French Rebuff Boq's Desire For A Tete-a-tete

Sydney Morning Herald

Monday June 30, 2008

Danny John

THE Bank of Queensland has been rebuffed in its attempts to discover the ultimate ambitions of the French bank that has built up a near-10 per cent stake in the Brisbane institution.

While indicating it is supportive of BoQ's ambitious expansion moves and its retail bank franchising business model, BRED Banque Populaire has chosen to adopt an "arms-length" approach to the discussions sought by the regional bank, says BoQ's finance director, Ram Kangatharan.

BRED Banque Populaire is sitting on a 9.4 per cent shareholding, which makes its BoQ's largest investor.

It first emerged as a substantial shareholder in February, when it appeared on the bank's register with 6.4 per cent, and was active again in the market last month, buying another 2 per cent.

That saw BRED top BoQ's long-term backer, Linfox, run by the trucking magnate Lindsay Fox, whose investment arm has slowly reduced its holding from 10.31 per cent to its present level of 7.97 per cent.

Mr Kangatharan said BRED's investment was at the point where the two banks needed to have a "deeper conversation" about their respective positions.

Describing the French bank as being a portfolio investor rather than a passive one, he said the aim of any talks would be to work out how they could co-operate and add value.

"We have made it clear [to them] that at the level they are now, we need to have that discussion," he told the Herald.

BoQ believes BRED should enter into a standstill agreement not to increase its stake further for the time being so that they can work out areas of co-operation under a banner of confidentiality. Not to do so would be to put other investors at a disadvantage, Mr Kangatharan said.

That, though, appears to have been the reason for the French bank choosing not to respond to BoQ's offer to talk, since the absence of an agreement allows BRED to continue buying.

Its recent purchases have coincided with falls in BoQ's stock price, which has followed the ASX 200 and the rest of the banking sector downwards, given investor concern about the effects of high corporate debt and the slowing economy on bank profits. Its shares ended the week at $13.60.

BoQ indicated on Friday that it still expects 10 per cent earnings-per-share growth this year and expects its margins to hold up better in the current second half than in the first despite the higher cost of raising funds.

The bank is also continuing to experience strong lending and deposit growth.