Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 2013 Earnings Presentation
58 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 18, 2013
Slide 1: Bendigo and Adelaide Bank 2013 half year results
For personal use only Bendigo and Adelaide Bank 2013 half year results February 18, 2013 1
Slide 2: For personal use only
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 does not purport to be complete. It is to be read in conjunction with the Bank’s half year results filed with the Australian
Slide 3: Agenda
For personal use only • Overview • Financial performance • Outlook • Questions • Appendices Agenda 3
Slide 4: Overview
For personal use only Mike Hirst Group Managing Director Overview 4
Slide 5: Our result
Our result Financial performance • Statutory profit after tax $189.4m - statutory profit after tax For personal use only • Statutory profit after tax before specific items $162.8m • Statutory earnings per share 45.9¢ • Half year dividend of 30.0¢1, fully franked Financial performance • Cash earnings
Slide 6: Our result
Our result Balance sheet Funding management • 10 basis point NIM improvement half-on-half For personal use only • Strategic approach to funding taking into account price, diversity and tenor • Issued our first senior unsecured wholesale issue since the GFC • Issued post balance-date RMBS at tightest
Slide 7: Well placed in a low credit growth environment
Well placed in a low credit growth environment… For personal use only 1. Solid and established platform • Improving efficiency, scale, and stable cost structure • Balance sheet strength, and positive ratings momentum • Increased wealth distribution capability • Bolt-on and opportunistic M&A • Robust
Slide 8: Supported by a differentiated customer value proposition
… supported by a differentiated customer value proposition 100% Customer satisfaction1 For personal use only 90% 87.6% 80.3% 78.5% 80% 75.7% 74.0% • Continued maturation of Community Bank® and 70% retail network 60% • Brand and customer advocacy 50% BEN NAB CBA WBC ANZ – Voted Australia’s favourite
Slide 9: Leads to market outperformance
… leads to market outperformance Total lending growth - 6 months1 Housing lending growth - 6 months1,2 BEN 4.7% NAB 7.0% For personal use only NAB 3.5% BEN retail 5.1% ANZ BEN 4.0% 2.1% BOQ 3.5% System 2.0% System 3.4% BOQ 1.4% ANZ 3.3% WBC 1.0% CBA 3.1% CBA 0.8% WBC -0.1% Total deposit growth - 6 m
Slide 10: Financial performance
For personal use only Richard Fennell Chief Financial Officer Financial performance 10
Slide 11: Financial performance summary
1H13 2H12 1H12 PCP change Net profit after tax ($m) 189.4m 137.1m 57.9m 227.1% Cash earnings ($m) 169.7m 160.4m 162.6m 4.4% For personal use only Cash EPS 41.9¢ 40.5¢ 43.9¢ 2c Dividend per share1 30.0¢ 30.0¢ 30.0¢ -- Cost to income (%) 57.8 59.8 58.2 (40 bps) Cost to average assets (%) 1.30 1.31 1.2
Slide 12: Improvement in cash earnings
Improvement in cash earnings For personal use only Cash earnings movement vs PCP ($m) • Strong NII performance 14.2 (15.0) • Costs contained (16.3) 29.8 2.8 (8.4) 169.7 • Credit impacted by 162.6 Queensland rural property prices 4.4% Dec-11 Net interest income Other Income Staff costs Credit Other e
Slide 13: Group performance and dividends
Dividends (cents) Group performance • Dividend maintained at 30 cents 30.0 30.0 30.0 30.0 30.0 30.0 For personal use only • Improving cash basis earnings • Capital aligned to Basel III Cash basis earnings ($m) Statutory profit ($m) Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 189.4 Cash earnings per sh
Slide 14: Return on equity and return on tangible equity
Return on equity (ROE) and return on tangible equity (ROTE) For personal use only ROE & ROTE $M Cash earnings vs average ordinary & tangible equity $M $180 20% $4,000 18% $174.1 $170 $169.7 16% 17.24% $160 $3,500 $162.6 $160.4 14% 14.81% $150 12% 13.36% 13.37% 10% $3,000 $140 9.47% 8% 8.52% $130 8.2
Slide 15: Net interest margin
Net interest margin (%) For personal use only 2.18% Community Bank 2.08% 0.11% & Alliance share 0.01% 0.35% 0.34% 1.74% 1.83% 10bps Jun-12 Asset mix Pricing & hedging Dec-12 Financial performance 15
Slide 16: Net interest margin
Net interest margin (%) % 2.5 For personal use only • Continued pricing discipline through asset and liability channels 2.3 • Prior headwind of declining margin lending portfolio abating 2.1 • Wholesale funding alternatives will be accessed on a strategic basis – 1.9 taking into account price, tenor
Slide 17: Marginal retail funding
Marginal retail funding Maximum term deposit rates ≤ 12 months* For personal use only 6.0% • Competition for retail deposits has remained very 5.5% high 5.0% 130bps • BEN maintains strategy of 4.5% growth at profitable prices 120bps 4.0% 115bps 3.5% $18bn 3.0% 2.5% Dec-11 Feb-12 Apr-12 Jun-12 Aug-12
Slide 18: Non-deposit funding opportunities
Non-deposit funding opportunities For personal use only • Recent ratings upgrades and general Bps Australian public RMBS transactions Yrs market improvement have provided 180 3.6 4.0 3.5 wholesale funding opportunities 160 3.4 3.4 3.5 3.2 140 2.9 3.0 120 2.4 2.7 2.5 • BEN has issued term senior unse
Slide 19: Funding remains a strength
Funding remains a strength For personal use only Term funding maturity profile $m Sub-debt Term senior debt 80% 80% 450 74% 75% 77% 400 350 300 250 200 150 100 19% 17% 15% 12% 50 7% 8% 8% 8% 9% 11% 0 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 2013 2014 2015 2020 Wholesale Securitisation Retail Financial per
Slide 20: Retail deposits
Retail deposits Retail call deposits Retail term deposits • Term deposits priced to manage liquidity $40.7bn $41.9bn • Not a price leader – value proposition driven $38.6bn For personal use only $36.7bn • Term deposit retention rate consistently above 80% Retail term deposit retention rate* 100% $29
Slide 21: Efficiency focus remains
Efficiency focus remains Cost-to-income ratio 59.8% • Cost growth of 1.7% half on half and 6.4% versus pcp – including For personal use only 58.2% impact of acquisition of Delphi Bank and Southern Finance portfolio 57.8% • Software amortisation costs to remain low relative to peers Dec-11 Jun-12 Dec
Slide 22: Results reflect management focus
Results reflect management focus • Maintaining positive ‘JAWS’ will remain a focus of management For personal use only • Costs to remain under pressure from award pay increases, rent and IT • Investment projects for strategic initiatives to continue Cost growth Income growth vs Cost growth 5% 6% 4%
Slide 23: Capitalised software
Capitalised software Capitalised software ($m) For personal use only • Low levels of capitalised software Additions Amortisation • Levels will increase as strategic initiatives continue (Basel Advanced 1.6 (1 Accreditation) (9.8) 67.4 59.2 Jun-12 Dec-12 Financial performance 23
Slide 24: Managing capital for a Basel III world
Managing capital for a Basel III world 0.18% For personal use only 0.31% 0.12% 11.07% (0.35%) 10.42% 0.60% (0.21%) 1.76% 2.02% Tier 1 Tier 2 9.31% 8.40% Jun-12 CPS/RPS B-note sale DRP Retained earnings RWA growth & Sub debt Dec-12 other amortisation Financial performance 24
Slide 25: Capital materially stronger under S&P methodology
Capital materially stronger under S&P methodology For personal use only Basel III Core Tier 1 Capital* S&P RAC ratio ** 8.50% 10.40% 8.20% 9.90% 8.02% 8.00% 9.80% 7.90% 9.50% 7.75% 9.40% 9.30% BOQ WBC BEN ANZ NAB CBA BEN ANZ CBA NAB WBC Financial performance *Source: Company Information, CBA equitie
Slide 26: Core Tier 1 materially higher
Core Tier 1 materially higher 8.50% Core Tier 1 For personal use only • Capital levels are materially 8.25% higher than 18-months ago 8.00% • This has had a dilutionary effect 7.75% • Opportunity remains for capital 7.50% efficiency through T2 7.25% 7.00% 6.75% 6.50% Jun-11 Sep-11 Dec-11 Mar-12 Jun-
Slide 27: Business segment earnings contributions
Rural Bank - earnings contribution ($m) Third Party banking - earnings contribution ($m) 0.6 (7.2) (1.9) 9.4 1.7 (0.1) (6.2) 8.0 25 25.0 84.7 24.7 80.7 For personal use only 1.2% 5.0% Jun-12 Net interest income Other Income Operating expenses Credit expenses Dec-12 Jun-12 Net interest income Other i
Slide 28: Homesafe strong contribution
Strong contribution Homesafe revaluation income contribution ($m) For personal use only • $3.3m of Homesafe contribution related to annual property reviews 18.5 • Portfolio outperforming the index during downturn 11.9 • YTD index changes • Melbourne +1.6% 5.6 5.4 4.9 5.0 • Sydney +2.3% 4.1 0.8 3.3 3
Slide 29: Bad and doubtful debts
Bad and doubtful debts ($m) Wealth Rural bank Retail Delphi bank Third party & other For personal use only 10.0 Bad and Doubtful Debts ($m) 0.9 11.2 32.1 8.8 $32.1m 2.5 1.9 Segment 3.7 3.7 0.1 breakdown 16.6 10.9 1.5 Jun-12 Retail Network Third Party Bendigo Delphi Bank Rural Bank Other Dec-12 Lendi
Slide 30: Loan arrears
Business loan arrears Billions Residential mortgage arrears - Dec 2012 Billions 1.4% 4.0% Portfolio $ (RHS) 90d+ %$ (LHS) $7.4 Portfolio (RHS) 90d+ excluding arrangements 90d+ total $32 1.2% 3.5% $7.2 3.0% 1.0% $30 $7.0 2.5% 0.8% $6.8 For personal use only 2.0% $28 $6.6 0.6% 1.5% 0.4% $6.4 $26 1.0%
Slide 31: Total provision cover of impaired assets
Total provision cover of impaired assets1 Bad and doubtful debts ($m) 102% • Provisioning remains conservative, and well in excess of 95% 89% For personal use only historical loss experience 50% • Portfolio remains well secured, with low LVR’s 263.2 262.3 244.2 248.7 BEN Majors average Regionals ave
Slide 32: Outlook
For personal use only Mike Hirst Group Managing Director Outlook 32
Slide 33: In summary: challenges and opportunities
In summary…. For personal use only Challenges Opportunities • Low credit growth environment • Continued network maturity and growth • Strong competition for deposits • Funding diversity and tenor • Expense of advanced accreditation project • Further efficiency gains • Regulatory change • Banking / t
Slide 34: Questions
For personal use only Questions 34
Slide 35: Appendices
For personal use only Appendices 35
Slide 36: A well diversified business
A well diversified business Business Segment Business conditions For personal use only Domestic bank operating four • Difficult and uncertain market conditions remain distinct brands • Unique community, customer, and partner proposition • #1 banking brand for customer and business satisfaction, and
Slide 37: A well diversified business
A well diversified business Business Segment Business conditions For personal use only Margin lending, wealth management, •Independent provider of choice in select products superannuation • Increased investment in IT and distribution capability •Margin lending at inflection point • Growing brand and
Slide 38: Half-on-half performance
Half-on-half performance Business segment contribution to profit For personal use only 13% 12% 11% 39% 39% 37% 37% 39% 47% 11% 10% 5% Dec-11 Jun-12 Dec-12 Wealth Retail Third party Rural bank Segment performance 38
Slide 39: A diversified business
A diversified business For personal use only Contribution by revenue Contribution by profit 9% 11% 9% 5% 47% 21% 61% 37% Brand overview - financials Note: Figures exclude central functions 39
Slide 40: Operating expenses
Operating expenses For personal use only Operating expenses ($m) 199.2 203.6 Jun-12 Dec-12 79.4 76 33.5 35.4 27.7 31.7 16 22.6 23.9 14.9 5.8 5.4 Salaries & staff Occupancy Information Fees & Property, plant Intangibles Other related technology commissions & equipment amortisation operating costs Fin
Slide 41: Growth – retail banking
Growth – retail banking Cumulative number of branches by channel For personal use only 479 486 Community Bank® Company owned 462 442 418 391 348 322 288 295 254 273 291 232 264 209 230 194 172 186 148 125 92 58 114 74 92 35 182 186 188 189 191 191 5 21 143 150 154 128 138 139 69 71 79 CY98 CY99 CY00
Slide 42: Geographic spread
2160 ATM’s 486 branches For personal use only 1 4 8 0 12 160 347 50 46 75 57 49 3 42 22 107 5 25 11 76 123 322 16 49 63 440 939 76 87 191 135 169 809 26 2 295 Community Bank® 9 8 Bendigo branded (3rd party) ATM’s 412 21 Geographic spread 42
Slide 43: The Community Bank model has proven robust and sustainable
The Community Bank® model has proven to be robust and sustainable Millions Community Bank® community grants ($m) For personal use only • Communities have proven to be great partners $100 in banking, and together we have opened more $90 than 295 Community Bank® branches in 12 $80 years (more than 60
Slide 44: Systematic growth in retail
Systematic growth in retail For personal use only 100 Deposits per Community Bank® branch 90 No. of branches 80 Community Bank® branches by age 70 CAGR 16.4% 60 50 $'000 40 60,803 30 44,445 36,514 34,142 37,261 20 28,294 26,513 30,092 20,634 10 13,487 15,447 0 <1 1 2 3 4 5 6 7 8 9 >10 <1 1 2 3 4 5 6
Slide 45: Community Bank footings growth
Community Bank® footings growth Community Bank® loans Community Bank® deposits Community Bank® footings For personal use only Community Bank® Note – Graphs shown are in financial years 45
Slide 46: Third-Party Banking
Third-Party Banking Originations per month (RHS) Portfolio size (LHS) Originations For personal use only Portfolio size per month ($b) ($m) $18.0 $400 $17.0 $350 $16.0 $300 $15.0 $250 $14.0 $200 $13.0 $150 $12.0 $100 $11.0 $50 $10.0 $0 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Third-Party mortgage business
Slide 47: Margin Lending
Margin Lending ML portfolio Margin lending portfolio vs ASX All Ords For personal use only size ($m) ASX All Ords 4,000 5,500 5,000 3,500 4,500 3,000 4,000 3,500 2,500 3,000 2,000 2,500 ML ($m) ASX All Ords 2,000 1,500 1,500 1,000 1,000 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12
Slide 48: Great Southern - looking forward to a resolution
Great Southern - looking forward to a resolution For personal use only Millions ($) 450 7000 Portfolio balance No. of borrowers 440 6600 430 6200 420 5800 410 5400 400 5000 390 380 4600 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Se
Slide 49: Specific provisions
Specific provisions Jun-12 Dec-12 40 Millions 35 30 For personal use only 25 20 Represented by $96.2m 15 10 5 - Consumer Retail Mortgages 3rd Party Commercial / Portfolio Funding Rural Bank Wealth Delphi Bank Mortgages Business (includes Great Southern) Portfolio Provision as % Retail 3rd Party Comm
Slide 50: Secure and low risk loan portfolios
Secure and low risk loan portfolios Loan portfolio by security1 • 98.2% secured 0.4% 1.8% For personal use only • 97.8% secured by mortgages and listed securities 4.1% • Residential lending 24.3% – arrears have improved in 1HY13 – average LVR 62.2%2 • Margin lending 69.3% – average LVR 39% – 87% of
Slide 51: Construction portfolio
Construction portfolio 2% 1% 11% 9% For personal use only • $726m of loans (0.3% decrease since Jun-12) 10% • 1.5% of total loans • $122k average loan size 8% • $25m largest loan size 4% • Geographic spread • $29m impaired loans 55% • $9.7m in arrears (1.3% 90 days+) ACT NSW NT QLD SA TAS VIC WA Cre
Slide 52: Group exposures and residential mortgages
Group exposures – total $49.4bn Residential Mortgages Dec-12 Jun-12 Dec-11 Owner occupied 63.6% 63.2% 63.0% Consumer Margin 9% Investment 36.5% 37.0% 37.0% For personal use only Lending 5% Lo Doc 5.9% 6.5% 7.0% Retail mortgages 52.3% 51.7% 50.2% Third Party mortgages 47.7% 48.3% 49.8% Mortgages with
Slide 53: Queensland
Queensland QLD arrears >90 days 2.50% For personal use only QLD Floods 2.00% 1.50% 1.00% 0.50% 0.00% Residential Consumer Credit 53
Slide 54: LVR trends
LVR trends LVR distribution by number of accounts % of portfolio 50% For personal use only • No material change in LVR trends of new business written 40% • LMI required for high 30% 15% of portfolio LVR loans > 80% LVR 20% 10% 0% 0% - 60% 60.01% - 80% 80.01% - 90% 91%+ Jun-11 Dec-11 Jun-12 Dec-12 Cr
Slide 55: MIP geographic distribution
MIP geographic distribution For personal use only MIP #: 0.75% MIP Blce: $0.14m Portfolio: $221m %MIP/Port Blce: 0.06% MIP #: 41.04% MIP Blce: $21.20m Portfolio: $7,943m MIP #: 12.69% %MIP/Port Blce: 0.27% MIP Blce: $12.68m Portfolio: $5,193m %MIP/Port Blce: 0.24% MIP #: 14.93% MIP Blce: $18.11m Por
Slide 56: Commercial – industry split
Commercial – industry split 1% 1% 3% 3% 0% Accom & food services Admin & support services 4% For personal use only Agri, forestry & fishing Arts & Rec services 36% Construction Education & training 26% Elec, gas, water & waste Finance & insurance Health Care & Social assist Info media & telecom Manu
Slide 57: Loans under management
Loans under management Geographic split Loan sectors For personal use only 10% 4% 3% 23% 6% 29% 23% 32% 18% 14% 6% 3% 13% 16% NSW SA/NT QLD TAS VIC WA Dairy Hort & vit Grain Grain, sheep & beef Sheep & beef Sheep Beef Other Rural Bank – loan diversity 57
Slide 58: Investor relations contacts
Analysts Media For personal use only Will Rayner Silvana Donato Head of Capital and Investor Relations Media and Communications Manager Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 8 8220 7764 Tel: +61 8 8220 7784 Mob: +61 437 794 366 Mob: +61 402 110 445 Email: will.
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