BoQ posts AU$318m profit, gears up to invest in digital

The Bank of Queensland has seen its fifth successive record half, posting a FY2015 statutory profit of AU$318 million, spending AU$79 million on IT, and gearing up for a digital spend in FY2016
Written by Asha Barbaschow, Contributor

The Bank of Queensland (BoQ) has posted statutory net profit after tax of AU$318 million for the financial year ending August 2015, up 22 percent year-on-year, thanks to a record second half of AU$164 million in statutory profit.

"BoQ has now delivered record results for five successive halves; a significant achievement in an environment of low growth and changing regulations," CEO John Sutton said.

"Though we have more work to do, particularly around returning to higher levels of asset growth, most of our key financial metrics are moving in the right direction."

BoQ's IT spend for the financial year was AU$79 million, of which AU$62 million was attributed to data processing. Other IT expenses included computer software and the depreciation value of IT equipment.

For the first half of the 2015 financial year, the digitisation and transformation of its back office capabilities helped the bank boost its statutory profit after tax to AU$154 million.

The bank had a stronger performing second half, which it attributed to one-off expenses it occurred in the first half, which included its pilot customer relationship management system. BoQ told shareholders the impairment of its CRM system accounted for its 46 percent cost to income ratio.

In February, BoQ announced its intentions to impair the carrying value of its pilot CRM system by AU$10 million pre-tax. The decision was made after the company's board of directors conducted a semi-annual review of its intangible assets in preparation for the half-year end process.

At the time, the bank said the review found the system was unable to meet operational and regulatory requirements.

"We remain committed to providing cost-effective tools to our business to support growth and productivity, and will therefore investigate the use of alternative CRM solutions," Sutton said.

The bank highlighted that IT expenses benefited from a number of strategic contracts being renegotiated to improve efficiency of IT services across the group.

In October last year, BoQ reinstated Hewlett-Packard (HP) for its information technology services, signing the company up for a five-year contract which would see HP underpin the bank's strategic transformation agenda.

"This [contract] replaces a highly inflexible, outdated 10-year contract, and will provide cost savings," Sutton said at the time. "For example, our enterprise storage costs will be around 60 percent lower."

At the time, BoQ hoped these cost savings would allow increased reinvestment into growth initiatives, and also provide the bank with a buffer for increased amortisation.

In May, the bank combined its IT, operations, and project office teams, which resulted in the appointment of a new group executive of enterprise solutions, Donna Vinci, who began her new role at the end of July.

For the financial year, BoQ said it also focused on its "Customer in charge" strategy, which sees an emphasis placed on the digital space, interacting with customers by way of their chosen channel.

"In terms of Customer in charge, we are continuing to expand our source of originations through growth in the mortgage broker market as well as improvements to digital, online, and call centre channels," the company said.

BoQ said in FY2015 branch numbers reduced by 18 as it strengthens its online connection -- via digital, mobile, or social media -- with customers.

"BoQ continues to invest in enhancing its digital and online presence across all brands with these benefits expected to be most evident in the 2017 financial year."

Looking forward, Sutton said BoQ's FY2016 priority is 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. This will improve our time to yes for customers and free up employee time from administrative tasks," Sutton said.

The company also told shareholders it also plans to utilise data analytics in the future.

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