Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — 1H23 Earnings Presentation
60 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 20, 2023
Slide 1: Results Presentation
Results rsonal use only Presentation For the half year ended 31 December 2022 Bendigo and Adelaide Bank Limited ABN 11 068 049 178
Slide 2: Contents
Contents 1 Overview Marnie Baker Page 3 rsonal use only 2 1H23 Financials Andrew Morgan Page 15 3 Summary Marnie Baker Page 29 4 Additional information Page 33 2
Slide 3: Overview
rsonal use only Overview Marnie Baker Managing Director 3
Slide 4: Strong result underpinned by disciplined execution
Overview Strong result underpinned by disciplined execution rsonal use only • Carefully balancing volumes and margin trade-offs • Strong balance sheet and credit quality • Continued improvement in CTI ratio • Transformation program delivering on key milestones • Delivering on returns, execution and
Slide 5: Shaping the future of banking
Shaping the future of banking Our strategy VISION: Australia’s bank of choice rsonal use only 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 Framework Operating Mo
Slide 6: Financial and operating performance: key highlights
Financial and operating performance Key highlights rsonal use only Cash earnings Net Interest Margin Interim dividend up 22.9% up 19bps up 9.4% to 29c to $294.7m to 1.88% fully franked Customer numbers NPS of 23.8 CTI improved increased 500bps to +28.2 above 5.0% industry1 54.6% Since June 2022 1. R
Slide 7: 1H23 divisional results
1H23 divisional results Key segments delivering for customers in highly competitive environment rsonal use only Cash earnings ($m) Consumer Business & Agribusiness • 44.8% increase in cash • 12.5% increase in cash earnings driven by NIM earnings driven by NIM increase of 75bps to increase of 34bps t
Slide 8: Transforming our business
Transforming our business Continuing focus delivering results rsonal use only 1. Returns 2. Execution 3. Business Sustainability 8
Slide 9: Transforming our business: Returns
Transforming our business 1. Returns Return on equity (%) rsonal use only • Selectively participated in lending 8.11 8.79 7.87 and deposit markets through 7.47 7.34 disciplined volume and margin management • Greater focus on capital usage supported by new Profit After 1H21 2H21 1H22 2H22 1H23 Capita
Slide 10: Transforming our business: Execution
Transforming our business 2. Execution FY19 FY22 1H23 FY24 rsonal use only 1H23 deliverables: # brands1 13 10 10 3 • Full integration of Delphi Bank # core banking systems 8 7 7 1 • Material progress of next tranche of core # IT applications 650 491 467 325 banking integrations % applications in the
Slide 11: Transforming our business: Execution
Transforming our business 2. Execution 3 4 5 • Most Trusted Bank and #1 rated banking app with NPS of 63 rsonal use only • 613,000+ Upsiders - ~2.5% MoM growth last 18 months 8.9% • • $1.3bn+ deposits at below-peer interest cost Up Home portfolio of $38m from beta launch in July 2022 of home loan •
Slide 12: Transforming our business: Execution
Transforming our business 2. Execution Bendigo and Adelaide Bank – # of customers by age Dec 2012 v Nov 2022 rsonal use only • Our strategy to acquire and 60,000 retain younger customers is delivering 50,000 • Average BEN customer age Home lending stage has fallen from 46 to 43 in a 40,000 decade 30
Slide 13: Transforming our business: Business Sustainability
Transforming our business 3. Business Sustainability Long-term focus for all stakeholders Recent outcomes rsonal use only Customers: NPS increase of 1.9 vs industry • Multi-channel experience continues to broaden, offering greater customer choice Stable level in retention of fixed rate • Proacti
Slide 14: Progression in ESG
Progression in ESG Building our business sustainability Key deliverables 2H23 priorities rsonal use only Environment • Continuing to support our • Launch of BENZero – our pathway to net customers in challenging times zero by 2040, inclusive of all operational and financed emissions • Development of
Slide 15: 1H23 financials
rsonal use only 1H23 financials Andrew Morgan Chief Financial Officer 15
Slide 16: A strong result, delivering on focus areas
A strong result, delivering on focus areas Strong performance across all line items rsonal use only Focus areas What we have delivered Results achieved Managing Strong revenue • Selectively competed in key markets – volumes and growth home lending, business lending and deposits margins • Broadened f
Slide 17: 1H23 result
1H23 result Improvement across all key metrics Cash earnings ($m) NIM CTI Cash ROE rsonal use only +19bps +22.9% +145bps 1.88% 59.3% 59.6% +-500bps 294.7 1.80% 8.79% 260.7 1.69% 239.7 54.6% 8.11% 7.34% 1H22 2H22 1H23 1H22 2H22 1H23 1H22 2H22 1H23 1H22 2H22 1H23 Customer deposits Cash EPS (cents) DPS
Slide 18: Financial and operating performance
Financial and operating performance Strong performance across all line items 1H23 1H23 1H23 ($m) v 2H22 v 1H22 rsonal use only Total income 958.2 14.5% 9.7% Key points Operating expenses 523.2 4.9% 1.1% • Strong income result underpinned by disciplined volume and Underlying profit 435.0 28.7% 22.3%
Slide 19: Cash earnings vs Statutory NPAT
Cash earnings vs Statutory NPAT 1H23 adjustments 1H23 1H23 v 1H23 v rsonal use only ($m) 2H22 1H22 Cash earnings after tax 294.7 22.9% 13.0% Non-cash items: - Homesafe (net) (35.7) Reflects downwards revaluation of property portfolio during half - Other items (10.0) Restructuring costs and amortisat
Slide 20: Total income
Total income Benefit of strong NIM growth in rising rate environment 2 Average growth: • Residential lending: +2.8% 1H23 ($m) rsonal use only • Business lending: +0.7% • Customer deposit growth: +4.5% NIM: +19bps +14.5% 131.3 965.7 958.2 (7.5) 958.2 (2.1) 836.5 836.5 1 2H22 Net interest income Other
Slide 21: Residential lending
Residential lending Disciplined growth, balancing volume and margin Settlements by channel ($b) vs BENExpress & Up (% of total settlements) rsonal use only 1.40% 14,000.00m 1.20% • Growing at 1.0x system on rolling 12 month 12,000.00m 1.20% 9.9 basis 10,000.00m 8.6 9.0 1.00% 3.4 0.80% 8,000.00m 3.7
Slide 22: Net interest margin
Net interest margin Strong result reflecting disciplined approach to volume / margin trade offs Variable and fixed Post-revenue share rsonal use only residential loan exit NIM of 2.03% competitive pressure 0.25% +19bps 0.36% 0.00% (0.04%) 2.04% (0.16%) 1.88% 1.69% (0.22%) Increase driven by 2.04% 1.
Slide 23: Operating expenses
Operating expenses Well managed in inflationary environment 1H23 ($m) Increased expensing of BAU costs well rsonal use only investment spend vs 2H22 managed, up 1.1% +4.9% $13.9 $5.5 $523.2 $5.2 $503.8 $498.6 2H22 BAU Ferocia Investment spend 1H23 Key considerations for FY23 and medium term: FY23 Me
Slide 24: Credit quality
Credit quality Continued improvement in credit metrics Credit expense ($m) Gross impaired loans ($m) Loan arrears rsonal use only Specific impairment Collective impairment Residential 90d+ Business 90d+ Agribusiness 90d+ Bad debts written off Recoveries 2.79% % of gross loans 1.5 0.8 222.2 208.8 2.1
Slide 25: Credit quality: home loan portfolio resilient
Credit quality Home loan portfolio remains resilient Current LVR of no buffer and <1 Composition of no buffer % of exposures by payments in advance month ahead (% EAD) and <1 month ahead (including offsets)1 (% of EAD) rsonal use only 39% 34 34 33 41 27% 17 17 16 19% 22 13 13 14 11 11 11 10 9 10 12%
Slide 26: Provisioning
Provisioning Small top up in collective provisions appropriate for the environment Total provisions ($m) Collective provisions ($m) rsonal use only Sector overlays reflect the risks associated with: • Potential residential mortgage stress resulting from fixed to variable conversions • Significant ap
Slide 27: Funding and liquidity
Funding and liquidity Strong and well diversified funding sources Funding profile ($b) • Household deposit / loan ratio remains well above industry rsonal use only levels 21.6 23.4 23.2 • Net $10bn funding contributed from Community Bank partners 18.4 18.9 21.0 73.9% • Inaugural Covered Bond issued
Slide 28: Capital and dividends
Capital and dividends Capital position strengthened; dividend increased CET1 movement - 6 months (%)1 rsonal use only 0.63 +45bps 0.17 0.02 0.03 10.13 (0.30) (0.10) 9.85 9.68 Dec-21 Jun-22 Earnings Dividend (net of Deferred tax assets Capitalised Other RWA Dec-22 DRP) expenses • Result reflects heig
Slide 29: Summary
rsonal use only Summary Marnie Baker Managing Director 29
Slide 30: 2H23 deliverables
2H23 deliverables 1. Returns 2. Execution 3. Business Sustainability rsonal use only • Grow at or better than • Further growth of digital • Continued focus on system whilst generating mortgages market-leading customer appropriate returns on service equity • Integrate ANZ margin lending business • Fu
Slide 31: Outlook
Outlook Well positioned for the future rsonal use only • Leading levels of customer advocacy and trust • Continuing to support customers through uncertainty • Multi-channel strategy supports our profitable growth path • High quality lending portfolio well positioned for rising rates • Strong capital
Slide 32: Q&A
Q&A rsonal use only Marnie Baker Managing Director Andrew Morgan Chief Financial Officer 32
Slide 33: Additional Information
rsonal use only Additional Information 33
Slide 34: Key performance indicators
Key performance indicators Consistent performance Net promoter Customer 2.30m 3 score rsonal use only 28.0 24.5 23.8 numbers 2.19m 2.10m -0.5 -1.8 -4.4 Dec-21 Jun-22 Dec-22 Dec-21 Jun-22 Dec-22 73.7% 73.2% Market 73.0% MFI business 60 1 4 45 share 2.36% 2.37% 2.28% NPS 10 41 41 -10 -9 -8 -40 Dec-21
Slide 35: Consumer Banking
Consumer Banking Multi-channel strategy delivering benefits Volume growth ($m)1 • Net interest income increase driven by strong NIM outcome rsonal use only +0.4% • Increase in operating expenses driven by higher depreciation +4.3% & amortisation, staff costs, fee & commissions, occupancy 58.7 58.9 a
Slide 36: Business and Agribusiness Banking
Business and Agribusiness Banking Positioned for growth Volume growth ($m)1 • Net interest income increase driven by higher NIM, despite declining asset rsonal use only balances -5.3% -3.0% • Other income decrease driven by lower fees and commissions from lower settlements occurring and lower manage
Slide 37: Happy Upsider Last 6 months
Happy Upsider Last 6 months “ I absolutely loved the 1000 savings challenge. It has made me a better saver, and I'm excited to save even more money. • Up Home beta launched (refinance only), early validation of offering • Continued innovation of core offering including: Maybuy, Locked Savers, Enhanc
Slide 38: Tic:Toc
Tic:Toc Leading platform technology company and digital lender Portfolio balance ($b) Tic:Toc continues to create value for BEN rsonal use only 3.50 Platform drives significant and high-quality home loan volumes 3.00 • BEN’s digital offering, BEN Express and UP Home, powered by Tic:Toc 2.50 • 143% i
Slide 39: Homesafe
Homesafe Homesafe wealth release • Reduced Homesafe income reflects lower level of completed Homesafe portfolio & funding balance ($m) rsonal use only contracts 1 Dec-22 split: 920.3 • Proceeds on contracts completed during 1H23 exceeded carrying Melbourne – 61% 897.4 value by $3.6m Sydney – 39% • A
Slide 40: Residential lending
Residential lending Residential metrics1,2,3 Flow Portfolio 1H23 2H22 Dec-22 Jun-22 Dec-21 rsonal use only Flow / Portfolio amount $6.7b $9.9b $56.1b $56.1b $52.5b Retail lending 41% 36% 47% 48% 50% Third Party Banking lending 59% 64% 53% 52% 50% Lo Doc 0.03% 0.01% 0.4% 0.4% 0.5% Owner occupied 76%
Slide 41: Residential lending: Retail and Third Party Banking portfolios
Residential lending Retail and Third Party Banking portfolios Residential balance by state Retail - portfolio ($b)1 rsonal use only 26.8 26.6 26.2 25.6 24.5 15% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 8% 9% Third Party Banking - portfolio ($b)1 27% 29.2 29.5 26.3 24.6 22.4 39% 2% Dec-20 Jun-21 Dec-21 Jun
Slide 42: Business lending
Business lending Portfolio and state splits Business balance by state Business portfolio ($b)1 rsonal use only 9.7 9.8 9.7 9.4 9.1 8.0 8.0 7.9 7.8 7.4 14% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 5% 8% Portfolio Commitment SME segment ($b)2 6.1 6.2 6.0 13% 5.8 5.3 58% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 2%
Slide 43: Agribusiness lending
Agribusiness lending Portfolio splits Agribusiness balance by state Agri exposure by industry rsonal use only 4.7% 5.9% Grain/Sheep/Beef 6.7% Sheep/Beef 33.5% Beef 8.0% Grain Sheep 12.0% Dairy 9% 16.3% Other 16% 19% 12.9% Hort./Vit. Agribusiness portfolio ($) 20% 7.5 7.6 7.7 7.7 7.8 6.2 6.3 6.0 5.8
Slide 44: Gross loans balance
Gross loans balance By security Dec-22 Jun-22 Change Dec-21 Change $m $m $m % $m $m % Residential 61,223.1 61,446.5 (223.4) (0.4) 57,860.4 3,362.7 5.8 Business rsonal use only Accommodation and food services 175.4 210.8 (35.4) (16.8) 252.8 (77.4) (30.6) Administrative and support services 23.5 28.4
Slide 45: Net interest margin: historical trends
Net interest margin Historical trends NIM monthly movement (%)1 2.10 Dec exit NIM: 3.5 rsonal use only 2.03% Updated 19/1/23 3 2.00 2.5 1.90 2 1.80 1.5 1 1.70 0.5 1.60 0 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 Dec-21 Jun-22 Dec-22 Monthly NIM (LHS) RBA cash rate target (RHS) Historical NIM
Slide 46: Net interest margin: sensitivity to rising rates
Net interest margin Sensitivity to rising rate environment – capital and deposit hedges rsonal use only Average hedged yield on capital and deposit replicating portfolio • 48bps Group NIM benefit expected over medium term from impact of higher interest rates on capital and deposit replicating yields
Slide 47: Community Bank: how the revenue share works
Community Bank How the revenue share works 50/50 rsonal use only Community Bank footings Interest rate FTP rate1 Margin income split between BEN and Community Banks Community Bank revenue: Community Bank Operating Community Operating 50% costs Bank profit costs Margin income share plus a Including s
Slide 48: Community Bank: profit with purpose model
Community Bank ‘Profit with purpose’ model Community Bank footings ($b)2 Purpose lead vision: rsonal use only Community Bank branches are a significant source of customer deposits for the broader Group, increasing Over $292m in community contributions 1 • ~$900m in 1H23. 30.4 31.3 • 302 Community Ba
Slide 49: Customer deposits
Customer deposits Split and funding costs Customer deposits - split ($b) Customer deposit – funding costs rsonal use only 65.7 7.6 0.3% '> 0.01% - <= 0.05%' Term 2.2% 25.4% 72.1% '> 0.05% - <= 0.25%' '> 0.25% - <= 1.50%' 21.0 '> 1.5%' '<= 0.01%' 8.6% '> 0.01% - <= 0.05%' Savings 2.1% 39.6% 49.5% '>
Slide 50: Investment spend
Investment spend Continuing to invest for long-term simplification benefits Investment spend ($m)1 % Opex rsonal use only Top 5 projects by spend: • Up Digital Bank 52% 48% 30% 44% • Foundational Lending (Foundational Technology) 111.4 • Core Banking – Product & Pricing (Foundational Technology) 96.
Slide 51: Arrears
Arrears Remain benign Residential loan arrears Business loan arrears 4.0% rsonal use only 0.8% 3.0% 2.0% 0.4% 1.0% 0.0% 0.0% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Residential 90d+ Business 90d+ Consumer loan arrears Agribusiness loan arrears 1.60% 3.0% 1.20% 2.0% 0.80
Slide 52: Specific provisions and impaired assets
Specific provisions and impaired assets Downward trend has continued 40.0 Specific provisions breakdown ($m) Specific provision rsonal use only balance ($m) 71.6 20.0 58.1 46.5 Represented by - Jun-22 Jun-22 Jun-22 Jun-22 Jun-22 Jun-22 Dec-21 Dec-22 Dec-21 Dec-22 Dec-21 Dec-22 Dec-21 Dec-22 Dec-21 D
Slide 53: Collective provisions and scenario outcomes
Collective provisions and scenario outcomes Remain cautious of credit environment Total collective provision movements ($m) 5.5 rsonal use only 2.2 1.1 232.3 229.4 (5.9) 225.7 Dec-21 Economic forecast and Additional overlays Jun-22 Economic forecast and Additional overlays Dec-22 scenario weights sc
Slide 54: Collective provisions and scenario outcomes: model inputs
Collective provisions and scenario outcomes Model inputs Unemployment (%) Gross Domestic Product (%) rsonal use only 10.00% 5.00% 8.00% 2.50% 6.00% 0.00% 4.00% -2.50% 2.00% Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 -5.00% Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Mild improvement Base scenario Mild
Slide 55: LCR and NSFR
LCR and NSFR Improvement in ratio’s through 1H23 Net Stable Funding Ratio ($b) 135.00 NSFR half year (%) rsonal use only 130% 133.00 2.9 131.00 1.6 129.00 (1.7) 1.4 129.9 11.3 129.2 (0.3) 127.00 Wholesale Funding & Other 130.10 (3.2) 15.7 Customer & SME Deposits125.00 128.90 128.90 128.20 Capital 12
Slide 56: Capital
Capital In summary Credit risk weighted assets ($b) Dec-22 Jun-22 Dec-21 Jun-21 rsonal use only (%) (%) (%) (%) 37.7 36.8 Common Equity Tier 1 10.13% 9.68% 9.85% 9.57% 36.4 36.3 35.3 Additional Tier 1 1.99% 1.95% 2.04% 2.04% Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Total Tier 1 12.12% 11.63% 11.89% 11.61%
Slide 57: Dividend
Dividend Stable dividend returns for shareholders Dividends (cents per share) rsonal use only Payout ratio1 60.1% 56.4% 62.1% 55.4% • FY23 interim dividend up 9.4% on 29.0 last three halves • Dividend levels continue to be 26.5 26.5 26.5 managed across the year, not the half 2H21 1H22 2H22 1H23 1. D
Slide 58: Progression in ESG: in detail
Progression in ESG In detail Key deliverables 2H23 priorities rsonal use only Environment • Launch of BENZero – our pathway to net zero by 2040, inclusive of all operational and financed emissions • Continuing to support our customers in • On track to meet FY23 operational emissions challenging time
Slide 59: 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 60: Analysts and Media
rsonal use only Analysts Media Alex Hartley James Frost Acting Head of Investor Relations Head of Public Relations M: +61 478 435 218 M: +61 419 867 219 E: alex.hartley@bendigoadelaide.com.au E: james.frost@bendigoadelaide.com.au 60
Bendigo and Adelaide Bank — 1H23 Earnings Presentation on 6ix