Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2017 Earnings Presentation
33 slides from Bank Of Queensland's earnings presentation, Mar 30, 2017
Slide 1: BOQ Half-Year Results 2017
B0Q 30 MARCH 2017 FOR THE HALF-YEAR ENDED 28 FEBRUARY 2017 Vir posse to LOVE A BANK. i Bank of Queensiand Limited ABN 32 003656 740, AFSL No 244816.
Slide 2: Welcome and presentation agenda
For personal use only Ladies and gentlemen, welcome to BOQ’s half year financial result for 2017. My name is Tanny Mangos and I am the General Manager Corporate Affairs and Investor Relations. Thank you for joining us today , in the room, on the phones and also by webcast. For today’s presentation,
Slide 3: Overview of the result
For personal use only Thank you Tanny and good morning. Before I begin, our thoughts are with our fellow Queenslanders who have been affected by Cyclone Debbie. Our team nationally and particularly in our home state of Queensland is working to support our customers during this difficult time. I’ll n
Slide 4: Expenses, capital and funding position
In a low revenue environment we have remained focused on tightly managing our expenses. We are on track to deliver the 1 per cent underlying expense growth target announced at our full year 2016 results. With a number of efficiency initiatives underway across the group, we are stepping up this focus
Slide 5: Key result: cash earnings and dividend
For personal use only I will now run through the key elements of this result on slide 4. Cash earnings of 175 million dollars was down 2 per cent on the prior corresponding period, with a 2 per cent decrease in headline expenses offset by 4 per cent decline in revenue. Cash earnings per share of 45.
Slide 6: Drivers of the result
For personal use only Let’s look at some of the drivers of the result on slide 5. In the first half, our loan book decreased by 168 million dollars. Our disciplined approach to pricing and actions taken to remain within the APRA investor lending cap contributed to the contraction of the loan book. I
Slide 7: Niche strategy
For personal use only Our niche strategy on slide 6 has continued to deliver positive results. BOQ Specialist remains an outstanding performer. In this half, 1,300 new clients were added while the commercial and housing loan books grew by 8 per cent and 27 per cent respectively on an annualised basi
Slide 8: Asset quality
For personal use only Turning to Asset Quality on slide 7. We continue to see further improvement in our asset quality metrics. This is in part due to some of the benign economic conditions and our focus in ensuring we have the settings to withstand the cycles. BOQ has maintained its process of vali
Slide 9: Expenses
For personal use only And now to expenses on slide 8. We are on track to deliver on the guidance we provided at our full year 2016 results, for 1 per cent underlying expense growth in FY17. Headline expenses were down 2 per cent on the prior corresponding period, and only up 1 per cent on an underly
Slide 10: Balance sheet and capital
For personal use only Turning to the balance sheet on slide 9. BOQ remains very well capitalised on all measures. Our CET1 ratio strengthened by a further 29 basis points to 9.29 per cent. When combined with our peer‐leading ratings capital position and higher mortgage risk weighting requirements, w
Slide 11: Progress against strategic priorities
For personal use only Let’s look at the progress we have made against our strategic priorities on slide 10. We have successfully launched the Virgin Money Reward Me home loan and significantly increased the number of brokers accredited to distribute this product. We have continued to optimise the br
Slide 12: Anthony Rose, Chief Financial Officer
ANTHONY E Chief Financial Officer Vir posse to LOVE A BANK Bank of Queensiand Limited ABN 32 003656 740, AFSL No 244816. 11
Slide 13: Profit and loss overview
For personal use only Thanks Jon. I’ll start with an overview of the P&L, then go into detail on each of the line items and drivers relevant to each. The bottom line result has been driven by a lower revenue outcome during the period. Net Interest Income was down 3 per cent on the prior correspondin
Slide 14: Loan portfolio
For personal use only Turning to the loan portfolio at an aggregate level and we did see a contraction in the half, primarily due to the housing loan book. In this half, we prioritised margin and credit quality. This has been an intensely competitive period not just in lending but also in retail dep
Slide 15: Housing book
For personal use only Focusing on the housing book – and I am now referring to slide 14. BOQ Specialist has continued to generate good mortgage growth and we have seen a stronger contribution from Virgin Money mortgages since the offering was launched in May of last year. BOQ Specialist delivered gr
Slide 16: Housing book: broker channel and serviceability
regulator’s 10 per cent cap on investment lending growth. This did create issues for us in the broker market and our return to growth has taken longer than we would have liked for a number of reasons. Firstly, there has been a lot of regulatory focus on serviceability calculations and ensuring For p
Slide 17: Commercial book
For personal use only Moving to the commercial book on slide 15. BOQ Specialist and BOQ Finance have contributed solid growth relative to the markets that they operate in. BOQ Specialist grew by 8 per cent annualised over the half and we would expect it to grow faster in the second half consistent w
Slide 18: Funding
For personal use only Turning to funding on slide 16, and we have taken the opportunity to improve the mix of the book given the lower asset growth we’ve seen during the half. As many of you would be aware, we have had the highest dependency on term deposits compared to our peers. When I go through
Slide 19: Net interest margin drivers
For personal use only Looking now at net interest margin, and on slide 17 we’ve tried to provide some insight into some of the external factors that significantly impact this metric. The two charts at the top are an update to the charts we provided last half, which demonstrate the reduced return tha
Slide 20: Net interest margin walk
For personal use only Getting into the specifics around our margin outcome for the half – and I’m now on slide 18. Starting with the asset side of the balance sheet, and there was a net 2 basis point benefit in the half from asset pricing and mix. We felt the usual headwind from the front to back bo
Slide 21: Net interest margin outlook
Thinking about the outlook, the one constant at the moment is the front to back book pricing dynamic, which is currently driving 3 to 4 basis points of NIM degradation each half. We expect this dynamic to continue, however recent industry pricing changes point to a potential for the gap to narrow. W
Slide 22: Non interest income
For personal use only Turning now to non interest income on slide 19. We’ve said in prior periods that this is a challenging line for us and we need to pedal hard to try and keep it flat. That has been particularly difficult this half. Banking fees in general continue to reduce as customer preferenc
Slide 23: Expenses
For personal use only Looking at expenses on slide 20, we have delivered a good result which is in line with the guidance we provided last year. The increase in amortisation and increased impact form the Virgin Money mortgage roll‐out have been absorbed as we said they would. We’ve been successful i
Slide 24: Asset quality and impairment
For personal use only Moving to asset quality and we have seen further improvement across most metrics this half. Loan impairment expenses has reduced to 13 basis points on the overall portfolio. Reduction in impairment expense was evident in the Commercial and BOQ Finance portfolios. There was a 3
Slide 25: Arrears
For personal use only The arrears charts on slide 22 also provide a picture of good portfolio health, with the normal seasonal uptick still well below the levels seen this time last year in the Commercial and BOQ Finance books. The Housing portfolio has been fairly flat, with no issues emerging in t
Slide 26: Capital
For personal use only Moving to capital on slide 23 and as Jon mentioned, we remain well capitalised on any measure. S&P’s risk adjusted capital measure is becoming an increasingly relevant metric given the S&P’s negative outlook for the sector, and the impact of the relevant capital band in determi
Slide 27: Advanced accreditation
For personal use only While the benefits and ultimate pathway to achieving advanced accreditation remain unclear, we have continued to make good progress towards being a better‐run bank. We remain committed to improving our risk management capability and stand ready to make a decision on whether or
Slide 28: Jon Sutton, Managing Director & CEO
JON SUTTON Managing Director & CEO Vir posse to LOVE A BANK Bank of Queensiand Limited ABN 32 003656 740, AFSL No 244816. 25
Slide 29: External environment and conduct reform
For personal use only Thanks Anthony. I’ll start by looking at the external environment, before moving to the outlook for the rest of the year. The industry is facing increased scrutiny from community, politicians and regulators. People expect more from their banks, particularly in terms of trust. A
Slide 30: Economic conditions by state
It will take time for the industry to rebuild trust. Even though BOQ is in a strong position, there is always more to do. Looking at the economy more broadly. NSW and Victoria continue to be the strongest state economies. For personal use only There have been signs of some improvement in the WA econ
Slide 31: Priorities
For personal use only Turning now to our priorities on slide 27. We are continuing to strive towards our vision to become Australia’s most loved bank. Our focus on niche segments that value a more intimate customer relationship remains unchanged. In the second half we will continue to expand the dis
Slide 32: Summary and outlook
For personal use only In summary, we have delivered a credible result in a difficult revenue environment. We expect revenue growth to resume in the second half with an improved outlook for net interest margin. We have seen a 30 per cent improvement in mortgage application volumes in recent weeks, wh
Slide 33: Disclaimer
Disclaimer This is a presentation of general background information about Bank of Queensland Limited’s (BOQ’s) activities at the date of this document. It is in summary form and does not purport to be complete. It should be read in conjunction with the BOQ’s other periodic and continuous disclosure