Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2018 Earnings Presentation
36 slides from Bank Of Queensland's earnings presentation, Oct 4, 2018
Slide 1: Results Presentation 2018
For personal use only 2U16 REOWle PRESENTATION
Slide 2: Results Overview, Financial Detail, Summary & Outlook
For personal use only RESULTS OVERVIEW Jon Sutton Managing Director & FINANCIAL DETAIL Matt Baxby Chief Financial Officer SUMMARY & OUTLOOK Jon Sutton Managing Director & CEO Bonk of Queensland Limited Results Presentation 2078
Slide 3: Results highlights
For personal use only Good morning everyone. I will start with the highlights of the results. The strategy we have been implementing in the past few years has transformed BOQ into a resilient, multi-channel business that is geographically diverse. It is therefore pleasing to report that this evoluti
Slide 4: Key elements of the result
For personal use only Looking at the key elements of the result. Cash earnings after tax decreased two per cent over the year to 372 million dollars. Excluding the 16 million dollar one-off profit on disposal of a vendor finance entity, which occurred in FY17, cash earnings increased three percent.
Slide 5: Drivers of the result
For personal use only Turning to the drivers of the result. We achieved lending growth of 1.5 billion dollars. This was close to 800 million dollars more than in 2017. We also delivered a five basis point improvement in net interest margin to 1.98 per cent. Our cost to income ratio was 47.5 per cent
Slide 6: Shift in business mix
For personal use only There has been a significant shift in our business mix. Our strategy to diversify our channels has delivered material benefits. Noticeable improvements in the business mix, channel and geography, positions BOQ to be more resilient over the long term. Loans originated through Vi
Slide 7: Delivering results while growing
For personal use only While the business continues to grow, we have maintained focus on delivering results. There is no doubt that 2018 has been a tough year for banking sector. Public scrutiny and regulatory change, slowing credit growth and changing customer expectations have all had an impact. De
Slide 8: Commercial niche segment performance
For personal use only The performance of our commercial niche business segments has been a stand- out again. We achieved lending growth of 623 million dollars across these segments which include the health sector, retirement living, hospitality and agribusiness. In the housing loan portfolio, Virgin
Slide 9: Asset quality improvement
For personal use only The improvement in our asset quality metrics is very pleasing. Impaired assets and loan impairment expense both reduced 15 per cent from FY17. Our bad debt expense was just eight basis points of total loans in the second half. Arrears levels remain low and steady, comparing fav
Slide 10: Capital position and investment
For personal use only Our capital position remains strong with a common equity tier one ratio of 9.31 per cent. Customer expectations are rapidly changing when it comes to digital experience. We have therefore decided to take advantage of our strong positon and invest for the future. We plan to incr
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Slide 12: Group profit and loss
For personal use only Thanks Jon. I’ll begin with the group profit and loss on slide 12. We’ve shown the headline numbers here as well as an adjusted view. As Jon mentioned earlier, we had a 16 million dollar profit on disposal of a vendor finance entity in FY17. The adjusted view excludes this, due
Slide 13: Half on half performance
For personal use only Turning to the half on half performance on slide 13. There was good momentum evident in the second half relative to the first, although this is partially driven by a higher day count. Net interest income grew three per cent, expense growth was kept to just one per cent and we s
Slide 14: Segment performance
For personal use only In the first half we began reporting on segment performance, which reflects the way we manage the business day to day. To recap, Retail Banking includes housing loans and deposits originated through the branch network, direct channels, Virgin Money Australia and our mortgage br
Slide 15: Loan portfolio
For personal use only Moving to the loan portfolio on slide 15, we delivered total loan growth of three per cent for the year. This represented a year on year improvement of 797 million dollars. This was made up of strong growth in commercial lending at 1.2 times system, driven by niche segments. BO
Slide 16: Loan growth by segment
For personal use only Looking at loan growth by segment, on slide 16 you can see the breakdown by channel within each division. In the Retail Bank, Virgin Money Australia has continued momentum with 932 million dollars of housing loan growth in FY18 compared to 690 million dollars in FY17. There was
Slide 17: Funding mix
For personal use only Moving to our funding mix on slide 17, there has been four per cent growth in customer deposits with our deposit to loan ratio at 69 per cent. This was driven primarily through our branch network, where our branches have become more focused on growing relationship based at-call
Slide 18: Net interest margin
For personal use only This improved funding mix helped to support our net interest margin in the second half, with an increase of one basis point to 1.98 per cent. This represented a five basis point improvement in NIM year on year. We made a change to the weighted average life of our housing loans
Slide 19: Net interest margin outlook factors
Absent a change in the market, the front to back book pricing dynamic is ongoing, and we would expect a headwind of around five basis points per half on this aspect. The last round of BOQ’s mortgage repricing took effect in July, and we would expect a benefit of around three basis points to flow thr
Slide 20: Non interest income
For personal use only Moving to non interest income on slide 19. We have been saying for a number of periods that non-interest income is a very challenging line to maintain. This has been evident in this half with a five million dollar reduction. Banking fees face ongoing pressure as customers gravi
Slide 21: Operating expenses
For personal use only Turning to operating expenses on slide 20 and we have maintained a disciplined approach given the lower revenue growth environment. The increase of three per cent was driven primarily by higher amortisation as we have continued investing in technology to support the business fo
Slide 22: Items excluded from cash earnings
For personal use only Given the one-off nature of these software changes, the expense has been excluded from cash earnings, which is an 11 million dollar after-tax impact. There were two other specific items that have been excluded from cash earnings this year due to their one-off nature. The legacy
Slide 23: Asset quality trends
For personal use only The asset quality trends you can see on slide 22 are all heading in the right direction. This is a direct result of the disciplined approach we have taken to managing within our clearly defined risk appetite. Impaired assets reduced 15 per cent, while loan impairment expense wa
Slide 24: Arrears performance
For personal use only The story is similar for arrears performance across our other portfolios, which have remained steady at low levels. Although some banks have reported an increase in housing arrears in recent periods, this is not something we have experienced. We credit this to our disciplined a
Slide 25: Provisioning
For personal use only Provisioning levels remain adequate across the portfolio. Total provisions decreased by 26 million dollars during the year. The majority of this reduction was due to the specific provisioning balance, which declined in line with the reduction in the impaired asset balance. Our
Slide 26: Capital
For personal use only Finishing with capital on slide 25, our CET1 ratio remains strong at 9.31 per cent. Underlying capital generation was two basis points. The impact from risk- weighted asset growth was higher than in the first half, partially due to a higher mix of commercial loan growth relativ
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Slide 28: Long term industry trends
For personal use only Thanks Matt. Looking at the broader picture, there are a number of long term trends that are shaping the sector. These will create a host of challenges, but also opportunities, especially for BOQ. The economic landscape is changing. Slower housing credit growth, lower house pri
Slide 29: Diversification and technology strategy
For personal use only Our strategy to diversify lines of business is the right one. An example of this is the growth of Virgin Money Australia, BOQ Specialist, BOQ Finance and our niche commercial segments. Progress has been made with improving our technology. We have successfully implemented a numb
Slide 30: FY19 digital investment outlook
For personal use only In 2019, we are accelerating a series of targeted investments to fast track our digital strategy. This will include upgrading our digital banking and customer engagement platforms and modernising our call centre systems. These initiatives will be leveraged across all of our bra
Slide 31: Summary
For personal use only In summary, the environment remains one of change but we firmly believe that our strategy is the right one. What is particularly pleasing is the acceleration of growth we have seen across our niche business segments and Virgin Money Australia. We continue to deliver results whi
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Slide 33: Housing portfolio
For personal use only HOUSING PORTFOLIO SUMMARY > Broker settlements at 30% including VMA > Interest only settlements reduced significantly > Owner occupied P&I loans represent 50% of portfolio PORTFOLIO METRICS Metrics(%) au ‘Owner occupied oo 4 EU Fixed rate Bonk of Queensland Limited Results Pres
Slide 34: Limited exposure to high risk
LIMITED EXPOSURE TO HIGH RISK APARTMENT CONSTRUCTION EXPOSURES > $154m current exposure to residential construction > 14 developments across 3 states, completing 2018 through 2019 > Well diversified intra-state within NSW and VIC OTHER HIGH RISK SECTORS > No material regional housing exposures > No
Slide 35: Abbreviations
For personal! use onl VIATIONS 1H: First half of financial year 2H: Second half of financial year 30DPD: 30 days past due ‘9ODPD: 90 days past due AASB: Australian Accounting Standards Board APRA: Australian Prudential Regulation Authority APS: ADI Prudential Standards Apts: Apartments AT1: Addition
Slide 36: Disclaimer
This is a presentation of general background information about Bank of Queensland Limited's (B0Q'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 BOQ's other periodic and continuous disclosure announcements,