BANK OF QUEENSLAND LIMITED Bank of Queensland Limited and its Controlled Entities ABN 32 009 656 740 AFSL No. 244616 1
2015 ANNUAL REPORT
YEAR ENDED 31 AUGUST 2015
CONTENTS
Directors' details 6
Operating and financial review 9
REMUNERATION REPORTIntroductory message 44
Remuneration report 45
LEAD AUDITOR'S INDEPENDENCE DECLARATION 69 FINANCIAL REPORTIncome statements 70
Statements of comprehensive income 71
Balance sheets 72
Statements of changes in equity 73
Statements of cash flows 77
Notes to the financial statements 78
OTHER INFORMATIONDirectors' declaration 137
Independent auditor's report to the members 138
Shareholding details 140
Shareholder information 143
FIND OUT MORE ABOUT HOW
WE'RE DELIVERING OUR STRATEGY AT WWW.BOQ.COM.AU/ANNUAL_REPORTS/2015
2 ANNUAL REPORT 2015
BOQ DELIVERS RECORD FY15 RESULTS
STATUTORY NET PROFIT AFTER TAX
$318M
CASH EARNINGS
$357M
UP 22%
UP 19%
NET INTEREST MARGIN
1.97%
COST TO INCOME
46%
UP 15BPS
UP 210BPS
CONSISTENT RETURNS TO SHAREHOLDERS
EARNINGS & DIVIDENDS (PER SHARE)
EARNINGS PER SHARE
DIVIDEND PER SHARE
60
50
40 41
CENTS
38
30
52
46 46
43
38
36
3234
C
97UP9%
C
74UP
12%
2830
20
SINCE FY14 SINCEFY14
RETURN ON
10
EQUITY
0
RETURN ON
TANGIBLE EQUITY
1H13 2H13
1H14
2H14
1H15 2H15
10.7% 14.4%
EARNINGS (PER SHARE) DIVIDENDS (PER SHARE)
Bank of Queensland Limited and its Controlled Entities ABN 32 009 656 740 AFSL No. 244616 3
BOQ DELIVERS RECORD FY15 RESULTS
RECORD CASH EARNINGS...
...UNDERPINNED BY STRONG MARGIN MANAGEMENT...
350
300
250
($MIL)
200
150
100
50
177
159
251
186
301
261
357
318
2.00
NET INTEREST MARGIN (%)
1.90
1.80
1.70
1.60
1.651.67
1.69
1.82
1.97
0 31
-17
1.50
-20
2011 2012 2013 2014 2015
CASH EARNINGS AFTER TAX STATUTORY NET PROFIT
2011 2012 2013 2014 2015
...FOCUS ON COST MANAGEMENT...
...IMPROVED ASSET QUALITY
50
COST TO INCOME RATIO (%)
40 44.5 45.7 44.3 43.9 46.0
30
20
10
0
LOAN IMPAIRMENT EXPENSE ($ MILLIONS)
400
300
200
100
0
201
401
115
86 74
2011
2012 2013 2014 2015
2011 2012 2013 2014 2015
CHAIRMAN & CEO'S LETTER
We are pleased to report that our strategy is delivering strong, sustainable growth for our business and shareholders.
Over the last 12 months, we have made significant strategic progress towards transforming our business so we can take advantage of future opportunities and respond to any challenges. Our results for FY15 demonstrate we are on the right path.
For the fifth successive half, we achieved a record financial result. Net profit after tax was up 19% to $357 million while statutory profit after tax increased 22% to $318 million.
Our strategy is also driving improved business performance with key metrics such as growth, margins and asset quality showing improvement. Our strong financial performance has enabled the Board to set a final dividend of 38 cents per share, taking full year dividends to 74 cents per share. This means we have delivered a total return to shareholders of 6.3% during the financial year, the highest return of any listed Australian bank during this period.
During the year we refreshed our strategy to focus on niche segments where customers value a more intimate banking relationship. We are delivering this strategy through four execution pillars: 'Customer in charge; 'Grow the right way'; 'There's always a better way'; and 'Loved like no other'. Our progress in these areas over FY15 is detailed in this report.
Our culture and success are crucial to the success of our strategy - we strive to be a company that our employees love working for and our customers love dealing with and we are happy to say our employee engagement scores are heading in the right direction.
Not surprisingly, this is also contributing to high levels of customer satisfaction. Independent Roy Morgan research comparing customer satisfaction and advocacy among Australia's top banks shows our Main Financial Institution Net Promoter Score has increased by 36.7 points over the last 2.5 years. This is by far the biggest improvement in our sector and puts us within striking distance of the top spot*.
BOQ achieved much over the financial year and shareholders should take comfort from the fact that the Bank is extremely well placed for the future.
Our strategy sets the Bank up for success in a market which continues to see significant regulatory and technology change. At a time when there is some uncertainty around the regulatory environment, we continue to maintain high levels of capital so we are well placed whatever global and local regulators decide to do.
Results like these are achieved through a true team performance - from the executive team right the way through to our front line employees who help customers every day. Thank you to everyone at BOQ for their efforts.
In January, we farewelled long-standing Director Steve Crane when he retired after six years on the Board. Steve's expertise was invaluable and we thank him for his service and wish him the best for the future.
We also thank shareholders for their ongoing support of our company.
Roger Davis Jon Sutton
Chairman Managing Director & CEO
*Roy Morgan Research, MFI customers aged 14+, 6 month averages, competitors exclude mutual banks. Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld.
The Directors' present their report together with the financial report of Bank of Queensland Limited ('the Bank') and of the Consolidated Entity, being the Bank and its controlled entities for the year ended 31 August 2015 and the independent auditor's report thereon.
DIRECTORS' DETAILS
The Directors of the Bank at any time during or since the end of the financial year are:
Name, qualifications and
independence status Age Experience, special responsibilities and other Directorships
Roger Davis
B.Econ. (Hons), Master of Philosophy
Chairman
Non-Executive Independent Director
Jon Sutton
Managing Director and Chief Executive Officer
Executive Non-Independent Director
(Officially appointed 5 January 2015)
Neil Berkett
B Com and Admin
Non-Executive Independent Director
Bruce Carter
B Econ, MBA, FAICD, FICA
Non-Executive Independent Director
Carmel Gray
B Bus
Non-Executive Independent Director
63 Mr Davis was appointed Chairman on 28 May 2013 and served on the Board of BOQ since August 2008. He has 33 years' experience in banking and investment banking in Australia, the US and Japan. He is currently a consulting Director at Rothschild Australia Limited. He was previously a Managing Director at Citigroup where he worked for over 20 years and more recently was a Group Managing Director at ANZ Bank. He is a Director of AIG Australia Ltd, Argo Investments Limited, Ardent Leisure Management Ltd, Ardent Leisure Ltd and Aristocrat Leisure Ltd. He was formerly Chairman of Charter Hall Office REIT and Esanda, and a Director of ANZ (New Zealand) Limited, CitiTrust in Japan and Citicorp Securities Inc. in the USA. He has a Bachelor of Economics (Hons) degree from the University of Sydney and a Master of Philosophy degree from Oxford. He is a qualified CPA.
Mr Davis is Chair of the Nomination & Governance Committee, a member of the Audit and Risk Committees, and an attendee at all other Board Committees.
52 Mr Sutton was appointed Managing Director and Chief Executive Officer on 5 January 2015 following four months as Acting Chief Executive Officer. Mr Sutton originally joined BOQ in July 2012 as Chief Operating Officer. Mr Sutton has more than 20 years' experience in banking and prior to BOQ was the Managing Director of Bankwest. Before that, as Executive General Manager of Commonwealth Bank Agribusiness, he was central to the establishment of the bank's agribusiness segment which grew strongly under his guidance and leadership. Prior to this, Mr Sutton was General Manager of Client Risk Solutions at CBA, responsible for marketing derivative products including interest rates, commodities and foreign exchange. He was also Head of Resources and Agribusiness and Head of Corporate Risk Management Commodities, charged with marketing and commodity hedging products to Australian institutions within the base metals, precious metals and energy sectors.
59 Mr Berkett has served on the Board of BOQ since July 2013. His career spans a range of sectors and geographies in both the consumer and enterprise space with an emphasis on managing significant change. For six years finishing in mid-2013 he was the Chief Executive Officer of Virgin Media, a NASDAC listed company where he oversaw the successful turnaround, differentiation and growth of the UK cable company. Mr Berkett then led the sale of the company to Liberty Global in June 2013. His previous career included senior roles at Lloyds TSB, Prudential, St George Bank in Australia, Citibank and Eastwest Airlines. He is the Chairman of the Guardian Media Group, a Non-Executive Director with the Sage Group plc, and a Trustee for the National Society for the Prevention of Cruelty to Children.
Mr Berkett is a member of each of the Human Resources & Remuneration and Information Technology Committees.
57 Mr Carter has served on the BOQ Board since February 2014. Mr Carter was a founding Managing Partner of Ferrier Hodgson South Australia, a corporate advisory and restructuring business, and has worked across a number of industries and sectors in the public and private sectors. He has been involved with a number of state government-appointed restructures and reviews including chairing a task force to oversee the government's involvement in major resource and mining infrastructure projects. Mr Carter had a central role in a number of key government economic papers including the Economic Statement on South Australian Prospects for Growth, the Sustainable Budget Commission, and the Prime Minister's 2012 GST Distribution Review. Before Ferrier Hodgson, Mr Carter was at Ernst & Young for 14 years including four years as Partner in Adelaide. During his time at Ernst & Young he worked across the London, Hong Kong, Toronto and New York offices. Mr Carter is the Chair of Australian Submarine Corporation and a Non-Executive Director of SkyCity Entertainment Group Limited and Genesee & Wyoming Australia Pty Ltd.
Mr Carter is Chair of the Risk Committee and a member of the Audit Committee.
66 Ms Gray was appointed a Director of BOQ in April 2006. Ms Gray has had an extensive executive career in IT and Banking. She was Group Executive Information Technology at Suncorp from 1999 until 2004 and a member of Suncorp's Group Executive committee during that period. Previously, she held a number of senior roles in the IT Services industry, including General Manager, Energy Information Solutions and Chief Executive, Logica Australia. Past memberships include the Board of the Australian Information Industry Association and the CSIRO Advisory Committee for the IT and Services Sectors. She is a past Chair of Information Technologies Australia and Director of BridgePoint Communications. Ms Gray continues to provide IT and business consultancy services to the SME sector.
Ms Gray is a member of each of the Information Technology and Audit Committees.
Name, qualifications and
independence status Age Experience, special responsibilities and other Directorships
Richard Haire
B.Ec, FAICD
Non-Executive Independent Director
Margaret Seale
BA, FAICD
Non-Executive Independent Director
Michelle Tredenick
B Sc, FAICD, F Fin
Non-Executive Independent Director
David Willis
B Com, ACA, ICA
Non-Executive Independent Director
56 Mr Haire was appointed a Director of the Bank on 18 April 2012. Mr Haire has more than 28 years' experience in the international cotton and agribusiness industry, including 26 years in agricultural commodity trading and banking. He is the Executive Chairman of Webster Limited. He was also formerly a Director of Open Country Dairy (NZ) and New Zealand Farming Systems Uruguay.
Mr Haire is Chair of the Audit Committee and a member of the Risk, Information Technology and Investment Committees.
55 Margaret (Margie) Seale has served on the BOQ Board since January 2014. Ms Seale has more than 25 years' experience in senior executive roles in Australia and overseas in the global publishing, health and consumer goods industries, and in the transition of traditional business models to adapt and thrive in a digital environment. Most recently she was Managing Director of Random House Australia (with managerial responsibility for Random House New Zealand) and President, Asia Development for Random House Inc., the global company. Amongst other roles prior to that she held national sales and national marketing roles for Oroton and Pan Macmillan respectively. She is a Non-Executive Director of Telstra and member of the Audit
& Risk Committee, and a Non-Executive Director of Ramsay Health Care and member of the Risk Committee. She has also served on the boards of the Australian Publishers' Association and the Powerhouse Museum, and on the Council of Chief Executive Women, chairing its Scholarship Committee from 2011 to 2012. She remains a Non-Executive Director of Random House Australia and New Zealand.
Ms Seale is a member of the Information Technology and Human Resources & Remuneration Committees.
54 Ms Tredenick has served on the Board of BOQ since February 2011. Michelle is an experienced company director and corporate advisor with over 30 years' experience in leading Australian businesses. She is currently a Director of Vocation Limited, Canstar Pty Ltd, and is Chairman of IAG NRMA Corporate Superannuation Trustee Board. She is a member of the Senate of the University of Queensland as well as sitting on the board of the Ethics Centre. She also has her own consulting business advising Boards and CEOs on strategy and technology and the successful management of large investment and transformation programs. Her Executive career included roles on the group executive teams of a number of Australia's largest companies including NAB, MLC and Suncorp. Her experience spans time as CIO with all of these companies as well as Head of Strategy and Marketing and divisional profit and loss roles in Corporate Superannuation, Insurance and Funds Management.
Ms Tredenick is Chair of the Information Technology Committee and a member of each of the Human Resources & Remuneration and Risk Committees.
59 Mr Willis has served on the Board of BOQ since February 2010. He has over 33 years' experience in financial services in the Asia Pacific, the UK and the US. He is a qualified Accountant in Australia and New Zealand and has had 17 years' experience working with Australian and foreign banks. Mr Willis is a Director of New Zealand Post, CBH (A Grain Cooperative in Western Australia) and Interflour Holdings, a Singapore based flour milling company. He is also a director of Converga Pty Ltd (a digital solutions company) based in Sydney. Mr Willis founded and chairs a Sydney based Charity 'The Horizons Program'.
With BOQ Mr Willis is Chair of the Human Resources & Remuneration Committee and is a member of the Risk Committee and the Nomination & Governance Committee. He is also a Non-Executive Director of the Bank's insurance subsidiary, St Andrew's.
Steve Crane
Retired as a Director on 22 January 2015.
COMPANY SECRETARY
Michelle Thomsen - Appointed 13 July 2015
LLB/ B Comm
Michelle Thomsen was appointed Company Secretary on 13 July 2015. Prior to this, Ms Thomsen was EGM Associate General Counsel at Suncorp Group Limited and has held a number of in house and private practice roles, including General Counsel positions for two funds listed on the Australian Securities Exchange and she was a partner at SJ Berwin LLP in London (now King & Wood Mallesons), prior to returning to Australia in 2012.
Melissa Grundy - Resigned 13 March 2015
Stacey Hester was acting Company Secretary during the interim period between the resignation of Ms Grundy and the appointment of Ms Thomsen.
DIRECTORS' MEETINGS
The number of meetings of the Bank's Directors (including meetings of Committees of Directors) and the number of meetings attended by each Director during the financial year were:
Board of Directors
Board of Directors - St Andrews
Risk Committee
Audit Committee
Nomination & Governance Committee
Human Resources & Remuneration Committee
- BOQ & St
Andrews
Investment Committee (1)
Information Technology Committee
Due Diligence Committee
Roger Davis (2) | A 13 | B 13 | A - | B - | A 7 | B 7 | A 6 | B 6 | A 2 | B 2 | A 5 | B 5 | A 1 | B 1 | A 5 | B 5 | A - | B - |
Jon Sutton (3) | 12 | 13 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
Neil Berkett | 9 | 13 | - | - | - | - | - | - | - | - | 4 | 5 | - | - | 3 | 5 | - | - |
Bruce Carter | 13 | 13 | - | - | 6 | 7 | 6 | 6 | - | - | - | - | 1 | 1 | - | - | - | - |
Steve Crane (4) | 4 | 4 | - | - | 3 | 3 | - | - | 1 | 1 | - | - | - | - | - | - | - | - |
Carmel Gray | 13 | 13 | - | - | - | - | 6 | 6 | 1 | 1 | - | - | - | - | 5 | 5 | - | - |
Richard Haire | 13 | 13 | - | - | 7 | 7 | 6 | 6 | - | - | - | - | 1 | 1 | 5 | 5 | - | - |
Margaret Seale | 12 | 13 | - | - | - | - | - | - | - | - | 5 | 5 | - | - | 5 | 5 | - | - |
Michelle Tredenick | 12 | 13 | - | - | 7 | 7 | - | - | 1 | 1 | 5 | 5 | 1 | 1 | 4 | 5 | - | - |
David Willis (5) | 12 | 13 | 4 | 5 | 5 | 7 | - | - | 1 | 1 | 5 | 5 | 1 | 1 | - | - | - | - |
Total number of meetings held | 13 | 5 | 7 | 6 | 2 | 5 | 1 | 5 | - |
A - Number of meetings attended
B - Number of meetings held during the time the Director was a member of the Board / Committee during the year
(1) The composition of the Investment Committee is not fixed. Composition and meetings held are set by the Board on an as required basis. (2) Roger Davis attends the meetings of a number of the Board's sub-committee's, however he is not considered a formal member of these. (3) Jon Sutton also attended Board meetings before he was officially appoointed as Managing Director and CEO on 5 January 2015.
(4) Steve Crane retired as a Director on 22 January 2015 and as such the details of meetings held and attended are for the period of time in which he was a Director during the financial year. (5) David Willis is also a member of the Audit & Risk Committee for St Andrew's. During the year he attended all three meetings held.
OPERATING AND FINANCIAL REVIEW
HIGHLIGHTS & STRATEGY
DISCLOSURE CONSIDERATIONS
Changes to Financial Reporting
This reporting period reflects the first full year contribution for BOQ Specialist since acquisition in July 2014. Section 2.2 provides further details of the contribution for the year.
Future performance
This document contains certain 'forward looking statements'. Forward looking statements can generally be identified by the use of forward looking words such as 'anticipate', 'believe', 'expect', 'project', 'forecast', 'estimate', 'likely', 'intend', 'should', 'will', 'could', 'may', 'target', 'plan' and other similar expressions within the meaning of securities laws of applicable jurisdictions. The forward looking statements contained in this document involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of BOQ, and may involve significant elements of subjective judgement as to future events which may or may not be correct.
There can be no assurance that actual outcomes will not differ materially from these forward looking statements.
Rounding
In accordance with applicable financial reporting regulations and current industry practices all amounts in this report have been rounded off to the nearest one million dollars, unless otherwise stated.
Note on Statutory Profit and Cash Earnings
Statutory Profit is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with International Financial Reporting Standards ('IFRS'). Cash Earnings is a non-Accounting Standards measure commonly used in the banking industry to assist in presenting a clear view of the Bank's underlying earnings. Refer to Section 4.1 for the reconciliation of Statutory Profit to Cash Earnings.
The items excluded from Cash Earnings are consistent with the prior period. Integration/Due Diligence costs relate to the acquisition of BOQ Specialist and are in line with guidance provided at acquisition. The increase in amortisation of customer contracts over the prior year includes recognition of BOQ Specialist customer contracts following purchase price adjustment allocations completed in the latest half year. Hedge ineffectiveness represents earnings volatility from hedges that are partially ineffective under the application of IAS 39 Financial Instruments and create a timing difference in reported profit, where these hedges remain economically effective. (Refer to the Reconciliation of Statutory Profit to Cash Earnings chart below).
Figures disclosed in this report are on a Cash Earnings basis unless stated as Statutory Profit basis. Unless otherwise stated, all financial comparisons in this document refer to the prior half (to 28 February 2015) and the prior year (to 31 August 2014).
These non-statutory measures have not been subject to review or audit.
RECONCILIATION OF STATUTORY PROFIT TO CASH EARNINGS ($M)
14
318
20
3
11357
INTEGRATION OF BOQ SPECIALIST
Statutory Net Profit
Amortisation of Amortisation of fair
Hedge
Integration / due
Legacy
Cash Earnings
after Tax
customer contracts value adjustments
ineffectiveness
diligence
after Tax
GROUP HIGHLIGHTS
GROUP HIGHLIGHTS (CONTINUED)
CASH EARNINGS
$357 million
increased by 19% on the prior year
$43 million first full year BOQ Specialist contribution
8% earnings growth excluding BOQ Specialist and one-offs (1)
NET INTEREST MARGIN (CASH)
1.97%
Up 15 bps over the prior year. The inclusion of BOQ Specialist and liability mix initiatives have contributed to the increase
CASH COST TO INCOME RATIO
46%
44.5% before one-off costs (1)
LOAN IMPAIRMENT EXPENSE
$74 million
Down 4bps to 18bps of lending and 14% reduction over the prior year
COMMON EQUITY TIER 1
8.91%
Capital ratio further strengthened, increasing 28bps over the year
IMPAIRED ASSETS
$237 million
Reduced $56m (19%) on the prior year
(1) Excluding one-off CRM impairment and property costs.
BOQ has delivered a record full year profit with Cash Earnings increasing 19% to $357 million and Statutory Profit after Tax increasing 22% to $318 million. Our clear and simple strategy has delivered improved momentum as we continue to build a more streamlined and lower risk organisation with sustainable earnings growth.
This is the first full financial year following the acquisition of BOQ Specialist which was acquired in July 2014. The contribution of BOQ Specialist to the Group result of $43 million was 13% above the earnings guidance of $38 million provided on announcement of the acquisition. The business has been successfully integrated and is delivering on its strategy to provide specialised banking solutions to a professional market niche.
Net Interest Margin was maintained in the second half at 1.97%, an increase of 15 basis points on the prior year, with an 11 basis point improvement from BOQ Specialist as expected. Whilst the maintenance of the Net Interest Margin in the second half was supported by the impact of lower liquid asset requirements, this was a solid result against a backdrop of contracting industry margins over this period. We continue to target measured growth in a dynamic market which remains highly competitive, maintaining a prudent outlook in the changing economic and regulatory environment.
Our Cost to Income ratio during the year was 46%, which was rebased by the first full year of BOQ Specialist and included a number of one-off costs. These were the impairment of the pilot Customer Relationship Management ('CRM') System for $10 million and $6 million of premises consolidation costs. Excluding these one-off costs, the Cost to Income ratio for the Group was 44.5%, in line with earlier market guidance. Underlying cost growth of 4%, excluding the acquisition of BOQ Specialist and one-off costs, was delivered whilst we continued to build out our front line capability and invest in new channels such as our developing Broker presence.
Lending growth of 7% was a significant improvement over the prior year as we gain further traction with the 'Customer in Charge' strategy by widening the choice of channels through which our customers can engage with us. We continue to gain penetration through the Broker channel which provided 15% of settlements this year compared to 5% last year. Second half growth was slower as we moved ahead of other industry participants with our pace of implementation in meeting the Australian Prudential Regulatory Authority's ('APRA') required lending serviceability standards. Lending growth through proprietary channels was credible as branch numbers once again moved in response to changes in consumer preferences.
Loan impairment expense reduced by 14% to $74 million in 2015 reflecting underlying improvement in credit quality across the retail and commercial portfolios supported by declining levels of defaults in the lower interest rate environment. The 30 day housing arrears reduced to the lowest level in recent years. We did witness an increase in impairment charge across the BOQ Finance portfolio with defaults of mining related exposures attributable to the subdued economic environment and the impact of the industry downturn. We continue to closely monitor our exposures and did see an improvement in the arrears trend in this portfolio in the last quarter.
As mentioned in the February 2015 results, we have successfully transitioned to the new APRA APS210 Liquidity framework. The new framework and steps taken to improve the resilience of the Bank's liability base, in line with broader industry changes, have been positive to the management of our liquidity requirements. Our recent rating upgrades have allowed us to selectively increase the duration of our wholesale funding profile whilst maintaining our retail deposit funding mix. At year end, our Common Equity Tier 1 ratio was 8.91%, an increase of 28 basis points on the prior year.
The Board has determined to pay a final dividend of 38 cents per share fully franked, with the full year dividend of 74 cents, an increase of 12% on the 2014 financial year.
STRATEGY
Cash Earnings after Tax ($m)
357
Statutory Profit after Tax ($m)
318
301 19%
261
22%
131140
1672H13 1H14 2H14 1H15 2H15
2H13 1H14 2H14 1H15 2H15
Cash Net Interest Margin ('NIM') (%)
1.97
Cash Cost to Income (%)
1.82
1.87
0.0215BPS
1.97 1.97
0.1143.9
210BPS
43.9
0.1
48.1
3.0
1.1
46.0
1.721.77
1.851.86
1.971.4
2H13 1H14 2H14 1H15 2H15
BOQ Specialist
Cash Basic Earnings per Share ('EPS') (cents)
2H13 1H14 2H14 1H15 2H15
BOQ Specialist Property & CRM Impairment
DIVIDENDS PER SHARE (CENTS)
89.5 9%
97.3
12% 74
66
40.743.2
45.83032
2H13 1H14 2H14 1H15 2H15
2H13 1H14 2H14 1H15 2H15
CASH RETURN ON AVERAGE EQUITY ('ROE') (%)
CASH RETURN ON AVERAGE TANGIBLE EQUITY ('ROTE') (%)
10.4 30BPS
10.7
13.2
120BPS
14.4
13.213.8
2H13 1H14 2H14 1H15 2H15
2H13 1H14 2H14 1H15
2H15
BOQ is a full service financial institution, listed on the Australian Securities Exchange ('ASX'), regulated by the Australian Prudential Regulation Authority as an authorised deposit-taking institution ('ADI') and ranked among the top 100 companies by market capitalisation on the ASX.
We have grown from being the first Permanent Building Society in Queensland in 1874 to the current day with a network of retail branches, and other points of presence spanning every state and territory in Australia.
BOQ aspires to build a differentiated position in the Australian financial services sector by demonstrating to customers that 'It is Possible to Love a Bank.' BOQ's corporate strategy is to focus on niche customer segments that value a more intimate banking relationship beyond what they receive from the major banks. Importantly, BOQ's strategic focus plays to its competitive strengths as a small challenger bank of being able to provide customers with personalised relationship management, passionate customer service, focused products and solutions, and nimble decision-making and problem resolution. The strategy is executed through BOQ's four strategic pillars: (i) Customer in Charge (ii) Grow the Right Way (iii) There's Always a Better Way, and (iv) Loved Like No Other.
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. We have further expanded our mortgage broker distribution network with accredited brokers servicing customers in New South Wales, Victoria, Western Australia, South Australia and, more recently, our home state of Queensland.
The successful integration of BOQ Specialist (formerly Investec Bank (Australia) Limited's Professional Finance and Asset Finance & Leasing businesses) has provided BOQ with unique access to a compelling and expanding customer base of high net worth medical, dental and accounting professionals served through a high touch, specialist banking proposition.
In our Retail network, a new commission model has been introduced for Owner Managed Branches based upon a balanced scorecard approach. The new scorecard balances lending, deposits, cross sales and compliance components and strongly aligns interests of Owner Managers and the Bank. The new scorecard and commission model forms the basis of a new standardised franchise agreement which is being rolled out on a progressive basis as existing agreements expire. There is also significant work underway to optimise branch mix and locations, particularly across our Corporate-owned branches.
To Grow the Right Way and achieve the right balance of return for risk taken, we continue to diversify our balance sheet by pursuing higher margin segments in Business Banking, Agribusiness and Asset Leasing. In Business Banking, a tiered approach to origination through our distribution channels has been embedded to reflect deal complexity. Business mix changes reflecting a core focus on credit quality were evident across the retail portfolio, with the concentration of poorer performing line of credit mortgages being substantially reduced.
There's Always a Better Way, which is the pursuit of operational efficiency, has seen continued focus on improving processes and systems to reduce the turnaround time on compliant retail and business lending applications. In 2016, we will implement a new digitised mortgage origination process as well as continue to simplify our product suite. A good example of this approach is our simple low cost mortgage offering 'Clear Path' which has been well received by our customers, particularly in the owner occupied segment.
Loved Like No Other is about building a culture that makes BOQ a great place to work and inspires our passion to deliver exceptional customer outcomes. The major brand refresh around 'It's Possible to Love a Bank' resulted in an increase in national unprompted awareness of our brand. We have seen a further increase in our Net Promoter Scores (1) from 16.1% in August 2014 to 30.5% in August 2015 placing us second amongst all measured banks (up from 9.9% in August 2013) which demonstrates strong customer satisfaction and advocacy. Our internal Employee Engagement score also saw a significant increase from 43% in July 2014 to 67% in July 2015.
Through continued focus on our four strategic pillars, we aim to deliver robust and sustainable financial performance, consistent growth in returns to shareholders and superior service to our customers and the wider community.
(1) Roy Morgan Research, MFI customers aged 14+, 6 month averages, competitors exclude mutual banks. Net promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld.
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