Liam Walsh The Courier-Mail October 19, 2012
BANK of Queensland is scouring additional detail on prospective borrowers and cutting commissions for branches with poor lending, as the battered institution tries to improve profitability.
Executives' short-term bonuses are also subject to clawback provisions as the bank moves to improve its risk processes.
The new policies come as BoQ reports the banking industry's first full-year loss in 20 years. The $17 million loss was previously foreshadowed.
Earnings per share - in earlier years a key BoQ profit gauge - was down from 63.6c a share to minus 10.2c.
The loss primarily stemmed from the first half at the 268-branch lender, when new management charged almost $328 million in bad debt expenses amid a troubled Queensland property market.
BoQ's second-half profit was $73.5 million.
"In the first half we went through (the loan book) with a fine tooth comb. The second half, we did the same, but we still recorded a profit," argued Stuart Grimshaw, in his first year as chief executive officer. "That gives us confidence that we're through ... the cycle, we're coming out."
The lender yesterday detailed changes to risk management.
One was a new "scorecard" for retail customers. Nothing would change from a customer perspective, but there would be "more questions" internally when assessing a borrower for something like a home loan.
Mr Grimshaw and chief financial officer Anthony Rose also detailed changes at branches, which are mostly owned by franchisees.
An outlet with a loan that had blown out by 180 days would lose the commission. Branches would also be subject to a financial-bonus "star rating" system, with points awarded for accomplishments such as passing compliance checks.
BoQ paid a final 26c dividend, which came despite the loss. "(The latest dividend) reflects the confidence that is shown in the business," Mr Grimshaw said.
Interest margins, a measure of profits on lending, improved. Operating cost ratios worsened.
BoQ shares closed down 8c at $7.49.
Macquarie analysts said it appeared a clean-up by new management was "now behind the bank".
Citigroup analysts questioned the one-off charges stripped out of BoQ's "normalised" earnings. "We strongly believe that this detracts from the quality of this result," Citi said.
The bank industry has battled feeble demand for loans, and Mr Grimshaw said he expected fairly flat growth.
A key concern is bad debts, and BoQ said specific second-half charges were based on an assessment of individual home loans late by 180 days. But Mr Rose pointed to an overall decline in laggard repayments from retail borrowers, suggesting the bad debt had peaked.