Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2003 Earnings Presentation
51 slides from Bank Of Queensland's earnings presentation, Oct 16, 2003
Slide 1: Les
Les ee ye ye VI i Le is Vee pe iy LOI ye ey Le Le yy Ley a Le Wy Lie yy YUL Ye Lo yy Lo _ y wees eh Ah a, USL ZUU. iy Le ye Uy Yipes Ge Uy yy Le ey eB ee SU Woe Co Ly oe Ly ey Lee He. Ye Le ey yey j Ley yy Lo GIG ee GID ey LD : Aa pes Le yy Guy Le Ly ye yey Les LUE ee oe — ee ye ee i y i: j y @ y ]
Slide 2: A record full year profit of $44.7m
A record full year profit of $44.7m As 56%LY Driven by: Increased sales of: $5.7b (lending approvals), #.54%LY Resulting in assets under management of: $8.7b, #932%LY Coupled with strong retail deposits of: $3.8b, #29%LY Increased net interest income to: $133m, #22%LY Increased non interest income o
Slide 3: Underlying profit $75m, up 51%
Underlying profit $75m, 4#x51%LY. EPS (Diluted) 57.1¢, A46%LY. Increased full-year dividend by 8¢ to 37¢ per share, #AXZ8%LY Excellent asset quality - impaired assets reduced to 0.07% of average assets (2002 0.13%). “PEP” Benefits achieved of $30m, expectation of $24m. 22 more branches opened to fur
Slide 4: Net Interest Income
Net Interest Income Non Interest Income Total Income Total Expenses Underlying Profit Bad Debts Profit Before Tax Income Tax Net Profit After Tax Earnings Per Share Cost to Income Ratio 64.9% 132.7 22% 81.6 26% 214.3 23% 139.0 12% 75.3 51% 11.7 26% 63.6 57% 18.9 59% 44.7 56% 57¢ 46%
Slide 5: Profit after tax
$m Profit after tax NO i) w oO or oO = oO = oO Growth in profit driven by strong revenues and cost control Non-Interest Expenses 7m (815m) i ja ie Bad Interest Income Tax ($7m) Aug 02
Slide 6: Strong Asset Growth
Strong Asset Growth Assets under management up 32% Double digit EPS Growth EPS growth of 46% Cost to Income Ratio of 68% Cost to Income ratio of 64.9% ROE of 14% ROE of 15.4% 120 Branches by August 03 120 Branches (22 opened this year)
Slide 7: The results are proof that our strategies are paying off
» The results are proof that our strategies are paying off. But critical that we capitalise on the platform this result provides. » BOQ recognised as the Best Regional Bankl"!. » Successful in acquiring UFJ Finance and ATM Solutions. These businesses will underpin our future expansion. » Finalised m
Slide 8: DEE LC
DEE LC LECT i ee Le ee ae, 2 Gy, Hy a LC i i us y y ee Lo Le 7 ee a ee Wa eo = ey yy ol Ye ay ee 7 Ly ae ye La Vay y Cr y CO y i Kare a Le LL Vy, ee ee y . Uy, Ly Ly, yj ye a — : Ly ee xs SS So ig yy ye Z y i A y Z y ie y Le ip ey Ve oe, _ eR Loy) ee) . _ SESS ie ® ee eee ee
Slide 9: EPS growth of 46%
Eee pea EPS growth of 46% (35% excl significant items) 5 30% § a 20% 3 > 1G) F 10% & 0% -10% 1999 2000 2001 2002 8 2003 2 EPS Diluted (LHS) -@ EPS Growth Rate (RHS)
Slide 10: Return on equity
Return on equity 16.0% 15.0% 14.0% 13.0% 12.0% ~ 11.0% ~ 10.0% ~ 1999 2000 2001 2002 2003 10 thew i
Slide 11: Return on assets
Return onassets _ 0.75% 0.70% 0.65% 0.60% 0.55% 0.50% 20% improvement in ROA on last year 1999 2000 2001 2002 2003 11 heey idesey tee borrikh
Slide 12: Share Price Performance
| Share Price Performance a . BOQ v ASX 200 Financials Index - BOQ Financial Year Close 15 Oct 03 $9.60 Mkt Cap $811m som ASX 200 Financials Opening price $7.40 Closing price $9.01 12
Slide 13: 5-year Economic Value Added (EVA)
5-year Economic Value Added (EVA®) Strong expectations of EVA growth, now being delivered 1999 2000 2001 2002 ~=—-.2003 EVA = Return over and above the cost of capital (Measure of shareholder value created) Source: Stern Stewart & Co (EVA@ is a reg'd trademark of Stern Stewart & Co) 13
Slide 14: 5-year Market Value Added (MVA)
S-year Market Value Added (MVA) il LIN it ’ i it 4999 2000 2001 2002 2003 MVA = market cap - equity capital (MVA is the market’s view of premium over capital base) Source: Stern Stewart & Co 14
Slide 15: LLY Ee i Ye
LLY Ee i Ye Ley I eis i ae Ly i BE Le Li ae age Yi Ge Le iy, ae Fs ye ee Vi BO ay Te ay Dy, Te Se SS ee Yi oe ~ Ye ie Hs Sey Le ye ee Li ee Le Ae ; a Ve i EE y, A ig ay ey So << — ae hy - Wuhan DY ie My _ es Lo Lega le oF oo ENS Sates: ey Go oe, _ eR Loy) ee) _ SESS es “ ee eee ee
Slide 16: Housing
Housing Total approvals of $5.7b, up 70% 54% on last year. This has doubled over the 2003 $5.7 past two years. Housing 74% ; Business 2002 $3.7b aap 26% Housing Consumer 2001 $2.8b 4% Business 22% 3% Business 30% 16
Slide 17: Doubled assets under management in 3.5 years
Doubled assets under management in 3.5 years At 30 Sep 03, with UFJ now over $10b 1999 2000 2001 2002 £2003 iat Value (LHS) -@i Percentage Increase (RHS) Housing loans under management $5.2b up 24% over last year. - Business loans under management $1 8b up 32% over last year. 17 Fron Ut
Slide 18: Housing, Business, Consumer
2001 2002 2003 @ Housing @ Business @ Consumer
Slide 19: Asset Quality
Asset Quality «» On Balance Sheet loan mix remains dominated by housing at 64%. « Arrears continue to fall in line with loan affordability - impaired assets now 0.07% of average assets. » Bad debts are not expected to rise in line with the short-term interest rate increases: — strong credit quality;
Slide 20: Low Impaired Assets & Conservative Provisioning
: Low Impaired Assets & Conservative Provisionin: 0.20% ~ aoe + A Provisions 0.15% conservatively 0.10% maintained 0.05% - 0.00% $8m Reductions in impaired assets $2m $0m + Impaired Assets to Average Assets 2001 2002 2003 2001 2002 2003 ®@ Impaired Assets (LHS) 20
Slide 21: Provision for Bad Debts
Provision for Bad Debts Total Provisions increased by $8.2m, largely due to maintaining the General Provision at 0.51% of RWA — Specific Provision ff $0.1m, General Provision tf $8.1m Provisions: Specific $ 2.7m General $34.0m Total $36.7m Underlying bad debts expense experience $3.5m (2002 $5.2m) 0
Slide 22: Vibrant Sales Performance
‘Vibrant Sales’ Performance : 1999 2000 2001 2002 2003 i Retail Value (LHS) -# Growth Rate (RHS) Retail deposits $3.8b, up 29% over 22
Slide 23: Balanced Debt Mix
Balanced Debt Mix $3.3b $3.96 $4.7b $5.8b $7.6b $0.55 — ann oe 75% 4 aaa 30% 50% 25% fae 92.2b $2.6b $3.0b SE 50% 0% - 1999 2000 2001 2002 2003 H Retail 2 Wholesale | Securitisation 23
Slide 24: Wy oe.
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Slide 25: Net Interest Income
Net Interest Income Stabilised ‘Net. Interest Margin and g Nil Growt Net interest margin of 2.3 1999 2000 2001 2002 2003 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Net Int Income (LHS) -@- Margin (RHS) 25 Sree | Net Interest Margin
Slide 26: Non-interest income from increased customer base and fee structure
Results are from increased customer base, improved discipline around fee collection/discounting and a competitive fee structure $75m - $60m - $45m - $30m + $15m - 1999 2000 2001 2002 2003 26
Slide 27: Mix of Operating Expenses
Ly 2003 $139m Mix of Operating Expenses _| Staff $46m 93% Signifi cant TT M) I 2002 $124m| — item = Admin Occupancy Computer 7% Operating b ay 21% Computer Occupancy 16% 9% 27 Fees
Slide 28: Cost to Income
78% 7) o nn oo 76% : 3 ° 2 vw 74% At 2 re) 5 72% 2 oO . 70% 8 B 68% c io ° 66% -5% % 2 64% 0% °F 1999 2000 2001 2002 2003 Income Growth (RHS) mg Expense Growth (RHS) -@ Cost to Income (LHS) 28
Slide 29: Continued growth in NPAT
| Continued growth in NPAT $50m A 56% increase in NPAT. (35% excluding significant items) $40m $30m $20m $10m - $0m - 1999 2000 2001 2002 2003 29
Slide 30: ey ey,
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Slide 31: Capital Management
Capital Management « As growth continues further capital is required to maintain our target range of 10%-11% (Tier 1 of 7%-8%). « We will continue to actively manage the capital base through securitisation, DRP, SPP and where necessary private or public placements of both ordinary and hybrid capital
Slide 32: Solid Capital Position - Capital Adequacy
| Solid Capital Position - Capital Adequac ratio of 11, .9% of RW After post balance date capital raisings this increased to 12.3% 11.9% 12% 10.4% 11.3% 8% 6% - . 4% : _ 2% — i 0% - 2001 2002 2003 Core T1 ® Hybrid T1 & Tier 2 32
Slide 33: DEE
ye Ge Oe Le DEE ye LLU LI Le e DU OE Lee ay ( c= be iy ye , - 4 Ags ey < <e — Be ee “yy j ye Yee YI Yas eee Oe, Bes oo ee oD ia EE = Sa oo 7 LPs nd itty Ey, yey Wy Vo. Ge LE Nae y ee Le i eo ay ye Le ey ey y Ls ee LU ay, EEE yy y es | fe C Lee 2 Q Ws ay Co Ls Yi Wey a Oe Sey _7 i Y Ve ane LE, ee
Slide 34: Information Technology & Infrastructure Investment
| Information Technology & __ _ Infrastructure Investmen » Carrying value of IT & Infrastructure Investment of $82m, peaking at approx $113m by 31 August 2004. » Servicing of amortisation built into evaluation of the outsourcing contract. » Benefits exceeding our original expectations of $100m over
Slide 35: Performance Management
_ » Performance Management Stabilise IT environment ~— EDS performance is monitored against 51 critical service levels. — monitored weekly by Management. — reported monthly to Board. Outsourcing is delivering to our expectations. Access to scale Transform IT systems NAW 35
Slide 36: EDS engaged to replace our outdated core banking system
» EDS engaged to replace our outdated core banking system. » Required a system capable of supporting our growth aspirations. » FiServ selected as supplier. » Expected investment will be $40m and is on track to be completed by March 2004. » Costs to date of $21m. 36
Slide 37: Information Technology & Infrastructure Investment
_ Information Technology & Infrastructure Investment Asset carrying values: Forecast 31 Aug 02 28 Feb 03 31 Aug 03 31 Aug 04 $m IT Hardware / 43 in 39 6 Software Infrastructure 12 17 22 27 Investment Core Banking 1 11 21 40 System 56 69 82 113 Amortisation 8 7 15 17 37
Slide 38: WE Ee
oe WE Ee y ey 7, EGY ope & _ Ve ee ue Jie ESTES: Lys Lye VI ee er ye Lo e ge yi i As ey ‘ ayy Gy, Us E Z, A a L _ eS oS ee ae ee ey yy co _ yyy BY, Ly See ey Ve oe, _ eR Loy) ee) _ SESS es “ ee eee ee
Slide 39: Acquisitions UFJ Finance
Acquisitions UFJ Finance » UFJ Finance settled on 8 October 2003 and renamed BOQ Equipment Finance. » BOQ now has $1.2b in equipment finance receivables under management. » Success of acquisition dependent on achievement of strategies around: ~— driving benefits from increased scale and capacity in
Slide 40: Acquisitions - ATM Solutions
Acquisitions - ATM Solutions - «» ATM Solutions acquisition completed on 10 September 2003. » ATM Solutions currently have approx 1,200 ATMs deployed nationally, positioning them as the 2nd largest third party deployer. « This enables BOQ to directly service all our customers around Australia. « BOQ
Slide 41: Introducing PEP II
$Millions Introducing PEP II once the core banking system replacement is complete $12m $24m $30m Initial 2003 Revised 2003 Actual 2003 Expectation Expectation (Run-rate per annum benefits) ” Revenue Initiatives Cost Savings
Slide 42: Our strategic focus
Ourstrategic focus « Expanding strongly whilst maintaining expense control » Investing in our future » Our person2person banking program » Broader reach and scale « Target to be writing 5% of national home loan market share within 3-5 years
Slide 43: ey ey, Ye Le ee Lae
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Slide 44: To be Australia's best regional bank
To be Australia’s best regional bank, by: » Building on our strong home base in Qld; and » Selected interstate expansion. Our New Vision: “To be Australia’s leading regional bank, providing innovative personal and business banking solutions and offering the best customer service experience.” 44
Slide 45: Branch Network Queensland
Branch Network Queensland 2002 2003 2004 Corporate Branches 58 58 58 Owner Managed 40 62 77 TOTAL 98 120 135 Plus: 10 dedicated business banking centres & 7 UFJ offices
Slide 46: Variable Cost Model
«» Variable Cost Model ~ Share in net revenues generated, through up- front commissions and trail commissions. — Share in net interest income and fee income - therefore incentivised to write profitable business. ~ OMB covers operating costs & set-up costs. «» Bank will only select prime candidates -
Slide 47: Interstate expansion will be the cornerstone of our growth strategy
« Interstate expansion will be the cornerstone of our growth strategy. » By 31 August 2004 we will have commenced our interstate expansion. » By 31 August 2007 we are targeting a minimum of 100 branches across New South Wales and Victoria. 47
Slide 48: Interstate expansion complemented by acquisitions
» Interstate expansion will be complemented by our acquisitions: ~ UFJ has existing offices in Sydney and Melbourne. ~— Opportunity to leverage existing UFJ customer bases in these locations. — ATM Solutions gives us the capability to quickly and efficiently deploy ATMs to support our interstate exp
Slide 49: Challenges...
Challenges... « Invest in expansion without sacrificing expense management. « Drive synergies from our acquisitions. » Realise benefits from new core banking system and PEP Il. « Continue to diversify income streams. » Housing expected to slow, but expansion and acquisitions will offset. » Uncertain
Slide 50: Outlook
Outlook » Key objectives for our 2004 financial year are to: — Consolidate our branch network and expanded business banking capability in Queensland. ~ Leverage infrastructure investment, particularly the core banking system replacement; and — Commence our interstate expansion. « Financial goals for
Slide 51: The person2person bank
» The “person2person bank” » Big small bank, not a small big bank » The leading regional bank » People focussed » Target to be writing 5% of the national home loan market in 3-5 years (currently 2.5%) » Key provider to SME market 51