BoQ Lifts Cash Profit, Unveils Insurance Sale

By Glenn Dyer | More Articles by Glenn Dyer

Bank of Queensland has left its interim dividend unchanged at 38 cents a share after announcing a slightly higher first half cash profit thanks to lower loan losses and lending growth in commercial loans.

The Brisbane-based regional bank also said it would sell its St Andrew’s Insurance division to Freedom Insurance Group for $65 million (see separate story.

BOQ today announced cash earnings after tax of $182 million for the February half year, up 4% from a year ago. Statutory net profit after tax increased by 8% to $174 million.

Directors said there was a notable improvement in lending growth, "continuing the positive business momentum that returned in the previous half.”

Total lending growth of $671 million in half "represents an uplift of more than $800 million compared to the contraction of $157 million in 1H17.”

“This has been delivered through 3% annualised housing loan growth (up $382 million), together with strong commercial loan growth of 6% annualised (up $292 million).

Chief Executive Officer Jon Sutton said The retail bank "further diversified its channels of distribution, with solid contributions to housing loan growth from BOQ Broker and Virgin Money Australia. BOQ Business has continued to grow in niche commercial lending segments while also diversifying by geography, industry and asset class.

“The Retail Bank has been successful in expanding its channels of distribution, with Virgin Money now a key contributor,” he said.

“Meanwhile the Business Bank has continued to benefit from maturing its niche strategy across commercial customer segments and its specialist businesses, BOQ Specialist and BOQ Finance.”

Impaired assets as a percentage of gross loans were down to 39 basis points, while loan impairment expense was just 10 basis points of gross loans (422 million) during the half.

Bank of Queensland shares lost 2.4% to $10.66.

Meanwhile Bank of Queensland has followed much bigger rivals in the Commonwealth, ANZ and NAB in departing the financial strained and poor returning insurance sector.

Bank of Queensland said yesterday it had sold its St Andrew’s Insurance business to the ASX-listed Freedom Insurance Group Limited for total consideration to BOQ of $65 million.

Both the NAB and the ANZ have sold or reduced their involvement in life insurance in 2016 and 2017, while the Commonwealth Bank solid its life arm, Comminsure late last year.

The transaction is comprised of two components. The first is an approximate$35 million quota reinsurance arrangement between the life insurance subsidiary of St Andrew’s and a major global reinsurer to be effective immediately before completion. The remaining cash proceeds of around $30 million will be paid by Freedom as consideration for the acquisition of the share capital of St Andrew’s.

In addition, BOQ said it will enter into an exclusive three year distribution agreement (with an additional two year option) with Freedom for the provision of life insurance products to BOQ’s customers.

BOQ Chief Executive Officer Jon Sutton said that the transaction made strategic sense for both parties.

“St Andrew’s has made a strong contribution to the BOQ Group since its acquisition in 2010, but industry and business dynamics have changed dramatically in recent years.,” he said in yesterday’s statement, an oblique reference to the rising tide of claims (especially for metal health), customer complaints about service and coverage, mostly arising from income protection provisions sold as part of life policies.

“These changing conditions now mean St Andrew’s is a better long-term strategic fit for Freedom” Mr Sutton said.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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