BANK of Queensland (ASX: BOQ) has maintained its cautious stance while announcing record interim cash earnings after tax, and simultaneously taken the opportunity to reiterate the need for government reform.  

For the six months to 28 February 2015, BOQ recorded cash earnings after tax of $167 million. The result was accredited to lending growth, strong net interest margin performance and asset quality improvements.

Statutory profit after tax rose 14 per cent to $154 million on the previous corresponding period.

The company incurred costs up 48.1 per cent over the period due to the integration of its targeted professional finance business BOQ Specialist and one-offs. Excluding these, only a three per cent increase was incurred.

Managing director and CEO Jon Sutton (pictured) says BOQ is still focusing its stance as a low risk and less volatile financial institution, while paying mention to the "uncertain economy over the short and medium term".

"Strong foundations are now in place and we're well into building a bank that is lower risk, lower volatility, and set up for sustainable growth," he says.

"I am particularly pleased to see lending growth improve while the bank's risk settings, margins, balance sheet and capital position are all strengthening."

Although BOQ has admitted home loans aren't currently its core focus, the company has seen a growth in this division beyond Queensland and across Australia.

Considering 57 per cent of housing applications came from outside Queensland over the period, BOQ appears to be making strides towards its goal of geographic diversification.

"We believe we can continue to drive growth through our existing strategy especially when you consider we're still below our peers' market share in the broker channel and we have further upside through BOQ Specialist, as well as Virgin Money Australia, where we expect to launch mortgages within 12 months," says Sutton.

Again, and as a continuation of BOQ's campaign for Australian financial system reform, the company has addressed government as being the single best catalyst for creating positive change in the broader environment.

The Basel Committee and Financial System Inquiry revolves around current lending regulations delivering higher return on equity to major banks than regionals.

"The economy is currently running at a pace below its long-run trend and, while there are some positive factors emerging, any sustained improvement will require a pick-up in consumer and business confidence," says Sutton.

"At this stage, no-one can accurately predict the outcome of the Basel Committee and Financial System Inquiry processes.

"Given our robust comparative capital position, we are very comfortable with our position and ability to adjust to any new regulatory requirements.

"We continue to wholeheartedly support the findings of the Financial System Inquiry's final report and urge the Federal Government and regulators to move quickly to create a more level playing field."

On a cash basis, BOQ's basic earnings per share were up six per cent on the prior half to 45.8 cents, return on average tangible equity increased 60 basis points to 13.8 per cent, and return on average equity stable at 10.3 per cent.

The BOQ board has declared an interim dividend of 36 cents per share fully franked, an increase of four cents or 13 per cent from first half fiscal 2014.

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