decommissioning of meat heritage systems and our Capgemini partnership key drivers of that outcome. Importantly, productivity improvements have been sustainably embedded into the way BOQ operates. We have reduced complexity, improved efficiency and created capacity to absorb cost pressures while continuing to invest in our transformation. We expect that on exit of FY26 we will have generated simplification benefits equivalent to more than 20% of our cost base compared to when the program commenced in FY23. This is an important outcome in what has been a complex operating environment and reinforces our focus on embedding sustainable efficiency into the way the bank operates. Looking beyond FY26, we acknowledge there is more work to do. Continued simplification alongside the increasing use of data, automation and AI provides a pathway to drive further productivity and to support operational leverage over time. The capital partner with Challenger announced earlier this month represents an important evolution in our approach to balance sheet optimisation and capital efficiency. Our strategic intent is to deliver sustainable returns through shifting asset and funding mix to optimise risk-adjusted returns and grow capital-light income. The Capital Partnership supports this, providing balance sheet optionality and the opportunity for scalable non-interest to income growth without the need for capital or funding. The Partnership includes the sale of approximately $3.7 billion of our equipment finance backbook alongside the establishment of a forward flow arrangement. This structure supports scalable growth in equipment finance without increasing balance sheet concentration or funding requirements while maintaining customer relationships. Under the whole of loan sale, the assets are fully de-recognised from BOQ's balance sheet. Risk funding and ownership transfers to Challenger enabling BOQ to reduce approximately $3.4 billion of higher cost funding, strengthening shareholder returns and further reinforce capital resilience. The forward flow rate agreement enables us to continue originating new lending using our existing capabilities, while scaling the customer offering without increasing balance sheet intensity or concentration risk. Over time, this model generates capital like income through origination and servicing fees, while Challenger provides funding and absorbs credit risk. For BOQ, this supports returns and the ability to do more with our customers. As announced, our intention is to return capital released from this transaction to shareholders with the objective of optimising return on equity and EPS over time. We are planning to do so through a combination of a fully franked special dividend and an on-market share buyback, subject to regulatory and board approvals and market conditions. We expect the transaction to be completed by the end of May. Turning now to progress on our remedial action plans. Delivery of our remedial action plans and meeting our regulatory obligations remains a key focus for our management team. We continue to make strong progress across both programs. At the end of the half, 61% of total activities were complete, with both program RQ and AML first transitioning from implementation into the embed phase. This reflects not only delivery against milestones, but also a clear shift towards embedding changes into day-to-day business-as-usual processes. The program remains well governed and appropriately resourced and we continue to progress in line with regulatory expectations, further strengthening BOQ's risk, governance and control frameworks. Turning now to our retail bank. Our priority in retail banking remains clear. To reset the economics of home lending and improve returns by scaling a lower cost to serve digitally enabled model. We've made considerable progress in reshaping the retail bank including reducing origination costs through the digital platform, delivering term deposits on the platform, which completes the product suite with all deposit products now available on the digital bank, and optimising distribution following the branch conversion. We've also been deliberate in allowing portfolio runoff where returns were uneconomic while improving funding efficiency at the same time. We are now at a key phase as the digital bank scales. More than $23 billion of home lending sits on the platform, with approximately 75% of flows originated digitally. The branch conversion has stabilised on a smaller, more efficient footprint and distribution is now better aligned to evolving customer preferences. Foundationally, operating on a modern cloud-enabled digital platform is also creating a strong underlying capability for the deployment of AI and automation. This has allowed us to explore introducing AI-driven automation across customer operations, particularly in the contact centre, with further opportunities to improve customer experience and reduce cost-to-serve costs. As noted at our full-year results last October, the rate of home lending decline has moderated. While we would continue to prioritise returns over short-term volume, we expect home lending to return to growth in FY27, supported by low origination costs and improved customer experience. Moving to our business bank, we are seeing the benefits of focused execution in targeted higher-returning specialist segments. Over the half, commercial lending grew above system by 7%, driven primarily by healthcare, agribusiness and well-secured commercial property. This reflects deliberate portfolio positioning in sectors where we have deep expertise. Housing contraction within the business division reflects targeted runoff where returns were less attractive. The branch conversion continues to support this strategy, enabling banker deployment into key growth corridors and regional SME markets, while maintaining strong customer relationships and attracting experienced bankers aligned to our specialist focus. Banker capacity is being further augmented by AI within commercial lending to free up bankers to spend more time with their customers and grow their portfolios. Overall, the business bank remains well positioned to deliver sustainable growth underpinned by strong relationships, quality bankers and deep industry expertise in our key segments. I'll finish by reinforcing the importance of our purpose and values. As a bank with more than 150 years of Queensland heritage, Supporting our customers, communities and people remains central to how we operate and make decisions. Across the half, we continue to invest in regional and SME communities and strengthen partnerships supporting vulnerable Australians. At the same time, we remain focused on our people, strengthening leadership capability, investing in learning and development, including the launch of an AI academy, and sustaining a strong risk culture that supports discipline execution and long-term performance. Together, this underpins the transformation we are delivering, building a stronger and simpler BOQ for our customers, communities and people. I'll now hand over to Rachel to talk more about the financial results in more detail.

Thank you, Rod, and good morning, everyone. The first half 2026 result reflects a steady and continued delivery of our strategy, including bold choices and the disciplined allocation of capital. We delivered cash earnings of $176 million and a half, down 4% against the prior comparative period and 12% against the second half 2025. When compared with the second half of 2025, total income reduced 4%, driven by margin compression, fewer days and lower asset balances. There was an uplift of 4% in non-interest income and we delivered another period of strong cost management, holding expenses flat. Loan impairment expense increased 11% to $20 million. This was primarily driven by one specific provision within the asset finance portfolio, and at five basis points to GLA, remains below historical levels. Against the prior comparative period, total income increased 5%, primarily driven by revenue uplift from the branch conversion. Expense growth of 6% included bringing on the cost of operating the branch network and and is down 2% excluding these costs. Pleasingly underlying profit increased 2%. Higher loan impairment expense compares to $3 million in the prior comparative period, which included a write-back in commercial lending. The progress we have made on executing against our strategy, including positive lead indicators of success in the digital bank, growth in our business bank and our capital partnership, and multi-year proof points on cost discipline leave us well positioned as we enter the second half. As outlined for the market earlier this month, there was a $31 million post-tax impact driven by the equipment finance portfolio being recognised as held for sale. Further changes to this number will primarily be driven by market movements in swap rates, the impacts of which will be known at completion. There was a further period of amortization relating to the branch strategy, with $8 million incurred this half. This program has been delivered on time and on budget, as announced in 2024. Adding in a small impact from hedging and fair value changes resulted in statutory net profit after tax for the first half of $136 million. I will now spend some time looking closer at the net interest margin, given the number of moving parts. On mortgages, we saw ongoing competition and we experienced slightly higher than expected retention discounting, particularly to support branch customers early in the half. Commercial lending competition was in line with expectations and came with strong growth in our business bank. We have seen acquisition spreads stabilised through the half. We saw a one basis point benefit from continuing mix shift towards higher margin business. Outside of these underlying lending drivers, cash rate movements contributed a four basis point headwind, driven materially by the non-repeat of benefits in the second half result, as rates reduced. Funding contributed a three basis point uplift with equal contribution across term deposit optimisation, wholesale pricing and funding mixed benefits. Liquidity and other was a negative one basis point. This included higher HQLA balances impacting margin by two basis points, replicating portfolio benefiting margin by one basis point. However, this was offset by unhedged exposures where the average cash rate in the half was lower than the prior period. And less exposure to basis risk and improved basis cost provided a small benefit. Finally, we had two basis points of a non-recurring benefit. This is made up of an adjustment to brokerage GST and as our fast-growing Novata leasing portfolio matured, we have an updated view on the average life of that portfolio. Net interest margin for the period was 1.67%. We exited the half with a stronger second quarter margin than the first. Looking to the second half, we will see the benefit from the February and March cash rate movements. Retention activity is expected to continue to feature as households and businesses look to manage their budgets in a rising rate environment, and as inflation persists, continuing the trend on underlying price competition. We expect to see ongoing benefit from reshaping the balance sheet toward business lending. We anticipate increasing funding cost benefits from current favourable term deposit spreads, retail deposit optimisation and funding mixed benefits. Replicating portfolio will continue to be a positive with higher tractor rates. We will optimise liquidity following the sale of the equipment finance portfolio, while impacts from the sale across lending and funding will be broadly neutral to margin. The two basis point benefit one-off I described in our first half will not reoccur. Despite there being some uncertainty and volatility in our outlook, there are more tailwinds than headwinds for margin as we enter the second half. This half, we delivered another period of strong expense management with costs flat on the prior half against a backdrop of high inflation. We are in the final period of our 2023 simplification program, which, since its commencement, has almost entirely offset annual inflation and new costs to operate the branch network from conversion. This period, inflation and investment across technology, risk and business banking have were offset by productivity benefits, seasonality in employee leave and a modest reduction in group investment spend. Whilst we have seen early success in our business processing partnership, we are experiencing some delays in the transition of our technology outsourcing, which is contributing to the multi-year $250 million productivity target and our 2026 cost guidance. The full $30 million of annualised benefits remains on track for 2027. I do want to take this opportunity to reiterate our commitment to sub-inflation cost growth for the full year 2026 against the prior year. This requires a planned reduction in our cost base into the second half. Our guidance on costs remains unchanged. We have continued to invest in the business at a sustainable level with $77 million invested in the first half. As outlined at the full year result, we are moving to a more sustainable level of investment for our business following a number of years of high investment including the integration of MeBank, investment in the business bank, the build and scale of the digital bank and risk and regulatory uplifts. 85% of our software intangible assets are now in use and amortizing following the successful delivery of the digital bank, and as we acquire and migrate customers and see more features released. Moving now to portfolio quality, and we remain strongly provisioned at 39 basis points to GLA. Impaired assets reduced on last half to $84 million. This includes a reduction in commercial lending and housing-impaired balances and an increase in asset finance. Loaning family expense increased to $20 million, or five basis points to GLA, remaining at a low level. Looking at each portfolio in more detail over the half. Home lending remains supported by strong underlying asset prices and a decrease in 90-day arrears. There was a $7 million credit to loan impairment expense driven by the improvement in arrears and house price increases over the period. Commercial lending 90-day arrears saw a slight increase with two single-name exposures contributing to a five basis point increase off a low base. Specific provision activity remained low. Total loan impairment expense on the commercial lending portfolio was $3 million. A modest increase in asset finance arrears was largely driven by seasonality, with loan impairment expense of $24 million impacted by a single name exposure, contributing almost half of the expense. EOQ remains well provisioned for a change in the cycle. We hold $298 million in provisions, which is $68 million above the base scenario. We had a reduction in the total collective provision due to the sale of a non-core credit card portfolio which occurred in the period. Our weightings remain unchanged in the period, however we have adjusted downwards the economic assumptions underpinning the base and downside scenarios. We continue to hold collective provision overlays for unique portfolio factors, including specific industries. If we were to enter a 100% downside scenario, a provision increase of $24 million would be required. Our downside scenario assumes residential house prices declining, negative GDP growth and an unemployment rate of 5.6% this calendar year. Whilst we consider our provisions to be appropriate, with current volatility in the broader economic environment, we are remaining vigilant. In a period of sustained lower home lending growth, as we recycled the balance sheet, there was a reduction in total funding. We continued to focus on deposits as a primary source of funding with runoff in less stable deposits and held deposits as a percentage of total funding at 72% with a broadly stable deposit-to-loan ratio of 85%. There was targeted runoff in term deposit portfolios of 6%. This was both a strategy around optimisation for cost of funds but also as we migrated customers onto our new digital platform. Customer deposits remained broadly flat outside of this. Our average LCR remains strong at 141%. As we near completion of the whole of loan sale, we are prudently managing down our liquidity position. We will then see a temporarily elevated LCR before managing this to normalise levels through the second half. Our optimisation plan will take the opportunity on a long-term wholesale maturity through our short-term wholesale portfolio and on retail deposits more broadly. Capital ended to half above our target management range at 11.18%. A 24 basis point increase was driven by earnings net of dividends. Business lending growth increased underlying risk-weighted assets. However, this was more than offset by a reduction in deferred acquisition costs, adding two basis points. Investment consumed two basis points. And lastly, other movements increased CT1 by 13 basis points. including mark-to-market gains in the available-for-sale reserve of nine basis points, deferred tax assets in excess of deferred tax liabilities benefiting six basis points, and equipment finance portfolio sale impacts of three basis points. Our strong capital position supports our planned capital return following the sale of the equipment finance portfolio and, as we enter, a period of higher uncertainty. As announced earlier in April, we have entered the partnership into a partnership with Challenger on the sale of our equipment finance portfolio and the establishment of a forward flow arrangement. Today we have provided some further detail on the expected impact on our 26 outlook. These impacts do remain subject to change through to completion date, which is on track to occur ahead of initial expectations by early May. In addition, the ranges provided include assumptions on the key moving parts, including the expected benefit from what loan impairment expense would have been without a sale and movements in swap rates. Lastly, while we won't comment further on the detail of the capital management plan, which is subject to board and regulatory approvals and market conditions, we intend to complete this in an efficient way to support current shareholders and to provide enduring benefit to both ROWE and EPS. In closing, this period saw our focus on costs and capital management deliver positive results for the group. 2026 is a key year of delivery against our four strategic pillars. In particular, our digitisation initiatives, which in addition to simplifying our business, enables us to grow customer deposits, supporting our commitment to return to asset growth in 2027. We have shown that we will be bold and disciplined in how we deploy capital. With heightened volatility and uncertainty in our environment, and how this may in particular impact funding, margins and losses, commitment to our transformation is even more critical. We continue to remain sharply focused on improving returns over the long term. I'll now hand over to Rod for closing comments and outlook.