Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 FY2024 Earnings Presentation
63 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 19, 2024
Slide 1: For the half year ending 31 December 2023
For the half year ending 31 December 2023 Released 19 February 2024 ’Feeling Valued’ original by Oliver Mills Commissioned for the launch for BEN’s Accessibility and Inclusion Plan 2024-26 Bendigo and Adelaide Bank Limited ABN 11 068 049 178
Slide 2: Acknowledgement of Country
Acknowledgement of Country I would like to begin today by acknowledging the Traditional Custodians of the many lands that we are gathered on. Specifically, I would like to respectfully acknowledge the Gadigal People of the Eora Nation. I would also like to acknowledge the Traditional Custodians of t
Slide 3: Contents
Contents 01 02 03 04 Overview Results Summary Additional information MARNIE ANDREW MARNIE BAKER MORGAN BAKER PAGE 4 PAGE 17 PAGE 30 PAGE 33 3
Slide 4: Marnie Baker – CEO and Managing Director
Marnie Baker – CEO and Managing Director 4
Slide 5: Overview: Key messages
Overview Key messages Consistent execution of long-term strategy Prudent approach to capital, funding and liquidity Managing complex revenue environment Operating expenses contained to sub-inflation levels Transforming the business, reducing systems, and exiting non-strategic arrangements
Slide 6: 1H24 divisional results
1H24 divisional results Key segments delivering for customers in highly competitive environment Consumer Cash earnings ($m) Business & Agribusiness • 9.9% decrease in cash • 16.7% increase in cash earnings earnings • 6.8% decrease in operating • 1.3% increase in operating expenses expenses • Digital
Slide 7: Unwavering commitment to our customers
Unwavering commitment to our customers Our proactive approach Economic conditions Mortgage Help Centre Cost of living pressures • Key purpose is to keep customers in their homes • Elevated despite inflation decreasing to 4.1% • Volume of inquiry has been subdued but complexity of issues • Core infla
Slide 8: Shaping the future of banking
Shaping the future of banking Our strategy VISION: Australia’s bank of choice PURPOSE: To feed into prosperity, not off it Reduce Invest in Tell our IMPERATIVES: complexity capability story Customer Customer Growth & ESG & Centric Value Proposition Transformation Sustainability Operating Model Based
Slide 9: Transforming our business
Transforming our business Continuing focus delivering results 1. Returns 2. Execution 3. Business Sustainability 9
Slide 10: Transforming our business: 1. Returns
Transforming our business 1. Returns Cash Earnings ($m) • Competition for lending and deposits has competed away benefits of cash rate rises; impacting NIM and consequently earnings in the period 294.7 282.2 268.2 • Inflation continues to impact expenses, but largely offset by 239.7 ongoing producti
Slide 11: Transforming our business: 2. Execution in 1H24
Transforming our business 2. Execution in 1H24 Reducing complexity by exiting Investing in capability non-strategic arrangements in key strategic opportunities • Elders relationship agreement • Digital lending and deposits • Homesafe Joint Venture • Up • Bendigo Super • Business and Agribusiness • A
Slide 12: Execution – Digital lending and deposits
Transforming our business 2. Execution – Digital lending and deposits % of residential lending settlements from digital Digital deposits1 $1,781.4m Bendigo Bank Up $1,531.8m Originated through multiple channels Direct: $910.9m 16.3% $712.3m Third party: 12.0% Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-2
Slide 13: Execution – Up
Transforming our business 2. Execution – Up Save Up 1000 — Savings Habit Creation 170,000+ Upsiders started, 14,500+ completed 800,000+ Upsiders3 ~$25m saved. ~22% have never saved $1k before1 60.4 NPS5 Locked Savers — Financial Wellbeing 11.8% customer growth $92m+ held in 33,500+ locked Savers ~23
Slide 14: Execution – Business and Agribusiness
Transforming our business 2. Execution – Business and Agribusiness < 2022 2022 2023 2024+ Feb 2022 Jan 2023 Complex Business Banking and Rural Launch commercial broker Our opportunity is Bank leadership form the channel to agri market and to be a leading business and agri operating model … new B
Slide 15: Execution - Digital Lending Platform
Transforming our Business 2. Execution - Digital Lending Platform What is it Current phase and next steps • A consolidation of core systems with an end-to-end November 2023 automated credit decisioning and loan processing system Pilot phase commenced to select brokers: • Over 200 applications to dat
Slide 16: Business sustainability – ESG & Sustainability
Transforming our business 3. Business sustainability – ESG & Sustainability Sustainability commitments 1H24 outcomes 2H24 priorities Environment & Climate No direct lending exposure to coal, coal seam gas, crude oil, natural gas, native forest Achieved logging projects • Implement FY24 Climate & Nat
Slide 17: Andrew Morgan – Chief Financial Officer
Andrew Morgan – Chief Financial Officer 17
Slide 18: Overview of key financials
Overview of key financials Disciplined focus continues Balance sheet P&L Net Interest Income $813.6m -3.6% Total lending $78.2b -0.7% Operating expenses $506.5m +1.6% Liquids $17.4b +7.7% (ex investment spend) Cash earnings $268.2m -5.0% Customer deposits $68.4b +3.5% NIM 1.83% -15bps FTE (spot) 4,6
Slide 19: Financial and operating performance
Financial and operating performance Challenging revenue environment 1H24 2H23 1H24 ($m) ($m) v 2H23 Total income 956.8 981.5 (2.5%) Key points Operating expenses 552.7 544.9 1.4% • Income impacted by higher liquids, deposit competition and lower lending growth Operating performance 404.1 436.6 (7.4%
Slide 20: Cash earnings vs Statutory NPAT
Cash earnings vs Statutory NPAT Adjustments 1H24 v 1H24 2H23 2H23 ($m) ($m) (%) Cash earnings after tax 268.2 282.2 (5.0%) Non-cash items: 1H24 adjustments Includes revaluation gain, funding costs, and - Homesafe (net) 47.8 30.0 restructure costs. Exiting relationship agreement with Elders - Elders
Slide 21: Total income
Total income Net interest income impacted by reduced net interest margin 1H24 ($m) Average 2 balance growth Interest earning assets +2.8% Residential +0.9% Business and Agribusiness +3.7% Liquids +7.7% NIM: -15bps Customer deposits +4.0% 981.5 30.7 -2.5% 1.2 7.2 956.8 1 2H23 Net interest income Othe
Slide 22: Net interest margin
Net interest margin Result reflects impact of competition and higher liquids NIM - 2H23 v 1H24 2.20% 2.10% Impacted by TD and savings pricing 2.00% 1.90% 1.98% 0.08% -15bps 0.15% 0.04% 0.07% 1.80% 0.11% 1.83% 1.70% 1.72% 1.60% 1.50% 1.40% 2H23 Lending pricing Deposit and funding Mix and other Liquid
Slide 23: Residential lending
Residential lending Diversified channels; strong retention 1H24 fixed rate maturities by dynamic LVR bands • Total portfolio down 0.1%; 1H24 settlements (% EAD) down 6% overall 69% • Strong growth in digital settlements continues – up 27% on prior half • Broker settlements down 14% on prior half; fl
Slide 24: Strength of deposit franchise
Strength of deposit franchise Branch network provides stable funding source APRA household deposit/loan ratio1 • Proprietary branch network and our Community Bank network remain a critical and stable source of deposit funding 73% 64% 61% 63% 56% • Digital deposits via Up increased 16% in 1H24 • Digi
Slide 25: Operating expenses
Operating expenses Productivity benefits keeping cost growth below inflation Contribution +5.1% +1.8% -4.0% -1.4% 0.0% to movement • Wage and price inflation • Technology software license increases 10.1 22.0 28.0 572.8 +1.4% 560.9 8.2 • Lower FTE in Operations 552.7 552.7 552.7 552.7 544.9 544.8 and
Slide 26: Credit quality
Credit quality Credit metrics remain sound Credit expense ($m)1 Gross impaired loans ($m) Loan arrears2 Residential 90d+ Business 90d+ Agribusiness 90d+ Collective provision Specific provision % of gross loans Expired loans impacted arrears rate 3.46% 28.0 152.8 133.1 0.15 2.64% 118.4 21.2 113.9 0.1
Slide 27: Funding and liquidity
Funding and liquidity Stable and diversified funding sources Funding profile ($b) • Strength of customer deposit franchise 22.9 23.2 24.4 demonstrated by 74.9% of customer deposits to 74.9% total funding ratio 21.0 24.4 26.0 Customer deposits • Net +$13.8bn funding from Community Bank network 44.7 4
Slide 28: Capital and dividends
Capital and dividends Capital position remains strong and well managed CET1 movement - 6 months (%)1 0.62 0.48 0.07 -2bps 0.10 0.13 11.25 11.23 Jun-23 Earnings Dividend (net of DRP) Capitalised expenses Other 2 RWA Dec-23 • Interim fully franked dividend of 30.0c, up 3.4% on 1H23 representing 63.3%
Slide 29: Growth engines
Growth engines Multiple growth opportunities exist to regain market share System BEN • Residential Lending volumes have reduced over last three halves reflecting competitive intensity Residential • New digital lending platform will enable growth at lower cost to lending manufacture and provide oppor
Slide 30: Marnie Baker – CEO and Managing Director
Marnie Baker – CEO and Managing Director 30
Slide 31: Our strategy delivering value
Our strategy delivering value A streamlined business, retaining our core differentiators FY19 1H24 FY26 13 3 8 2 7 2 3 1 4 Divisions Brands Core Banking Divisions Brands Core Banking Divisions Brands Core Banking Systems Systems System • 1.7m customers • 2.47m customers • Return on equity in excess
Slide 32: Marnie Baker, Andrew Morgan, Taso Corolis
Marnie Baker CEO and Managing Director Andrew Morgan Chief Financial Officer Taso Corolis Chief Risk Officer 32
Slide 33: Additional information
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Slide 34: Who we are
Who we are Overview 2.47 +7,000 • 165 years of history, amalgamation of more than 80 different organisations million employees • 2.20% market share • 433 total branches (307 Community Bank, 126 company owned) customers • Multi-channelled: • Residential lending – Retail, Digital and Third Party Banki
Slide 35: 1H24 result: Key metrics
1H24 result Key metrics Cash earnings ($m) NIM CTI ROE +230bps 294.7 1.98% 8.8% 57.8% 8.5% -63bps 282.2 -5.0% 1.90% -15bps 55.5% 7.8% 268.2 1.83% 54.3% 1H23 2H23 1H24 1H23 2H23 1H24 1H23 2H23 1H24 1H23 2H23 1H24 Cash EPS (cents) DPS (cents) CET1 Customer deposits -2bps as % of total funding -6.3% 52
Slide 36: Building blocks to achieve ROE above cost of capital
Building blocks to achieve ROE above cost of capital 1H24 proof point Continued focus on cost management Op expense managed to and targeting improvement in CTI ratio sub-inflation Community Investing in our deposit gathering franchise underpinned by Bank net the strength of our Community Bank model
Slide 37: Consumer
Consumer Multi-channel strategy delivering benefits Volume growth ($m)1 Divisional NIM (%) • Net Interest income decreased by 11.3% as margins Dec-22 Jun-23 Dec-23 declined 28bps and asset balances decreased 2.05 marginally half on half 2.01 58.5 59.8 59.6 • Deposit balances increased $1.4b, as term
Slide 38: Business and Agribusiness
Business and Agribusiness Significant opportunities over the medium term; early signs of improvement Volume growth ($m)1 Divisional NIM (%) Dec-22 Jun-23 Dec-23 Total division cash earnings increased 3.56% 3.53% 21.7 16.7% HoH: 21.0 3.27% 20.6 • Strong seasonal conditions resulted in a 19.6 19.4 19.
Slide 39: Homesafe
Homesafe Summary of performance • Restructure of Homesafe investments in December 2023: Homesafe portfolio & funding balance ($m) • Ceasing funding of new contracts from 30 June 2024 1,106.6 1 Dec-23 split: • Portfolio valued at ~$1.1b will be in run-off as existing contacts are Melbourne – 59% comp
Slide 40: Residential lending
Residential lending Residential metrics1,2,3 Flow Portfolio 1H24 2H23 Dec-23 Jun-23 Dec-22 Flow / Portfolio amount $6.5b $6.9b $58.5b $58.6b $57.5b 4 Retail lending (Proprietary) 32% 32% 46% 48% 48% 5 Third Party Banking lending (Broker/white label) 52% 56% 47% 46% 46% 6 Digital Lending 16% 12% 7% 6
Slide 41: Residential lending: Portfolio and state splits
Residential lending Portfolio and state splits Residential balance by state Residential portfolio ($b)1 15% 58.6 58.5 9% 9% 57.6 57.5 27% 54.0 38% Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 2% 1. Loan portfolio balances are represented by purpose and include all portfolios including relevant Portfolio Fundi
Slide 42: Business lending
Business lending Portfolio and state splits Business balance by state3 Business portfolio ($b)1 10.6 10.2 10.2 10.3 10.3 14% Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 5% 8% SME segment ($b)2 14% 6.3 6.4 6.0 5.6 57% 5.0 2% Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 1. Business portfolio balances are represented by
Slide 43: Agribusiness lending
Agribusiness lending Portfolio splits Agribusiness balance by state Agri exposure by industry 5% 6% Grain/Sheep/Beef 6% 29% Sheep/Beef Beef 9% Grain Sheep 16% Dairy 9% 16% Other 13% Hort./Vit. 16% 18% Agribusiness portfolio ($b)1 20% 6.3 6.1 6.1 34% 5.8 5.7 3% Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 1. A
Slide 44: Financial assets - credit risk exposures
Financial assets - credit risk exposures By industry (AASB9) Dec-23 ($b) Jun-23 ($b) Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Residential/Consumer 54.4 5.4 0.5 60.3 54.8 5.2 0.4 60.4 Accommodation and food services 0.2 0.0 0.0 0.2 0.2 0.0 0.0 0.2 Administrative and support service
Slide 45: Net interest margin: Capital and deposit hedges
Net interest margin Capital and deposit hedges Average hedged yield on capital and deposit replicating portfolio • Additional NIM benefit expected over medium term from impact of higher interest rates on capital and deposit replicating yields 1H22 2H22 1H23 2H23 1H24 avg avg avg1 avg1 avg • Actual o
Slide 46: Community Bank: How the revenue share works
Community Bank How the revenue share works Community 50/50 Bank footings Interest rate FTP rate1 Margin income split between BEN and Community Banks Community Bank Community Bank revenue: Community Operating Operating 50% costs Bank profit costs Margin income share plus a Distributions to Community
Slide 47: Community Bank: 'Profit with purpose' model
Community Bank ‘Profit with purpose’ model Community Bank footings ($b)1 Aims: Community Bank branches are a significant source To secure branch banking services for participating of customer deposits for the broader Group, increasing communities $1.6b in 1H24. To empower and build confidence an
Slide 48: $324m invested back into communities
Community Bank impact Driving positive social and economic outcomes in communities across Australia 950,934 1,744 70,850 1,540 217 307 Community Bank Community Bank Community Bank Community Bank Community Bank Community Bank Customers Staff Shareholders Directors Companies Branches $324m invested ba
Slide 49: Transformation update
Transformation update Transformation scorecard FY19 FY23 1H24 FY24 # brands1 13 7 7 3 • IT applications continue to reduce, down # core banking systems 8 4 4 1 13% in 1H24 # IT applications 650 401 348 325 • Median time to decision (home loans) benefiting from productivity initiatives, % application
Slide 50: Investment spend
Investment spend Continuing to invest for long-term simplification benefits 3 Investment spend ($m)1 % Opex Top 5 projects by spend: 28% 28% 44% 43% • Digital Lending Platform (Foundational Technology) 106.5 • Up Digital Bank (Growth and Productivity) 104.6 98.1 3.6 4.6 • Cloud Data Enablement (Foun
Slide 51: Arrears
Arrears Remain benign Residential loan arrears Business loan arrears 1.0% 5.0% 0.8% 0.69% 4.0% 0.52% 2.79% 2.52% 2.64% 0.53% 0.49% 3.0% 2.26% 0.6% 0.46% 2.07% 2.10% 0.41% 0.4% 2.0% 0.2% 1.0% 0.0% 0.0% Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Consumer loan a
Slide 52: Credit quality: Residential loan portfolio remains resilient
Credit quality Residential loan portfolio remains resilient 33 Current LVR of no buffer and <1 month Composition of no buffer and % of exposures by payments in advance (including offsets) 1 31 31 ahead (% EAD) <1 month ahead (%of EAD) 35% 37 16 16 15 15 32% 14 15 11 12 12 19 10 10 10 8 8 8 9 9 9 22%
Slide 53: Specific provisions and impaired assets
Specific provisions and impaired assets Downward trend on impaired balances has continued Specific provision Specific provisions breakdown ($m) 40.0 balance ($m) 46.5 47.8 20.0 Represented by 41.3 - Dec-22 Jun-23 Dec-23 Dec-22 Jun-23 Dec-23 Dec-22 Jun-23 Dec-23 Dec-22 Jun-23 Dec-23 Dec-22 Jun-23 Dec
Slide 54: Provisioning
Provisioning Provisioning remains appropriate for the current uncertainties in operating environment Total provisions ($m) Collective provisions ($m) as % of gross loans 0.30 0.30 0.32 388.4 381.5 384.9 371.6 374.0 87.4 95.2 248.4 87.8 95.2 95.2 232.3 238.5 44 45 71.6 47.8 41.3 46 58.1 46.5 238.5 24
Slide 55: Collective provisions and scenario outcomes
Collective provisions and scenario outcomes Continued caution is warranted Total collective provision movements ($m) 4.1 17.6 11.3 5.7 248.4 - 238.5 1.1 5.5 232.3 225.7 Jun-22 Economic forecast Additional overlays Dec-22 Economic forecast Additional overlays Jun-23 Economic forecast Additional overl
Slide 56: Collective provisions and scenario outcomes: Model inputs
Collective provisions and scenario outcomes Model inputs Unemployment (%) Gross Domestic Product (%) 10.00% 5.00% 8.00% 2.50% 6.00% 0.00% 4.00% -2.50% 2.00% -5.00% Dec-23 Jun-24 Dec-24 Jun-25 Dec-25 Jun-26 Dec-26 Dec-23 Jun-24 Dec-24 Jun-25 Dec-25 Jun-26 Dec-26 Mild improvement Base scenario Mild de
Slide 57: LCR and NSFR
LCR and NSFR Funding & liquidity ratios remain well positioned Net stable funding ratio ($b) As at 31 December 2023 NSFR full year (%) 119.7% Wholesale funding & 10.7 other 2.3 Customer & SME 21.0 deposits 4.5 Capital 121.5 1.6 3.1 53.9 0.7 119.7 31.2 Other loans Residential mortgages 7.9 8.3 LVR <8
Slide 58: Customer deposits
Customer deposits Split and funding costs Customer deposit - split ($b) Customer deposit – funding costs 68.4 1.9% '<= 1.00%' 0.3% '> 1.00% - <= 2.00%' 7.8 '> 2.00% - <= 3.00%' Term 21.0% 62.3% 13.7% '> 3.00% - <= 4.00%' 26.0 '> 4.00% - <= 5.00%' '> 5.0%' 0.8% '<= 1.00%' '> 1.00% - <= 2.00%' '> 2.00
Slide 59: Capital
Capital Continued strengthening in ratios CET1 ratio - using standardised RWA1 Credit risk weighted assets ($b) CET1 ratio - standardised CET1 standardised - avg of peers 37.7 36.8 36.3 11.23% Average: 9.49% 35.6 35.2 10.64% 10.38% Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 9.61% 9.45% 9.47% 9.42% S&P RAC R
Slide 60: Dividend
Dividend Increasing returns for shareholders Dividends (cents per share) Payout ratio1 • 1H24 dividend up 3.4% on 1H23 62% 56% 64% 63% • Dividend levels continue to be managed across 32.0 the year 29.0 30.0 26.5 • Target payout ratio 60-80% • Strong CET1 capital position provides flexibility 2H22 1H
Slide 61: Important Information
Important Information 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 informati
Slide 62: Our reporting suite
Our reporting suite Reporting our progress We continue to grow trust through governance, authentic Prioritising our approach engagement and transparent disclosure We leverage a range of global and domestic frameworks and guidance to focus on the risks and opportunities that matter Global Annual Repo
Slide 63: Shareholder centre
Shareholder centre 1H24 Results Presentation Annual Financial Report Sustainability Report Investor Calendar Corporate Governance Statement Investors/Analysts Media Sam Miller Alisha Mulholland James Frost Head of Investor Relations and ESG Senior Analyst Investor Relations Head of Public Relations
Bendigo & Adelaide Bank — H1 FY2024 Earnings Presentation on 6ix