“It balanced our business 50:50 and as a bank through the cycle it’s just a much more resilient way of doing it,” Mr Frazis said.
This week BoQ is expected to hand back ME Bank’s authorised deposit-taking institution (ADI) licence to APRA, in a step that will bring cost-savings and efficiencies by integrating the two banks’ funding.
“We’ll be able to combine our treasuries, we’ll be able to combine wholesale funding,” Mr Frazis said.
“With two ADIs you have to manage capital at both the individual and the combined levels, so it provides us more flexibility on the balance sheet to help fund our investment and our growth.”
At the company’s annual meeting last year, BoQ confirmed the merger synergies were on track for completion 12 months earlier than expected.
ME Bank, which had been losing market share in the ultra-competitive mortgage market until the acquisition, which was completed in July, is once again back to growth, Mr Frazis said.
“It’s been a really quick turnaround and the reason why we were able to do that is we’ve had this weekly home loan improvement plan in BoQ for two years, so we could pick that up immediately for ME,” Mr Frazis said.
Although ME Bank is now at system, BoQ and Virgin Money have been growing at 1.6 times system growth in the competitive mortgage market. Mr Frazis said while housing market growth will cool as interest rates rise, it will take a number of rate increases before volumes of sales start to fall.
“We haven’t seen it slow down yet. If you think about what happens historically, I think price growth is softening, but we will still get positive appreciation over the next 12 months,” he said.
“It tends to be towards the end of the interest rate cycle that you see the volumes impacted.”
BoQ is the only lender with a plan to move all of its core banking systems to the cloud, with Virgin Money already benefiting from the move. BoQ is expected to move to the same version of Terminos as Virgin Money next month, allowing for speedier integration of new technologies and services.
ME Bank will be last to move, but has transitioned to a version of Terminos that will make the transfer efficient, he said.
“As a bank we’re going all in on cloud,” Mr Frazis said, adding that corporate service functions such as finance, HR and treasury will also be integrated.
“That gives us a significant step-change in terms of our cost to income ratio and more importantly we can provide innovative solutions and services to our customers a lot more quickly.”