Bank of Queensland boss Stuart Grimshaw says the government should address the regulatory "imbalances" that exist between the big banks and smaller lenders by allowing regional banks to take on more risk.
The lender revealed a huge turnaround in earnings for the 2013 financial year, as it reduces the number of bad debts on its loan book.
The bank lifted its cash earnings to $251 million for the year to June, up from $31 million in 2012. It declared a fully franked dividend of 58¢ a share, up 6 per cent.
The result was a departure from a year earlier when the bank became the first Australian lender to post a loss in two decades.
Mr Grimshaw said a review of the home loan book, which led the bank to tighten lending standards, was behind the improved earnings.
"There's no doubt we've tightened our risk management systems," he said.
"Hindsight's a great thing ... some of the loans were riskier than we should have taken on board."
The bank also benefited from gradual improvements to the state's housing market. However, he remained cautious about the outlook for the year ahead.
"Domestically, small business and retail is still doing it tough and we don't expect things to change significantly over the next 12 months," he said.
"While challenges remain, particularly around external market and economic volatility, the foundations are firmly in place for sustainable growth in shareholder returns."
The results follow a restructure and management reshuffle after a $17 million loss in 2012. Statutory net profit for 2013 was $186 million.
Mr Grimshaw called for the government to address the "imbalances" that existed in regulatory standards for the big banks and smaller lenders.
"If any customer walks into a major bank for a home loan, that major bank only has to hold less than third of the capital that we are required to hold," he said. "This means the majors have up to three times the return on equity."
Bank of Queensland shares closed 6.7 per cent higher at $11.17 on Thursday.
"The market didn't believe the company's forecasts, and now they are starting to," Shaw Stockbroking analyst David Spotswood said. "Now there's every chance they're going to exceed their forecast."