Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 2013 Earnings Presentation
58 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 18, 2013
Slide 1: Bendigo and Adelaide Bank 2013 half year results
Bendigo and Adelaide Bank 2013 half year results February 18, 2013 1
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 does not purport to be complete. It is to be read in conjunction with the Bank’s half year results filed with the Australian
Slide 3: Agenda
• Overview • Financial performance • Outlook • Questions • Appendices Agenda 3
Slide 4: Overview
Mike Hirst Group Managing Director Overview 4
Slide 5: Our result
Our result Financial performance • Statutory profit after tax $189.4m - statutory profit after tax • Statutory profit after tax before specific items $162.8m • Statutory earnings per share 45.9¢ • Half year dividend of 30.0¢1, fully franked Financial performance • Cash earnings of $169.7m - cash bas
Slide 6: Our result: balance sheet, funding, capital, efficiency
Our result Balance sheet Funding management • 10 basis point NIM improvement half-on-half • Strategic approach to funding taking into account price, diversity and tenor • Issued our first senior unsecured wholesale issue since the GFC • Issued post balance-date RMBS at tightest margins since the GFC
Slide 7: Well placed in a low credit growth environment
Well placed in a low credit growth environment… 1. Solid and established platform • Improving efficiency, scale, and stable cost structure • Balance sheet strength, and positive ratings momentum • Increased wealth distribution capability • Bolt-on and opportunistic M&A • Robust core banking platform
Slide 8: Supported by a differentiated customer value proposition
… supported by a differentiated customer value proposition 100% Customer satisfaction1 90% 87.6% 80.3% 78.5% 80% 75.7% • Continued maturation of Community Bank and ® 74.0% retail network 70% 60% • Brand and customer advocacy 50% – Voted Australia’s favourite bank3 BEN NAB CBA WBC ANZ – Voted best da
Slide 9: Leads to market outperformance
… leads to market outperformance Total lending growth ‐ 6 months1 Housing lending growth ‐ 6 months1,2 BEN 4.7% NAB 7.0% NAB 3.5% BEN retail 5.1% ANZ 2.1% BEN 4.0% BOQ 3.5% System 2.0% System 3.4% BOQ 1.4% ANZ 3.3% WBC 1.0% CBA 3.1% CBA 0.8% WBC ‐0.1% Total deposit growth ‐ 6 months1 Business lendin
Slide 10: Financial performance
Richard Fennell Chief Financial Officer Financial performance 10
Slide 11: Financial performance summary
1H13 2H12 1H12 PCP change Net profit after tax ($m) 189.4m 137.1m 57.9m 227.1% Cash earnings ($m) 169.7m 160.4m 162.6m 4.4% Cash EPS 41.9¢ 40.5¢ 43.9¢ 2c Dividend per share1 30.0¢ 30.0¢ 30.0¢ -- Cost to income (%) 57.8 59.8 58.2 (40 bps) Cost to average assets (%) 1.30 1.31 1.28 2 bps Tax rate on ca
Slide 12: Improvement in cash earnings
Improvement in cash earnings Cash earnings movement vs PCP ($m) • Strong NII performance 14.2 (15.0) • Costs contained (16.3) 29.8 2.8 (8.4) 169.7 • Credit impacted by 162.6 Queensland rural property prices 4.4% Dec‐11 Net interest income Other Income Staff costs Credit Other expenses Other specific
Slide 13: Group performance
Dividends (cents) Group performance • Dividend maintained at 30 cents 30.0 30.0 30.0 30.0 30.0 30.0 • Improving cash basis earnings • Capital aligned to Basel III Cash basis earnings ($m) Statutory profit ($m) Jun‐10 Dec‐10 Jun‐11 Dec‐11 Jun‐12 Dec‐12 189.4 Cash earnings per share (cents) 173.9 174.
Slide 14: Return on equity and return on tangible equity
Return on equity (ROE) and return on tangible equity (ROTE) ROE & ROTE $M Cash earnings vs average ordinary & tangible equity $M $180 20% $4,000 18% $174.1 $170 $169.7 16% 17.24% $160 $3,500 $162.6 $160.4 14% 14.81% $150 12% 13.36% 13.37% 10% $3,000 $140 9.47% 8% 8.52% $130 8.21% 8.39% 6% $2,500 $12
Slide 15: Net interest margin (%)
Net interest margin (%) 2.18% Community Bank 2.08% 0.11% & Alliance share 0.01% 0.35% 0.34% 1.74% 1.83% 10bps Jun‐12 Asset mix Pricing & hedging Dec‐12 Financial performance 15
Slide 16: Net interest margin (%)
Net interest margin (%) % • Continued pricing discipline through 2.5 asset and liability channels 2.3 • Prior headwind of declining margin lending portfolio abating 2.1 • Wholesale funding alternatives will be accessed on a strategic basis – 1.9 taking into account price, tenor and diversity Monthly
Slide 17: Marginal retail funding
Marginal retail funding Maximum term deposit rates ≤ 12 months* 6.0% • Competition for retail deposits has remained very 5.5% high 5.0% 130bps • BEN maintains strategy of 4.5% growth at profitable prices 4.0% 120bps 115bps 3.5% $18bn 3.0% 2.5% Dec‐11 Feb‐12 Apr‐12 Jun‐12 Aug‐12 Oct‐12 Dec‐12 Feb‐13
Slide 18: Non-deposit funding opportunities
Non-deposit funding opportunities • Recent ratings upgrades and general Bps Australian public RMBS transactions Yrs market improvement have provided 180 3.6 4.0 3.5 wholesale funding opportunities 160 3.4 3.4 3.2 3.5 140 2.9 3.0 120 2.4 • BEN has issued term senior unsecured 100 2.7 2.5 for the firs
Slide 19: Funding remains a strength
Funding remains a strength Term funding maturity profile $m Sub‐debt Term senior debt 80% 80% 450 74% 75% 77% 400 350 300 250 200 150 100 19% 17% 15% 12% 11% 50 7% 8% 8% 8% 9% 0 Dec‐10 Jun‐11 Dec‐11 Jun‐12 Dec‐12 2013 2014 2015 2020 Wholesale Securitisation Retail Financial performance Note : Term f
Slide 20: Retail deposits
Retail deposits Retail call deposits Retail term deposits • Term deposits priced to manage liquidity $41.9bn $40.7bn • Not a price leader – value proposition driven $38.6bn $36.7bn • Term deposit retention rate consistently above 80% Retail term deposit retention rate* 100% $29.7bn $27.2bn $29.2bn $
Slide 21: Efficiency focus remains
Efficiency focus remains Cost-to-income ratio 59.8% • Cost growth of 1.7% half on half and 6.4% versus pcp – including 58.2% impact of acquisition of Delphi Bank and Southern Finance portfolio 57.8% • Software amortisation costs to remain low relative to peers Dec‐11 Jun‐12 Dec‐12 Operating expenses
Slide 22: Results reflect management focus
Results reflect management focus • Maintaining positive ‘JAWS’ will remain a focus of management • Costs to remain under pressure from award pay increases, rent and IT • Investment projects for strategic initiatives to continue Cost growth Income growth vs Cost growth 5% 6% 4% 5% 3% 4% 3% 2% 2% 1% 1
Slide 23: Capitalised software
Capitalised software Capitalised software ($m) • Low levels of capitalised software Additions Amortisation • Levels will increase as strategic initiatives continue (Basel Advanced 1.6 (1 Accreditation) (9.8) 67.4 59.2 Jun‐12 Dec‐12 Financial performance 23
Slide 24: Managing capital for a Basel III world
Managing capital for a Basel III world 0.12% 0.18% 0.31% 11.07% (0.35%) 10.42% 0.60% (0.21%) 1.76% 2.02% Tier 1 Tier 2 9.31% 8.40% Jun‐12 CPS/RPS B‐note sale DRP Retained earnings RWA growth & Sub debt Dec‐12 other amortisation Financial performance 24
Slide 25: Capital materially stronger under S&P methodology
Capital materially stronger under S&P methodology Basel III Core Tier 1 Capital* S&P RAC ratio ** 8.50% 10.40% 8.20% 9.90% 8.02% 8.00% 9.80% 7.90% 9.50% 7.75% 9.40% 9.30% BOQ WBC BEN ANZ NAB CBA BEN ANZ CBA NAB WBC Financial performance *Source: Company Information, CBA equities research **Source: S
Slide 26: Core Tier 1 materially higher
Core Tier 1 materially higher 8.50% Core Tier 1 • Capital levels are materially 8.25% higher than 18-months ago 8.00% • This has had a dilutionary effect 7.75% • Opportunity remains for capital 7.50% efficiency through T2 7.25% 7.00% 6.75% 6.50% Jun‐11 Sep‐11 Dec‐11 Mar‐12 Jun‐12 Sep‐12 Dec‐12 Finan
Slide 27: Financial performance – business segments
Rural Bank ‐ earnings contribution ($m) Third Party banking ‐ earnings contribution ($m) 0.6 (7.2) (1.9) 9.4 1.7 (0.1) (6.2) 8.0 25 25.0 84.7 24.7 80.7 1.2% 5.0% Jun‐12 Net interest income Other Income Operating expenses Credit expenses Dec‐12 Jun‐12 Net interest income Other income Operating expens
Slide 28: Homesafe: strong contribution
Strong contribution Homesafe revaluation income contribution ($m) • $3.3m of Homesafe contribution related to annual property reviews 18.5 • Portfolio outperforming the index during downturn 11.9 • YTD index changes • Melbourne +1.6% 5.6 5.4 5.0 • Sydney +2.3% 4.9 4.1 0.8 3.3 3.4 0.7 1.9 • Portfolio
Slide 29: Bad and doubtful debts ($m)
Bad and doubtful debts ($m) Wealth Rural bank Retail Delphi bank Third party & other 10.0 Bad and Doubtful Debts ($m) 0.9 11.2 32.1 8.8 $32.1m 2.5 1.9 Segment 3.7 3.7 breakdown 0.1 16.6 10.9 1.5 Jun‐12 Retail Network Third Party Bendigo Delphi Bank Rural Bank Other Dec‐12 Lending Wealth Dec‐12 Finan
Slide 30: Arrears by loan portfolio
Business loan arrears Billions Residential mortgage arrears ‐ Dec 2012 Billions 1.4% 4.0% Portfolio $ (RHS) 90d+ %$ (LHS) $7.4 Portfolio (RHS) 90d+ excluding arrangements 90d+ total $32 1.2% 3.5% $7.2 3.0% 1.0% $30 $7.0 2.5% 0.8% $6.8 2.0% $28 $6.6 0.6% 1.5% 0.4% $6.4 $26 1.0% 0.2% 0.5% $6.2 0.0% $2
Slide 31: Bad and doubtful debts ($m)
Bad and doubtful debts ($m) Total provision cover of impaired assets1 102% • Provisioning remains conservative, and well in excess of 95% 89% historical loss experience 50% • Portfolio remains well secured, with low LVR’s 263.2 262.3 244.2 248.7 BEN Majors average Regionals average Sector average 23
Slide 32: Outlook
Mike Hirst Group Managing Director Outlook 32
Slide 33: In summary: challenges and opportunities
In summary…. Challenges Opportunities • Low credit growth environment • Continued network maturity and growth • Strong competition for deposits • Funding diversity and tenor • Expense of advanced accreditation project • Further efficiency gains • Regulatory change • Banking / telco convergence • Rur
Slide 34: Questions
. Bendigoand 34
Slide 35: Appendices
. Bendigoand Appendices > | AdelaideBank 35
Slide 36: A well diversified business
A well diversified business Business Segment Business conditions Domestic bank operating four • Difficult and uncertain market conditions remain distinct brands • Unique community, customer, and partner proposition • #1 banking brand for customer and business satisfaction, and advocacy • Unique busi
Slide 37: A well diversified business
A well diversified business Business Segment Business conditions Margin lending, wealth management, •Independent provider of choice in select products superannuation • Increased investment in IT and distribution capability •Margin lending at inflection point • Growing brand and distribution Agri-bus
Slide 38: Half-on-half performance
Half-on-half performance Business segment contribution to profit 13% 12% 11% 39% 39% 37% 37% 39% 47% 11% 10% 5% Dec‐11 Jun‐12 Dec‐12 Wealth Retail Third party Rural bank Segment performance 38
Slide 39: A diversified business
A diversified business Contribution by revenue Contribution by profit 9% 11% 9% 5% 47% 21% 61% 37% Brand overview - financials Note: Figures exclude central functions 39
Slide 40: Operating expenses
Operating expenses Operating expenses ($m) 199.2 203.6 Jun‐12 Dec‐12 79.4 76 33.5 35.4 27.7 31.7 16 22.6 23.9 14.9 5.8 5.4 Salaries & staff Occupancy Information Fees & Property, plant Intangibles Other related technology commissions & equipment amortisation operating costs Financial performance 40
Slide 41: Growth – retail banking
Growth – retail banking Cumulative number of branches by channel 479 486 Community Bank® Company owned 462 442 418 391 348 322 288 295 254 273 291 232 264 209 230 194 172 186 148 125 92 58 114 74 92 35 182 186 188 189 191 191 5 21 143 150 154 128 138 139 69 71 79 CY98 CY99 CY00 CY01 CY02 CY03 CY04 C
Slide 42: 2160 ATMs, 486 branches
2160 ATM’s 486 branches 1 4 8 0 12 160 347 50 46 75 57 49 3 42 22 107 5 25 11 76 123 322 16 49 63 440 939 76 87 191 135 169 809 26 2 295 Community Bank® 9 8 Bendigo branded (3rd party) ATM’s 412 21 Geographic spread 42
Slide 43: The Community Bank model has proven robust and sustainable
The Community Bank® model has proven to be robust and sustainable Millions Community Bank® community grants ($m) • Communities have proven to be great partners $100 in banking, and together we have opened more $90 than 295 Community Bank® branches in 12 $80 years (more than 60 in the last three year
Slide 44: Systematic growth in retail
Systematic growth in retail 100 Deposits per Community Bank® branch 90 s 80 e Community Bank® branches by age h 70 CAGR 16.4% c n 60 a r b 50 0 0 f 40 '0 o $ 60,803 . 30 44,445 o 36,514 34,142 37,261 N20 28,294 26,513 30,092 20,634 10 13,487 15,447 0 <1 1 2 3 4 5 6 7 8 9 >10 <1 1 2 3 4 5 6 7 8 9 >10
Slide 45: Community Bank footings growth
Community Bank® footings growth Community Bank® loans Community Bank® deposits Community Bank® footings Community Bank® Note – Graphs shown are in financial years 45
Slide 46: Third-Party Banking
Third-Party Banking Originations per month (RHS) Portfolio size (LHS) Originations Portfolio size per month ($b) ($m) $18.0 $400 $17.0 $350 $16.0 $300 $15.0 $250 $14.0 $200 $13.0 $150 $12.0 $100 $11.0 $50 $10.0 $0 Dec‐11 Mar‐12 Jun‐12 Sep‐12 Dec‐12 Third-Party mortgage business 46
Slide 47: Margin Lending
Margin Lending ML portfolio size ($m) Margin lending portfolio vs ASX All Ords ASX All Ords 4,000 5,500 5,000 3,500 4,500 3,000 4,000 3,500 2,500 3,000 2,000 2,500 ML ($m) ASX All Ords 2,000 1,500 1,500 1,000 1,000 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Margin Lending
Slide 48: Great Southern - looking forward to a resolution
Great Southern - looking forward to a resolution Millions ($) 450 7000 Portfolio balance No. of borrowers 440 6600 430 6200 420 5800 410 5400 400 5000 390 380 4600 Dec‐10 Mar‐11 Jun‐11 Sep‐11 Dec‐11 Mar‐12 Jun‐12 Sep‐12 Dec‐12 Dec‐10 Mar‐11 Jun‐11 Sep‐11 Dec‐11 Mar‐12 Jun‐12 Sep‐12 Dec‐12 Great Sout
Slide 49: Specific provisions
Specific provisions Jun‐12 Dec‐12 40 Millions 35 30 25 20 Represented by 15 $96.2m 10 5 ‐ Consumer Retail Mortgages 3rd Party Commercial / Portfolio Funding Rural Bank Wealth Delphi Bank Mortgages Business (includes Great Southern) Portfolio Provision as % Retail 3rd Party Commercial/ Funding Rural
Slide 50: Secure and low risk loan portfolios
Secure and low risk loan portfolios Loan portfolio by security1 • 98.2% secured 0.4% 1.8% • 97.8% secured by mortgages and listed securities 4.1% • Residential lending – arrears have improved in 1HY13 24.3% – average LVR 62.2%2 • Margin lending 69.3% – average LVR 39% – 87% of portfolios held ≥ 4 st
Slide 51: Construction portfolio
Construction portfolio 2% 1% 11% 9% • $726m of loans (0.3% decrease since Jun-12) 10% • 1.5% of total loans • $122k average loan size 8% • $25m largest loan size 4% • Geographic spread • $29m impaired loans 55% • $9.7m in arrears (1.3% 90 days+) ACT NSW NT QLD SA TAS VIC WA Credit 51
Slide 52: Group exposures – total $49.4bn
Group exposures – total $49.4bn Residential Mortgages Dec-12 Jun-12 Dec-11 Owner occupied 63.6% 63.2% 63.0% Consumer Investment 36.5% 37.0% 37.0% Margin 9% Lo Doc 5.9% 6.5% 7.0% Lending 5% Retail mortgages 52.3% 51.7% 50.2% Third Party mortgages 47.7% 48.3% 49.8% Mortgages with LMI 39.5% 42.5% 42.7%
Slide 53: Queensland
Queensland QLD arrears >90 days 2.50% QLD Floods 2.00% 1.50% 1.00% 0.50% 0.00% Residential Consumer Credit 53
Slide 54: LVR trends
LVR trends LVR distribution by number of accounts % of portfolio • No material change in 50% LVR trends of new business written 40% • LMI required for high 30% 15% of portfolio LVR loans > 80% LVR 20% 10% 0% 0% ‐ 60% 60.01% ‐ 80% 80.01% ‐ 90% 91%+ Jun‐11 Dec‐11 Jun‐12 Dec‐12 Credit 54
Slide 55: MIP geographic distribution
MIP geographic distribution MIP #: 0.75% MIP Blce: $0.14m Portfolio: $221m %MIP/Port Blce: 0.06% MIP #: 41.04% MIP Blce: $21.20m Portfolio: $7,943m MIP #: 12.69% %MIP/Port Blce: 0.27% MIP Blce: $12.68m Portfolio: $5,193m %MIP/Port Blce: 0.24% MIP #: 14.93% MIP Blce: $18.11m Portfolio: $4,608m %MIP/P
Slide 56: Commercial – industry split
Commercial – industry split 1% 1% 3% 3% 0% Accom & food services Admin & support services 4% Agri, forestry & fishing Arts & Rec services 36% Construction Education & training 26% Elec, gas, water & waste Finance & insurance Health Care & Social assist Info media & telecom Manufacturing Mining Other
Slide 57: Loans under management
Loans under management Geographic split Loan sectors 10% 4% 3% 23% 6% 29% 23% 32% 18% 14% 6% 3% 13% 16% NSW SA/NT QLD TAS VIC WA Dairy Hort & vit Grain Grain, sheep & beef Sheep & beef Sheep Beef Other Rural Bank – loan diversity 57
Slide 58: Contact
Analysts Media Will Rayner Silvana Donato Head of Capital and Investor Relations Media and Communications Manager Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 8 8220 7764 Tel: +61 8 8220 7784 Mob: +61 437 794 366 Mob: +61 402 110 445 Email: will.rayner@bendigoadelaide
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