Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2018 Earnings Presentation
55 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 13, 2018
Slide 1: For personal use only
For personal use only
Slide 2: Business summary, financial performance, looking forward, appendices
Business summary Financial performance Looking forward Appendices For personal use only
Slide 3: Marnie Baker, Managing Director
Marnie Baker Managing Director
Slide 4: Operating environment
Operating environment Importance of trust Subdued banking sector Advancements in technology Q. Uncertainty and disruption EB Changing customer preferences > | BendigoandAdelaideBank ,
Slide 5: A proven business model
A proven business model Customer focused culture CS _ustomer fou Most trusted 7“z Strength in retail funding it History of, and continued commitment to innovation > | BendigoandAdelaideBank
Slide 6: Business performance
Business performance Cash earnings Final dividend <e $445. im | 35 tratket Investment in capability NIA Alignment of effort @ technology to customer © staff _ ZN strategy Strong . fT) balanze ‘Active management sheet @ margin @ volume @ costs > | BendigoandAdelaideBank Note — All movements are for F
Slide 7: For personal use only
For personal use only
Slide 8: Financial performance
Financial performance Statutory earnings ($m) Cash earnings per share (¢) For personal use only Cash earnings ($m) +1.1% +6.4% +4.1% 434.5 445.1 92.1 429.6 418.3 415.6 401.4 88.5 87.3 FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 1 Return on equity (%) Return on tangible equity1 (%) Cost to income ra
Slide 9: Balance sheet and capital
Balance sheet and capital Total gross loans ($b) Retail deposit funding (%) For personal use only +1.4% 61.8 79.6 80.2 80.2 60.9 57.5 Jun-16 Jun-17 Jun-18 Jun-16 Jun-17 Jun-18 Common Equity Tier 1 (%) Total capital (%) +35 bps +39 bps 8.62 12.85 8.27 8.09 12.46 12.21 Jun-16 Jun-17 Jun-18 Jun-16 Jun-
Slide 10: 2H18 growth outcomes
2H18 growth outcomes Total lending growth Housing loan growth For personal use only Major 5.5% Major 5.8% System 4.8% System 5.1% Regional 4.5% Major 4.8% Major 4.3% BEN 4.7% BEN 4.2% Major 3.4% Major 3.8% Regional 3.0% Regional 3.6% Regional 2.9% Major 2.3% Major 2.6% Total deposit growth Business
Slide 11: Residential mortgage growth
Residential mortgage growth 1 Retail - settlements breakdown Third Party - settlements breakdown2 $2000m $2000m For personal use only $1500m $1500m $1000m $1000m $500m $500m $m $m OO PI OO IO INV PI INV IO OO PI OO IO INV PI INV IO 2H16 1H17 2H17 1H18 2H18 2H16 1H17 2H17 1H18 2H18 Investor credit gr
Slide 12: Cash earnings growth
Cash earnings growth FY18 FY17 FY18 v 2H18 v ($m) ($m) FY17 2H17 For personal use only Cash earnings up 6.4% Strong annual margin performance +14bps Net interest income $1,323.6 $1,232.0 +7.4% +4.5% Significantly lower trading book income 2H18 cost increase as expected Other income $281.2 $3
Slide 13: Net interest margin
Net interest margin Historical NIM +14bps 2.36 2.37 2.36 2.26 2.22 2.17 For personal use only 0.38 0.39 0.38 Active management of margin / volume balance 0.35 0.37 0.36 for both lending and deposits June 2018 exit margin of 2.35% 1.89 1.98 1.98 1.86 1.98 1.82 Mortgage repricing in late July 20
Slide 14: Other income
Other income FY18 FY17 FY18 v 2H18 v Lower ATM and transaction fees ($m) ($m) FY17 1H18 For personal use only Commission – 2H18 stronger with flows into superannuation and managed funds Fee income $167.9 $172.2 (2.5%) (1.8%) Trading book income lower given the stable interest rate environment
Slide 15: Cost to income
Cost to income Cost to income ratio (%) 50bp improvement over FY18 in challenging environment For personal use only Increased cost of compliance and regulation 58.1 Staff costs up 3.5% for FY18 due to annual salary increases -50bps and reduction in project capitalisation Software amortisatio
Slide 16: Bad and doubtful debts
Bad and doubtful debts BDD charge 11bps of gross loans, 10bps excluding Great Bad and doubtful debts composition ($m) Southern – in line with four year average 46.3 For personal use only 5.3 New impaired loans in 2H18 are being actively managed and 0.7 6.2 provisions are based on recent valuatio
Slide 17: Arrears remain benign
Arrears remain benign Business Loan Arrears Residential Loan Arrears For personal use only 1.6% 3.0% 1.2% 2.0% 0.8% 1.0% 0.4% 0.0% 0.0% Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Res 90d+ Bus 90d+ 1 Consumer Loan Arrears Home Loans 90+ days past due - by state 3.0% 2.0% 1.
Slide 18: Business segment performance (cash earnings)
Business segment performance (cash earnings) All lending markets remain highly competitive Local Connection ($m) For personal use only Significant margin improvement in Local and Partner 57.5 (1.1) Connection businesses (13.5) (16.9) (6.0) Extreme price competition in agribusiness lending 213.
Slide 19: Continued CET1 strength
Continued CET1 strength Historical CET1 35bp increase in CET1 since June 2017 - well positioned For personal use only 8.61 8.62 to meet unquestionably strong CET1 requirement Organic capital growth reflects strong profitability, stable 8.27 balance sheet and move to lower risk exposures 8.09 C
Slide 20: Industry leading funding position
Industry leading funding position Funding mix continues to be a strength providing flexibility to fund asset growth and manage margin Historical funding mix For personal use only Retail call deposit portfolio continues to increase with 6.3% 6.6% 5.7% customer demand for revised product range 23.
Slide 21: AASB impact on collective provision
AASB 9 AASB 9 Impact on Collective Provision and General Reserve For personal use only • $112.8m increase in collective provision due to expected loss model rather than incurred loss for Credit Losses model $m 175 • Increase taken through retained earnings as at 1 July 2018 161.0 150 • Individually
Slide 22: Marnie Baker, Managing Director
Marnie Baker Managing Director
Slide 23: Consistently ranked top for customer satisfaction
Consistently ranked TOP 2 for customer satisfaction‘ \v) For more than a decade {vi Customers are most likely to recommend Bendigo Bank and 3rd most KPMG 2018 Forrester’s Australian @ trusted brand Customer Experience Customer Experience Excellence Report® Index® . “1 in Australia Ranked #3 in the R
Slide 24: Environment is right for us to succeed
Environment is right for us to succeed To feed into the prosperity Australia’s of our customers and their bank communities, not off it. of choice ... the same today as the day we were founded. CUSTOMERS - STAFF + PARTNERS « INVESTORS > | BendigoandAdelaideBank ,,
Slide 25: We have the team to deliver
+ We have the team to deliver din iy A) ain Marnie Baker Richard Fennell Bruce Spelrs Alexandra Gartmann Andrew Twalts anaging Director Executive — E ~ Agribusiness and Executive eS sumer Banking Executive - Busi Louise Tebbutt Travis Crouch Taso Corolls Stella Thredgold Robert Musgrove hief People
Slide 26: Key focus
Key focus cS Australian’s choose to bank For personal us >> | BendigoandAdelaideBank ,,
Slide 27: Questions
Questions Australia’s bank of choice
Slide 28: For personal use only
For personal use only
Slide 29: Customer connected
Customer connected Bendigo Bank Mobile and Business Development Managers dos ‘Agri lending Relationship Managers 120+ Mortgage brokers, 5000+ eBanking customers 630,000+ POINTS OF PRESENCE @ Alliance Bank™ 22 @ Community Bank? Branch 321 @ company-owned Branch 173 . @ Rural Bank 217 é & © Delphi Ban
Slide 30: Customer focus
Customer focus Customers can provide their feedback to the team in a number of different ways: Our website Social pray a] Media channels a e.g. Branch vy Customer miVoice Secure Surveys our insights email community *K a) {a} Customer NPS 26.31 1. Roy Morgan (3 month rolling average) Compliments A 28
Slide 31: Workforce and staff metrics
We believe that individual, positive actions create a workforce that is motivated to work, is proud of our company, understand the needs of our customers, and genuinely care about making a difference in the community. - © 9.3% 19.4 Staff with formal flexible work options tralning hours per employee
Slide 32: Executive appointments
Executive appointments Louise Tebbutt Chief People Officer Louise Tebbutt has been appointed to the role of Chief People Officer, forming part of the Executive Group. Louise is a lifelong human resources practioner who has worked across and been responsible for all aspects of human resource function
Slide 33: Future proofing technology
Future proofing technology For personal use only • Improving customer choice and convenience • Creating safe and secure online presence • Ensuring we remain relevant • Implemented agile way of working • Focusing on simplification and innovation • Continuing investment in cloud • Maintaining a strong
Slide 34: Tic:Toc – The world's first instant home loan
Tic:Toc – The world’s first instant home loan TM Application Pipeline ($m) $600 For personal use only $500 $400 $300 $200 Significant growth since July 2017 launch: $100 • $1.36b value of submitted applications $ • $170m loan portfolio Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 • Successfully
Slide 35: Up – Super powered banking
Up – Super powered banking For personal use only • Australia’s first fully licenced and all-in-app mobile banking platform • Testing began in Oct 2017 — 99.962% up-time • Public beta live in Aug 2018 — 500+ customers • Public launch planned for Oct 2018 • Up brings a more human-focused technology so
Slide 36: Innovation snapshot
{innovation snapshot ) < (©) Sp) ae @) or = © LL 1986 1990 1982 — > Introduced Mortgage Help Centre, : { of high interest rates : superannuation back to regional > First Australian financial institution to launch Visa Debit card > First Australian financial institution to launch Visa Credit card ass
Slide 37: Funding
Funding Term funding maturity profile Retail deposit balances ($bn) $m For personal use only 1,400 50.58 50.74 50.31 50.61 1,200 48.44 1,000 25.99 27.38 27.07 25.98 26.03 800 600 400 22.45 23.20 23.67 24.33 24.58 200 0 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 2018 2019 2020 2021 2022 2023 2024 Retail call
Slide 38: Key capital ratios
Key capital ratios 1H17 2H17 1H18 2H18 For personal use only Common Equity Tier 1 7.97% 8.27% 8.61% 8.62% Additional Tier 1 2.20% 2.22% 2.37% 2.34% Tier 1 10.17% 10.49% 10.98% 10.96% Tier 2 2.03% 1.97% 2.00% 1.89% Total capital 12.20% 12.46% 12.98% 12.85% Total Risk weighted assets $38.3b $38.1b $37
Slide 39: Stress testing scenarios
Stress testing scenarios • The Bank has a comprehensive stress testing framework in place which has been operational since 2010 and is managed by a dedicated stress testing team within Group Risk For personal use only • Stress testing is undertaken annually at the Group level (across all risk types)
Slide 40: Liquidity
Liquidity Liquidity coverage ratio – 3 month average ($b) Net stable funding ratio (NSFR) For personal use only 109.2% as at 30 June 2018 Sep-17 Dec-17 Mar-18 Jun-18 $b $49.7b High quality liquid assets 4.19 4.26 4.15 3.62 50 Wholesale funding $45.5b & other 45 Committed liquidity facility 3.28 3.28
Slide 41: Residential lending
Residential lending Total residential loan approval ($m) Settlements2 ($b) For personal use only 9.1 8,711 6.6 6.3 6.0 5,881 5,419 5,438 1H17 2H17 1H18 2H18 1H17 2H17 1H18 2H18 Residential portfolio balance1 ($b) Offset account portfolio ($b) 40.0 2.6 2.6 2.4 39.0 2.3 38.0 37.0 Jun-17 Sep-17 Dec-17
Slide 42: Residential LVR breakdown at origination
Residential LVR breakdown at origination Residential LVR breakdown For personal use only • Proportion of portfolio with LVR ≤ 80% is 77% • Average LVR has reduced to 59% (based on property value at origination) 7% 0% - 60% 31% 16% 31% • Dynamic LVR reflects an even lower portfolio 60%-80% 46% averag
Slide 43: Secure and low risk loan portfolios
Secure and low risk loan portfolios BEN loan composition1 Commercial breakdown For personal use only Agri, forestry & fishing Residential mortgages Rental, hiring & real estate 2% 11% Commercial mortgages 3% Construction 3% 71.4% 4% Health Care & Social assist Listed securities & managed funds 43% 2
Slide 44: Commercial loan book portfolio
Commercial Loan book portfolio Portfolio For personal use only Jun-18 Jun-17 VIC – Melbourne 33% 34% Business arrears by state 1.40% VIC – other 14% 13% 1.20% NSW – Sydney 6% 6% 1.00% 0.80% NSW – other 4% 3% 0.60% QLD – Brisbane 4% 4% 0.40% 0.20% QLD – other 6% 6% 0.00% ACT NSW QLD SA/NT TAS VIC WA
Slide 45: Specific provisions
Specific provisions Specific provision Specific provisions breakdown For personal use only balance ($m) 100.0 119.3 50.0 Represented by 0.0 Local Consumer Business Partner Delphi Bank Great Southern Agribusiness Alliance Connection lending Connection Partners residential residential mortgages mortga
Slide 46: Great Southern paying down
Great Southern paying down Great Southern portfolio has paid down significantly and For personal use only adequately provisioned Past due 90 days of $50.5m1, down 36% from 30 June 2017 Specific provision of $9.9m1, down 17% from 30 June 2017 Collective provision of $13.5m1, reduced by $3m in
Slide 47: Agribusiness
Agribusiness Lending customer management Agribusiness loan arrears For personal use only 4.0% 3.0% 49% Jun-18 51% 2.0% 1.0% 0.0% Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Elders Rural Bank Agri 90d+ Agri exposure by industry Agri exposure by state Grain/Sheep/Beef 28.4% VIC 37.2% Grain 15.6% WA 19.2% Sheep
Slide 48: Homesafe investment property portfolio
Homesafe investment property portfolio Realised - income vs funding costs ($m) Proceeds on completed contracts continue to exceed For personal use only pre-overlay values 13.4 13.5 Overlay reflects an assumed 3% increase in property 10.7 10.2 9.6 prices for the next 18 months before returning to
Slide 49: Homesafe investment property portfolio (statutory earnings)
Homesafe investment property portfolio (statutory earnings) Portfolio overlay ($m) For personal use only 31.2 1H17 2H17 1H18 2H18 ($m) ($m) ($m) ($m) Profit on sale $1.4 $0.3 $1.0 $1.3 2.5 2.1 1.9 1.1 1H17 2H17 1H18 2H18 Discount $9.0 $9.4 $10.4 $10.1 Change Total balance Property revaluations $38.5
Slide 50: Homesafe accounting treatment – illustrative example
Homesafe accounting treatment – illustrative example Start of Year 1 End of Year 1 Year 2 Year 3 Year 4 Total For personal use only Day 1 funding 100,000 Property value 110,000 130,000 120,000 Homesafe Income 10,000 20,000 (10,000) 5,000 Unrealised funding costs (5,000) (5,000) (5,000) (5,000) Prope
Slide 51: The Community Bank model 20th anniversary
The Community Bank® model 20th anniversary Over $200m in community contributions1 since For personal use only inception – enabling tangible economic and social Community Bank® footings ($bn)2 benefits for the communities and our business Significant matched funding leveraged by community partner
Slide 52: Alliance Bank growth
Alliance Bank® growth For personal use only • Nova Alliance Bank® added in May 2018 • Nova included $71m in total loans and deposits and 1,500 new members • Alliance Bank® delivered 13.6% lending growth in FY18 Alliance Bank® loan portfolio balance Alliance Bank® deposit portfolio balance 800.0 800.
Slide 53: Statutory earnings to cash earnings - reconciliation
Statutory earnings to cash earnings - reconciliation FY18 FY17 For personal use only ($m) ($m) Statutory Profit after tax $434.5 $429.6 Fair value adjustments $0.8 $1.8 Homesafe unrealised adjustments ($26.8) ($52.2) Hedging/income (costs) ($1.2) $5.6 (Profit)/Loss on sale of business $1.2 ($2.7) In
Slide 54: Investor relations contacts
nalysts Nicole Rooke Head of Investor Relations T +61 3 5485 6286 M +61 431 442 808 E nicole.rooke@bendigoadelaide.com.au Alex Hartley Manager, Investor Relations T +61 8 8300 6290 M +61 478 435 218 E alex.hartley@bendigoadelaide.com.au > | Bendigoand AdelaideBank Silvana Arena Head of Public Relati
Slide 55: Disclaimer
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 no representation or warranty is made as to the accuracy, completeness or reliability of the information. It is t
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