Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2020 Earnings Presentation
46 slides from Bank Of Queensland's earnings presentation, Apr 8, 2020
Slide 1: 1H20 Results Presentation
1H20 RESULTS PRESENTATION 8 APRIL 2020 Half year ended 29 February 2020 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 2: Agenda
AGENDA INTRODUCTION Cherie Bell, General Manager Investor Relations RESULTS OVERVIEW George Frazis, Managing Director and CEO FINANCIAL DETAIL Ewen Stafford, Chief Financial Officer and Chief Operating Officer SUMMARY & OBSERVATIONS, IMPACTS OF COVID-19 George Frazis, Managing Director and CEO Adam
Slide 3: Results Overview
RESULTS OVERVIEW GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 4: 1H20 Overview
1H20 OVERVIEW 1. Cash NPAT down 10% on PCP and a 1% reduction compared to 2H19, with FY20 being a transition year for BOQ 2. Balance sheet growth, with improved momentum across housing and commercial businesses 3. Asset quality remains sound, additional $10m collective provision overlay taken in res
Slide 5: 1H20 Results
1H20 RESULTS CAPITAL REMAINS STRONG WITH PROFITS IMPACTED BY STRATEGIC INVESTMENT AND REGULATORY COSTS Key financial results 1H20 2H19 1H19 1H20 v 2H19 1H20 v 1H19 Statutory net profit after tax $93m $142m $156m (35%) (40%) Cash earnings after tax $151m $153m $167m (1%) (10%) Cash return on average
Slide 6: Drivers of Results
DRIVERS OF RESULTS LENDING MOMENTUM DRIVING PROFIT, OFFSET BY INCREASED COST BASE LENDING GROWTH ($M) NET INTEREST MARGIN (%) +56% -3bps 791 781 1.97 1.98 1.94 671 1.92 1.89 500 437 1H18 2H18 1H19 2H19 1H20 1H18 2H18 1H19 2H19 1H20 COST TO INCOME RATIO (%) LOAN IMPAIRMENT EXPENSE ($M) Flat +450bps 4
Slide 7: Lending Growth
LENDING GROWTH NICHE SEGMENTS DELIVERING GROWTH GROWTH IN HOUSING GLA ($M)1 BALANCED GROWTH ACROSS BUSINESS BANKING GLA ($M) 507 462 102 332 39 70 489 60 445 89 265 469 43 339 459 364 287 303 189 -441 -717 -682 33 -92 1H19 2H19 1H20 1H19 2H19 1H20 Total VMA Housing BOQ Specialist Housing BOQ Retail
Slide 8: Retail Banking Overview
RETAIL BANKING OVERVIEW STRONG LENDING GROWTH FOR VMA - IMPROVED PERFORMANCE FOR BOQ BLUE IMPROVED CUSTOMER NPS1 IMPROVED HOME LENDING GROWTH ($M)2 -248 -216 73 +13 +27 +2 to +16 to +7 to +31 469 445 489 1H20 Movement in -416 1H20 Movement in 1H20 Movement in -717 -661 Retail MFI NPS Mortgage NPS ov
Slide 9: Business Banking Overview
BUSINESS BANKING OVERVIEW NICHE SEGMENT STRATEGY DELIVERING BALANCED GROWTH ACROSS BOQB BRANDS LENDING GROWTH – BUSINESS BANK AND BOQF ($M) LENDING GROWTH – BOQ SPECIALIST ($M) +112% -89% +41% 364 502 303 411 399 43 189 40 341 357 70 60 89 68 33 371 459 273 287 339 1H19 2H19 1H20 -92 1H18 2H18 1H19
Slide 10: Group Strategy
GROUP STRATEGY CLEAR PRIORITIES FOCUSED ON CUSTOMERS, PEOPLE AND SHAREHOLDERS Bank of Queensland Limited 2020 Half Year Results Presentation 10
Slide 11: Strategy Progress
STRATEGY PROGRESS EXECUTING ON OUR STRATEGY WITH EARLY RESULTS Our purpose led empathetic culture +13 MFI NPS BOQ Retail from +3 (Aug 19) to +16 (Feb 20) 1 sets us apart +27 Mortgage NPS BOQ Retail from -20 (Aug 19) to +7 (Feb 20) 1 Distinctive brands serving attractive 1.3x system home lendin
Slide 12: Financial Detail
FINANCIAL DETAIL EWEN STAFFORD CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER
Slide 13: Financial Performance
FINANCIAL PERFORMANCE 1H20 IN LINE WITH EXPECTATIONS DURING TRANSITIONAL YEAR $ million 1H20 2H19 1H19 1H20 v 2H19 1H20 v 1H19 Net interest income 483 485 476 (0%) - 1% Non-interest income 58 63 65 (8%) (11%) Total income 541 548 541 (1%) 0% - Operating expenses (292) (282) (268) 4% 9% Underlying pr
Slide 14: Divisional Performance
DIVISIONAL PERFORMANCE RETAIL AND BUSINESS IMPACTED BY NON INTEREST INCOME DECLINE AND INCREASED EXPENSES RETAIL BUSINESS $ million 1H20 1H20 v 1H19 1H20 1H20 v 1H19 Net interest income 214 0% - 271 4% Non-interest income 29 (9%) 21 (19%) Total income 243 (2%) 292 2% Operating expenses (154) 9% (127
Slide 15: Lending Portfolio
LENDING PORTFOLIO OUTPERFORMANCE IN LENDING GROWTH DESPITE COMPETITIVE LANDSCAPE SUMMARY HALF ON HALF GLA GROWTH ($M) +56% • Niche strategy resulting in strong 791 781 growth in commercial and housing 671 264 500 lending 437 517 379 38 105 292 159 • VMA and BOQS driving uplift in 277 303 364 232 hou
Slide 16: Funding Mix
FUNDING MIX RESILIENT FUNDING PROFILE WITH STRATEGIC OPTIONS TO GROW SUMMARY LONG TERM WHOLESALE ($BN) +11% • Deposit to loan ratio of c.69% 12.0 10.4 11.5 • Lower reliance on TDs and continued growth in low cost 4.6 4.6 4.2 4.2 3.9 3.9 transaction and savings accounts 0.8 1.6 1.7 4.9 4.9 5.0 5.0 4.
Slide 17: Term Funding
TERM FUNDING DIVERSIFIED AND WELL SPACED FUNDING MATURITY TOWERS SUMMARY MAJOR MATURITIES ($M)1 2 3 • Well positioned on funding through 1,311 diversified funding sources and orderly maturity towers 350 • 2H20 includes a $150m4 Additional Tier 1 note and $700m senior 850 150 unsecured maturities 750
Slide 18: Current Funding Environment
CURRENT FUNDING ENVIRONMENT STRONG FUNDING POSITION PROVIDING STABILITY IN CURRENT ENVIRONMENT COVID-19 has caused significant disruptions and volatility in financial markets Term funding credit spreads have increased, and debt investors are more cautious BOQ is well positioned for volatility
Slide 19: Net Interest Margin
NET INTEREST MARGIN GOOD NIM MANAGEMENT WHILE COMPETING FOR GROWTH NET INTEREST MARGIN – AUGUST 2019 TO FEBRUARY 2020 0.06% 0.04% -0.05% -0.03% -0.03% 1.92% -0.02% 1.89% 2H19 Asset pricing Funding costs Hedging costs Capital and low Third party costs Liquidity 1H20 and mix and mix cost deposits and
Slide 20: Non-Interest Income
NON-INTEREST INCOME DECLINING TREND CONTINUES DUE TO CHANGES IN CONSUMER PREFERENCES SUMMARY NON-INTEREST INCOME BREAKDOWN ($M) • Banking income declines as a result of: -11% 75 70 • changes in consumer preferences 2 towards low and no fee products; 65 63 10 9 58 7 5 • reduction in merchant fee inco
Slide 21: Operating Expenses
OPERATING EXPENSES INCREASED INVESTMENT IN STRATEGIC INITIATIVES AND RISK AND COMPLIANCE PROGRAMS SUMMARY OPERATING EXPENSE BREAKDOWN ($M) • Increased technology spend on +9% strategic initiatives (e.g., VMA Phase 1 and core infrastructure modernisation) 292 268 282 262 265 17 17 • Increased employe
Slide 22: Portfolio and Loan Impairment Expense
PORTFOLIO AND LOAN IMPAIRMENT EXPENSE SOUND PORTFOLIO QUALITY1 PROVISIONS ($M)1 LOAN IMPAIRMENT EXPENSE ($M)1 +1% FLAT 219 214 233 235 44 201 30 10 30 120 115 137 148 150 22 2 19 12 34 28 99 86 77 85 85 18 1H18 2H18 1H19 2H19 1H20 1H18 2H18 1H19 2H19 1H20 Specific Collective Specific Collective IMPA
Slide 23: Capital Investment
CAPITAL INVESTMENT EXECUTING ON THE TRANSFORMATION ROADMAP SUMMARY CAPITAL INVESTMENT ($M) 95 • Increased capital investment spend in 71 1H20 (+$17M) 60 52 46 • Investment focus on VMA digital bank 25 35 and core infrastructure modernisation • Foundational investment for strategy FY18 FY19 FY20 1H 2
Slide 24: Non Cash Earnings
NON CASH EARNINGS STATUTORY NPAT DOWN 40% DUE TO TRANSFORMATION CHARGE $ million 1H20 2H19 1H19 Cash earnings after tax 151 153 167 Strategy Refresh (after tax) Intangible Asset Review (Policy change (18m) / Amor. acceleration ($11m) / Other ($3m)) (32) 0 0 Restructure charges (operating model revie
Slide 25: Capital
CAPITAL STRONG CAPITAL POSITION WITH FLEXIBILITY TO ADAPT TO CHANGING CONDITIONS CET1 1H20 VS 2H19 0.49% 1.10% (0.31%) (0.12%) (0.04%) (0.07%) (0.05%) Underlying capital generation of (0.06%) (0.07%) 10.07% +6 bps 9.04% 9.91% 2H19 AASB 16 Capital Proforma Cash earnings Dividend RWA growth Securitisa
Slide 26: Subsequent Event Note
SUBSEQUENT EVENT NOTE COVID-19 The economic environment has evolved materially since 29 February 2020 including COVID-19 being classified as a pandemic by the World Health Organisation on 11 March 2020 Requirement to disclose material change in circumstances as a non-adjusting subsequent event d
Slide 27: Summary & Observations, Impacts of COVID-19
SUMMARY & OBSERVATIONS, IMPACTS OF COVID-19 GEORGE FRAZIS ADAM MCANALEN MANAGING DIRECTOR AND CEO CHIEF RISK OFFICER
Slide 28: Summary
SUMMARY Future economic outlook uncertain due to rapid escalation of COVID-19 and subsequent actions to contain the virus that have resulted in extraordinary economic dislocation Entered this unprecedented and uncertain period with a good capital and liquidity position, and a quality book Our
Slide 29: Significant Shift in Environment Due to COVID-19
SIGNIFICANT SHIFT IN ENVIRONMENT DUE TO COVID-19, WHICH WILL IMPACT 2H20 AND BEYOND Economic impact of COVID-19 has been significant - abrupt, deep and broad Government and regulatory response has been extensive to cushion impact Government injection of ~$320bn into the economy supporting jobs
Slide 30: Macro Economic Environment
MACRO ECONOMIC ENVIRONMENT SIGNIFICANT UNCERTAINTY ON ECONOMIC ENVIRONMENT MACRO ECONOMIC • Economy heading into a very difficult period, with a likely sharp decline in GDP in Q2 • Government and regulatory response has cushioned the decline • Greatest uncertainty is the length of the crisis, depend
Slide 31: Wellbeing of Staff and Continuation of Bank Operations
WELLBEING OF STAFF AND CONTINUATION OF BANK OPERATIONS EXECUTION OF CONTINGENCY PLANS GOING WELL STAFF WELLBEING BANK OPERATIONS Extensive communication plan enacted – ‘Act now’, Business Continuity Plan enacted on 28 January 2020 ‘Prioritise” and ‘Avoid’ All 165 branches remain open All bra
Slide 32: Asset Quality
ASSET QUALITY BROADLY FLAT PROVISIONS WITH STRONG COVERAGE LEVELS AS AT 29 FEBRUARY 2020 SUMMARY SPECIFIC PROVISIONS / IMPAIRED ASSETS (%) • Specific provisions to impaired assets remained broadly flat 57 • Coverage levels remain strong compared to peers 52 51 43 43 • Increased collective provision
Slide 33: Arrears
ARREARS QUALITY UNDERLYING PORTFOLIO EVIDENCED BY STABLE ARREARS AS AT 29 FEBRUARY 2020 SUMMARY COMMERCIAL ARREARS (bps) • A general improvement has been experienced over the last 150 141 138 140 147 few years in both 30+DPD and 90+DPD arrears 126 150 129 119 • Marginal elevation for 90+DPD arrears
Slide 34: Lending Portfolio
LENDING PORTFOLIO DIVERSIFIED PORTFOLIO MITIGATING ECONOMIC UNCERTAINTY SUMMARY HOUSING PORTFOLIO LVR BANDS • Carefully managed risk levels across housing portfolio, with 6% 13% Less than 40% average LVR of 66% 16% 40-60% • Increased industry diversification across our commercial and 21% 61-80% fina
Slide 35: COVID-19 Scenario Modelling – 2H20
COVID-19 SCENARIO MODELLING – 2H201 GOVERNMENT LOCK DOWNS LEAD TO GLOBAL ECONOMY HIBERNATION ECONOMIC ASSUMPTIONS – 7 APRIL 2020 Economic Assumptions Q2 2020 2020 2021 Potential collective provision GDP Movement (%) -6.0% -3.0% +1.3% – 4.0% impact of $49m - $71m1, 8.5% reducing to inclusive of the $
Slide 36: Supporting Our Customers
SUPPORTING OUR CUSTOMERS RELIEF PACKAGES DESIGNED FOR OUR RETAIL AND BUSINESS BANKING CUSTOMERS SMALL BUSINESS CUSTOMERS PERSONAL CUSTOMERS Business Banking Relief Package offering small business Personal Banking Relief Package providing deferral customers with up to $10m in lending a 6 month de
Slide 37: Banking Relief Packages – Personal Customers
BANKING RELIEF PACKAGES – PERSONAL CUSTOMERS AVERAGE LVR FOR PERSONAL ASSISTANCE REQUESTS IS 59% CUSTOMER FACTS1 BANKING RELIEF PACKAGE REQUESTS Of 75k customers c.5.5% c.5,000 59% with <80% LVR and av. loan size of $392K requested assistance Total assistance requests Average LVR 49% $319K Of 20k cu
Slide 38: Banking Relief Packages – Business Customers
BANKING RELIEF PACKAGES – BUSINESS CUSTOMERS MAJORITY OF ASSISTANCE REQUESTS FROM HEALTHCARE AND PROFESSIONAL SERVICES CUSTOMER FACTS1 BUSINESS ASSISTANCE REQUESTS BY LVR (%) Total assistance requests for business c.10,000 customers 3% 14% 0% - 60% 3% 61% - 80% Of 168k customers c.6% with <$10m and
Slide 39: FY20 Observations
FY20 OBSERVATIONS Revenue – Continued pressure Home loan and business loan application volume growth holding up, but this could change quickly Repayment holidays limit decline in growth of loan balances Margin pressure on mortgages abating as deposits are becoming more competitive, NIM likely
Slide 40: FY20 Observations
FY20 OBSERVATIONS Impairments – Uncertain environment Government actions cushion downside to unemployment Preliminary overlay provision of $49m-$71m1, inclusive of the $10m recognised in 1H20 Proactive contact with customers to help best manage through the next 6 months Will require careful
Slide 41: Concluding Remarks
CONCLUDING REMARKS 1 First half results on track reflecting transition year, with good momentum 2 Remain committed to transformation strategy and return to profitable growth 3 Uncertain outlook given COVID-19 impacts, sensible adjustments being made, being monitored and managed closely 4 Balance she
Slide 42: Appendices
APPENDICES
Slide 43: BOQ
BOQ UNIQUE BRANDS IN NICHE SEGMENTS SERVING CUSTOMERS FOR 145 YEARS OUR DIFFERENTIATORS KEY STATISTICS FOR 1H20 Unique brands with proud history Deeply anchored in local communities c.210k VMA c.35k Specialist >910k c.500k Retail c.90k Finance Highly specialised bankers, within niche industry
Slide 44: Abbreviations
ABBREVIATIONS 1H: First half of financial year GDP: Gross Domestic Product 2H: Second half of financial year GLA: Gross Loans & Advances 30DPD: 30 days past due GRCL: General Reserve for Credit Losses 90DPD: 90 days past due LCD: Low cost deposit AASB: Australian Accounting Standards Board LCR: Liqu
Slide 45: Disclaimer
DISCLAIMER IMPORTANT INFORMATION AND DISCLAIMER Summary information This is a presentation of general background information about Bank of Queensland Limited’s (BOQ’s) activities at the date of this document. It is in summary form and does not purport to be complete. It should be read in conjunction
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