Leaner BOQ now more focused

With signs that the worst of the global financial crisis has passed, chief executive David Liddy said BOQ had emerged a leaner, stronger and more focused organisation than it was going into the turmoil.

But with smaller lenders still being squeezed by high funding costs, Mr Liddy added to warnings about competition in the banking industry, likening the dominance of the big banks to an oligopoly.

Mr Liddy, one of the more vocal critics of the dominance of the big four, cautioned that imbalances remained in Australia's banking landscape and urged the federal government to consider measures to restore competition.

Banking competition is likely to come under the spotlight within the next week, with the Australian Competition and Consumer Commission expected to finalise its position on National Australia Bank's proposed $13.3 billion move on wealth manager AXA Asia Pacific.

Mr Liddy's comments came as BOQ reported a net profit of $90.9 million for the first half of its financial year, up sharply from last year's $46.3 million. Earnings were helped by lower costs and repricing of business loans, while last year's result was dampened by a series of one-off charges.

"I think we're through the worst of the GFC from a structural point of view in banking in Australia. We've moved out of a bunkering-down mode into a growth mode," Mr Liddy told BusinessDay.

BOQ is attempting to increase its exposure to small and mid-sized business, particularly in asset leasing and vendor financing. It is also eying ways to drive up its non-interest income.

In recent weeks, it paid about $60 million for St Andrew's, a small Perth-based life and credit insurer. It is now in talks with troubled US bank CIT over the acquisition of its Australian vendor finance unit. Mr Liddy said an announcement on CIT was expected soon.

Meanwhile, the bank is considering expanding its branch network.

BOQ's revenue growth of 7 per cent was helped by a 6 per cent lift in its overall lending book. Interest margins, a key driver of profit, expanded by 13 basis points.

BOQ declared a dividend of 26? a share, flat on the first half of the previous financial year. Mr Liddy promised a return to dividend growth once a series of investments in the business gained traction.

Unlike its bigger rivals, BOQ's bad debts continued to rise during the first half, lifting to 0.68 per cent of its lending book, from 0.56 per cent previously. But this was mostly due to a bigger exposure to small business, a segment of the economy that takes longer to recover. Mr Liddy expects the pace of lending losses to slow during the second half.

BOQ shares closed up 9? at $12.14.