Bank of Queensland's half-year financial report reveals that the bank faces difficulties on a number of fronts. Its core branch lending business is in decline, its branch network is shrinking and its lending processes and digital customer offering need overhauling.With little business growth in prospect it faces higher costs as it adjusts to the post-Hayne regulatory regime. And in December the anti-money laundering regulator Austrac issued a report that identified "potential compliance contraventions" at the bank.The branch network is under stress, with 11 closures during its latest half-year. And the bank is stuck with a life insurance business whose sale fell through last year.BOQ made a net profit of A$156 million for the six months to February - down 10 per cent on the previous corresponding period. On a cash basis, earnings fell 8 per cent to $167 million.Return on equity (on a cash basis) was down 110 bps to 8.8 per cent.Net interest income of $476 million was unchanged, compared with the previous corresponding period. Non-interest income fell 13 per cent to $65 million. Total income was down 2 per cent.The bank's net interest margin fell three basis points to 1.94 per cent. The cost to income ratio rose 190 bps to 49.5 per cent.The loan impairment expense rose from $22 million in February last year to $30 million in the latest half - largely a result of the adoption of the AASB 9 accounting standard for provisions. The $30 million charge represents 13 bps of gross loans and acceptances.Common equity tier 1 fell five bps to 9.26 per cent. The bank's chief financial officer Matt Baxby warned that accelerated investment spend would further reduce CET1 in the second half of the year and next year.The bank cut its dividend from 38 cents a share to 34 cents.Branch network lending balances were down. This was mitigated by lending growth in BOQ finance, Virgin Money Australia and BOQ Specialist. Total lending growth was just 2 per cent.BOQ Finance was the standout, with 13 per cent annualised loan growth during the half.BOQ interim chief executive Anthony Rose said: "Housing loan growth was constrained by the slowing mortgage market and an increasingly competitive environment for new lending."Rose said the bank was having difficulty growing its branch network, some of which operates as a franchise network, because potential owner-managers were uncertain about the future of the industry.Form next year the bank will offer a new "value share structure", designed to make the business model more attractive to owner-managers.Rose said the bank was working on its lending process, which was overly complex. It has started a transformation program that includes the use of automation and robotics.It is also working on new internet and mobile banking offerings. Rose conceded that "our mobile banking app is not delivering the experience customers expect in 2019".Rose warned that costs would increase as the bank made changes necessary to ensure compliance standards meet higher community and regulatory standards.BOQ had announced the sale of its insurance business, St Andrew's, to