Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2021 Earnings Presentation
66 slides from Bank Of Queensland's earnings presentation, Oct 13, 2021
Slide 1: FY21 Investor Materials
FY21 INVESTOR MATERIALS 13 October 2021 Full Year ended 31 August 2021 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 2: Contents
CONTENTS FY21 RESULTS PRESENTATION 3 ABOUT BOQ 35 DIVISIONAL RESULTS 41 ME BANK 45 PORTFOLIO QUALITY 49 CAPITAL, FUNDING & LIQUIDITY 56 ECONOMIC ASSUMPTIONS 62 Bank of Queensland Limited 2021 Full Year Results Presentation 2
Slide 3: FY21 Results Presentation
FY21 RESULTS PRESENTATION 13 October 2021 Full Year ended 31 August 2021 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 4: Agenda
AGENDA INTRODUCTION Cherie Bell, General Manager Investor Relations & Integration RESULTS OVERVIEW George Frazis, Managing Director and CEO FINANCIAL DETAIL, TRANSFORMATION & INTEGRATION Ewen Stafford, Chief Financial Officer and Chief Operating Officer SUMMARY & OUTLOOK George Frazis, Managing Dire
Slide 5: FY21 Results Presentation – Presenters
FY21 RESULTS PRESENTATION GEORGE FRAZIS EWEN STAFFORD MARTINE JAGER Managing Director and Chief Financial Officer and Group Executive Retail Bank and Chief Executive Officer Chief Operating Officer CEO of ME Bank • Joined BOQ in September 2019 ▪ Joined BOQ in November 2019 ▪ Joined BOQ in April 2021
Slide 6: Results Overview
RESULTS OVERVIEW GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 7: FY21 Overview
FY21 OVERVIEW 1. Strong FY21 statutory profit and cash earnings reflecting balance sheet growth, margin management and improved economic conditions • Including 2 months of ME Bank, statutory profit of $369m up 221%, cash earnings after tax up 83% and EPS growth of 51%1 • Excluding ME Bank statutory
Slide 8: FY21 Results
FY21 RESULTS HIGHER CASH PROFIT DRIVEN BY STRONG QUALITY ASSET GROWTH AND MARGIN MANAGEMENT 1 BOQ Key Financial Results FY21 FY20 FY21 v FY20 FY21 vs FY20 excluding ME Bank Statutory net profit after tax ($m) 369 115 221% 352 206% Cash earnings after tax ($m) 412 225 83% 389 73% Cash return on avera
Slide 9: Key Elements of the Result
KEY ELEMENTS OF THE RESULT1 INCOME GROWTH WITH GOOD MARGIN MANAGEMENT, IMPROVED PRODUCTIVITY AND IMPAIRMENT RELEASES NET INTEREST INCOME ($M) NET INTEREST MARGIN (%) FY20 – $986m +6% FY21 –$1,050m FY20 - 1.91% +4bps FY21 - 1.95% +5% flat 538 512 503 1.92 1.95 1.95 483 1.89 1H20 2H20 1H21 2H21 1H20 2
Slide 10: Lending and Deposit Growth
LENDING AND DEPOSIT GROWTH1 STRONG ABOVE SYSTEM GROWTH IN HOME LENDING WITH A TURNAROUND IN THE BUSINESS BANK GROWTH IN LENDING GLAS ($M)2 GROWTH IN CUSTOMER DEPOSITS ($M) 3,546 3,270 2,334 198 2 759 400 1,103 1,537 1,112 827 264 937 2,946 239 15 1,364 1,399 343 600 141 151 659 508 (567) (14) (39) F
Slide 11: Quality Home Lending Growth
QUALITY HOME LENDING GROWTH1 GOOD QUALITY ABOVE SYSTEM GROWTH IN HOME LENDING SUMMARY HOME LENDING GROWTH ($M) 2,946 1,949 • 1.7x system growth in home lending achieved in FY21 141 508 1,120 507 997 39 102 • BOQ Housing3, BOQ Specialist and Virgin Money contributing 459 1 310 248 287 339 228 to stro
Slide 12: Divisional Achievements
DIVISIONAL ACHIEVEMENTS1 RETAIL BANK BUSINESS BANK Housing Loan Growth ($m)2 Deposit Growth ($m) BOQB Loan Growth ($m) Deposit Growth ($m) 1,065 870 467 512 2,479 400 1,536 1,363 1,399 343 1,112 198 15 (4) FY20 FY21 FY20 FY21 FY20 FY21 Asset Finance Commerical Housing3 FY20 FY21 • Total income up 10
Slide 13: Retail Bank Digital Transformation
RETAIL BANK DIGITAL TRANSFORMATION TRANSFORMATION ON TRACK AND PROGRESSING AS PLANNED BUILDING THE RETAIL DIGITAL BANK OF THE FUTURE FUTURE RETAIL PLATFORM END STATE Phase 1 – Foundational Capabilities • Key banking partnerships established FY20 – FY21 COMPLETE • Cloud based core foundation built •
Slide 14: ME Bank Acquisition
ME BANK ACQUISITION STRATEGIC BENEFITS DELIVERING VALUE AND INTEGRATION AHEAD OF SCHEDULE Significantly enhanced • 580k customers added, bringing the total to 1.5m scale and portfolio mix • $25bn GLAs added, total BOQ GLAs now c.$75bn for profitable growth • Retail net profit contribution increase
Slide 15: Executing the Transformation Roadmap
EXECUTING THE TRANSFORMATION ROADMAP Excluding ME Bank unless otherwise noted Key Metrics FY19 FY20 FY21 Employee engagement 56% 59% 64% Purpose Led Culture Executive team in place and Strong Leadership Team High level of Executive turnover Key Executive roles filled delivering Customer Numbers c.1.
Slide 16: Building a Sustainable Business
BUILDING A SUSTAINABLE BUSINESS CLEAR FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE OUTCOMES FY21 OUTCOMES KEY FOCUS AREAS GOING FORWARD Environmental Environmental • Carbon neutral certification achieved • Reducing emissions and targeting 100% renewable • Climate risk scenario analysis enhanced ene
Slide 17: Financial Detail, Transformation & Integration
FINANCIAL DETAIL, TRANSFORMATION & INTEGRATION EWEN STAFFORD CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER
Slide 18: Financial Performance
FINANCIAL PERFORMANCE1 UNDERLYING PROFIT GROWTH OF 8% DRIVEN BY 2% JAWS IN THE HALF AND FOR FY21 BOQ + ME FY21 vs $ million FY21 FY20 FY21 vs FY20 2H21 1H21 2H21 vs 1H21 3 FY21 FY204 Net interest income 1,050 986 6% 538 512 5% 1,128 14% Non-interest income 2 125 128 (2%) 59 66 (11%) 130 2% Total inc
Slide 19: Non Cash Earnings
NON CASH EARNINGS NON CASH EARNINGS IMPACTED BY ME BANK ACQUISITION BOQ + ME2 $ million FY21 FY20 2H21 1H21 ME Bank1 FY21 Cash earnings after tax 389 225 224 165 23 412 Intangible asset review and restructure charges - (80) - - (3) (3) Employee pay and entitlement review (6) (8) - (6) - (6) ME Bank
Slide 20: Net Interest Margin
NET INTEREST MARGIN1 GOOD NIM MANAGEMENT BALANCING RETURNS AND GROWTH SUMMARY NET INTEREST MARGIN – FY20 TO FY21 0.03% • Asset pricing impacts from front to back book drag are consistent with 0.14% (0.07%) (0.05%) prior halves (0.01%) • Reductions from fixed housing spreads and mix in FY21 • Funding
Slide 21: Non-Interest Income
NON-INTEREST INCOME1 STABILISING BANKING NON-INTEREST INCOME BUT IMPACTED BY TRADING AND LOWER INSURANCE INCOME SUMMARY NON-INTEREST INCOME BREAKDOWN ($M)2 • FY21 non-interest income declined by $3m: › Banking fees normalising following the ongoing industry trends toward 144 low and no fee products
Slide 22: Operating Expenses
OPERATING EXPENSES1 INVESTMENT IN STRATEGIC INITIATIVES AND COSTS TO SUPPORT GROWTH SUMMARY OPERATING EXPENSE BREAKDOWN ($M)2 • Expenses increased $21m or 3% from FY20 612 633 • Underlying expenses increased 1.5% 9 10 (30) 17 11 14 5 6 7 • Increased investment on strategic 45 52 initiatives, includi
Slide 23: Capital Investment
CAPITAL INVESTMENT1 TRANSFORMATION INVESTMENT CONTINUES SUMMARY CAPITAL INVESTMENT ($M) 113 • Major capital investment in 2H21 with 95 100 10 projects moving from discovery to 48 development 60 66 FY21 • $10m in cards management system $103m 52 has been partner funded 35 37 • Assets of the combined
Slide 24: Provisions and Loan Impairment Expense
PROVISIONS AND LOAN IMPAIRMENT EXPENSE1 CONTINUE TO REVIEW ECONOMIC ASSUMPTIONS TO ENSURE PROVISIONS ARE PRUDENTLY MANAGED PROVISIONS ($M) -16% LOAN IMPAIRMENT EXPENSE ($M) 369 374 147 313 235 28 126 275 271 206 2 24 (44) 150 26 28 21 21 (4) (65) 85 94 103 107 1H20 2H20 1H21 2H21 1H20 2H20 1H21 2H21
Slide 25: Portfolio Quality
PORTFOLIO QUALITY1 ARREARS TRENDS REMAIN BROADLY STABLE SUMMARY COMMERCIAL ARREARS (bps) • Low interest rate environment and increased household deposits supporting lower housing arrears 160 153 152 148 • Commercial arrears normalised to pre COVID-19 levels • Increase in asset finance arrears driven
Slide 26: Funding & Liquidity
FUNDING & LIQUIDITY1 RESILIENT FUNDING AND LIQUIDITY PROFILE MAINTAINED SUMMARY FUNDING MIX ($BN) 55.2 • Deposit to loan ratio at 75% 50.3 50.8 • Customer deposit growth of $3.3bn, driven by an increase in transaction, 11.8 12.0 11.3 savings and investment, and offset accounts 5.4 5.9 4.8 • Reliance
Slide 27: Capital
CAPITAL STRONG CAPITAL POSITION ENABLING GROWTH AND TRANSFORMATION SUMMARY CET1 – FY20 TO FY21 0.86% • Successfully completed $1.35bn capital raise to fund the acquisition of ME Bank2 (0.40%) (0.09%) 0.07% (0.33%) • 37bps of capital utilised in 2H21 to deliver above system asset growth, (0.04%) (0.1
Slide 28: Executing the Transformation Roadmap
EXECUTING THE TRANSFORMATION ROADMAP KEY STRATEGIC INITIATIVES DELIVERED IN FY21 Digital Bank of the Future Simple and intuitive • Online transaction, savings and credit card accounts • Improved broker experience, mortgage hub service developed and plans to scale to all brands and efficiency uplift
Slide 29: Integration Program Delivering
INTEGRATION PROGRAM DELIVERING STRATEGIC BENEFITS DELIVERING VALUE AND INTEGRATION AHEAD OF SCHEDULE Return ME Bank to growth Technology integration commenced • Home Buying Transformation program commenced • Collaboration tools in place for day 1 • Product and pricing capability consolidated • Netwo
Slide 30: Synergies Accelerated
SYNERGIES ACCELERATED SYNERGY BENEFITS AND INTEGRATION COSTS CONFIRMED AND ACCELERATING SUMMARY EXPENSE SYNERGY PROFILE ACCELERATED • Synergy cost commitment accelerated and additional synergies identified FY22 FY23 FY24 • FY22 in year P&L synergies expected to be $30 - $34m • Pre-tax cost synergy b
Slide 31: FY21 BOQ Group Key Metrics & Pro Forma
FY21 BOQ GROUP KEY METRICS & PRO FORMA1 BOQ excluding ME Bank 2 ME Bank3 BOQ Group (Aug 21 YE) (Aug 21 YE) Pro Forma Gross Loans and Advances ($bn) 50.6 25.2 75.7 Total Assets ($bn) 62.4 29.0 91.4 Balance Sheet Total Interest Earning Assets ($bn) 56.4 28.8 85.2 Risk weighted assets ($bn) 33.8 10.4 4
Slide 32: Summary & Outlook
SUMMARY & OUTLOOK GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 33: FY21 Summary
FY21 SUMMARY 1. Supporting our customers and people through ongoing challenging times 2. Delivering quality sustainable profitable growth 3. Executing on our digital transformation 4. Successfully completed acquisition of ME Bank and expected divestment of St Andrew’s in 1H22 5. Focus on strength wi
Slide 34: FY22 Outlook
FY22 OUTLOOK1 1. Cautiously optimistic, despite the uncertain environment, Australia remains well placed for economic recovery 2. Focus remains on achieving quality sustainable profitable growth and delivering positive jaws 3. Expecting at least 2% jaws • Above system growth in BOQ and VMA housing t
Slide 35: About BOQ
GROUP ABOUT BOQ
Slide 36: History of BOQ
HISTORY OF BOQ BOQ HAS BEEN SERVING CUSTOMERS FOR 147 YEARS with distinctive brands, highly specialised niches and Owner Managed branches BOQ has successfully grown organically and added differentiated capability in niche segments through “bolt on” acquisitions, providing a strong platform for diffe
Slide 37: BOQ
BOQ UNIQUE BRANDS IN NICHE SEGMENTS SERVING CUSTOMERS FOR 147 YEARS OUR DIFFERENTIATORS KEY STATISTICS FOR FY21 Unique brands with proud history Deeply anchored in local communities c. 570k BOQ c. 15k BOQB c. 1.5m c. 195k VMA c. 35k Specialist Highly specialised bankers and credit officers, wi
Slide 38: Experienced Leadership Team
EXPERIENCED LEADERSHIP TEAM GEORGE FRAZIS EWEN STAFFORD DEB ECKERSLEY CRAIG RYMAN Managing Director and Chief Executive Chief Financial Officer and Chief Group Executive People Chief Information Officer NICHOLAS ALLTON Officer Operating Officer and Culture Group General Counsel and Company Secretary
Slide 39: Distribution Footprint
DISTRIBUTION FOOTPRINT SUMMARY • FY21 branch numbers at 163 (incl. transaction centres) • The franchise network remains a key differentiator for 1 25 13 BOQ and is pivotal to the Bank’s deposit raising capabilities 1 1 36 25 66 1670 • In FY21 we expanded strategic 3rd party distribution 11 6 1073 xx
Slide 40: Distribution Footprint Movements
DISTRIBUTION FOOTPRINT MOVEMENTS Aug-21 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 25 7 10 11 - - - 53 Owner managed branches 66 18 9 6 1 2 1 103 Transaction centres 7 - - - - - - 7 98 25 19 17 1 2 1 163 Aug-20 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 33 9 9 12 - - - 63 O
Slide 41: Divisional Results
GROUP DIVISIONAL RESULTS
Slide 42: Divisional Performance
DIVISIONAL PERFORMANCE1 STRONG PERFORMANCE ACROSS RETAIL & BOQ BUSINESS RETAIL BUSINESS $ million FY21 FY20 FY21 vs FY20 FY21 FY20 FY21 vs FY20 Net interest income 492 437 13% 555 543 2% Non-interest income 69 74 (7%) 48 40 20% Total income 561 511 10% 603 583 3% Operating expenses (356) (335) 6% (2
Slide 43: Retail Banking Overview
RETAIL BANKING OVERVIEW1 IMPROVED PERFORMANCE FOR BOQ BLUE AND CONTINUED MOMENTUM FOR VMA SUMMARY IMPROVED HOME LENDING GROWTH ($M)1 1,684 • The housing momentum generated at the end of FY20 has translated into positive lending growth across VMA and BOQ 581 795 Retail 46 (50) 459 1,103 • Successful
Slide 44: Business Banking Overview
BUSINESS BANKING OVERVIEW NICHE SEGMENT STRATEGY DELIVERING BALANCED GROWTH DESPITE CHALLENGING MARKET CONDITIONS SUMMARY LENDING GROWTH – BUSINESS BANK AND BOQF ($M) • Continued support to customers through the impacts of COVID-19 and the challenging economic climate • Continued focus on niche segm
Slide 45: ME Bank
GROUP ME BANK
Slide 46: ME Bank Financial Performance
ME BANK FINANCIAL PERFORMANCE FINANCIAL RESULT IN LINE WITH DUE DILIGENCE ASSUMPTIONS SUMMARY FY21 FINANCIAL IMPACT ME Bank BOQ FY21 BOQ FY21 • Cash NPAT contribution of $23m for the two months post FY21 Financial Performance Jul to Aug 21 excluding ME Bank including ME Bank acquisition $m $m $m • F
Slide 47: ME Bank Performance
ME BANK PERFORMANCE FINANCIAL RESULT IN LINE WITH DUE DILIGENCE ASSUMPTIONS SUMMARY ME BANK PRO FORMA1 • Net interest income growth of 4% despite declining GLAs of 5% ME Bank - FY21 ME Bank - FY20 FY20 v FY21 ME Bank Financial Performance driven by NIM improvement Adjusted2 Adjusted $m $m $m • On a
Slide 48: ME Bank Lending and Deposit Growth
ME BANK LENDING AND DEPOSIT GROWTH1 FINANCIAL RESULT IN LINE WITH DUE DILIGENCE ASSUMPTIONS SUMMARY GROSS LOANS AND ADVANCES GROWTH ($M) • Housing loans continued to decline in line with recent historical 439 trends (494) (512) (897) • Deposit growth of $2.4bn in FY21 has increased the deposit to 44
Slide 49: Portfolio Quality
GROUP PORTFOLIO QUALITY
Slide 50: Housing Portfolio
HOUSING PORTFOLIO FY21 FY21 Portfolio FY201 excluding ME Bank including ME Bank Total Spot Balance - ($m) 34,101 59,053 31,155 Variable Rate 68% 63% 78% Owner Occupied 63% 69% 61% Investor 37% 31% 39% Line of Credit 3% 2% 4% Proprietary 74% 61% 79% Broker 26% 39% 21% Interest Only 16% 14% 19% Princi
Slide 51: Housing Loan Portfolio
HOUSING LOAN PORTFOLIO HOUSING PORTFOLIO BY STATE HOUSING PORTFOLIO BY LVR HOUSING PORTFOLIO BY CHANNEL Excluding ME Bank Excluding ME Bank Excluding ME Bank 4% 5% 10% 13% 17% 29% 16% 44% 13% 44% 12% 31% 18% 27% 18% Including ME Bank Including ME Bank Including ME Bank 5% 7% 6% 11% 16% 26% 30% 31% 2
Slide 52: Asset Finance Portfolio
ASSET FINANCE PORTFOLIO SUMMARY ASSET FINANCE BY STATE • Portfolio is well diversified geographically 9% 6% QLD • Broad industry spread reducing concentration 31% 8% NSW • Focused on supporting tools of trade VIC WA 20% NZ 26% Other ASSET FINANCE BY INDUSTRY ASSET FINANCE BY CHANNEL Construction 18%
Slide 53: Commercial Portfolio
COMMERCIAL PORTFOLIO SUMMARY COMMERCIAL PORTFOLIO BY STATE • Commercial portfolio well diversified geographically 6%3% QLD • Focused on specialist industry segments 16% NSW & ACT 40% VIC WA 34% Other COMMERCIAL PORTFOLIO BY INDUSTRY COMMERCIAL PORTFOLIO BY CHANNEL 16% 3% Property 15% 33% Health Care
Slide 54: Industry and Geographic Split Over Time
INDUSTRY AND GEOGRAPHIC SPLIT OVER TIME1 HOUSING LOANS - GEOGRAPHIC SPLIT OVER TIME SUMMARY FY21 Balance Outstanding (%) 31% 29% 22% 11% 6% FY17 Balance Outstanding (%) 50% 21% 14% 12% 3% • Enhanced geographic QLD NSW & ACT VIC WA Other diversification, Queensland housing portfolio reducing over ASS
Slide 55: Supporting Our Customers Through COVID-19
SUPPORTING OUR CUSTOMERS THROUGH COVID-19 SUMMARY DEFERRALS ($BN)1 • Assistance to customers affected by extended lock down HL deferral balance as % of remains considerably lower compared to the height of 18% retail lending COVID-19 15% SME deferral balance as % of commercial lending 16% 7.6 12% ME
Slide 56: Capital, Funding & Liquidity
CAPITAL, FUNDING & LIQUIDITY
Slide 57: Replicating Portfolio
REPLICATING PORTFOLIO1 SUMMARY REPLICATING PORTFOLIO AND EQUITY HEDGE (%) • Slowing reduction from the low cash rate environment on the capital and low cost deposit portfolio Aug-21 2H21 Exit Return Rate Avg term Balance $bn Avg Return Equity 2.7 0.80% 0.71% 3 years Deposit 2.5 0.84% 0.68% 3 years U
Slide 58: Hedging Costs - Basis Risk
HEDGING COSTS - BASIS RISK SUMMARY LONG TERM BASIS RISK AVG - 23BPS • The impacts of hedging costs had a flat NIM impact in 2H21 0.6% 0.4% 0.2% 0.0% -0.2% Bank of Queensland Limited 2021 Full Year Results Presentation 58
Slide 59: Funding
FUNDING SUMMARY DEPOSIT TO LOAN RATIO • Loan growth funded through stable funding sources, including customer deposits, long term wholesale and the TFF • Ongoing growth in deposits resulted in the increase of the deposit to loan ratio to 75% • ME Bank customer deposits contributed $18.4bn to Group d
Slide 60: Liquidity
LIQUIDITY SUMMARY NSFR MOVEMENT • Strong liquidity with LCR at 149% and NSFR at 122%, well above regulatory targets at the end of 2H21 • Customer deposits grew by $3.3 billion or 9% on FY20, consistent with the Bank’s strategy to increase stable sources of funding while also reflecting ongoing high
Slide 61: Credit Rating
CREDIT RATING The Bank monitors rating agency developments closely and is rated by Standard & Poor's (S&P), Moody’s Investor Service and Fitch Ratings. BOQ’s current debt ratings are shown below. Rating Agency Short Term Long Term Outlook S&P A2 BBB+ Positive Fitch F2 A- Stable Moody’s P2 A3 Stable
Slide 62: Economic Assumptions
GROUP ECONOMIC ASSUMPTIONS
Slide 63: Macro Economic Environment
MACRO ECONOMIC ENVIRONMENT ECONOMIC ENVIRONMENT TO IMPROVE BUT UNCERTAINTY TO REMAIN MACRO ECONOMIC • The economy should rebound strongly from the lockdowns • The likelihood of ongoing COVID cases creates uncertainty about the outlook • Some restrictions (notably on international people movement) ar
Slide 64: Disclaimer
GROUP DISCLAIMER
Slide 65: Disclaimer
DISCLAIMER IMPORTANT INFORMATION AND DISCLAIMER This is a presentation of general background information about Bank of Queensland Limited and its consolidated entities (BOQ’s) activities at the date of this document. It is in summary form, does not purport to be complete and should be read in conjun
Slide 66: Abbreviations
ABBREVIATIONS 1H: First half of financial year GDP: Gross Domestic Product 2H: Second half of financial year GLA: Gross Loans & Advances 30DPD: 30 days past due GRCL: General Reserve for Credit Losses 90DPD: 90 days past due LCD: Low cost deposit AASB: Australian Accounting Standards Board LCR: Liqu