Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2022 Earnings Presentation
58 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 15, 2022
Slide 1: Results Presentation
Results Presentation For the full year ended 30 June 2022 Bendigo and Adelaide Bank Limited ABN 11 068 049 178
Slide 2: Contents
Contents 1 Overview Marnie Baker Page 3 2 FY22 Financials and priorities Andrew Morgan Page 13 3 Summary Marnie Baker Page 29 4 Businesses and Divisions Page 31 5 Lending, Funding and Liquidity Page 41 6 Risk and Capital Page 49 2
Slide 3: Overview
Overview Marnie Baker Managing Director 3
Slide 4: Overview
Overview • Continued growth in loans, deposits and customer numbers • Decline in 2H22 revenues due to margin pressures; exit NIM higher • Absolute reduction in costs and continued improvement in CTI ratio • Strong balance sheet and credit quality • Strengthened focus on returns, execution and sustai
Slide 5: Financial performance
Financial performance FY22 FY21 FY22 ($m) ($m) v FY21 Total income $1,709.9 $1,702.5 0.4% Operating expenses $1,016.3 $1,027.4 (1.1%) Underlying profit (pre-credit expenses) $693.6 $675.1 2.7% Credit expenses ($27.2) $18.0 Large Cash earnings (after tax) $500.4 $457.2 9.4% Statutory net profit (afte
Slide 6: Key performance indicators
Key performance indicators Consistent performance 28.5 27.3 24.5 Customer 2.20m Net promoter 2.05m 3 numbers score 1.6 1.88m -1.2 -1.8 Jun-20 Jun-21 Jun-22 Jun-20 Jun-21 Jun-22 Market 75.1% MFI business 48 44 41 1 74.5% 73.2% 4 share NPS 2.24% 2.41% 2.37% -16 -13 -9 Jun-20 Jun-21 Jun-22 Jun-20 Jun-2
Slide 7: Shaping the future of banking
Shaping the future of banking Our strategy VISION: Australia’s bank of choice PURPOSE: To feed into prosperity, not off it Reduce Invest in Tell our IMPERATIVES: complexity capability story Customer Customer Growth & ESG Centric Value Proposition Transformation Framework Operating Model Based on tru
Slide 8: Rapidly changing environment requires a dynamic response
Rapidly changing environment requires a dynamic response The new cycle presents fresh challenges Macro-economic backdrop Customer Impacts • Tighter business operating margins and household cash flows • Inflationary pressures • Potential wealth deterioration from moderating asset prices • Rising inte
Slide 9: Transforming our business and returns
Transforming our business and returns Same strategy with a shift in emphasis 1. Returns 2. Execution 3. Sustainability 9
Slide 10: Transforming our business and returns: Returns
Transforming our business and returns 1. Returns • Increased focus on financial returns • Deliver a broadly flat expense profile 10
Slide 11: Transforming our business and returns: Execution
Transforming our business and returns 2. Execution Short to FY22 medium term Ferocia acquisition completed, Portfolio Margin Lending acquisition Continue to actively manage for value Combined Business/Agri division Digitisation of term deposit opening Customer Up Home process Executive changes made
Slide 12: Transforming our business and returns: Sustainability
Transforming our business and returns 3. Sustainability Getting the balance right for all stakeholders: • Supporting our customers’ financial needs • Investment in our businesses and people • Generation and utilisation of capital • Franked dividends to our shareholders 12
Slide 13: FY22 financials and priorities
FY22 financials and priorities Andrew Morgan Chief Financial Officer 13
Slide 14: Cash earnings vs Statutory NPAT
Cash earnings vs Statutory NPAT Solid growth in cash earnings, disciplined cost management and lower loan provisions FY22 FY21 FY22 v FY21 ($m) ($m) Total income 1,709.9 1,702.5 0.4% Operating expenses 1,016.3 1,027.4 (1.1%) Credit (reversals) / expenses (27.2) 18.0 Large Cash earnings after tax 500
Slide 15: FY22 result
FY22 result Key metrics showing improvement, with the exception of NIM Cash earnings ($m) NIM Cost to income Cash ROE -90bps +9.4% +5bps 1.95% 60.3% 500.4 59.4% 7.67% 7.72% -21bps 457.2 1.74% FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 Cash EPS (cents) DPS (cents) CET1 Customer deposits as % of total fu
Slide 16: Total income
Total income Benefit of strong volume growth offset by lower margins FY22 ($m) 2H22 ($m) 873.4 -4.2% 6.0 36.4 837.0 Increased number of completed 6.5 836.5 contracts, up 21% YoY 830.5 830.5 1H22 Net interest Other income ex Homesafe 2H22 income Homesafe +0.4% 17.2 1,709.9 1,702.5 6.4 1,696.1 3.4 1,6
Slide 17: Net interest margin
Net interest margin Impacted by competitive pressures, higher liquids and asset mix TD pricing, benefit of FY22 higher rates and changes to replicating portfolio 0.17% 1.95% 1.82% 0.11% -21bps 0.03% 0.19% 1.76% 1.76% 1.74% 0.11% 1.71% 1.71% Includes impact of fixed rate lending Variable and fixed re
Slide 18: Net interest margin
Net interest margin Impacted by competitive pressures partially offset by deposit pricing 1 2H22 NIM monthly movement (%) 2.10 2.50 June exit NIM: 2.00 1.73% 2.00 TD pricing, benefit of 1.90 1.50 higher rates and changes 1.80 1.00 to replicating portfolio 1.70 0.50 1.60 0.00 1.80% Jun 18 Dec 18 Jun
Slide 19: Net interest margin: Capital and deposit hedges
Net interest margin Sensitivity to rising rate environment – Capital and deposit hedges • Investment tenor extended in 2H22. • Proportion hedged will vary over time • 46bps Group NIM benefit expected over next 3 years from impact of higher interest rates on replicating portfolio yields 1,2 • 27bps N
Slide 20: Net interest margin: Community Bank revenue share
Net interest margin Sensitivity to rising rate environment – Community Bank revenue share Revenue share v CB proportion of BEN • Revenue share is influenced by product NIM (impacted by cash rates) and Community Bank (CB) volumes customer deposits (%) 0.5 50% • Over time, CB footings have grown at fa
Slide 21: Operating expenses
Operating expenses Costs managed prudently, appropriate to revenue environment 2H22 ($m) FY22 ($m) 5.3 2.6 Investment expense reduced, particularly in 2H22, 22.1 in response to slowing revenue environment 517.7 517.6 520.2 -3.7% 503.4 1.1 502.3 3.8 498.6 498.6 1H22 CPI Increase Ferocia Investment St
Slide 22: Credit quality
Credit quality Continued reduction in credit expenses, supported by improving arrears Credit expense ($m) Gross impaired loans ($m) Loan arrears Residential 90d+ Business 90d+ Agribusiness 90d+ % of gross loans Specific and 3.00% 168.5 collective 2.79% release of $22.7m 2.50% 240.5 0.29 222.2 208.8
Slide 23: Provisioning
Provisioning Reductions in COVID-19 overlays largely offset by increased sector overlays Total provisions ($m) Collective provisions ($m) • Sector overlays reflect the risks associated with: • Significant appreciation in farmland values • Potential deterioration in business conditions and cashflow •
Slide 24: Funding and liquidity
Funding and liquidity Diverse range of funding across both retail and wholesale channels Funding profile ($b) Term funding maturity profile1,2 $m 23.4 4,000 21.4 18.5 3,200 18.9 19.8 2,400 21.7 45.3 73.3% 38.1 Customer 1,600 deposits 29.0 800 Jun-20 Jun-21 Jun-22 0 1H23 2H23 1H24 2H24 1H25 2H25 FY26
Slide 25: Capital
Capital Capital generation offset by growth in RWA and Capitalised Expenses CET1 movement - 6 months (%)1 0.72 RWA growth driven by residential lending and seasonality in agribusiness lending 0.27 10.30 0.03 10.27 0.14 10.13 0.04 10.09 9.85 9.85 0.41 9.68 9.68 9.57 Jun-21 Dec-21 Earnings Dividend (n
Slide 26: Dividend
Dividend Increased DPS supported by solid business performance Dividends (cents per share) Payout ratio 1 Capital considerations • Dividend levels dependent on need to 82.4% 59.5% 58.4% 59.0% balance target capital levels, capital required to support balance sheet growth and desire to distribute imp
Slide 27: Medium term outlook
Medium term outlook • Expect subdued lending growth and heightened competition for deposits • NIM should benefit from new replicating portfolio settings, largely offset by higher revenue share Income payments which are likely to exceed historical levels • Other income expected to decline in FY23 due
Slide 28: Priorities
Priorities Heightened focus on cost management and capital utilisation Cash ROE 1. Targeting ROE at levels closer to peers in order to lift organic capital generation FY15 FY16 FY17 FY18 FY19 FY20 FY21 2. Heightened focus on cost BEN Peer average efficiency and volume vs margin management Cost to in
Slide 29: Summary
Summary Marnie Baker Managing Director 29
Slide 30: In summary
In summary • Strategy remains consistent leveraging our unique strengths • Resolute focus on customers and communities • Rapidly changing environment • Dynamic response required, with focus on factors within our control • Strengthened focus on returns, execution and sustainability 30
Slide 31: Businesses and Divisions
Businesses and Divisions >| Bendigoand AdelaideBank
Slide 32: Businesses and Divisions – Consumer Banking
Businesses and Divisions – Consumer Banking 1 FY22 volume growth ($m) • Net interest income increase driven by stronger lending growth +11% +12% partially offset by declining NIM • Decline in operating expenses due to the benefit of branch 58.2 rationalisation and sale of merchant services to Tyro 5
Slide 33: Businesses and Divisions – Business and Agribusiness Banking
Businesses and Divisions – Business and Agribusiness Banking • Net interest income decrease driven by lower average balances and FY22 volume growth ($m)1 declining margins over the year +0.8% +12% • Other income decrease due to lower revenue from government services business partially offset by high
Slide 34: Up - Australia's leading digital bank
Businesses and Divisions Up - Australia’s leading digital bank Most Trusted Bank1 and #1 550,000 Customers of which 47% are 2 Rated banking app considered ‘active monthly’ 3 with NPS of 72 Up Home 54,000+ Soft launch in July 22 leveraging Customers with home buyer Tic:Toc platform savings intentions
Slide 35: Community Bank - 'Profit with purpose' model
Businesses and Divisions Community Bank - ‘Profit with purpose’ model Community Bank footings ($b)2 Community Bank branches are a significant source 307 Over $272m in of stable customer deposits for the broader Group, increasing $2.5b in FY22 Community Bank community contributions 1 branches across
Slide 36: Community Bank – How the revenue share works
Businesses and Divisions Community Bank – How the revenue share works Community Interest 50/50 Bank footings rate FTP rate1 Margin income split between BEN and Community Banks Operating Community Operating 50% costs Bank profit costs Margin income share plus a Including staff costs, Distributions to
Slide 37: Tic:Toc - Leading Digital Home Loan platform
Businesses and Divisions Tic:Toc - Leading Digital Home Loan platform Portfolio balance ($b) 3.2 3 primary drivers of Tic:Toc’s value for BEN: 2.8 2.4 1. Platform drives significant and high-quality home loan volumes 2.0 1.6 • 64% increase YoY in home loan approvals 1.2 • 87% increase YoY in home lo
Slide 38: Homesafe
Businesses and Divisions Homesafe • The value of completions has led to a strong contribution to cash Homesafe portfolio & funding balance ($m) earnings in 2H22 1 Jun-22 split: • Proceeds on contracts completed during 2H22 exceeded carrying Melbourne – 60% 901.7 920.3 value by $3.0m Sydney – 40% • A
Slide 39: Investment spend
Investment spend Continuing to invest for longer-term simplification benefits Investment spend ($m)1 Top 5 projects by spend ($m): 165.1 166.6 77.9 101.3 • Core banking simplification (foundational technology) 101.6 • Foundational lending (foundational technology) 44.7 • Delphi bank integration (fou
Slide 40: Transformation program
Financials Transformation program FY19 1H22 FY22 FY24 # brands 13 10 10 3 # core banking systems 8 8 7 1 # IT applications 650 570 491 325 % applications in the Cloud 1% 13% 19.9% 50% % of API re-use 0% 25% 26% 40% Median time to decision (home loans)1 22 days 14 days 13 days ≤1 day % automated cred
Slide 41: Lending, funding and liquidity
Lending, funding and liquidity 41
Slide 42: Residential lending portfolio
Lending, funding and liquidity Residential lending portfolio Residential metrics1, 2, 3 Flow Portfolio 2H22 1H22 Jun-22 Dec-21 Jun-21 Retail lending 36% 44% 48% 50% 51% Third Party Banking lending 64% 56% 52% 50% 49% Lo Doc 0.01% 0.01% 0.4% 0.5% 0.7% Owner occupied 77% 71% 69% 67% 66% Owner occupied
Slide 43: Residential lending portfolio
Lending, funding and liquidity Residential lending portfolio Retail - portfolio ($b)1 Residential balance by state 26.8 26.2 25.6 24.5 23.9 15% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 8% 10% Third Party Banking - portfolio ($b)1 29.2 26.3 27% 24.6 22.4 19.9 38% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 2% 1 Loa
Slide 44: Residential lending portfolio
Lending, funding and liquidity Residential lending portfolio Current LVR of no buffer and <1 month Composition of no buffer and % of exposures by payments in advance ahead (% EAD) Strong LVR profile <1 month ahead (% of EAD) (including offsets)1 34 42 31 39% 27 21 19 26% 24 17 15 14 13 12 11 11 20%
Slide 45: Business lending portfolio
Lending, funding and liquidity Business lending portfolio Business portfolio ($b)1 Business balance by state 9.7 9.8 9.7 9.5 9.4 7.9 8.0 8.0 7.9 7.8 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 14% Portfolio Commitment 5% 8% SME segment ($b)2 13% 6.2 6.1 6.2 6.0 5.8 58% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 2% 1
Slide 46: Agribusiness lending portfolio
Lending, funding and liquidity Agribusiness lending portfolio Agribusiness balance by state Agri exposure by industry 4.6% 5.1% Grain/Sheep/Beef 6.9% Sheep/Beef 35.9% Beef 6.9% Grain 11.5% Sheep Dairy Other 9% 12.2% 16.9% Hort./Vit. 17% 19% Agribusiness portfolio ($) 20% 7.5 7.6 7.7 7.7 7.3 6.1 6.2
Slide 47: Customer deposits
Lending, funding and liquidity Customer deposits Customer deposit – split ($b) Customer deposit – funding costs 64.3 7.1 0.4% '> 0.01% - <= 0.05%' 18.9 '> 0.05% - <= 0.25%' Term 13.8% 68.4% 17.4% '> 0.25% - <= 1.50%' '> 1.5%' 22.5 0.2% '<= 0.01%' 11.8% '> 0.01% - <= 0.05%' Savings 2.1% 81.6% '> 0.05
Slide 48: Liquidity
Lending, funding and liquidity Liquidity Net Stable Funding Ratio (NSFR) 129.2% as at 30 June 2022 Liquidity coverage ratio LCR ($b)1,2 Wholesale funding & other 141% 134% $12.2b 2.6 2.0 10% regulatory overlay 12.5 12.1 Other loans Other flows $17.1b 1.0 1.0 1.8 Wholesale funding Retail & SME deposi
Slide 49: Risk and capital
Risk and capital >| Bendigoand AdelaideBank
Slide 50: Arrears
Risk and capital Arrears Residential loan arrears Business loan arrears 4.0% 0.8% 3.0% 2.0% 0.4% 1.0% 0.0% 0.0% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 90d+ 90d+ Consumer loan arrears Agribusiness loan arrears 2.0% 1.6% 3.0% 1.2% 2.0% 0.8% 1.0% 0.4% 0.0% 0.0% Jun-20 Dec
Slide 51: Specific provisions and impaired
Risk and capital Specific provisions and impaired Specific provision Specific provisions breakdown ($m) 60.0 balance ($m) 40.0 94.3 71.6 20.0 58.1 Represented by - Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 Jun-22 Dec-21 Dec-21 Dec-21 Dec-21 Dec-21 Dec-21 Consumer -
Slide 52: Construction portfolio
Risk and capital Construction portfolio • Construction portfolio currently representing ~1% of total group EAD and Exposure at default ($b) reducing in value 1.13 1.13 • Portfolio is well secured, with 87% of the book either fully secured or partially secured (fully secured is where the exposure is
Slide 53: Collective provisions
Risk and capital Collective provisions Total collective provision movements ($m) 246.7 10.0 236.7 0.0 2.2 7.3 229.4 0.0 229.4 229.4 5.9 225.7 0.0 225.7 Jun-21 Economic forecast and Additional overlays Dec-21 Economic forecast and Additional overlays Jun-22 scenario weights scenario weights 1,2 Scena
Slide 54: Collective provision modelling
Risk and capital Collective provision modelling Unemployment (%) Gross Domestic Product (%) 8.00% 10.00% 7.00% 7.50% 6.00% 5.00% 5.00% 2.50% 4.00% 0.00% 3.00% -2.50% 2.00% -5.00% Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Mild improvement Base s
Slide 55: Capital - in summary
Risk and capital Capital - in summary Credit risk weighted assets ($m) Jun-22 Dec-21 Jun-21 Dec-20 $37.7b (%) (%) (%) (%) $36.4b $36.3b $35.3b Common Equity Tier 1 9.68% 9.85% 9.57% 9.36% $34.3b Additional Tier 1 1.95% 2.04% 2.04% 2.81% Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Total Tier 1 11.63% 11.89% 1
Slide 56: Strengthening our ESG credentials
ESG Strengthening our ESG credentials • Establishment of dedicated ESG and Sustainability function Targets Key highlights • Delivery of an ESG Framework which sets out approach to ESG risks and opportunities management and governance • Delivered over 30 ESG capability building sessions for divisions
Slide 57: Important Information
Important Information This document is a presentation of general background information about the Group’s activities current at the date of the presentation. It is information in a summary form and no representation or warranty is made as to the accuracy, completeness or reliability of the informati
Slide 58: Analysts Media
Analysts Media Karen McRae James Frost Head of Investor Relations Head of Public Relations T: +61 3 8414 7060 M: +61 419 867 219 M: +61 417 186 500 E: james.frost@bendigoadelaide.com.au E: karen.mcrae@bendigoadelaide.com.au Alex Hartley Manager Investor Relations T: +61 8 8300 6290 M: +61 478 435 21
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