BOQ Delivers Record Result in 2008

Thursday, 09/10/2008 


  • Normalised cash NPAT up 46% to $155.4m
  • Normalised cash EPS up 11% to 102.9cps
  • Normalised CTI ratio down 10% to 56.1%
  • Lending growth yoy of 23% (1.9x system)*
  • Retail deposit growth yoy of 25% (1.3x system)*
  • Projected Home Building Society synergies increased by $10m to $30m p.a. (year 3)
*Excludes acquisition balances of Home Building Society 

BOQ today announced a record normalised cash profit after tax of $155.4 million for the 2007/08 financial year, an increase of 46% on last year, which flowed through to growth in normalised cash diluted earnings per share of 11%, after allowing for the Home Building Society acquisition. 

BOQ Managing Director David Liddy said while the result was strong, he and his team were continuing to position the Bank for a challenging period ahead. 

“While we are very pleased with this result, the market remains extremely turbulent and we will continue to focus on improving our core business with an emphasis on deposit growth and further improvements in efficiency. 

“While the improvement in our Net Interest Margin from 1.62% in 1H08 to 1.70% in 2H08 was pleasing, margins are expected to come under pressure in the year ahead as wholesale funding continues to be re-priced. 

“We are positioning ourselves to be capable of absorbing further increases in wholesale funding costs, while continuing to grow the business at a time of great uncertainty and opportunity. 

“Importantly, we have improved our efficiency and operating costs significantly, which has helped offset increased funding costs without compromising the long-term potential of our brand or our unique distribution model. 

“And 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 commercial exposures greater than $10 million. 

”Importantly, almost 70% of our loans under management are in the buoyant state of Queensland.
“We have successfully grown our retail deposit capability to support our growth and are well-positioned in a liquidity sense going forward.  Our capital base remains strong. 

“So overall this is a very strong result for BOQ, and we believe it has positioned us well to meet the challenges in the year ahead. 

“We remain cautiously optimistic,” Mr Liddy said.

Bank of Queensland’s Board also announced an ordinary dividend for the second half of FY2008 of 38 cents per share, up from 35 cents in the first half, bringing the full year dividend to 73 cents per share, an increase of 4 cents per share or 6% on last year. 

Branch network

Mr Liddy said BOQ 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 Model will continue to be a fundamental driver as the Bank continues to grow and expand nationally.
“The flexibility of our OMB Model and the drive and passion of our Owner-Managers have been instrumental in helping the Bank refocus its sales force towards retail deposits. 

“In fact, the growth in our retail deposits has funded 53% of our growth in loans under management.” 

Home integration

The successful integration 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 well exceeded expectations in terms of the synergies we expect to see in year one of our merger, with $5.7 million already realised,” Mr Liddy said. 

“We are confident of achieving run rate synergies in year two of $15 million against our original target of $10 million, and synergies of $30 million in year three against our earlier estimate of $20 million.” 

Funding and liquidity

The key to BOQ’s funding philosophy has been and will remain to ensure a suitable diversification of funding sources remains in place, according to David Liddy. 

“We continue to focus on accelerating the growth in our retail deposits and diversifying our wholesale borrowings, across the inter-bank market, securitisation, short and long term senior debt, and domestic and offshore markets,” said Mr Liddy.
“Despite adverse conditions, we have successfully issued across a variety of funding markets this year, including a $350 million RMBS issue in October 07, $200 million hybrid securities in December last year, and a $500 million RMBS private placement in June this year. We were also well supported with a $310 million syndicated loan in September. 

“And, as I mentioned earlier, we continue to focus on sustainable, ‘stickier’ deposit growth through our OMB network.  We are also considering niche segments with new products. 

“In addition, the Home acquisition has further enhanced our retail funding base and reach. 

“In terms of liquidity, we currently hold approximately 16% liquidity with 94% of securities held either in cash or securities eligible for RBA repurchase agreements.” 


“Although BOQ has had no material direct exposures to stressed local or offshore assets, we are not immune to the higher costs all banks have had to pay to secure their funding as a result of the developments in the offshore credit crisis,” said Mr Liddy. 

“We continue to vigorously monitor credit market developments with a view to adjusting the levers of the business to suit the prevailing environment. 

“The underlying fundamentals of our strategy remain strong and give us cautious confidence in what is proving to be a challenging time ahead.” 

Bank of Queensland 2008 half year result snapshot




Change on 2007 (yoy)

Normalised Cash Profit After Tax




Retail Deposits*




Loan Approvals




Loans Under Management (before collective provisions):
















Assets Under Management




Normalised Cash Cost to Income Ratio




Normalised Diluted Cash Earnings Per Share




Dividend per share




*Excludes acquisition balances of Home Building Society Ltd. 
  • Record Normalised Cash Profit after Tax of $155.4, up 46% on FY07: Continues the Bank’s strong growth in profit over the last six years and breaks the $150m mark for the first time, just one year after breaking the $100m mark.
  • Interest Margin improved: NIM improved 8bps from 1H08 to 2H08 despite the volatile and competitive market.  Overall year on year margin contracted 14bps to 1.67%.
  • Cost-to-income reduced: An ongoing focus on efficiency and operating costs has driven a reduction of 10% in the cost-to-income ratio to 56.1%, which in an extremely difficult market is a significant achievement.
  • Continued strong retail deposits growth: Retail deposit growth of 25% (yoy) reflects the Bank’s continued emphasis on driving retail deposits through our OMB network as wholesale funding costs climb.
  • Asset quality still strong: Only moderate increase in bad debts reflects sound credit quality.  The increase in collective provisions from 8 basis points to 11 basis points reflects the Bank’s prudent approach to provisioning.
  • Merger with Home Building Society: Integration of Home Building Society successfully completed with year one synergies of $5.7 million realised, exceeding original guidance on acquisition of $3 million.
  • Owner-Managed Branch growth: The addition of 24 Home branches, two private bank sites, two corporate branches and eight Owner-Managed Branches has been the Bank’s overall network expand to 284 branches across every Australian state and territory.