Bank of Queensland Limited · ASX:BOQ
Bank of Queensland — H1 2003 Earnings Presentation
51 slides from Bank of Queensland's earnings presentation, Feb 28, 2003
Slide 1: Bank of Queensland Half-Year Results Presentation
Bank of Queensland Half-Year Results Presentation 28 February 2003
Slide 2: A strong first half, following a record year
A strong first half, following a record year... ■ Continued strong sales growth $2.3b of Lending approvals é7%LH, é51%pcp. ■ Growth in assets under management $7.3b é10%LH, é25%pcp. ■ Growth in retail deposits $3.4b é14%LH, é22%pcp. ■ Total revenue $101m é12%LH, é20%pcp. ■ Improved efficiency 65% Co
Slide 3: Highlights
Highlights ■ Underlying profit $35m, é30%LH, é55%pcp. ■ EPS (Diluted) 28¢, é33%LH, é51%pcp. ■ Increased dividend by 2¢ to 17¢ per share. ■ Continued excellent asset quality - impaired assets reduced to 0.1% of average assets. ■ “PEP” Benefits revised up to $24m from $16m. ■ 10 more branches opened t
Slide 4: Summary of Results
Summary of Results % Change Feb 02 Aug 02 Feb 03 vs Last $m $m $m Half Net Interest Income 54 55 62 13% Non Interest Income 30 35 39 11% Total Income 84 90 101 12% Total Expenses 61 63 66 5% Underlying Profit 23 27 35 30% Bad Debts 4 5 5 0% Profit Before Tax 19 22 30 36% Income Tax 6 7 9 29% Net Pro
Slide 5: Profit Performance
Profit Performance Growth in profit driven by strong revenues and cost control 35 Non-Interest Expenses Income ($4.5m) $8.8m 30 Bad $m Profit after tax debts ($0.7m) Tax Interest ($3.8m) 25 Income $8.2m 20 $21.3m Revenue up 15 20% Costs up 7% $13.3m 10 Feb 02 Feb 03 5
Slide 6: Report Card for the year so far
Report Card for the year so far... Goals 1H03 Results ■ Strong Asset Growth ■ Assets up 10% on last half, 25% on pcp ■ Double digit EPS ■ EPS growth of 33% on Growth last half, 51% on pcp ■ Cost to Income Ratio of ■ Cost to Income ratio of 68% 65% ■ ROE of 14% ■ ROE of 17% ■ 120 Branches by ■ 108 Br
Slide 7: Growing Shareholder Value
Growing Shareholder Value Bank of Queensiand New ideas in banking
Slide 8: EPS Performance
EPS Performance EPS up 33% on last half 30 40% 25 30% Cents per Share 20 20% 28¢ 15 10% 10 21¢ 0% 18¢ 19¢ 5 16¢ -10% 0 -20% 1H01 2H01 1H02 2H02 1H03 EPS Diluted (LHS) EPS Growth 8
Slide 9: ROE Performance
ROE Performance ROE up 3% pts on last half 18% 15% 17% 12% 9% 14% 13% 6% 12% 11% 3% 0% 1H01 2H01 1H02 2H02 1H03 9
Slide 10: ROA Performance
ROA Performance 0.8% 0.8% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.5% 1H01 2H01 1H02 2H02 1H03 10
Slide 11: Share Price Performance
Share Price Performance BOQ v ASX 200 Financials Index Last 12 Months 1.2 1.1 1.0 0.9 0.8 0.7 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 02 02 02 02 02 02 02 02 02 02 02 03 03 BOQ ASX 200 Financials 11
Slide 12: Revenues and Expenses
Revenues and Expenses Bank of Queensiand New ideas in banking
Slide 13: Stabilised Net Interest Margin and solid NII Growth
Stabilised Net Interest Margin and solid NII Growth Net interest margin of 2.34% 64 3.5% 62 3.0% 60 2.5% $Millions 58 2.0% 56 $62m 1.5% 54 $55m 1.0% 52 $54m $54m $53m 50 0.5% 48 0.0% 1H01 2H01 1H02 2H02 1H03 Net Int Income (LHS) Margin (RHS) 13
Slide 14: Sound and growing non-interest income contribution
Sound and growing non-interest income contribution 40 $39m 30 $35m $m 20 $30m $30m $27m 10 0 1H01 2H01 1H02 2H02 1H03 14
Slide 15: Mix of Operating Expenses
Mix of Operating Expenses Admin This Half $66m 6% Staff $4m 32% Operating $21m $23m 34% $5m $13m Significant Last Half Item Admin Occupancy $63m 3% Staff 9% Computer 8% $6m $2m 28% $20m 20% $19m $10m $6m Operating Occupancy 37% 8% Computer 15% 15
Slide 16: Growth in Income & Expenses
Cost to income ratio Cost to income ratio of 65% from 73%pcp 80% 14% Growth in Income & Expenses 78% 12% Cost to Income Ratio 76% 10% 74% 72% 8% 70% 6% 68% 4% 66% 2% 64% 62% 0% 60% -2% 1H01 2H01 1H02 2H02 1H03 Expense Growth (RHS) Income Growth (RHS) Cost to Income (LHS) 16
Slide 17: Showing growth in NPAT for 3rd successive half
Showing growth in NPAT for 3rd successive half 23 50% 21 40% 19 17 30% $ Millions 15 $21m 20% 13 11 $15m 10% 9 $13m $13m $11m 0% 7 5 -10% 1H01 2H01 1H02 2H02 1H03 NPAT (LHS) Percentage Growth (RHS) 17
Slide 18: Investing in technology to support our growth
Investing in technology to support our growth
Slide 19: Information Technology & Infrastructure Investment
Information Technology & Infrastructure Investment Asset carrying values: Change v Projected Investment 28 Feb 03 Last half 31 Aug 04 $m $m $m IT Hardware / 41 (3) 43 Software EDS Infrastructure 17 6 27 Investment Core Banking 11 10 40 System 69 13 110 19
Slide 20: IT Assets
IT Assets IT assets of $41m, consist of: ■ Hardware ■ Completed software and systems ■ Systems under development 20
Slide 21: EDS Infrastructure Investment
EDS Infrastructure Investment ■ First year costs total $17m, now being amortised: – Transition & Transformation Project is a significant infrastructure investment for the Bank. – Implementing new systems and processes to underpin the 10 year outsourcing contract. – Initiatives are driving tangible b
Slide 22: Core Banking System
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 complete by March 2004. ■ Costs to date of $11m. 22
Slide 23: Our IT & Infrastructure Investment
Our IT & Infrastructure Investment ■ Carrying value of our technology and infrastructure investment will be approx $110m by 31 August 2004. ■ Servicing of amortisation (approx $13m p.a.) built into evaluation of the outsourcing contract. ■ Benefits exceeding our original expectations of $100m over 1
Slide 24: Outsourcing objectives on track
Outsourcing objectives on track ■ EDS is delivering improvements. Stabilise IT environment ■ Core Banking System project on schedule and on track against budget. Reduce ■ Benefits of $100m over 10 years on track. costs ■ Processing costs reduced, service improved. Access to ■ Processing cycle times
Slide 25: EDS Performance Management
EDS Performance Management ■ Performance Management – EDS performance is monitored against 47 critical service levels. – monitored weekly by Management. – reported monthly to Board. ■ Currently EDS meet or exceed all 47 critical service levels. We are receiving a higher quality more cost efficient s
Slide 26: Lending and Deposit Growth
Lending and Deposit Growth Bank of Queensiand New ideas in banking
Slide 27: Vibrant Sales Performance - Lending
Vibrant Sales Performance - Lending Housing Total Approvals of $2.3b, 68% sales up 7% on last half and 51% on pcp. This Half $2.3b Housing 71% Business Consumer 28% Last Half $2.1b 4% Housing 79% Consumer PCP $1.5b 5% Business Consumer 24% 3% Business 18% 27
Slide 28: Assets under management growing strongly
Assets under management growing strongly Doubled assets under management in 3.5 years 8 16% 14% 7 12% 10% 6 $Billions $7.3m 8% 5 $6.6m 6% $5.8m $5.2m 4% 4 $4.8m 2% 3 0% 1H01 2H01 1H02 2H02 1H03 Value (LHS) Percentage Increase (RHS) Housing loans under management $4.5b up 21% over last 12 mths. Busin
Slide 29: Low risk housing dominates assets under management
Low risk housing dominates assets under management $4.8b $5.2b $5.8b $6.6b $7.3b 100% $0.7b $0.6b $0.7b $0.8b $1.1b 80% $1.0b $1.1b $1.2b $1.4b $1.5b 60% 40% $2.8b $3.3b $3.7b $4.2b $4.5b 20% 0% 1H01 2H01 1H02 2H02 1H03 Housing Business Consumer Other 29
Slide 30: Vibrant Sales Performance - Deposits
Vibrant Sales Performance - Deposits 4 16% Retail Dep o sits $ Billio n s 3 12% $3.4b 2 8% $2.9b $2.8b 1 $2.5b 4% $2.3b 0 0% 1H01 2H01 1H02 2H02 1H03 Retail Value (LHS) Growth Rate (RHS) Deposits $3.4b up 22% over last 12 mths. 30
Slide 31: Balanced Debt Mix
Balanced Debt Mix $4.2b $4.7b $5.1b $5.8b $6.4b 100% $0.8b $1.0b $1.1b $1.3b $1.5b 75% $1.1b $1.2b $1.2b $1.6b $1.5b 50% $2.3b $2.5b $2.8b $2.9b $3.4b 25% 0% 1H01 2H01 1H02 2H02 1H03 Retail Wholesale Securitisation 31
Slide 32: Solid Capital Position
Solid Capital Position - Capital Adequacy ratio of 11.1% of RWA 450 400 3.5% 350 300 $M illio n s 250 200 150 7.6% 100 50 0 1H01 2H01 1H02 2H02 1H03 12.0% 10.4% 11.1% 11.3% 11.1% Core T1 Hybrid T1 Tier 2 32
Slide 33: Capital Management
Capital Management ■ As growth continues further capital is required to maintain our target range of 10%-11% (Tier 1 of 7%-8%). ■ In the second half we will seek to raise $35m through: – the DRP; and – a Share Purchase Plan. ■ The SPP will occur in late May. ■ It will consist of an offer to each sha
Slide 34: Loan Quality
Loan Quality Bank of Queensiand New ideas in banking
Slide 35: Asset Quality
Asset Quality ■ Balance Sheet loan mix remains dominated by housing at 64%. ■ Arrears continue to fall in line with loan affordability - impaired assets now 0.1% of average assets. ■ Bad debts are not expected to rise in line with interest rate increases (if any) because of security positions, inclu
Slide 36: SME Exposure
SME Exposure ■ SME lending increase of 31% on pcp but, actual exposure increase only $360m. ■ Increased exposure to business sector has been tightly controlled through lending policies and reviews. ■ SME lending represents 32% of loans on the Bank’s balance sheet and 24% of loans under management. 3
Slide 37: Credit Exposures
Credit Exposures ■ Largest 25 exposures total $300m. ■ Range between $5m and $30m. ■ Largely secured by real property. ■ None are non-accrual. ■ All Queensland based. 37
Slide 38: Low Impaired Assets & Conservative Provisioning
Low Impaired Assets & Conservative Provisioning 0.8% Impaired Assets / Average Assets Total Provision / Average Assets 0.6% Provisions 0.6% 0.6% conservatively 0.4% maintained 0.2% 0.16% 0.15% 0.13% 0.10% 0.0% 2H01 1H02 2H02 1H03 8 7 6 Reductions in $ millions 5 impaired assets 4 $6.9m 3 $6.4m $6.3m
Slide 39: Provision for Bad Debts
Provision for Bad Debts Total Provisions increased by $2.9m, largely due to maintaining the General Provision at 0.52% of RWA – Specific Provision ñ $0.4m, General Provision ñ $2.5m Provisions: Healthy Provision Coverage 650% Specific $ 3.0m 550% General $28.4m 450% Total $31.4m 350% 250% Underlying
Slide 40: Change Initiatives
Change Initiatives Bank of Queensiand New ideas in banking
Slide 41: Blueprint for growth: core programs
Blueprint for growth: 5 core programs ■ Marketing Capability Acquisition & Corporate Strategy strategy ■ Segmentation ■ Channels Customer Multi- People ■ Products Relationship Channel Development Services Expansion Program ■ Profitability measures & Metrics & Measurement targets ■ Customer value man
Slide 42: PEP - Our cornerstone for productivity improvement
PEP - Our cornerstone for productivity improvement Performance Enhancement Program: ■ Expense management. ■ Revenue enhancement. ■ Process improvement. ■ Business review. ■ Product enhancements. ■ Procurement / contract management. 42
Slide 43: Revised Expected Benefits from PEP
Revised Expected Benefits from PEP $16m $24m 24 20 $14m $M illions 16 12 $10m 8 $10m 4 $6m 0 Previous 2003 Expectation Revised 2003 Expectation Revenue Initiatives Cost Savings 43
Slide 44: Our strategic focus
Our strategic focus ■ Customer driven delivery. ■ “Communitisation” of branches. ■ Escape the commoditisation squeeze. ■ Sales & service culture development. ■ Entrepreneurial management. ■ Re-engineering integrated economics: – people – processes – technology ■ Synchronised performance management.
Slide 45: Outlook
Bank of Queensiand New ideas in banking
Slide 46: Our Ultimate Goal
Our Ultimate Goal To be Australia’s best regional bank, by: ■ Building on our strong home base in Qld; and ■ Selected interstate expansion. Our Vision: To be a great Queensland company working hard to provide new ideas in banking and the best customer service experience. 46
Slide 47: Qld Branch Network
Qld Branch Network 2H02 1H03 2H03 FY04 Corporate 58 58 58 58 Branches Owner 40 50 62 72 Managed TOTAL 98 108 120 130 Plus: 5 dedicated business banking centres recently opened By empowering our Corporate Branches we have seen a 25% lift in productivity. 47
Slide 48: Owner Managed Branch Model
Owner Managed Branch Model ■ Variable Cost Model – Shares in net revenues generated. – Carries operating costs & funds set-up costs. ■ Incentive to write profitable business. ■ Ability of the Bank to select only prime candidates for agency – 80% of a well performing branch is the person who runs it.
Slide 49: What happens as housing slows
What happens as housing slows... ■ Expansion on a variable cost model through owner managed branches. ■ Niche player - currently writing 13% compared with 6% Market Share. ■ Diversification into business related products particularly the SME market which is underserviced. ■ Therefore solid growth is
Slide 50: Challenges going forward
Challenges going forward ■ Reinvest in business without sacrificing expense management. ■ Continued diversification of income streams. Launching new products ■ Growth in a slowing market. ■ Regulatory changes eg Basel II. ■ Empowerment of staff to “WOW” customers. 50
Slide 51: Outlook
Outlook ■ The Bank remains committed to its objectives for the year. ■ 2nd half profit should be in line with 1st half: – Vibrant asset growth while maintaining loan quality. – EPS growth for the full year of 30%-35% (15%-20% before 2002 significant item). – Cost to income ratio of 68%, reducing to