Significant broker expansion has driven geographical diversification and above system home lending growth for Bank of Queensland (BOQ).
The non-majors total mortgage book reached $30.4 billion in the six months to February 2016, growth of $1.7 million over the first half-year. This represents growth of 1.6 times system growth.
Mortgage brokers were behind 19% of new home loan settlements over the period, an increase of 5% from the six months prior and 6% from the prior comparative half.
BOQ’s chief executive Jon Sutton said growth in its third party channel also improved the bank’s mortgage portfolio diversification outside of Queensland and increased its lower LVR lending relative to the portfolio.
“The momentum in the broker channel and BOQ Specialist demonstrates the effectiveness of our strategy to expand our business,” he said.
“We also made good progress with growing our target niche commercial segments.”
Commercial lending growth was 6% for the half as the non-major maintained a focus on credit quality and appropriate pricing for risk within its targeted niche segments.
Sutton said the launch of Virgin Money mortgages — expected this year — will drive further growth in its home loan book.
“Our retail lending origination program, the expansion of Virgin Money mortgages and our specialist niche strategy will help us grow our business further.”
Changes to regulatory capital requirements will also aid growth.
“Although the final outcomes of Basel IV remain unclear, we remain confident that we will see further convergence between the advanced and standardised approaches to regulatory capital,” Sutton said.
“This should provide opportunities for BOQ to either drive additional growth, expand margin or potentially achieve both outcomes.”
The Basel IV framework proposes that the minimum capital buffers required by the major banks — who use advanced internal risk-based (IRB) weighting — should be increased in line with the standardised approach used by non-major lenders.
BOQ announced interim cash earnings after tax of $179 million for the six months to February 2016. Statutory profit after tax rose 11% to $171 million on the prior comparative half.