Annual Report

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BOQ’s 2019 Annual Report incorporates the Group’s audited financial statements and other statutory disclosures.


Annual Review

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BOQ’s 2019 Annual Review provides an overview of BOQ's operations across the Group and outlines our strategies for creating long-term value for shareholders, customers, employees, suppliers and the community.


Sustainability Report

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BOQ’s 2019 Sustainability Report focuses on how we engage with stakeholders as well as on our performance against social, environmental and economic challenges and opportunities.

Corporate Governance Statement

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BOQ’s 2019 Corporate Governance Statement discloses how we have complied with the ASX Corporate Governance Council’s Principles and Recommendations.


Messages from the Chairman and Managing Director & CEO

Dear Shareholder,

2019 has been a year of significant change for the banking industry and for BOQ. As we reported at our first half results, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) will have long lasting effects on the Australian financial services landscape.

We have already started to see the impact of higher costs as a result of the increase in expectations from regulators and the community. Meanwhile, the sector has also faced challenges of an uncertain outlook for housing prices and credit growth and the lower for longer interest rate environment, including the recent move to a record low cash rate of 0.75%.

At BOQ, we have also seen changes in leadership throughout the year. Our former Managing Director & CEO Jon Sutton announced his resignation for health reasons in December 2018. We finalised plans for the Chairman succession in May 2019 with the announcement of Patrick Allaway as BOQ’s next Chairman effective 18 October 2019, and announced the appointment of our new Managing Director & CEO, George Frazis in June 2019.

During this period of change, the business has continued to execute on a strategy of growing our niche business segments, while enhancing our technology platforms and processes to make it easier for our customers to deal with us through their channel of choice. We have also maintained our prudent risk settings and sought to further enhance our risk and compliance capability to meet rising stakeholder expectations.

A major achievement for the year has been the development and refinement of our purpose and values. Our purpose is to deliver more human, empathetic experiences that help customers and communities prosper. Our values are: we show we care; we act with integrity; we achieve together; and we make a difference.


We believe that by living our purpose and values and helping customers and communities prosper, we will deliver on our financial performance objectives and deliver returns for shareholders. In terms of our 2019 financial performance, our results have been below expectations and reflective of the difficult operating environment.

Cash earnings after tax decreased 14 per cent from 2018 to $320 million and cash basic earnings per share decreased 16 per cent to 79.6 cents per share. Return on equity also decreased 160 basis points to 8.3 per cent. These reductions were driven by lower income, higher operating expenses and a large increase in loan impairment expense.

A two per cent contraction in income was the result of subdued asset growth, a five basis point reduction in net interest margin and a 12 per cent reduction in non-interest income. We achieved growth in lending balances of two per cent across the Group.

This included strong growth of 15 per cent or $667 million in the asset finance and leasing businesses of BOQ Finance. The growth momentum continued in Virgin Money Australia and BOQ Specialist housing loans, with growth of $914 million and $626 million respectively. Our core BOQ housing loan portfolio, however, contracted during the year.

This is attributable to a number of factors including a reduced distribution footprint, more onerous lending processes and digital customer offerings which lag our peers. We have plans in place to address these issues and anticipate improved performance from our Retail Bank in 2020.

The contraction in net interest margin was most pronounced in the first half of the year, due in part to the higher bank bill swap rate which normalised later in the year, as well as ongoing price competition for new business.



The reduction in non-interest income was driven by ongoing downward pressure on fees and insurance income. Operating expenses increased by four per cent which took our cost to income ratio to 50.5 per cent.

We have continued to invest for the future by improving our technology, risk and compliance capability. As we flagged at the 2018 results and in the first half this year, the increased capitalised investment expenditure we have been incurring will lead to an increase in amortisation as these important foundational projects are completed. We continue to explore opportunities to offset this increase through digitation and automation of processes to improve efficiency.

Our underlying asset quality remains sound. Despite this, impaired assets increased 20 per cent from a very low level to $197 million. This represents 43 basis points of our total loan balances. Our loan impairment expense also increased substantially during the year, reflecting the move to a new collective provisioning model to align with new accounting standards, as well as the deterioration in a number of forward looking economic indicators and a small number of larger exposures.

Arrears trends have increased slightly but remain at relatively low levels. We remain comfortable with the overall performance of the loan portfolio, with no systemic issues emerging and support from the recent stabilisation of house prices, low interest rates and low levels of unemployment.

BOQ’s capital position remains appropriate with a Common Equity Tier 1 ratio (CET1) of 9.04 per cent. CET1 has reduced in recent years as we have reinvested in the future of the business and continued growth in higher capital-consumptive commercial lending segments.



Given the challenging outlook, the dividend was reduced by 14 per cent, in line with the reduction in cash earnings, to 65 cents per share.

We have taken a prudent approach which keeps the payout ratio consistent with the level of the first half. An important milestone in 2019 has been the decision to proceed with additional investment in Virgin Money Australia to build a new digital bank.

We are very excited about the prospects for this business given the recent success the brand has demonstrated in attracting customers across its other product lines. You will hear more about how this will contribute to BOQ’s future through 2020.

We have also made considerable progress in the modernisation of our technology infrastructure, which has involved shifting our data centres to a cloud-based environment. This will deliver benefits in the future as we have better capacity to scale up, reduce cost, implement change and partner with external providers to deliver better solutions for our customers.

We are also on track to rollout a more contemporary mobile banking offering to our customers in 2020. These are critical investments that will support our transformation and future aspirations.

Many challenges remain for BOQ, including changes in regulation, technology and customer behaviour, as well as the broader economic challenges facing the sector. However, there are good opportunities available for BOQ to capitalise on and again return to growth with a clear and focused strategy. I am confident that under Patrick and George’s leadership, I am leaving the Bank in very good hands to do just this.

It has been a privilege to serve on the BOQ Board and as your Chairman. I would like to thank my colleagues on the Board, the management team and everyone at BOQ, our customers and you, our shareholders, for your ongoing support.

Roger Davis,                                            Retiring Chairman

Dear Shareholder,

I take on the role as Chair of BOQ effective from 18 October with appreciation of the considerable responsibility for the Board and management to deliver better outcomes for our stakeholders. Our FY19 cash earnings after tax of $320 million represents a 14 per cent decline on last year. We are operating in a low growth environment with rising investment needs, regulatory costs and community expectations. Irrespective of the challenging operating environment, we are not satisfied with our performance.

We recognise that BOQ needs to take decisive action to transform to a more sustainable business model with a clear strategy to return to growth whilst continuing to deliver our purpose of helping customers and communities prosper. We are confident that in transforming BOQ we can grow long term sustainable shareholder value. At the half year we foreshadowed providing our strategy update later this calendar year. Whilst we are well into the process of our strategic review, we are now of the view that it would be prudent to defer this market update to February 2020. This will enable our new Chief Executive Officer, George Frazis, to optimise the strategy and conduct a productivity review to ensure we have a fit for purpose operating model aligned with our niche growth strategy. In the interim, George, a seasoned banker with considerable leadership experience in transformation and digital innovation, has settled into his new role well. We are excited about the change he will lead at BOQ.

The foreshadowed transformation strategy will focus on five high level priorities for BOQ:

  1. Return to profitable and sustainable growth. We will continue to focus on niche growth segments, lift the performance of our Retail Bank and seek to optimise risk adjusted returns.
  2. Embed our purpose led, customer culture. To achieve this we need to attract, develop and retain the right talent. We will invest in developing our people and building an inclusive and diversified workforce that respects and endorses BOQ as a great place to work.
  3. Simplify our business, improve productivity and address costs. We will address our rising cost to income ratio through a structural productivity and operating model review, aimed at reducing complexity and adopting technology to drive efficiency.
  4. Close the digital and data gap, delivering our mobile and Virgin Money Australia investments. We are committed to delighting our customers by providing a seamless end to end experience across all channels, including new internet and mobile banking platforms.
  5. Continue to strengthen the Bank through strong governance, compliance and prudent risk management. We have more work to do in improving our non-financial risk governance and are investing in continuous improvement.

Looking ahead, the environment in banking and the broader global and local economy remains challenged. We anticipate that industry disruption will accelerate, requiring BOQ to transform to an agile challenger bank with a refocus of our retail strategy on targeted segments, as we have successfully achieved through our niche segment strategy in BOQ Business. This includes the rollout of Virgin Money Australia as a digital bank of the future in FY20, following a successful proof of concept earlier this year.

We recognise that our transformation will take time. The investments being made to make BOQ stronger will mean FY20 will be a difficult year. We anticipate a decline in year on year cash earnings in FY20, largely driven by low revenue growth, higher regulatory compliance costs and increased amortisation and operating expenses related to our increased investment in technology. Following the finalisation of our strategic and productivity review we will provide a further update to the market in relation to the impact of these initiatives on our FY20 performance. We will be transparent about our transformation when we outline our plans to the market in February 2020, providing clear benchmarks to monitor progress.

We recognise that many of our shareholders rely on dividends to support their income. We have paid a full year divided for FY19 of 65 cents per share, representing a payout ratio of 82 per cent. We will continue to factor the importance of dividends for shareholders into our future capital management plans as we invest in the business to return to profitable and sustainable growth.

We have announced that our outgoing Chair, Roger Davis, will be stepping down from the Board in October. In addition, David Willis will be stepping down at the AGM, providing for an orderly succession plan. I would like to thank Roger and David for their significant contribution to BOQ. During their tenure, BOQ has made a number of niche investments that have delivered strong growth for shareholders in specialty sectors providing a good foundation for our strategy to return the Group to growth. We will take this opportunity to both refresh and reduce the size of the Board. I would also like to thank Anthony Rose, our interim CEO, and Matt Baxby, our outgoing CFO, for their contribution to BOQ and wish them all the best in their future careers.

It is a great honour to be appointed Chair of BOQ and I relish the opportunity to be a change agent and harness the collective strength of the Board and the organisation to transform BOQ and to grow long term sustainable value uplift for all stakeholders.

Thank you for your continued support,

Patrick Allaway,
Chairman Elect

Dear Shareholder

I am delighted to join Bank of Queensland as CEO, at a time of evolution and change for BOQ and the banking sector as a whole. I have been in banking for 18 years and am passionate about the important role it plays in our society.

What excites me most about leading BOQ is the genuine love our people have for BOQ and our customers, along with the opportunity to build an organisation that is innovative and makes banking easy for our customers. My experience has taught me that building strong relationships with our customers begins with our people – our purpose, values, culture and the way we go about our business. In the recent past BOQ has not lived up to its full potential and has underperformed for its key stakeholders, including our shareholders. However, let me assure you, I am very focused on delivering sustainable and profitable growth and improved shareholder returns.

Our success will come from a clear vision for growth coupled with inclusive leadership that harnesses the diverse skills of all of our team. But achieving this will take time – 2020 will be another tough year of transition. There are challenges ahead, however, fundamentally, BOQ is a good business. Our capital is well positioned for unquestionably strong, we have a good funding position and our underlying asset quality is sound. A strong balance sheet will be a focus. We have good opportunities to differentiate and profitably grow. This is evidenced by the success of Virgin Money Australia and our niche business segments which have developed clear customer propositions that are differentiated in the market.

My high level priorities are: (1) return to profitable and sustainable growth; (2) embed our purpose led, customer culture; (3) simplify our business, improve productivity and address costs; (4) close the digital and data gap, delivering our mobile and Virgin Money Australia investments; and (5) continue to strengthen the Bank.

I would like to thank our outgoing Chairman Roger Davis and congratulate our incoming Chairman Patrick Allaway. I will be working closely with the Board on my strategic review of the business and look forward to updating you on the outcomes early in the coming year.
Thank you for your support.

George Frazis,
Managing Director & CEO