Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — Investor Day (November 2013)
68 slides from Bank Of Queensland's investor day presentation, Nov 14, 2013
Slide 1: Strategy update
BOQ STRATEGY UPDATE Strategy update 14 November 2013
Slide 2: Notes: BOQ strategy update November 2013
Notes: BOQ strategy update November 2013 1
Slide 3: Notes: BOQ strategy update November 2013
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Slide 4: Notes: BOQ strategy update November 2013
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Slide 5: Notes: BOQ strategy update November 2013
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Slide 6: Four pillar strategy is simple and consistent
Notes: • Four pillar strategy is simple and consistent: • Opening doors to more customers. • Continued focus on risk and return. • Further efficiency gains to be harvested. • The right people with capability to execute. BOQ strategy update November 2013 5
Slide 7: Track record of execution since recapitalisation
Notes: • Looking at the journey we’ve been on over the last 18 months, we’ve been able to demonstrate a track record of execution as we’ve established the foundations for a new operating model. • Since the balance sheet recapitalisation in April 2012, we’ve achieved an extraordinary amount. • We’ve
Slide 8: Notes:
Notes: BOQ strategy update November 2013 1
Slide 9: Refreshed retail leadership with execution capability
Notes: • To deliver results, strategy needs to be underpinned by strong execution capability. • More than 80% of the leadership group within retail at BOQ has been refreshed in the last 12 months with strong talented and experienced operators. • I’m joined today by Darren Maier, who runs our franchi
Slide 10: Relationship based model differs from competitors
Notes: • We operate a relationship based model that is different to our competitors & that customers love. • We are leveraging that service experience through new channels of growth – opening more doors for customers to deal with the bank; harvesting productivity and cost efficiencies by reform of t
Slide 11: Owner Managers operate the network
Notes: • Around two-thirds of our network is operated by Owner Managers - experienced bankers who have bought the right to operate their branch: • Personally invested in the business and passionate. • Generally well established in their community. • Average tenure is seven years – contrast this with
Slide 12: Owner Manager case study: Gladstone
Notes: • There is no way to better illustrate this than through a case study. • Andrew Bauer is the Owner Manager of two branches in Gladstone in Queensland. He is one of a number of very high performing owner managers. • Bought his branch seven years ago - $50m in footings. Grown at 25% CAGR during
Slide 13: Online search and broker market growth
Notes: • Virtually every new origination is commenced online during the search phase. A key part of this is social peer review – how does the product stack up and what are people saying about service. • Likewise, there has been rapid growth in the broker market – drivers being a desire to outsource
Slide 14: New channels of growth
Notes: • Key element of the strategy is fully leveraging our relationship based banking proposition through new channels of growth. • We know once a customer joins us they will love our service & the experience. • But we need to give new customers the opportunity to deal with us the way they want. •
Slide 15: Franchise network and relationship banking
Notes: • I joined BOQ 12 months ago after a decade and a half in franchising and retail. • The thing I love about franchising is the people and as Matt mentioned earlier with Andrew in Gladstone, we have a lot of fabulous franchisees right around the country. • Our proposition is best in market…in a
Slide 16: Owner Manager strategy
Notes: • Three key aspects of the Owner Manager Strategy: • Moving the franchise model from an historically retail lending centric business to being fully aligned to the strategy of BOQ both now and into the future. • Developing capability within our franchise group so we move from good bankers runn
Slide 17: Owner Manager scorecard
Notes: • This is an example of a real branch. The way the scorecard works is: • We determine the right KPIs to ensure alignment with the BOQ strategy. • We weight the KPIs based on relative return and importance. • Sitting over the top of the scorecard are a series of ‘gate closers’ where penalty po
Slide 18: Commission model implementation
Notes: • Implementation will commence in 2014 and will be progressive. • This analysis is retrospective - branches who on past data would be worse off, now understand the glide path to build the right structures in their businesses to bring themselves into alignment and ultimately be better off. • F
Slide 19: Longer Owner Manager terms and tenure
Notes: • Our average tenure is currently seven years. • Moving from a five year to a 10 year term gives those Owner Managers who we partner with the opportunity to further deepen relationships with existing and new customers. • 18 Owner Managers exited over the last 12 months. In my experience most
Slide 20: Corporate network issues
Notes: • Corporate Network has not traditionally been in great shape. Three reasons: • Previously Corporate network played role of failed franchisee takebacks. Usually in poor locations with low footfall and profitability. • Internal and market perception that every branch was ultimately for sale to
Slide 21: Corporate network strategy
Notes: • So, what is our strategy and how are we addressing the issues? • Firstly; firm focus on getting the right people into the right roles and motivating them for success. • Refreshed leadership team – seasoned bankers with experience in change management. • Restructured branch personnel to redu
Slide 22: Upside for the Corporate business
Notes: • Significant upside for the Corporate business. • With a focus to increase performance to 75% of our franchise operation relative to branch numbers within three years, a disciplined approach to executing our strategy will be critical. • While strategy execution has only just begun, early sig
Slide 23: Notes:
Notes: BOQ strategy update November 2013 16
Slide 24: Broker channel growth opportunity
Notes: • So where else is the growth going to come from? • Size of broker market growing. • Valued by consumers – outsource & simplify a complex problem. • Why we are different to the majors: • Know that the broker groups are keen to diversify flows. • We are independent. • Consumer preference for a
Slide 25: Broker pilot learnings
Notes: • Broker acceptance has been positive – over 240 brokers accredited in the first stage. • Lack of established BDM team has inhibited consistent flows. • Increased competition across commission and product - new product launched & continuing to review commissions. • Channel conflict has been a
Slide 26: Digital channel
Notes: • The digital channel is now totally integrated into a customer’s experience. • Phased approach. • Renewed focus on online sales. • Partnering with boutique technology houses & other providers to bring product to market. BOQ strategy update November 2013 19
Slide 27: New online services launched
Notes: • We’ve just launched two new online services this week • The Property Finder app has been developed with RP Data and enables customers to search property listings and download valuations & reports • The BOQ Property Ladder is a social media initiative which will allow us to engage and acquir
Slide 28: Other strategic pillars: risk, efficiency, talent
Notes: • I’ve talked a lot about channels of distribution but there are three other important pillars of our strategy: • Risk / return balance - changes to operating model, risk appetite, credit and collections implemented over last 12 months. This has driven significant reduction in housing arrears
Slide 29: Relationship model and new channels
Notes: • We operate a relationship based model that is different to our competitors and that customers love. • We are leveraging that service experience through new channels of growth – opening more doors for customers to deal with the bank because they know they’ll love the experience once they’re
Slide 30: Notes: BOQ strategy update November 2013
Notes: BOQ strategy update November 2013 1
Slide 31: Business Bank mandate
Notes: • My mandate when joining BOQ was simple: reinvigorate the Business Bank; establish an Agribusiness footprint; and build a financial markets capability. • I was attracted by the opportunity to work with a great team and get back to banking the way I think it should be done – an emphasis on re
Slide 32: Business banking objectives
Notes: • In achieving our goals, there are three key objectives as we expand: • Diversifying by product, geography, industry and asset class. • Heavy focus on profitable growth and cross sell. • Understanding and exploiting our competitive advantage – in our case a relationship model which attracts
Slide 33: Branches and business banking responsibilities
Notes: • Clear delineation of responsibilities between branches and business banking. • Branches need to be accredited to originate Commercial lending above $1m – introduced earlier this year. • Specialised capability in Agri, Property Finance and BOQ Private. • Focus on cross sell of financial mark
Slide 34: Tiered commercial lending
Notes: • Tiered approach to commercial lending – SME lending <$1m managed through the branch network, leveraging the natural fit of the OMB model. • Accreditation for branches to lend over $1m, otherwise referred to Commercial lending specialists. • BOQ has ranked #1 for Business Banking customers s
Slide 35: Corporate banking
Notes: • All lending above $5m referred to the Corporate team. • Expanding presence nationally with high calibre relationship bankers. • Genuine competitor with a compelling value proposition – proximity to decision makers and close relationships providing superior service. BOQ strategy update Novem
Slide 36: Property finance
Notes: • Targeted strategy to grow high quality property assets >$2.5m • Looking to diversify the portfolio away from QLD BOQ strategy update November 2013 7
Slide 37: Agribusiness
Notes: • Selective strategy to target generational farming families who have become disenfranchised with the major banks. • Heavy focus on cross sell of leasing, financial markets and deposit products. BOQ strategy update November 2013 8
Slide 38: Financial markets
Notes: • Expanding the risk management offering for our customers. • Ability to use as a lead product for broader business banking relationship. BOQ strategy update November 2013 9
Slide 39: Alignment with four pillar strategy
Notes: • Strategy aligns with the group’s broader four pillar strategy. • Risk-Return balance is an area of heavy focus – disciplined approach to growth. BOQ strategy update November 2013 10
Slide 40: Notes:
Notes: BOQ strategy update November 2013 1
Slide 41: BOQ Finance overview
Notes: • I’ve been CEO of BOQ Finance since Sept 2012 and involved in the industry since the early 90s. • While asset finance and leasing are just another form of lending it is different to general commercial lending – need an understanding of not only the capacity to repay but the industry and asse
Slide 42: BOQ Finance history and integration
Notes: • Started in 1971 so long track record in this industry. Built through a number of acquisitions, with the CIT acquisition in June 2010 transforming our size and scale. • At the start of FY13 commenced integration of our back and middle offices including settlements, customer service, collecti
Slide 43: Core product offerings
Notes: • Four core product offerings – general equipment finance, vendor, dealer finance and debtor finance. • All are reliant upon an understanding of assets and markets. • Based upon industry data our market share of commercial asset finance (excluding debtor and dealer finance) is 4%. When big ti
Slide 44: Asset life cycle funding solutions
Notes: • There are multiple asset and cash flow funding solutions offered by BOQF. This variability of offering allows BOQ to leverage into new customers and the asset life cycle to meet distribution and end customer needs. • This gives BOQ multiple revenue opportunities on the same asset – as per t
Slide 45: Speed and flexibility win business
Notes: • This is an example of how our flexibility and speed helps us win business. • The lead came from our Agri area – needed a quick turnaround to secure the deal. • We were able to give the customer certainty very quickly – while our competitor was still working out how to get the credit approve
Slide 46: Diversified portfolio
Notes: • One of the most important elements of a healthy finance business is having a well-diversified portfolio - while the rewards are typically in excess of other bank provided lending facilities, the risk also can be higher. • The BOQF book is well diversified across customer, geographic and ass
Slide 47: Arrears and bad debt trends
Notes: • While the graph on the right hand side only shows the 30 and 90 day series since Feb 2012, the arrears position is materially improved from Feb 2011 when 30 day arrears were running at 3% and 90 day arrears at 1.24%. • Regular reviews of risk appetite and process improvements, combined with
Slide 48: Market conditions and channels
Notes: • In terms of current market conditions, asset finance demand has been declining for some time, with fragile business confidence and strong competition. • There are some bright spots emerging, in particular construction. • In our Retail and Business Banking channels there is significant untap
Slide 49: BOQ Finance summary
Notes: • BOQ Finance is a relationship based asset finance specialist. • We have a diversified asset portfolio which has come from a diverse range of new business sources. • We’ve now been integrated into the Bank which gives is a scalable platform for growth. • We provide a key product capability t
Slide 50: Notes: BOQ strategy update November 2013
Notes: BOQ strategy update November 2013 1
Slide 51: Virgin Money rationale
Notes: • Virgin Money brand has been under-leveraged in Australia. • The first time the business and the major product manufacturers interests have been fully aligned. • Virgin Money brings online acquisition capability to BOQ Group. • Virgin Money is differentiated by: • Brand. • No legacy gives fr
Slide 52: Notes: BOQ strategy update November 2013
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Slide 53: The Virgin brand
Notes: • The Virgin brand has a tradition of disruption. • The brand allows (indeed compels) the holder to do things differently. • The current brand purpose also captures the goal of “doing good” for the community. BOQ strategy update November 2013 4
Slide 54: Original Virgin Money business and lessons
Notes: • The original cards business showed very strong customer acquisition. 650,000 customers within three years – but interests of all parties were not aligned. • Mortgage acquisition was also strong but securitisation model could not be funded through the GFC. • Lessons learned are that pulling
Slide 55: Notes: BOQ strategy update November 2013
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Slide 56: Customer base and cross-sell
Notes: • Good geographic diversity of customer base enhances BOQ group. • Core competency in marketing and direct customer acquisition brings new expertise to BOQ. • Potential cross-sell upside if it is well executed. • VMA existing business on track to being EPS accretive in second full year of own
Slide 57: Insurance, superannuation and cards
Notes: • Existing business diversified across three core product groupings of insurance, superannuation and cards. • 184,000 customers and growing. • The superannuation business is 100% sold online. The product design is the original low-cost retail fund now copied by the major banks. BOQ strategy u
Slide 58: Virgin brand advantage
Notes: • Virgin brand is the single biggest competitive advantage. • Strong brand awareness nationally. • Brand attributes and differentiated from the major banks. BOQ strategy update November 2013 9
Slide 59: Credit card book growth
Notes: • Credit Card market has negative annual growth. • Virgin continues to punch above its weight in book growth. • Proof point on ability of brand to execute in the online space. BOQ strategy update November 2013 10
Slide 60: Notes: BOQ strategy update November 2013
Notes: BOQ strategy update November 2013 11
Slide 61: Consumer relationship model
Notes: • Success will be derived from developing a unique relationship with consumers off the back of the brand and customer service proposition. • It is a whole of business model that is enabled through the nimbleness of the organisation, as well as a lack of silos and legacy product and profit poo
Slide 62: Target market
Notes: • Target market is 25 – 45 year olds by ”attitude”. • Urban, educated, tech savvy professionals. • Emotional connection to the brand as important as rational purchase. BOQ strategy update November 2013 13
Slide 63: BOQ and Virgin fit
Notes: • BOQ and Virgin are a highly complementary fit which has been lacking in past iterations. • Brands appeal to different customer segments and provides good geographic diversification for BOQ. • Virgin brings online capability and experience in direct and digital channels. • Complementary prod
Slide 64: Three year target plans
Notes: • Three year target plans for product, channel and service/customer. • Large body of work which, once executed, will produce a full service banking/wealth offering. • Highlights include substantial digital/mobile upgrade, bringing together customer service in a single customer interface and n
Slide 65: Virgin Money aligned interests
Notes: • The first time the business and the major product manufacturers interests have been fully aligned. • Virgin Money brings online acquisition capability. • Virgin Money is differentiated by: • Brand. • No legacy gives freedom of pricing and product design. • No channel conflict. • Small, nimb
Slide 66: Notes: BOQ strategy update November 2013
Notes: BOQ strategy update November 2013 1
Slide 67: Closing: execution of four pillar strategy
Notes: • Looking forward, as it has been for the past two years, it’s all about execution. • We’re largely implementing strategies that others have successfully implemented – it’s basic banking done well. • We will retain and exploit our competitive advantage through relationship-based distribution.
Slide 68: Important notices
DRAFT 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 indic