Bank of Queensland: Retaining Our Fair Value After New CEO Gets Some Bad News Out of the Way

Ahead of reporting first-half fiscal 2023 results next week. Bank of Queensland announced an AUD 200 million goodwill write-down plus an AUD 60 million pretax provision to cover costs of uplifting nonfinancial risk controls over the next three years. The latter includes systems and processes to manage operational risk (cybersecurity, fraud, human error, and so on), risk culture, and compliance with anti-money laundering laws. The goodwill write-down is of little consequence, in our view, but the spending on risk is noteworthy as the board highlighted it when booting the CEO late last year. The costs are expected to be one-off, and in our view “catch-up” investments. Pressure is likely coming from regulators, with management noting internal and external reviews had identified areas of weakness. Given how costly breaches of anti-money laundering law have been for Commonwealth Bank and Westpac in recent years, it is money well spent.