Record profits continue for Bank of Queensland

Bank of Queenslands aggressive market growth has led to record profit after tax of $28.1 million for the half-year ended 29 February 2004, an increase of 32% on the same period last year.


Bank of Queensland Managing Director David Liddy said the net profit after tax (NPAT) result was built on a powerful underlying profit of $50 million for the half, up 42% on the same period last year.


Bank of Queenslands growth strategy of increasing our footprint through new branches and boosting our business banking resources has proved extraordinarily successful, Mr Liddy said.


The platform has been established for continued strong growth as we expand our Banks unique person2person service proposition interstate in the second half of 2004.


The growth in the first half for 2004 has come from a 75% increase in home loan approvals and a doubling in business loan approvals (up 107%) on the comparable first half of 2003, he said.


Significantly, retail deposits increased 35% on the same period last year to $4.6 billion.


Bank of Queensland Chairman Neil Roberts said the last half NPAT result of $28.1 million was impressive when compared to the full-year result of $28.7 million for 2002, less than two years ago.


This means we have effectively doubled our profit in under two years, Mr Roberts said.


Bank of Queensland shareholders have seen this strong profit growth flow through to increased dividends and double digit Earnings Per Share (EPS) growth over the last two years, Mr Roberts said.


The strong interim profit result led to the Bank of Queensland Board declaring an interim dividend of 21 cents per share fully franked, up 4 cents (24%) on the first half last year.


Mr Liddy said Bank of Queensland was on track to meet its full year projections for 2004.


We posted a return on equity (ROE) of 14.2% compared with a full-year goal of 14%, achieved a cost-to-income ratio of 63.3%, in line with the 64% full-year objective, and met our target of double-digit EPS growth with 11% on the previous comparable period.


Mr Liddy said the Bank had also realised significant synergies between its existing operations and two acquisitions during the first half of 2004.


The Bank has succeeded in the integration of two major acquisitions in equipment finance company UFJ Finance Australia and third-party ATM provider ATM Solutions Australasia, Mr Liddy said.


Since the acquisition of UFJ Finance Australia on October 8, 2003 and the merger with our existing equipment finance operations, we have achieved $2 million in cost synergies and lifted sales volumes without compromising margins or asset quality, he said.


The acquisition of ATM Solutions increased our ATM fleet by 1,400 machines to more than 1,500 Australia-wide. Of these, up to 800 will be branded BOQ by the end of this month, providing the Bank with its first major brand exposure interstate.


Other major operational achievements include the expansion of the Banks branch network to 132 during the reporting period (now 133) and the Banks core system migration, which is undergoing final testing and staff training prior to going on-line in early May.


The Queensland network is now meeting our demands of increased reach and scale and will provide an excellent platform for our interstate growth. We will open 100 owner-managed branches in Victoria and New South Wales by the end of FY2006, the first of these to be open before the end of this financial year, Mr Liddy said.


Mr Liddy said the Bank had invested heavily in infrastructure and people and would be rewarded in the medium to long term through even stronger profit growth, while managing short-term pressure on EPS and ROE.


"Bank of Queensland will continue to work towards providing the platform for strong future growth while meeting the market expectations on EPS, ROE and cost-to-income ratios, Mr Liddy said.


Lending growth is faster than deposit growth, and that means the bank will continue to access wholesale funding, which can put pressure on net interest margins in the short term.


However, our customer-focused strategy, based on owner-managed branches, business bankers and personalised service is proving very strong, and very attractive to the Australian market. Queenslanders are voting with their feet, and all evidence to date indicates the rest of Australia will as well.


Bank of Queensland is in the unique position of being able to improve shareholder value by providing what bank customers want more branches and more personal contact combined with innovative products, and the latest in ATMs, phone and internet banking.


Bank of Queensland is a value proposition for both shareholders and customers, and that is a winning formula going forward, Mr Liddy said.


Strong growth in all key areas

2H031H04Change on 1H03 (pcp)
Net Profit After Tax$13.3m$15.4m$21.3m$23.4m$28.1m32%
Underlying Profit$22.8m$27.1m$35.3m$40.0m$50.0m42%
Net Interest Income$54.0m$55.2m$62.2m$70.5m$88.2m42%
Non-Interest Income$30.1m$34.6m$38.9m$42.7m$47.9m23%
Retail deposits$2.8bn$3.0bn$3.4bn$3.8bn$4.6bn35%
New loans approved$1.53bn$2.16bn$2.31bn$3.35bn$4.18bn81%
Assets Under Management$5.8bn$6.6bn$7.3bn$8.7bn$11.3bn55%
Cost to Income Ratio72.9%69.9%65.1%64.7%63.3%-3%
Cash Earnings Per Share18.7c21.0c27.0c28.3c30.0c11%
Dividend per Share14c15c17c20c21c24%

1H04 highlights

  • Net Profit After Tax up 32% pcp: NPAT of $28.1 million was up 32% pcp (20% on last half) more than double the first half result two years ago (1H02).

  • Underlying Profit up 42% pcp: Underlying profit of $50 million was up by 42% pcp (25% on last half) and more than twice (up 119%) that of 1H02

  • Income up 35% pcp: Total income was $136.1 million, a rise of 35% pcp (20% on last half). Net interest income of $88.2 million was up 42% pcp (25% on last half). Non-interest income rose by 23% pcp (12% on last half) to $47.9 million.

  • Retail deposits up 35% pcp: Deposits rose to $4.6 billion pcp (19% on last half).

  • Lending approvals up 81% pcp: $4.2 billion of new loans were approved during the half, up 81% pcp (25% on last half), taking total loans under management to $9.7 billion (excluding general provisions).
    New housing loans increased by 75% pcp (13% on last half) to $2.7 billion.
    Business lending approvals more than doubled on the pcp (up 107%) to $1.34 billion (68% on last half).

  • Assets Under Management up 55% pcp: Assets under Management increased by 55% pcp (30% on the last half) to $11.3 billion. Despite the 110% pcp increase in commercial assets with the acquisition of UFJ Finance, impaired assets remaining steady at 0.1%.

  • Cost to Income Ratio reduced: The cost-to-income ratio fell from 65.1% in the pcp to 63.3%, in line with the target of 64% for the full-year.

  • Per Share up: Despite dilution caused by the issue during the half of 14.9 million new ordinary shares to fund growth, Cash EPS grew by 11% pcp (6% on last half) to 30 cents and Interim Dividend per Share grew by 24% pcp to 21 cents per ordinary share fully franked.

  • 12 new branches opened during the half: The branch network increased to 132 as at 29 February 2004 (now at 133), meeting all previously announced targets.

  • Acquisitions integrated: Substantial inroads were made in integrating BOQs acquisitions UFJ Finance and ATM Solutions and realising the anticipated $2 million worth of synergy benefits. Without compromising asset quality we have improved sales and margins while reducing costs.

  • New headquarters announced: BOQ announced it would move its head office to the brand new Macarthur Towers office building, which will be renamed the BOQ Centre.

  • New core system completed: The new $40 million core banking system was complete at the end of March, with the expected go-live date of early May allowing further testing and staff training.