BOQ banks on mortgage growth

Bank of Queensland chief executive Jon Sutton, speaking to analysts and media yesterday, said the bank's improved half-year performance in the mortgage market was a highlight.

After struggling to achieve any growth in its mortgage book over the 12 months to August last year, the bank got close to system growth during the February half.

Most of that growth came through brokers, while branch sales fell. BOQ chief financial officer Anthony Rose said the branches were finding growth "a challenge".

The bank cut branch numbers by ten during the February half. Numbers were cut by 18 during the year to August.

The bank has made a big investment in broker distribution. This time last year BOQ was originating four per cent of its home loans through brokers and now that is up to 14 per cent.

Over the past six months the number of brokers accredited to sell BOQ mortgages has grown from 1200 to 2000 and the bank expects it to be 2500 by the end of the bank's financial year (August).

However, analysts at yesterday's briefing questioned whether a growth strategy based on broker sales was sustainable, given the intense competition in that part of the market.

Sutton said: "We are careful about how we are growing there. We will not grow assets by cutting price or moving higher up the risk curve."

He said the bank's growth strategy also included offering mortgages through its subsidiary Virgin Money. BOQ bought Virgin Money almost two years ago and has not done much with it, but Sutton said Virgin Money mortgages would be in the market within the next 12 months.

He said the bank was improving its margin with "disciplined re-pricing" in the liability side of the business.

Sutton also pointed to the strong performance of the bank's commercial division, which grew loans by 1.2 times system.