Path Opens To Merger Up North

Sydney Morning Herald

Friday December 12, 2008

Eric Johnston

THE Bank of Queensland has declared all options open as it pushes ahead with a review of its business that could lead to the regional lender merging or forging a joint venture with a bigger rival.

The managing director, David Liddy, said he believed the bank, which operates more than half of its branches under a franchise system, could even remain independent as it targeted customers disgruntled by the sale of BankWest and St George to the big four banks. "I see us as being able to fill the void of the regional banks that have been lost in Australia," he told the Herald.

Details of the review, unveiled at the bank's annual meeting, came as BoQ launched a share purchase plan. The lender is following its bigger rivals in an effort to bolster its balance sheet and hopes to raise as much as $100 million.

Mr Liddy rejected suggestions the review had come about after a takeover approach. The process, to be overseen by the advisory firm O'Sullivan Partners, was a matter of the Brisbane bank getting on the front foot in response to a shake-up in the banking sector, he said. The credit crunch has resulted in smaller banks being squeezed more than ever by a sharp rise in funding costs.

Mr Liddy said the review would consider joint ventures, mergers, acquisitions and new business strategies that could range from selling off some of its businesses to ramping up the use of technology to save on costs. "This is not something saying our business is broken . . . this is about revisiting where we are and taking advantage of opportunities going forward. We're prepared to consider all options. If people see us as someone they'd like to talk to - sure we'll talk to them."

Analysts believe BoQ's business is particularly vulnerable as the economy stalls. Its fast-paced growth in recent years was driven by the owner-manager business model, which relies on a sales-based remuneration structure.

ANZ, which has previously expressed interest in expanding into Queensland, has been tipped by analysts as the most likely partner to enter a joint venture with the bank. But an offshore lender with access to funding markets could take a significant stake in BoQ to access its 280-plus branch network.

Mr Liddy believes the bank can navigate the tougher environment because it has not been a heavy user of wholesale funding and its deposit growth has been strong. But he said it would take advantage of the Government's wholesale funding guarantee and tap international markets soon to raise long-term funds.

Shareholders yesterday approved a pay overhaul for the bank and a one-off $250,000 bonus for Mr Liddy. BoQ shares ended 2c lower at $10.25.