BoQ’s billion-dollar deal brings 146-year-old lender into 21st century

When George Frazis took over Bank of Queensland two years ago, the veteran banker knew the 146-year-old lender needed a major overhaul.

When George Frazis took over Bank of Queensland two years ago, the veteran banker knew the 146-year-old lender needed a major overhaul.

Mr Frazis, who previously held executive roles at Westpac and NAB, inherited a bank with antiquated loan approval systems, slow customer service and lagging digital offerings.

On Thursday, his two-year effort to reform BoQ comes to fruition with the $1.32bn acquisition of one of the country’s youngest financial institutions, ME Bank.

Unlike BoQ, which began as the Brisbane Permanent Benefit Building and Investment Society in 1874, ME Bank was formed in the 1990s as a “digital bank” with no physical branches.

The acquisition of ME Bank’s half a million customers allows BoQ to leapfrog its long-time rival Suncorp in terms of the size of its banking business.

That effectively doubles its retail business and gives it a strong presence in Victoria. More importantly, the acquisition allows BoQ to roll out a national cloud platform, giving it the financial strength to invest further in modernisation.

Mr Frazis said the deal made BoQ, which has survived both world wars and depressions, better able to withstand changes in the sector. And Mr Frazis does not rule out further acquisitions.

It will now operate three national brands – BoQ, Virgin Money and ME Bank – catering for everyone from older customers who want to visit a physical branch or tech-savvy millennials who are happy to do their banking via an app. “A big part of our strategy launched two years ago was to fix the retail bank,” he said.

Bank of Queensland will now operate three national brands – BoQ, Virgin Money and ME Bank. Picture David Clark

“We were always open to inorganic growth opportunities and ME Bank was compelling.

“It gives us scale, allowing us to invest in new systems and also face the challenges of more regulation.”

He said the bank’s three brands would eventually operate from the one cloud-based system, which could be accessed by all customers online and at physical branches.

“Unlike other banks we are looking to increase the number of branches,” he said.

Queensland would remain the heartland of BoQ despite the increasingly geographical diversification. About two-thirds of its 3000 staff are based in Queensland, with ME Bank adding about 1000 workers across the country.

“This is a win for Queensland because it gives us the ability to reinvest in our operations here,” he said. “We would not rule out other acquisitions in the future but it has to align with our strategy.

“We had a viable business ­acceptable to the market (before the acquisition) but this means we can be innovative, particularly with the rolling out of a cloud-based platform.”

BoQ shares have climbed 10 per cent since the acquisition was announced in February. Hunter Green Institutional Broking director Charlie Green said the bank was “basking in the glow of a good corporate deal”.

On Thursday, George Frazis’s his two-year effort to reform BoQ comes to fruition with the $1.32bn acquisition of one of the country’s youngest financial institutions, ME Bank.

“They are having a crack and not going to die wondering,” said. “They have stolen a march on the other regional banks and this will allow them to upgrade their antiquated IT systems.”

The acquisition is the culmination of two years of work by Mr Frazis to rebuild the bank’s fortunes. Soon after taking over the top job in 2019, he announced a $275m capital raising to strengthen its balance sheet and provide an “increased buffer” above the requirements of the Australian Prudential Regulation Authority.

Mr Frazis said at the time there was a need to simplify BoQ’s operations to boost productivity. The bank had more than 220 products, long processing times and slow decision making.

Originally published as BoQ’s billion-dollar deal brings 146-year-old lender into 21st century