The banking group grew commercial and asset finance lending during the year, but warned of a future squeeze on its mortgage book.
Bank of Queensland (BOQ) has reported a $4.3 billion decline in housing in its 2025 financial year (FY25) ending 31 August, as the lender cautioned it expects a “modest decline” in its mortgage book.
The non-major banking group posted a 7 per cent year-on-year drop in housing lending to $57.5 billion, which it said reflected the prioritisation of returns over housing volume growth, as well as the pause in Virgin Money Australia (VMA) and BOQ Broker origination.
Commercial lending increased by $1.6 billion over the year, or 14 per cent, to $13.1 billion. The uptick was attributed to growth in the healthcare sector, agribusiness, and well-secured commercial property lending.
Asset finance lending grew by $143 million, or 2 per cent, to $7.0 billion, supported by expansion in BOQ’s equipment finance business and structured finance portfolio, partially offset by a contraction in its cash flow finance portfolio.
Gross loans and advances of $77.9 billion contracted by $2.6 billion, or 3 per cent, on 2024 levels.
BOQ’s lending margins were up 8 basis points to 1.64 per cent, driven by benefits from branch conversion and business mix management.
‘Elevated competition’ for housing lending
Reflecting on its performance in housing lending, BOQ noted that home lending “remained benign, with a contraction of balances and strong property valuations”.
Housing lending margins remained largely stable, although the bank warned of a future squeeze on its mortgage book.
“Elevated competition for housing lending and quality business lending is anticipated to continue,” the banking group said.
“BOQ’s mortgage book is expected to experience [a] modest decline, as the group continues to prioritise higher returning business lending, which is targeting growth broadly in line with system.”
Over FY25, BOQ focused on rolling out digital mortgages to brokers, as the banking group underwent a transformation and cost reduction program, closing several branches and converting all owner-managed branches to corporate operations to boost returns.
The bank reported that it had made progress on its transformation program, with 44 per cent of retail customers now on its digital platform.
BOQ CEO Patrick Allaway said the lender had moved forward with efforts to simplify.
“We have made strong progress in FY25, delivering on our transformation and improving financial performance,” he said.
“We are well progressed through this ambitious program of work to uplift operational resilience, simplify the way we operate, scale customer growth with improved digital experiences, and shift our balance sheet mix to deliver more sustainable returns.
“We’ve seen encouraging momentum across our core businesses with strong growth in business lending and have expanded our proprietary acquisition channels.”
Karen Penrose, chair of the people, culture and remuneration committee, added: “We have made meaningful progress in our transformation towards a simpler, specialist bank.”
In FY25, BOQ also launched mortgages on its digital bank across mobile banker channels for both the Virgin Money and ME brands. It also migrated all ME deposit-only customers to the digital platform.
The bank has been aiming to scale its digital banking platform and is prioritising its proprietary channel and ME Bank channels as it continues to work on moderating home lending volumes, as capital is deployed to higher-returning business lending.
As part of the move, BOQ ‘paused’ new home loan originations through the broker channel in August 2024 (following a similar move by its subsidiary brand Virgin Money in September 2023) and drew ire from the broking industry after failing to pass on the first rate cut in four years in February.
[Related: BOQ to roll out digital mortgage to brokers]
