Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2013 Earnings Presentation
41 slides from Bank Of Queensland's earnings presentation, Aug 31, 2013
Slide 1: Bank of Queensland Full year results
Bank of Queensland Full year results 31 August 2013 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 2: Agenda
DRAFT Agenda Stuart Grimshaw Result overview Managing Director and CEO Anthony Rose Financial detail Chief Financial Officer Stuart Grimshaw Summary Managing Director and CEO 2
Slide 3: The year’s highlights
DRAFT The year’s highlights Cash earnings result of $250.9m with full year dividend up 6c (12%) to 58c per 1 share 2 Disciplined approach to growth, focusing on credit quality and margin Strength of balance sheet and progress made in risk management recognised 3 in two credit rating upgrades in 15 m
Slide 4: Back in the black
DRAFT Back in the black Change FY13 FY12 FY13 v FY12 Underlying profit before tax (Cash)(1) $477.4m $443.5m 8% Cash earnings (loss) after tax $250.9m $30.6m Large Statutory net profit (loss) after tax $185.8m ($17.1m) N/A Ordinary dividend 58¢ 52¢ 12% Net interest margin (Cash) 1.69% 1.67% 2bps Cost
Slide 5: Strong margin management
DRAFT Strong margin management Margin improved despite run-off of higher margin Line of Credit portfolio Mortgage market remains highly competitive in a low-growth environment Focus on attracting profitable customers – particularly through Business Banking expansion Opportunities taken to im
Slide 6: Tight cost control
DRAFT Tight cost control Cost to income down to 44.3% Ongoing $20m in savings identified since efficiency Savings savings Progress and effectiveness program commenced in Management spans and layers $9m FY12 Shared services model $2m Back office operations $2.5m Realisation of low hanging fruit
Slide 7: Disciplined risk management
DRAFT Disciplined risk management Actions taken Asset quality review exposures managed down 525.3 Increased capability in risk functions delivering 478.5 improved metrics 381.6 Lowering future volatility Retail credit policy and scorecard changes implemented Tiered approach to commercial o
Slide 8: Track record of execution
DRAFT Track record of execution Foundations established for a new operating model Targeting areas of opportunity to achieve growth S&P upgrade Commercial Relentless focus on margin and costs to A- origination Brand re- tiering Acquisition of launched Virgin Money Product, New Retail Australia
Slide 9: 6 out of 7 key management targets met
DRAFT 6 out of 7 key management targets met Metrics(1) FY13 Actual FY13 Target FY15+ Target(4) BOQ asset growth -Retail 0.6x system 1.0x system 1.2x system -Business(2) 3.6x system 1.0x system 1.5x system Net Interest Margin 169bps Low-Mid 160s Low-Mid 160s Expense growth 2% < Inflation < In
Slide 10: Financial detail
Financial detail Anthony Rose Chief Financial Officer Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 11: Financial performance summary
DRAFT Financial performance summary Change FY13 FY12 FY13 v FY12 Record cash earnings of Net Interest Income $694.4m $656.4m 6% $250.9m Non interest income $162.4m $160.5m 1% Total income $856.8m $816.9m 5% Net interest income growth Expenses $379.4m $373.4m 2% of 6% Cash underlying profit befor
Slide 12: Significant items
DRAFT Significant items 2H13 1H13 Total FY13 Legacy issues provided Cash earnings / (loss) after tax $131.0m $119.0m $250.9m for adequately Amortisation of customer contracts ($4.2m) ($4.9m) ($9.1m) Amortisation of fair value adjustments - ($1.0m) ($1.0m) Restructuring costs of ~$3m Hedge ineffe
Slide 13: Growing and diversifying loan portfolio
DRAFT Growing and diversifying loan portfolio Growth of 2% in loans under management and 8% in retail deposits Growth in lending in target segments whilst managing exit of weak and impaired assets Geographic diversification continuing – QLD down to 58% from 60% (1) 35.1 33.4 34.3 32.0 28.9 (1)
Slide 14: Retail asset growth: focus on quality
DRAFT Retail asset growth: focus on quality New risk framework and appetite implemented; disciplined approach to growth, prioritising credit quality and margin Accelerated run-off of Line of Credit portfolio with adjusted pricing for risk Mortgage broker re-entry commenced April and will take
Slide 15: Business & Agri: higher margin, higher return
DRAFT Business & Agri: higher margin, higher return Business loans growing well above system after impaired asset run-off – 7.5% or 3.6x system Diversifying by industry sector, asset class and geography – QLD exposure reduced from 97% to 85% since FY12 Business Loan portfolio 15
Slide 16: Deposit growth hits target range
DRAFT Deposit growth hits target range Growth in retail deposits fully funding growth in lending Deposits to Loan ratio now at 68%, comfortably within target range of 65-70% Well placed for Basel III liquidity requirements Deposits to Loans ratio 57% 57% 61% 64% 68% 16
Slide 17: Active margin management
DRAFT Active margin management Improvement of 6bps on 1H13, benefiting from 2.05% improved funding costs and 1.98% 2.00% mix Deposit pricing managed to reflect lower lending growth CPS impact of 2bps reduction in FY13, ~3% annualised NIM 3rd Party costs 17
Slide 18: Other income headwinds
DRAFT Other income headwinds Continued reduction in banking fee income since 2012 83.2 82.5 77.3 79.9 Insurance impacted by slower housing credit growth First year of financial markets contribution Virgin Money Australia ahead of expectations 18
Slide 19: Cost-to-income tightly managed
DRAFT Cost-to-income tightly managed Successful implementation of efficiency and effectiveness programs Investment in front line sales capabilities (eg CRM system, Agri) absorbed Marketing costs deferred from 1H to 2H13 (1) 192.0 186.7 192.7 181.4 19 (1) Cash earnings basis
Slide 20: Impairment expense reducing
DRAFT Impairment expense reducing Impairment charges continue to stabilise following the 1H12 Asset Quality Review New risk appetite, credit policies and management processes continuing to improve the profile On track to achieve FY15 management target of 20bps 20
Slide 21: Impaired assets continuing to decline
DRAFT Impaired assets continuing to decline 257 525.3 478.5 203 183 381.6 125 21
Slide 22: Progress on impaired assets
DRAFT Progress on impaired assets Top 10 Impaired Assets – Feb-Aug 2013 Feb-13 Exposure Aug-13 Exposure Comment ($m) ($m) 18.1 - Property QLD - Assets realised 17.0 14.8 Property Qld - Subject to unconditional contract (settlement Oct-13) 14.9 - Property QLD - Assets realised 13.6 - Property VIC - A
Slide 23: Arrears improving
DRAFT Arrears improving Retail (1) Housing arrears reduced significantly due to improvement in collections practices and resourcing Improving property markets and lower interest rates assisting Commercial Commercial arrears improving but remain high Performance continues to be in line with i
Slide 24: Provisioning remains strong
DRAFT Provisioning remains strong 52% of the reduction in the collective provision has been driven by the release of the allocated collective held on accounts identified in the Asset Quality Review that have now been either realised, moved to impaired status or rectified. 220.3 213.9 174.8 24
Slide 25: Strong provisioning coverage
DRAFT Strong provisioning coverage (1) 1.10% 1.09% 1.00% 0.97% 0.96% 0.94% 0.91% 0.76% (1) Grossed up for tax effect Note: Major banks are accredited to run advanced risk weighting models. Comparison between the major and the standardised regional banks is not like for like. 25
Slide 26: Significant wholesale debt towers eliminated
DRAFT Significant wholesale debt towers eliminated Actively managing liability profile with ~$0.6bn of original $1bn March 2015 Government Guaranteed deal bought back in 2H13 All significant maturity towers established post the GFC now addressed S&P upgrade to A- announced in September 2013 wi
Slide 27: Capital generation momentum
DRAFT Capital generation momentum Continued capital strength with Total Capital at 12.2% and Common Equity Tier 1 at 8.6% Internal capital generation supporting dividend growth 13.1% 12.6% 12.2% 10.8% Underlying capital generation 27
Slide 28: Remain well capitalised vs peers
DRAFT Remain well capitalised vs peers (1) Source: latest published S&P reports and company reports 28
Slide 29: Journey to S&P upgrade
DRAFT Journey to S&P upgrade Foundations established for a new operating model Targeting areas of opportunity to achieve growth S&P upgrade Commercial Relentless focus on margin and costs to A- origination Brand re- tiering Acquisition of launched Virgin Money Product, New Retail Australia pro
Slide 30: Summary
Summary Stuart Grimshaw Managing Director and CEO Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 31: Levelling the playing field
DRAFT Levelling the playing field Regulatory system favours Big 4 banks, reducing competition for consumers: Imbalance exists in residential mortgage risk-weightings, resulting in major banks 3x achieving significantly higher returns than smaller banks Proposed Federal Govt financial system in
Slide 32: Growth opportunities in Retail
DRAFT Growth opportunities in Retail Diversifying BOQ’s heavy emphasis on a single distribution channel (branch) creates significant opportunity KEY MULTI-CHANNEL DISTRIBUTION OPPORTUNITIES Balanced scorecard increases focus on quality and share of wallet OMBs Tighter operating model and impro
Slide 33: Other upside opportunities
DRAFT Other upside opportunities Business Banking – plans for 2 regional (1) commercial centres in VIC and one in WA as well as further investment in 7 existing hubs in QLD & NSW Product simplification such as recent launch of Clear Path home loan Further cost and productivity initiatives incl
Slide 34: Summary and outlook
DRAFT Summary and outlook 1 Record cash earnings of $250.9m 2 Strong year of execution with disciplined approach to growth, margin, risk management and costs 3 Improved returns to shareholders with an increase in full year dividend from 52 to 58 cents and a lower risk, lower volatility platform esta
Slide 35: Appendices
Appendices Additional information Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 36: Housing arrears
DRAFT Housing arrears Portfolio metrics FY13 FY12 Portfolio size ($b) 26.1 25.4 Impaired ($m) 155.6 213.6 Impaired % 0.60% 0.84% BDD expense ($m) 31.6 125.1 BDD / GLA (bps) 12 49 Specific provisions ($m) 56.7 73.9 Collective provisions ($m) 29.9 40.1 Total Provision ($m) 86.6 114.0 Total provision c
Slide 37: Commercial arrears
DRAFT Commercial arrears Portfolio metrics FY13 FY12 Portfolio size ($b) 5.3 5.2 Impaired ($m) 205.6 284.4 Impaired % 3.88% 5.47% BDD expense ($m) 52.0 236.9 BDD / GLA (bps) 98 456 Specific provisions ($m) 105.0 127.9 Collective provisions ($m) 79.9 121.2 Total provision ($m) 184.9 249.1 Total provi
Slide 38: BOQ Finance arrears
DRAFT BOQ Finance arrears Portfolio metrics FY13 FY12 Portfolio size ($b) 3.7 3.7 Impaired ($m) 19.4 26.3 Impaired % 0.52% 0.71% BDD expense ($m) 26.5 35.2 BDD / GLA (bps) 72 95 Specific provisions ($m) 12.4 17.6 Collective provisions ($m) 25.3 26.9 Total provision ($m) 37.7 44.5 Total provision cov
Slide 39: BOQ Finance security & risk profile
DRAFT BOQ Finance security & risk profile Minimal direct exposure to mining Security primarily cars, construction equipment, trucks and other transport 39
Slide 40: Important notices
DRAFT Important notices Financial amounts All dollar values are in Australian dollars (A$) and financial data is presented as at the date stated. Pro-forma financial information and past information provided in this Presentation is for illustrative purposes only and is not represented as being indic
Slide 41: Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.