BoQ chief keen to stay on acquisitions path

New Bank of Queensland chief executive Jon Sutton has backed previous acquisitions. Picture: Hollie Adams

NEW Bank of Queensland chief executive Jon Sutton will consider further acquisitions and has rejected suggestions previous deals have left the regional lender owning a range of “disparate” businesses, lifting the group’s complexity.

Mr Sutton saidfurther deals would not be ruled out after last year spending $440 million on Investec’s professional finance and leasing businesses. It also purchased Virgin Money Australia for $40m in 2013.

The deals came under former chief Stuart Grimshaw as he strove to gain scale, which resulted in renewed speculation last year of an $8.5 billion tie-up with fellow Queensland financial services group Suncorp.

But the long mooted consolidation of the three regional banks — the other being Bendigo and Adelaide Bank — failed to occur and Mr Grimshaw left BoQ in August for a job in the US.

“We will always look at transactions that are on strategy for us,” Mr Sutton told The Australian on Friday in his first interview since becoming chief.

Formerly BoQ’s chief operating officer, Mr Sutton was involved in the acquisition of Investec’s businesses.

His strategy for BoQ is an “evolution, not revolution”, planning to address the group’s below average asset growth by using mortgage brokers, growing outside Queensland and investing in digital.

“The Investec acquisition, or BoQ Specialist now, was attractive because it’s a niche market, high touch for the clientele, relatively high margin and relatively low levels of default that give you a very good return on equity and that’s the sort of evolution I’m talking about,” Mr Sutton said.

Analysts largely backed the Investec deal, which included a $2.4 billion loan portfolio, $2.7bn of deposits and a $2.9bn of mortgages off balance sheet, boosting BoQ’s exposure outside Queensland and helping offset sagging organic growth.

The bulk of the loans are in the professional finance unit, which provides practice and personal finance to professionals such as equipment loans and leases, home loans, car leases, credit cards and transaction accounts.

But when BoQ made the acquisition, Macquarie analysts said it was becoming a “serial acquirer” and must improve underlying growth. In 2010, BoQ bought vendor finance business CIT Group and St Andrew’s Insurance.

“BoQ’s strategy appears to be increasing rather than decreasing the complexity of the business with the bank owning a variety of seemingly disparate businesses such as medical equipment finance, computer and motor finance, insurance and a stand-alone online brand,” Macquarie said.

But Mr Sutton said: “I reject it’s a jumble of acquisitions. It was very carefully thought out and it fits well with our strategy of looking at highly profitable niche businesses.

“It’s a fantastic business. It is bang on strategy and it’s an example of where I would like to continue to take the business.”

Mr Sutton also stressed the Investec acquisition would not form the start of a bigger push into wealth management, despite the businesses’ high net worth clientele.

“The business was never set up and will not be set up in any way shape or form to run a manufactured wealth business,” he said.
“BoQ’s decided to stay well and truly out of creating a wealth business.”