Bank of Queensland's profit down 6 percent alongside AU$55m IT spend

The Queensland-based bank has posted AU$161 million in after-tax profit as it continues its focus on IT-related projects.
Written by Asha Barbaschow, Journalist on

Bank of Queensland (BoQ) has announced its results for the first half of the 2017 financial year, reporting a 6 percent year-on-year drop in statutory net profit after tax to AU$161 million.

Interim cash earnings after tax for the six-month period came in at AU$175 million, down 2 percent on the prior corresponding period.

For the six months to February 28, 2017, BoQ reported AU$252 million in operating expenses. This included a AU$55 million spend on IT-related initiatives, such as a new application programming interface (API) gateway, which the bank said will make it easier and faster for BoQ and its partners to develop new mobile capabilities in the future.

During the period, BoQ said it experienced strong uptake of its banking app, which saw the introduction of e-statements for customers, contributing -- along with initiatives such as cheque digitisation -- ongoing savings of up to AU$15 million annually.

Virgin Money Australia (VMA), scooped up by BoQ in 2013, is expected to launch a new credit card app before the end of the financial year, with both VMA and BoQ slated to launch new customer-facing websites during the calendar year.

As part of the bank's strategy to invest in niche businesses, the initiative to progressively transform the leasing platform for BoQ Finance from more than 20 separate systems into a single system went live for novated leases in November 2016.

BoQ said on Thursday this will be rolled out to the rest of the leasing business over the course of the 2017 financial year.

As part of its overall transformation focused on delivering technology to enhance customer experience at the bank, BoQ said it will be improving its digital, online, and call centre channels to enable customers to interact with the bank "when and how they want".

On its balance sheet, BoQ also noted that it is carrying a total AU$167 million of intangible assets, which includes AU$142 million attributable to software.

BoQ managing director and chief executive officer Jon Sutton said the outlook for second half revenue was more positive, and noted that a number of efficiency initiatives were underway to digitise operations, remove duplication, and improve processes within the bank.

"We are operating in a rapidly changing operating environment where regulation, competitive dynamics, and customer demands are shifting," the bank's chief said. "A number of the headwinds that emerged in 2016 abated late in the half, which saw mortgage application momentum return and deposit spreads improve. It's expected that this will contribute to better revenue momentum in the second half."

Priorities for the remaining six months of the financial year include enhancing the customer's digital experience.

Under the banner of credit risk, BoQ said it is preparing for a data warehouse and data governance enhancement, while its focus will be on data collection when it comes to tackling operational risk within the bank. It will also be using data analytics to "optimise" deposit pricing for home loans and other lending activities.

For the 2016 financial year, BoQ delivered its fourth consecutive annual profit increase, posting AU$338 million in statutory net profit, spending AU$92 million on IT expenses.

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.

BoQ announced early last 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.

The company told shareholders on Thursday that further initiatives under the AU$15 million program include the establishment of a mortgage hub that will progressively become the centre of excellence for all mortgage processing across BoQ.

With the Reserve Bank of Australia's (RBA) new payments platform slated to go live later this year, BoQ said it considers itself well placed for regulatory changes.


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