Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — 1H23 Earnings Presentation
69 slides from Bank Of Queensland's earnings presentation, Apr 20, 2023
Slide 1: Investor Materials
20 APRIL 2023 INVESTOR MATERIALS Half year ended 28 February 2023
Slide 2: Important information and disclaimer
2023 HALF YEAR RESULTS PRESENTATION Important information and disclaimer This is a presentation of general background information about Bank of Queensland ABN 32 009 656 740 and its consolidated entities (BOQ’s) activities at the date of this document. It is in summary form, does not purport to be c
Slide 3: Contents
2023 HALF YEAR RESULTS PRESENTATION Contents 1H23 Results Presentation 4 About BOQ 36 ME Integration Detail 42 Divisional Results 44 Portfolio Quality 51 Capital, Funding & Liquidity 59 Economic Assumptions 65 Abbreviations 68 3
Slide 4: 1H23 Results Presentation
1H23 RESULTS PRESENTATION 20 APRIL 2023 Half Year ended 28 February 2023
Slide 5: Acknowledgement of Traditional Custodians
BOQ Group acknowledges the Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of the land where we live and work. We pay our respects to Elders past, present and emerging. Artwork proudly created for Bank of Queensland (BOQ) by the Harristown Clontarf Academy, Toowoomba.
Slide 6: Agenda
2023 HALF YEAR RESULTS PRESENTATION Agenda Introduction Summary & outlook >Tanya Aaskov, General Manager Investor Relations > Patrick Allaway, MD & Chief Executive Officer Results overview Q&A > Patrick Allaway, MD & Chief Executive Officer > Patrick Allaway, MD & Chief Executive Officer > Racheal K
Slide 7: Results Overview
RESULTS OVERVIEW Patrick Allaway Managing Director & Chief Executive Officer
Slide 8: Key messages
2023 HALF YEAR RESULTS PRESENTATION Key messages We are continuing our transformation journey with a comprehensive and integrated program 1. Strong progress since 2020 on digitisation, achieving growth across our brands, and improving our financial position and strength 2. Transformation program wit
Slide 9: 1H23 results
2023 HALF YEAR RESULTS PRESENTATION 1H23 results Strong financial position, statutory result impacted by one-off non-cash impairment and risk program provision. Margin uplift offset by expense growth Key financial results ($m) 1H23 1H23 v 1H22 Total income 902 9% Operating expenses (495) 7% Underlyi
Slide 10: Retail banking overview
2023 HALF YEAR RESULTS PRESENTATION Retail banking overview Digital strategy delivering customer growth in a competitive environment Summary Home lending growth ($m) › Total income increased 4%, as deposit margin recovery more than 2,212 1,598 739 offset the normalisation of non-interest income 1,24
Slide 11: Business banking overview
2023 HALF YEAR RESULTS PRESENTATION Business banking overview Strong performance underpinned by higher revenue, lower CTI, increased margins and improved returns Summary Lending growth ($bn) › Total income grew 19% on 1H22, reflecting targeted lending 1.0 balance growth of 5% and optimisation of mar
Slide 12: Significant transformation progress
2023 HALF YEAR RESULTS PRESENTATION Significant transformation progress BOQ is progressing through its transformation journey, with considerable progress made but more work to do Completed ME Integration Launched digital platform Customer & Employee Improved balance sheet c$70-80m 171K +10 to +17 CE
Slide 13: Strategy Update
STRATEGY UPDATE Patrick Allaway Managing Director & Chief Executive Officer
Slide 14: Building a stronger, simpler, low cost digitally enabled bank
2023 HALF YEAR RESULTS PRESENTATION Building a stronger, simpler, low cost digitally enabled bank BUILDING Group Purpose SOCIAL CAPITAL THROUGH BANKING. Strategic Differentiating through exceptional customer and people experience Pillars STRENGTHEN SIMPLIF Y DIGITISE OPTIMISE Digital transformation
Slide 15: Strengthening BOQ
2023 HALF YEAR RESULTS PRESENTATION Strengthening BOQ A focus on financial and operational resilience and risk culture building stronger foundations › $60m provision for multi-year Integrated Risk Program covering the costs associated with reducing complexity in systems, manual processes, uplifting
Slide 16: Simplifying BOQ
2023 HALF YEAR RESULTS PRESENTATION Simplifying BOQ Driving greater productivity through a simpler operating model, underpinned by scalable technology Existing initiatives delivering uplift in productivity Material productivity initiative to address expenses. Detailed update to be provided 2H23 › Mo
Slide 17: Digitising BOQ
2023 HALF YEAR RESULTS PRESENTATION Digitising BOQ Digital strategy improving customer experience, providing strong deposit growth and lower cost to serve FY2021 - 20231 FY2024 - 2025 Post FY2025 VMA and BOQ transaction and savings launched on new cloud Digital mortgage for all brands on new cloud d
Slide 18: Optimising BOQ
2023 HALF YEAR RESULTS PRESENTATION Optimising BOQ Increasing competition requires a simple, low-cost, scalable operating model MATERIAL PERFORMANCE UPLIFT FY26 FINANCIAL TARGETS SOLID FOUNDATIONS TO BE DRIVEN BY REAFFIRMED Completed integration of ME Bank, with synergies realised Moving off complex
Slide 19: Building a sustainable business through living our purpose and values
2023 HALF YEAR RESULTS PRESENTATION Building a sustainable business through living our purpose and values Supporting the transition towards decarbonisation, our customers and communities and enriching our people Supporting our customers and communities Enriching our people Environmental commitments
Slide 20: Financial Detail
FINANCIAL DETAIL Racheal Kellaway Chief Financial Officer
Slide 21: Financial performance
2023 HALF YEAR RESULTS PRESENTATION Financial performance Solid cash earnings delivering 10% uplift in underlying profit and positive jaws both PCP and sequentially Key financial results ($m) 1H23 2H22 1H23 v 2H22 1H22 1H23 v 1H22 Net interest income 832 788 6% 741 12% Non-interest income 70 63 11%
Slide 22: Non-cash items
2023 HALF YEAR RESULTS PRESENTATION Non-cash items Statutory result impacted by one-off non-cash impairment and integrated risk program provision Reconciliation of cash earnings to statutory net profit after tax ($m) 1H23 2H22 1H22 Cash earnings after tax 256 240 268 Goodwill impairment1 (200) - - I
Slide 23: Key elements
2023 HALF YEAR RESULTS PRESENTATION Key elements Income growth supported by a higher margin, with selective capital deployment for better returns Total income ($m) Net interest margin (%) 902 1.79 851 1.74 1.75 831 1H22 2H22 1H23 1H22 2H22 1H23 Housing GLA growth ($m) Business lending GLA growth ($m
Slide 24: Net interest margin
2023 HALF YEAR RESULTS PRESENTATION Net interest margin NIM higher due to funding cost benefits, partially offset by retention discounting and competition Summary › NIM increase in 1H23 with higher cash rates benefiting deposit margins, partly offset by rising wholesale funding costs › Ongoing compe
Slide 25: Net interest margin future considerations
2023 HALF YEAR RESULTS PRESENTATION Net interest margin future considerations Retention and competition driving industry margin headwinds NIM Driver 2H23 › Competition continuing through retention and front book discounting Asset pricing and mix › Focus on optimising portfolio mix › Tailwinds from s
Slide 26: Non-interest income
2023 HALF YEAR RESULTS PRESENTATION Non-interest income Stable non-interest income excluding historical one-off benefits Summary Non-interest income breakdown ($m) 90 › Non-interest income of $70m reflects the non-recurrence of one-off benefits seen in 1H22 4 › As compared to 2H22: 12 70 › Banking i
Slide 27: Operating expenses
2023 HALF YEAR RESULTS PRESENTATION Operating expenses Inflation and technology costs partially offset by productivity and synergy benefits Operating expenses ($m) 2H23 considerations › Ongoing inflationary pressures (4) (3) › Higher employee costs 11 (3) (2) 3 495 › Maintenance of legacy core banki
Slide 28: Transformation investment
2023 HALF YEAR RESULTS PRESENTATION Transformation investment Investment in strengthening the Bank and ongoing investment to deliver transformation roadmap Investment spend ($m) Summary 177 183 › Investment spend increased due to Integrated Risk Program partly offset by lower ME Integration 154 prog
Slide 29: Provisioning and loan impairment expense
2023 HALF YEAR RESULTS PRESENTATION Provisioning and loan impairment expense Sound provisioning levels maintained in light of changing economic conditions Housing, asset finance and commercial arrears 90DPD (bps) Impaired assets ($m) 93 84 243 74 194 80 61 38 60 153 133 77 36 59 55 57 63 38 31 20 54
Slide 30: Funding & liquidity
2023 HALF YEAR RESULTS PRESENTATION Funding & liquidity Increased liquidity coverage demonstrating financial resilience through the cycle Summary › Strong liquidity position › 1H23 spot LCR of 143% up 4% half on half › Spot NSFR of 126% up 1% half on half › Build of liquidity during the period in pr
Slide 31: Customer deposits
2023 HALF YEAR RESULTS PRESENTATION Customer deposits Strong growth in customer deposits with digital strategy starting to deliver Summary Customer deposit balances1 ($bn) › 12.3% growth in customer deposits vs 1H22 Deposit to loan ratio (%) 80% › Deposit to loan ratio increased to 80% 75% › Growth
Slide 32: Capital
2023 HALF YEAR RESULTS PRESENTATION Capital Strong CET1 ratio demonstrating financial resilience whilst investing in transformation Summary Common equity Tier 1 (CET1)2 (%) › Benefit to CET1 under Basel III. New target range of 10.25-10.75% › CET1 ratio at upper end of new target range, at 10.71% ›
Slide 33: Summary & Outlook
SUMMARY & OUTLOOK
Slide 34: Outlook
2023 HALF YEAR RESULTS PRESENTATION Outlook FY23 outlook1 › Australian economy resilient supported by low unemployment and strong terms of trade › Strong Australian banking system and regulatory environment supporting financial stability › Escalating risks into FY24 due to elevated inflation and the
Slide 35: 1H23 summary
2023 HALF YEAR RESULTS PRESENTATION 1H23 summary › Strong financial position with increased capital and liquidity buffers and sound asset quality with prudent risk settings › Cash earnings supported by higher NIM offset by expense growth › NIM peaked in October 2022 › Expense growth driven by inflat
Slide 36: About BOQ Group
ABOUT BOQ GROUP | a [| om | Dae
Slide 37: BOQ Group
2023 HALF YEAR RESULTS PRESENTATION BOQ Group Unique brands in niche segments serving customers for 149 years Our differentiators Key statistics for 1H23 › Unique brands with proud history c. 10k BOQ Business › Deeply anchored in local communities c. 540k BOQ c. 1.3m c. 30k Specialist › Highly speci
Slide 38: Distribution footprint
2023 HALF YEAR RESULTS PRESENTATION Distribution footprint Summary › 1H23 branch numbers at 153 (incl. transaction centres) 1 25 › The franchise network remains a key differentiator for BOQ and is 14 83 2,051 13 37 pivotal to the Bank’s deposit raising capabilities and growth in 6 1,439 2,372 mortga
Slide 39: Distribution footprint movements
2023 HALF YEAR RESULTS PRESENTATION Distribution footprint movements Feb-23 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 14 4 3 7 0 0 0 28 Owner managed branches 83 19 12 7 1 2 1 125 Total 97 23 15 14 1 2 1 153 Aug-22 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 17 4 5 10 - - -
Slide 40: Cultural transformation
2023 HALF YEAR RESULTS PRESENTATION Cultural transformation Cultural transformation delivering improved outcomes for our people and business Engagement Culture Safe to speak up I know the level of Alignment of role risk in my role to strategy August 2020 August 2020 May 2020 August 20222 August 2020
Slide 41: Balanced portfolio for growth and geographic diversity
2023 HALF YEAR RESULTS PRESENTATION Balanced portfolio for growth and geographic diversity Well diversified portfolio across Retail and Business Banking Summary 1H23 Cash profit by division1 (%) › Well diversified portfolio, with 47% of profits from Retail Banking and 47% 53% from Business Banking ›
Slide 42: ME Integration Detail
ME INTEGRATION DETAIL | a [| om | Dae
Slide 43: ME Integration update
2023 HALF YEAR RESULTS PRESENTATION ME Integration update Final year of integration program delivering ahead of plan Expense synergy profile ME Integration costs2 1H22 FY22 1H23 FY23 FY21 FY22 1H23 FY23 c.$70m - Synergies annualised run rate $33m $47m $60m ME Integration costs $13m $81m $18m c.$40m
Slide 44: Divisional Results
DIVISIONAL RESULTS | a [| om | Dae
Slide 45: Divisional performance
2023 HALF YEAR RESULTS PRESENTATION Divisional performance Positive NII growth in BOQ Business and Retail Bank, NPAT down due to operating expenses and one-offs in 1H22 Retail Business 1H23 1H22 1H23 v 1H22 1H23 1H22 1H23 v 1H22 Net interest income 500 460 9% 339 280 21% Non-interest income 45 62 (2
Slide 46: Home lending performance
2023 HALF YEAR RESULTS PRESENTATION Home lending performance Moderated housing growth, reflecting decision to prioritise return over volume growth Quality housing growth metrics Housing application volumes (# ‘000) Quality Growth Portfolio 1H23 Flow 1H23 29.4 25.8 23.7 3.2 20.5 LVR > 90% (%) 2.1 1.3
Slide 47: Business Banking SME and corporate lending
2023 HALF YEAR RESULTS PRESENTATION Business Banking SME and corporate lending SME continuing to deliver above system growth driven by healthcare and owner-occupied property sectors Summary Growth in SME lending GLAs ($m) 340 › Focus on lending to SME businesses delivered 1H23 growth of $0.2bn at 2.
Slide 48: Lending to households (APRA data)
2023 HALF YEAR RESULTS PRESENTATION Lending to households (APRA data) Lending to Households (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share Major 1 15.78% 14.27% 0.90% 3.2 3.2 3.5 5.01% Major 5 7.55% 5.65% 0.35% 1.5 1.3 1.4 13.16% Major 3 5.79% 5.76% 0.41% 1.2 1.3 1.6 25.92% Regional
Slide 49: Lending to business (APRA data)
2023 HALF YEAR RESULTS PRESENTATION Lending to business (APRA data) Lending to Businesses (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share Major 2 9.59% 9.79% 0.53% 1.8 4.6 1.3 21.03% Major 5 7.43% 0.79% -0.30% 1.4 0.4 Neg 16.30% Regional 1 7.42% 6.14% 0.82% 1.4 2.9 2.0 1.40% Internat
Slide 50: Business lending (RBA data)
2023 HALF YEAR RESULTS PRESENTATION Business lending (RBA data) Strategic focus on SME lending providing solid business growth Small and medium (rolling 3m growth rate) – RBA Large (rolling 3m growth rate) 30.0% 30.0% 20.0% 20.0% 10.0% 6.9% 10.0% 7.6% 5.1% 0.0% 0.0% -0.3% -10.0% -10.0% Feb-22 Aug-22
Slide 51: Portfolio Quality
PORTFOLIO QUALITY | a [| om | Dae
Slide 52: Collective provisioning
2023 HALF YEAR RESULTS PRESENTATION Collective provisioning Prudent economic forecasts reflective of a changing environment Provision model assumptions Economic forecasts (calendar year) (%)1 Base Downside › The base case scenario reflects conservative economic assumptions 2023 2024 2025 2023 2024 2
Slide 53: Portfolio quality
2023 HALF YEAR RESULTS PRESENTATION Portfolio quality Housing, Commercial and Asset Finance arrears increasing, reflecting the economic environment Summary Commercial arrears (bps) › Rising interest rates, inflation, and seasonality are the primary drivers increasing 171 arrears across the portfolio
Slide 54: Housing loan portfolio
2023 HALF YEAR RESULTS PRESENTATION Housing loan portfolio Strong portfolio quality with diversified portfolio and conservative LVR lending Summary Housing portfolio by geography (%) › Housing portfolio diversified across geography and channel 6% QLD 10% › 98% of customers with LVR <90%, with 1H23 f
Slide 55: Asset finance portfolio
2023 HALF YEAR RESULTS PRESENTATION Asset finance portfolio Portfolio remains well diversified Summary Asset finance by geography (%) › Broad industry spread reducing concentration of asset finance 10% QLD portfolio 5% 30% NSW 9% VIC WA 21% NZ 25% Other Asset finance by industry (%) Asset finance by
Slide 56: Business portfolio
2023 HALF YEAR RESULTS PRESENTATION Business portfolio Strong growth across the core distribution channels of Business Banking, BOQS & owner managed branches Summary Business by geography (%) › Business portfolio diversified geographically with a diverse channel mix 3% 6% QLD › The portfolio is well
Slide 57: Industry and geographic split over time
2023 HALF YEAR RESULTS PRESENTATION Industry and geographic split over time1 Enhanced geographic and sector diversification over time Housing loans - geographic split over time (%) Summary 1H23 Balance Outstanding (%) 31% 30% 23% 10% 6% › Enhanced geographic diversification, Queensland FY17 Balance
Slide 58: Emerging risks
2023 HALF YEAR RESULTS PRESENTATION Emerging risks Macro economic environment Outlook for credit losses Commercial real estate › Rising interest rates and inflation, with › Specific provisions remain low, collective › Sector risks emerging given economic cash rates forecast to peak in the latter pro
Slide 59: Capital, Funding & Liquidity
CAPITAL, FUNDING & LIQUIDITY
Slide 60: Term deposits continued to provide a lower cost of funding
2023 HALF YEAR RESULTS PRESENTATION Term deposits continued to provide a lower cost of funding Summary › Growth in TDs continuing as customers seek yield from higher interest paying products › 1H23 term deposit growth of 8% half on half1 › Strategic growth of lower cost term deposits due to relative
Slide 61: Replicating portfolio & uninvested capital and low cost deposits
2023 HALF YEAR RESULTS PRESENTATION Replicating portfolio & uninvested capital and low cost deposits Summary Replicating portfolio › Replicating portfolio has an investment term of 5% 5 years, this remains appropriate in current 4% market conditions Replicating Portfolio Return › For every 25bps cas
Slide 62: Hedging costs - basis risk
2023 HALF YEAR RESULTS PRESENTATION Hedging costs - basis risk Summary Long term basis risk avg - 21 bps › The impacts of hedging costs had a -1bp NIM impact in 1H23 0.60% › Basis exposure has normalised to historical levels with customers favouring variable over fixed rate lending and continued ter
Slide 63: Funding
2023 HALF YEAR RESULTS PRESENTATION Funding Summary Deposit to loan ratio (%) › Loan growth funded through stable funding sources, including customer deposits and long term wholesale funding › Strategic focus on customer deposits has seen an increase to the 80% deposit to loan ratio of 5% to 80% 75%
Slide 64: Credit rating
2023 HALF YEAR RESULTS PRESENTATION Credit rating Current debt ratings1 Rating Agency Short Term Long Term Outlook S&P A-2 BBB+ Positive Fitch F2 A- Stable Moody’s P-2 A3 Stable (1) The Bank monitors rating agency developments closely and is rated by Standard & Poor’s (S&P), Fitch Ratings and Moody’
Slide 65: Economic Assumptions
ECONOMIC ASSUMPTIONS
Slide 66: Macro economic environment
2023 HALF YEAR RESULTS PRESENTATION Macro economic environment1 Economic growth slowing with declining, but still elevated inflation Macro economic › Economic growth is slowing with a forecast modest rise in the unemployment rate › Inflation is likely to decline over calendar-year 2023. Uncertainty
Slide 67: Housing, business lending and deposit outlook
2023 HALF YEAR RESULTS PRESENTATION Housing, business lending and deposit outlook1 Economic growth slowing with declining, but still elevated inflation Housing outlook Business lending outlook Deposits outlook › Unemployment rate to stay low at c.3.5% › Business order books and capex › Household sav
Slide 68: Abbreviations
ABBREVIATIONS | | Ow | vce | ® Ps nusr usness
Slide 69: Abbreviations
2023 HALF YEAR RESULTS PRESENTATION Abbreviations 1H: First half of financial year CLF: Committed Liquidity Facility NM: Not meaningful 2H: Second half of the financial year DPD: Days past due NPAT: Net Profit After Tax 30DPD: 30 days past due EPS: Earnings per Share NPS: Net Promoter Score 90DPD: 9