BoQ presses on with St Andrews sale plan as profit dips

Bank of Queensland is pressing ahead with the contentious sale of its life insurance division.

Bank of Queensland will push ahead with its plan to sell St Andrews. Picture: AAP

Regional lender Bank of Queensland is pressing ahead with the sale of its life insurance division St Andrews to troubled insurance firm Freedom Insurance, the news coming as the lender announced a dip in annual profit.

BoQ said the highly contentious sale of St Andrews to Freedom remained subject to regulatory approval, although the bank was factoring in the $65 million deal into its future plans.

The deal has been subject to a degree of uncertainty after the royal commission revealed Freedom Insurance had been shunting customers into largely useless funeral insurance and accidental death insurance policies through its high-pressure outbound telemarketing “boiler room”.

Freedom has since had its business model shredded by a regulatory ban on the majority of its products and its outbound call centre, sparking an 80 per cent fall in the company’s share price.

In a statement to shareholders, chairman Roger Davis and managing director Jon Sutton said the findings at the royal commission had highlighted how the banking sector had fallen short of community expectations.

“Some of the findings that have emerged reflect poorly on the industry and has tested the reputation of all banks. In the case of BOQ, we have been increasing our focus on ensuring that ethical conduct is embedded in everything we do and when mistakes are made, we fix them.”

Bank of Queensland chairman Roger Davis. Picture: AAP

Mr Sutton made the comments as Bank of Queensland announced its annual profit slipped 5 per cent to $336 million.

The fall in profit came despite a 2 per cent increase in revenue to $1.1 billion.

The bank’s net interest margin, its key measure of profitability, rose 5 basis points over the financial year.

BoQ revealed it had spent $9 million on the royal commission and other regulatory matters so far.

The regional lender’s treatment of small business borrowers was brought into question at the royal commission, which probed loans sold to Sue Riches to buy a Wendy’s franchise even though an adviser said the profit looked skinny.

BoQ said this “involved maladministration” on the part of the bank and that it was now reviewing its processes with the Financial Ombudsman Service in the wake of the scandal, after the lender argued with the watchdog to try and limit the compensation provided to the customer, who businesses collapsed.

BoQ said it accepted it “engaged in irresponsible lending” and said it “regrets not making the concession earlier in time than it did”.

Mr Sutton today said the bank’s loan quality had improved and that the amount of borrowers in arrears remained at benign levels.

“There have been plenty of examples of banks cutting corners on risk to achieve growth, but all of our credit metrics demonstrate that we have been taking a prudent approach to risk,” he said.

St Andrews life insurance earlier this year halted the sale of its policies through a separate life insurance distributor Select AFSL, which was also hammered at the royal commission over its high-pressure selling of policies to Aboriginal and Torres Strait Islander people.

A separate ASIC investigation into Freedom is putting pressure on the Australian Prudential Regulation Authority to block the group’s $65m takeover St Andrew’s. The deal is Freedom’s ticket to an APRA insurance licence.