Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2010 Earnings Presentation
38 slides from Bank Of Queensland's earnings presentation, Feb 28, 2010
Slide 1: Bank of Queensland Half year results
Bank of Queensland Half year results 28 February 2010
Slide 2: Agenda
Agenda Result highlights David Liddy Managing Director & CEO Financial result in detail Ram Kangatharan Chief Operating Officer BOQ portfolio Ram Kangatharan Chief Operating Officer Strategy and outlook David Liddy Managing Director & CEO 2 Bank of Queensland Limited ABN 32 009 656 740
Slide 3: Result highlights
Result highlights David Liddy Managing Director
Slide 4: Result highlights
Result highlights Continued cash profit growth despite bad debt losses increasing substantially in 1H10 as previously guided Sustainable cost disciplines in place – allowing headroom to invest in marketing, technology, compliance and regulatory initiatives Headwinds in non-interest income as guided…
Slide 5: Strong financial results in tough market
Strong financial results in tough market 1H-09 1H-10 Normalised cash NPAT $84.2m $97.2m 15% Cash EPS (normalised fully diluted) 45.9¢ 41.8¢ 9% Ordinary dividend 26¢ 26¢ - Loan growth (pcp) 13% 10% Retail deposit growth (pcp) 25% 5% Net interest margin 1.52% 1.65% 13bps Cost to income ratio (normalis
Slide 6: Slowing growth continues across system
Slowing growth continues across system… Lending growth: 2.5x system* Deposit growth: 0.6x system* 10% 8% 5% 4% System BOQ System BOQ BOQ System System BOQ System System Lending growth Deposit growth * Last 12 months Source: APRA data 6 Bank of Queensland Limited ABN 32 009 656 740
Slide 7: Cost efficiencies accelerating
Cost efficiencies accelerating… Efficiency initiatives implemented in March ‘09 gaining traction… run rate allows higher brand investment, compliance & regulatory costs in FY10 & FY11 Cost to income ratio* Expenses* $165.3m 58.7% $7.0m $156.0m (6%) $7.5m Admin 54.3% $47.3m $46.3m Operating 54.0% $31
Slide 8: Strong capital base and liquidity
Strong capital base and liquidity Tier 1 and total capital levels remain in excess of APRA and internal benchmarks Liquidity levels increased to record levels post-GG bond issue Capital adequacy Liquidity 18.6%* 11.5% 11.7% 16.4% 16.3% 10.8% Tier 2 Tier 2 ratio 2.5% 16.0% Hybrid Tier 1 Tier 1 ratio
Slide 9: The result in detail
The result in detail Ram Kangatharan Chief Operating Officer
Slide 10: Meeting our commitments
Meeting our commitments 1H09 1H10 % Change $m $m vs pcp Total operating incom e 304.0 342.9 13% Expenses 212.1 160.9 -24% Adj: Normalisation & non-cash items 46.8 4.9 Norm alised Expenses 165.3 156.0 -6% Impairment on loans and advances 27.6 51.4 Adj: Normalisation item 7.2 - Norm alised im pairm en
Slide 11: Margin improvement in 1H10
Margin improvement in 1H10 As per guidance, a similar trend to 2H09 albeit increasing term and retail funding costs have impacted NIM NIM* up 6 bps in 2H09 NIM* up 12 bps in 1H10 (23bps) 8bps (3bps) 4bps 10bps 5bps 1.97% 1.70% (1bp) 1.77% (8bps) (1bp) (4bps) 1.79% (7bps) (1bp) 1bp 1.85% 1.70% 1.62%
Slide 12: Lending income strong, non-interest headwinds as guided
Lending income strong… Non-interest headwinds as guided Net Interest Income Non Interest Income 21% (12%) $275m $77m $68m $227m 1H09 1H10 1H09 1H10 Balance sheet continues to grow As guided the headwinds in non-interest well above system income continued to reduce this source Margin expansion contin
Slide 13: Expense composition
Expense composition Sustainable cost initiatives implemented…providing headroom to invest in marketing, brand, technology, compliance and regulatory initiatives Maintain previous guidance of 47% in FY10 and 45% in FY11 Cost to Income Ratio Operating Expenses Employee, $57.3m (37%) 1.2% Operating, 46
Slide 14: Funding balance sheet impact
Funding balance sheet impact Following capital raising and improvements in market stability, new sources of funding may become available Record liquidity levels established in prior periods has enabled us to be more selective in funding options, not dependent on highly competitive deposit markets 1H
Slide 15: Long-term debt maturity profile
Long-term debt maturity profile After the recent A$1.0b GG notes issue, the weighted average maturity of long term debt has lengthened to 2.4 years from 1.8 years pre-GFC BoQ Funding Programs Maturity Profile ($A) 1,200,000 Weighted Average Issuance (A$000’s) 1,000,000 Maturity 800,000 600,000 400,0
Slide 16: Strong Capital position
Strong Capital position Tier 1 capital increased to 9.2% - above APRA and internal benchmarks providing a platform to support future growth 11.5% 11.7% Targets: 10.8% Tier 1 of 8%-9% Total of 11%-12% 8.9% Tier 1 Tier 1 ratio 9.2% Hybrid Tier 1 Tier 2 ratio 2.5% Tier 2 1H09 2H09 1H10 16 Bank of Queen
Slide 17: Prudent capital management
Prudent capital management Dividend policy to continue providing for greater organic capital generation Excess equity capital diluted EPS during the period, but provides platform for future growth Strategic focus on solving the capital intensity (eg. St. Andrew’s Insurance acquisition) Earnings per
Slide 18: BOQ portfolio
BOQ portfolio Ram Kangatharan Chief Operating Officer
Slide 19: Loans under management by product
Loans under management by product 12% CAGR $30.3b $28.9b 11% $27.5b $3.4b $26.3b $3.2b leasing $24.3b $3.1b $5.0b $3.0b $4.7b $2.9b $4.6b 17% $4.4b commercial $4.1b $21.9b 21.0b $19.8b $18.9b $17.3b 72% retail 1H08 2H08 1H09 2H09 1H10 Retail Business Leasing Focus continues to remain towards retail
Slide 20: Geographic diversification growing
Geographic diversification growing BOQ historically has had most of its business in Queensland As a result of interstate OMB expansion and acquisition of Home there has been a material and growing geographic diversification trend 1H06 1H10 1H10 – Growth Rate % QLD 64% QLD 5% QLD 83% NSW 11% NSW 9% N
Slide 21: Large exposures
Large exposures The Bank has 68 connections Largest exposures by ANZSIC Group with exposures >$10m Retail 3% Wholesale Arts & Recreation 2% Total commitment exposure 2% $1,486m (drawn balance Construction Personal $1,299m) 16% 30% 4.3% of total loans under management ~30% matures within 1yr Other 12
Slide 22: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 68% of 20% of 12% of Portfolio Portfolio Portfolio 2.00% 1.74% 1.75% 1H08 1.50% 2H08 1.25% 1H09 0.97% 0.95% 1.00% 2H09 0.68% 0.75% 1H10 0.50% 0.25% 0.00% Retail Business Leasing Total 22 Bank of Queensland Limited ABN 3
Slide 23: Bad debt analysis
Bad debt analysis Leasing and commercial portfolios showed increased stress in 1H10 As per guidance peak bad debts in FY10 Arrears and write-offs are stabilising and improving Bad debts by product Underlying bad debts $44.6m Leasing Business $35.8m 25.9% 50.6% $17.0* $14.5m Housing 11.9% 2H08 1H09 2
Slide 24: Increased provisioning providing buffer
Increased provisioning…providing buffer Significant increase in provisions in line with peak loss expectations in FY10 Consistent provisioning despite emerging signs of strength in the economy Portfolio focus remains on well secured housing and SME lending Total provisions 0.97%* 0.82%* $56.7m 0.66%
Slide 25: Strategy and outlook
Strategy and outlook David Liddy Managing Director
Slide 26: Positioned for Growth
Positioned for Growth Key planks of our strategy are now coming together: OMB Model has proved resilient and a more productive distribution channel to address Retail and SME lending Returning to organic expansion of OMB model in high growth geographies Funding concerns are receding and the balance s
Slide 27: We believe our OMB model is superior
We believe our OMB model is superior… The productivity of the OMB model is proven to be unmatched…even throughout the GFC We have now converted 39 corporate branches to OMBs where average monthly settlements have increased 65% post conversion Key to unlocking shareholder value is to exploit this adv
Slide 28: Accelerating the pace of growth
Accelerating the pace of growth… The performance of the OMB network and the OMB: 1 CB: 36 improvements ATM: 165 OMB: 113 SC: 3 throughout the TC: 12 OMB: 14 GFC has given us CB: 16 PB: 3 BBC: 10 the confidence to BBC: 1 EF: 4 EF: 1 ATM: 1066 re-establish our ATM: 293 OMB: 1 EF: 1 organic branch ATM:
Slide 29: Sticking to the plan
Sticking to the plan… High margin/ Expand / acquire high low capital margin / low capital intensity products Value Accretion Acquisition of Pioneer & Geographic, Home in WA- focused higher Scale M&A growth geo plays Interstate Organic expansion into a Expansion national footprint & ATM fleet High gr
Slide 30: St Andrew's
St Andrew’s The acquisition of the St Andrew’s business fits within our growth strategy True bolt-on acquisition – within existing capital footprint Simple income and life protection products closely aligned to core mortgage, personal loans and credit card sales Income diversification through capita
Slide 31: New Executive structure
New Executive structure Managing Director & CEO David Liddy Head of MD’s Office Tarryn McMullen Chief Financial Chief Operating General Manager General Manager Officer Officer Risk Credit TBD Ram Kangatharan Amanda Lawson Lindsay Johnston Group Executive Group Executive Heads of HR, General Counsel
Slide 32: Prospects for FY10
Prospects for FY10 Headwinds Tailwinds Significant margin pressure as Growth opportunities in our model in retail deposits competition SME and Housing continues Strong presence in growth Non-interest income pressure economies continues until acquisitions come Cost disciplines holding and will now on
Slide 33: Outlook to FY10 & beyond
Outlook to FY10 & beyond Outlook has changed from “bunkering down” to returning to growth, with a stronger balance sheet ready for expansion – organic and acquisitions Our OMB model has continued to grow and demonstrate its resilience, further establishing its credibility as a branch distribution mo
Slide 34: Capital and funding
Capital and funding Aug/Sep-09 capital raising provides buffer to exploit organic and inorganic opportunities Dealing from a position of strength on capital to expand our funding options Securitisation markets continue to improve.… BOQ continues to have access to increased warehouse capacity ($800m
Slide 35: Pathway to 15% ROE in FY12
Pathway to 15% ROE in FY12 Strategic plan to support ROE guidance – some dependencies include NIM & BDD improvement, continued incremental efficiency gains and improving securitisation markets Bolt-on acquisitions in line with plans to fill the gap…. recent St Andrew’s insurance acquisition consiste
Slide 36: Expense initiatives gaining traction
Expense initiatives gaining traction Disciplined expense management has given headroom to allow continued investment in brand & operational requirements Maintain guidance of 47% in FY10 and 45% in FY11 Cost to Income Ratio Targets 64.5% 62.6% 56.1% Phase 2 Savings are not 54.3% - 1H09(A) Phase 1 – E
Slide 37: Summary
Summary We have emerged from the GFC as a stronger organisation We didn’t stop lending throughout the GFC We’ve been unique in that we’ve met the commitments we made to the market Earnings, growth and cost reduction guidance Acquisition strategy within existing capital and funding footprint We’ve es
Slide 38: Bank of Queensland Limited ABN 32 009 656 740
38 Bank of Queensland Limited ABN 32 009 656 740