Bank of Queensland's IT expands with branches

The Bank of Queensland's (BoQ) technology costs have increased significantly over the last year in a rise associated with the expansion of its branch network.

Today the bank revealed it spent AU$32 million on technology in the six months to 28 February this year, a 23 percent rise on the same period in 2005/2006. According to BoQ chief information officer Iain Blacklaw, there were two reasons behind the rise.

"One is that we have significantly increased the number of branches," he told ZDNet Australia by telephone this afternoon. "Last financial year we opened nearly 50 branches ... that's basically the biggest driver."

"The driver for a branch is basically Telstra -- lines going into Telstra, and desktops going into branches. Every branch will have between eight to 2 terminals, both dumb terminals in terms of Wyse, or PCs for the lenders."

With the expansion in the bank's footprint has come an increase in back-end processing costs, as customers started to transact with the new branches. "Once you open up the branches, they then start firing up loans, transactions and customers etc," said Blacklaw. "You get this physical footprint, then there is this uplift in customer transactions."

That merger
Aside from the branch expansion, the other key item on Blacklaw's agenda is his group's AU$2.5 billion proposed acquisition of Bendigo Bank. The two banks are still discussing the merger, with BoQ flagging substantial synergies expected to result from a larger joint operation.

Blacklaw said some of those benefits were expected to come from the technology side of the business.

"We have an outsourcing agreement with EDS, where they basically run all of our technology," he said. "We clearly see some scale benefits to be had, under the EDS contract or a new derivation of that contract, through doubling the business volumes through the acquisition of Bendigo."

"So if we go from 250 branches to, say, 550, then clearly there will be some step costs down that we can extract from the EDS contract because of business volumes. So there'll be some savings at the fixed cost level."

Most banks would typically take "between 12-18 months" to integrate an acquisition into their platform, Blacklaw said, with the Bendigo acquisition expected to be no exception. "So that's going to be a big job," he said.

BoQ has substantial experience with integration through a number of acquisitions over the years -- for example it is currently migrating across the systems of the Pioneer Building Society, which it took control of in December last year. Documents sent to the Australian Stock Exchange this morning revealed the bank expected a major technology milestone on that effort to be delivered by the end of calendar year 2007.