Wider national branch roll-out planned
Bank of Queensland today announced an increase in Net Profit After Tax (NPAT) of 42% for the 2005 financial year based on achieving key revenue objectives, strong retail growth and the sale of its wholly-owned subsidiary ATM Solutions Australasia.
Bank of Queensland’s NPAT for the 2005 financial year was $91.7 million, up from $64.5 million last year.
Chairman Neil Roberts said the Board had approved a second half dividend of 25 cents per share, fully franked, bringing total ordinary dividends to 48 cents a share, up 12% for the year. The Board also decided to pay a fully-franked special dividend of 15 cents per share as a result of the successful sale of the ATM Solutions business, which contributed $15.5 million to net profit after tax. The 63 cent total 2004/05 dividend is an increase of 47% on last year’s dividend.
“We want shareholders to benefit from the successful management and growth of the Bank,” Mr Roberts said. “The special dividend reflects the entire profit after tax generated by the sale of ATM Solutions.
“Shareholders have also benefited from a growth in Cash Earnings Per Share (diluted) of 30% to 84.1 cents in the year. Once again Bank of Queensland has achieved strong profits while maintaining rapid growth and building a business for the future,” he said.
Managing Director David Liddy said Bank of Queensland’s underlying profit had grown 34% from $106.9 million in 2004 to $143.5 million this year and NPAT excluding significant items had grown 24% from $61.7 million to $76.2 million from 2004 to 2005. Significant items included the sale of Cashcard in 2004 and the sale of ATM Solutions Australasia in 2005. Normalised cash EPS rose 14% excluding significant items to 70.2 cents on the previous year.
Mr Liddy said 2005 had been a year of achievements by the Bank, including:
- Substituting monthly sales volumes from the mortgage broker channel with the interstate branch network by year-end;
- Improving net interest margins from 2.25% to 2.30% in a tough market;
- Growing branch network to 173 (177 today), including 34 (38 today) in NSW, Victoria and ACT;
- Producing strong lending and deposit growth in the interstate branches;
- Producing double-digit normalised cash growth of 14%;
- Selling ATM Solutions for a net profit after tax of $15.5 million;
- Strong deposit growth and market-leading product launches; and,
- Significantly growing its Business Banking division, particularly the equipment finance business.
“Bank of Queensland is now a very strong business model built on a growing retail network and strong business banking and commercial growth,” Mr Liddy said.
“Importantly, we have continued to see strong results from our interstate branches, which, by year end, had achieved the monthly lending approvals previously sourced through mortgage brokers.
“Consequently, our intention over the next 6 to 12 months is to move into other states. We have assessed the markets in those states and will make a decision based on the same criteria we have used to date - matching exceptional owner managers with good sites in growth areas. These new interstate branches will be supported by the existing ATM fleets and equipment finance offices in each state.
“Our first five interstate branches have now been open 12 months and have average footings, that’s loans and deposits combined, of more than $50 million. That’s an exceptional result in 12 months from a new entrant into the New South Wales and Victorian markets, and gives us confidence about taking the owner-managed branch network into other growth markets in Australia.
“The Bank of Queensland model has proved itself in Queensland, and in the very tough New South Wales and Victorian markets, so a broader national reach is strategically and operationally appropriate.”
Mr Liddy said he was also happy with the pace of the branch roll-out, although it was unlikely Bank of Queensland would meet its initial target of 100 interstate branches by August 2006.
“Bank of Queensland has undertaken one of the fastest retail roll-outs in the country, with 31 new branches since August last year and 84 new branches in the last four years.
“We have grown from 93 branches just in Queensland in 2001 to 177 branches today, including 22 in New South Wales, 14 in Victoria, 2 in the ACT and 139 in Queensland. However, due to a higher concentration of metropolitan branches than expected, we have encountered some issues interstate around development applications and site selection in metropolitan areas which have slowed the process,” Mr Liddy said.
“Our Owner-Managed Branch model is based on a combination of the owner-manager and the site, and we have been delighted with the quality of owner managers wishing to open branches in major metropolitan areas in Sydney, Canberra and Melbourne.
"To ensure our success continues, we will not sacrifice the quality of the owner-managers or the sites for new branches in the interests of expediency. So, if it takes longer to reach the 100 interstate branch mark, so be it. Provided those branches are of the same quality that we have opened to date, I won’t mind, and neither should the market,” he said. “In fact I expect us to have significantly more than 100 new branches over the next two to three years.”
Mr Liddy said he was equally happy with the strong sales of mortgages despite the Bank’s decision to withdraw from using mortgage brokers.
“Our withdrawal from the use of mortgage brokers in June 2004, which was a major strategic issue for us and an industry leading stance, has obviously impacted through lower new loan approvals, which dropped 4% year on year. However, we planned for this reduction and we have now made up the loss in monthly approvals and achieve more valuable, ongoing, stronger customer relationships.
“Our decision has been vindicated in terms of business growth and has also helped with margins, with BOQ actually improving net interest margin from 2.25% in 2004 to 2.30% in 2005. This improved margin is a particularly strong result in our very competitive environment.”
The 20% growth in retail deposits had also strengthened Bank of Queensland position in the market, built on the launch of a new, market leading, Cash Management Account and more competitive term deposit rates and will be strengthened further by the launch of a revolutionary new transaction account soon.
“Over the next few weeks Bank of Queensland will launch the newest entrant in the competitive deposit product range with a unique day-to-day transaction account which we believe will help capture new customers for the Bank,” Mr Liddy said.
Mr Liddy said the Bank had more than doubled the value of ATM Solutions over two years.
“We have sold this business as part of an ongoing alliance with Macquarie Bank which will ensure that Bank of Queensland continues to have a national, BOQ-branded ATM fleet and an alternative revenue stream through acquiring income. These were the two principal reasons for purchasing the ATM business in the first place,” Mr Liddy said. BOQ will remain as transaction acquirer and cash servicer for ATM Solutions, at market rates, for the next five years, and earn a branding fee.
“This means the Bank will still have a growing fleet of around 2000 branded BOQ ATMs nationally continuing to support our branch and business banking expansion across the country,” Mr Liddy said.
Mr Liddy said the Bank’s success with turning its business bank and, in particular, the equipment leasing business, into a growth powerhouse was particularly satisfying.
“To have the Bank’s equipment leasing business grow 21% in the year and our business banking portfolio continue to forge ahead with 16% growth shows we are much more than just a mortgage shop,” he said.
Highlights of 2005 FY Bank of Queensland Results
Change on 2004*
Net Profit After Tax
Net Interest Income
New Loans Approved
Loans Under Management
Loans Under Management Housing
Loans Under Management Business/Consumer
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 42% pcp: NPAT of $91.7 million is almost four times 2001’s NPAT and 42% up on 2004’s net profit after tax of $64.5 million. Excluding significant items (ATM Solutions in 2005 and Cashcard in 2004) NPAT was $76.2 million in 2005, up 24% on 2004.
Special dividend: The BOQ Board has approved a second half dividend of 25 cents per share fully franked and a special dividend of 15 cents a share fully franked, bringing the total dividend for 2005 to 63 cents a share, an increase of 47% on last year.
Margins increase: Net interest margin increased by 5 basis points to 2.30% in the financial year.
Retail deposit growth strong: Despite fierce competition BOQ maintains strong retail deposit growth through the introduction of a new CMA product, the revamp of term deposit products and continued branch number growth. A new transactional savings account will be launched in the next month.
Asset quality still strong: Bad debt expense increased by just $1.5 million over last year to $13.4 million. Impaired assets as a percentage of average total assets decreased from 0.08% to 0.05%, reinforcing the Bank’s strategy of strong growth, but not at the expense of asset quality.
ATM network secured, and expanding: BOQ now has a network of more than 1800 branded ATMs under its arrangement with Macquarie Bank, and a further 178 of its own branded machine, giving it a powerful presence in the ATM market.
Leasing business shows strong growth: BOQ’s leasing portfolio had grown 21% or $300 million in the year to $1.7billion off the back of the Bank’s acquisition in 2003 of UFJ Equipment Finance Ltd.
- 31 new branches opened in financial year: The branch network increased to 173 as at August 31, 2005, an increase of 31 since August 31 2004. BOQ has opened a further four branches since August 31 2005, bringing the current total to 177 branches, of which 38 are in NSW, ACT and Victoria.