Lender reports great figures after retreat from mortgage market, ongoing legal woes.
The Bank of Queensland (BOQ) is facing a deepening legal standoff with a growing number of former franchise branch operators, as dissatisfaction mounts over the compensation paid during the bank's sweeping shift to a fully corporate-owned branch network.
As the dispute gains traction, the financial and reputational stakes for the 150-year-old institution are climbing sharply.
At the heart of the conflict is a heated disagreement over the value of the branches forcibly acquired by BOQ as part of its 2024 strategy to dismantle its 22-year-old owner-managed model.
Former branch owners – known as owner managers – are now seeking an additional $125 million to $200 million in compensation, more than doubling the estimated $115 million to $125 million BOQ has already paid out or earmarked for buybacks.
The number of claimants continues to grow, with approximately 70 of the 114 former branch owners now aligned in legal efforts to challenge the valuations.
The group, supported by advisory firm BDO, argues the acquisition pricing methodology significantly undervalued their businesses by excluding key revenue streams and shifting compliance costs onto them, allegedly in violation of the franchise agreements and Australia's franchising code of conduct.
BOQ’s franchise model, launched in 2002, once set it apart by giving local entrepreneurs a stake in the bank’s community presence. The strategy facilitated rapid branch growth and allowed BOQ to tap into grassroots customer loyalty. However, the model became increasingly expensive and less aligned with digital banking trends.
In August 2024, under chief executive Patrick Allaway, BOQ announced its plan to convert all franchised branches into company-owned outlets. By March 2025, the transition was completed, and roughly 570 branch employees were absorbed into the bank’s workforce.
This overhaul was part of a wider effort to modernize BOQ’s operations, cut up to 400 jobs, and enhance cost efficiency – particularly through a reduced reliance on third-party mortgage brokers and costly distribution channels.
Dispute overshadows solid financial results
Despite the brewing conflict, BOQ has reported encouraging half-year results, posting a 6% increase in cash earnings to $183 million.
Analysts attributed the performance to tight cost management and a conscious retreat from the highly competitive mortgage market. Notably, the bank expects a 12-basis-point lift in net interest margin following the branch consolidation, which is being positioned as a key plank in BOQ’s digital transformation.
However, analysts such as Morningstar’s Nathan Zaia have flagged risks for regional lenders like BOQ, noting they remain vulnerable to funding pressures and a potential erosion of market share.
BOQ has already scaled back broker channel activity and is pivoting toward business lending in targeted sectors like agribusiness and healthcare.
