Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2012 Earnings Presentation
50 slides from Bank Of Queensland's earnings presentation, Oct 18, 2012
Slide 1: Bank of Queensland Full year results
For personal use only Click Bank to edit Master title style of Queensland Full year results Click to edit 31 August 2012 Master subtitle style
Slide 2: Agenda
Agenda For personal use only Result highlights Stuart Grimshaw Managing Director and CEO Financial results Anthony Rose Chief Financial Officer Strategy update Stuart Grimshaw Managing Director and CEO 2 Bank of Queensland Limited ABN 32 009 656 740
Slide 3: Important notices
Important notices For personal use only 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 represente
Slide 4: Result highlights
For personal use only Click Resulttohighlights edit Master title style StuarttoGrimshaw Click edit Master subtitle style Managing Director and CEO
Slide 5: Result highlights
Result highlights For personal use only Dividend of 26c, reflecting confidence in underlying business Normalised underlying profit maintained at $443.5m NIM improved by 2bps despite competitive pressure in a low growth environment Strong deposit growth, bringing retail funding mix to 59% B
Slide 6: Financial results
For personal use only Financial results Anthony Rose Chief Financial Officer
Slide 7: Financial performance overview
Financial performance overview For personal use only 2011 2012 Normalised underlying profit before tax $447.4m $443.5m 1% Normalised cash net profit (loss) after tax $176.6m $30.6m 83% Statutory net profit (loss) after tax $158.7m ($17.1m) 111% Cash EPS (normalised fully diluted) 66.7¢ 7.9¢ 58.8¢ Or
Slide 8: Dividend
Dividend For personal use only Dividend maintained at first half level of 26c, reflecting continued confidence in the underlying business Normalised Diluted Cash Earnings per share Dividends (cps) and yield (%) 83 c 60 54 52 52 10.0% 67 c 50 10.3% 7.6% 9.8% 8.0% 40 7.2% 6.9% 6.0% 30 5.3% 4.0% 20 8
Slide 9: FY12 Result summary
FY12 Result summary For personal use only Net interest income growth 2011 2012 % Change (vs pcp) Expense growth circa 4% Net Interest Income $628.4m $656.4m 4% Impairment expense mostly Non interest income $177.7m $160.5m 10% recognised at 1H12 as part of Total income $806.1m $816.9m 1% asset
Slide 10: Return to profitability
Return to profitability For personal use only Return to profitability in second half Normalised cash NPAT ($m) Significant loan impairment expense reduction in second half 119 103 57 1H11 2H11 1H12 2H12 (72) 10 Bank of Queensland Limited ABN 32 009 656 740
Slide 11: Significant items
Significant items For personal use only Asset impairment driven by decision 2011 2012 Change (vs pcp) to enhance customer platforms Normalised cash profit after tax $176.6m $30.6m ($146.0m) Legacy issues provided Amortisation of customer contracts ($6.2m) ($10.5m) ($4.3m) for adequately Amortisa
Slide 12: Asset growth
Asset growth For personal use only Housing portfolio growth continues: 5.2% Improved 2H performance of 1.15x system growth Business & Agri run off due to impaired property asset realisations BOQ Finance book relatively flat Total loans under management – 2012 Loans under management ($b) * Ot
Slide 13: Deposit growth
Deposit growth For personal use only Strong retail deposit growth of $2b (1.0x system) Funding Mix (%) Focus on term deposits over online savings $35.3b $36.3b $37.9b Good success in new SMSF product – growth of ~$600m 12% 13% Solid progress and on track for 63% retail funding target 15% 17%
Slide 14: Net interest margin
Net interest margin For personal use only Net Interest Margin – YOY Net Interest Margin – HOH 0.11% 2.02% 0.09% 0.12% 1.99% 0.14% 2.01% 1.98% 0.01% 0.01% 0.34% 0.34% 0.34% 0.34% 1.65% 1.67% 1.68% 1.64% FY 11 Asset Pricing Funding Capital FY12 1H12 Asset Pricing Funding Capital 2H12 & Mix & Mix 14 Ba
Slide 15: Non interest income
Non interest income For personal use only Non interest income ($m) Customer fees and charges relatively flat 100.9 Other income reduced 98.6 Insurance income steady in low credit growth environment 40.9 41.3 35.9 20.6 FY11 FY12 Banking income Other income Insurance income 15 Bank of Queensland
Slide 16: Cost-to-income
Cost-to-income For personal use only Cost-to-income at competitive levels Expense increases going forward will be minimised as part of the Bank’s efficiency initiative Normalised cost-to-income ratio Expense composition ($m) 373.4 358.7 18.0 56.1% 20.3 160.0 154.8 49.9% 27.1 30.9 45.8% 44.5% 66.
Slide 17: Provision coverage maintained in 2H
Provision coverage maintained in 2H For personal use only Impairment charges stabilised in 2H following the asset quality review in 1H Specific charges in 2H were predominantly from the housing portfolio $15m top up in collective overlay adopted to provide additional coverage for general econo
Slide 18: Strengthening risk management
Strengthening risk management For personal use only New Risk Management organisational structure and leadership team now in place A dedicated Retail Credit team has been established to have full oversight of the ‘end to end’ credit process New Retail scorecards and underwriting standards have
Slide 19: Impaired assets fall
Impaired assets fall For personal use only Impaired assets ($m) New impaired loans 55.2 257 135.0 54.7 578.7 67.8 146.3 203 525.3 134.8 151 214.6 104 178 36 443.9 310.7 96 70 9 8 16 1H12 New Impaired Realisations 2H12 2H11 1H12 2H12 0 Commercial Retail Portfolio Sale Exposure > $10m Exposure $5m to
Slide 20: Home loan arrears improving
Home loan arrears improving For personal use only Decrease in home loan 90+ arrears to 0.70% in 2H (0.93% in 1H) and 30+ arrears down by nearly 30% to 1.25% Improvement in arrears performance is across all states Improvement reflects the positive impact of RBA rate cuts and continued managemen
Slide 21: Retail provisions
Retail provisions For personal use only Increased specific provisions in 2H due to higher Retail provisions ($m) recovery activity Recovery processes streamlined, enabling earlier 17.8 actioning of defaulted accounts, resulting in 43.7 2.9 16.4 119.3 increased specific provisions and accelerated
Slide 22: Commercial provisions
Commercial provisions For personal use only Debt sale effected in July 2012 resulting in the Business & Agri and BOQ Finance provisions ($m) 378.7 decrease of $47.6m in provisions (4 exposures) 25.7 Commercial specific provisions stabilised in 2H 47.6 17.0 13.9 following Asset Quality Review in
Slide 23: Provision coverage remains strong
Provision coverage remains strong For personal use only Collective provision v Peers (bps/RWA) 1.20% 1.00% 90bps/RWA 0.80% 0.60% 0.40% 0.20% 0.00% BOQ Major 1 Major 2 Major 3 Major 4 Regional 1 Regional 2 23 Bank of Queensland Limited ABN 32 009 656 740
Slide 24: Liquidity and Wholesale Funding
Liquidity and Wholesale Funding For personal use only Continued strong levels of liquidity, increased at year end for October maturity Reduced reliance on wholesale funding due to success in retail deposit strategy Short term wholesale of $4.8b effectively funds liquid assets Liquidity Wholesa
Slide 25: Wholesale maturity profile
Wholesale maturity profile For personal use only $3.75bn issued between 2009 & 2010 maturities well spaced (100% GG outstanding) Repaid $575m FY11 (including $575m buybacks) (85% GG outstanding) Repaid $1,158m FY12 (including $658m buybacks) (54% GG outstanding) Original GG Profile & Redemptio
Slide 26: Capital position
Capital position For personal use only Capital adequacy Core equity Tier 1 substantially increased 2H performance funds final dividend of 26c 13.0% 12.6% 8.5% ratio flat to position pro forma the capital raising 10.8% 3.4% Reduction in Tier 2 as T2 Bridge partially redeemed 3.1% as foreshado
Slide 27: Summary
Summary For personal use only Increased provisioning to market leading level Restored the capital base through the equity raising Improved funding mix through solid retail deposit growth Substantially enhanced risk management capability and practices Impaired asset and arrears trends demon
Slide 28: Strategy update
For personal use only Strategy update Stuart Grimshaw Managing Director and CEO
Slide 29: Macro trends: Economic
Macro trends: Economic For personal use only Moderate GDP growth – global & local uncertainty restraining confidence Low credit growth – cautious consumers deleveraging Margins under pressure – decreasing cash rate and competition for deposits Bad and Doubtful Debts – stabilising but mixed e
Slide 30: Macro trends: Consumer channel preferences
Macro trends: Consumer channel preferences For personal use only Use of direct channels (Internet, Sales breakdown by channel Expected dominant channel mobile) rapidly increasing (2010, %) (2015E, %) However, consumers will continue seeking face-to-face advice when Current Accounts buying more c
Slide 31: BOQ needs to evolve with these trends
BOQ needs to evolve with these trends For personal use only Source of BOQ: ~90% branch originations Competitors: branch, broker, call centre, online, mobile, social media Broker and online originations continue to increase Housing Loans represent 74% of LUM Sources of Revenue Low margin, l
Slide 32: Strategic focus
Strategic focus For personal use only Branch focus on development of service and sales, incl. cross sales 1. Multi-channel Online, mobile & social media capability to be developed optimisation Call centre optimisation & selective use of brokers (by Mar 2013) Focus on higher margin, higher RO
Slide 33: Multi-channel optimisation: Retail bank strategy
1. Multi-channel optimisation Retail bank strategy For personal use only Significant opportunity exists to increase footings per branch (Best in class competitor is >$450m household footings per branch vs. BOQ ~$150m#) Cross sale potential still needs to be reached (BOQ currently ~2 products per
Slide 34: Multi-channel optimisation: WA case study
1. Multi-channel optimisation WA case study For personal use only Why WA? WA will continue to exhibit strong GDP growth Significant opportunity exists for BOQ to improve market share to match a solid branch footprint Need a multi-channel approach to capture share What have we done? Reinvigor
Slide 35: Risk/Return balance: Business Bank strategy
2. Risk/Return balance Business Bank strategy For personal use only Focusing on Commercial customer segments that value relationship banking, including Agribusiness – targeting $1bn in Agribusiness assets over 3 years Targeting a greater share of higher ROE business Cross sale of equipment fin
Slide 36: Business Bank strategy progress
2. Risk/Return balance Business Bank strategy progress For personal use only More than 20 new Agribusiness and Corporate Bankers now on-boarded Funded through moving people out and in (zero cost increase) Opened in 8 new locations across NSW/QLD Driving customer acquisition and asset growth
Slide 37: Operational excellence: Transformational change
3. Operational excellence Transformational change For personal use only An efficiency and effectiveness program is in progress to address these issues Front End Core Back End Organisation Structure Optimisation 1 Retail Lending E2E 2 Commercial Lending E2E 3 Operations Consolidation & Optimisation
Slide 38: Operational excellence: Progress made
3. Operational excellence Progress made For personal use only Review of organisational spans and layers of control, ~100 management roles eliminated, $9m saving (self-funded in FY13) Shared services model – bringing together duplicated functions (IT, HR, Finance) across 1H13 Banking, BOQ Finan
Slide 39: Operational excellence: Progress made
3. Operational excellence Progress made For personal use only New CRM system being implemented for front line # of Customer/Account creation & servicing staff procedures Better ability for branch staff to focus on sales activities Faster access to customer information and customer down servici
Slide 40: Operational excellence: Technology approach
3. Operational excellence Technology approach For personal use only Software as a service vs. hard wired Smaller investment and more flexibility Investing in the low cost front end systems - Customer Relationship Management (CRM) Delivering enhanced sales performance & improved workforce eff
Slide 41: Talent, capability & culture: Change underway
4. Talent, capability & culture Change underway For personal use only New New Executive team on-boarded between March and CEO and August—extensive experience Executive Team Refresh at next levels Existing talent at next levels being complemented by of management selected new hires Diversity and
Slide 42: Key management targets
Key management targets For personal use only Metrics FY13 FY15+ BOQ asset growth - Retail 1.0x system 1.2x system - Business# 1.0x system 1.5x system Net Interest Margin Low-Mid 160s Low-Mid 160s Expense growth < Inflation < Inflation Cost to Income 45% Low 40s Bad & Doubtful Debts to GLA 28-34bps ~
Slide 43: Summary
Summary For personal use only Loan book is known and prudently provided for Stronger credit and arrears management processes now in place Strong cost management focus and operational redesign well underway Efficiency drive & operational excellence continuing to simplify processes for staff a
Slide 44: Appendix: Portfolio Information
For personal use only Appendix Portfolio Information
Slide 45: Housing arrears
Housing arrears For personal use only 30DPD 90DPD 1.84% 1.78% 1.76% 1.75% 1.78% 1.72% 1.71% 1.64% 1.67% 1.59% 1.50% 1.25% 0.92% 0.90% 0.93% 0.95% 0.96% 0.93% 0.87% 0.86% 0.88% 0.85% 0.80% 0.70% Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Portfolio metrics 2H11
Slide 46: Lines of Credit arrears
Lines of Credit arrears For personal use only 30DPD 90DPD 4.36% 4.11% 4.16% 4.03% 3.67% 3.74% 3.50% 3.52% 3.38% 2.87% 3.09% 2.52% 2.65% 2.52% 2.53% 2.52% 2.29% 2.35% 2.23% 2.33% 2.15% 2.07% 1.89% 1.63% Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Portfolio metr
Slide 47: Business & Agri arrears
Business & Agri arrears For personal use only 4.32% 30DPD 90DPD 3.81% 3.65% 3.68% 3.80% 3.55% 3.43% 3.39% 3.31% 3.38% 3.03% 2.46% 2.83% 2.79% 2.55% 2.42% 2.52% 2.29% 2.04% 2.25% 2.10% 1.71% 1.77% 1.26% Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Portfolio metr
Slide 48: Leasing arrears
Leasing arrears For personal use only 30DPD 90DPD 1.29% 1.28% 1.21% 1.20% 1.19% 1.13% 1.12% 1.17% 1.10% 1.04% 0.94% 0.81% 0.46% 0.37% 0.30% 0.31% 0.31% 0.23% 0.28% 0.27% 0.26% 0.23% 0.20% 0.17% Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Portfolio metrics 2H11
Slide 49: Business & Agri impaired portfolio
Business & Agri impaired portfolio For personal use only Commercial Impaired assets by Segment Commercial Impaired assets by Geography 9% 17% 5% 9% Gold Coast QLD (ex GC) Retail 13% Office NSW 20% Land VIC Other Dev Finance 9% WA Other Prop Invest NT 29% Other Corp SA Agricultural TAS 24% 61% ACT 49
Slide 50: For personal use only
For personal use only