BOQ delivers record growth despite difficult environment


Bank of Queensland today announced an interim Normalised Cash Net Profit After Tax¹ of $65.3 million for the first half of the 2007/08 financial year, an increase of 33% on the prior comparable period (pcp), leading to growth in Normalised Cash Diluted Earnings Per Share of 10%.


The record result comes on the back of lending growth 1.7 times system and retail deposit growth 2.2 times system², and has been achieved despite a difficult economic environment.


“We continue to grow well above system in both lending and deposits, without sacrificing asset quality,” BOQ Managing Director David Liddy said today.


“Despite the recent market volatility, BOQ maintains strong asset quality with a focus on well-secured housing and SME lending, and a low level of significant corporate exposures.


“We have also introduced cost disciplines to offset the increased funding costs caused by volatile markets without compromising the long-term potential of our brand or our unique distribution model.


“We have successfully grown our retail funding capability to support our growth and are well-positioned in a liquidity sense to support continuing growth.


“It is no surprise that net interest margin has reduced, reflecting margin pressure in the sector.


“But, all in all, we are continuing to drive shareholder value despite the difficult economic climate.”


Bank of Queensland’s Board announced an interim ordinary dividend of 35 cents per share, an increase of 3 cents or 9% (pcp).


Key indicators include:

  • Lending growth of 1.7 times system (LUM growth of 27%);
  • Deposit growth 2.2 times system (retail deposit growth of 26%);
  • Maintenance of high credit quality;
  • Normalised cash cost to income ratio of 58.7%, down from 64% (pcp);
  • Five successful conversions of corporate branches to Owner-Managed Branches (OMBs) and five new sites opened this financial year;
  • Significant advancement of the Home Building Society integration with considerably higher than planned cost synergies.


Mr Liddy said Bank of Queensland was continuing to bolster its branch network through interstate expansion, conversion of Queensland corporate branches to OMBs, and the addition of Home Building Society branches.


“The OMB has been a fundamental platform in BOQ’s success to date, and will continue to be so as we grow and expand nationally. Importantly, we are increasing our network of OMBs in Queensland which will have a direct impact on our revenue generation in our home state.


“We have now converted 21 corporate branches to OMBs and continue to see a huge spike in performance following conversion, with average monthly settlements increasing by 62%."


Mr Liddy said that in addition to the OMB network, business banking, particularly in the equipment finance, debtor finance and SME sectors, had continued to outperform the market.


“We have had 31% growth in the business loans portfolio compared to the first half last year. In particular, our equipment finance book has grown by 24% (pcp).


“Our large exposures are limited; we only have 59 connections with exposures over $10 million.  Our total large exposures contribute only 22% of the Bank’s commercial portfolio and only about 5% of our assets under management.


“Asset quality is pristine,” Mr Liddy said.


Home integration:

The commencement of integration following the successful merger of the Western Australia-based Home Building Society reinforced the strength of BOQ's execution skills and builds on the Bank’s integration experience.


“We have already upgraded the synergies we expect to see in year one of our merger from $3 million to $4 million, and system conversion has been brought forward by nine months, which will bring our synergy estimates forward also," Mr Liddy said.


“We are confident of achieving year three cost-only synergies of approximately $25 million against our plan of $20 million.


“We have had strong interest in our OMB Model in WA and will look to convert some of the existing branches to this model as soon as we can.”


Funding and liquidity:

The key to Bank of Queensland’s funding philosophy has been and will remain diversification of funding sources, according to David Liddy.


“We are focusing heavily on accelerating our retail deposits; it’s a strategy focused not just on price competition but institutionalising our ability to grow stickier term deposits.  Our success to date is compelling.


“In addition, we continue to diversify our wholesale borrowing, accessing across the inter-bank market, securitisation, short and long term senior debt, and domestic and offshore markets.
“And we are also still issuing senior debt domestically and in offshore markets.


“And, as I mentioned earlier, we are also focusing on growth in retail deposits through our OMB network. Our OMB Model is structured to reward deposits.


“In terms of liquidity, we currently hold in excess of 14% liquidity with 82% of securities held either in cash or securities eligible for RBA repurchase agreements.”


Bank of Queensland 2008 half year result snapshot





Change on 1H07 (pcp)

Normalised Cash Profit After Tax





Retail Deposits





Loan Approvals





Loans Under Management (before collective provisions):




















Assets Under Management





Cost to Income Ratio





Diluted Cash Earnings Per Share (available for ordinary shareholders)(1)





Dividend per share





All figures include Home Building Society.
*The decrease in consumer LUM reflects the sale of the cards business.


  • Net Profit After Tax up 33% pcp: Normalised Cash Net Profit After Tax of $65.3 million for the first half of the 2007/08 financial year, an increase of 33% on the prior comparable period (pcp).
  • Diluted Cash Earnings per Share: EPS growth of 10% is in line with the guidance of 10% to 12% EPS growth.
  • Asset quality still strong: Impaired assets to non-securitised lending remains steady at 0.09% compared to the second half of 2007.
  • Expense discipline: Cost to income ratio dropped from 64% to 58.7%.  Cost disciplines have been introduced to offset volatile markets without compromising the long-term potential of the branch or our unique distribution model.  Adjusting for amortisation of customer contracts, major expense categories have been kept relatively flat.
  • Network growth: With the purchase of Home Building Society and Pioneer Permanent Building Society, Bank of Queensland now has a network of 283 branches across every State and Territory.
  • Owner-Managed Branch growth: 22 corporate branches have now been converted to OMBs and we continue to see a huge spike in performance following conversion, with average monthly settlements increasing by 62%.
  • Home Building Society: Significant advancement of the Home integration with considerably higher than planned cost synergies.
  • Interest Margin: Net interest margin (before commissions) down by 15 basis points in the half reflecting margin pressures in the sector.

¹ Normalised Cash Net Profit After Tax (NPAT) excludes Home integration and due diligence costs on other transactions.
² Growth figures refer to system growth year on year and exclude Home Building Society.