Boq Expects Boost To $4b Federal Package

Sydney Morning Herald

Friday October 10, 2008

Eric Johnston

THE Bank of Queensland expects the Federal Government to increase the size of its $4 billion package aimed at jump-starting mortgage funding markets to help banks and other lenders navigate their way through the global credit freeze.

The comments came as the smallest of the nation's listed banks reported a 2 per cent dip in full-year profit, but the managing director of the Bank of Queensland, David Liddy, was cautiously optimistic about its prospects.

"I think it's going to be a really tough 12 months, but we're well positioned. We're not going to do anything out of our core business," he said yesterday.

But the bank faces a two-fold problem. As a smaller bank it is finding it tougher to pin down new sources of funding outside its deposit base; at the same time rising bad debts are starting to drag on earnings.

Still, Mr Liddy said the bank had secured most of its funding needs before the worst of the credit crisis hit and strong deposit growth had reduced its reliance on wholesale markets. The bank's headline net profit of $126.8 million for the year to the end of September was down from $129.8 million in the previous corresponding period. Cash earnings rose 10 per cent to $145.5 million after booking several one-off items.

Full-year income grew 14 per cent to $570.6 million, although cost growth of 22 per cent significantly outpaced revenue growth.

Mr Liddy said lending growth had cooled but the bank had plenty of capacity for organic growth, particularly in its core market of retail customers and small-to-medium business.

The bank did not have exposures to big-name problem loans or complex credit instruments that have crippled international banks, he said.

"In these troubled times its good to be a boring bank."

Elsewhere in the sector Commonwealth Bank closed down $2.75, or 6.09 per cent, to $42.40, after falling 13 per cent following the successful completion of a share placement to fund the $2.1 billion acquisition of BankWest and St Andrew's from its British parent, HBOS.