Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — 1H14 Earnings Presentation
33 slides from Bank Of Queensland's earnings presentation, Apr 11, 2014
Slide 1: Results presentation for the half year ended 28 February 2014
Results presentation for the half year ended 28 February 2014 11 April 2014 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 2: Agenda
Agenda Stuart Grimshaw Result overview Managing Director and CEO Anthony Rose Financial overview Chief Financial Officer Stuart Grimshaw Summary & outlook Managing Director and CEO 2
Slide 3: Strong performance across key metrics
Strong performance across key metrics Change 1H14 1H13 1H14 v 1H13 Statutory net profit after tax $134.7m $100.5m 34% Cash earnings after tax $140.2m $119.9m 17% Underlying profit before tax (Cash)(1) $249.2m $230.7m 8% Net interest margin (Cash) 1.77% 1.66% 11bps Cost-to-income ratio (Cash)
Slide 4: Key messages
Key messages 1 Simple, well executed strategy delivering record results 2 Disciplined approach to growth has continued – not compromising quality Proactive management of levers to deliver results – strong improvement in 3 margin, cost to income, risk metrics and ROTE 4 Balance sheet quality and stre
Slide 5: Multi-channel: improving momentum in Retail channels
Multi-channel: improving momentum in Retail channels Retail channels: source of lending applications 536 brokers accredited - lending applications Broker flow doubled between 1Q13 and 2Q13 Improved corporate branch productivity Corporate following restructure & refocus – lending Total = $739m ap
Slide 6: Risk-Return: focus on profitable growth
Risk-Return: focus on profitable growth Targeting growth and expansion in higher margin Business Banking, but not Commercial loans: diversifying by geography(1) compromising price or risk Sound risk management practices embedded in the lending processes across the business, contributing to quali
Slide 7: Operational excellence: reinvesting in future growth
Operational excellence: reinvesting in future growth Reinvestment for growth: Lending platform – digitisation, straight-through processing Consolidation of technologies across the group Front line staffing and capability uplift, particularly in Business Banking Savings harvested in: Proc
Slide 8: Talent & culture: driving customer satisfaction
Talent & culture: driving customer satisfaction Retail customer satisfaction metrics improving Net Promoter Scores – February 2014(1) 68% of customers classified as ‘high advocates’ (scored BOQ ANZ CBA NAB WBC 8-10/10) – ranked #1 in February 2014 among all major +17.5 -7.5 +1.5 +1.6 -10.9 banks
Slide 9: Good progress towards management targets
Good progress towards management targets FY15+ Target Metrics(1) 1H14 Actual (from 2H12)(5) BOQ asset growth -Retail 0x system 1.2x system -Business(2) 2.4x system 1.5x system Net Interest Margin 177bps Low-Mid 160s Expense growth(3) 2% < Inflation Cost to Income 43.8% Low 40s Bad & Doubtf
Slide 10: Financial overview
Financial overview Anthony Rose Chief Financial Officer
Slide 11: Strong financial performance
Strong financial performance Day count view 21% increase in half year cash 1H14 2H13 1H14 v 2H13 1H14 v 2H13(1) earnings on an adjusted basis(1), Net Interest Income $362.2m $359.5m 1% 5% to $140.2m Non interest income $81.6m $79.9m 2% 4% Total income $443.8m $439.4m 1% 5% Net interest income gr
Slide 12: Loan portfolio – focus on quality
Loan portfolio – focus on quality Lending stable over the half with disciplined approach to pricing and risk Better quality book with geographic diversification continuing – QLD down to 57% from 60% in 2H12 Business Banking volumes strong, but new business volumes offset by planned exits of ex
Slide 13: Run-off & deleveraging restraining growth
Run-off & deleveraging restraining growth Focus on improving quality of the book and building a sound platform for growth ( ) ( ) Line of Credit (LOC) run-off still high as portfolio re- weighting continues – down to $3.9bn from $5.2bn in Feb 2012 QLD continues to underperform national system
Slide 14: Deposit funding composition improved
Deposit funding composition improved Focus on composition rather than growth given flat asset growth – actively reduced reliance on high cost retail segments Deposits to Loan ratio maintained comfortably within target range of 65-70% Access to wholesale and middle market counterparties enhance
Slide 15: Proactive margin management
Proactive margin management Strong 5bps improvement on 2H13 2.10% 2.05% Tailwinds Rating upgrades reducing wholesale costs and opening up counterparty ( ) limits ( ) Deposit pricing adjustments with lower lending growth Headwinds High margin asset run-off (eg. Line of Credit) Lending front
Slide 16: Other income remains flat
Other income remains flat Continued pressure on banking fee income 83.2 82.5 81.6 79.9 BOQ Finance equipment sales lower due to customer inertia/lower reinvestment APS210 will shift component of other income to NII Strategies to offset include Business Banking expansion (fee income) and fina
Slide 17: Cost-to-income on track
Cost-to-income on track Cost-to-income down to 43.8% from 44.7% in 1H13 Compliance costs, network reconfiguration and reinvestment all accommodated within expense profile Intangible asset amortisation has been reducing but is expected to peak in 3-4yr horizon at double its low point, with subs
Slide 18: Significant improvement in impairment expense
Significant improvement in impairment expense Significant reduction in impaired assets, particularly commercial – levels now in line with broader industry New impaired assets have also decreased as a result of tighter risk management On track to achieve FY15 management target of 20bps 18
Slide 19: Continued success in realisation of impaired assets
Continued success in realisation of impaired assets 478.5 257 381.6 203 183 298.4 125 88 19
Slide 20: Impaired levels now in line with peers
Impaired levels now in line with peers 20
Slide 21: Continued positive arrears trends
Continued positive arrears trends Housing Commercial Housing arrears at consistent and Revised risk appetite and manageable levels origination framework driving Lower post holiday season spike reductions in commercial arrears QLD weighting of portfolio keeping overall levels higher Post holi
Slide 22: Strongest bad debt coverage amongst peers
Strongest bad debt coverage amongst peers 1.08% 0.94% 0.95% 0.90% 0.88% 0.81% 0.77% (1) Grossed up for tax effect Note: Major banks are accredited to run advanced risk weighting models. Comparison between the majors and the standardised regional banks is not like for like. 22
Slide 23: Strong capital generation
Strong capital generation Capital strength maintained with Total Capital at 12.41% and Common Equity Tier 1 at 8.84% Internal capital generation supporting dividend growth Underlying capital generation 23
Slide 24: Remain well capitalised vs peers
Remain well capitalised vs peers (1) Source: latest published S&P reports and company reports 24
Slide 25: Summary & outlook
Summary & outlook Stuart Grimshaw Managing Director and CEO
Slide 26: Opportunities for growth
Opportunities for growth Source of origination National roll out and scale up of BDM & Broker processing resource – target to double accredited brokers & aggregators in 2H14 15% ~5% Digital Leverage refresh of digital assets to drive online sales and lead generation ~20% New sources of growth Mo
Slide 27: Opportunities for growth
Opportunities for growth Business Banking expansion Continue to invest in existing metropolitan hubs with planned expansion into regional and rural Victoria / WA over the next 12 months Focus on credit quality, pricing for risk and achieving return hurdles Remain committed to growing a strong,
Slide 28: Summary & outlook
Summary & outlook 1 Record half yearly cash earnings of $140.2m Continued focus on execution with disciplined approach to growth, margin, risk 2 management and costs Increasing returns to shareholders with interim dividend 32 cents off a lower risk, 3 lower volatility platform Further growth potenti
Slide 29: Appendices
Appendices Additional information
Slide 30: BOQ Finance arrears
BOQ Finance arrears 0.82% BOQ Finance arrears 0.88% 0.81% 0.17% aie 0.13% 0.15% 0.14% 0.13% 0.15% —_, — —- —a Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 —*30DPD -®-90DPD 30
Slide 31: Cash to statutory reconciliation
Cash to statutory reconciliation 1H14 2H13 1H13 Legacy items dealt with, only Cash earnings / (loss) after tax $140.2m $131.0m $119.9m existing litigation remains Amortisation of customer contracts ($2.5m) ($4.2m) ($4.9m) Amortisation of fair value adjustments - - ($1.0m) Hedge ineffectiveness ($0
Slide 32: Important notices
Important notices Financial amounts All dollar values are in Australian dollars (A$) and financial data is presented as at the date stated. Pro-forma financial information and past information provided in this Presentation is for illustrative purposes only and is not represented as being indicative
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