Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2021 Earnings Presentation
60 slides from Bank Of Queensland's earnings presentation, Apr 15, 2021
Slide 1: 1H21 Investor Materials
1H21 INVESTOR MATERIALS 15 April 2021 Half Year ended 28 February 2021 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 2: Contents
CONTENTS 1H21 RESULTS PRESENTATION 3 ABOUT BOQ 30 1H21 RESULTS 34 PORTFOLIO QUALITY 38 CAPITAL, FUNDING & LIQUIDITY 45 DIVISIONAL RESULTS 52 ECONOMIC ASSUMPTIONS 56 Bank of Queensland Limited 2021 Half Year Results Presentation 2
Slide 3: 1H21 Results Presentation
1H21 RESULTS PRESENTATION 15 April 2021 Half Year ended 28 February 2021 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 4: Agenda
AGENDA INTRODUCTION Cherie Bell, General Manager Investor Relations RESULTS OVERVIEW George Frazis, Managing Director and CEO FINANCIAL DETAIL AND PORTFOLIO QUALITY Ewen Stafford, Chief Financial Officer and Chief Operating Officer SUMMARY & OUTLOOK George Frazis, Managing Director and CEO Q&A Georg
Slide 5: Results Overview
RESULTS OVERVIEW GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 6: 1H21 Overview
1H21 OVERVIEW 1. Statutory profit growth of 66%, cash net profit up 9%, and EPS growth of 3%1, reflecting strong growth whilst managing margin, costs and lower impairments 2. Good business momentum, with strong housing loan growth of 1.6x system and improved NIM to 1.95% 3. Delivering on the strateg
Slide 7: 1H21 Results
1H21 RESULTS HIGHER CASH PROFIT DRIVEN BY STRONG ASSET GROWTH AND GOOD MARGIN MANAGEMENT Key financial results 1H21 2H20 1H20 1H21 vs 2H20 1H21 vs 1H20 Statutory net profit after tax ($m) 154 22 93 600% 66% Cash earnings after tax ($m) 165 74 151 123% 9% Cash return on average equity 7.8% 3.4% 7.5%
Slide 8: Key Elements of the Result
KEY ELEMENTS OF THE RESULT INCOME GROWTH WITH IMPROVED PRODUCTIVITY AND NORMALISED IMPAIRMENTS NET INTEREST INCOME ($M) NET INTEREST MARGIN (%) +2% +3bps 485 483 503 512 1.95 1.92 1.92 1.89 2H19 1H20 2H20 1H21 2H19 1H20 2H20 1H21 COST TO INCOME RATIO (%) -30bps LOAN IMPAIRMENT EXPENSE ($M) -84% 28 1
Slide 9: Lending and Deposit Growth
LENDING AND DEPOSIT GROWTH STRONG TURNAROUND IN HOUSING WITH BALANCED GROWTH IN NICHE BUSINESS SEGMENTS GROWTH IN CUSTOMER DEPOSITS ($M) GROWTH IN LENDING GLAS ($M) 2,445 1,065 782 1,459 1,062 437 72 (113) 1,205 10 45 19 481 237 3 272 549 331 1,433 997 611 363 507 1 22 58 (36) 429 (70) 214 102 (193)
Slide 10: Divisional Achievements
DIVISIONAL ACHIEVEMENTS RETAIL BANK BOQB Housing Loan Growth ($m)1 Deposit Growth ($m) BOQB Loan Growth ($m) Deposit Growth ($m) 795 1,433 293 1,205 131 19 72 22 611 58 202 214 51 (50) 2H20 1H21 2H20 1H21 2H20 1H21 Asset Finance Commercial Housing2 2H20 1H21 • Retail Bank has delivered improved perf
Slide 11: Delivering Results and Executing the Transformation Roadmap
DELIVERING RESULTS AND EXECUTING THE TRANSFORMATION ROADMAP Key Metrics 1H20 2H20 1H21 Jaws Negative jaws -5% Positive jaws +1% Positive jaws +1% Home lending system multiples1 1.2x system 0.2x system 1.6x system Growth, margin and Business lending system multiples1 1.6x system Positive to system Le
Slide 12: Building the Digital Bank of the Future
BUILDING THE DIGITAL BANK OF THE FUTURE Foundational investment in a new Phase 2 underway including home First phase of the retail Launch of three Compelling and loans, expanded deposit and new fully digital personalised cloud environment loyalty offering and Open Banking digital bank launched in Ma
Slide 13: ME Acquisition on Track and Capital Raise Completed
ME ACQUISITION ON TRACK AND CAPITAL RAISE COMPLETED INTEGRATION PLANNING PROGRESSED AND REGULATORY APPROVALS UNDERWAY Significantly enhanced scale • Number of customers increases from ~900k to ~1.45m and portfolio mix for profitable • Broadly doubles retail banking GLAs to over $57 billion growth
Slide 14: Experienced Leadership Team
EXPERIENCED LEADERSHIP TEAM GEORGE FRAZIS EWEN STAFFORD CRAIG RYMAN DEB ECKERSLEY Managing Director and Chief Executive Chief Financial Officer and Chief Operating Chief Information Officer Group Executive People Officer Officer and Culture • Joined BOQ in September 2019 • Joined BOQ in November 201
Slide 15: Financial Detail & Portfolio Quality
FINANCIAL DETAIL & PORTFOLIO QUALITY EWEN STAFFORD CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER
Slide 16: Financial Performance
FINANCIAL PERFORMANCE CASH PROFIT UP IN THE HALF DRIVEN BY INCOME GROWTH AND LOWER LOAN IMPAIRMENT EXPENSE $ million 1H21 2H20 1H20 1H21 vs 2H20 1H21 vs 1H20 Net interest income 512 503 483 2% 6% Non-interest income 57 52 58 10% (2%) Total income 569 555 541 3% 5% Operating expenses (306) (300) (294
Slide 17: Non Cash Earnings
NON CASH EARNINGS REDUCED BELOW THE LINE ADJUSTMENTS POST COMPLETION OF STRATEGY REFRESH $ million 1H21 2H20 1H20 Cash earnings after tax 165 74 151 Strategy Refresh (after tax) Intangible asset review 0 (25) (32) Restructure charges 0 (8) (15) Employee pay and entitlement review (6) (8) 0 ME transa
Slide 18: Net Interest Margin
NET INTEREST MARGIN GOOD NIM MANAGEMENT BALANCING GROWTH WITH RETURNS NET INTEREST MARGIN – 2H20 TO 1H21 0.02% (0.04%) 0.13% (0.03%) (0.05%) 1.92% 1.95% 2H20 Asset pricing Funding costs Hedging costs Capital and low Liquidity 1H21 and mix and mix cost deposits and other SUMMARY KEY NIM MOVEMENTS OVE
Slide 19: Non-Interest Income
NON-INTEREST INCOME STABLISING NON-INTEREST INCOME SUMMARY NON-INTEREST INCOME BREAKDOWN ($M) • 1H21 Non-interest income broadly flat on PCP 63 58 57 • Banking fees normalised post the 5 52 2 2 waiver of selected banking fees 4 during COVID-19 offsetting the 6 3 4 trend of lower banking fees 15 5 14
Slide 20: Operating Expenses
OPERATING EXPENSES INCREASED INVESTMENT IN STRATEGIC INITIATIVES AND LOAN SERVICING COSTS TO DELIVER GROWTH SUMMARY OPERATING EXPENSE BREAKDOWN ($M) • Expenses increased $12m vs PCP and by $6m from 2H20 +4% • Increased spend on strategic 294 306 initiatives including VMA and other Other cost growth
Slide 21: Capital Investment
CAPITAL INVESTMENT INVESTMENT PRIORITISED ALONG STRATEGIC ROADMAP SUMMARY CAPITAL INVESTMENT ($M) • Reduced capital investment of $37m in 95 100 the half with a number of projects in discovery stage (opex) 48 60 37 • 2H21 investment spend expected to increase to previously committed 35 52 37 $100m p
Slide 22: Executing the Digital Transformation
EXECUTING THE DIGITAL TRANSFORMATION FY21 STRATEGIC INITIATIVES EXECUTION CAPABILITY UPLIFT Simple and intuitive Digital Bank of the Future • Executive sponsorship of key projects • Home Buying Transformation • Retail Digital Bank – Program and sponsor training completed • VMA Phase 1 delivery and •
Slide 23: Provisions and Loan Impairment Expense
PROVISIONS AND LOAN IMPAIRMENT EXPENSE PRUDENT PROVISIONING LEVELS MAINTAINED PROVISIONS ($M) +1% LOAN IMPAIRMENT EXPENSE ($M) -84% 369 374 147 233 235 275 271 41 28 123 148 150 24 10 2 26 28 85 85 94 103 31 3 21 2H19 1H20 2H20 1H21 1 (4) 2H19 1H20 2H20 1H21 Specific Collective Specific Collective C
Slide 24: Portfolio Quality
PORTFOLIO QUALITY1 LOWER ARREARS AND BRP LOANS RETURNING TO PERFORMING DRIVEN BY IMPROVED ECONOMIC CONDITIONS SUMMARY COMMERCIAL ARREARS (bps)2 • Improving economic conditions and recommencement of collection activities has reduced arrears in the half 160 153 148 • 95% of housing loan customers and
Slide 25: Funding & Liquidity
FUNDING & LIQUIDITY RESILIENT FUNDING AND LIQUIDITY PROFILE MAINTAINED SUMMARY FUNDING MIX ($BN)2 • Deposit to loan ratio maintained at 74% during 1H21 whilst 50.8 51.8 49.7 asset growth continued • $1.1bn customer deposit growth during 1H21 now representing 32.3 34.7 35.8 69% of Group funding • Ter
Slide 26: Capital
CAPITAL STRONG CAPITAL POSITION WITH CAPACITY FOR GROWTH AND INVESTMENT CET1 1H21 VS 2H20 0.51% (0.08%) (0.15%) (0.06%) 0.06% (0.03%) Underlying capital generation of +28bps 10.03% 9.78% 1 2H20 1H21 cash RWA growth Dividend Net CAPEX Securitisation Other items 1H21 earnings after tax net of DRP impa
Slide 27: Summary & Outlook
SUMMARY & OUTLOOK GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 28: 1H21 Summary
1H21 SUMMARY 1. Supporting our customers and people through COVID-19 2. Delivering sustainable profitable growth 3. Operational improvement driving increased momentum 4. Executing on our digital transformation 5. Strong balance sheet and capital, with sound asset quality 6. Announced acquisition of
Slide 29: FY21 Outlook
FY21 OUTLOOK1 1. Environment more positive, with indications that Australia is relatively well placed with less likelihood of downside scenarios on unemployment and house prices given the success of the Government stimulus. 2. Completion of ME Bank acquisition and St Andrews divestment expected in 2
Slide 30: About BOQ
GROUP ABOUT BOQ
Slide 31: BOQ: Unique Brands in Niche Segments
BOQ UNIQUE BRANDS IN NICHE SEGMENTS SERVING CUSTOMERS FOR 147 YEARS OUR DIFFERENTIATORS KEY STATISTICS FOR 1H21 Unique brands with proud history Deeply anchored in local communities c. 570k BOQ c. 35k Specialist c. 890k c. 190k VMA c. 90k Finance Highly specialised bankers, within niche indust
Slide 32: Distribution Footprint
DISTRIBUTION FOOTPRINT SUMMARY • In 1H21 branch numbers increased by 1 to 166 (incl. transaction centres) • The franchise network remains a key differentiator for BOQ and is pivotal to the Bank’s deposit raising 1 23 12 capabilities 30 62 1159 1 5 907 497 • Number of owner managed branches increased
Slide 33: Distribution Footprint Movements
DISTRIBUTION FOOTPRINT MOVEMENTS Feb-21 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 30 9 10 12 - - - 61 Owner managed branches 62 18 9 6 1 2 - 98 Transaction centres 7 - - - - - - 7 99 27 19 18 1 2 - 166 Aug-20 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 33 9 9 12 - - - 63 Ow
Slide 34: 1H21 Results
GROUP 1H21 RESULTS
Slide 35: 1H21 Results Overview
1H21 RESULTS OVERVIEW Financial Balance Sheet, Capital & Funding 1H21 1H21 vs 2H20 1H21 vs 1H20 1H21 1H21 vs 2H20 1H21 v 1H20 Statutory NPAT $154m +600% +66% CET1 10.03% +25bps +12bps Cash NPAT $165m +123% +9% Total GLAs $48,108m +5% +2% ROE (cash) 7.8% +440bps +30bps Customer Deposits $35,823m +6%
Slide 36: Average Balance Sheet & Margin – Half on Half
AVERAGE BALANCE SHEET & MARGIN – HALF ON HALF AVERAGE BALANCE SHEET AND MARGIN ANALYSIS 1H21 (Half Year) 2H20 (Half Year) Average Average Average balance Interest rate Average balance Interest rate $millions $m $m % $m $m % INTEREST EARNING ASSETS Gross loans & advances at amortised cost 44,511 739
Slide 37: Cash EPS
CASH EPS1 Half Year Performance Feb 21 vs Aug Feb 21 vs Feb Feb-21 Aug-20 Feb-20 20 20 Basic EPS (cents) 34.3 15.3 33.3 124% 3% Diluted EPS (cents) 31.8 14.5 30.5 119% 4% Reconciliation of Cash Earnings for EPS Cash earnings available for ordinary shareholders ($ million) 165 74 151 123% 9% Add: Con
Slide 38: Portfolio Quality
GROUP PORTFOLIO QUALITY
Slide 39: Housing Portfolio
HOUSING PORTFOLIO Portfolio 1H21 2H20 1H20 Total Spot Balance - ($m) 32,152 31,155 31,154 Variable Rate 75% 78% 78% Owner Occupied 62% 61% 61% Investor 38% 39% 39% Line of Credit 4% 4% 5% Proprietary 77% 79% 80% Broker 23% 21% 20% Bank of Queensland Limited 2021 Half Year Results Presentation 39
Slide 40: Housing Loan Portfolio
HOUSING LOAN PORTFOLIO SUMMARY HOUSING PORTFOLIO BY LVR • Carefully managed risk levels across housing portfolio, with the 6% Up to and including 60% weighted average LVR of 66% 17% 32% >60% to 70% • Increasing geographic diversification outside of QLD >70% to 80% • 94% of customers with LVR<90% >80
Slide 41: Asset Finance Portfolio
ASSET FINANCE PORTFOLIO1 SUMMARY ASSET FINANCE BY STATE • Portfolio is well diversified geographically 9% 6% 31% QLD • Broad industry spread reducing concentration 8% NSW VIC WA 20% NZ 26% Other ASSET FINANCE BY INDUSTRY ASSET FINANCE BY CHANNEL Health Care Construction 15% 20% 17% Equipment Finance
Slide 42: Commercial Portfolio
COMMERCIAL PORTFOLIO1 SUMMARY COMMERCIAL PORTFOLIO BY STATE • Commercial portfolio well diversified geographically 7%2% 16% QLD • Owner-managers and Business Banking focused on SME 41% NSW & ACT lending VIC WA 34% Other COMMERCIAL PORTFOLIO BY INDUSTRY COMMERCIAL PORTFOLIO BY CHANNEL Property 3% 21%
Slide 43: Industry and Geographic Split Over Time
INDUSTRY AND GEOGRAPHIC SPLIT OVER TIME HOUSING LOANS - GEOGRAPHIC SPLIT OVER TIME SUMMARY 1H21 Balance Outstanding (%) 44% 27% 15% 10% 4% • Enhanced geographic FY17 Balance Outstanding (%) 50% 21% 14% 12% 3% diversification, Queensland QLD NSW & ACT VIC WA Other housing portfolio reducing over 3 ye
Slide 44: Banking Relief Package Update
BANKING RELIEF PACKAGE UPDATE 95% OF HOUSING LOANS AND 97% OF SME LOANS HAVE RETURNED TO PERFORMING KEY MESSAGES OUTCOMES FROM BANKING RELIEF PACKAGES2 • Banking Relief Package balances continue to decline • 0.5% of the SME portfolio and 0.3% of the housing loan 5% portfolio remains on loan deferral
Slide 45: Capital, Funding & Liquidity
CAPITAL, FUNDING & LIQUIDITY
Slide 46: Replicating Portfolio
REPLICATING PORTFOLIO SUMMARY REPLICATING PORTFOLIO AND EQUITY HEDGE (%) • The low interest rate environment has 6% resulted in a 4bps impact to NIM in the half 4% Replicating Portfolio Return 3M BBSW 2% RBA Official Cash Rate 0% Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19
Slide 47: Hedging Costs - Basis Risk
HEDGING COSTS - BASIS RISK SUMMARY LONG TERM BASIS RISK AVG - 24BPS 0.6% • The impacts of hedging costs improved NIM by 2bps in 1H21 • Average portfolio spreads decreased from 17bps to 1bps during the half 0.4% 0.2% 0.0% -0.2% Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Ban
Slide 48: Funding
FUNDING SUMMARY DEPOSIT TO LOAN RATIO • Loan growth funded through stable funding sources, including customer deposits and long term wholesale • Ongoing growth in deposits resulted in maintenance of the 74% deposit to loan ratio despite increased loan growth in the half 74% 74% USES & SOURCES OF FUN
Slide 49: Liquidity
LIQUIDITY SUMMARY NSFR MOVEMENT 1.7% (1.1%) 0.4% (3.4%) • Strong liquidity with LCR at 182% and NSFR at 118%, well 1.2% 119% above regulatory targets at the end of 1H21 (0.2%) 0.1% 118% • 1H21 LCR boosted by the contractual capital raising inflows • Customer deposits grew by $1.1bn, reflecting ongoi
Slide 50: Term Funding
TERM FUNDING LONG TERM WHOLESALE FUNDING ($BN) MAJOR MATURITIES ($M)1 -5% 11.5 11.3 10.8 0.8 0.8 350 0.7 1.2 500 4.2 1.0 150 3.4 150 2.9 820 1.7 2.4 811 2.3 700 600 744 600 600 750 420 4.8 4.0 200 3.4 H2 H1 H2 H1 H2 H1 H2 H1 H2 2021 2022 2023 2024 2025 1H20 2H20 1H21 Senior Unsecured Covered Bonds C
Slide 51: Credit Rating
CREDIT RATING The Bank monitors rating agency developments closely and is rated by Standard & Poor's (S&P), Moody’s Investor Service and Fitch Ratings. BOQ’s current debt ratings are shown below. Rating Agency Short Term Long Term Outlook S&P A2 BBB+ Stable Fitch F2 A- Negative Moody’s P2 A3 Stable
Slide 52: Divisional Results
GROUP DIVISIONAL RESULTS
Slide 53: Divisional Performance
DIVISIONAL PERFORMANCE STRONG PERFORMANCE ACROSS RETAIL & BOQ BUSINESS RETAIL BUSINESS $ million 1H21 1H20 1H21 v1H20 1H21 1H20 1H21 v 1H20 Net interest income 236 214 10% 270 271 - Non-interest income 27 29 (7%) 25 21 19% Total income 263 243 8% 295 292 1% Operating expenses (167) (155) 8% (132) (1
Slide 54: Retail Banking Overview
RETAIL BANKING OVERVIEW IMPROVED PERFORMANCE FOR BOQ BLUE AND CONTINUED MOMENTUM FOR VMA SUMMARY IMPROVED HOME LENDING GROWTH ($M)1 • Retail Bank has delivered improved performance turnaround since FY19 795 46 • Improved application volumes through increased branch and (50) 336 broker productivity 4
Slide 55: Business Banking Overview
BUSINESS BANKING OVERVIEW NICHE SEGMENT STRATEGY DELIVERING BALANCED GROWTH DESPITE CHALLENGING MARKET CONDITIONS SUMMARY LENDING GROWTH – BOQ SPECIALIST ($M) • Growth delivered in the half, despite challenging market 517 conditions 83 +169% • Continued focus on niche market segments • Supporting cu
Slide 56: Economic Assumptions
GROUP ECONOMIC ASSUMPTIONS
Slide 57: Macro Economic Environment
MACRO ECONOMIC ENVIRONMENT ECONOMIC ENVIRONMENT IMPROVING BUT UNCERTAINTY REMAINS MACRO ECONOMIC • The economic rebound has been stronger than anticipated. But there remains some uncertainty about the outlook. • The most important factor determining the immediate outlook will be the speed of the vac
Slide 58: Disclaimer
GROUP DISCLAIMER
Slide 59: Abbreviations
ABBREVIATIONS 1H: First half of financial year GDP: Gross Domestic Product 2H: Second half of financial year GLA: Gross Loans & Advances 30DPD: 30 days past due GRCL: General Reserve for Credit Losses 90DPD: 90 days past due LCD: Low cost deposit AASB: Australian Accounting Standards Board LCR: Liqu
Slide 60: Important Information and Disclaimer
DISCLAIMER IMPORTANT INFORMATION AND DISCLAIMER Summary information This is a presentation of general background information about Bank of Queensland Limited’s (BOQ’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