Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 FY2014 Earnings Presentation
48 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 17, 2014
Slide 1: Half Year Results Presentation 17 February 2014
= A\\\\\\ S, | Bendigoand Wy > aoladdet sn mar ae y HH Ua y 4! } ; 4 ene 17 February 2014 Mike Hirst Richard Fennell Managing Director Chief Financial Officer
Slide 2: Disclaimer
This document is a presentation of general background information about the Group’s activities current at the date of the presentation. It is information in a summary form and no representation or warranty is made as to the accuracy, completeness or reliability of the information. It is to be read i
Slide 3: Agenda
• Overview • Financial performance • Outlook • Appendices Agenda 3
Slide 4: Overview
Mike Hirst Group Managing Director Overview 4
Slide 5: Our half year result
Our half year result Financial performance - statutory profit after tax Financial performance - cash basis earnings • Statutory profit after tax $180.7m • Cash earnings of $185.9m • Half year dividend of 31.0¢, fully franked1 • Cash earnings per share 45.0¢ • Return on average tangible equity 13.3%
Slide 6: Consolidation to investment
Consolidation to investment Consolidation Strengthening Investment • Rating agency upgrades • BEN buys Australian arm • Basel II Advanced (Fitch “A-”, S&P “A-”) of Bank of Cyprus – later Accreditation naming it Delphi Bank • BEN’s securitisation • Opportunity for future program used to • BEN buys So
Slide 7: A unique and valued customer proposition
A unique and valued customer proposition • Brand and customer advocacy Leading financial institution for customer loyalty 20132 Top 100 fastest growing bank followings on Facebook • Continued maturation of Community Bank® and retail network 1. Roy Morgan Research – 6 month average to December 20
Slide 8: Low growth environment
Low growth environment Source: APRA statistics December 2013, Nomura research 1. Data is based on 6 month growth annualised 2. BEN retail growth of 3.8% is for retail origination channel only Overview 8
Slide 9: Loan approvals continue to grow
Loan approvals continue to grow • Continued growth in new loan approvals • Accelerated amortisation of back book impacting net growth • No discernible increase in outward refinances • Some element of half-on-half seasonality evident in loan growth Overview 9
Slide 10: Pipeline to improve customer's digital experience
Pipeline to improve customer’s digital experience • Launch of our new version of Bendigo Bank mobile e-banking • Bendigo Bank website enhancements to accelerate customer acquisition and product sales with online account opening • Launch of “redy” a new payment solution developed in conjunction with
Slide 11: Financial performance
Richard Fennell Chief Financial Officer Financial performance 11
Slide 12: At a glance
At a glance Change Change 1H14 2H13 1H13 1H13 – 1H14 2H13 – 1H14 Cash earnings $185.9m $178.3m $169.7m 9.5% 4.3% Statutory NPAT $180.7m $162.9m $189.4m (4.6%) 10.9% Cash EPS 45.0¢ 43.5¢ 41.9¢ 3.1¢ 1.5¢ Net interest margin 2.24% 2.20% 2.19% 5 bps 4 bps Expense to income ratio 55.4% 56.2% 57.8% (240 b
Slide 13: Solid cash earnings growth
Solid cash earnings growth • Margin management a continued focus • Strong contribution from Homesafe portfolio • Staff costs impacted by Community Telco and salary adjustments • North Queensland cattle property exposures continue to impact credit outcome Financial performance 13
Slide 14: Positive earnings performance
Positive earnings performance Financial performance 14
Slide 15: Steady growth in ROE
Steady growth in ROE • Steady ROE & ROTE outcome • Strong growth in revenue • Capital base increasing for Basel III environment •Return on Equity (ROE) is the net income returned as a percentage of shareholders equity •Return on Tangible Equity (ROTE) is the net income returned as a percentage of sh
Slide 16: Net interest margin
Net interest margin • Proactive and disciplined approach to pricing drives NIM improvement • Customer proposition and brand positioning provide tangible funding benefits • Continuing to utilise improved wholesale markets where appropriate Financial performance 16
Slide 17: Flexible funding position
Flexible funding position • Continued wholesale issuance provides diversity, tenor and pricing benefits • Leveraging core strengths of the retail business and market conditions • No RMBS issued in 1H14 Note : Term funding maturity profile as at 31 December 2013, with Jan 2014 sub debt Financial perf
Slide 18: Retail deposits
Retail deposits • Management target of 75-80% retail funding remains • Term deposit retention rate consistently above 80% • Strong growth in call deposits, with movement from term deposits a contributing factor 1Source: Company data Financial performance 18
Slide 19: Efficiency focus remains
Efficiency focus remains • Cost headwinds appearing - New Adelaide head office - Basel II Advanced Accreditation project • Maintaining positive ‘JAWS’ will remain a focus of management Financial performance 19
Slide 20: Capitalised software
Capitalised software • Capitalised software balance continues to reduce • Levels will increase as strategic initiatives are finalised including Basel II Advanced Accreditation • $22m of Basel II costs yet to be added to capitalised software Financial performance 20
Slide 21: Stable capital position
Stable capital position • Common equity Tier 1 capital improved to 7.86% • Negative impact from net RMBS movement Financial performance 21
Slide 22: Basel II Advanced Accreditation
Basel II Advanced Accreditation • Continuing to develop and embed the use of enhanced models - Credit Risk, Operational Risk and IRRBB • Developing internal, external and regulatory reporting required of an Advanced institution. • Introducing enhanced risk-adjusted performance measures, risk-based p
Slide 23: Business segment performance
Business segment performance Note – Graphs refer to segment performance on p44 in 4D,excludes central functions. Financial performance 23
Slide 24: Homesafe investment property portfolio
Homesafe investment property portfolio • Asset growth driven by: New business (properties acquired) Portfolio revaluation (income contribution) o Change in property prices – residex index increase for 6 months1; Melbourne +4.7% Sydney +7.8% o Ageing of portfolio • Net average annual return on co
Slide 25: Bad and doubtful debts
Bad and doubtful debts • Northern Queensland cattle properties continue to devalue • Improvement in Third Party Lending predominantly due to Great Southern MIS portfolio Financial performance 25
Slide 26: Bad and doubtful debts cont
Bad and doubtful debts cont • Increase in collective provisions • Portfolio remains well secured, with low LVR’s * Collective provision (adjusted for tax) & GRCL to risk weighted assets Financial performance 26
Slide 27: Arrears – days+
Arrears – 90 days+ Financial performance 27
Slide 28: Outlook
Mike Hirst Group Managing Director Outlook 28
Slide 29: In summary….
In summary…. Performance Future Considerations • Strong margin and • Low growth balance sheet environment • Good cost control • Price vs value • Investing in customer • Emerging convergence experience and Basel II telco/payments/banking • Queensland cattle property values continue to fall • Improvin
Slide 30: Questions
‘eS AdelaideBank
Slide 31: Appendices
‘eS AdelaideBank
Slide 32: A portfolio of diverse businesses
A portfolio of diverse businesses Business Segment Business conditions Domestic bank operating five • Difficult and uncertain market conditions remain distinct brands • Unique community, customer, and partner proposition • #1 banking brand for customer and business satisfaction, and advocacy Consume
Slide 33: The Community Bank model
The Community Bank® model 15 years old • More than $110m in community grants since inception – delivering tangible benefits for these communities and our business • Circa 300 Community Bank branches with more than 90 in communities where there is no alternative provider • Proven, reliable and cost e
Slide 34: Diversity of revenue and profit contribution
Diversity of revenue and profit contribution Note – Graphs refer to segment performance on p44 in 4D,excludes central functions. Appendices 34
Slide 35: Operating expenses
Operating expenses Appendices 35
Slide 36: Margin Lending portfolio
Margin Lending portfolio • Margin lending portfolio stabilised • Restablished our commitment to our customers and partners • Positioned to take advantaged of upswing in equities and renewed interest in leveraging products 1Source: RBA/APRA/Thomson one Appendices 36
Slide 37: Third party banking
Third party banking • Investment in Adelaide Bank brand starting to show benefit in originations • Market conditions remain highly competitive, especially in the broker channel Appendices 37
Slide 38: Great Southern
Great Southern • The trial of group proceedings concluded on 25 October 2013 with judgement anticipated in the first half of 2014 • Borrowers are generally high net worth that sought to take advantage of the upfront tax benefit from investing in MIS • All loans are full recourse • The balance of loa
Slide 39: Diverse geographic footprint
Diverse geographic footprint 1819 ATM’s 507 branches 1 4 8 0 3 152 349 50 47 76 55 13 3 43 7 1 2 1 105 5 71 24 11 117 266 16 50 16 8 4 432 916 49 87 190 138 58 726 26 2 301 Community Bank® 9 8 Bendigo branded (3rd party) ATM’s 177 9 14 2 Appendices 39
Slide 40: Community Bank footings growth
Community Bank® footings growth Appendices 40
Slide 41: Community Bank maturing
Community Bank® maturing Appendices 41
Slide 42: Specific provisions
Specific provisions Represented by Provision as % of Retail 3rd Party Commercial Delphi Great Consumer Rural Bank Wealth BEN total portfolio Mortgages Mortgages / Business Bank Southern June 2013 0.03% 0.03% 0.17% 0.29% 0.35% 3.50% 1.31% - 0.21% December 2013 0.04% 0.03% 0.21% 0.33% 0.33% 2.92% 0.97
Slide 43: Secure and low risk loan portfolios
Secure and low risk loan portfolios • 98.3% secured • 97.8% secured by mortgages and listed securities • Residential lending – average LVR 62.4% • Margin lending – average LVR 36% – 76% of portfolios held ≥ 4 stocks Appendices 43
Slide 44: Group exposure – total $51.0b
Group exposure – total $51.0b Residential Mortgages1 Dec-13 Jun-13 Dec-12 Owner occupied 64.95% 64.4% 63.6% Investment 35.05% 35.6% 36.5% Lo Doc 4.48% 5.2% 5.9% Residential Detail Retail mortgages 53.75% 53.2% 52.3% Third Party mortgages 46.25% 46.8% 47.7% Mortgages with LMI 39.83% 40.3% 39.5% Avera
Slide 45: Business – industry split
Business – industry split Note: All loan data above represented by security as per page 15 in the 4D. Data excludes Delphi Bank Appendices 45
Slide 46: Construction portfolio
Construction portfolio • $1.1b of loans • 2.2% of total loans • $182k average loan size • $15.7m largest loan size • Geographic spread • $13.6m impaired loans (1.2%) • $13.7m in arrears (1.8% 90 days+) Note: Excludes Rural Bank Appendices 46
Slide 47: Rural Bank – loan portfolio
Rural Bank – loan portfolio Appendices 47
Slide 48: Contact
Analysts Media Travis Crouch Lauren Andrews Head of Capital and Investor Relations Senior Manager Media and Communications Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 3 5485 6261 Tel: +61 3 5485 7109 Mob: +61 418 552 922 Mob: +61 407 340 283 Email: travis.crouch@bend
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