Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2010 Earnings Presentation
44 slides from Bank Of Queensland's earnings presentation, Aug 31, 2010
Slide 1: Bank of Queensland Full year results
Bank of Queensland Full year results 31 August 2010
Slide 2: Agenda
Agenda Result highlights David Liddy Managing Director & CEO Financial results & portfolio details Ewan Cameron Chief Financial Officer Strategy and outlook David Liddy Managing Director & CEO 2 Bank of Queensland Limited ABN 32 009 656 740
Slide 3: Result highlights
Result highlights David Liddy Managing Director
Slide 4: Result highlights
Result highlights Increased normalised cash profit despite peak bad debt losses as per guidance Expense disciplines continue to improve cost-to-income ratio Balance sheet continues to outperform system, achieving ~2.5x system lending and ~1.5x system deposit growth Increased funding costs impacting
Slide 5: Result continues momentum
Result continues momentum 2009 2010 Normalised cash NPAT $187.4m $197.1m 5% Cash EPS (normalised fully diluted) 98.4¢ 83.4¢ 15¢ Ordinary dividend 52¢ 52¢ - Loan growth (pcp) 10% 11% Retail deposit growth (pcp) 16% 11% Net interest margin 1.56% 1.60% 4bps Cost-to-income ratio (normalised cash) 49.9%
Slide 6: Growth well ahead of system
Growth well ahead of system Lending growth: ~2.5x system* Deposit growth: ~1.5x system* 11% 11% 8% 4% System BOQ System BOQ BOQ System System BOQ System System Lending growth Retail deposit growth * Last 12 months Source: APRA data 6 Bank of Queensland Limited ABN 32 009 656 740
Slide 7: Continued expense management
Continued expense management Expenses slightly ahead of full year guidance… expense management disciplines delivering a more efficient business Cost-to-income ratio* Expenses* $314.0m $320.6m 62.6% 2% $13.8m $16.3m Admin $85.5m $87.2m Operating 56.1% $64.4m $68.3m Computer 49.9% $24.5m $24.0m Occupa
Slide 8: Strong capital base and liquidity
Strong capital base and liquidity Tier 1 and total capital levels remain in excess of APRA and internal benchmarks Conservative liquidity position maintained during half to ensure smooth completion of recent acquisitions and recently buoyed by record post-GFC securitisation issue Capital adequacy Li
Slide 9: Financial results and portfolio details
Financial results and portfolio details Ewan Cameron Chief Financial Officer
Slide 10: Normalisation items
Normalisation items In line with market practice, a number of non-cash and non-recurring items have been normalised to better illustrate underlying performance Summary of normalised income and expense items below Normalisation adjustments Income ($m) Expenses ($m) After tax (before tax) (before tax)
Slide 11: Delivering commitments on income growth and expense management
Delivering commitments on income growth and expense management 2009 2010 % Change $m $m vs pcp Total Income 629.0 710.9 13% Adj: Normalisation & non-cash items - 11.1 Norm alised Total Incom e 629.0 699.8 11% Expenses 369.8 347.9 -6% Adj: Normalisation & non-cash items 55.8 27.3 Norm alised expenses
Slide 12: Funding costs impact NIM
Funding costs impact NIM As per 1H guidance, some NIM contraction experienced in 2H as a result of higher funding costs, but full year NIM increased 4bps NIM up 4 bps (23bps) 14bps (13bps) 1.70% (8bps) (2bps) 5bps (7bps) (1bp) 1.60% 1.70% 1bp 1.56% 1.62% Margin Asset Funding Capital & Liquidity Marg
Slide 13: NIM deterioration over GFC
NIM deterioration over GFC Increased funding costs and impact of holding increased capital levels having a significant impact on shareholder returns vs pre-GFC GG fee $41m in FY10 increasing to $56m in FY11 vs majors paying $22m for GG on a comparative basis Carrying additional liquidity post GFC 15
Slide 14: Lending income strong… Non-interest headwinds as guided
Lending income strong… Non-interest headwinds as guided Net Interest Income Non Interest Income1 17% (7%) $562m $148m $138m $481m 2009 2010 2009 2010 Balance sheet growth in excess of As guided the headwinds in non-interest system continues to support NIM income continued to reduce this source Incre
Slide 15: Expense composition
Expense composition Cost initiatives implemented have created a more efficient and productive organisation Targeting 45% in FY11 (excluding acquisitions)… providing headroom to invest in marketing, brand, technology, compliance and regulatory initiatives Cost-to-income ratio Operating expenses Emplo
Slide 16: Funding profile
Funding profile High liquidity levels enabled more selective funding options Opportunistic issuance of L/T debt lengthening funding profile to 2.4 years Recent record securitisation issue and significant warehouse capacity providing further room to grow 2009 Funding 2010 Funding S/T S/T Wholesale Wh
Slide 17: Wholesale funding task manageable
Wholesale funding task manageable Wholesale Funding ($b) Long Term Debt Issuance ($b) $5.4 0.1 $17.4 $17.5 - $18.3 0.5 2.5 $15.5 0.5 0.3 5.0- 5.4 $3.0-$3.6 5.3 0.2 5.6 $2.3 6.2 - 6.4 0.7 1.6 - 1.8* 6.0 0.3 2.8 6.1 0.4 - 0.6 1.3 5.6 5.8 - 6.0 0.8 - 1.0 3.4 2009 2010 2011E 2009 2010 2011E Term Debt Sy
Slide 18: Consistent capital management
Consistent capital management Dividend policy aimed at preserving capital strength Excess equity capital diluted EPS during the period, but provides platform for future growth and bolt-on acquisition opportunities A number of proposed regulatory changes in progress that may impact capital position.
Slide 19: Acquisition contribution
Acquisition contribution CIT and St Andrew’s both provided financial contribution for two months in FY10 result Summary of their respective contributions is as follows: CIT St Andrew 's Total Net Interest Income 9.5 0.0 9.5 Non Interest Income 0.8 7.5 8.3 Total Incom e 10.3 7.5 17.8 Expenses (6.3) (
Slide 20: Portfolio Details
Portfolio Details Ewan Cameron Chief Financial Officer
Slide 21: Loans under management by product
Loans under management by product 19% CAGR $32.0b 12% $28.9b $3.8b leasing $26.3b $3.2b $5.2b $3.0b 16% $4.7b SME and $19.2b $4.4b 23.0b commercial $21.0b $2.7b $18.9b $3.4b $13.1b 72% retail 2007 2008 2009 2010 Retail Business Leasing Focus continues to remain towards retail mortgages and residenti
Slide 22: Geographic diversification continues
Geographic diversification continues Consistent pattern of growing geographic diversity – less reliance on Queensland Strongest growth from interstate franchise, particularly VIC and NSW 2006 2010 FY10 – Growth rate % QLD 62% QLD 5% QLD 81% NSW NSW18% NSW NSW 13% Vic VIC 34% 9% WA 1% VIC 7% WA 1% Ot
Slide 23: Large exposures
Large exposures Largest exposures by ANZSIC Group The Bank has 25 connections Retail Financial and Insurance with exposures >$20m Arts & Recreation 2% 4% Services 3% Personal Total commitment exposure 2% Other Property & $796m (drawn balance $691m) 5% Construction 27% 2.5% of total loans under manag
Slide 24: Portfolio quality
Portfolio quality Arrears 90+ days (% of portfolio, excluding securitised loans) 38% of 26% of 22% of 14% of Portfolio Portfolio Portfolio Portfolio 2.00% 1.78% 1.68% 1.75% 1H08 1.50% 2H08 1.28% 1.25% 1.22% 1H09 2H09 1.00% 1H10 0.75% 2H10 0.56% 0.50% 0.25% 0.00% Housing Other Retail* Business Leasin
Slide 25: Lines of Credit portfolio
Lines of Credit portfolio Majority of “other retail” is Lines of Credit, secured by residential property Very low risk portfolio with good security, resulting in negligible bad debt Increase in arrears a definition issue rather than any material credit issue LOC Arrears Portfolio Metrics 2H’09 1H’10
Slide 26: Equipment Finance Leasing portfolio
Equipment Finance Leasing portfolio Slight deterioration in 30+ delinquent from February, peaking in May Doubled collection team to enable more active monitoring and communication with customers in arrears - 15% reduction in 3 months Portfolio is well provisioned and bad debts in line with SME Leasi
Slide 27: Bad debt analysis
Bad debt analysis As per guidance peak bad debts in FY10 – commercial and EF portfolios increased write-offs … all portfolios now showing signs of improvement vs peak Retail portfolio remains well secured resulting in minimal bad debts Underlying bad debts by product Underlying bad debts Leasing Bus
Slide 28: Increased provision coverage
Increased provision coverage Total provisions increase in line with peak loss expectations in FY10 Level of impaired assets has reduced in 2H10 whilst increasing provisions Focus remains on well secured housing and SME lending Impaired assets vs Total provisions Collective & specific provisions 1.00
Slide 29: Strong asset quality
Strong asset quality As per guidance we believe FY10 will be the peak loss year, but BOQ focus remains on well secured housing and SME lending BDD / GLA Performance* 0.79% BOQ peak loss year FY10 0.45% 0.45% BOQ 0.33% Majors 0.20% 0.18% 0.12% 0.11% 2007 2008 2009 2010 * Source – GS Research. BOQ cal
Slide 30: Strategy and outlook
Strategy and outlook David Liddy Managing Director
Slide 31: Sticking to the plan
Sticking to the plan High margin/ Expand / acquire high low capital margin / low capital intensity products Value Accretion Acquisition of Pioneer & Geographic, Home in WA- focused higher Scale M&A growth geo plays Interstate Organic expansion into a Expansion national footprint & ATM fleet High gro
Slide 32: Bolt-on Acquisitions
Bolt-on Acquisitions CIT Aust. & NZ and St Andrew’s acquisitions completed 30 June and 1 July respectively 100% of existing management team and 100% of key staff transitioned Business momentum maintained and enhanced through the purchase process Transition and integration projects underway - complet
Slide 33: Creating BOQ National Finance
Creating BOQ National Finance BOQ Distribution s le s sa es er ch ok ed an br ct ur ire ct Br EF ru D BOQ Products St Equipment loans Equipment leases CIT Products Receivables finance Automated consumer finance Automated commercial leases Technology Leasing Managed Services Inventory Finance Existin
Slide 34: BOQ National Finance
BOQ National Finance Creation of a best in class finance company Loans Under Management by segment Ex-CIT management team is Debtor Finance now responsible for ~$3.9bn 4% of assets including BOQ Vendor Finance Equipment Finance and 12% Debtor Finance Majority of customers have their primary banking
Slide 35: St Andrew's acquisition
St Andrew‘s acquisition Life and general insurer underwriting personal lines focussed on consumer credit Capital-lite, high ROE business overcoming 1% of policies headwinds in banking non- 0 FTE 18% of policies interest income 34% of policies 5 FTE B2B distribution model 57 FTE 2% of policies throug
Slide 36: Strategic opportunities in Insurance
Strategic opportunities in Insurance Grow and diversify the Product mix by underwritten product * business through: Improving sales Other productivity of existing 14% Corporate Partners Acquiring new Corporate Partner relationships Mortgage Developing Life Protection complementary product 23% 48% li
Slide 37: Operating business model
Operating business model Customers Segment Value proposition Housing 71% of total lending Ave loan size: Your own personal ~ $250k bank Retail Banking Ave LVR: low 60s Relationship based SME ~33% securitised service model – SME ~ 16% of total lending ~40% secured by residential property ie. Owner Ma
Slide 38: Unique relationship based personal service platform
Unique relationship based personal service platform Exposure Consumer Exposure SME Commercial $500k $10m Increasing Credit Protection Increasing Credit Protection Investment Capex $250k $2.5m $100k Refinance $1m Consolidation $50k Leisure & $500k Receivables Lifestyle $25k $150k Equipment / Cars/bik
Slide 39: Network continuing to grow and diversify earnings stream
Network continuing to grow and diversify earnings stream Total OMB commissions OMB income split FY10 Upfront income $133.1m 29% $116.1m Share of fees $93.7m 12% $70.4m Other income 10% FY07 FY08 FY09 FY10 Trail income 49% Total OMB commission payments Majority OMB income comes from continue to incre
Slide 40: Targeting customer growth and lower cost funding
Targeting customer growth and lower cost funding PRODUCT INNOVATION FILLING PRODUCT SUITE GAPS Online share trading service in partnership with CMC Markets Stockbroking (launch first qtr 2011) Increase non-interest income, diversify revenue SMSF high interest bearing investment account (launch first
Slide 41: FY11 guidance
FY11 guidance CASH NPAT GROWTH (normalised) Maintain 1.5 – 2x system growth $220m - $250m DIVIDEND GROWTH EFFICIENCY 45% cost to income 10% - 20% (excluding acquisitions) 41 Bank of Queensland Limited ABN 32 009 656 740
Slide 42: Pathway to 15% ROE
Pathway to 15% ROE Strategic plan to support ROE guidance – some dependencies include NIM & BDD improvement, continued incremental efficiency gains Growth in 2010 bolt-on acquisitions embedded in forecasts 0.5% ~15%+ 1.6% GG Fee 1.6% 3.3% 9.6% Assumptions : Asset growth 11% pa NIM (ex-CIT) 175bps C/
Slide 43: Summary
Summary Another strong result, despite economic conditions and bad debts peaking Headwinds Tailwinds Margin pressure still present 2010 acquisitions performing better Funding costs still high than pro-forma Significant regulatory and Growth opportunities in our model in technology spend our 3 busine
Slide 44: Bank of Queensland Limited ABN 32 009 656 740
44 Bank of Queensland Limited ABN 32 009 656 740