Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2008 Earnings Presentation
47 slides from Bank Of Queensland's earnings presentation, Aug 31, 2008
Slide 1: Bank of Queensland Full Year Results
Bank of Queensland Full Year Results 31 August 2008
Slide 2: Agenda
Agenda Result highlights David Liddy Managing Director & CEO Financial result in detail Ram Kangatharan Group Executive & CFO BOQ Portfolio Ram Kangatharan Group Executive & CFO Strategy and outlook David Liddy Managing Director & CEO FY08 Full Year Results 2
Slide 3: Result highlights
Result highlights David Liddy, Managing Director
Slide 4: Result highlights
Result highlights Record profit and strong EPS growth NIM improvement from 1.62% in 1H08 to 1.70% in 2H08 – full year 1.67% down from 1.81% in FY07 Integration of Home Building Society completed with synergies ahead of market guidance. Further upward revision of run rate synergies in Years 2 and 3 S
Slide 5: Strong financial results
Strong financial results FY07 FY08 Normalised cash profit after tax $106.1m $155.4m 46% Cash EPS (normalised fully diluted) 93.0¢ 102.9¢ 11% Ordinary dividend 69¢ 73¢ 6% Loan growth (pcp) 27% *23% Retail deposit growth (pcp) 33% *25% Net interest margin 1.81% 1.67% (14bps) Cost to income ratio (norm
Slide 6: Strong lending and deposit growth
Strong lending and deposit growth Lending growth Retail deposits Ç 23% * Ç 25% * 23% 25% 19% 12% BOQ System BOQ System Source: APRA data * Excludes acquisition balances from Home Building Society Ltd. FY08 Full Year Results 6
Slide 7: Continuing strong lending growth
Continuing strong lending growth Strong growth in all areas * Overall 1.9x system growth * 23% 25% 18% 12% 11% 12% BOQ System System System BOQ BOQ Retail Commercial Overall lending growth Source: APRA data * Excludes acquisition balances from Home Building Society Ltd. FY08 Full Year Results 7
Slide 8: Improving efficiency
Improving efficiency Cost to income ratio Expenses 65.8% $320m 64.5% $287m $11.7m Admin $10.5m 11% $94.5m Operating 62.6% $87.2m $64.5m Computer $60.9m $21.8m Occupancy $18.2m Employee $127.5m $110.4m 56.1% 2005 2006 2007 2008 2007 2008* Based on Normalised Cash costs, excluding the impacts of signi
Slide 9: Strong asset quality
Strong asset quality Focus remains on well secured housing and SME lending in Qld & WA Level of impaired assets has increased but no systemic issues Adopting a more conservative approach to provisions Impaired assets vs Underlying bad debts Collective & Specific Provisions Total Impaired Assets $24.
Slide 10: Strong capital and liquidity
Strong capital and liquidity Capital Adequacy Liquidity 16.2% 11.5% 10.8% 11.0% 13.0% Tier 2 Tier 2 ratio 3.8% 11.1% Hybrid Tier 1 Tier 1 Tier 1 ratio 7.2% 2H07 1H08 2H08 2H07 1H08 2H08 FY08 Full Year Results 10
Slide 11: Delivering superior results
Delivering superior results BOQ has a strong track record of delivering shareholder value Earnings per Share Dividends* 93¢ 15% 15% 73¢ 103¢ CAGR CAGR 69¢ 93¢ 80¢ 57¢ 68¢ 48¢ 2005 2006 2007 2008 2005 2006 2007 2008 * Excludes special dividends, on a cash normalised profit basis, although 2007 divide
Slide 12: The result in detail
The result in detail Ram Kangatharan, Chief Financial Officer
Slide 13: Meeting our commitments
Meeting our commitments FY07 FY08 % Change $m $m vs PCP Total operating income 500.0 570.6 14% Total expenses 294.7 360.7 22% Underlying profit 205.3 209.9 2% Impairment on loans and advances 20.9 27.0 29% Profit before tax 184.4 182.9 -1% Income tax 54.6 56.1 3% Net profit after tax 129.8 126.8 -2%
Slide 14: Normalisation and integration details
Normalisation and integration details Normalisation items - $28.6m after tax - Amortisation of customer contracts $18.7m - Integration costs $10.1m - Gain on sale of Visa shares ($6.3m) - Mark to market on banking book bonds and hedge ineffectiveness related to Home acquisition $6.1m Home Building S
Slide 15: Recovering Margins
Recovering Margins NIM in 2008 1.67% vs. 1.81% in 2007; but improved in 2H08… NIM down 15bps in 1H08 NIM up 8 bps in 2H08 31bps (23bps) (23bps) 31bps 4bps 1.77% 1.77% (8bps) (4bps) (4bps) 4bps (7bps) (1bp) (1bp) 1bp 1bp 1.70% 1.70% 1.62% 1.62% Margin Asset Funding 3rd Party Capital Margin Asset Fund
Slide 16: Continued strong revenue growth
Continued strong revenue growth Net Interest Income Non Interest Income* 9% 31% $150m $421m $137m $321m FY07 FY08 FY07 FY08 NII reflecting strong lending Disposal of the Cards business and growth offsetting higher cost of lower non-core income offset by funds higher banking & insurance income * Adju
Slide 17: Expenses
Expenses Cost to Income Ratio Operating Expenses Employee, $127m (40%) 63.2% 4.7% Operating, $95m (29%) $32m $32m 2.4% Occupancy, $22m (7%) 56.1% Admin $12m (4%) Reported Amortisation Acquisition Normalised IT, $64m $53m (20%) $57m cost to of customer integration cost/income income contracts costs r
Slide 18: Expense discipline
Expense discipline Fundamental cost disciplines introduced to offset volatile markets In FY09 focus will be on sustainable, process re-engineered cost reductions Higher investment in our People and Brand required in FY09 Employee* Computer* Administrative* Occupancy* Operating* 24% 13% 19% 22% 2% 2%
Slide 19: Funding and liquidity
Funding and liquidity Key to BOQ’s philosophy has been first and foremost to grow ‘sticky’ Retail deposits, then tap multiple wholesale funding sources… Diversification of wholesale borrowing - Inter-bank market - Securitisation - Short and long term senior debt - Domestic and offshore BOQ has issue
Slide 20: Focus on retail deposits
Focus on retail deposits Growth in retail deposits funded Retail deposits 53% of growth in loans under management in FY08* $14.0b OMB performance on deposits 34% demonstrates the power of the CAGR distribution model. $9.2b Early success in trial Deposit incentive scheme since Apr ’08 $6.9b $5.8b 200
Slide 21: Wholesale funding
Wholesale funding Despite adverse market conditions in FY08, BoQ successfully issued across various funding markets: - ABS - $630m in April 2008 - RMBS - $350m in October 2007 - RMBS private placement - $500m in June 2008 - Increased Warehouse capacity $500m (incl. new providers) - Hybrid securities
Slide 22: Funding our growth
Funding our growth Home acquisition enhances our Retail funding base. Limited capacity in securitisation markets, driving increasing reliance on wholesale markets. 53% 49% 35% FY07 FY08 26% 12% 12% 9% 4% Retail Wholesale Securitisation Capital Funding mix for growth including addition of the Home ba
Slide 23: Funding balance sheet impact
Funding balance sheet impact 85% of funding comes from committed and sticky sources Securitisation run off will slow as warehouse capacity replaces term issues Term debt average maturity lengthening vs. pre-crisis levels FY07 Funding FY08 Funding S/T Wholesale S/T Wholesale 11% 15% L/T Wholesale 14%
Slide 24: Long-term debt maturity profile
Long-term debt maturity profile Weighted average maturity of long term debt is 2.0 years BOQ Funding Programs Maturity Profile (AUD) Weighted 600 Average Maturity 500 400 300 200 100 - Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- 08 08 09 09 09 09 09 09 1
Slide 25: Capital adequacy
Capital adequacy S1RPS hybrid conversion announced in Aug ’08, increases Tier 1 to upper range… 12.5% Targets: 11.5% Tier 1 of 7%-8% 11.0% Total of 10% to 11% Tier 1* ratio 7.7% Tier 1 Tier 1 ratio 7.2% Hybrid Tier 1 Tier 2 ratio 3.8% Tier 2 Tier 2* ratio 3.3% FY06 FY07 FY08 *Post $64.7m S1RPS Conve
Slide 26: FY09 funding & capital plan
FY09 funding & capital plan Strong emphasis on retail deposit growth - Not just price driven; influencing customer interaction model - Driving sustainable, stickier deposit growth by incentivising OMBs - New products pipeline to be executed from 2H09 Continued drive into wholesale middle market Addi
Slide 27: BOQ portfolio
BOQ portfolio Ram Kangatharan, Chief Financial Officer
Slide 28: Loans under management by product
Loans under management by product $26.3b $3.0b 11% 29% CAGR leasing $4.4b $19.2b 17% commercial $2.7b $18.9b $15.1b $3.4b $12.3b $2.1b $2.7b $13.1b $1.7b $2.2b 72% $10.3b Retail $8.4b FY05 FY06 FY07 FY08 Retail Business Leasing FY08 Full Year Results 28
Slide 29: Retail portfolio
Retail portfolio Total retail portfolio (LUM) by product FY07 $7,000 36% FY08 $6,000 46% $5,000 25% $Millions $4,000 21% 28% $3,000 21% $2,000 13% $1,000 3% 3% 2% 2% $0 Variable Fixed Line of Low Doc Personal Home BS Credit FY08 Full Year Results 29
Slide 30: Commercial portfolio
Commercial portfolio Total commercial portfolio (LUM) by product $3,000 40% $2,500 43% $2,000 31% FY07 Millions 32% FY08 $1,500 18% $1,000 18% $500 6% 3% 5% 2% 2% $0 Term Business CRF's / Debtor Equipment Home BS Loans Overdrafts CRL's Finance Finance FY08 Full Year Results 30
Slide 31: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 1.00% 1H06 0.75% 2H06 1H07 2H07 0.50% 1H08 2H08 0.25% 0.00% Retail Business Leasing Home BS FY08 Full Year Results 31
Slide 32: Impaired Assets & Collections
Impaired Assets & Collections Stress testing asset values - “Market” to “Forced sale” valuations Conservative provisioning based on forced sale valuations. Market value shows upside…. Impaired Assets – Market Value v Forced Sale 17.2 13.0 Market Value 7.2 Forced Sale 5.6 4.4 4.4 4.6 4.0 Business Equ
Slide 33: Bad Debts Analysis
Bad Debts Analysis Sound credit quality, moderate increase in bad debts Greater transparency on bad debts Execution started on plans to eliminate specific origination issues in some minor products accounting for ~30% of ’08 BDD charges by FY10 Bad Debts by Product Total Impairment Expense $27.0m Equ
Slide 34: Conservative Provisioning
Conservative Provisioning No systemic portfolio risks identified during extensive Reviews in FY08 Strong geographic and industry diversification; Home portfolio in transition to the BOQ risk management systems and processes Some deterioration in isolated sectors but with strong underlying security p
Slide 35: Large exposures
Large exposures The Bank has 69 connections Largest exposures by ANZSIC Group with exposures >$10m Personal Arts & recreation services Total commitment exposure Other 7% 1% 4% $1,769m (drawn balance $1,347m) Construction 23% ~6% of total assets under management ~52% matures within 1yr Accommodation
Slide 36: Top large exposures
Top 20 large exposures Personal 3% ($29.0m) Operating Property entities investment 3% ($30.6m) Type Weighted Average 48% ($465.5m) Security Cover Operating Entities 1.85 Property Development 1.50 Property Investment 1.37 Personal 1.39 Total Cover 1.45 Property development 46% ($450.5m) FY08 Full Yea
Slide 37: Strategy and outlook
Strategy and outlook David Liddy, Managing Director
Slide 38: Core business – Retail Bank
Core business – Retail Bank Retail Customers SME Customers Unsecured/Structured/High Risk Structured Vehicles OMB Business Banking Australian Banking Lending Mix* ~$18.9 B ~$4.4B ~$3.0B Large Corporate Large Exposures Retail Business Equipment Lending Finance Fully Secured/Low Risk Retail BOQ Custom
Slide 39: Our strategy… 'sticking to the basics'
Our strategy… ‘sticking to the basics’ 1 Continue strong organic growth - Focus on deposits We will keep - Focus on margins adjusting our - Focus on risk - Focus on efficiency execution in response to the Continue our national distribution expansion in 2 changing market both retail and business bank
Slide 40: Strong organic growth
1 Strong organic growth Strong organic growth will continue, however our focus on deposits, margin and risk will be the priority Our OMB productivity gives us the edge in growth Annualised growth before and after conversion Post Conversion Assets We have now 30% Deposits converted 22 33% corporate b
Slide 41: Continue our national expansion
2 Continue our national expansion Over 2,900 touch points OMB: 1 CB: 43 12 new sites opened ATM: 117 OMB: 107 this financial year SC: 3 TC: 13 OMB: 7 PB: 2 10 corporate Home: 24 BBC: 11 CB: 1 conversions EF: 5 BBC: 1 ATM: 736 completed this year EF: 1 OMB: 1 ATM: 213 EF: 1 ATM: 305 OMB: 54 Focussing
Slide 42: Continue our national expansion
2 Continue our national expansion We will also strengthen our current distribution channels: Retail Business Direct Financial Services Financial Services Channels OMBs, corporate Business Banking, BOQEF, Internet banking, telephone branches, Private Bank debtor & trade finance banking, mobile bankin
Slide 43: Disciplined acquisitions
3 Disciplined acquisitions We will look at opportunistically buying in the retail banking, equipment finance, and debtor finance space Our focus for 1H09 will be to bed down the Home Building Society acquisition - Successful IT integration occurred 20th/21st September – all Home customers are now fu
Slide 44: 'bank different' – being the real banking alternative
4 ‘bank different’ – being the real banking alternative Extensive research on what ‘bank different’ means to staff and customers has been completed We are investing in an internal and external campaign that will be noticed! FY08 Full Year Results 44
Slide 45: Market guidance
Market guidance The model is proving its resilience and productivity in the toughest of conditions We expect to continue to grow profitably all aspects of our business ahead of our competitors whilst maintaining pricing and credit disciplines Gaining greater confidence in our ability to manage costs
Slide 46: Summary
Summary Strong performance given current economic climate Continued access to funding – albeit more expensive Strong business momentum Sound portfolio benefiting from Queensland and WA Strong credit and cost disciplines Sticking to the basics with ever increasing discipline Cautiously confident FY08
Slide 47: bank different®
bank different® Bank of Queensland