The issuer credit ratings on Bank of Queensland Ltd. (BoQ; BBB+/Stable/A-2) reflect our view that the bank has low credit-risk exposure, strong capitalization, and a low cost-to-income ratio underpinned by good operational efficiencies. These strengths are moderated by our view that BoQ has a high appetite for growth through acquisitions and expanding its number of branches; is concentrated in Queensland; and is exposed to the Australian banking system's dependence on wholesale funding. Standard&Poor's considers that BoQ's credit losses are likely to remain low. In our opinion, the bank's low exposure to credit risk is reflected in the residential mortgage lending that forms 70% of BoQ's loan book, and its relatively low nonperforming-assets-to-customer-loans ratio of 1.3% in February 2010.
