Bank of Queensland warns of vision shortage in election campaign

Australia’s election campaign is short on substance, with Bank of Queensland boss Patrick Allaway warning both sides have failed to present a vision for lifting the country or solving its housing crisis.

Bank of Queensland has seen an unexpected bump in interim earnings. Picture: Jono Searle/NCA NewsWire

Australia’s federal election campaign is short on substance, Bank of Queensland boss Patrick Allaway says, warning both sides have failed to present a vision for lifting productivity or solving the housing crisis.

As BOQ ruled off a $183m first-half cash profit, beating expectations, Mr Allaway said Australia needed a long-term vision, and election cycles “don’t help that”.

Mr Allaway, who has steered BOQ since taking on the top job in November 2022, said Australia needed a plan, and politicians and leaders had to give people a path to productivity.

“We’re a fabulous country, we’ve got enormous opportunities, we’ve got significant wealth in resources, but we should be thinking about the long-term opportunity for Australia,” he said.

“Productivity is part of that.”

But political pledges to slash costs for homebuyers, or allow borrowers to offset their interest bill against their taxes, fail to properly address a pressing housing crisis, Mr Allaway said.

“The issue is supply, it’s not the demand side,” he said,

“The real question is how does the government open up supply and how does it support quick development applications and ensure we’ve got the trades and skills to support the construction of housing.”

BOQ has struggled to make money from home lending, amid record competition in the sector.

BOQ chairman Warwick Negus and CEO Patrick Allaway. Picture: Jane Dempster/The Australian

Instead, the bank has pivoted to business lending, alongside a plan to scoop up its franchised bank branches and bring them in-house, with many to close.

The impact of this plan squeezed BOQ’s earnings, with 34 branches rolled up in the six months to February, of which 18 were then closed, dragging down earnings.

BOQ completed its conversion of all 114 owner managed branches in March this year, with the bank warning it would book a further $115-125m in costs as a consequence.

Mr Allaway said the lender was “making considerable progress transforming to a simpler, specialist bank”.

BOQ has also spent millions boosting its internal technology systems, in a bid to put the bank’s three brands on one platform, to cut costs and stamp out costly problems of double handling.

This involves upgrading the tech stacks of BOQ, ME Bank, and Virgin Money, before transitioning all three into a core platform.

ME Bank is the furthest advanced, with Mr Allaway noting 41 per cent of all transaction accounts were now on its new digital platform, with plans to decommission 40 core banking systems by the end of 2026.

BOQ has also pivoted its home lending to a digital platform, again to cut costs.

Mr Allaway noted the acquisition of its franchised branches would allow BOQ to boost its lending margin, which remained stable over the half at 1.57 per cent, by almost 12 basis points.

BOQ said it expected a step up in its headline margin in the second half of the financial year, but noted its mortgage contraction was likely to continue amid a persistent push into business lending.

“Our improved performance and stable margin in the current operating environment validate our strategy to shift our portfolio towards higher-returning segments, and reposition the Retail Bank as a scalable, low cost-to-serve digital bank,” he said.

BOQ noted its lower home lending over the half had supported its commercial lending, which lifted 10 per cent as the bank targeted healthcare, agriculture, and commercial property sectors.

The bank’s home mortgage book fell $1.5bn over the six months, which BOQ noted “reflects the continued prioritisation of economic return over volume”.

Business lending was up $624m.

BOQ said it was near “peak mortgage contraction”, with expectations its portfolio would return to growth.

But Mr Allaway said BOQ also expected it would see a rise in troubled loans across its home and business lending books, after a subdued period despite the rise in interest rates.

US President Donald Trump’s tariffs made things hard to predict, warning it was hard to know if America was negotiating or actually committed to raising import duties.

“That does mean we’re going to enter a more unpredictable macro environment,” he said.

“If we see this sustained uncertainty, you’ll see a repricing of risk to reflect that increased volatility.”

But despite the geopolitical uncertainty, BOQ “remains optimistic about the longer-term view”, he said.

The BOQ boss also noted he was committed to staying on at the bank until at least its 2026 results, after taking on the job in the wake of former boss George Frazis’ ouster.

UBS analyst John Storey said BOQ was showing “some positive signs” but maintained his call to sell the bank.

BOQ shares closed 5.5 per cent higher at $6.86 in a flat market.

Originally published as Bank of Queensland warns of vision shortage in election campaign