BOQ AGM told of strong, early interstate growth

Bank of Queensland Managing Director David Liddy told today's 2004 financial year Annual General Meeting that interstate growth in the first months of the 2005 financial year had proved very strong.


Mr Liddy said Bank of Queensland's drive to differentiate itself when it comes to personal service, and more new points of customer contact, was paying off.


Our strategies have proved very successful. Our two major acquisitions for 2004 have been seamlessly integrated and are already contributing positively to our bottom line.


And we are seeing a strong movement of customers to our new Bank of Queensland branches in New South Wales and Victoria, Mr Liddy said.


Impressively, business levels in New South Wales and Victoria has proved strong in only the first three months. This highlights the strength of Bank of Queensland's service-focused owner managed distribution model and the benefits it brings to our bottom line, Mr Liddy said.


One again our Owner-Managed Branch model is proving extraordinarily popular with customers, both retail, and, importantly, small businesses, he said.


With 137 branches in Queensland, 14 interstate branches, 13 business banking centres, a new core computer system, a national equipment leasing company and the second largest ATM fleet of any Australian Bank, we have built a strong base for future growth.


Now it is time for Bank of Queensland to expand, to capitalise from this strong base. The Bank is on target to have 50 interstate branches open by August 2005 and 100 open by August 2006.


Our shareholders are being rewarded by the Bank delivering on its commitments. We have said what we are going to do, and we have done it, he said.


Bank of Queensland has grown its branch network from 93 to 151, its business banking centres from one to 13 and its ATM network from 80 machines to 2000 since 2001.


Mr Liddy said the 2005 financial year was bouncing back after a relatively slow start due to the country's focus on the Federal Election, BOQ's withdrawal from the mortgage broker market, and the Bank's internal focus on replacing its core computer system.


We saw a slight slowdown in lending growth in September and October leading into the Federal election, but November figures indicate a return to strong growth, he said.


We have also tackled the margin pressures which had affected BOQ, and most of the banking sector, last financial year. We have stopped the decline in our margin, which has now stabilised in the first quarter of 2005.


Importantly, we are now funding balance sheet growth 100 per cent through our retail deposits, Mr Liddy said.

Mr Liddy reaffirmed the growth prospects for BOQ in the 2005 financial year.


Bank of Queensland's financial goals for 2005 remain that we will continue asset growth of at least 1.5 times system and deposit growth at twice system growth. We will do this while maintaining credit quality, obtaining cash EPS growth of 10%-12% and a cost-to-income ratio of 63 per cent, he said.


Overall, Mr Liddy said there had been a slowdown in some segments of the Queensland market, particularly property development, but that the small business sector in Queensland was powering along in line with the State's strong growth.


Interstate we are hearing of a downturn in the housing market, but we are performing well interstate as we enter new markets and focus on branch-based, service delivery. Competition in all sectors of the banking industry is strong, and anyone who says otherwise is kidding themselves, but Bank of Queensland is performing above the market, he said.


BOQ Chairman Neil Roberts said shareholders had seen continued strong results despite growing competition, and the continued imposition of regulation on bank profits.In 2001, the market capitalisation of the Bank was $400 million, assets under management were $5.2 billion, net profit after tax was $24.1 million and cash earnings per share were 33.2 cents, Mr Roberts told the AGM.


In 2004 the Bank's market capitalisation was approximately $1 billion, its assets under management were $12.5 billion, net profit after tax was $64.5 million and cash earnings per share were 64.5 cents.


In 2001, our cost to income ratio was 76%, today it is 63.4%. The fact is that since 2001 this Bank has doubled in size and profitability. That very impressive achievement occurred during a three-year period which commenced a mere six months after David took on the role of Managing Director, the Chairman said.


Mr Roberts said that the weight of regulation was a cost burden on all listed companies in Australia.


Regulations are often spawned in response to the collapse of a corporation within the very small percentage of corporations which have failed to conduct themselves responsibly, yet the burden of compliance always falls on the vast majority of corporations which have a culture of responsible corporate conduct, he said.


I call this the lowest common denominator effect - regulation to control the behaviour of everyone as a reaction to the misbehaviour of a few.


In the months to come, this Bank will have to deal with changes in the Privacy Act, Anti- Money Laundering legislation, the Uniform Consumer Credit Code and the Electronic Funds Transfer Code of Conduct, along with the substantial changes involved in complying with the new Financial Services Reform Act, the new International Financial Reporting regime, and the Basel 2 risk management regime.


I do not expect that any of this will change, but at least opportunities such as this should be taken to remind investors of the consequence of an ever increasing array of legislation and regulation and the inevitable cost to business of compliance, Mr Roberts said.