​BoQ posts AU$338m profit as digital focus continues

Bank of Queensland (BoQ) has delivered its fourth consecutive annual profit increase, posting AU$338 million in statutory net profit for the 2016 financial year.

In the 12 months ending August 31, 2016, the regional lender spent AU$92 million on IT expenses as part of its overall transformation, focused on delivering technology to enhance customer experience at the bank.

Cash earnings after tax increased to AU$360 million and operating expenses increased 4 percent from the prior year to AU$520 million, which BoQ said included the one-off AU$15 million investment to refine its operating model.

Managing director and CEO Jon Sutton said he was pleased the bank achieved another profit increase for the 2016 financial year.

"BoQ has delivered increased cash earnings after tax for the fourth consecutive year, a significant achievement in an environment of low interest rates and intense competition," Sutton said.

"The bank has come a long way in recent years and we are confident that we have the right strategy in place and are well positioned for the future."

The bank confirmed the next release of the digitised mortgage platform is on schedule for the end of the calendar year and will see the majority of mortgage applications processed digitally, which it said will result in increased lender productivity, improved customer experience, and reduced operational risk.

BoQ also said a number of efficiency and digitisation initiatives are underway across the group to enhance productivity, eliminate duplication, and streamline BoQ's overall operations, which includes an upgrade of the mobile banking app, a refresh of the ATM network, and the e-statements initiative.

During the 2016 financial year, 30 percent of BoQ's of mortgage applications were covered by its new digital lending system. It also digitised cheque processing, invested in deposit analytics, and established an electronic statement capability.

"Managing our costs in a disciplined way remains a key focus for the year ahead and this will be supported by the rollout of further efficiency initiatives and improvement in our digital capability," Sutton added.

"I am pleased with today's result as it demonstrates the progress we are making against our strategic objectives and the growth opportunities that exist in the customer segments that we are targeting. I remain confident about the future for BoQ."

The bank said it is also investing in capabilities that support its strategy of focusing on niche areas in the market where specialisation can deliver higher return on equity This includes creating an application programming interface that is in the process of being implemented, intended to make it easier for BoQ and its partners to develop new mobile capabilities.

BoQ's IT spend for the 2015 financial year was AU$79 million, reporting statutory net profit after tax of AU$318 million for the period.

At the time, Sutton said that BoQ's FY2016 priority was to "break-in digital", by continuing to digitise its back office, introduce a new IT sourcing model, build new online capabilities, and continue the simplification of its IT.

"A key plank of our strategy is to improve productivity through our retail lending origination system which will start rolling out later this month," Sutton said previously. "This will improve our time to yes for customers and free up employee time from administrative tasks."

BoQ announced earlier this year it was gearing up to cut jobs from its workforce of 2,200 staff as part of a program to reshape its organisational structure to better affect the bank's strategy.

Sutton said at the time that the bank needed to reduce costs in the face of strong competition and market volatility, telling shareholders that the size and shape of the bank's business had changed significantly over the last three years as it had grown organically and through acquisition.

"We have redefined our strategy over the last 12 months and need to ensure our organisational structure continues to support this strategy," he said.

"We are building a more flexible and efficient operating model, which is increasingly important given the accelerated pace of change in financial services. This will also improve the way we work by reducing duplication and manual processes and will assist us in finding better ways to share capabilities across the group."