BOQ maintains strong growth momentum


 

Bank of Queensland announced an interim headline NPAT result of $42.3 million for the first half of 2006, up 18% on $35.9m in the same period last year.

 

The headline profit of $42.3 million under the previous AGAAP accounting system equates to NPAT distributable to ordinary shareholders under AGAAP of $39.8 million ($33.2m pcp), up 20%.

 

Under the new Australian International Financial Reporting Standards BOQ recorded a profit of $37.5 million available for distribution to ordinary shareholders, up 16% on the same period last year ($32.3m pcp).

 

“Which ever way you cut it, this is a strong interim result for Bank of Queensland,” Managing Director David Liddy said today.

 

The Board also announced an increased interim dividend of 27 cents, a 17% increase on the first half of 2005 (pcp).

 

BOQ has continued on track with its interstate branch expansion, maintained margins and grown revenue through strong increases in lending and deposits.

 

Bank of Queensland also announced today two key initiatives. They were:

 

  • A Memorandum of Understanding for BOQ to form an alliance to provide white-labelled financial products to Western Australia’s HBF, the State’s biggest health fund with 900,000 members (see attached media release); and,

 

  • The provision of wealth management services through the formalisation of the Genesys Wealth Management alliance and the launch of a market-leading margin lending product with Macquarie Bank.

 

Mr Liddy said the Bank’s strong growth in the first half of 2006 was particularly impressive considering the key business decisions the Bank had made over the last two years.

 

“In particular, our above system home loan growth has been achieved without using lower yielding mortgage broker-generated loans,” he said.

 

“We started this journey of reinvention for Bank of Queensland five years ago and we are now seeing clear signs that a service-focused Bank with a sales-driven model and expanding footprint can make strong profits in an extremely competitive market.”

 

Mr Liddy said key indicators highlighted the Bank’s success in growing in a difficult market, including:

  • Loan approval growth of 28%
  • Retail deposit growth of 18%
  • Loans Under Management growth of 19%; and,
  • Maintaining high credit quality.

 

“We are confident of meeting our cash EPS guidance of 10%-12% for the full year based on AIFRS standards (currently 9% under AIFRS or 12% under AGAAP for first half 2006),” Mr Liddy said.

 

Mr Liddy said the Bank’s retail expansion plans were well on target.

                                                                                                           

“Our branch roll-out is on schedule to reach our target of 215 branches nationally (75 outside of Queensland) by the end of August this year, with a total of 193 branches open today, of which 53 are outside of Queensland,” Mr Liddy said.

 

“Our 20 new branches in New South Wales, Victoria and the ACT which have been open for more than 12 months have average footings of $41 million, which is outstanding growth for greenfield sites in anyone’s language,” Mr Liddy said.

 

“Our first branch in Darwin opened last week and our first West Australian branch opens later this month, so the reach of our network continues to grow.

 

“We have now opened 100 new branches in the five years since I joined BOQ in April 2001.”

 

The Bank’s business banking has also shown continued strong growth both through its business banking channel, and through growth in SME customers through the expanding branch network and its acquisitions in both equipment finance and debtor finance.

 

“The growth of our business banking network nationally and the acquisitions over the last few years of ATM Solutions, UFJ Australia Ltd and the Orix debtor finance business have caused a revolution in the Bank’s offering to customers.

 

“All of these strategic acquisitions have married with organic growth within our Business Banking division to create a powerhouse sector for the Bank from what was one of the weakest areas of the Bank a few years ago,” he said.

 

“Our business lending portfolio has grown 23% over the last 12 months, which is impressive at any time, but particularly strong considering the competitiveness of the current market.”

 

Mr Liddy said the HBF announcement demonstrated the advantage of the Bank’s prior investments in IT infrastructure and product development, and provided a new strategic platform for the Bank.

 

“The relationship with HBF is of great importance to Bank of Queensland as it provides a new revenue stream and helps utilise the IT and operational capacity we have attained through our core system replacement and the outsourcing relationship with EDS.

 

“HBF is a membership organisation focused on service and, like Bank of Queensland, is innovative while at the same time customer-focused. BOQ is proud to have been chosen to provide a range of leading financial products to HBF members.”

 

Mr Liddy said the Genesys and Macquarie Bank offerings filled one of the final gaps in BOQ’s customer offering.

 

“We had a major product and service gap in the area of wealth management and today’s announcements will give us a powerful relationship with a network of 400 financial planners across Australia who can work hand-in-hand with our expanding branch network.

 

“These new alliances put Bank of Queensland on a level playing field with its much larger competitors when it comes to providing customers with wealth management solutions,” he said.

 

 

Bank of Queensland 2006 Interim Result Snapshot

 

1H05 AIFRS
(pcp)

2H05 AIFRS

AIFRS

1H06

AIFRS Change on 1H05 (pcp)

AGAAP

1H06

Net Profit After Tax Available for distribution to ordinary shareholders*

$32.3m

$35.2m

$37.5m

16%

$39.8m

Retail Deposits

$5.4b

$5.8b

$6.4b

18%

$6.4b

Loan Approvals

$3.5b

$4.0b

$4.5b

28%

$4.5b

Loans Under Management

$11.4b

$12.4b

$13.5b

19%

$13.5b

            Housing

$7.5b

$8.1b

$8.7b

16%

$8.7b

            Business

$3.6b

$4.0b

$4.4b

23%

$4.4b

Assets Under Management

$13.3b

$14.4b

$15.9b

19%

$15.9b

Cost to Income Ratio*

65.7%

66.2%

64.1%

-

62.5%

Diluted Earnings Per Share*

32.5c

34.9c

35.5c

9%

36.9c

Dividend per Share

23c

25c

27c

17%

27c

Market Cap Value

$1.0b

$1.2b

$1.6b

62%

$1.6b

* Excluding significant items (sale of ATM Solutions Australasia Pty Ltd in July 2005)

 

  • Net Profit After Tax up 16% pcp: NPAT available for distribution to ordinary shareholders of $37.5 million for the first half continues strong growth in profit over the last three years. AGAAP NPAT distributable to ordinary shareholders was $39.8 million.
  • Interest Margin on track: Excluding one-off AIFRS adjustments the Bank was able to increase its margin by 1 basis point to 1.83%. This was through increasing asset yields by 3 basis points while limiting the costs of liabilities to an increase of 2 basis points in a very competitive market.
  • Asset quality still strong: Impaired assets as a percentage of non-securitised loans remained steady at 0.08% in the first half of 2006. This is a particularly good result considering the Bank’s growth in commercial assets and reinforced the Bank’s strategy of growing strongly but not at the expense of asset quality.
  • MOU with HBF: BOQ moves towards a new strategic business alliance with Western Australia’s HBF to provide lending and deposit products to its 900,000 members.
  • Wealth Management: BOQ launches strategic relationship with Genesys to provide wealth management for customers through its 400 financial planners. BOQ has also launched a market-leading margin lending product to supplement its offering in this sphere.
  • Product suite: Strong sales from innovative new deposit products such as Reverse Charges and Websavings accounts and the addition of the Margin Lending product, along with the development of online business banking products, has seen BOQ close all major gaps in the product offering.
  • 20 new branches opened: BOQ opened 20 new branches since the end of last half, bringing the total as of today to 193, of which 53 are outside of Queensland. Importantly, BOQ has opened 5 new branches in the last two weeks and has 14 ready for opening between now and July and another 20 in the pipeline. BOQ restated its position that it would have 75 branches outside of Queensland by the end of August 2006.