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Bank of Queensland Limited (BOQ) has announced a strategic capital partnership with investment management firm Challenger Limited for its equipment finance loans (part of BOQ’s commercial equipment finance business), as it continues its transformation to a “simpler, specialist bank”.
The deal involves a whole-of-loan sale of its equipment finance assets and a forward flow arrangement for an initial 12-month term (with the option to extend), whereby BOQ will service and manage the asset finance facilities while the underlying direct credit risk exposure will be held by Challenger.
Challenger has agreed to pay $3.7 billion for the whole-of-loan sale (the final amount being dependent on whether new originations are sold under the whole-of-loan sale or the forward flow arrangement), net of a $25 million collective provision release ($18 million post tax).
BOQ estimates that the partnership will reduce debt funding by around $3.4 billion and optimise its balance sheet while providing a return to shareholders of approximately $300 million post-sale.
The transaction is expected to complete by the end of May 2026, and the banking group has said that there will be no impact on existing customers.
Announcing the deal, BOQ said the off-balance sheet capital partnership would enable BOQ to scale its equipment finance business - which supports business customers with equipment purchases, including trucks, cars, buses, trailers, lifting & handling and agricultural equipment - and help it support more customers.
BOQ’s new managing director & CEO, Rod Finch, said: “This innovative partnership with Challenger is an evolution of our strategy to think differently about how we support our customers’ growth ambitions and generate value for our shareholders.
“We are harnessing our recognised capability in originating and servicing customers, particularly in the SME sector, to generate capital-efficient growth. Our ability to return capital to shareholders demonstrates the strength of BOQ’s balance sheet.”
Challenger Group’s chief investment officer, Damian Graham, added: “We’re pleased to have partnered with BOQ on this whole-of-loan sale and forward flow arrangement for equipment finance assets.
“The transaction establishes a strategic partnership with BOQ and provides Challenger with access to a high-quality, seasoned and highly diversified loan portfolio that will deliver attractive risk-adjusted returns for Challenger and institutional investors. It also reflects Challenger’s continued expansion in whole loan investing, as we partner with leading counterparties to provide tailored funding solutions and further position whole loan investments as a core pillar of our portfolio strategy.”
The BOQ transformation
Over the past few years, the banking group has changed its lending strategy several times, with BOQ “pausing” mortgage distribution through the broker channel in 2024 (despite brokers originating around 70 per cent of all its home loans) and shifting its primary broker focus to ME Bank.
The banking group has also been through a digital transformation, with new broker technology being rolled out across ME Bank.
Over FY25, BOQ focused on rolling out digital mortgages to brokers, as the banking group underwent a transformation and cost reduction program, closing several branches and converting all owner-managed branches to corporate operations to boost returns.
However, its loan book has been steadily shrinking in the past year.
According to the Australian Prudential Regulation Authority’s (APRA) latest Monthly Authorised Deposit‑taking Institution Statistics for February 2026, BOQ’s total housing balances were at $52.8 billion - down by around $4.5 billion from a year earlier.
Nevertheless, asset and equipment finance has been one of the few growth areas for the bank in recent years.
Asset finance lending grew by $143 million in FY25, or 2 per cent, to $7.0 billion, supported by expansion in BOQ’s equipment finance business and structured finance portfolio.
[Related: BOQ announces new CEO]
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