Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2023 Earnings Presentation
61 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 14, 2023
Slide 1: Results Presentation
Results Presentation For the year ended 30 June 2023 Released 14 August 2023 Bendigo and Adelaide Bank Limited ABN 11 068 049 178
Slide 2: Acknowledgement of Country
Acknowledgement of Country I would like to begin today by acknowledging the Traditional Custodians of the many lands that we are gathered on. Specifically, I would like to respectfully acknowledge the Gadigal People of the Eora Nation. I would also like to acknowledge the Traditional Custodians of t
Slide 3: Contents
Contents 01 02 03 04 Overview FY23 Results Summary Additional information MARNIE ANDREW MARNIE BAKER MORGAN BAKER PAGE 4 PAGE 17 PAGE 32 PAGE 36 3
Slide 4: Overview
Overview Marnie Baker – CEO and Managing Director 4
Slide 5: FY23 highlights
FY23 highlights Key highlights Cash earnings Net Interest Margin Strong result delivered with a prudent approach to up 15.3% up 20bps balance sheet management to $576.9m to 1.94% Delivered improved returns Key transformation milestones achieved, particularly Full year dividend CTI improved in
Slide 6: FY23 divisional results
FY23 divisional results Key segments delivering for customers in highly competitive environment Consumer Cash earnings ($m) Business & Agribusiness • 45.9% increase in cash • 0.4% increase in cash earnings driven by NIM earnings expansion • 16.5% FTE reduction in • 1.1% FTE reduction in FY23 FY23 •
Slide 7: Unwavering commitment to our customers
Unwavering commitment to our customers Our proactive approach Economic conditions Mortgage Help Centre • Dedicated service to understand customers’ personalised Cost of living pressures remain a major challenge to circumstances households • Key purpose is to keep customers in their homes • RBA cash
Slide 8: 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 Sustainability Operating Model Based
Slide 9: Disciplined year-on-year execution of strategy
Disciplined year-on-year execution of strategy Staying true to our purpose FY19 – FY20 FY21 – FY22 FY23 • Launch of Up Bank in Oct 2018 • Acquired Ferocia in September 2021, • Up Bank reached 700,000 resulting in full ownership of Up Bank customers, $1.5b in deposits • First bank to provide all toge
Slide 10: Transforming our business
Transforming our business Continuing focus delivering results 1. Returns 2. Execution 3. Business Sustainability 10
Slide 11: Transforming our business: Returns
Transforming our business 1. Returns Cash EPS (cents) • Cash earnings have increased 15.3% Impacted by COVID provisioning 102.1 through disciplined cost 89.8 85.0 85.6 management and responsible management of volume and margin 59.7 • Structural foundations in business practices that return above cos
Slide 12: Transforming our business: Execution
Transforming our business 2. Execution Transformation scorecard FY23 achievements: FY19 FY22 FY23 FY24 • Reduction of core banking systems # brands1 13 10 7 3 # core banking systems2 8 7 4 1 • Decommissioned data centre infrastructure and related services # IT applications 650 491 401 325 • Introduc
Slide 13: Transforming our business: Execution
Transforming our business 2. Execution % of residential lending Up Home: settlements from digital1 • Portfolio of $74m+ from beta launch in July 2022 • $514m in identified savings towards a home • Cost of acquisition significantly lower than group 12.0% BEN Express: • Consolidated offering in 2H23 8
Slide 14: Execution – market leading innovation
Transforming our business 2. Execution – market leading innovation Save Up 1000 — Savings Habit Creation 715,000+ Upsiders3 145,000+ Upsiders started, 10,800+ completed ~$20m saved. ~20% have never saved $1k before 1 51.5 NPS4 2.6% month-on-month growth Locked Savers — Financial Wellbeing 78% custom
Slide 15: Transforming our business: Business Sustainability
Transforming our business 3. Business Sustainability Long-term focus for all stakeholders Recent outcomes (comparisons vs June 2022) Customers: • Multi-channel experience continues to broaden in response to customers’ evolving needs NPS increase of +2.1 vs industry2 • Supported customers through p
Slide 16: ESG & Sustainability performance
ESG & Sustainability performance Sustainability commitments FY23 outcomes Environment & Climate No direct lending exposure to coal, coal seam gas, crude oil, natural gas, native forest logging projects Achieved Maintain carbon neutral status Maintained since 2020 BEN Operations: 40% Purchase 100% re
Slide 17: FY23 results
FY23 results Andrew Morgan – Chief Financial Officer 17
Slide 18: Delivering on key focus area - Returns
Delivering on key focus area - Returns Strong performance across all line items Focus areas What we have delivered Outcomes • Disciplined utilisation of capital Return on equity Managing through selectively competing in volumes key markets 8.62% (+90bps) and margins • BAU costs well managed with Imp
Slide 19: Financial and operating performance
Financial and operating performance Strong performance across all line items FY23 FY23 FY22 v FY22 ($m) ($m) (%) Total income 1,932.8 1,695.7 14.0% Key points • Income reflects ongoing Operating expenses 1,061.2 1,002.1 5.9% discipline in managing volumes and margins Underlying profit 871.6 693.6 25
Slide 20: Cash earnings vs Statutory NPAT
Cash earnings vs Statutory NPAT FY23 adjustments FY23 v FY23 FY22 FY22 ($m) ($m) (%) Cash earnings after tax 576.9 500.4 15.3 Non-cash items: Reflects impact of higher funding costs partly - Homesafe (net) (5.7) (3.4) offset by modest appreciation in property values - Software impairment (33.3) - As
Slide 21: Total income
Total income Volume growth and NIM improvement 2 Average growth: • Residential lending: +3.9% FY23 ($m) • Business lending: -0.4% • Customer deposit growth: +4.9% NIM: +20bps +14.0% 249.1 2.3 9.7 1,932.8 1,695.7 1 FY22 Net interest income Other income ex Homesafe Homesafe FY23 Key income callouts: •
Slide 22: Proven sustainable residential lending growth
Proven sustainable residential lending growth Diversified channels; strong retention FY23 fixed rate maturities by dynamic LVR bands • Intense competition and use of cashbacks limited (% EAD) ability to write business above cost of capital in 1H23 • Opportunity to compete improved through 2H23 and 7
Slide 23: Strength of deposit franchise
Strength of deposit franchise Branch network provides stable funding source 1 Household deposit/loans ratio 69% 62% 60% 62% 55% • Proprietary branch network and our Community Bank partners are a critical source of deposit funding • New digital channels including Up represent BEN System Major Average
Slide 24: Net interest margin
Net interest margin Strong result reflecting disciplined approach to volume / margin trade-offs 2H23 Post-revenue share Q4 average NIM: 1.96% Variable and fixed residential loan competitive pressure 0.06% 0.01% +8bps 2.06% 0.08% 0.19% 1.98% 1.90% 0.08% Increase driven by benefit of replicating portf
Slide 25: Operating expenses
Operating expenses Prudently managed in inflationary environment Contribution +2.4% +1.8% +1.7% to movement Investment in risk, digital, Impact from scams / fraud BAU costs well lending transformation +5.9% below inflation +4.2% 17.3 1,061.2 18.0 1,043.9 23.8 1,002.1 1 FY22 BAU Investment spend FY23
Slide 26: Credit quality
Credit quality Credit metrics remain sound Credit expense ($m)1 Gross impaired loans ($m) Loan arrears2 Collective provision Specific provision Residential 90d+ Business 90d+ Agribusiness 90d+ % of gross loans Expired loans impacted arrears rate 208.8 28.0 2.52% 152.8 0.17 2.07% 2.10% 1.95% 21.2 133
Slide 27: Credit quality
Credit quality Residential loan portfolio remains resilient Current LVR of no buffer and <1 month % of exposures by payments in advance Composition of No Buffer and (including offsets)1 ahead (% EAD) < 1 month ahead (% of EAD) 3433 31 36% 39 30% 17 16 16 20 15 22% 13 14 11 11 12 15 8 9 9 9 10 10 8 8
Slide 28: Provisioning
Provisioning Small top-up in collective provisions appropriate for the environment Total provisions ($m) Collective provisions ($m) Sector overlays reflect the risks associated with: • Potential residential mortgage stress resulting from fixed / IO 445.7 to variable / P&I conversions • Challenges in
Slide 29: Funding and liquidity
Funding and liquidity Stable and well diversified funding sources Funding profile ($b) • Strength of customer deposit franchise demonstrated by 23.4 24.4 % of customer deposits to total funding ratio 21.4 18.9 24.4 73% 19.8 • Net +$11bn funding contributed from Community Bank Customer 38.1 45.3 41.7
Slide 30: Capital and dividends
Capital and dividends Capital position strengthened; dividend increased CET1 movement - 6 months (%)1 0.63 0.44 0.06 +112bps 0.15 1.11 11.24 0.01 0.08 11.25 10.13 Dec-22 Capital Dec-22 Earnings Dividend RWA Capitalised Deferred tax Other Jun-23 reforms (adjusted) (net of DRP) expenses assets • Benef
Slide 31: Building blocks to achieve ROE above cost of capital
Building blocks to achieve ROE above cost of capital FY23 proof point Continued focus on cost management BAU costs managed to and targeting improvement in CTI ratio sub-inflation Community Investing in our deposit gathering franchise underpinned by Bank net the strength of our Community Bank partner
Slide 32: Summary
Summary Marnie Baker – CEO and Managing Director 32
Slide 33: FY24 deliverables
FY24 deliverables • Leveraging our point of difference: • Continue to invest in digital channels 1. Returns • Grow at or better than system through channel optimisation • Maintain our strong retention rates and our market leading NPS • Continued focus on prudent cost management for the current envir
Slide 34: Our strategy delivering value
Our strategy delivering value A streamlined business, retaining our core differentiators FY19 FY23 FY26 13 3 8 2 7 2 3 1 4 Divisions Brands Core Banking Divisions Brands Core Banking Divisions Brands Core Banking Systems Systems Systems • 1.7m customers • 2.4m customers • Return on equity in excess
Slide 35: Q&A
Q&A Marnie Baker CEO and Managing Director Andrew Morgan Chief Financial Officer 35
Slide 36: Additional Information
Additional Information > | BendigoandAdelaideBank
Slide 37: FY23 result
FY23 result Strong performance across key metrics Cash earnings ($m) NIM CTI ROE +15.3% +20bps +90bps 1.95% 1.94% 60.3% 576.9 8.62% 500.4 59.1% 457.2 -420bps 7.67% 7.72% 1.74% 54.9% FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23 Cash EPS (cents) DPS (cents) CET1 Customer deposits +157bp
Slide 38: Key performance indicators
Key performance indicators Consistent performance 27.3 24.5 23.2 Customer Net promoter numbers 2.39m score3 1.6 2.05m 2.18m -1.8 -5.2 Jun-21 Jun-22 Jun-23 Jun-21 Jun-22 Jun-23 74.5% Market 73.2% 72.8% MFI business share1 NPS4 44 41 46 -13 -9 -3 2.4% 2.4% 2.3% Jun-21 Jun-22 Jun-23 Jun-21 Jun-22 Jun-2
Slide 39: Consumer
Consumer Multi-channel strategy delivering benefits Volume ($m)1 Divisional NIM (%) Jun-21 Jun-22 Jun-23 • Net Interest income increased by 42.9% due to 2.22 disciplined approach to margin and volume in home lending 60.2 1.65 58.7 55.8 53.0 • Operating expense increased due to investment in 52.6 Up,
Slide 40: Business and Agribusiness
Business and Agribusiness Significant opportunities the medium term 1 Volume ($m) Divisional NIM (%) Total division net interest income increased by 7.8% Jun-21 Jun-22 Jun-23 2.76 • Business portfolio reduced by 2.7% due high level of amortisation from very mature portfolio 19.7 19.6 19.2 18.1 17.9
Slide 41: Homesafe
Homesafe Homesafe wealth release • Reduced Homesafe income reflects lower level of completed Homesafe portfolio & funding balance ($m) contracts from prior year Jun-23 split:1 • Proceeds on contracts completed during 2H23 exceeded carrying Melbourne – 60% 957.8 value by $4.9m and up $8.4m over the f
Slide 42: Residential lending
Residential lending 1,2,3 Residential metrics Flow Portfolio 2H23 1H23 Jun-23 Dec-22 Jun-22 Flow / Portfolio amount $7.0b $6.7b $57.6b $56.1b $55.6b Retail lending 34% 41% 47% 47% 48% Third Party Banking lending 66% 59% 53% 53% 52% Lo Doc 0.00% 0.03% 0.3% 0.4% 0.4% Owner occupied 78% 76% 71% 70% 69%
Slide 43: Residential lending
Residential lending Retail and Third Party Banking portfolios Residential balance by state Retail - portfolio ($b)1 27.2 26.8 26.6 26.2 25.6 15% Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 9% 9% Third Party Banking - portfolio ($b)1 27% 30.5 29.2 29.5 38% 26.3 24.6 2% Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 1. Lo
Slide 44: Business lending
Business lending Portfolio and state splits Business balance by state Business portfolio ($b)1 9.7 9.8 9.7 9.4 9.1 8.9 8.0 8.0 7.9 7.8 7.4 7.3 13% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 5% 8% Portfolio Commitment SME segment ($b)2 13% 6.4 6.3 6.4 6.2 6.0 5.6 59% 2% Dec-20 Jun-21 Dec-21 Jun-22 Dec
Slide 45: Agribusiness lending
Agribusiness lending Portfolio splits Agribusiness balance by state Agribusiness exposure by industry 4.9% 6.2% Grain/Sheep/Beef 6.1% Sheep/Beef 31.5% Beef 8.4% Grain Sheep Dairy 15.4% 9% 14.9% Other 12.6% Hort./Vit. 17% 19% Agribusiness portfolio ($) 20% 7.7 7.8 8.1 7.6 7.7 6.2 6.3 6.6 5.9 6.0 33%
Slide 46: Financial assets - credit risk exposures
Financial assets - credit risk exposures By industry (AASB9) Jun-23 ($b) Jun-22 ($b) Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Residential/Consumer 54.8 5.2 0.4 60.4 55.2 4.1 0.5 59.8 Accommodation and food services 0.2 0.0 0.0 0.2 0.2 0.1 0.0 0.3 Administrative and support service
Slide 47: Net interest margin
Net interest margin FY23 NIM and historical trends FY23 (%) Variable and fixed residential loan competitive pressure 0.32% 0.05% +20bps 2.15% 0.21% 0.48% 1.94% 1.74% 0.34% Increase driven by benefit of replicating portfolio on capital and deposits FY22 Lending pricing Deposit and funding pricing Mix
Slide 48: Net interest margin
Net interest margin Capital and deposit hedges • Additional NIM benefit expected over medium term from Average hedged yield on capital and deposit replicating portfolio impact of higher interest rates on capital and deposit replicating yields 1H22 2H22 FY22 1H23 2H23 FY23 • Actual outcomes will be d
Slide 49: Community Bank revenue share
Community Bank How the revenue share works 50/50 split Community Interest Margin Bank FTP rate1 rate income footings between BEN and Community Banks Community Bank Community Bank revenue: Community Operating Operating 50% costs Bank profit costs Margin income share plus a Distributions to Community
Slide 50: Community Bank
Community Bank ‘Profit with purpose’ model Purpose led vision: Community Bank footings ($b)3 Community Bank branches are a significant source • Celebrating 25 years since inception of customer deposits for the broader Group, increasing ~$1.9b in FY23. • Over $320m in community contributions1 32.3 •
Slide 51: Arrears
Arrears Remain benign Residential loan arrears Business loan arrears 1.0% 5.0% 0.8% 4.0% 0.6% 3.0% 0.4% 2.0% 0.2% 1.0% 0.0% 0.0% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Consumer loan arrears Agribusiness loan arrears1 Personal Loans 90d+ Credit Cards 90d+
Slide 52: Investment spend
Investment spend Continuing to invest for long-term simplification benefits Investment spend ($m)1 Top 5 projects by spend: % Opex 3 • Lending Transformation Program (Foundational Technology) 48% 28% 37% 44% • Open Banking (Risk & Compliance) • Up Digital Bank 104.6 98.1 3.6 • Core Banking – Product
Slide 53: Specific provisions and impaired assets
Specific provisions and impaired assets Downward trend on impaired balances has continued Specific provisions breakdown ($m) Specific provision 40.0 balance ($m) 20.0 58.1 Represented by 46.5 47.8 - Jun-22 Jun-23 Jun-22 Jun-23 Jun-22 Jun-23 Jun-22 Jun-23 Jun-22 Jun-23 Jun-22 Jun-23 Dec-22 Dec-22 Dec
Slide 54: Collective provisions and scenario outcomes
Collective provisions and scenario outcomes Continued caution is warranted Total collective provision movements ($m) 17.6 11.3 2.2 0.0 238.5 5.9 1.1 5.5 232.3 229.4 225.7 Dec-21 Economic Additional Jun-22 Economic Additional Dec-22 Economic Additional Jun-23 forecast and overlays forecast and overla
Slide 55: Collective provisions and scenario outcomes
Collective provisions and scenario outcomes Model inputs Unemployment (%) Gross Domestic Product (%) 12.00% 5.00% 10.00% 2.50% 8.00% 0.00% 6.00% 4.00% -2.50% 2.00% -5.00% Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-25 Jun-26 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-25 Jun-26 Mild improvement Base scenario
Slide 56: LCR and NSFR
LCR and NSFR Funding & liquidity ratios remain well positioned NSFR full year (%)3 Net Stable Funding Ratio ($b) As at 30 June 2023 121.5% 0.3 1.0 8.0 4.6 129.2 5.0 Wholesale Funding & Other 2.4 12.0 Customer & SME Deposits 2.4 22.2 Capital 121.5 Other Loans 51.2 Residential Mortgages LVR <80% 29.8
Slide 57: Customer deposits
Customer deposits Split and funding costs Customer deposit - split ($b) Customer deposit – funding costs 66.1 7.3 3.3% '<= 1.00%' '> 1.00% - <= 2.00%' 24.4 '> 2.00% - <= 3.00%' Term 18.0% 31.0% 40.3% '> 3.00% - <= 4.00%' '> 4.00% - <= 5.00%' 2.5% 4.8% '> 5.0%' 0.0% '<= 1.00%' '> 1.00% - <= 2.00%' '>
Slide 58: Capital
Capital Continued strengthening in ratios Credit risk weighted assets ($b) Jun-23 Dec-22 Jun-22 Dec-21 37.7 36.8 Common Equity Tier 1 11.25% 10.13% 9.68% 9.85% 36.4 36.3 35.2 Additional Tier 1 2.18% 1.99% 1.95% 2.04% Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Total Tier 1 13.43% 12.12% 11.63% 11.89% S&P RAC
Slide 59: Dividend
Dividend Increasing returns for shareholders Dividends (cents per share) Payout ratio1 • FY23 full year dividend up 15.1% on FY22 60% 58% 59% 60% • Dividend levels continue to be managed across the year 61.0 • Target payout ratio 60-80% 53.0 50.0 • Improvement in organic capital generation provides
Slide 60: 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 61: Contact
Contact Investors/Analysts Media Sam Miller James Frost Head of Investor Relations and ESG Head of Public Relations M: + 61 402 426 767 M: +61 419 867 219 E: sam.miller@bendigoadelaide.com.au E: james.frost@bendigoadelaide.com.au Alex Hartley Senior Manager Investor Relations M: +61 478 435 218 E: a
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