Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2009 Earnings Presentation
46 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 10, 2009
Slide 1: Bendigo and Adelaide Bank FY 2009 Results
For personal use only Bendigo and Adelaide Bank FY 2009 Results August 10, 2009
Slide 2: For personal use only
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 Banks Full Year results filed with the Australian
Slide 3: Agenda
For personal use only • Overview • Financial performance • Credit • The future Agenda 3
Slide 4: Overview
For personal use only Mike Hirst – Group Managing Director Overview 4
Slide 5: The landscape has changed
The landscape has changed For personal use only • Market conditions deteriorated quickly and dramatically in late 2008 • Slowing domestic economy/global recession • Increased competition for deposits • Unprecedented drop in official cash rates • Government’s funding guarantees Overview 5
Slide 6: Our response
Our response • The first to restructure our balance sheet For personal use only – Leverage retail network – Reduce funding risks – Short-term impact on NIM • Capital flexibility – ~$300m fully underwritten equity capital raising announced today • Dealing with our risks and threats – Transparent cred
Slide 7: The future
The future For personal use only • Well positioned to realise revenue growth opportunities • Focus on growth – Flexible capital position – Strong retail demand – Partner, wealth and advised businesses – Considered, non-organic growth (eg: Elders Rural Bank, Macquarie margin lending) • Improved NIM –
Slide 8: Our result
Our result For personal use only Financial performance • Cash earnings $182.2m • Cash EPS 62.9¢ • Profit after tax before significant items $173.2m Risk management • Prudent provisioning • % total provisions of gross loans, 51bp Capital • Tier 1 ratio of 7.43% post Elders Rural Bank consolidation (p
Slide 9: Financial performance
For personal use only David Hughes - CFO Financial performance 9
Slide 10: Financial performance summary
For personal use only $m 2008 2009 Cash earnings – reported 201.9 182.2 Cash earnings – restated 239.6 182.2 Profit after tax before significant items 233.4 173.2 Profit after tax – reported 170.5 83.8 Profit after tax – restated 198.3 83.8 Cash EPS - reported 93.7¢ 62.9 ¢ Cash EPS - restated 111.1¢
Slide 11: Profit after tax
Profit after tax 239.6 restated For personal use only 37.7 198.3 restated 27.8 182.2 121.8 201.9 118.5 170.5 83.8 2007 2008 2009 Statutory Reported Cash Basis Earnings Financial performance 11
Slide 12: Cash earnings per share
Cash earnings per share For personal use only Cash earnings per share (cents) 111.1 17.4 Cash EPS affected by restated Great Southern provisions 93.7 and commercial property 5.2 Construction loan provisions* loans 5.9 Great Southern provisions* 62.9 2007/08 2008/09 Financial performance * Full year
Slide 13: Dividend
Dividend Group dividends (cents) For personal use only 65 58 52 37 43 34 30 15 24 28 28 22 2005/06 2006/07 2007/08 2008/09 Interim Final Financial performance 13
Slide 14: Goodwill
Goodwill For personal use only • Test conducted in accordance with accounting standards • Prescribed calculation methodology • No goodwill impairment FY09 • Impairment test is of designated Cash Generating Units (CGUs) – retail, wealth, business partners and third party mortgages • CGUs are assessed
Slide 15: Net interest margin
Net interest margin Com m unity Asset 0.32 Net interest income impacted by Bank & m ix For personal use only Alliances Com m unity Share (0.01) Free Com m unity Bank & 1.40 0.26 funding Bank & Alliances (0.01) Alliances Share • Reduced demand for credit Share Asset Liability Liability pricing (0.06)
Slide 16: Balance sheet restructured
Balance sheet restructured 100% Wholesale Retail For personal use only 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Funding mix 16
Slide 17: Leveraged franchise
Leveraged franchise • Steady growth via branch network For personal use only • Deposits growth before government guarantee introduced $bn FY09 Retail Deposits 24 22 27.1% growth 20 18 57.9% Term Deposits 16 14 42.1% Call Accounts 12 June 09 10 J A S O N D J F M A M J Growth in retail deposits 17
Slide 18: Provisions
Provisions Total group provisions of $198.1m as at June 2009 For personal use only 0.51%* 0.41%* 67.7 0.32%* 0.34%* 41.0 18.0 22.1 44.3 32.5 36.8 37.1 80.8 76.2 78.8 86.1 Dec-07 Jun-08 Dec-08 Jun-09 General Collective Specific Financial performance *Percentage of total gross loans 18
Slide 19: Capital (pre new capital)
Capital (pre new capital) Tier 1 Capital +0.44% -1.46% • Capital position reflects the low risk +0.19% For personal use only +0.26% nature of the loan book • Total capital 10.91% 7.99% 8.44% 7.43% • Tier 1 capital 7.43%, • Tier 1 capital position improved Dec-08 Organic Asset Mix Jun-09 - pre ERB ne
Slide 20: Capital
Capital • Internal modeling and stress testing validates capital available for growth For personal use only • Low risk loan book • 98% secured • No offshore exposure • No exotic securities • Nonetheless, post the capital management initiatives, the Bank’s capital position is expected to compare favo
Slide 21: Capital
Capital Tier 1 Capital +2.14% • Strong underlining creditworthiness of residential For personal use only mortgages in Australia 10.76% • BEN’s residential loan book expected to behave 8.63% consistently with asset class • Significant reduction in the Bank’s credit risk weighted assets should we adop
Slide 22: Credit
For personal use only David Hughes - CFO Credit 22
Slide 23: Secure and low risk loan portfolio
Secure and low risk loan portfolio • 98% secured Portfolio Security For personal use only • 77% secured by residential mortgages and listed securities 2% 8% • Residential lending 8% – recent improvement in arrears – in the main, home lenders remain ahead on repayments 13% – average LVR 62%* • Margin
Slide 24: Solid portfolio
Solid portfolio For personal use only • Diversity by geography and industry • Credit remains sound across the business • Vast majority of exposure in residential mortgages where 90 day arrears are falling • Adequately provisioned for our portfolios Credit 24
Slide 25: Commercial loans typically small
Commercial loans typically small • $6.1b business loans by security 6% 5% For personal use only • 16% of on-balance sheet loans 7% 5% 3% • Predominantly SME 8% 3% 3% • Average loan size $180k 3% • 57 loans >$10m totalling $1,129m 3% 2% (2.8% of BEN loans) 17% 1% 0% • Diversity by geography and indus
Slide 26: Signs of improvement
Signs of improvement Residential loans – 90 days+ arrears • Credit Customers are managing quality 1.40% 1.20% For personal use only economic conditions well 1.00% 0.80% • 90+ day arrears improving 0.60% across the vast majority of our 0.40% asset base 0.20% 0.00% Jan 08 Mar 08 May 08 Jul 08 Sep 08 N
Slide 27: Home loan stress testing results benign
Home loan stress testing results benign • Harsh recession scenario based on experience Expected Loss For personal use only of UK recession (1992) which saw: ($m) Trough PD stress factor • Up to 6 fold increase in delinquency rates Property Value x2 x4 x6 x8 from peak to trough No decrease 8.3 20.8 3
Slide 28: The future
For personal use only Mike Hirst – Group Managing Director The future 28
Slide 29: Organisation structure
Organisation structure Bendigo and For personal use only Adelaide Bank Mike Hirst Customer and Banking and Corporate Risk Finance Community Wealth Resources Russell Jenkins Jamie McPhee Marnie Baker Tim Piper David Hughes Wealth and 3rd Party banking Anthony Baum Retail Dennis Bice Strategic, commun
Slide 30: Our business
Our business For personal use only Customer Banking Corporate and and Wealth Resources Risk Finance Community Create an environment to Deliver the service Provide services, skills Manage the risks for the Provide financial do business and structures that allow business resources, measures Meet and e
Slide 31: Leading brands in specific markets
Leading brands in specific markets • Our key retail brand has a net promoter score of +33 For personal use only – World class score – Highest rating of any Australian bank* • Group brands re-launched The future *Source: The Nielsen Company 31
Slide 32: Scale and diversity in retail network
Scale and diversity in retail network For personal use only • 1.4 million customers – 11,000 new customers per month (7,000 net) • 1.9 products per person • 428 branches – 191 Bank owned branches – 237 Community Bank® branches The future 32
Slide 33: Community Bank remains a growth engine
Community Bank® remains a growth engine Community Bank® branches by age For personal use only 30 25 20 15 • 20 branches opened in FY09 10 5 • 20 branches to be opened in FY10 0 • Community Bank® network remains <1 1 2 3 4 5 6 7 8 9 10 11 relatively immature Branch age (years) • Liability growth stro
Slide 34: Opportunities in Third-party mortgages
Opportunities in Third-party mortgages • Opportunity now to grow the business For personal use only • Partners desire maintaining a genuine 5th funding alternative • Variable cost base • Commissions have been adjusted • Margins improving • Focus shifting to growth The future 34
Slide 35: Fundamentals remain attractive for Margin Lending
Fundamentals remain attractive for Margin Lending • Customer appetite for risk and gearing is improving For personal use only • Independent margin loan provider of choice • Strong long term relationships with many financial advisory firms • Strong margins • Low cost to income • Capacity for signific
Slide 36: Wealth management growth expected
Wealth management growth expected • Value chain under pressure For personal use only • Strong industry drivers remain - ageing population, compulsory super • Independence and trust to the fore - an opportunity for a trusted institution • Advice structure changing to meet customer preference - Bank’s
Slide 37: Outlook
Outlook For personal use only Planning for uncertain times to prevail • Meaning greater focus on the fundamentals of our business • Strength of franchise remains • Genuine demand and appetite for a real banking alternative • Capital to exploit growth opportunities Potential upside • Re-opening of se
Slide 38: Questions
For personal use only Questions 38
Slide 39: Appendixes
For personal use only Appendixes 39
Slide 40: Operating Expenses
Operating Expenses – six months 301.7 308.2 305.8 158.2 • Operating expense growth flat 2H09 149.9 159.0 For personal use only • Heightened focus on costs 151.8 150.0 146.8 • Actively reducing operating leverage Jun 2008 Dec 2008 Jun 2009 Staff Other Operating expenses – full year 296.8 Note: 2008 c
Slide 41: Interest income and margin
Interest income and margin Average term deposit rate For personal use only 8.00% • TD rates are falling, from high levels 7.50% • Volume continues to grow 7.00% • Successful in retaining more than 86% 6.50% of TD’s at maturity 6.00% 5.50% 5.00% 4.50% 4.00% Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 D
Slide 42: Mortgage summary
Mortgage summary For personal use only Full-doc Lo-doc All Value ($m) 24,503 2,578 27,081 Number 162,366 13,129 174,465 Average LVR (at origination) 62.3% 58.0% 61.7% Average seasoning (months) 49.9 41.5 44.4 Mortgages 42
Slide 43: Great Southern
Great Southern Borrower characteristics Strategic v credit arrears For personal use only 14% Borrower profile* % of portfolio Strategic Credit Income > $100k 82% 12% Net assets > $500k 70% 10% Loan balances < $250k 76% 8% Professional (by occupation) 60% 6% 4% 2% 0% 1-30 days 31-90 days 90+ days Tot
Slide 44: Specific provisions
Specific provisions For personal use only $m Jun-08 Jun-09 40 35 30 4 problem loans, $21.5m 25 20 15 10 100% Great Southern 5 0 Consumer Mortgages Commerical Loans Portfolio Funding Wealth Financing Credit quality 44
Slide 45: MIP - Geographic distribution
MIP #: 0 For personal use only MIP Blce: $0m Portfolio: $91.057m %MIP/Port Blce: 0.0% MIP #: 34 MIP Blce: $33.828m Portfolio: $6,425.81b MIP #: 6 %MIP/Port Blce: 0.53% MIP Blce: $7.229m Portfolio: $4,336b %MIP/Port Blce: 0.17% MIP #: 2 MIP Blce: $1.121m Portfolio: $4,542.6b %MIP/Port Blce: 0.02% MIP
Slide 46: Investor and media contacts
For personal use only Investors Media Will Rayner Lauren Treacy Head of Investor Relations Public Relations Manager Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Level 5 The Bendigo Centre 169 Pirie Street PO Box 480 Adelaide Bendigo South Australia 5000 Victoria 3550 Tel: +61
Bendigo and Adelaide Bank — FY2009 Earnings Presentation on 6ix