Bank of Queensland is staking its future on a multi-brand strategy with confirmation yesterday of terms for a A$1.325 billion all-cash offer from BOQ for ME Bank.
“The ME brand, people, operations, and Melbourne-based presence will be retained,” ME informed its clients yesterday.
“With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform,” Patrick Allaway, the BOQ chair said.
“It gives us a platform …. one that’s capital efficient,” BOQ Group managing director, George Frazis, told an investor briefing.
“Going back 18 months, BOQ was going backwards in mortgages …. We’ve been able to turn that around [and] get ‘time to yes’ down to one day,” he said.
“We definitely know how to originate mortgages; and we definitely know how to grow in the mortgage channel.”
ME has “differentiated customer segments and geographies with minimal overlap [and] re-balances BOQ’s East Coast presence” BOQ said in their investor presentation.
Receivables in Queensland will be reduced from 42 per cent to 31 per cent of BOQ’s loan portfolio while NSW increases to 29 per cent and VIC to 21 per cent.
BOQ estimated “full run-rate pre-tax synergy benefits” in the range from $70 million to $80 million, or roughly 20 per cent of ME’s operating expenses. These savings are on the low side for an in-market merger and may rise, depending on plans for staff levels and seniority around ME’s Melbourne HQ.
The takeover increases BOQ’s retail net profit contribution from around 35 per cent to greater than 50 per cent and lifts the number of customers from around 900,000 to 1.45 million.
With BOQ in the market to raise the entire cash cost of ME Bank, BOQ provided a trading update.
BOQ said it “expects to announce 1H21 statutory net profit growth of 60 – 65 per cent and 1H21 cash net profit growth of 8 – 10 per cent”, while its upcoming first-half dividend is expected to be 17 cents, inclusive of new shares issued through the capital raise.