Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 2012 Earnings Presentation
55 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 20, 2012
Slide 1: Bendigo and Adelaide Bank 2012 half year results
For personal use only Bendigo and Adelaide Bank 2012 half year results February 20, 2012 1
Slide 2: Disclaimer
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 does not purport to be complete. It is to be read in conjunction with the Bank’s full year results filed with the Australian
Slide 3: Agenda
For personal use only • Overview • Business performance • Outlook Agenda 3
Slide 4: Overview
For personal use only Mike Hirst Group Managing Director Overview 4
Slide 5: Our result
Our result Financial performance • Net profit after tax $57.9m - Statutory earnings For personal use only • Net profit after tax before specific items $157.4m • Statutory earnings affected by $95.1m goodwill write-down in wealth cash generating unit (announced 16th December 2011) • Half year dividen
Slide 6: Our result
Our result Business strength • Above system mortgage growth1 • Core Tier 1 ratio of 7.78% and Tier 1 ratio of 8.61% as at December 2011 For personal use only • Total capital ratio of 10.93% as at December 2011 • 77% retail funded3 as at December 2011 • Current liquidity above 12.5%, and more than 25
Slide 7: Balance sheet strength
Balance sheet strength Capital * For personal use only • Significant increase in capital ratios • Current Core Tier 1 in excess of expected Basel III requirements • Details of SPP announced today Funding • More than 77% deposit funded • No government guaranteed wholesale rollover task • Opportunitie
Slide 8: Robust foundations for volatile times
Robust foundations for volatile times • Assets – Above system mortgage growth For personal use only • Liabilities – Growth in deposits continue to be strong – Term deposits used to balance liquidity • Ratings – Two rating upgrades in the past 12 months • Brand and customer advocacy – Still #1 for cu
Slide 9: Bank of Cyprus – opportunistic and complementary acquisition
Bank of Cyprus – opportunistic and complementary acquisition • Acquisition of 100 per cent of BOCAL announced in December 2011 For personal use only • Settlement expected 29 February 2012 • Focus on Hellenic communities in Australia • 14 branch network across NSW (4), VIC (8) and SA (2) • Diversifie
Slide 10: Continued strategic investment - NoQ
Continued strategic investment - NoQ For personal use only • Strategic investment in e-commerce • “Hub IT” – a company developing on-line and smart-phone applications for the retail and food/beverage industries • ‘NoQ’ (no queue) ordering system launched and operational Overview 10
Slide 11: Strategic rationale - NoQ
Strategic rationale - NoQ For personal use only • Leverages existing payments, processing and telecommunications resources within the bank Retail banking and infrastructure • Launched September 2011 – 60+ vendors – 10,000+ app downloads from Apple iTunes since September 2011 Telecommunications and c
Slide 12: The Community Bank model has proven to be robust and sustainable
The Community Bank® model has proven to be robust and sustainable For personal use only • Communities have proven to be great partners in banking, and together we have opened more than 280 branches in 12 years (more than 60 in the last three years) • More than $68m in Community grants over 12 years
Slide 13: Business performance
For personal use only Richard Fennell Chief Financial Officer Business performance 13
Slide 14: Business performance - financials
$m HY Dec 2010 HY June 2011 HY Dec 2011 change (pcp) Net profit after tax ($m) 173.9m 168.2m 57.9m $116.0m Cash earnings ($m) 162.1m 174.1m 162.6m $0.5m For personal use only Cash EPS 44.7 ¢ 47.6¢ 43.9 ¢ 0.8 ¢ Dividend per share 30.0¢ 30.0¢ 30.0¢ –– Cost to income 57.7% 57.0% 58.2% 0.5% Net interest
Slide 15: Group performance
Group performance For personal use only Business performance - financials Note: figures are for six-monthly reporting periods 15
Slide 16: Net interest margin (%)
Net interest margin (%) For personal use only June 2011 December 2011 Business performance - financials 16
Slide 17: Funding costs
Funding costs For personal use only • Price increases across all funding sources – Retail deposits – Unsecured wholesale – Secured wholesale (RMBS and covered bonds) Business performance - financials Note: above graph represents post GFC, the weighted average cost of core funding channels over the o
Slide 18: Return on equity (ROE) and return on tangible equity (ROTE)
Return on equity (ROE) and return on tangible equity (ROTE) For personal use only • ROE decrease of 10bps over prior corresponding half year period • Maintain ROE discipline on investments and initiatives • Medium-term returns to be driven by strong ROTE, and efficiency focus • Basel II advanced ini
Slide 19: Cost-to-income
Cost-to-income For personal use only • Increase in cost-to-income is primarily a factor of lower income, as costs have remained steady over the period • Long-term target of 55 per cent remains • BEN remains determined to retain capacity within the network Business performance - financials 19
Slide 20: Operating expenses
Operating expenses For personal use only • Increase since June-11 $3.9m (1.1%) Business performance - financials Note: BEN BAU = BEN business as usual 20
Slide 21: Business performance – retail banking
• Profit down 11% vs pcp For personal use only • Homesafe income reduction • Increased allocation of central costs – amortisation of new CRM system • Continued investment in branch distribution • Interest income reflects volume off-setting price • Credit quality remains sound Business performance –
Slide 22: Business performance – Third Party banking
For personal use only • Profit up 8.9% vs pcp driven by portfolio growth • Flat operating expenses • Scalable business model, with sustainable commission structure Business performance – Third Party banking 22
Slide 23: Business performance - Wealth
For personal use only • Profit down 27.7% vs pcp • Material fall in interest income due to circa $800m reduction of margin lending portfolio • Slight increase in operating costs and credit expenses • Goodwill write-down of $95.1m affects statutory earnings Business performance - Wealth 23
Slide 24: Business performance – Rural Bank
For personal use only • Profit up 25.2% vs pcp • Reduction in credit expenses to more normal levels • Further growth potential through distribution alliances • Roll-out of Australia Post distribution continues Business performance – Rural Bank 24
Slide 25: Funding mix
Funding mix • No Government Guaranteed wholesale funding rollover risk For personal use only Business performance - financials Note: All figures include Rural Bank 25
Slide 26: Retail deposits
Retail deposits • Term deposits priced to manage liquidity • Successful growth and retention strategies in place • Not a price leader – value proposition driven For personal use only • Term deposit retention rate consistently above 80% $18bn $11bn Business performance - financials *Source: Company d
Slide 27: Business performance - capital
• Material improvement in capital ratios over the reporting period Capital • December 2011 Core Tier 1 approx 7.78% • Pro-forma March 2012 Core Tier 1 approx 7.59% For personal use only • Significant hybrid capacity to improve capital efficiency (subject to market conditions) Business performance -
Slide 28: Core Tier 1 levels
Core Tier 1 materially higher • Continuing improvement in For personal use only Core Tier 1 levels • Basel II advanced initiative underway Business performance - capital Note: Pro-forma March 2012 assumes A$70m SPP and includes Bank of Cyprus Australia Limited risk-weighted assets 28
Slide 29: Total provisions and reserves for doubtful debts ($m)
Total provisions and reserves for doubtful debts ($m) • Total provisions increased $0.4 million over the For personal use only past six months • Rural Bank specific provisions have remained flat at $33.7m (Dec-11) vs $33.8m (Jun-11) • Great Southern represents $23.8m of total provisions • Collective
Slide 30: Business performance - arrears
For personal use only Business performance - arrears 1. ‘90d+ excluding arrangements’ data only excludes those arrangements from October 2011 to December 2011 for retail originated residential mortgages 30
Slide 31: Bank of Cyprus Australia Limited
Bank of Cyprus Australia Limited Purchase price—capital release For personal use only • Acquisition EPS accretive in year one • Funding synergies of $2.0m • Pro-forma opex synergies of $4.0m • Expected to be in line with BEN’s ROE target on a full- year run-rate basis Business performance - BOCAL 31
Slide 32: Outlook
For personal use only Mike Hirst Group Managing Director Outlook 32
Slide 33: In summary….
In summary…. For personal use only • Strong capital and liquidity position • Asset pricing adjusted due to higher funding costs • No signs of deterioration in credit • Ratings upgrades vindicates long term approach • General market conditions remain difficult • Continue to opportunistically invest O
Slide 34: Appendices
For personal use only Appendices 34
Slide 35: A well diversified business
A well diversified business Business Segment Business conditions For personal use only • Difficult and uncertain market conditions remain Domestic bank operating four distinct • Unique community, customer, and partner proposition brands • Ratings upgrade reflects sound credit quality and capital pos
Slide 36: A well diversified business
A well diversified business Business Segment Business conditions For personal use only Margin lending, wealth management, • Launch of ‘SmartStart Super’ superannuation • Independent provider of choice in select products • Increased investment in IT and distribution capability • Growing brand and dis
Slide 37: 1H12 performance
1H12 performance For personal use only • Retail, Third Party and Rural Bank continue to perform • Wealth affected by loss of confidence in equity markets, resultant goodwill impairment of $95.1m • Margin pressure due to funding- hedging costs and asset mix Overview *Total segment result, excluding c
Slide 38: Retail deposits
Retail deposits For personal use only $18bn $11bn Business performance - financials *Source: Company data 38
Slide 39: Specific provisions
Specific provisions For personal use only Represented by Provision as % of Consumer Retail 3rd Party Commercial Portfolio Funding Rural Wealth BEN portfolio Mortgages Mortgages / Business (includes Great Bank total Southern) HY2011 0.17% 0.02% 0.03% 0.56% 1.00% 0.60% 0.00% 0.19% HY2012 0.12% 0.02% 0
Slide 40: Total provisions and reserves for doubtful debts ($m)
Total provisions and reserves for doubtful debts ($m) For personal use only Business performance - credit 40
Slide 41: A diversified business
A diversified business For personal use only Business performance - financials Note: Figures exclude central functions 41
Slide 42: Geographic spread
2158 ATM’s 479 branches For personal use only 8 0 1 4 12 173 346 50 45 68 50 48 3 41 22 25 11 113 5 73 124 341 16 48 58 445 956 87 72 191 131 152 817 25 3 288 Community Bank® 9 8 Bendigo branded (3rd party) ATM’s 385 20 Geographic spread 42
Slide 43: Systematic growth in retail
Systematic growth in retail For personal use only • 12 Community Bank® branches opened in HY2012 • 15-20 branches to be opened in FY2012 • Relatively immature network Deposits per Community Bank® branch Community Bank® branches by age Community Bank® and retail 43
Slide 44: Growth – retail banking
Growth – retail banking • Continued growth in retail network For personal use only • Strong pipeline for Community Bank® branches. Retail banking Source: BEN internal data. Notes: 2001 includes FABS acquisition, 2007 includes ADB merger. Excludes alliances and private franchises. 44
Slide 45: Opportunities in Third-Party Banking
Opportunities in Third-Party Banking For personal use only • Fewer competitors in the market • Variable cost base Third-Party mortgage business 45
Slide 46: Margin Lending dependent on equity market sentiment
Margin Lending dependent on equity market sentiment • Wealth business affected by lack of For personal use only confidence in markets • Write-down in business of $95.1m • Strong long term relationships with many financial advisory firms • Strong margins • Continued excellent credit quality Business
Slide 47: Towards a resolution
Towards a resolution • Reducing portfolio and borrowers • Court date now set for M+K class action – August 2012 For personal use only Great Southern 47
Slide 48: Secure and low risk loan portfolios
Secure and low risk loan portfolios • 98.3% secured For personal use only • 97.8% secured by mortgages and listed securities • Residential lending – arrears have improved in HY12 – average LVR 61.8%1 • Margin lending – average LVR 45% – 87% of portfolios held ≥ 4 stocks – negligible arrears Credit N
Slide 49: Construction portfolio
Construction portfolio For personal use only • $752m of loans (0.8% decrease since June-11) • 1.6% of total loans • $143k average loan size • $30m largest loan size • Geographic spread • $39m impaired loans • $6m in arrears (0.8% 90 days+) Credit 49
Slide 50: Group exposures
Group exposures – total $46.8bn Mortgages Dec-11 Jun-11 Dec-10 Owner occupied 63.0% 62.7% 62.6% Investment 37.0% 37.3% 37.4% For personal use only Lo Doc 7.0% 7.5% 7.9% Retail mortgages 50.2% 49.4% 49.4% Third Party mortgages 49.8% 50.6% 50.6% Mortgages with LMI 42.7% 44.6% 47.8% Average LVR 61.8% 6
Slide 51: LVR trends
LVR trends For personal use only • No material change in LVR trends of new business written • LMI required for high LVR loans Credit 51
Slide 52: MIP geographic distribution
MIP geographic distribution For personal use only Credit Note: Includes Commercial property MIP and Business Banking portfolio. MIP# represents the percentage of MIP by the number of loans. Excludes Rural Bank. 52
Slide 53: Commercial – industry split
Commercial – industry split For personal use only Credit 53
Slide 54: Loans under management
Loans under management For personal use only Rural Bank – loan diversity 54
Slide 55: Analysts and Media contacts
Analysts Media For personal use only Will Rayner Lauren Treacy Head of Capital and Investor Relations Head of Media and Communications Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 8 8220 7764 Tel: +61 3 5485 7109 Mob: +61 437 794 366 Mob: +61 407 340 283 Email: will.r
Bendigo and Adelaide Bank — H1 2012 Earnings Presentation on 6ix