Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2020 Earnings Presentation
46 slides from Bank Of Queensland's earnings presentation, Apr 8, 2020
Slide 1: Half year ended 29 February 2020
For personal use only Half year ended 29 February 2020 BANK OF QUEENSLAND LIMITED ABN 32 009 656 740. AFSL NO 244616.
Slide 2: Introduction, results overview, financial detail, summary
For personal use only INTRODUCTION Cherie Bell, General Manager Investor Relations RESULTS OVERVIEW George Frazis, Managing Director and CEO FINANCIAL DETAIL Ewen Stafford, Chief Financial Officer and Chief Operating Officer SUMMARY & OBSERVATIONS, IMPACTS OF COVID-19 George Frazis, Managing Directo
Slide 3: George Frazis, Managing Director and CEO
For personal use only GEORGE FRAZIS MANAGING DIRECTOR AND CEO
Slide 4: Result highlights
For personal use only 1. Cash NPAT down 10% on PCP and a 1% reduction compared to 2H19, with FY20 being a transition year for BOQ 2. Balance sheet growth, with improved momentum across housing and commercial businesses 3. Asset quality remains sound, additional $10m collective provision overlay take
Slide 5: Key financial results
For personal use only Key financial results 1H20 2H19 1H19 1H20 v 2H19 1H20 v 1H19 Statutory net profit after tax $93m $142m $156m (35%) (40%) Cash earnings after tax $151m $153m $167m (1%) (10%) Cash return on average equity 7.5% 7.8% 8.8% (30bps) (130bps) Common Equity Tier 1 ratio 9.91% 9.04% 9.2
Slide 6: Lending growth, NIM, cost to income, loan impairment
For personal use only LENDING GROWTH ($M) NET INTEREST MARGIN (%) +56% -3bps 791 781 1.97 1.98 1.94 671 1.92 1.89 500 437 1H18 2H18 1H19 2H19 1H20 1H18 2H18 1H19 2H19 1H20 COST TO INCOME RATIO (%) LOAN IMPAIRMENT EXPENSE ($M) Flat +450bps 44 51.5 54.0 47.6 47.3 49.5 30 30 22 19 1H18 2H18 1H19 2H19 1
Slide 7: Growth in housing and business banking
For personal use only GROWTH IN HOUSING GLA ($M)1 BALANCED GROWTH ACROSS BUSINESS BANKING GLA ($M) 507 462 102 332 39 70 489 60 445 89 265 469 43 339 459 364 287 303 189 -441 -717 -682 33 -92 1H19 2H19 1H20 1H19 2H19 1H20 Total VMA Housing BOQ Specialist Housing BOQ Retail and Business Housing Total
Slide 8: Customer NPS, home lending, deposits, VMA
For personal use only IMPROVED CUSTOMER NPS1 IMPROVED HOME LENDING GROWTH ($M)2 -248 -216 73 +13 +27 +2 to +16 to +7 to +31 469 445 489 1H20 Movement in -416 1H20 Movement in 1H20 Movement in -717 -661 Retail MFI NPS Mortgage NPS overall NPS VMA 1H19 2H19 1H20 Net Growth VMA BOQ Retail SOLID DEPOSIT
Slide 9: Business bank, BOQ Specialist lending and deposits
For personal use only LENDING GROWTH – BUSINESS BANK AND BOQF ($M) LENDING GROWTH – BOQ SPECIALIST ($M) +112% -89% +41% 364 502 303 411 399 43 189 40 341 357 70 60 89 68 33 371 459 273 287 339 1H19 2H19 1H20 -92 1H18 2H18 1H19 2H19 1H20 1H19 2H19 1H20 Asset Finance Commercial Commercial Housing & Co
Slide 10: For personal use only
For personal use only Bank of Queensland Limited 2020 Half Year Results Presentation 10
Slide 11: Strategy execution progress
For personal use only Our purpose led empathetic culture +13 MFI NPS BOQ Retail from +3 (Aug 19) to +16 (Feb 20) 1 sets us apart +27 Mortgage NPS BOQ Retail from -20 (Aug 19) to +7 (Feb 20) 1 Distinctive brands serving attractive 1.3x system home lending growth2 niche customer segments 2.2x
Slide 12: Financial Detail
For personal use only FINANCIAL DETAIL EWEN STAFFORD CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER
Slide 13: Group financial results
For personal use only $ million 1H20 2H19 1H19 1H20 v 2H19 1H20 v 1H19 Net interest income 483 485 476 (0%) - 1% Non-interest income 58 63 65 (8%) (11%) Total income 541 548 541 (1%) 0% - Operating expenses (292) (282) (268) 4% 9% Underlying profit 249 266 273 (6%) (9%) Loan impairment expense (30)1
Slide 14: Retail and Business results
For personal use only RETAIL BUSINESS $ million 1H20 1H20 v 1H19 1H20 1H20 v 1H19 Net interest income 214 0% - 271 4% Non-interest income 29 (9%) 21 (19%) Total income 243 (2%) 292 2% Operating expenses (154) 9% (127) 8% Underlying profit 89 (16%) 165 (2%) Loan impairment expense (9) (10%) (21)1 5%
Slide 15: Lending growth and gross loans
For personal use only SUMMARY HALF ON HALF GLA GROWTH ($M) +56% • Niche strategy resulting in strong 791 781 growth in commercial and housing 671 264 500 lending 437 517 379 38 105 292 159 • VMA and BOQS driving uplift in 277 303 364 232 housing volumes, whilst BOQ Blue 235 15 -32 33 continues to li
Slide 16: Funding mix and customer deposits
For personal use only SUMMARY LONG TERM WHOLESALE ($BN) +11% • Deposit to loan ratio of c.69% 12.0 10.4 11.5 • Lower reliance on TDs and continued growth in low cost 4.6 4.6 4.2 4.2 3.9 3.9 transaction and savings accounts 0.8 1.6 1.7 4.9 4.9 5.0 5.0 4.8 4.8 • Focused on increasing longer dated, sta
Slide 17: Major maturities
For personal use only SUMMARY MAJOR MATURITIES ($M)1 2 3 • Well positioned on funding through 1,311 diversified funding sources and orderly maturity towers 350 • 2H20 includes a $150m4 Additional Tier 1 note and $700m senior 850 150 unsecured maturities 750 744 150 • Diversified access and capacity
Slide 18: COVID-19 funding and liquidity environment
For personal use only COVID-19 has caused significant disruptions and volatility in financial markets Term funding credit spreads have increased, and debt investors are more cautious BOQ is well positioned for volatility given good liquidity and capital levels prior to market disruption RBA
Slide 19: Net interest margin
For personal use only NET INTEREST MARGIN – AUGUST 2019 TO FEBRUARY 2020 0.06% 0.04% -0.05% -0.03% -0.03% 1.92% -0.02% 1.89% 2H19 Asset pricing Funding costs Hedging costs Capital and low Third party costs Liquidity 1H20 and mix and mix cost deposits and AASB 16 NIM SUMMARY KEY NIM MOVEMENTS OVER TI
Slide 20: Non-interest income breakdown
For personal use only SUMMARY NON-INTEREST INCOME BREAKDOWN ($M) • Banking income declines as a result of: -11% 75 70 • changes in consumer preferences 2 towards low and no fee products; 65 63 10 9 58 7 5 • reduction in merchant fee income 4 2 17 15 6 due to migration to new third party 15 arrangeme
Slide 21: Operating expense breakdown
For personal use only SUMMARY OPERATING EXPENSE BREAKDOWN ($M) • Increased technology spend on +9% strategic initiatives (e.g., VMA Phase 1 and core infrastructure modernisation) 292 268 282 262 265 17 17 • Increased employee and 10 10 11 41 administrative expenses relating to 40 44 47 41 risk and r
Slide 22: Provisions and loan impairment expense
For personal use only PROVISIONS ($M)1 LOAN IMPAIRMENT EXPENSE ($M)1 +1% FLAT 219 214 233 235 44 201 30 10 30 120 115 137 148 150 22 2 19 12 34 28 99 86 77 85 85 18 1H18 2H18 1H19 2H19 1H20 1H18 2H18 1H19 2H19 1H20 Specific Collective Specific Collective IMPAIRED ASSETS ($M) -1% LOAN IMPAIRMENT EXPE
Slide 23: Capital investment and software intangibles
For personal use only SUMMARY CAPITAL INVESTMENT ($M) 95 • Increased capital investment spend in 71 1H20 (+$17M) 60 52 46 • Investment focus on VMA digital bank 25 35 and core infrastructure modernisation • Foundational investment for strategy FY18 FY19 FY20 1H 2H SUMMARY SOFTWARE INTANGIBLE ASSET B
Slide 24: Cash to statutory profit reconciliation
For personal use only $ million 1H20 2H19 1H19 Cash earnings after tax 151 153 167 Strategy Refresh (after tax) Intangible Asset Review (Policy change (18m) / Amor. acceleration ($11m) / Other ($3m)) (32) 0 0 Restructure charges (operating model review ($10m)/ other ($5m)) (15) 0 0 Other Non-Cash It
Slide 25: CET1 capital movement and outlook
For personal use only CET1 1H20 VS 2H19 0.49% 1.10% (0.31%) (0.12%) (0.04%) (0.07%) (0.05%) Underlying capital generation of (0.06%) (0.07%) 10.07% +6 bps 9.04% 9.91% 2H19 AASB 16 Capital Proforma Cash earnings Dividend RWA growth Securitisation Intangible Restructuring Other items1 1H20 transition
Slide 26: Subsequent event note: COVID-19
For personal use only The economic environment has evolved materially since 29 February 2020 including COVID-19 being classified as a pandemic by the World Health Organisation on 11 March 2020 Requirement to disclose material change in circumstances as a non-adjusting subsequent event disclosure
Slide 27: Summary & Observations, Impacts of COVID-19
GROUP SUMMARY 6 _ OBSERVATIONS, IMPACTS OF COVID-19 GEORGEFRAZIS = ADAM MCANALEN
Slide 28: Outlook and COVID-19 uncertainty
For personal use only Future economic outlook uncertain due to rapid escalation of COVID-19 and subsequent actions to contain the virus that have resulted in extraordinary economic dislocation Entered this unprecedented and uncertain period with a good capital and liquidity position, and a quali
Slide 29: Economic impact of COVID-19 and BOQ position
For personal use only Economic impact of COVID-19 has been significant - abrupt, deep and broad Government and regulatory response has been extensive to cushion impact Government injection of ~$320bn into the economy supporting jobs and businesses RBA providing liquidity through term funding
Slide 30: Macro economic and consumer business outlook
For personal use only MACRO ECONOMIC • Economy heading into a very difficult period, with a likely sharp decline in GDP in Q2 • Government and regulatory response has cushioned the decline • Greatest uncertainty is the length of the crisis, dependent on cures for severe cases and on a vaccine • Bala
Slide 31: Staff wellbeing and bank operations
For personal use only STAFF WELLBEING BANK OPERATIONS Extensive communication plan enacted – ‘Act now’, Business Continuity Plan enacted on 28 January 2020 ‘Prioritise” and ‘Avoid’ All 165 branches remain open All branches fully equipped with social distancing measures Corporate Offices ro
Slide 32: Provision coverage and impaired assets
For personal use only SUMMARY SPECIFIC PROVISIONS / IMPAIRED ASSETS (%) • Specific provisions to impaired assets remained broadly flat 57 • Coverage levels remain strong compared to peers 52 51 43 43 • Increased collective provision by $10m in response to COVID- 19 uncertainty • No new large impaire
Slide 33: Arrears
For personal use only SUMMARY COMMERCIAL ARREARS (bps) • A general improvement has been experienced over the last 150 141 138 140 147 few years in both 30+DPD and 90+DPD arrears 126 150 129 119 • Marginal elevation for 90+DPD arrears across all portfolios 103 108 116 compared to prior year 97 102 90
Slide 34: Housing, commercial and finance portfolios
For personal use only SUMMARY HOUSING PORTFOLIO LVR BANDS • Carefully managed risk levels across housing portfolio, with 6% 13% Less than 40% average LVR of 66% 16% 40-60% • Increased industry diversification across our commercial and 21% 61-80% finance portfolio compared to the previous 3 years 81-
Slide 35: Economic assumptions April 2020
For personal use only ECONOMIC ASSUMPTIONS – 7 APRIL 2020 Economic Assumptions Q2 2020 2020 2021 Potential collective provision GDP Movement (%) -6.0% -3.0% +1.3% – 4.0% impact of $49m - $71m1, 8.5% reducing to inclusive of the $10m Unemployment Rate (%) 9.0% 8.5% 6.5% recognised in 1H20: Property P
Slide 36: Relief for small business and personal customers
For personal use only SMALL BUSINESS CUSTOMERS PERSONAL CUSTOMERS Business Banking Relief Package offering small business Personal Banking Relief Package providing deferral customers with up to $10m in lending a 6 month deferred repayment options for our home loan customers for an initial repaym
Slide 37: Retail customer facts and relief requests
For personal use only CUSTOMER FACTS1 BANKING RELIEF PACKAGE REQUESTS Of 75k customers c.5.5% c.5,000 59% with <80% LVR and av. loan size of $392K requested assistance Total assistance requests Average LVR 49% $319K Of 20k customers c.4.5% with >80% LVR and av. loan size of $409K requested assistanc
Slide 38: Business customer facts and assistance requests
For personal use only CUSTOMER FACTS1 BUSINESS ASSISTANCE REQUESTS BY LVR (%) Total assistance requests for business c.10,000 customers 3% 14% 0% - 60% 3% 61% - 80% Of 168k customers c.6% with <$10m and av. loan size of $126k requested assistance 81% - 90% 21% 59% Of 150 customers c.4% 91% - 100% wi
Slide 39: Revenue and cost outlook
For personal use only Revenue – Continued pressure Home loan and business loan application volume growth holding up, but this could change quickly Repayment holidays limit decline in growth of loan balances Margin pressure on mortgages abating as deposits are becoming more competitive, NIM lik
Slide 40: Impairments, capital and liquidity outlook
For personal use only Impairments – Uncertain environment Government actions cushion downside to unemployment Preliminary overlay provision of $49m-$71m1, inclusive of the $10m recognised in 1H20 Proactive contact with customers to help best manage through the next 6 months Will require care
Slide 41: Summary
For personal use only First half results on track reflecting transition year, with good momentum Remain committed to transformation strategy and return to profitable growth Uncertain outlook given COVID-19 impacts, sensible adjustments being made, being monitored and managed closely Balance sheet is
Slide 42: Appendices
GROUP APPENDICES For personal us
Slide 43: Differentiators and key statistics
For personal use only OUR DIFFERENTIATORS KEY STATISTICS FOR 1H20 Unique brands with proud history Deeply anchored in local communities c.210k VMA c.35k Specialist >910k c.500k Retail c.90k Finance Highly specialised bankers, within niche industry segments Customers c.80k Business Building a
Slide 44: Glossary
For personal use only 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 L
Slide 45: Important information and disclaimer
For personal use only IMPORTANT INFORMATION AND DISCLAIMER Summary information 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
Slide 46: For personal use only
For personal use only