Bank of Queensland Limited · ASX:BOQ
Bank of Queensland — H1 2004 Earnings Presentation
47 slides from Bank of Queensland's earnings presentation, Feb 29, 2004
Slide 1: Bank of Queensland Half-Year Results
Bank of Queensland Half-Year Results 29 February 2004
Slide 2: Another Strong Half
Another Strong Half Half-year profit of $28.1m é 32%pcp Sales $4.2b é81%pcp Assets under mgmt $11.3b é55%pcp Retail deposits $4.6b é35%pcp Net interest income $88m é42%pcp Non-interest income $48m é23%pcp Cost to income ratio 63.3% 65.1%pcp 2
Slide 3: Achieving Our Goals
Achieving Our Goals Full Year Goal At 29 Feb 04 ROE 14% 14.2% ü EPS Growth 10%-12% 11% ü Cost to Income ratio 64% 63.3% ü Branch Expansion 12 new branches ü Asset Growth 55% increase in assets under management ü Asset Diversification UFJ acquisition & business banking ü expansion 3
Slide 4: Highlights
Highlights Underlying profit $50m é 42%pcp Cash EPS (Diluted) 30¢ é 11%pcp Interim dividend 21¢ é 24%pcp Impaired assets 0.10% pcp 0.10% (of avg assets) Branches 132 é 12 branches (since 31 Aug 03) é 24 branches (since 28 Feb 03) 4
Slide 5: Summary of Results
Summary of Results Feb 03 Feb 04 % Change $m $m vs PCP Net Interest Income 62.2 88.2 42% Non Interest Income 38.9 47.9 23% Total Income 101.1 136.1 35% Total Expenses 65.8 86.1 31% Underlying Profit 35.3 50.0 42% Bad Debts 4.6 8.6 87% Profit Before Tax 30.7 41.4 35% Goodwill - 0.9 -% Income Tax 9.4
Slide 6: Profit Contributions
Profit Contributions $60m $9m $50m $20m $40m $26m $4m $30m $1m $3m $20m $28m $21m $10m 28 Feb Net Non Expenses Bad & Goodwill Income 29 Feb 2003 Interest Interest Doubtful Expense Tax 2004 Income Income Debts 6
Slide 7: Continued Growth in NPAT
Continued Growth in NPAT NPAT up 32% on pcp and 20% on LH $30m $25m $20m $28m $23m $15m $21m $10m $13m $15m $5m 1H02 2H02 1H03 2H03 1H04 7
Slide 8: Underlying Profit
Underlying Profit Particularly strong growth in 1H04 42% up on pcp and 25% up on 2H03 $50m $50m $40m $40m $30m $35m $27m $20m $23m $10m $0m 1H02 2H02 1H03 2H03 1H04 Underlying profit = Profit before bad debts expense, goodwill expense and income tax 8
Slide 9: First-Half Highlights
First-Half Highlights ■ Integrated acquisitions and synergies realised: – UFJ Finance – ATM Solutions. ■ Opened a further 12 branches. ■ Granted Australian Financial Services license (FSRA). ■ Core banking system ready for deployment. ■ US$250m EMTN funding from European & Asian markets. ■ Successfu
Slide 10: Growing Shareholder Value
Growing Shareholder Value Bank of Queensland New ideas in banking
Slide 11: Shareholder Return
Shareholder Return Total Cumulative Shareholder Return on $1,000 invested on 1 September 1998 $2,700 Interstate BOQ expansion $2,619 announced $2,500 $2,300 1H03 profit Qld OMB released $2,100 David expansion Liddy, commenced $1,900 State Gov't appointed divested its as MD $1,700 shareholding All Or
Slide 12: Cash EPS Performance
Cash EPS Performance Cash EPS growth of 11% on pcp 30c 30.0c 28.3c 25c 27.0c 20c 21.0c 18.5c 15c 10c 5c 0c 1H02 2H02 1H03 2H03 1H04 Cash EPS = Diluted EPS before the impact of goodwill expense 12
Slide 13: Return On Equity
Return On Equity 18% 17.3% 15% 14.1% 14.5% 14.2% 12% 13.3% 9% 6% 3% 0% 1H02 2H02 1H03 2H03 1H04 Cash ROE = ROE before the impact of goodwill expense 13
Slide 14: Lending and Deposit Growth
Lending and Deposit Growth Bank of Queensland New ideas in banking
Slide 15: Sales (Loan Approvals)
Sales (Loan Approvals) Sales up 81% on pcp and 24% on LH Exceeded total annual sales for FY02 $4b $4.2b $3.4b $3b $2b $2.2b $2.3b $1.5b $1b $0b 1H02 2H02 1H03 2H03 1H04 Broker introduced home loans approx 22%of home loan approvals 15
Slide 16: Assets Under Management Growing Strongly
Assets Under Management Growing Strongly $12b $11.3b 35% 30% $10b $8.7b 25% $8b $7.3b 20% $6.6b $5.8b 15% $6b 10% $4b 5% $2b 0% 1H02 2H02 1H03 2H03 1H04 Value (LHS) Percentage Increase (RHS) ■ Total Assets Under Mgmt $11.3b up 55% (41% ex UFJ) over last 12 mths ■ Total Loans Under Mgmt $9.7b up 56%
Slide 17: Assets Under Management Mix
Assets Under Management Mix $5.8b $6.6b $7.3b $8.7b $11.3b 100% $0.7b $0.8b $1.1b $1.4b $1.6b 14% 80% $1.2b $1.4b $1.5b $1.8b $3.2b 28% 60% 40% $3.9b $4.4b 58% $4.7b $5.5b $6.5b 20% 0% 1H02 2H02 1H03 2H03 1H04 Housing & Consumer Business Treasury/Other Assets Target balance sheet lending mix 60% hou
Slide 18: Lending Growth
Lending Growth Growth rates significantly above system growth Housing Growth 40% Business Growth 45% 38% (excluding impact of UFJ) 40% 40% 35% 35% 30% 30% 25% 23% 25% 20% 20% 15% 15% 10% 10% 8% 5% 5% 0% 0% 2001 2002 2003 2004 2001 2002 2003 2004 BOQ System Note: 2004 = results to 29 Feb 2004 annuali
Slide 19: Asset Quality
Asset Quality ■ Significant growth without compromising asset quality: – strong credit standards; – well secured SME lending and strength of other security positions; and – mortgage insurance. ■ Minimal levels of low doc loans – $45m portfolio of low doc loans, < 1% of housing LUM. ■ Impaired assets
Slide 20: Low Impaired Assets
Low Impaired Assets $8.0b $8m $6.9m $2.9m UFJ Impaired assets $6m $6.3m (Unsecured portion $5.4m $5.1m of non-accrual, past $4m $4.3m due and restructured BOQ loans) $2m $0m 1H02 2H02 1H03 2H03 1H04 Impaired assets to 0.15% 0.15% average assets 0.13% Increase in 1H04 0.10% 0.10% 0.10% due to additio
Slide 21: Provision Coverage
Provision Coverage Total Provisions increased by $14.8m in the half, largely due to maintaining the General Provision at approx 0.72% of RWA (0.5% of RWA when tax effected) – Specific Provision ñ $1.8m, General Provision ñ $13m Healthy Provision Coverage $60m 9x 9x 6x 8x Provisions at 1H04: $50m 7x
Slide 22: Bad Debt Expense
Bad Debt Expense Bad debts expense increase driven by general provision requirements. Underlying bad debts expense experience $3.4m (pcp $2.1m ) $6m Expense $8.6m $4m $5.6m $5.2m $2m $3.3m $3.4m $2.5m $2.5m $2.0m $2.1m $1.5m $1.5m $0m 1H02 1H02 1H03 2H03 1H04 Underlying bad debts Increases in genera
Slide 23: Balanced Funding Mix
Balanced Funding Mix $5.6b $6.6b $7.3b $8.7b $11.3b 100% $0.2b $0.3b $0.3b $0.4b $0.6b 5% $1.1b $1.3b $1.5b $1.5b $1.7b 15% 75% $1.5b 39% $2.0b $2.1b $3.0b $4.4b 50% 25% 41% $2.8b $3.0b $3.4b $3.8b $4.6b 0% 1H02 2H02 1H03 2H03 1H04 Retail Wholesale & Other Securitisation Capital 23
Slide 24: Retail Deposits
Retail Deposits 19% growth in retail $5b deposits on LH $4.6b $4b $3.8b $3b $3.4b 19% $2.8b $2.9b $2b 13% 14% 7% $1b $0b 1H02 2H02 1H03 2H03 1H04 Retail deposits $4.6b, up 35% over last 12 months. 24
Slide 25: Revenues and Expenses
Revenues and Expenses Bank of Queensland New ideas in banking
Slide 26: Strong Revenue Growth
Strong Revenue Growth 35% increase in revenue over pcp $136m $140m & 20% over LH $113m $120m $101m $48m 35% $100m $90m $84m $43m $80m $39m $30m $35m $60m 65% $88m $40m $70m $54m $55m $62m $20m $0m 1H02 2H02 1H03 2H03 1H04 Net Int Income Non Int Income 26
Slide 27: Net Interest Margin
Net Interest Margin 2.50% 2.49% 2.34% 2.29% 2.25% 2.00% 2.11% 1.50% 1.00% 0.50% 0.00% 1H02 2H02 1H03 2H03 1H04 27
Slide 28: Margin Impacts
Margin Impacts ■ Margin pressure from timing issues : – Lag in deposit growth Strong asset growth – Negative cash/bill spread outstripping deposit growth in the short term 5.75% $8b 5.50% $7b $3.4b $6b 5.25% $5b 5.00% $4b 4.75% $1.1b $3b 4.50% $2b Feb- Apr- Jun- Aug- Oct- Dec- Feb- 1H02 2H02 1H03 2H
Slide 29: Operating Expenses
Operating Expenses Admin 5% This half $86m Operating Staff 29% 37% Last Half Admin $73m Occupancy 6% Computer Operating 21% 8% 31% PCP Admin Staff $66m 6% Staff 33% Operating 32% 34% Computer Occupancy 23% 7% Occupancy Computer 8% 20% 29
Slide 30: Growth in Income & Expenses
Cost to Income Ratio Cost to income ratio of 63.3% down from a high of 79% in 2H01 74% 25% Growth in Income & Expenses 72% Cost to Income Ratio 20% 70% 68% 15% 66% 10% 64% 5% 62% 60% 0% 1H02 2H02 1H03 2H03 1H04 Expense Growth (RHS) Income Growth (RHS) Cost to Income (LHS) 30
Slide 31: Capital
Capital Bank of Queensland New ideas in banking
Slide 32: Solid Capital Position
Solid Capital Position 12.1% capital adequacy $800m $278m 4.2% $600m $195m $109m 1.7% $400m $137m $143m $58m $118m $58m $50m 6.2% $200m $44m $405m $305m $202m $233m $176m $0m 1H02 2H02 1H03 2H03 1H04 Core T1 Hybrid T1 Tier 2 32
Slide 33: Capital Management
Capital Management ■ Ongoing capital required for regulatory requirements, target range of 10%-11% of RWA (Tier 1 of 7%-8%). ■ Recent capital raising of $90m ($50m ord, $40m hybrid). ■ Recent successful securitisation of leasing assets and established a securitisation warehouse. ■ Active capital man
Slide 34: Investing in Technology to Support our Growth
Investing in Technology to Support our Growth
Slide 35: Outsourcing Objectives on Track
Outsourcing Objectives on Track ■ Performance Management Stabilise IT environment – EDS performance is monitored against 47 critical service levels. Reduce costs Outsourcing is delivering to our expectations. Access to scale Transform IT systems 35
Slide 36: New Core Banking System
New Core Banking System ■ Expected investment will be $40m and will go live in May 2004. Costs of $33m at 1H04. ■ Will be the cornerstone of the PEP II initiative. Core Banking System Benefits 1. Customer centric system, rather than current product focus 2. Required a new system capable of supportin
Slide 37: Information Technology & Infrastructure Investment
Information Technology & Infrastructure Investment Asset carrying values: Expect to peak at approx $115m in 1H03 2H03 1H04 IT assets at 2H04 $m $m $m (excl ATM Solutions ATMs) IT Hardware / 41 39 48 Software Depreciation impact to be Infrastructure 17 22 25 offset by cost Investment savings and Core
Slide 38: Acquisitions
Acquisitions Bank of Queensland New ideas in banking
Slide 39: Acquisitions - UFJ Finance
Acquisitions - UFJ Finance ■ UFJ Finance acquired for a premium of $7m over net assets, total goodwill of $12.3m. ■ Renamed BOQ Equipment Finance. ■ BOQ now has $1.3b in equipment finance receivables under management. ■ Integration completed, successful in driving: – cost saving synergies – increase
Slide 40: Acquisitions - ATM Solutions
Acquisitions - ATM Solutions ■ ATM Solutions acquisition completed in September 2003. Total goodwill of $18.1m. ■ ATM Solutions currently have approx 1,400 ATMs deployed nationally, positioning them as the 2nd largest third party deployer. ■ This enables BOQ to directly service all our customers aro
Slide 41: Outlook
Bank of Queensland New ideas in banking
Slide 42: Our Strategic Focus
Our Strategic Focus ■ We are differentiating through our distribution focus. ■ We will build on our Qld franchise and expand interstate with the OMB model. ■ The OMB model drives shareholder value through: – empowerment, and – rewarding a customer service focus ■ PEP II will commence after implement
Slide 43: Analysts Risks/Issues
Analysts Risks/Issues Perceived Risk Mitigation ■ Insufficient organic capital ✦ Growth well above system generation ✦ Strong shareholder value creation ■ Execution risk in expanding ✦ 40 branches deployed in Qld interstate ✦ People/Service led strategy ■ Exposure to a housing ✦ Acquisition of UFJ d
Slide 44: Our Qld Expansion
Our Qld Expansion Opened 40 branches in 2 years 140 132 Target of 140 Qld branches by 31 Aug 05 120 93 100 74 62 50 Branches 80 37 40 60 58 58 58 58 58 40 20 0 1H02 2H02 1H03 2H03 1H04 Corporate Branches Owner Managed Branches 44
Slide 45: Interstate Expansion
Interstate Expansion ■ Targeting 100 branches interstate by 31 August 2006. ■ Will commence rollout by 31 August 2004. ■ Strong interest from potential owner managers. ■ Targeting consumer and SME market segments. ■ Business banking presence will closely follow. 45
Slide 46: Goals
Goals ■ Financial goals for 2004: – Strong asset growth whilst maintaining credit quality. – Drive further cost & revenue synergies from acquisitions – EPS growth of 10%-12% on a cash basis. – Target cost to income ratio of 64%. – ROE target of >14%. ■ Market Share Targets: – Maintain double digit h
Slide 47: Our Vision
Our Vision: “To be Australia’s leading regional bank, providing innovative personal and business banking solutions and offering the best customer service experience.”