Sustained growth and strong cost control have led to a record first-half result for Bank of Queensland.
The growth has been driven through higher productivity, increased branch numbers, new products, IT and business banking investment, combined with the success of the Performance Enhancement Program (PEP) in controlling expenses.
Bank of Queensland Chairman Neil Roberts today announced a record net profit after tax of $21.3 million for the half-year ended 28 February 2003, up 60% on the previous corresponding period and ahead of market expectations.
The Directors declared an interim dividend of 17 cents per share fully franked, up 2c from last half.
"The half-year result has reinforced the Bank's strong fundamentals, with excellent revenue growth coupled with tight control of expenses," Mr Roberts said.
In a major endorsement of the ongoing Performance Enhancement Program, focusing on efficiency, the cost to income ratio has declined from 73 per cent in first half of 2002 to 65 per cent for the first-half of 2003. Revenue grew at 20% compared to an increase in costs of only 7% for the same period.
The success of PEP has led the Bank to increase its target from $16 million to $24 million in benefits. The $24 million in efficiencies will come through $14 million in costs saved and $10 million in increased revenue.
"We are on track to meet, and in fact exceed, our previously announced objectives for the full year," Mr Roberts said.
Managing Director David Liddy said today's announcement highlighted how the Bank had exceeded all of the key goals stated in last year's Annual Report.
"Our goals for the current financial year were to achieve double digit EPS growth, cut our cost-to-income ratio to 68%, lift ROE to 14% and expand our branch network to 119 branches.
"Against these goals we have, in the first half, achieved 33% EPS growth, a cost to income ratio of 65% and a ROE of 17%. We have 108 branches open now, and will have 120 branches open by August this year, in addition to five business banking centres," Mr Liddy said.
"We are now on target to outperform our stated objectives for the full year with a second-half result in line with the first half. We expect this to lead to EPS growth for the full year of between 30% and 35% with a ROE of 15%. Today's result is a sustainable result.
"This is a very strong result for Bank of Queensland. This is a result built on sustainable growth and improved productivity and efficiency," Mr Liddy said. "The results are an early indication of the significant internal transformation realised at BOQ over the past year.
"We are doing what we said we would do."
"This record interim result for the first half of 2003 positions Bank of Queensland to continue reaping the rewards of recent and ongoing Bank-wide efforts to contain costs and lift revenue through our increased points of representation," Mr Liddy said.
"It also reinforces our brand re-positioning, the introduction of phone and internet banking, and acceptance of our face-to-face, community-focused banking model.
"We are seeking to consolidate the performance of the first half whilst investing further in growing our business through branch openings, increasing business banking resources and developing further the BOQ brand awareness.
"One of the key drivers behind this success is Bank of Queensland's unique OMB model, which allows us to roll-out our branch network at an accelerated rate, with minimal impact on the bottom line. This has increased our footprint throughout Queensland and led to strong revenue growth.
"While the OMB model has proved a great success, our growth in business banking of 31% over the last 12 months should not be underestimated either. This highlights our strong performance across all sectors," Mr Liddy said.
Underlying profit before bad debts and income tax lifted 55% to $35.3 million on the back of a 29% improvement in non-interest income and a 15% lift in net interest income, compared with the first half 2002 performance.
The tightening of fee collection rates as well as growth in loans written underpinned the significant increase in non-interest income to $38.9 million.
Strong growth in lending approvals and assets
Lending approvals rose 51% over the same period last year to $2.3 billion, assisted by continued buoyancy in the housing market, making BOQ one of Australia's fastest growing banks over the period. Total assets under management grew by 10% over the last half to $7.3 billion, with $5.8 billion of this on the balance sheet compared to $4.7 billion at the same time last year. Increased branch numbers have contributed to the growth in approvals. Deposit growth has also been strong with 14% growth compared to last half and 22% growth on the previous comparable period.
Quality of portfolio maintained
Bad debts written off and movements in specific provisions were reduced by $0.4 million on the same period last year to $2.1 million, reflecting the quality of the loan portfolio which is heavily weighted toward secured home loans. Non-performing loans to total loans is a mere 0.1%. Since 31 August 2002, the general provisions lifted $2.5 million in light of the 8% growth achieved in the Bank's on-balance sheet lending portfolio.
Cost containment and revenue enhancement drove the Bank's cost-to-income ratio down from 73% to 65%. This puts BOQ firmly on track to achieve its target 64% for 2004.
The Bank has maintained its active management of capital through a $400 million securitisation of loans in January 2003, and a share issue last September.
Given the exceptionally strong growth, the Bank plans to raise additional capital to fund growth through its dividend reinvestment plan and through a new Shareholder Share Purchase Plan offer, planned for late May 2003. The Bank is seeking to raise approximately $35 million in capital through these initiatives.
The proposed Shareholder Share Purchase Plan offer follows a similar successful offer in 2002. Registered shareholders will be able to apply for up to $5,000 worth of new shares at a 2.5% discount to the market price.
The pricing will be based on a weighted average share price and be set and announced at the end of the offer period. Shareholders will be sent further details in late May 2003. It is expected that this raising will be completed by early June 2003.
2003 Half-Year Achievements At A Glance
Operational achievements for 2003
- Selection of FISERV to provide the Bank's new core banking system scheduled for completion in March 2004
Additional functionality added to the successful 2002 launch of internet banking. In the 8 months since the launch 32,000 customers have signed up for online banking
- Branch openings - opened 10 new branches taking the total numbers of branches to 108, with a revised target of 120 branches by August 2003 and 130 by August 2004
Continue to develop the new BOQ corporate identity to underpin targeted growth in marketshare.
- Laying of strategic five-point plan for 2003 with taskforces established, each led by a GM to set the next phase of our progress in stone
- Signed contract with Diebold in December 2002 for the purchase of 100 new ATMs for a fleet replacement program.
- Acquired 10% interest in ATM Solutions, a third party ATM delpoyer, to provide BOQ branded ATM facilities and improve ATM reach for bank customers.
- Opened new Business Banking Centres on the Gold and Sunshine Coasts, Townsville and at Stones Corner, bringing the total number of Business Banking Centres to five.
Financial achievements for 2003
- Bank of Queensland recognised as one of Australia's fastest growing banks in period to February 2003 following a 51% jump in sales over the prior comparable period, to a record $2.3 billion
Enhanced efficiencies and sales growth push operating profit after tax up 60% on the previous comparable period to $21.3 million
EPS growth (fully diluted) of 33%
Fully franked dividend of 17 cents declared, an increase of 2c over the second half of 2002.
- Increase in Business Banking loan book of 31% compared to first half last year.
2.7 million shares placed with institutional investors in September 2002
- Assets under management climb 25% over the past year to $7.3 billion with housing assets up 21%, business assets recording growth of 31% and consumer loans 17% higher than 12 months ago.
- Continuation of the very successful Performance Enhancement Program which has contributed to a reduction in the Bank's cost-to-income ratio from 73% in the first half of last year to 65% for the current reporting period. Target for PEP increased to $24 million (comprising $10 million in revenue benefits and cost savings of $14 million) from $16 million previously reported.