Bank of Queensland is making some headway with its lacklustre productivity and high cost base, and is meeting its targets to limit the rise in expenses over the past year.Yesterday, the bank awarded itself numerous gold stars for meeting most of the targets its board and management agreed last year, while improving many balance sheet and credit quality measures.From a loss last year of A$17 million, the bank posted a net profit of $185.8 million in the year to August 2013.It said underlying profit and cash profit were $477 million and $251 million, respectively.Chief executive Stuart Grimshaw said the low growth in costs followed a move to shared services for its bank, equipment finance and insurance divisions, and a reduction in staff numbers. Many more gains in productivity beckon for the bank as it exploits its investment in new systems.The bank pointed to improvements in procedures, such as stripping 120 steps from the process needed to open a new account."As we bring the CRM [customer relationship management] system aboard we hope it will bring a fair bit of improvement," Grimshaw said."We still have files couriered into credit and have security documents couriered around."There are a lot of processes to go through. There's no one golden fix. It takes time to review."One target missed was on lending growth. The bank has suffered in recent years because of a weakness in the Queensland property market, where nearly 60 per cent of its home lending business is centred.A cut-back on line-of-credit loans also hampered growth. But, Grimshaw said, the market appeared to be improving, and this would help BOQ over the next 12 months."That should give us an organic kick, just from being in the right place at the right time," he said.Grimshaw believes the bank can continue to build on its 2013 result. "There is still plenty of unrealised growth potential... the future is looking promising." Grimshaw said that in an environment where some lenders are aggressively chasing mortgage business "we chose to focus on credit quality and margins."The improvement in the quality of its mortgage book has seen Standard and Poor's upgrade BOQ's credit rating twice in the past 12 months, to A-, a rating that will help the bank manage its margin.BOQ's chief financial officer, Anthony Rose, said the upgrade should help reduce the bank's borrowing costs."The upgrade is a very important milestone in BOQ's history," he said."It should support the margin in an environment where other industry participants have flagged an expected margin contraction."Grimshaw also grumbled about features of APRA's regulation of banks, which, he said, favoured the big banks.One beef is the lower capital weighting large banks have on home loans, given their use of "advanced" measures that rely on internal models.BOQ, by contrast, follows an APRA template.The BOQ financials also show that it paid more in goodwill for Virgin Money, at $44 million, than it handed over in cash and shares, $43 million. That is, BOQ assessed the Virgin Money business, which it acquired in April, as