Sydney - Bank of Queensland Ltd said it will buy the professional finance and leasing arm of South African-owned Investec's Australian unit for A$440 million ($414 million), aiming to boost credit quality and diversify outside its home state.

BoQ said on Friday the acquisition will give it Investec's A$2.4 billion loan portfolio, grow its commercial loan book by 38 percent and add A$38 million in net earnings in the first year excluding acquisition costs.

Australia's banks are focusing on improving their credit quality to buffer against sluggish business spending as a mining slowdown curbs investment plans. BoQ has been especially keen to cut bad debt since its exposure to a weak economy in Queensland state contributed to an annual loss in 2012.

“It broadens the scope of the existing (small to medium enterprise) book away from Queensland and away from commercial property into safer businesses below the border where there's more growth,” CIMB banking analyst John Buonaccoursi said.

BoQ, which has most of its business in Queensland but has operations in most Australian states, bid against regional rival Bendigo and Adelaide Bank Ltd and larger Australia and New Zealand Banking Group Ltd for the asset, local media reported.

Investec, a South African investment bank and asset manager, said last month its struggling Australian arm had dampened an improved performance in Africa and Britain.

BoQ said it would buy 100 percent of Investec Bank (Australia) Ltd, following a restructuring of the bank to remove certain businesses outside of the scope of the acquisition.

BoQ said it was buying the Investec unit, which specialises in banking products for the medical and accounting professions, the same day as it reported a 17 percent rise in cash earnings, which exclude one-off items, for the six months to February 28.

The result included a 23 percent reduction in loan impairment expense, reflecting improved credit management practices, the bank said.

BoQ shares were placed in a trading halt before the start of trading on Friday, having risen 32 percent in the past year as the bank improved the quality of its balance sheet. - Reuters