Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — 1H17 Earnings Presentation
35 slides from Bank Of Queensland's earnings presentation, Feb 28, 2017
Slide 1: For the Half-Year Ended 28 February 2017
FOR THE HALF-YEAR ENDED 28 FEBRUARY 2017 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 2: Jon Sutton and Anthony Rose presenters
JON SUTTON Managing Director & CEO ANTHONY ROSE Chief Financial Officer JON SUTTON Managing Director & CEO Bank of Queensland Limited 1H17 Results Presentation
Slide 3: Earnings down, improved outlook for second half
Earnings down, improved outlook for second half Niche business segments continue to perform well Further improvement in asset quality Delivering on expense management targets Strong capital and funding position provides opportunity for growth Bank of Queensland Limited 1H17 Results Presentation
Slide 4: 1H17 Results Presentation key metrics
190 179 181 175 167 51.5 47.8 47.8 45.7 45.5 11.2 38 38 38 38 10.3 10.5 10.2 36 9.8 Bank of Queensland Limited 1H17 Results Presentation
Slide 5: 1H17 includes BOQF Cashflow Finance Pty Ltd
1.97 1.97 1.97 1.90 1,949 1.85 1,300 1,249 228 (168) 48.1 36 38 36 46.4 47.3 47.4 31 44.0 27 Bank of Queensland Limited 1H17 Results Presentation (1) 1H17 includes BOQF Cashflow Finance Pty Ltd (formerly Centrepoint Alliance Premium Funding Pty Ltd) acquired in December 2016
Slide 6: Commercial loan book growth 8% annualised
• Commercial loan book growth 8% annualised • 1H17 annualised organic growth of 1% • Benign loss experience continues • Improving mix of higher margin business • Housing loan book growth of $394m (27% annualised) • Impairment expense below expected range • High quality residential loan portfolio • P
Slide 7: Strong focus on meeting responsible lending obligations
152 • Strong focus on meeting responsible lending obligations and prudential practice guide standards 108 • 100% validation of mortgages 75 • BOQ Specialist and Virgin Money mortgages providing 58 54 49 further diversification • Continued run-off of development exposures 86 80 30DPD 57 90DPD Bank of
Slide 8: Reaffirming 1% underlying expense growth target for FY17
256 256 264 • Reaffirming 1% underlying expense growth target for 244 251 FY17 One-off • $15m in run-rate savings delivered expenses • Active investigation of additional efficiency opportunities Underlying underway expenses 264 One-off $15m in ongoing savings delivered through: 256 256 251 expenses
Slide 9: Strong capital position on any measure
• Strong capital position on any measure • Liquidity & funding position provides room for growth • Well placed for any changes • Capital base to be optimised when regulatory requirements have been settled 71% 68% Target operating 66% 66% 66% range 65-70% Common equity Average residential tier one ra
Slide 10: Strategic pillar FY17 priorities 1H17 progress
Strategic pillar FY17 priorities 1H17 progress 1. Expansion of mortgage aggregators for Virgin Money Customer in charge 2. Enhance digital customer experience 3. Ongoing branch network optimisation 1. Optimise deposit pricing using data analytics Grow the right way 2. Develop specialist niche
Slide 11: Anthony Rose, Chief Financial Officer
ANTHONY ROSE Chief Financial Officer Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 12: Net interest income 1H17 $452m
1H17 1H17 v 1H16 1H17 v 2H16 Net interest income $452m (3%) (4%) Non interest income $80m (6%) (9%) Total income $532m (4%) (5%) Operating expenses ($252m) (2%) (5%) Underlying profit $280m (5%) (5%) Loan impairment expense ($27m) (25%) (13%) Profit before tax $253m (3%) (4%) Income tax expense ($78
Slide 13: Contraction in housing portfolio
43.2 43.0 • Contraction in housing portfolio 41.0 38.4 35.3 • Niche segments contributing to commercial growth BOQ Finance • Prioritised margin over growth in 1H17 due to funding conditions and competition Commercial Retail FY13 1H17 1,956 BOQ Finance 1,308 1,259 Commercial 604 241 Retail (272) 1H17
Slide 14: BOQ Specialist continues to grow strongly
Virgin • BOQ Specialist continues to grow strongly Money • Branch network remains consistent source of Broker settlements BOQ • Focus on margin preservation and credit settings Specialist • 55% of settlements originated outside QLD Corporate • Application volumes higher in past 6 weeks OMB FY13 1H17
Slide 15: Solid contribution from Business Banking niche segments
• Solid contribution from Business Banking niche • Acquisition completed 30 December 2016 segments • Leading participant in the premium funding industry • BOQ Specialist Commercial growth continuing strongly • Originating around 30,000 new loans per annum • Improved business mix in BOQ Finance • Loa
Slide 16: Transaction account growth of 10% annualised
46.1 46.3 Long Term • Transaction account growth of 10% annualised 43.5 43.4 45.4 Wholesale (including strong mortgage offset growth) • Deposit to Loan ratio increased from 68% to 71% Wholesale Deposits • Net Stable Funding Ratio ~107% during the period • Strong funding mix with operating leverage C
Slide 17: Term deposit run-off and reinvestment rates
Run-off rate Reinvestment rate Rate differential Average reinvestment differential (2.15%) in 1H17 2H16 1H17 2H17 May & August TD portfolio RBA rate cuts Illustrative profile spread Average TD special spread Portfolio 6mth period average 6mth period average Assumes 60bps new spread TD new and rolled
Slide 18: Front book vs back book housing impact ongoing
( ) ( ) ( ) Third party costs Net interest margin • Front book vs back book housing impact ongoing Element 1H16 2H16 1H17 • Mortgage repricing has provided some offset Asset pricing benefits +6bps +9bps +6bps • Capital & Low Cost Deposits – returns on replicating Front book pricing & mix (4bps) (5bp
Slide 19: Customer shift to lower fee products continues
• Customer shift to lower fee products continues • Change in ATM fee arrangements reduced result by 96 $3m on prior half 88 84 85 • Trading profits at a more normal level 80 • St Andrew’s Insurance transitioning to new agreement Trading and product mix as expected Income Insurance Other Banking Bank
Slide 20: Underlying expense growth of 1% in 1H17
• Underlying expense growth of 1% in 1H17 • Cost to Income ratio up to 47.4% • Increase in amortisation absorbed 256 264 • Virgin Money mortgage roll-out added $4m in 1H17 256 244 252 Operating • Targeting 1% underlying expense growth in FY17 model • Premium funding acquisition to add $4m in FY17 Ot
Slide 21: Continued improvement in asset quality
• Continued improvement in asset quality BOQ Finance • Commercial portfolio performance in 1H17 particularly pleasing; no new impaired assets >$5m Commercial • Retail impairments weighted to Central QLD & North WA exposures Group Total Retail 259 82 86 237 240 232 80 210 74 BOQ Finance Exposure < $5
Slide 22: Improving seasonally-adjusted trends across all portfolios
• Improving seasonally-adjusted trends across all portfolios • BOQ Specialist mortgages contributing to improvement • Diminishing impact of mining construction transition evident in Equipment Finance portfolio (1) Includes BOQ Specialist Bank of Queensland Limited 1H17 Results Presentation (2) Housi
Slide 23: Capital position compares well against peers
• Capital position compares well against peers, particularly given BOQ’s more conservative risk weightings • Well placed for regulatory changes • Good progress made towards advanced accreditation if size of the prize warrants accelerating that step ( ) Underlying capital ( ) Increases BOQ’s CET1 gen
Slide 24: Application for Advanced accreditation
Initiatives in place Initiatives to commence Credit policy framework Economic/regulatory modelling Credit models & application scorecards Collateral management Credit risk Collective Provision/GRCL Global credit limits system Lending origination systems Data warehouse and data Application for Advanc
Slide 25: Jon Sutton, Managing Director & CEO
JON SUTTON Managing Director & CEO Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 26: Industry and Economic environment
• Conduct and culture focus • Rapidly changing customer expectations Industry • Increased regulatory scrutiny • Licence to operate • National economy holding up well • Improved business sentiment but credit growth subdued Economic • Tourism, education and exports helping QLD • Impact of mining secto
Slide 27: Vision, Strategy, FY17 priorities
Vision … Strategy … Focus on niche segments that value a more intimate customer relationship There’s always a better Customer in charge Grow the right way Loved like no other way 1. Expansion of mortgage 1. Optimise deposit pricing 1. Complete roll out of 1. Invest in leadership and FY17 priorities
Slide 28: Better outlook for revenue in second half
Better outlook for revenue in second half Mortgage momentum returning Strong capital and funding provide room for growth Risk discipline to be maintained Efficiency remains a key focus Bank of Queensland Limited 1H17 Results Presentation
Slide 29: For the Half-Year Ended 28 February 2017
FOR THE HALF-YEAR ENDED 28 FEBRUARY 2017 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 30: Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 31: Quality continues to improve under revised risk appetite
• Quality continues to improve under revised risk appetite Less than 40% • Higher proportion of owner occupied lending in 1H17 40-60% • Broker settlement volumes supported by Virgin Money 60-80% • Line of credit portfolio continues to reduce 80-90% 90%+ Metrics (%) 1H16 2H16 1H17 Metrics (%) 1H16 2H
Slide 32: $197m current exposure to residential apartment construction
Lending to residential apartment construction Concentration Apartment construction exposures(1) • $197m current exposure to residential Limit - $102m construction Exposure - $52m • 25 developments across 3 states, NT QLD # Apts - 326 completing 2017 through 2018 WA • Highest concentration in VIC and
Slide 33: Glossary of abbreviations
1H: First half of financial year FY: Financial year 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 KPI: Key performance indicator ALM: Asset & Liability Management LCD: Low cost deposit APRA: Austr
Slide 34: Important notice and general background 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 with the BOQ’s other periodic and continuous disclosure announcemen
Slide 35: Firs Possible to
Firs Possible to (OVE A BANK