Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2009 Earnings Presentation
46 slides from Bank Of Queensland's earnings presentation, Aug 31, 2009
Slide 1: Full year results
Bank of Queensland Full year results 31 August 2009
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 Full Year Results 2009 2
Slide 3: Result highlights
Result highlights David Liddy, Managing Director
Slide 4: Result highlights
Result highlights Strong cash profit growth – beating guidance at 21% growth ($187.4m) Continued outperformance of system – achieving 1.8x system lending 88% of LUM growth in retail deposits, maintaining record levels of liquidity Resilience of OMB model established - NSW consolidation completed Ass
Slide 5: Strong financial results in tough market
Strong financial results in tough market 2008 2009 Normalised cash NPAT $155.4m $187.4m 21% Cash EPS (normalised Fully Diluted) 99.9¢ 98.4¢ 1.5% Ordinary dividend 73¢ 52¢ 21¢ Loan growth (pcp) *23% 10% Retail deposit growth (pcp) *25% 16% Net interest margin 1.67% 1.56% 11bps Cost to income ratio (n
Slide 6: Moderated growth continues…
Moderated growth continues… Lending growth : 1.8x system* Deposit growth : 1.0x system* 10% 16% 16% 6% System System BOQ System System BOQ System BOQ BOQ System Lending growth Deposit growth * Last 12 months Source: APRA data Full Year Results 2009 6
Slide 7: Cost efficiencies accelerating…
Cost efficiencies accelerating… Efficiency initiatives implemented in March 2009 gaining traction…2H09 run rate allows higher brand investment, compliance & regulatory costs in FY10 Cost to income ratio* Expenses* $320m 58.7% $314m $11.7m (2%) $13.8m Admin 54.3% $94.5m Operating 54.0% $85.5m $64.5m
Slide 8: Asset quality remains strong
Asset quality remains strong Impaired assets have increased in line with deteriorating economy, but BOQ focus remains on well secured housing and SME lending We expect BDD / GLA to remain materially lower than majors BDD / GLA Performance* 0.77% $14.5m 0.44% BOQ Majors $11.2m 0.20% 0.16% 0.17% 0.12%
Slide 9: Strong capital base and liquidity
Strong capital base and liquidity Tier 1 capital improved 1.7% to 8.9%, or 9.6% including retail entitlement High liquidity levels remain well in excess of APRA and internal benchmarks Capital adequacy Liquidity 12.2%* 16.3% 11.5% 11.0% 13.6% Tier 2 Tier 2 ratio 2.6% 11.1% Hybrid Tier 1 Tier 1 Tier
Slide 10: The result in detail
The result in detail Ram Kangatharan, Chief Financial Officer
Slide 11: Meeting our commitments
Meeting our commitments 2008 2009 % Change $m $m vs pcp Total operating incom e 570.6 629.0 10% Expenses 341.7 369.8 8% Adj: Normalisation & non-cash items 21.7 55.8 Norm alised Expenses 320.0 314.0 -2% Impairment on loans and advances 27.0 66.0 Adj: Normalisation item - 7.2 Norm alised im pairm ent
Slide 12: Restatement of FY08 statutory profit
Restatement of FY08 statutory profit FY08 profit and balance sheet were stated using provisional entries in accordance with AASB 3 Business Combinations. These provisional entries have now been finalised resulting in restatement of several items. A summary is below. 31-Aug-08 Restated Reported Incre
Slide 13: Margin improvement in 2H09
Margin improvement in 2H09 Increasing term and retail funding costs have impacted NIM Similar trend to FY08, albeit increased retail funding costs reduced quantum of NIM recovery in 2H09 NIM down 18 bps in 1H09 NIM up 7 bps in 2H09 15bps (23bps) 4bps 2bps 1.70% (30bps) 9bps (7bps) 1.77% (8bps) 1bp 3
Slide 14: Lending income strong… other income flat
Lending income strong… other income flat Net Interest Income Non Interest Income 14% (1%) $481m $150m $148m $421m 2008 2009 2008 2009 NII continues to grow with balance Strong underlying customer fee income sheet growth above system and growth was offset by impact of direct margin improvement in 2H0
Slide 15: Expense composition
Expense composition Cost to Income Ratio Operating Expenses Employee, 1.7% $125.8m (40%) 2.1% 2.1% Operating, 58.8% 3.0% $85.5m (27%) $32m $32m 49.9% Occupancy, $24.5m (8%) Admin $13.8m (4%) Cost to Amortisation Integration Asset Restructuring Normalised income ratio of customer Costs Impairment Cos
Slide 16: Expense initiatives gaining traction
Expense initiatives gaining traction Meeting previous guidance with cost to income ratio of 49.9% Expect further improvements as efficiencies continue to gain traction Cost to Income Ratio Targets 64.5% 62.6% 56.1% 54.3% - 1H09(A) Phase 2 Savings are not Phase 1 – Efficiency program incremental to P
Slide 17: Funding our growth
Funding our growth Reduced availability of wholesale funding (inc. securitisation markets) increased reliance on retail deposits Wholesale capacity has started to grow 64% 53% 49% 2008* 2009* 26% 12% 12% 9% Retail Wholesale Securitisation Capital * Last rolling 12 months v pcp -25% Full Year Results
Slide 18: Focus on retail deposits
Focus on retail deposits Through the market turmoil the Bank has significantly grown retail deposits Retail deposits growth accounted for 88% of LUM growth for the year Record liquidity levels in FY09, affording some flexibility in FY10 Retail deposits Retail portfolio composition Term $16.2b 33% De
Slide 19: Funding balance sheet impact
Funding balance sheet impact Retail deposit growth continues to contribute a higher portion of total funding Following capital raising and improvements in market stability, significant capacity on ST wholesale funding emerging 2008 Funding 2009 Funding S/T Wholesale 14% S/T Wholesale 17% L/T Retail
Slide 20: Long-term debt maturity profile
Long-term debt maturity profile Weighted average maturity of long term debt has lengthened to 1.9 years remaining at pre- crisis levels BOQ Funding Programs Maturity Profile (AUD) 800,000 700,000 Weighted Average Maturity 600,000 Issuance ($'000s) 500,000 400,000 300,000 200,000 100,000 - -13 -10 -1
Slide 21: Strong capital position
Strong capital position Tier 1 capital improved 1.7% to 8.9% 11.5% 11.5%* 11.0% Targets: Tier 1 of 8%-9% Total of 11%-12% 7.2% Tier 1 Tier 1 ratio 8.9% Hybrid Tier 1 Tier 2 Tier 2 ratio 2.6% 2007 2008 2009 * Excludes the Retail Entitlement Offer for $110.8m settled post 31-Aug-09 balance date Full Y
Slide 22: Prudent capital management
Prudent capital management Final dividend per guidance provides for greater organic capital generation Conclusion of Project Pathways delivering continued distribution and efficiency gains to improve earning base for organic capital generation Strategic focus on solving the capital intensity of the
Slide 23: Capital and funding
Capital and funding Recent capital raising provides buffer to exploit organic and inorganic opportunities Dealing from a position of strength on capital to expand short term wholesale funding Network has demonstrated track record in retail deposit gathering BOQ will continue to access term market de
Slide 24: BOQ portfolio
BOQ portfolio Ram Kangatharan, Chief Financial Officer
Slide 25: Loans under management by product
Loans under management by product 24% CAGR $28.9b $26.3b 11% $3.2b leasing $3.0b $4.7b $4.4b 16% $19.2b commercial $21.0b $15.1b $2.7b $18.9b $3.4b $2.1b $2.7b $13.1b $10.3b 73% Retail 2006 2007 2008 2009 Retail Business Leasing Focus continues to remain towards retail mortgages and residentially se
Slide 26: 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 2005 2009 FY09 – Growth Rate % QLD 64% QLD 11% QLD 85% NSW 21% NSW NSW
Slide 27: Differentiated risk profile & fully provisioned
Differentiated risk profile & fully provisioned BOQ lending: secured, small exposures, avoid non-recourse lending, high pre-sales on development Housing Personal Leasing Commercial Large exposures 72% of total 1% of total 11% of total 16% of total 5% of total lending lending lending lending lending
Slide 28: Large exposures
Large exposures The Bank has 67 connections Largest exposures by ANZSIC Group with exposures >$10m Personal Arts & recreation 8% services 1% Total commitment exposure Other Construction $1,504m (drawn balance 6% 18% $1,310m) ~5% of total loans under Accommodation & food services management 6% ~52% m
Slide 29: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 1.30% 1.25% 1H08 1.00% 2H08 0.81% 0.73% 0.75% 0.65% 1H09 0.50% 2H09 0.25% 0.00% Retail Business Leasing Total Full Year Results 2009 29
Slide 30: Bad debt analysis
Bad debt analysis Bad debts continue to increase, but tracking well below majors with early signs of improvement in housing as economy shows signs of improvement Leasing and commercial portfolios showed increased stress in 2H09 Expect to hit peak bad debts in FY10 Bad debts by product Underlying bad
Slide 31: Increased provisioning…providing buffer
Increased provisioning…providing buffer Portfolio focus remains on well secured housing and SME lending with no single name exposures of significance. Increased collective / GRCL provisions to account for peak loss expectations in FY10 Total provisions 0.82%* $29.4m 0.66%* 0.67%* 0.60%* $18.5m $18.7
Slide 32: Strategy and outlook
Strategy and outlook David Liddy, Managing Director
Slide 33: Finalisation of Project Pathways
Finalisation of Project Pathways Objective was to reposition the Bank’s cost base over the next 3 years A two-phased project that set a goal to get the Bank’s CTI ratio on a glide path Efficiency down to 45% by 2011 on a sustainable basis 1 program Phase 1 initiatives completed in March 2009 – expec
Slide 34: The new banking landscape….
The new banking landscape…. Housing loans (August 2009)1 28.3% There is a ‘void’ created by the departures of 26.0% St George and BankWest – opportunity for a real alternative to the major banks ~$81bn ~$34bn ~$21bn 14.3% 14.0% 8.7% 3.7% 3.6% 2.8% 2.7% 2.2% 1.8% 1.7% 1.0% 0.9% 0.6% iC t G IN c a M Z
Slide 35: Is competition important?
Is competition important? YES Regional banks, and the building society / credit union sector, are needed in the financial services landscape to provide competition for Australian consumers and businesses Competition in residential and business lending, and stronger, viable non-major banks will ultim
Slide 36: What is needed for real competition post-GFC?
What is needed for real competition post- GFC? 1. Securitisation markets 2. ACCC’s role Regionals / smaller players have ACCC should take a more proactive historically had access to securitisation role in monitoring competitive markets providing funding at levels behaviour allowing them to compete w
Slide 37: What is needed for real competition post-GFC?
What is needed for real competition post- GFC? 3. Flattening of Government guarantee fee for term funding This is NOT asking for a handout – it’s asking for the playing field to be levelled again! Current fee structure has inadvertently advantaged the major banks at the expense of regionals Senate E
Slide 38: How will BOQ become the real alternative?
How will BOQ become the real alternative? Organisation changes made in FY09 embed the ‘small bank’ differentiated culture and processes Single distribution organisation recognises the target segment of retail customers and SME customers predominantly rely on loans secured by residential housing Mark
Slide 39: Unique OMB distribution productivity
Unique OMB distribution productivity Through the GFC the OMB model has continued to demonstrate unmatched productivity… both on the assets and liabilities side We have now converted 39 corporate branches to OMBs where average monthly settlements have increased 64% post conversion Key to unlocking sh
Slide 40: Managed, targeted lending growth….
Managed, targeted lending growth…. Mature and interstate OMB network continue to demonstrate the capability to continue to grow with a moderate premium pricing starting 2008… proving its superior customer value proposition Corporate branches deliberately focusing away from lending towards deposits w
Slide 41: Resilience of the network proven
Resilience of the network proven Total OMB commissions OMB income split FY09 Upfront income 35% 32% $116.1m CAGR Share of fees $93.7m 16% $70.4m $47.6m Other income 14% Trail income 38% FY06 FY07 FY08 FY09 Total OMB commission payments Majority OMB income comes from continue to increase existing bal
Slide 42: Our focus - Housing & SME
Our focus - Housing & SME The OMB model is uniquely qualified and productive in growing our housing lending, leveraging successfully the personal service proposition The recent takeovers of BankWest and St.George by major banks has left a void in real alternatives for small business finance in Austr
Slide 43: Evolution of our strategy
Evolution of our strategy 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
Slide 44: Market guidance and outlook
Market guidance and outlook The distribution model is proving its resilience and productivity in the toughest of conditions – we’ve cleared the decks on underperforming NSW footprint We expect to continue to grow profitably all aspects of our business ahead of our competitors whilst maintaining pric
Slide 45: Summary
Summary Strong performance given the economic climate - BOQ has been successful in: Increasing liquidity Strengthening our balance sheet Strengthening capital management Ensuring business sustainability Increasing efficiency – creating headroom for investment Project Pathways was completed with succ
Slide 46: Full Year Results 2009
Full Year Results 2009 46