• $3.7 billion whole-of-loan sale to Challenger
• Forward flow arrangement for equipment finance assets
• Expected to be ROE and EPS accretive

BOQ Group Limited (ASX: BOQ) today announces a strategic capital partnership with Challenger Limited (ASX: CGF), marking a further step in its transformation to a simpler, specialist bank. The partnership with Challenger includes a whole-of-loan sale and a forward flow arrangement for equipment finance assets that will further optimize BOQ's funding base and support the acceleration of the Group's ambition to service more equipment finance customers, particularly in the small to medium business sector. The partnership will support the optimization of BOQ's balance sheet and cost of funding while enabling the bank to grow capital-light revenue streams to improve Return on Equity (ROE) and enhance shareholder returns. The $3.7 billion whole-of-loan sale, net of a $25 million collective provision release, is expected to reduce debt funding by ~$3.4 billion and facilitate a return to shareholders post-sale of ~$300 million. The forward flow agreement is for an initial 12-month term, extendable by agreement between the parties and is subject to Challenger and its financiers' discretion as to funding. BOQ will leverage its capability in originating and servicing equipment finance facilities, while underlying direct credit risk exposure will be held by Challenger for facilities originated through the partnership. This off-balance sheet capital partnership will enable BOQ to scale its equipment finance business and support more customers. The partnership, including the associated funding and capital benefits, is expected to be ROE and EPS accretive to the Group, with an uplift to cash ROE of 15 - 25 basis points anticipated in FY26.

In FY26, an uplift to cash ROE of 15 - 25 basis points is anticipated.