BoQ chief 'excited' about ME Bank despite risk problems

Bank of Queensland chief executive George Frazis says he is excited about the ME Bank acquisition, despite rising costs to improve the small lender's operations, risk controls, antimoney laundering compliance and customer experience.

BoQ announced plans to buy ME Bank from its industry superannuation fund shareholders in February and has now had controlling ownership of the boutique lender for two months. In this time, ME Bank's mortgage applications have risen by 36 per cent.

BoQ chief executive George Frazis says he is 'really excited' about the ME Bank acquisition despite rising costs. Credit:Nick Cubbin

BoQ, alongside reporting its fullyear results, said it planned to spend up to $140 million over the next two years on integrating ME Bank into its business, which will include upgrading technology and fixing weaknesses of the lender's anti-money laundering program.

"We're really excited by the ME bank acquisition," Mr Frazis said. BoQ had conducted "extensive due diligence" before acquiring the business, he said, and the bank would now incorporate lessons from its previous acquisition of Virgin Money to find cost savings and turn it into a growth engine.

"It is all about looking at the end-toend process and improving the time to yes [the time to approve mortgage applications]. This is the critical thing," Mr Frazis said. "The other important thing in terms of growth is how your operations are able to handle the volumes.

"Where banks get unstuck is they have either brokers or mortgage lenders that grow in terms of the home loans, but then their operations can't handle it."

BoQ's share price fell by around 5 per cent to $9.25 per share after it flagged costs were expected to increase by another 3 per cent next year as it executes its strategy to overhaul technology, diversify geography and grow through acquisitions.