Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2011 Earnings Presentation
34 slides from Bank Of Queensland's earnings presentation, Feb 28, 2011
Slide 1: Bank of Queensland Half year results
Bank of Queensland Half year results 28 February 2011
Slide 2: Agenda
Agenda Result highlights David Liddy Managing Director & CEO Financial results & portfolio details Ewan Cameron Chief Financial Officer Strategy and outlook David Liddy Managing Director & CEO 2 Bank of Queensland Limited ABN 32 009 656 740
Slide 3: Result highlights
Result highlights David Liddy Managing Director
Slide 4: Result highlights
Result highlights Strong improvement in underlying profit - up 14% Integration of recent acquisitions completed and financial results above expectations Cost-to-income ratio in line with guidance at 45% Asset and deposit growth continue to outperform system – 1H growth funded 100% by retail deposits
Slide 5: Strong underlying growth
Strong underlying growth 1H10 1H11 Underlying profit $189.7m $215.8m 14% Normalised cash NPAT $97.2m $57.6m 41% Cash EPS (normalised fully diluted) 41.8¢ 23.8¢ 18¢ Ordinary dividend 26¢ 26¢ - Loan growth (pcp) 10% 7% (3) pts Retail deposit growth (pcp) 5% 13% 8 pts Net interest margin 1.65% 1.65% -
Slide 6: Growth continues ahead of system with deposits outpacing lending
Growth continues ahead of system with deposits outpacing lending Lending growth: ~1.8x system* Deposit growth: ~1.3x system* 7% 13% 10% 4% BOQ System** BOQ System** * Last 12 months ** Source: APRA data 6 Bank of Queensland Limited ABN 32 009 656 740
Slide 7: Continued expense management
Continued expense management Growth in expenses driven by acquisitions, in line with income growth Expenses on track to reach full year guidance of 45% Cost-to-income ratio* Expenses* 62.6% 14% $177.2m $9.0m Admin $156.1m 56.1% $7.5m $44.2m Operating $46.4m $35.2m Computer 49.9% $33.0m Occupancy $13
Slide 8: Strong capital base and liquidity
Strong capital base and liquidity Tier 1 and total capital levels remain in excess of APRA and internal benchmarks; well positioned to assume additional securitisation assets Continue to hold conservative liquidity buffer over 12% regulatory minimum Capital adequacy Liquidity 17.1% 11.7% 11.7% 11.7%
Slide 9: Financial results and portfolio details
Financial results and portfolio details Ewan Cameron Chief Financial Officer
Slide 10: Delivering commitments on income growth and expense management
Delivering commitments on income growth and expense management 1H10 1H11 % Change $m $m vs pcp Norm alised total incom e 345.8 393.0 14% Norm alised total expenses 156.1 177.2 14% Underlying profit 189.7 215.8 14% Total im pairm ent charges 51.4 134.4 161% Norm alised cash profit after tax 97.2 57.6
Slide 11: 1H bad debt one-off's masking underlying positive trend
1H bad debt one-off’s masking underlying positive trend Normalised cash NPAT 18% $114m* Adjusting for flood $97m $100m provision and one-off losses on large exposures, cash NPAT increased 18% $58m Growth in earnings driven by acquisitions and 7% loan growth 1H10 2H10 1H11 1H11 Adjusted* * Adjustment
Slide 12: Funding costs impact NIM
Funding costs impact NIM NIM benefit from repricing retail assets in November. Deposit pricing was relatively flat as term funding now fully repriced. Pricing for retail deposits remain competitive Benefit of higher margin vendor finance business helped improve NIM NIM up 10 bps 2bps (3bps) 10bps (4
Slide 13: Strong income growth
Strong income growth Net Interest Income Non-Interest Income 13% 17% $83m $310m $71m $275m 1H10 1H11 1H10 1H11 Balance sheet growth in St Andrew’s acquisition excess of system continues helping to diversify income to drive income growth sources and drive recovery in non-interest income 13 Bank of Qu
Slide 14: Expense composition
Expense composition On track to deliver 45% in FY11, despite ongoing investment in acquisitions, brand, new products, technology and compliance and regulatory initiatives Cost-to-income ratio Expenses Employee costs, 1.0% $75.3m (42% ) Operating expenses, $44.2m 1.0% (25% ) 47.3% 0.2% $32m $32m 45.1
Slide 15: Funding profile
Funding profile Focus on retail growth in 2011, increasing retail deposits to 49% Retail deposits funding >100% of LUM growth L/T debt funding profile holding at 2.3 years Overall share of funding from securitisation steady 1H10 Funding 1H11 Funding S/T Wholesale S/T Wholesale (16%) (13%) Retail Ret
Slide 16: Consistent capital management
Consistent capital management Maintaining 26c dividend due to one-off nature of 1H11 result. Positive EPS growth assuming a normalised BDD charge Aiming to deliver 2H dividend growth in line with previous guidance Earnings per Share* Dividends 26¢ 26¢ 26¢ 49¢ adjusted for bad debt increase 42¢ 42¢ 2
Slide 17: Portfolio Details
Portfolio Details Ewan Cameron Chief Financial Officer
Slide 18: Loans under management by product
Loans under management by product 9% CAGR $32.0b $32.6b $30.3b 11% $28.9b $3.8b $3.6b BOQNF $27.5b $3.4b $3.2b $5.3b $5.2b $3.1b $5.0b 16% $4.7b $4.6b SME and $23.7b $21.9b 23.0b commercial $21.0b $19.8b 73% retail 1H 09 2H 09 1H 10 2H 10 1H 11 Retail Business Leasing Continuing to grow in SME and c
Slide 19: Geographic diversification continues
Geographic diversification continues Strong growth from interstate franchise continues, particularly VIC Queensland and Northern NSW impacted by weather events from December to February 1H11 – Growth rate % 1H07 1H11 (pcp) QLD QLD 61% 78% QLD 3% NSW NSW 12% 10% NSW 13% VIC 26% VIC VIC 8% WA 1% WA 1%
Slide 20: Large exposures
Large exposures The Bank has 22 connections Largest exposures by ANZSIC Group with exposures >$20m Retail Financial and Insurance Total commitment exposure Arts & Recreation 7% Services 4% 2% $730m (drawn balance $629m) Construction 18% Personal 2% of total loans under 5% management Other Accommodat
Slide 21: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 38% of 26% of 22% of 14% of Portfolio Portfolio Portfolio Portfolio 2.00% 1.80% 1.73% 1.75% 1H09 1.50% 1.32% 2H09 1.25% 1.11% 1H10 1.00% 0.87% 2H10 0.75% 1H11 0.50% 0.25% 0.00% Housing Other Retail* Business Leasing Tot
Slide 22: Bad debt analysis
Bad debt analysis Increase in total bad debt expense driven by ‘one-off’ weather events and impairment of large exposures Improving trends within Equipment Finance book Total bad debts by product Normalised impairment charge $134.4m Leasing 17% Weather $45.0m events Large Housing ~$35m exposures 9%
Slide 23: Increased provision coverage
Increased provision coverage Significant increase in level of provisions as a result of floods and specific commercial exposures Majority of book well secured housing and SME lending Total provisions 1.47%* 1.00%* $139.7m 0.97%* $60.5m 0.82%* $56.7m $29.4m $57.2m $77.0m $86.5m 0.60% of risk $83.2m w
Slide 24: Strategy and outlook
Strategy and outlook David Liddy Managing Director
Slide 25: Operating model
Operating model St Andrew’s and CIT were acquired as part of our ongoing strategy to expand in high margin and low capital intensity areas Post acquisitions, BOQ is running three key business lines: National Banking Insurance Finance FY11 focus is on growth, transitioning and integrating these busin
Slide 26: Banking division update
Banking division update Branch network continues to grow; strongest growth rates still outside Qld Seeking to be as innovative in product design as in our unique distribution model (The Big Deal, Day to Day Plus, Save to Win) Brand campaigns working – 3.3% average gain in spontaneous brand awareness
Slide 27: Banking division update
Banking division update OMBs are improving revenue profile and quality – leading to underlying BOQ financial performance improvement Less reliance on upfronts More growth funded by deposits Upfronts 60.00% Trail 120% Retail 50.00% Fee / 100% Wholesale 40.00% Other 80% 30.00% 60% 20.00% 40% 10.00% 20
Slide 28: BOQNF update
BOQNF update Successfully integrated with Equipment Finance and Debtor Finance to form BOQ National Finance Rebuild of IT environment completed on target and on budget Including compliance requirements under National Consumer Credit Protection regulations Management team intact and employee turnover
Slide 29: St Andrew's update
St Andrew’s update Integration complete – four offices relocated and systems infrastructure transitioned without interruption to operations All major corporate partners have been ‘locked in’ to medium- to long- term distribution agreements New corporate partner – Macquarie Life Investment focus has
Slide 30: Acquisitions performing ahead of expectations
Acquisitions performing ahead of expectations Revenue from both St Andrew’s and CIT are above original forecasts St Andrew’s payback is expected to be achieved ahead of forecast in ~18 months ROE is above original benchmarks – combined ROE is ~30% vs forecast ~25% Cross-sell rate improving and bette
Slide 31: Continuing our strategy – acquiring high margin, low capital intensive businesses
Continuing our strategy – acquiring high margin, low capital intensive businesses Acquisition Target parameters Debtor finance ROE > 20% Vendor finance ROE > 20% BOQNF Equipment finance ROE > 15% New business lines ROE > 20% Consumer credit Insurance ROE > 25% insurance 31 Bank of Queensland Limited
Slide 32: FY11 guidance
FY11 guidance CASH NPAT GROWTH (normalised) Maintain 1.5 – 2x system growth $175m - $195m DIVIDEND GROWTH EFFICIENCY 2H11: 45% cost-to-income ~10% (excluding acquisitions) 32 Bank of Queensland Limited ABN 32 009 656 740
Slide 33: Summary
Summary Underlying improvement in normalised cash profit after excluding bad debt loss one-offs and weather related provisions Management and Board remain committed to a 15% ROE target Headwinds Tailwinds Funding costs remain high with Growth opportunities in our model in increasing retail mix our 3
Slide 34: Bank of Queensland Limited ABN 32 009 656 740
34 Bank of Queensland Limited ABN 32 009 656 740