Bank of Queensland's group head of technology Jim Stabback has been given free reign under the bank's war on cost, chief executive David Liddy said today.
BoQ CIO Jim Stabback (Credit: BoQ)
Liddy today outlined the bank's cost offensive under its Project Pathways — its answer to today's leaner economy — which is aimed at reducing BoQ's 2008 half year cost-to-income ratio of 60 per cent by 15 points by 2011.
BoQ today claimed to have made headway on its goal, with the measure standing at 54 per cent, representing a 5 per cent fall on the same period last financial year.
"We've mandated [Stabback's team] with the task of finding circa $50 million in annualised cost savings, half of which was to be realisable in financial year 2009. That's no mean feat, given our cost base last year was around $350 million," said Liddy.
BoQ's financial report revealed its computing costs, dominated by processing charges, had fallen $1 million on last year to $31.3 million. The bank's data processing costs stood at $22 million for the half year, down from $23.5 million last year.
Under Project Pathways, Liddy said Stabback had been given "unlimited scope" in determining how the bank should tackle its cost-to-income ratio. "Nothing was seen as sacred or untouchable and no idea was stupid," Liddy said.
"The restructuring initiatives executed [so far] gives us line of sight to getting below 50 per cent cost-to-income ratio within [the] next 12 months and our ambition is to hit around 45 per cent by 2011 on a sustainable basis."
The core components of Stabback's role in Pathways include an analysis of BoQ's organisational structure, operational expenses, and strategic alignment, with phase one of the project now complete, according to Liddy.
"These recommendations were reviewed by our executive team, and signed by our board and the Project Pathways committee, and are now in various stages of implementation," he said.
The first $20 million of the proposed $50 million in ongoing savings had come from BoQ's recent restructure, which affected technology staff, including senior managers. The remaining $30 million Stabback has been charged with finding is expected to come from a reduction in discretionary spending, rationalisation of suppliers, and reducing data storage costs.
Nothing was seen as sacred or untouchable and no idea was stupid
BoQ CEO David Liddy
EDS can also expect to face negotiations with BoQ in the coming months with Liddy today highlighting that the next phase of Pathways will include a "sourcing review". BoQ signed a comprehensive 10-year IT outsourcing agreement with EDS in 1995.
"Whilst the first phase is completed, another phase under Jim's leadership is to simplify product and processes and undertaking a sourcing review, which will no doubt present further opportunities," said Liddy. Opportunities expected to come from phase two included boosting BoQ's IT capability, alongside a renewed marketing effort.
BoQ's hope for a leaner operation comes as it attempts to position itself in the void left by St George after its acquisition by Westpac last year. Liddy noted difficulties BoQ had faced with its NSW owner-managed branches in terms of generating loans. BoQ plans to cut its NSW branches down from 56 to 45.
Liddy today flagged BoQ's intention to establish so-called Business Assistance Teams, which will handle back-end processing requirements to enable its owner-managed operations to focus on selling loans rather than processing tasks, such as loan origination.