Business Description:
Bank of Queensland Limited (BOQ) is a financial institution offering core banking (commercial/retail) services, equipment finance, wealth management and insurance. BOQ uses its unique concept of the Owner-Managed Branch (OMB), which is a partnership between the Bank of Queensland (franchisor) and experienced bank managers (franchisees) to provide banking services. The bank operates a network of over 280 branches Australia-wide.

Strategy Analysis:
Growth has been driven by acquisition and the interstate Owner Management Branches (OMB) rollout program. Total OMBs of 210 include 118 in Queensland. In addition BOQ operates 52 corporate branches and 10 transaction centres. The previous expansion strategy clearly has not worked despite successfully delivering a two-and-a-half times increase in assets over the past five years. During the same period ROE has more than halved from over 12% in FY06 to estimated low single digits in FY12. The cost to income ratio declined following considerable work on driving down the cost base. BOQ is targeting a medium term cost to income ratio of 45%. The greatest challenge facing BOQ in the short term is managing deteriorating asset quality and improving the return on equity. Competition for deposits is tough, particularly retail deposits which fund a large majority of loan growth. Bank of Queensland reported NPAT down 14% to $158.7m for the year ended 31 August 2011. A key driver in the reduction in profit after tax is the increase in impairment charges from $104.2m in the prior financial year to $200.5m in the current period. Profit before tax and impairment rose from $362.3m in the prior financial year to $422.3m in the current period, an increase of 17%. Revenues from ordinary activities were $796.4m, up 12% from last year. Diluted EPS was 63.1 cents compared to 77.0 cents last year. Net operating cash flow was $261.5m compared to $338.8m last year. The final dividend declared was 28 cents, taking the full year dividend to 54 cents compared with 52 cents last year.