Bank of Queensland warns of more regulatory shake-ups ahead

Bank of Queensland has declared progress in reforms to pay and sales, as it warned of further regulatory changes to come.

Bank of Queensland chairman Roger Davis. Pic: AAP

Bank of Queensland has emphasised progress in a review to remove “misaligned or conflicted” pay or sales structures, as it warned of further regulatory change stemming from the banking royal commission.

The comments came in speeches lodged with the ASX ahead of the bank’s annual general meeting in Brisbane today.

BoQ’s chairman Roger Davis said the review of pay and sales models was moving forward despite it being a “highly complex and complicated task”.

“Efforts are also being made to promptly comply with all the other BEAR (banking executive accountability regime) and Sedgwick requirements regarding remuneration in the sector, through a thorough review of the bank’s commission structure and the removal of any misaligned or conflicted remuneration or sales commission structures,” he said.

“It is being implemented in the manner that you would expect of a bank with a strong ethical framework that puts the customer first.”

But shareholders will also want clarity at the AGM on whether an agreed transaction by BoQ to sell its St Andrews life unit to troubled insurance firm Freedom Insurance will proceed. The sale wasn’t mentioned in the AGM materials posted on the ASX.

On the Hayne royal commission, Mr Davis said the damning report card of the banks would have far-reaching consequences for the sector.

“Unfortunately, the ‘not so good news’ coming out of the royal commission is that faith in the industry, in our collective corporate purpose and social license, has been well and truly tarnished and arguably, justifiably so,” he said.

“We are not immune from these adverse industry factors, but changing the community’s perception is a much more difficult task than just remediating your own issues, as an ebbing tide carries all before it, regardless of how well you can swim.”

Ahead of shareholders voting on BoQ’s remuneration report, Mr Davis highlighted a 20 per cent cut in short term bonus payments to senior executives, meaning total aggregate pay to that group and the chief executive fell to its lowest level in five years.

“In part, this recognises below target scores on key performance metrics as well increased community concern over the quantum of bank remuneration,” he said.

CEO Jon Sutton was to tell shareholders the external environment remains challenging for the banking sector as mortgage growth slows, house prices fall and wage growth remains stagnant.

He pointed to BoQ’s diversification strategy and its investment in technology, saying that would help the bank navigate the difficult environment.

Mr Sutton also said the likelihood of further regulatory change “is high”. That comes against the backdrop of the final round of the royal commission coming to a close this week.

BoQ’s annual profit slipped 5 per cent to $336 million in the 12 months ended August 31. 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 five basis points over the financial year.

Last month, 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.