BANK of Queensland today announced an interim profit after tax of $13.3 million for the six months to 28 February 2002, a 15.4% increase on the previous half year and a 6.3% increase on the corresponding period last year.
An interim dividend of 14 cents per share fully franked will be paid to entitled shareholders on 30 April 2002. Diluted earnings per share increased slightly to 18.5 cents for the period.
Record lending, asset and deposit growth
Bank of Queensland Managing Director David Liddy said the result reflected a period of record lending approvals with an increase of more than 49% over the first half in 2001 to $1.7 billion.
Assets under management grew 22.2% to $5.8 billion from the close of the corresponding period last year.
Loans under management grew 11% for the half year to $5.0 billion, giving the Bank an excellent 25% growth rate for the 12 months to the end of February, and taking total on-balance sheet assets to $4.7 billion, including loans of $3.9 billion.
Total deposits with the Bank have also shown strong growth, rising 18.9% from the close of the previous corresponding period to $4.0 billion this half.
"While our loan book and deposits have increased significantly," Mr Liddy said, "the main progress this half has been our work to make the Bank a more efficient and productive organisation that is ready and able to grow profitably.
"Our restructuring, outsourcing and efficiency initiatives have gained momentum and are now well on track to becoming a suitable foundation for sound growth.
"We expect the real benefits will begin to flow through to our net profit in the current half. However the full return of our efficiency measures to stop revenue leakage, reduce expenses, and maximise earnings to prepare us for growth will not be clear until our next financial year."
This six months saw non-interest income lift 12% to $30.1 million and net interest income pick up 1% from the corresponding period to $54.0 million.
The net interest margin dropped from 2.74% at the close of the last financial year to 2.5% this reporting period. This was largely attributable to the impact of the Reserve Bank's three interest rate cuts which reduced the cash rate by 0.75% and took it to an historical low of 4.25%, eroding the benefit of the Bank's low-cost deposit base.
Conversely, being strongly retail funded, Bank of Queensland is positioned to benefit from the expected cash rate increases by the Reserve Bank of Australia over the coming months.
Our net interest margin was also adversely affected by the large increase in new housing loans written at low-start rates. However, after the initial low-start period of one year these loans convert to a higher margin.
Getting set for growth
The interim results reflect the Bank's new focus on efficiency and cost reductions with operating expenses of $61.3 million, 6.3% less than in the preceding six months despite the significant asset growth achieved.
"We have built a solid base now so our future growth will translate directly to our bottom line," Mr Liddy said.
- Enhancing efficiency: "We have upgraded the expected savings of our Performance Enhancement Program from the previously stated run rate of $12 million, to $16 million for the 2003 financial year. This will include $6 million in revenue enhancements per annum and $10 million in savings on operating expenses leading to a target cost-to-income ratio of 68% for 2003 and putting our target of 64% by 2004 within reach.
Plugging revenue leakage: "We have undertaken a rigorous review and repair project to locate revenue leakage and opportunities. For example in December we identified and corrected a previously unknown system glitch, which saw the Bank missing out on $1 million in revenue per annum.
Growth strategy: "We have also unveiled our growth strategy to open 34 new branches (on top of the existing 95) around Queensland by August 2004 through our unique, extremely efficient owner-managed distribution model. Coolum and Carina branches began trading during the half. Kingaroy opens next week. We will have seven more branches by August this year.
Outsourcing: "During the half year we also progressed our strategy to outsource all IT, credit card and loans processing and call centre operations, culminating in a contract with global business services company EDS in March. This is expected to deliver not only vastly superior business processes, Internet banking by June and a new core banking system within 24 months, but also $100 million of savings in prospective costs over the next ten years.
Active capital management: "We are committed to actively managing the Bank's capital base in line with its growth in assets. To do this we announce today our intention to raise an additional $10 million of capital through a Share Purchase Plan giving shareholders the opportunity to increase their holding by subscribing for up to $3,000 of new shares in the Bank. Details of the plan will be forwarded to shareholders with dividend notices in late April."
For further information contact:
Head of Corporate Affairs
Bank of Queensland
Ph: (07) 3212 3522