Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — H1 2003 Earnings Presentation
51 slides from Bank Of Queensland's earnings presentation, Apr 4, 2003
Slide 1: MEA OU AR ESTED Ly EERE Yeie Gait LNA HUN ASNT COP A Ly
MEA OU AR ESTED Ly EERE Yeie Gait LNA HUN ASNT COP A Ly i es Vy LO Leys yy Ly We ey j Le oy ae Y, Vee LLL LI ay Yee I Le CO yy / . ye Us ee ae Ly DO ne DI Aes Gey fy Le es) eye we ESTE: a, LT GLE RL Eee j . Wis Te Le Ta ye Le Leone ee a, oe a 4, "9 ey ve eae egy ey y ye ED, y i - a; ie iy ip a y es
Slide 2: Year highlights
year... by «» Continued strong sales growth $2.3b of Lending approvals 4#47%LH, #451 %pcp. » Growth in assets under management $7.3b A10%LH, W25%pcp. » Growth in retail deposits $3.4b A#14%LH, M22%pcp. » Total revenue $101m #12%LH, W20%pcp. » Improved efficiency 65% Cost to income ratio, Y from 70%L
Slide 3: Underlying profit, EPS and dividend
Underlying profit $35m, 4830%LH, #4.55%pcp. EPS (Diluted) 28¢, A833%LH, #451 %pcp. Increased dividend by 2¢ to 17¢ per share. Continued excellent asset quality - impaired assets reduced to 0.1% of average assets. “PEP” Benefits revised up to $24m from $16m. 10 more branches opened to expand our dist
Slide 4: Summary of Results
Summary of Results con ag Change bo scat > 13% Net Interest Income Non Interest Income 30 35 11% Total Income 84 90 12% Total Expenses 61 63 5% Underlying Profit 23 27 30% Bad Debts 4 5 0% Profit Before Tax 19 22 36% Income Tax 6 7 29% Net Profit After Tax 13 15 38% Earnings Per Share 19¢ 21¢ 33% Co
Slide 5: Growth in profit driven by strong revenues and cost control
35 x 30 £ 5 ® 25 : a 20 £ A 15 10 Growth in profit driven by strong revenues and cost control Feb 02 Non-Interest Expenses rege Em Bad Tax Interest ($3.8m) Income $8.2m 5 Hew hens te backlog
Slide 6: Strong asset growth and double digit EPS growth
» Strong Asset Growth » Assets up 10% on last half, 25% on pcp » Double digit EPS » EPS growth of 33% on Growth last half, 51% on pcp » Cost to Income Ratio of |s Cost to Income ratio of 68% 65% » ROE of 14% » ROE of 17% «» 120 Branches by » 108 Branches August 03 (10 opened this half)
Slide 7: MEET
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Slide 8: EPS Performance
EPS Performance 30 + o 25 -- = 20 + 20% w oy 15 + 10% 2 10 -- ~ 0% rs) 5 4 + 10% 0- ~ -20% 1H01 2H01 1H02 2H02 1H03 i EPS Diluted (LHS) -# EPS Growth
Slide 9: ROE Performance
ROE Performan a - . 6% -- 3% 0% - 1H01 2H01 1H02 2H02 1H03
Slide 10: 1H01 2H01 1H02 2H02 1H03
1H01 2H01 1H02 2H02 1H03 10 cw hfeas. te batho
Slide 11: BOQ vs ASX 200 Financials share price
0.8 = Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 02 02 O02 O02 02 O02 O02 O02 O02 O02 O02 O03 = 03 —BOQ *ASX 200 Financials 11
Slide 12: HY yee
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Slide 13: Stabilised Net Interest Margin and solid net interest income
Stabilised Net Interest Margin and solid Nil Ct — . W c ° = FA 52 1.0% 50 0.5% 48 0.0% 1H01 2H01 1H02 2H02 1H03 Net Int Income (LHS) -& Margin (RHS) 13
Slide 14: Sound and growing non-interest income contribution
Sound and growing non-interest i contribution _. oO i) 1 $m N °o i —_ i) L 1H01 2H01 1H02 2H02 1H03 14
Slide 15: Admin expenses this half
Admin This Half $66m Staff 32% Operating 34% | Significant Item Last Half $63m Admin Occupancy 3% Staff 8% 28% Computer 20% $20m Operating — ~ Occupanc 37% ~ Computer 8% 15% 15
Slide 16: Cost to Income Ratio
Cost to Income Ratio 80% + r 14% 78% — 12% 76% ; 74% hy 10% 72% 7 8% 70% - + 6% 68% - L 4% 66% + nm 64% - | 24 62% oe re 0% 60% -2% 1H01 2H01 1H02 2H02 1H03 mam Expense Growth (RHS) ™ Income Growth (RHS) -@ Cost to Income (LHS) 16 Growth in Income & Expenses
Slide 17: Showing growth in NPAT for 3rd successive half
Showing growth i in NPAT for 3rd successive half i 1 oi gS SN l t N Sg 3 $ Millions i t —_. 3 = 1H01 2H01 1H02 2H02 1H03 ia NPAT (LHS) - Percentage Growth (RHS) 17
Slide 18: Ly BAUR Le SYOSSET LOIS, Gan a ey ES GORI
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Slide 19: Information Technology Investment
Information. Technology Investment Investment IT Hardware / Software EDS Infrastructure Investment Core Banking System Change v_ Projected 28 Feb 03 Lasthalf 31 Aug 04 $m $m $m 41 (3) 43 17 6 27 11 10 40 69 13 110 19
Slide 20: IT Assets
IT Assets IT assets of $41m, consist of: » Hardware » Completed software and systems » Systems under development 20
Slide 21: First year costs total $17m, now being amortised
» First year costs total $17m, now being amortised: - Transition & Transformation Project is a significant infrastructure investment for the Bank. -~ Implementing new systems and processes to underpin the 10 year outsourcing contract. -- Initiatives are driving tangible benefits. » One more year to
Slide 22: EDS engaged to replace core banking system
EDS engaged to replace our outdated core banking system. Required a system capable of supporting our growth aspirations. FiServ selected as supplier. Expected investment will be $40m and complete by March 2004. Costs to date of $11m. 22
Slide 23: Technology and infrastructure investment
astructure Investment « Carrying value of our technology and infrastructure investment will be approx $110m by 31 August 2004. « Servicing of amortisation (approx $13m p.a.) built into evaluation of the outsourcing contract. » Benefits exceeding our original expectations of $100m over 10 years. » We
Slide 24: Stabilise IT environment, access to scale, transform IT systems
Stabilise IT environment Access to scale Transform IT systems
Slide 25: Performance Management
ormance Management _ » Performance Management -~ EDS performance is monitored against 47 critical service levels. ~ monitored weekly by Management. ~ reported monthly to Board. » Currently EDS meet or exceed all 47 critical service levels.
Slide 26: HY yee
HY yee WY 7 LF YG Zh ue iy, Ye Ly We _ a yy, iy, So is Ley 7 a Lo ey Be. DESI We Vee Gy Lae 2 Wes ee _ Ly ay LD Yi ey Gees Gos Gee es SEAS SS = — cS SS ) iy y y j y yi Z ye y y y Z y te y . ey Le is ie y ie Bo ie a yy Hee a ee So _ Lo 7 Sey) oe Coy) Vie _. : as / one _ 7 y y y _ / Lo ee ye _ LS . y
Slide 27: Key sales: Total approvals of $2.3b
Key Us Housing ‘Total Approvals of $2.3b, 68% sales up 7% on last half and 51% on pcp. ° pep This Half $2.3b Housing 71% a Business Cc 9 Last Half $2.1b rua 28% Housing 78% Consumer 5% Business 24% Business 1B% 27
Slide 28: Assets under management growing
Assets el management growing $Billions - 4% - 2% - 0% 1H01 2H01 1HO2 2HO2 = 1HO03 a Value (LHS) -@iF Percentage Increase (RHS)
Slide 29: Assets under management by product
$4.8b $5.2b $5.8b $6.6b $7.3b | 1H01 2H01 1HO2 2H02~ = 1H03 M Housing & Business Consumer # Other 29
Slide 30: Vibrant Sales Performance - Deposits
Vibrant Sales Performance - Deposits _ a i i - 16% 12% 8% 14) + 4% Retail Deposits $ Billions 0 - r 0% 1H01 2H01 1H02 2H02 1H03 Retail Value (LHS) - Growth Rate (RHS)
Slide 31: Retail deposits by funding source
$4.2b $4.7b $5.1b $5.8b $6.4b 100% $14b = $1.3b 0 $41.5b 75% - . 50% - 25% , , a ” se 0% - 1H01 2H01 1H02 2H02 1H03 # Retail = Wholesale | Securitisation 31
Slide 32: Solid Capital Position - Capital Adequacy
Solid Capital Position - Capital Adequacy — ratio of 11.1% of RWA — 7 716% 1H01 2H01 1H02 2H02 1H03 12.0% 10.4% 11.1% 11.3% 11.1% M Core 11 @ Hybrid T1 © Tier 2 32
Slide 33: Capital Management
Capital Management _ » As growth continues further capital is required to maintain our target range of 10%-11% (Tier 1 of 7%-8%). » In the second half we will seek to raise $35m through: — the DRP; and —a Share Purchase Plan. » The SPP will occur in late May. a It will consist of an offer to each sh
Slide 34: LIE
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Slide 35: Asset Quality
Asset Qualit » Balance Sheet loan mix remains dominated by housing at 64%. » Arrears continue to fall in line with loan affordability - impaired assets now 0.1% of average assets. » Bad debts are not expected to rise in line with interest rate increases (if any) because of security positions, includ
Slide 36: SME lending increase of 31% on pcp
» SME lending increase of 31% on pcp but, actual exposure increase only $360m. » Increased exposure to business sector has been tightly controlled through lending policies and reviews. » SME lending represents 32% of loans on the Bank’s balance sheet and 24% of loans under management. 36
Slide 37: Largest exposures total $300m
« Largest 25 exposures total $300m. » Range between $5m and $30m. » Largely secured by real property. » None are non-accrual. » All Queensland based. 37
Slide 38: Low Impaired Assets & Conservative Provisioning
Low Impaired Assets & Conservative Provisionin 0.8% Mimpaired Assets / Average Assets # Total Provision / Average Assets Provisions 0.6% | conservatively 0.4% - maintained 0.2% 0.0% ~ 2H01 1H02 2H02 1H03 Reductions in impaired assets a $ Billions oOePF NW kr OD SN OC 2H01 1H02 2H02 1H03 © Impaired A
Slide 39: Total Provisions increased by $2.9m
Total Provisions increased by $2.9m, largely due to maintaining the General Provision at 0.52% of RWA ~ Specific Provision tf $0.4m, General Provision tf $2.5m Provisions: Healthy Provision Coverage 650% Specific $ 3.0m General $28.4m so Total $31.4m 350%. 250% 550% ~ 150% ~ 1H01 2H01 1H02 2H02 1HO3
Slide 40: DEUS ENOL Lennon: Pie Se EM UO MRL Dag Wee Bie Gie WS
DEUS ENOL Lennon: Pie Se EM UO MRL Dag Wee Bie Gie WS ae LD Ly Ly oe a Le Zi . ge ey) y ay Ca Yee iy ie ey A Le Lee. i sy Le So 7 Le: Wy ay, Ye We Ye i Ly, Ye Le Beri yy ee Le Le ee y se) Lo LIES Lo. Lo ey ee os 7 Lh yyy yyy i i SS _ Vee ay ee Se oe = a SS So Y | | | | | ) | Z : : i y G ] | / | 7 i
Slide 41: Employees
employees: 41
Slide 42: PEP - Our cornerstone for productivity improvement
PEP - Our cornerstone for productivity improvement _ Performance Enhancement Program: » Expense management. » Revenue enhancement. » Process improvement. » Business review. » Product enhancements. » Procurement / contract management. 42
Slide 43: PEP benefits: previous vs revised 2003 expectation
$Millions r) Previous 2003 Expectation § Revised 2003 Expectation ’ Revenue Initiatives Hf Cost Savings 43
Slide 44: Our strategic focus
Our strategic focus » Customer driven delivery. « “Communitisation” of branches. » Escape the commoditisation squeeze. » Sales & service culture development. » Entrepreneurial management. » Re-engineering integrated economics: ~ people ~ processes ~ technology » Synchronised performance management.
Slide 45: Lo Ge Lo
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Slide 46: To be Australia's best regional bank
To be Australia’s best regional bank, by: » Building on our strong home base in Qld; and » Selected interstate expansion. Our Vision: To be a great Queensland company working hard to provide new ideas in banking and the best customer service experience. 46
Slide 47: Branch numbers: corporate and owner managed
Corporate 58 = «55BSt«S'B 58 Branches . Owner 40 50 #62 72 Managed —. TOTAL 98 108 120 130 Plus: 5 dedicated business banking centres recently opened
Slide 48: Owner Managed Branch Model
Owner Managed Branch Model » Variable Cost Model -~- Shares in net revenues generated. — Carries operating costs & funds set-up costs. » Incentive to write profitable business. » Ability of the Bank to select only prime candidates for agency -~ 80% of a well performing branch is the person who runs
Slide 49: Expansion on a variable cost model
Expansion on a variable cost model through owner managed branches. Niche player - currently writing 13% compared with 6% Market Share. Diversification into business related products particularly the SME market which is underserviced. Therefore solid growth is expected regardless. 49
Slide 50: Challenges going forward
Challenges going forward » Reinvest in business without sacrificing expense — management. - » Continued diversification of income streams. « Growth in a slowing market. » Regulatory changes eg Basel II. «» Empowerment of staff to “WOW” customers. Launching new products 50
Slide 51: Outlook: commitment to objectives for the year
» The Bank remains committed to its objectives for the year. » 2nd half profit should be in line with 1st half: ~ Vibrant asset growth while maintaining loan quality. -- EPS growth for the full year of 30%-35% (15%-20% before 2002 significant item). ~ Cost to income ratio of 68%, reducing to 64% in