BOQ growth story continues; well-placed for market upturn



  • Normalised cash NPAT up 21% to $187.4m
  • Normalised cost-to-income ratio down 6.2% to 49.9%
  • Lending growth yoy of 10% (1.8 x system)
  • Retail deposit growth yoy of 16% (1.0 x system)


BOQ today announced a record normalised cash net profit after tax of $187.4 million for the 2008/09 financial year, an increase of 21% on last year, again delivering system-beating growth despite the difficult environment.


Bank of Queensland Managing Director David Liddy said the Bank’s continued growth in a challenging environment demonstrated its ability to quickly adapt to and take advantage of changing market conditions and meant it was well-placed for the market upturn.


“We are a leaner, more robust bank than we were going in to the Global Financial Crisis and we now have a platform ready to strategically drive our continued growth forward,” said Mr Liddy.


“Sustained cost discipline, stringent asset quality surveillance and targeted cost savings combined to underpin the Bank’s normalised cash net profit after tax of $187.4 million, a 21% increase over the prior year.


“Not only did we achieve our earnings forecasts, we also again outpaced the vast majority of our competitors in terms of loan growth.


“In addition, the Bank’s retail deposits increased 16% from the previous record year, enabling us to fund 88% of growth in loans under management this year and demonstrating our ability to re-focus our Owner-Managed Branch network according to changing market conditions. 


“And this strong growth in retail funding helped us build up record levels of liquidity and enabled us to focus on margins in the second half, which is demonstrated by a seven basis point increase in Net Interest Margin (NIM) to 1.59%,” he said.


Mr Liddy said that one of the most positive outcomes of the efficiency stream of Project Pathways, which was completed in August this year, was improved efficiencies through a single channel distribution organisation, resulting in a significant reduction in our cost-to-income ratio.


“The cost disciplines we have put in place combined with our expanding revenue base have seen our cost-to-income ratio decrease to 49.9% in FY 2009, a 6.2% decrease from the previous year.


“These disciplines, combined with our funding and capital position, mean we are well placed to continue to grow in a challenging domestic and global economic environment.


“Competition is fierce and while smaller financial service providers like BOQ are operating on an uneven playing field, compared to the majors, BOQ remains a real alternative to the major banks.

Asset quality remains sound
Mr Liddy said that the Bank’s positive result was also due to a highly disciplined focus on maintaining strong asset quality.


“As at 31 August 2009, Bank of Queensland had only 67 exposures over $10 million, reinforcing that we are essentially a domestic retail bank servicing household customers and small business customers.


“Our level of impaired assets has increased in line with the deteriorating economy and the banking sector, but overall our asset quality is sound.


“We expect bad debts to peak in the coming financial year, but we have increased our General Reserve for Credit Losses to account for this and our losses to date are still tracking well below our larger competitors.”


Funding and capital levels position BOQ to exploit growth opportunities

“The Bank is in a strong position in terms of funding and capital and after the recent capital raising our Tier 1 Capital, at approximately 9.6% and total capital of 12.2%, is at the upper end of any Australian bank,” said Mr Liddy.  “We are determined, having achieved self sufficiency on funding, to achieve a similar status with respect to capital.


“We were delighted with the positive response from both retail and institutional investors to our capital raising announced in August this year, and believe our capital buffer positions us well to take advantage of emerging growth opportunities.”


“We feel it prudent to maintain the dividend at 26 cents per share as paid in the interim dividend, which brings the total dividend for this financial year to 52 cents per share.”


Dividends remain fully franked.


Project Pathways
Project Pathways was completed in August this year and generated significant benefits to the Bank in its drive for scale and efficiency.


“I believe we are well-positioned to take advantage of the market upturn and any appropriate opportunities to gain scale.  We remain a strong growth story in Australian banking and believe our model, capital position and SME focus position us well as we emerge from this economic downturn.”





Change on 2008 (yoy)

Normalised Cash Profit After Tax




Retail Deposits





Loans Under Management:

(before collective provisions)













Assets Under Management




Normalised Cash Cost to Income Ratio




Normalised Diluted Cash Earnings Per Share




Dividend per share





  • Record Normalised Cash Profit after Tax of $187.4m, up 21% on FY08: System-beating growth despite the difficult environment.
  • Interest Margin improved: NIM improved 7bps from 1H09 to 2H09 despite the volatile and competitive market.  Overall year on year full year margin contracted 11bps to 1.56%.
  • Cost-to-income reduced: Cost disciplines combined with expanding revenue base have seen cost-to-income ratio decrease to 49.9% in FY 2009, a 6.2% decrease from the previous year.
  • Continued strong retail deposits growth: Retail deposit growth of 16% (yoy) reflects the Bank’s ability to re-focus the OMB network, depending on need.
  • Asset quality still strong: The Bank’s level of impaired assets, despite incremental increases, remains well below our peers demonstrating the consistency and low risk profile of our book.
  • Project Pathways: Phase 1initiatives have been completed and helped BOQ reduce its cost-to-income ratio to 49.9%.  Phase 2 initiatives are being undertaken to assist us achieve our target cost-to-income ratio in the mid-40s.
  • Owner-Managed Branch Network: OMB commission payments have continued to increase throughout the economic downturn, demonstrating the resilience of the model.  Interstate expansion of our Owner-Managed Branches and the acquisition of Western Australia’s Home Building Society has diminished BOQ’s traditional geographic concentration in Queensland, and subsequently reduced geographic concentration risk.  14 branches in NSW have been consolidated and the network is performing well (12 in FY09, and two in September 2010).
  • Statutory profit: Statutory profit increased 2% year on year with revenue growth and reduced income tax expenses more than offsetting the increase in expenses and bad debt charges.