Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 FY2008 Earnings Presentation
48 slides from Bank Of Queensland's earnings presentation, Feb 29, 2008
Slide 1: Bank of Queensland Half-Year Results
Bank of Queensland Half-Year Results 29 February 2008 FY08 Half-Year Results 1
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 FY08 Half-Year Results 2
Slide 3: Result highlights
Result highlights David Liddy, Managing Director FY08 Half-Year Results 3
Slide 4: Result highlights
Result highlights Record profitability whilst continuing to gain market share Strong EPS growth Results capture the full impact of the credit crisis Acquisition of Home Building Society completed with expected integration and synergies ahead of market guidance Improved efficiency Continued sound cre
Slide 5: Strong financial results
Strong financial results 1H07 1H08 Normalised cash profit after tax $49.1m $65.3m 33% Cash EPS (normalised diluted) 43.4¢ 47.6¢ 10% Ordinary dividend 32¢ 35¢ 9% Loan growth (pcp) 26% *27% Retail deposit growth (pcp) 30% *26% Net interest margin 1.85% 1.62% (23bps) Cost to income ratio (normalised ca
Slide 6: Strong lending and deposit growth
Strong lending and deposit growth Loan approvals Lending growth Retail deposit growth Ç 25% Ç 27% * Ç 26% * 27% 26% $7.0b $5.6b 16% 12% 1H07 1H08 BOQ System BOQ System * Excludes growth from the acquisition of Home Building Society Ltd. and based on comparison to pcp. FY08 Half-Year Results 6
Slide 7: Excellent retail deposit growth
Excellent retail deposit growth In the 6 months since the credit crisis began, deposit growth has continued. BOQ continues to out-perform system growth. 30% 29% 16% 10% BOQ System BOQ System System System System 1H07System 1H08 * Excludes growth through the acquisition of Home Building Society Ltd.
Slide 8: Continuing strong lending growth
Continuing strong lending growth Strong growth in all areas * Overall 1.7x system growth * 27% 27% 27% 22% 16% 11% System BOQ System System BOQ BOQ Retail Commercial Overall lending growth Source: RBA – based on 12-month rolling period to Feb 08. Excludes Home Building Society contribution in the pe
Slide 9: Shareholder returns
Shareholder returns BOQ has a strong track record of maintaining share price premium even in difficult times and delivering strong shareholder returns Dividends* P/E Ratio – BOQ v Banking Index 20.0x 37¢ 18.0x 30¢ 16.0x 25¢ 14.0x 35¢ 12.0x 32¢ 10.0x 27¢ 23¢ 8.0x c- 06 c- 07 g- 0 6 Se -20 7 M - 20 6
Slide 10: Strong asset quality
Strong asset quality Focus remains on well secured housing and SME lending Low level of large exposures Impaired assets to Underlying bad debts non-securitised lending $11.2m $9.8m 0.09% 0.09% $8.6m 0.08% 0.08% $7.9m 0.07% 2H06 1H07 2H07 1H08 1H06 2H06 1H07 2H07 1H08 FY08 Half-Year Results 10
Slide 11: Strong capital and liquidity
Strong capital and liquidity Capital Adequacy Liquidity 12.1% 13.0% 11.5% 10.8% 11.1% Tier 2 10.2% ratio 3.7% Tier 2 Deductions 0.3% Hybrid Tier 1 Tier 1 ratio 7.4% Tier 1 1H07 2H07 1H08 1H07 2H07 1H08 Including Home Building Society for 1H08 figures FY08 Half-Year Results 11
Slide 12: The result in detail
The result in detail Ram Kangatharan, Chief Financial Officer FY08 Half-Year Results 12
Slide 13: Meeting our commitments
Meeting our commitments 1H07 1H08 % Change $m $m vs PCP Total operating income 219.6 252.9 15% Total expenses 141.7 159.2 12% Underlying profit 77.9 93.7 20% Impairment on loans and advances 9.3 9.2 -1% Profit before tax 68.6 84.5 23% Income tax 20.2 26.7 32% Net profit after tax 48.4 57.8 19% Add:
Slide 14: Headline margin down 15bps in 1H08
Headline margin down 15bps in 1H08 NIM down 8bps in 2H07 NIM down 15 bps in 1H08 1.85% (1bp) (2bp) (2bps) (3bps) 1.77% (4bps) (4bps) 1bp (7bps) 1.62% (1bp) Funding Mix Funding Mix Liquidity Margin 2H07 Capital Issues Margin 1H08 Cards Sale Asset Mix 3rd party 3rd party Margin1H07 Asset Mix Impact of
Slide 15: Continued income growth
Continued income growth Net Interest Income Non Interest Income 21% 2% $186m $154m $66m $67m 1H07 1H08 1H07 1H08 NII reflecting strong lending Disposal of the Cards business and growth offsetting higher cost of lower non-core income offset by funds higher banking & insurance income FY08 Half-Year Re
Slide 16: Expenses
Expenses Cost to Income Ratio Operating Expenses 65% 64% 63% Employee, Operating, 62% 62.9% 3.8% $44m (1H07 $57m (1H07 $53m) $40m) 61% 60% 59% 0.5% 58% 58.7% $32m $32m 57% Administrative 56% $5m (1H07 $6m) 55% IT, $32m Occupancy, $53m $10m (1H07 $57m (1H07 $32m) Reported Amortisation Home Normalised
Slide 17: Expense discipline
Expense discipline Cost disciplines introduced to offset volatile markets without compromising the long term potential of the brand or our unique distribution model Adjusting for amortisation of customer contracts, major expense categories have been kept flat relative to income growth Employee* Comp
Slide 18: Capital adequacy
Capital adequacy Targets: Tier 1 of 7%-8% 12.1% Total of 10% to 11% 11.5% 10.8% Tier 2 Tier 2 ratio 3.7% Deductions 0.3% Hybrid Tier 1 Tier 1 Tier 1 ratio 7.4% 1H07 2H07 1H08 FY08 Half-Year Results 18
Slide 19: Funding and liquidity
Funding and liquidity Key to BOQ’s funding philosophy has been and will remain, diversification of funding sources Diversification of wholesale borrowing - Inter-bank market - Securitisation - Short and long term senior debt - Domestic and offshore BOQ is still issuing senior debt domestically and i
Slide 20: Funding and liquidity
Funding and liquidity Liquidity - Currently holding ~14.0% liquidity with 82% of securities held either in cash or securities eligible for RBA repurchase agreements Securitisation Markets - Access to securitisation warehouse funding is still available - Securitised $500m of Residential Mortgages whi
Slide 21: Funding our growth
Funding our growth Home acquisition enhances our Retail funding base. Limited capacity in securitisation markets, driving increasing reliance on wholesale markets. 56% 54% 1H07 1H08 31% 24% 10% 11% 11% 3% Retail Wholesale Securitisation Capital Funding mix for Growth including addition of the Home b
Slide 22: 2H08 funding plan
2H08 funding plan Strong emphasis on retail deposit growth - Not just price driven - Focused on sustainable, stickier deposit growth - Considering niche segments with new products Targeted drive into wholesale middle market Additional warehouse capacity BOQ will continue to access the term debt mark
Slide 23: Funding balance sheet impact
Funding balance sheet impact 86% of funding comes from committed and sticky sources Weighted average maturity of long term debt is 1.7 years 2H07 Funding 1H08 Funding S/T Wholesale S/T Wholesale 11% 14% L/T Wholesale L/T Wholesale 14% Retail 11% Retail 43% 46% Securitisation Securitisa tion 23% 28%
Slide 24: Long-term debt maturity profile
Long-term debt maturity profile Funding Programs Maturity Profile (AUD) Funding Programs Maturity Profile (AUD) 600 Weighted Average 500 Maturity Issuance ($'ms) 400 300 200 100 0 Ja 8 09 10 09 10 M 8 M 9 M 0 Se 8 Se 9 Se 0 08 09 10 8 9 0 -0 0 -0 -1 l-0 l-0 l-1 -0 -0 -1 v- v- v- n- n- p- p- p- ar ar
Slide 25: Plan to achieve our EPS guidance
Plan to achieve our EPS guidance 3 variables are key to understanding 1H08 and FY08 performance - Pricing actions from January to April 08 - Cost control vs cost of funds market volatility - Asset growth Our view of the opportunities & risks: - Pricing action locks in ~15%+ vs 1H Gross NII (ex-Home)
Slide 26: BOQ portfolio
BOQ portfolio Ram Kangatharan, Chief Financial Officer FY08 Half-Year Results 26
Slide 27: Loans under management by product
Loans under management by product $24.3b 12% 43% $2.9b leasing $19.2b $4.1b 17% $17.0b $2.7b commercial $15.1b $2.3b $17.3b $13.5b $3.4b $2.1b $3.0b $1.9b $2.7b $13.1b $2.5b $11.7b $10.3b 71% $9.1b Retail 1H06 2H06 1H07 2H07 1H08 Retail Business Leasing FY08 Half-Year Results 27
Slide 28: Retail portfolio
Retail portfolio Total retail portfolio (LUM) by product $6,000 32% $5,000 45% $4,000 1H07 23% 24% $Millions 1H08 $3,000 25% 21% 14% $2,000 $1,000 4% 5% 4% 3% $0 Line of Low Doc Home BS Personal Standard Fixed Credit FY08 Half-Year Results 28
Slide 29: Commercial portfolio
Commercial portfolio Total commercial portfolio (LUM) by product $3,000 41% $2,500 43% $2,000 31% $Millions 1H07 $1,500 1H08 29% 21% $1,000 20% $500 6% 5% $0 2% 2% Loans CRF's / Finance Equipment CRL's Term Overdrafts Debtor Business Finance FY08 Half-Year Results 29
Slide 30: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 1.00% 1H06 0.75% 2H06 1H07 0.50% 2H07 1H08 0.25% 0.00% Retail Business Leasing Home BS FY08 Half-Year Results 30
Slide 31: Large exposures
Large exposures The Bank has 59 connections with Largest exposures by ANZSIC Group exposures >$10M Total commitment exposure $1,560M ~5% of assets under management >50% matures within 1yr Large exposures are concentrated in the Property & Construction sectors, accounting for 85% of large exposures.
Slide 32: Top large exposures
Top 20 large exposures Property Personal Investment $31M Type Weighted Average $543M Operating Security Cover Entities Operating Entities 1.79 $56M Property Development 1.37 Property Investment 1.66 Personal 1.59 Total Cover 1.57 Property Development $308M FY08 Half-Year Results 32
Slide 33: Strategy and outlook
Strategy and outlook David Liddy, Managing Director FY08 Half-Year Results 33
Slide 34: We are in challenging times...
We are in challenging times… • Securitisation markets closed • RBA implementing • Cost of wholesale funding Ï tight monetary • Worldwide investor nervousness policy • Irrational markets GLOBAL • New Federal POLITICAL government CREDIT ENVIRONMENT • Several CRISIS reviews within banking underway • “T
Slide 35: ...but our strategy remains largely unchanged
…but our strategy remains largely unchanged Continue our strong organic growth, laser focus on deposit growth We expect some Continue our national distribution short term impact expansion in both retail and business from higher banking funding costs, but Continue to target complementary the fundamen
Slide 36: Starting 2H08 with strong momentum
Starting 2H08 with strong momentum Strong and proven sales force through our OMB model RFS New leadership is bringing ‘fresh eyes’ to the network Major deposit raising campaigns underway Focussing on achieving SME bank of choice in chosen segments in Queensland and leveraging BFS interstate branches
Slide 37: Our national footprint
Our national footprint Over 2,800 touch points 5 new sites OMB: 1 CB: 43 opened this ATM: 109 OMB: 106 financial year SC: 3 OMB: 6 TC: 13 5 corporate Home: 30 BBC: 13 BBC: 1 EF: 5 conversions EF: 1 ATM: 714 completed this ATM: 222 OMB: 1 year EF: 1 ATM: 291 OMB: 55 Targeting 4 new BBC: 1 EF: 2 branc
Slide 38: OMBs continue to increase productivity
OMBs continue to increase productivity We have now converted 22 corporate branches to OMBs Average monthly settlements have increased 62% post conversion Annualised growth before and after conversion Post Conversion 37% 27% 6 months Pre-Conversion 10% 6% Lending Deposits Lending Deposits Note: For b
Slide 39: Consolidation of branch network
Consolidation of branch network 22 Corporate branch conversions to OMBs (5 in 1H08) Home 3 new interstate OMBs opened in 1H08 30 branches Home Branches – 85 88 75 79 potential conversion to OMBs OMBs Interstate Target of 4 new 34 branches in 2H08 5 152 150 137 139 140 140 Qld branches 79 82 86 91 10
Slide 40: Business priorities for 2H08
Business priorities for 2H08 Integrating Home Building Society Tightly managing margins and risk Focus on profitable, capital efficient growth Undertake a Share Purchase Plan in 2H08 Developing and recognising our people ‘bank different’ FY08 Half-Year Results 40
Slide 41: Welcome Home
Welcome Home We will be focussing in the second half on integrating Home Building Society Integration is progressing well - dedicated team Expected synergies in Yr 1 of $3m have been upgraded to $4m Yr 2 & 3 synergies will be exceeded System conversion has been brought forward 9 months Strong intere
Slide 42: Confident outlook
Confident outlook The underlying BOQ business is in a strong position: - Established retail and commercial national distribution points - Growing strongly and profitably - Leveraging our strong base of a healthy Queensland economy - No significant corporate exposures, CDO’s, sub-prime exposure – we
Slide 43: Alignment to funding capacity in 2H08
Alignment to funding capacity in 2H08 Three-part strategy to align to funding capacity without diminishing our growth platforms (eg. OMB distribution network) 1. Focus and redirection of resources to building a stickier, larger deposit base 2. Re-engineering Home growth model away from brokers to hi
Slide 44: Summary
Summary Well capitalised Continued access to funding – albeit more expensive Strong business momentum – well above system Home synergies will be exceeded Sound portfolio benefiting from Queensland and WA Strong credit and cost disciplines New management team delivering FY08 Half-Year Results 44
Slide 45: FY08 Half-Year Results
bank different® Bank of Queensland
Slide 46: Additional Information
Additional Information FY08 Half-Year Results 46
Slide 47: Home Building Society financials
Home Building Society financials Forecast contribution of Home Building Society* to FY08 financial results $Million Net Interest Income 44.2 Non Interest Income 12.0 Total Income 56.2 Expenses 30.6 Profit before tax 25.6 Tax payable 6.8 Net profit after tax 18.8 •Pro-forma normalised forecast for pe
Slide 48: Satisfied customers...but it's not enough
Satisfied customers…but it’s not enough Retail customers Commercial customers 88% 66% 69% 76% 82% 83% 56% 80% 53% 79% 72% 45% 67% 67% 36% ANZ CBA NAB Westpac BankWest ANZ BOQ CBA NAB St George Westpac Suncorp BOQ Bendigo St George February 08 QLD MFI Customer Satisfaction – 6 months to February 2008