Bank of Queensland (ASX: BOQ) Chief Executive David Liddy will step down at the end of 2011 and the bank has started a search for his replacement, the Australian regional lender said on Friday.

Earlier, the Brisbane-based bank reported its first half profit slumped 45 per cent as it was hit by a significant rise in bad debts, which jumped to $134.4 million.

Net profit fell to $50.4 million for the six months to February 28 from $90.9 million a year earlier. Cash profit declined 41 per cent to $57.6 million and shareholders will receive an interim dividend of 26 cents.

The result came amid some of the worst weather conditions in the history of Queensland, where the bank is mainly based. Mr Liddy said he is disappointed by the bank’s bad debt experience and has dedicated significant resources in managing this area.

In a separate statement, Mr Liddy who has been with the company for 10 years announced he would be not be extending his contract after it expires at the end of this year.

"After such a long and fulfilling banking career, I’m close to being ready to step down from full time executive leadership,” Mr Liddy said.

"Personally, I’m obviously disappointed to make this announcement at the same time as such a disappointing profit result, however I thought it was important to give the Board enough notice to ensure a smooth and successful recruitment process for the benefit of our staff and shareholders."

Bank of Queensland share had risen 1.3 per cent to $9.90 by 11:52am (AEST).