Bank of Queensland Limited · ASX:BOQ
Bank of Queensland — FY2004 Earnings Presentation
47 slides from Bank of Queensland's earnings presentation, Aug 31, 2004
Slide 1: Annual Results Presentation
Bank of Queensland Annual Results Presentation 31 August 2004
Slide 2: Agenda
Agenda 4 Results Overview 4 Strategy Implementation and Outlook
Slide 3: Result Highlights
Result Highlights 2004 2003 % A record full year net profit $64.5m $44.7m é 44% Net profit excl. significant items $61.7m $44.7m é 38% Loan Approvals $7.8b $5.7b é 38% Assets Under Management $12.5b $8.7b é 43% Retail Deposits $4.9b $3.8b é 27% Full-year dividend 43¢ 37¢ é 16% Operationally, a year
Slide 4: Report Card for the Year
Report Card for the Year... Goals 2004 Results 4 Strong lending and deposit 4 Assets under management growth up 43% deposits up 27% - double system growth 4 Double digit EPS Growth 4 17% cash EPS growth 4 Cost to income ratio of 64% 4 63.4% cost to income ratio 4 ROE of 14% 4 ROE of 14.5% 4 Continue
Slide 5: Summary of Results
Summary of Results Aug 03 Aug 04 $m $m % Change Net Interest Income 132.7 183.3 38% Non Interest Income 81.6 108.6 33% Total Income 214.3 291.9 36% Total Operating Expenses 139.0 185.0 33% Underlying Profit 75.3 106.9 42% Bad Debts 11.7 11.9 2% Profit Before Tax 63.6 95.0 49% Goodwill - 1.7 - Income
Slide 6: Profit Performance
Profit Performance Growth in profit driven by acquisitions and our core business. Non-Interest Income Expenses $27m ($46m) $120m Net Interest Income $100m $51m $m Profit after tax Bad debts Tax ($0.2m) ($10m) $80m Goodwill ($2m) $60m $65m Revenue up 36% Costs up 33% $45m $40m Aug 03 Aug 04 6
Slide 7: Cash EPS Growth
Cash EPS Growth EPS EPS growth growth ofof 17% 17% (12% (12% excl excl significant significant items) items) 70c 65c 60c 64.5c Cash Diluted EPS 55c 55.2c 50c 45c 40c 39.1c 35c 33.9c 33.2c 30c 2000 2001 2002 2003 2004 7
Slide 8: Return on Equity/Assets
Return on Equity/Assets 16.0% Return on Equity 4 There is short term 15.0% 15.4% pressure on ROE during 14.0% 14.5% our period of strong 13.0% 13.3% growth. 12.7% 12.0% 12.2% 4 Continuing to improve our 11.0% ROA. 10.0% 2000 2001 2002 2003 2004 0.75% Return on Assets 0.75% 0.70% 0.72% 0.65% 0.66% 0.
Slide 9: Growth in Loans Under Management
Growth in Loans Under Management Housing Growth Business Growth (excluding impact of UFJ acquisition) 40% 35% 35% 30% 32% 36% 30% 25% 25% 20% 20% 15% 15% 19% 10% 10% 5% 5% 9% 0% 0% 2001 2002 2003 2004 2001 2002 2003 2004 BOQ System Source: RBA 9
Slide 10: Assets Under Management Growing Strongly
Assets Under Management Growing Strongly $13b 50% 43% $11b 40% $9b 30% $12.5b $7b 20% $8.7b $5b $6.6b 10% $5.2b $4.4b $3b 0% 2000 2001 2002 2003 2004 Value (LHS) Percentage Increase (RHS) Housing loans under management $7.1b up 36% over last year. Business loans under management $3.5b up 89% over la
Slide 11: Low Risk Housing Dominates Loans Under Management
Low Risk Housing Dominates Loans Under Management $4.5b $5.8b $7.3b $10.9b 100% $1.5b $1.0b $1.2b $1.7b $0.3b 80% $2.0b 60% 40% $3.3b $4.2b $5.2b $7.1b 20% 0% 2001 2002 2003 2004 Housing Business Consumer Leasing $100m in low doc loans, low growth area particularly after exit from mortgage brokers.
Slide 12: Balance Sheet Lending Mix
Balance Sheet Lending Mix Leasing Leasing acquisition acquisition diversifying diversifying our our lending lending $9.0b $8.3b $8.0b 24% $1.9b business $7.0b $6.0b $1.1b 13% leasing $5.0b $1.6b $0.3b $4.0b $1.2b $3.0b $1.0b 60% $5.0b housing $2.0b $3.7b $2.9b $1.0b $2.3b $0.0b 2001 2002 2003 2004 H
Slide 13: Credit Quality
Credit Quality 0.20% Impaired Assets to Average Assets Significant growth 0.15% 0.16% has not been at the 0.13% expense of credit 0.10% quality. 0.05% 0.07% 0.08% 0.00% 2001 2002 2003 2004 $8m Continuing low Impaired Assets levels of impaired $6m $6.4m $6.3m $6.4m assets. $1.4m attributable $4m $4.3
Slide 14: Provision for Bad Debts
Provision for Bad Debts Total Provisions increased by $16.3m, largely due to maintaining the General Provision at 0.5% of RWA with significant asset growth, and the acquisition of provisions through the UFJ Finance acquisition. 4 Specific Provision ñ$1.5m, General Provision ñ$14.8m 4 8 times total p
Slide 15: Retail Deposits
Retail Deposits Retail Retail deposits deposits $4.9b, $4.9b, up up 27% 27% over over last last year. year. $6b Double Double system system growth growth 35% $4.9b 30% $5b BOQ 25% $4b $3.8b $3.0b 20% $3b $2.6b 15% System $2b 10% $1b 5% $0b 0% 2001 2002 2003 2004 Retail Deposits System Growth BOQ Gro
Slide 16: Total Funding Mix
Total Funding Mix $5.2b $6.6b $8.7b $12.5b 100% $0.5b $0.8b $1.1b $1.6b 13% $1.0b $1.3b $1.5b 20% 75% $2.5b $1.1b $1.5b $2.3b 27% $3.4b 50% 25% $2.6b $3.0b $3.8b 39% $4.9b 0% 2001 2002 2003 2004 Retail Wholesale Securitisation Other On On balance balance sheet sheet funding funding mix: mix: 60% 60%
Slide 17: Strong Growth in Income
Strong Growth in Income 4 Strong growth off the back of 4 Grown strongly off customer strong asset and deposit and product growth. growth, and UFJ acquisition. 4 37% of total income. Net Interest Income Non-Interest Income $200m $100m $109m $183m $160m $80m $82m $120m $133m $60m $65m $107m $109m $57
Slide 18: Margin Impacts - Overview
Margin Impacts - Overview 4 Net margin declined from 5.75% Cash/Bills Spread 2.31% to 2.02%. 5.50% 4 Margin pressure from timing 5.25% issues : 5.00% 4 Strong asset growth in low 4.75% margin products and a lag in 4.50% deposit growth. Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- 03 03 03 03 03
Slide 19: Spread Reduction
Spread Reduction 4 Spread has reduced from 2.34% to 2.00% (1H 24bps, 2H 10bps). 4 1H impact greater than 2H because of greater impact of cash/bills spread, acquisition funding of UFJ and greater impact of Broker introduced mortgages. 4 Cash/bills spread 0.09%. 2.40% Cash/bill 4 Asset mix changes 0.1
Slide 20: Mix of Operating Expenses
Mix of Operating Expenses 33% Admin 2004 $185m 33% increase increase in in costs. costs. Acquisitions contributed Acquisitions contributed 3% $18m $18m ofof additional additional Operating expenses expenses 30% $6m Staff $67m 37% $55m $41m $16m Admin 2003 $139m 4% Staff Occupancy Operating $8m Compu
Slide 21: Growth in Income & Expenses
Cost to Income Ratio Cost Cost to to income income ratio ratio of of 63.4% 63.4% down down from from 64.9% 64.9% in in 2003, 2003, and and aa high high of of 76% 76% in in 2001 2001 40% Growth in Income & Expenses 76% 35% 74% Cost to Income Ratio 30% 72% 25% 70% 68% 20% 66% 15% 64% 10% 62% 5% 60% 0%
Slide 22: Solid Capital Position
Solid Capital Position Regulatory Capital to Risk Weighted Assets 14% 11.9% 11.6% 12% 11.3% 10.4% 10% 4.2% 3.9% 2.9% 4.1% 8% 1.4% 1.4% 1.2% 1.7% 6% 4% Tier 1 6.1% 6.5% 6.0% 7.7% 5.8% 2% 0% 2001 2002 2003 2004 Core T1 Hybrid T1 Tier 2 Target Target Tier Tier 11 of of 7% 7% -- 8%, 8%, Overall Overall
Slide 23: Capital Management
Capital Management 4 Active capital management through: 4 Securitisation - housing and leasing 4 DRP 4 Share Purchase Plan, and 4 Private and public placements. 4 APRA changes required that from 1 Jul 04 deferred expenditure must be deducted from Tier 1 capital. This now totals approx $25m. 23
Slide 24: Share Price Performance
Share Price Performance BOQ v ASX 200 Financials Index - BOQ Financial Year 1.4 BOQ Share Price: 1.3 Year High: $12.03 Year Low: $8.72 1.2 1.1 1.0 0.9 04 04 4 4 03 03 03 04 04 03 04 04 04 04 0 l0 ay pr p p ec ar ov ug ct ct b n n Ju Se Se Ja Ju Fe O O M A M D N A BOQ % Increase BOQ ASX 200 Financial
Slide 25: Strategy Implementation & Outlook
Strategy Implementation & Outlook
Slide 26: Interstate Expansion
Interstate Expansion 4 Targeting 100 branches interstate by 31 August 2006. 4 Strong interest from potential owner managers. 4 Targeting consumer and SME market segments. 4 Business banking presence also in place. 4 Early days, but interstate branches have exceeded planned performance. 4 Interstate
Slide 27: Our Branch Distribution
Our Branch Distribution Forecast 250 240 200 192 100 142 50 160 120 5 Branches 120 95 98 79 84 92 62 80 37 40 40 58 58 58 58 58 58 0 Aug 01 Aug 02 Aug 03 Aug 04 Aug 05 Aug 06 Corporate Branches Owner Managed - Qld Owner Managed - Interstate Plus: 13 dedicated business banking centres & 8 UFJ offices
Slide 28: Owner Managed Branch Model
Owner Managed Branch Model 4 Commercially focused retail franchise banking model. 4 Provides a low cost basis to expand our network 4 Attracts the best bankers, and 4 Aligns the manager’s interest with our customers, shareholders and community. 4 Variable Cost Model 4 Share in net revenues generated
Slide 29: Mortgage Broking
Mortgage Broking 4 In May 2004 the Bank decided to exit the mortgage broking market. 4 At the time of exiting brokers contributed 18% of the Bank’s new lending volumes (peaked at 22% during the year). 4 Key reason was to focus our resources, both financial and our people on the task of our aggressiv
Slide 30: Continuing Strong Lending Sales
Continuing Strong Lending Sales Housing Total approvals of $7.8b, up 62% 38% on last year. 2004 $7.8b Housing Business 70% 30% Leasing Consumer 2003 $5.7b 6% 2% Housing 74% Consumer 2002 $3.7b 4% Business Consumer 26% 4% Business 22% 30
Slide 31: New Core Banking System
New Core Banking System 4 Implemented in May 2004 on budget at a cost of $40m. 4 Replaced our 25 year old core banking system. 4 We needed a new system to support our growth aspirations and product requirements. 4 Will be the cornerstone of the PEP II initiative. Core Banking System Benefits 1. Cust
Slide 32: Information Technology & Infrastructure
Information Technology & Infrastructure 4 We have invested in new technology to replace our outdated systems. 4 With the new core banking in system in place the investment in IT has peaked: 4 Carrying value of IT hardware & software, and Infrastructure Investment of $106m, annual depreciation of $18
Slide 33: Outsourcing Objectives on Track
Outsourcing Objectives on Track 4 Benefits exceeding our original expectations of $100m over 10 years. 4 Performance Management: 4 EDS performance is monitored against >50 critical service levels. 4 monitored weekly by Management. 4 reported monthly to Board. 4 PEP II will consider any other areas f
Slide 34: BOQ Equipment Finance
BOQ Equipment Finance (formerly UFJ Finance) 4 UFJ Finance settled on 8 October 2003 and renamed BOQ Equipment Finance. 4 BOQ now has $1.5b in equipment finance receivables under management (representing 12% of total lending portfolio). 4 Diversified assets geographically and across various industri
Slide 35: ATM Solutions
ATM Solutions 4 ATM Solutions acquisition completed on 10 September 2003, (1,052 ATMs.) 4 ATM Solutions currently have over 1,700 ATMs (1,661 at 31 August 04) deployed nationally, positioning them as the 2nd largest third party deployer and 2nd largest bank ATM deployer. 4 Enables BOQ to directly se
Slide 36: Profitability of Expansion
Profitability of Expansion 4 One of our challenges is sustaining traditional profit measures whilst expanding aggressively. 4 Following slides illustrate the compelling nature of our growth story. 36
Slide 37: Profitability of Expansion - A Product View
Profitability of Expansion - A Product View 4 Our expansion is built on a foundation of profitable products, coupled with our Owner Managed Branch model and a mature profitable book. 4 Example home loan through an Owner Marginal Home Loan ROE Managed Branch, 50% weighted average Target Funding mix -
Slide 38: Profitability of Expansion - A Branch View
Profitability of Expansion - A Branch View 25% A New Owner 4 New OMBs operate under Managed Branch a variable cost structure which is shareholder 20% value accretive. 4 Size of portfolio, product 15% ROE improves as profitability and book matures and deposit base establishment costs 10% grows. dilut
Slide 39: Profitability of Expansion - Branch Growth
Profitability of Expansion - Branch Growth 4 Our Owner Managed Branch model has proved to be successful. 4 Generating strong lending and deposit growth from growing a strong customer base. 4 The branches we have opened to date fall into 3 categories: 4 New - opened within last year (22 OMBs) 4 Emerg
Slide 40: ROE Profile
ROE Profile 4 The initial strong period of asset growth in our new OMBs is followed by accumulation of deposit funds. 4 However, the expansion puts short term pressure on ROE. 17% Growth phase 16% Mature branches 15% Total Bank 14% Efficiencies 13% driven Improving ROE as the growing out of existing
Slide 41: People
People 4 Our people driven approach: 4 Loyal customers due to service priority. 4 OMBs drive high service standards. 4 Face-to-face business banking the key to SME market. 4 More branches does mean more customers. 4 Cross-selling strength - a real bank, not just lending. 4 New Certified Agreement in
Slide 42: Our Strategy
Our Strategy 4 Driving growth... 4 Cessation of Mortgage Brokers in favour of own channels. 4 Growth in Equipment Finance, Debtor Finance, International Trade and Merchant Acquiring. 4 Continue to grow ATM Solutions business. 4 Select product alliances in Insurance & Wealth Mgmt. 4 Attract, retain a
Slide 43: Our Strategy
Our Strategy 4 Going forward: 4 Specialist distributor focused on superior customer service. 4 Competitive platform provided by Core Banking System. 4 Interstate expansion of OMB model into NSW, Vic, ACT & NT. 4 Consolidation of Qld branch network. 4 Grow Business Banking presence. 4 BOQ’s “stepped”
Slide 44: Goals
Goals 4 Financial goals for 2005: 4 Substantially above system asset (1.5x system) and deposit growth (2x system). 4 Maintaining credit quality. 4 Cash EPS growth of 10%-12%. 4 Cost to income ratio of 63%. 4 Key objectives for our 2005 financial year are to: 4 Continue the interstate branch network
Slide 45: Challenges
Challenges... 4 Invest in expansion without sacrificing expense management. 4 Realise benefits from new core banking system and PEP II. 4 Continue to diversify income streams. 4 Holding the margin steady, whilst increased competition drives lending rates down and deposit rates up. 4 Housing expected
Slide 46: Future Looks Bright
Future Looks Bright… 4 Infrastructure investment complete. 4 Our growth strategy will create substantial shareholder value. 4 We are differentiating through our distribution focus. 4 Focused, committed management team. 4 Moving into a new head office. 4 Unique, differentiated retail franchise distri
Slide 47: Bank of Queensland
Bank of Queensland 47