BOQs record profit built on strong growth and expanding branch network

Bank of Queensland today announced an increase in Net Profit After Tax (NPAT) of 44% for the 2004 financial year, based on strong growth in both lending and deposits, the power of its expanding branch network and further diversification of the business.


The record result highlights the profitable growth of Bank of Queensland with both NPAT and Underlying Profit, which passed $100 million for the first time, more than doubling in just two years.


NPAT for 2004 was $64.5 million compared to the 2003 full year result of $44.7 million and built on the back of a 38% increase in new lending approvals to $7.8 billion and a 27% increase in deposits to $4.9 billion.


Underlying profit for 2004 increased 42% to $106.9 million. Excluding significant items, which include $6.1 million before tax from the sale of Cashcard Australia Ltd and $2 million in expenses for the write-off of assets and provisions for surplus lease space in the Banks new head office, BOQs adjusted NPAT was $61.7 million for 2004, an increase of 38% on last year.


Bank of Queensland Chairman Neil Roberts said the record profit result was testament to the Banks strategy of getting back to the people through an expanded branch network, improved products and boosted business banking resources.


This growth is flowing through to real value for the shareholders with Cash Earnings Per Share (diluted) growth of 17%. In light of this strong growth the final dividend for BOQ shareholders for the full year will be 43 cents per ordinary share (22 cents for second half), up from 37 cents in 2003, an increase of 16%, Mr Roberts said.


Importantly, Bank of Queensland has achieved this strong profit result for 2004 while also building the foundations for future growth in shareholder value in the years ahead, he said.


Managing Director David Liddy said the growth over the 2004 financial year was particularly satisfying given that it was also a year of significant investment in the business.


The 2004 year saw a continuation of our rebuilding phase to prepare us for the growth ahead, so it is important to recognise the significant achievements in light of that vital investment back into the business, Mr Liddy said.


These figures also highlight that, as a bank, we have been able to grow profitably while also opening branches, expanding our business banking arm, totally replacing our core banking system and undertaking key acquisitions.


Successive record profits and growth well above the banking system highlights the people-power of our business banking and branch distribution model and the rewards from doing the simple things right, like focusing on customers and service.


The record profit of $64.5 million is gratifying, and comes with a reduction in our cost-to-income ratio to 63.4%, ahead of our target of 64%. This reduction in cost-to-income has occurred while we have also successfully implemented our $40 million new core banking computer system, integrated two key acquisitions and launched our interstate branch network, he said.


Our growth in assets under management of almost $4 billion from $8.7 billion to $12.5 billion is a major step forward for Bank of Queensland. We have also seen total income for the Bank increase 36% to $291.9 million for 2004, reflecting a 38% increase in net interest income to $183.3 million and a 33% increase in non interest income to $108.6 million.


To achieve this growth while essentially in the final year of a massive infrastructure rebuilding phase is extraordinary, and sets Bank of Queensland up for a powerful future of growth across the board.


Our growth in new lending and deposits is well ahead of system growth in the Australian banking sector and sets us up for continued growth in market share as we move interstate in force.


Importantly, BOQ has retained its 60/40 mix, on balance sheet, of home lending to business and commercial lending, ensuring that, with the growth into new markets, we are well placed to thrive during any downturn in the home lending market over the 2005 financial year.


Mr Liddy said he was particularly happy with the performances of the Banks two acquisitions, UFJ Finance Australia, now Bank of Queensland Equipment Finance (BOQEF) and ATM Solutions Australasia.


The UFJ portion, separate from the previously existing Bank of Queensland Equipment Finance prior to the acquisition, has seen sales increase 50% and customer numbers increase 32% over the 2004 year, he said.


Its $1.5 billion leasing book now makes up 13% of total loans under management and highlights the diversification of the BOQ business, and its improved geographic spread.


ATM Solutions had boosted its number of machines by 58% to 1661 as at August 31, improved profitability and increased the Banks interchange-acquiring income. Bank of Queensland now has the second largest bank-owned ATM network in Australia with more than 1800 machines.


These acquisitions have highlighted our ability to execute business integrations efficiently.


Mr Liddy said the decline in net interest margin had been an issue during the 2004 financial year, as it had been across the financial sector.


We have taken three key steps to address this in 2005. Firstly, our withdrawal from the home loan mortgage broker market, which occurred in June and had a minimal impact on 2004 results, will impact positively on our margin going forward.


Secondly, Bank of Queenslands margin was also impacted negatively during 2004 by the funding of the UFJ leasing book acquisition which has now been effectively digested. Finally, BOQ has adjusted its commission model for branches to focus more on deposit raising which saw an additional $200 million in deposits collected over August and September, 2004. The rate of margin decline slowed in the second half of 2004.


Mr Liddy said the continued expansion of Bank of Queensland into New South Wales, Victoria, ACT and the Northern Territory, and the consolidation and growth of the Queensland market, would be the key focus in 2005.


We opened 22 new branches, including our first five interstate branches, during 2004, bringing our total network at the end of the year to 142 branches. This is an increase of 49 branches in just three years. Two more branches in Doncaster and Dee Why have opened since August 31, bringing our total to 144, he said.


We expect to increase that branch network by opening a total of 100 interstate branches by August 31, 2006. This growth will be supported by our interstate BOQEF offices, business banking network and a fleet of ATMs which is expected to grow to more than 2000 by 2006.


Bank of Queenslands market share in new home lending in Queensland hit 16% in February 2004, and averaged 14% for the year, up from around 6% three years ago.

2004 FY Bank of Queensland Results



2003 (pcp)


Change on 2003*

Net Profit After Tax






Underlying Profit






Net Interest Income






Non-Interest Income






Retail deposits






New Loans Approved






Loans Under Management


















Assets Under Management






Cost to Income Ratio






Earnings per Share (cash)






Dividend per Share






Market Cap value






*Percentages relate to the actual figures rather than rounded figures in the above chart.

Net Profit After Tax up 44% pcp: NPAT of $64.5 million is more than double 2002 FY NPAT. Underlying profit up 42% to $106.9 million and is also more than twice that of 2002.

Asset quality still strong: Bad debt expense increased by just $0.2 million over the 2004FY to $11.9 million, of which the general provisions increase contributed $7.0 million. Impaired assets as a percentage of average total assets has increased slightly from 0.07% to 0.08%, reinforcing the Banks strategy of strong growth, but not at the expense of asset quality.

Cost to Income Ratio reduced: The cost-to-income ratio fell from 64.9% in the pcp to 63.4%.

ATM network expanded: 1661 ATM Solutions machines across Australia, of which 1009 were BOQ branded, and another 143 Bank of Queensland branch-based machines.

$40 million core banking computer system implemented: The fundamental platform for the Banks growth, the new core banking system has the capacity to handle the Banks interstate expansion and provide a much better customer view for BOQ employees.

New, more competitive products: BOQ has launched a market-leading, full access Cash Management Account, a market-leading low-rate credit card and two new home loan packages since the implementation of the new core banking system.

Employee training: More than 60,000 hours of training undertaken, including for regulatory changes such as FSRA and the Code of Banking Practice.

22 new branches opened: The branch network increased to 142 as at August 31, 2004 with BOQ on target to open 100 interstate branches by August 31, 2006. All existing branches in the network have also been refurbished.

Acquisitions integrated: BOQs acquisitions - UFJ Finance Australia Ltd and ATM Solutions Australasia - successfully integrated and synergy benefits realised.

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