Billion-dollar loan book buyer boasts broker expansion

by Calida Smylie14 Apr 2014
It was a good Friday for regional lender Bank of Queensland, who announced buoyant half-year results plus beat the competition to become the successful bidder on Investec Bank’s $2.3 billion loan book.

BoQ will pay $440 million to buy Investec's professional and asset finance and leasing businesses.

This will involve a $400 million capital raising and is likely to be fully finalised by the end of August, the bank said.

BoQ beat Bendigo and Adelaide Bank after third bidder ANZ pulled out.

The acquisition will grow its commercial loan book by 38% and add $38 million in net earnings in the first year excluding acquisition costs, the bank said on Friday.

The businesses are being sold as a going concern with a total team of over 310 people transferring to BoQ. 

Investec will no longer own an ADI after the sale but will focus on investment banking.

“Investec Group remains committed to the Australian market. We have an experienced leadership team with a focused business backed by a strong global balance sheet and parent. We are in a good position to concentrate on what we do best within our specialist niches and to demonstrate our distinctive approach,” said CEO Ciaran Whelan.

BoQ also announced it has expanded its mortgage broker distribution network through new partnerships with Vow Financial and Custom Equity Group.

This means there are now around 650  BoQ-accredited  brokers servicing customers in New South Wales, Victoria, Western Australia and South Australia.

The new partnerships are crucial to BoQ’s future plans in the broker channel, especially to build presence in New South Wales,” the bank’s third party distribution head Brad Rockwell said.

“Vow and Custom Equity Group both strongly complement BoQ’s approach to doing business and together we offer a compelling proposition to those customers who are looking for an offering that is independent to the majors.”

Twelve months after  re-entering  the broker channel through a partnership with AFG in Western Australia, BoQ is building good momentum in its broker channel, where the bank believes there is strong potential for growth.

BoQ recorded an impressive 34% increase in its first half profit results, released Friday. The bank made $134.7 million in the six months to the end of February.

Its preferred measure of cash earnings rose 17% to a record $140.2 million, with underlying profit before tax up 8% to $249.2 million.

The higher profit figure came from an increase in the margin it makes on lending versus borrowing and a drop in the cost of bad loans.

The bank's bad debts have nearly halved over the past two years to $298 million, as parts of the Queensland property market stabilised.

"Our performance over the half shows we are successfully executing our strategy and proactively managing the levers available to us to deliver results," said the bank's CEO Stuart Grimshaw.

"We maintained a focus on profitable growth rather than compromising margins or risk standards, building momentum in our new customer distribution channels, tightly controlling expenses while investing in future growth, and building our customer-focused culture."

He said the bank has grown its network to 536 accredited brokers across four states, who accounted for 7% of lending applications across the bank. Lending flow from brokers doubled from the first to second quarter of last year.

Shareholders will get a 14% improved interim dividend of 32 cents a share, fully-franked.
 

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