Bank of Queensland lays out transformation roadmap

Bank of Queensland is "delivering to plan" its digital banking transformation, and is "ahead of plan" on its integration of ME Bank, which it bought for $1.3 billion early last year.

Managing director and CEO George Frazis told the bank's full-year results on Wednesday that both initiatives have helped in upgrading the bank's digital capabilities for customers and staff.

“The integration program is delivering ahead of plan with increased synergies," Frazis said.

"We are also delivering against our transformation roadmap with BoQ and VMA [Virgin Money Australia] digital transaction deposits enabled on our new cloud digital bank."

Frazis said BoQ's operating expenses for the year remained flat, coming in at $937 million for the year, courtesy in part of synergy and productivity benefits.

Some of the savings were reinvested into BoQ's transformation, which Frazis warned had costs associated with it in the immediate term.

“We are at a midpoint in this transformation, which means we continue to incur the costs associated with our legacy platforms while building our new digital platform," Frazis said.

“This leads to increased costs in the near term due to the lag between developing the new and decommissioning the old."

BoQ is taking a staged approach to the transformation and to transitioning customers of its brands across to the new digital banking platform, which is based on Temenos software.

The bank has also recently signed on to use Azure cloud services to drive automation and unlock further operating efficiencies.

As reported by iTnews, it plans to go all-in on public cloud and ultimately exit its data centres.

“Using the cloud will enable us to respond quickly to changing customer needs and deliver efficient banking services at low unit costs on an ongoing basis," Frazis said today.

Frazis said the banking group wanted to reduce complexity in the systems underpinning and connecting into its core banking platform.

Three-phase approach

By 2023, the bank expects to finalise its data centre migration, and to have all customers using the new core for digital deposits and payments.

Frazis said phase one of the transformation favoured digital deposits and payments “because it benefits the majority of our customers who are mostly transaction deposit holders and it strategically improves our funding”

“Towards the end of next year, we will have migrated 300,000 existing ME Bank deposit customers into the new digital bank.”

Across 2024 and 2025, BoQ will focus on the development of retail and business banking lending origination and on efforts to achieve scaled growth, increased personalisation and the retirement of legacy systems.

ME Bank integration

Frazis said the ME Bank integration is progressing well with plans to launch the new ME digital transaction and savings product in 2023.

Core foundational integration activities are mostly completed with a roadmap to full integration into a digital platform and the decommissioning of legacy technology planned. 

BoQ outlined plans to decommission legacy technology in 2024 as well as introduce digital home loans for new customers.

BoQ will migrate existing ME Bank deposit customers by the end of calendar 2023, with Frazis adding the bank has “returned ME's books to growth and we are completing the integration ahead of schedule and with increased synergies.”

“As well as upgrading the ME core banking system we have integrated the balance sheet and Treasury functions and are preparing to migrate ME customers onto the group's digital bank," he said.

“Our focus now is providing ME deposit customers with the benefits of the new digital bank experience.”

BoQ’s statutory net profit after tax reached $426 million, up 15 percent from FY21 while its cash earnings after tax dropped five percent to $508 million.