BRED in, Fox out at BOQ

Bank of Queensland has settled, for now, on a strategy of organic growth once again after the eight month strategic review failed to identify a buyer for the bank on terms the board would accept.

How many serious offers BOQ received from prospective bank buyers is a matter of conjecture. There was some public relations at one stage, and continued yesterday, that there was interest from banks in Asia (and maybe Singapore).

BOQ must have talked in detail to Bendigo and Adelaide Bank (which spurned overtures two and a half yeas ago), ME Bank and Suncorp Metway (with the latter presumably the most credible option in the domestic market).

With presumably no more than lukewarm interest BOQ is taking the alternative path of raising additional capital and seeking to lift market share in lending (where there is no growth in credit across the Australian economy at present, but fair growth in home loans and small business lending that is the BOQ niche).

BOQ said it will sell $340 million in new shares. Of this it will sell $143 million to French regional bank BRED (already a minority shareholder) and institutions in a placement. It will also undertake a $197 million rights issues, of which retail investors qualify to buy $112 million.

Linfox, the family investment company, will also sell down its own holding from 7.9 per cent to 0.8 per cent in a secondary offer.

BRED will end up with a 12.5 per cent stake in BOQ. BRED also owns a small stake in Bendigo and Adelaide Bank.

The bank published a trading update yesterday. The bank said it expected growth in normalised net profit of 20 per cent to $186 million in the year to August 2009. It said the net interest margin would "moderately improve" on the first half.

BOQ said it would report growth in lending over the full year of 10 per cent.