Feature Stories | Apr 15 2006
You know a company is on a roll when the managing director presents the half yearly figures with a smile from ear to ear and makes remarks such as "last week saw us recording the highest sales figure in the history of the bank".
Making such a statement used to be the privilege of high tech companies, prior to the bust in 2001. Especially those that specialised in solving the Y2k problem (thank you for that Bill Gates!). Those programmers and box-movers didn’t have to do anything while seeing prospects flying towards them from every corner of the market as the end of the second millennium drew closer. But there was good money for all of them in those days.
Typically, management would hire some posh hotel lobby, with nothing but a glass of water for the hordes of journalists present, and announce the company had again broken last quarter’s record sales. "And by the way, Boeing has just agreed to a global rollout of our latest software package".
Take it from me, you don’t really aspire to be a financial journalist working for one of the electronic news wires when things like that happen. Next thing you know you find yourself shooting off your chair, mobile phone firmly in one hand, trying to beat a group of other wire journalists in calling the news desk and getting the headline about a large Boeing order into the market quicker than the competition can.
Times have changed since then, and stock markets have considerably tightened the rules that require companies to report anything that could materially impact their business, and thus the share price, first to the stock market itself.
The ultimate annoying task when being a wire journalist is getting sent off to take up position when one or multiple central bankers are visiting. Ever experienced the circus surrounding such an event? It’s fun, when you’re a passive observer. The man steps towards the door (or appears from the opening) and all of a sudden he is surrounded by a group of sticky followers, pushing each other but not him, yelling predictable questions and trying to get their mini voice recorder or microphone as close to his mouth as humanly possible, and to keep it there for as long as possible. (Remember, the man is actually moving).
Did he say "irrational exuberance"? Was that in relationship to bond yields or equity markets? Damn, why can’t he just speak normally, without the accent!
There were no jump and rush activities from the audience at Bank of Queensland’s (BOQ) interim result presentation.
I would even question whether MD David Liddy’s throwaway remark has made it into other journalists’ reports (this is more than twenty years of experience speaking). In the end, it doesn’t really matter, because Bank of Queensland achieving record sales has merely become a side issue.
Let there be no mistake, David Liddy is doing a great job and Bank of Queensland is arguably the sexiest bank in the country. Any other MD in the sector would hope they can report a profit increase of 16% while carrying the burden of the transformation towards a new accountancy standard and still being confident there are better things to come, still.
Let’s have a look at some of the details. Retail deposits grew by 18% to $6.4 billion. Total loan approvals went up by 28% to $4.5 billion. Assets under management grew by 19% to $15.9 billion. Total amount of bad debts: $7 million.
Bank of Queensland seems miles ahead of the other regionals and the four majors having successfully waved goodbye to third party mortgage brokers to market and sell its home loans. A growing army of critics among banking analysts at leading stock brokers believes the banks are cutting off their noses by holding on to their commercial relationships with independent mortgage brokers. Sooner or later they will have to face the issue, so the story goes, and when that time finally arrives Bank of Queensland will be the benchmark for all of them, shake up or no shake up.
David Liddy, by the way, is one of those fierce advocates of bringing mortgage brokers under the same stringent regulations as the banks already are and one does not have to be a clairvoyant to see this would cause total mayhem in a sector that’s still enjoying the winds of fortune, even without the banks turning their back on them.
Bank of Queensland shuns so-called low doc mortgage loans. Its current total in low docs represents less than 2% of its complete loan portfolio, equaling a mere $200 million. The bank has successfully introduced retail products, such as its Reverse Charges account, which give it a customer-friendly image in the market while at the same time adding an extra stream of banking fees (a leopard never loses its spots). Without using the same superlatives as some banking specialists ("innovative products"), one can only admit it’s a big ask to do better than this while being a banker in Australia.
Continues in part II.