Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2017 Earnings Presentation
35 slides from Bank Of Queensland's earnings presentation, Oct 12, 2017
Slide 1: FY17 Results Presentation
>» FY201/ Results Presentation 12 October 2017 FOR THE YEAR ENDED 31 AUGUST 2017 Bank of Queensland Limited ABN 32 009 656 740, AFSL No 244616
Slide 2: Agenda
AGENDA Results Overview Jon Sutton Managing Director & CEO Financial Detail Anthony Rose Chief Financial Officer Summary & Outlook Jon Sutton Managing Director & CEO Bank of Queensland Limited Results Presentation 2017
Slide 3: FY17 Highlights
FY17 HIGHLIGHTS 1 — _ Improved second half performance 2 — Niche segments continue to grow 3 — Asset quality remains sound 4 —— Delivering ongoing cost savings to enable reinvestment 5 — Strong capital position provides flexibility Bank of Queensland Limited Results Presentation 2017 3
Slide 4: Key Elements of the Result
KEY ELEMENTS OF THE RESULT CASH EARNINGS AFTER TAX ($M) EARNINGS PER ORDINARY SHARE (CENTS)(”) 357 360 . 5, 97.6 FYI5 FV16 rVI7 FY13 ry14 FYI5 FV16 rVI7 RETURN ON EQUITY (%)\") DIVIDENDS PER ORDINARY SHARE (CENTS) 10.4 84 i i i i rVI7 FY13 FY14 FYI5 FV16 rVI7 Hi Special dividend Bank of Queensland L
Slide 5: Drivers of the Result
DRIVERS OF THE RESULT LENDING GROWTH ($M) NET INTEREST MARGIN (%) 2,549 2477 a 1.92 1.97 4.94 = = i _ i a L a: | || FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY1S FY16 FY17 COST TO INCOME RATIO (%)") LOAN IMPAIRMENT EXPENSE ($M) 46.0 46.8 46.6 115 44.3 43.9 86 x 7 LJ LU | : FY13 FY14 FY15 FY16 FYI7 FY13 PY
Slide 6: Improved Second Half Performance
IMPROVED SECOND HALF PERFORMANCE SUMMARY LENDING GROWTH ($M) ¢ Lending growth returned to positive 822 + 2H17 Net Interest Margin rebounded to 1.90% as forecast + Loan Impairment Expense showed further improvement 157 1H17 2H17 NET INTEREST MARGIN (%) LOAN IMPAIRMENT EXPENSE ($M) 1.95 1.90 7 oe = 1H
Slide 7: 2H17 Housing Loan Growth
2H17 HOUSING LOAN GROWTH SUMMARY HOUSING LOAN GROWTH ($M) + Improved second half across all distribution channels (0.4x) system 0.4x system + Branch numbers now stabilising + Broker volumes returned * BOQ Specialist momentum maintained + Virgin Money ahead of expectations WB Virgin Money | BOQ Speci
Slide 8: Niche Business Segments Delivering
NICHE BUSINESS SEGMENTS DELIVERING ° BOQ SPECIALIST Distinctive banking BOQ SPECIALIST BOQ FINANCE ‘e500 FINANCE Commercial loan book growth of $188m (7%) Housing loan book growth of $804m (26%) New commercial volumes remain at strong levels Customer numbers grown to over 30,000 BUSINESS BANKING SEG
Slide 9: Asset Quality Remains Sound
ASSET QUALITY REMAINS SOUND SUMMARY IMPAIRED ASSETS % OF GROSS LOANS (bps) * Pleasing results across all portfolios * Commercial and BOQ Finance performing particularly well + Housing solid, with pockets of weakness concentrated in Central QLD &WA COMMERCIAL LOAN ARREARS") BOQ FINANCE IMPAIRMENT EXP
Slide 10: Delivering Ongoing Cost Savings
DELIVERING ONGOING COST SAVINGS SUMMARY UNDERLYING EXPENSES ($M) Other‘) [BB One-off expenses Virgin Money a mortgage Hl Amortisation Hl Core expenses * 1% underlying expense growth target achieved for FY17 + More than $15m in ongoing savings delivered through efficiency programs ¢ Further efficienc
Slide 11: Funding & Capital Position
RONG FUNDING & CAPITAL POSITION Standardised Advanced 10.1% 10.1% 10.1% 10.0% * Good progress in relationship deposit growth * Strong capital position on any measure 9.4% 9.2% * 8c special dividend and DRP suspension announced 8.3% + Additional capital management options available CAGR a 4.2—17% b |
Slide 12: FY17 Scorecard: Strategic Priorities
FY17 SCORECARD: STRATEGIC PRIORITIES Strategic pillar FY17 priorities FY17 progress Highlights Customer in 1. Expansion of mortgage aggregators for Virgin Money @ h 2. Enhance digital customer experience q charge 3. Ongoing branch network optimisation @ Grommmerant 1. Optimise deposit pricing using
Slide 13: Financial Detail
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 14: Financial Performance: Year on Year
FINANCIAL PERFORMANCE: YEAR ON YEAR FY17 v FY16 FY17 adjusted") —_FY17 adjusted) v FY16 Net interest income (1%) $926m (1%) Non interest income 1% A $159m (8%) Total income (1%) $1,085m (2%) Operating expenses (1%) VW ($513m) (1%) VW Underlying profit - $572m (3%) Loan impairment expense (28%) V ($4
Slide 15: Financial Performance: Half on Half
FINANCIAL PERFORMANCE: HALF ON HALF 2H17 v 1H17 2H17 adjusted) = 2H17 adjusted() v 1H17 Net interest income 5% A $474m 5% A Non interest income 19% A $79m (1%) Total income 7% A $553m 4% A Operating expenses 4% ($261m) 4% Underlying profit 10% A $292m 4% A Loan impairment expense (22%) V ($21m) (22%
Slide 16: Growth Momentum Returned in 2017
GROWTH MOMENTUM RETURNED IN 2417 SUMMARY GROSS LOANS & ADVANCES ($B) * Growth across all portfolios in 2H17 + Commercial loan growth a feature * Geographic diversification continues TOTAL LENDING GEOGRAPHIC MIX 43.1 43.8 1 B00 Finance HB Commercial BB Retail FY13 FY14 FY1S FY16 FY17 HALF YEARLY GROW
Slide 17: Diversified Retail Lending Distribution
DIVERSIFIED RETAIL LENDING DISTRIBUTION SUMMARY MONTHLY HOUSING LOAN SETTLEMENTS ¢ Virgin Money made a significant contribution to growth + Broker volumes improving — 2H17 BOQ settlements nearly doubled from 1H17 * BOQ Specialist continuing to deliver strong growth ¢ Branch network momentum improved
Slide 18: Niche Commercial Lending Strategy
NICHE COMMERCIAL LENDING STRATEGY SUMMARY NICHE SEGMENT FOCUS * Growth achieved across all portfolios Agribusiness growth + BOQ Commercial delivered strong 2H17 growth $109m + Niche target segments strategy delivering * BOQ Specialist growth lower at 7% Hospitality & tourism growth of $65m COMMERCIA
Slide 19: Improved Funding Mix
IMPROVED FUNDING MIX SUMMARY OVERALL FUNDING MIX ($B) * Customer Deposit growth fully funded lending growth Long Term + Deposit to Loan ratio of 69% MULES Wholesal + Focus on growing transaction accounts — 10% FY17 growth or 15% | Deposits including Mortgage Offsets H Customer * Wholesale funding su
Slide 20: Movement in Net Interest Margin
MOVEMENT IN NET INTEREST MARGIN NET INTEREST MARGIN MOVEMENTS 1H17 TO 2H17“) 2.15% 2.20% .05% 0.06% 0.02% 0.05% eI — [i Third party costs uea- Hl \et interest margin 1H17 Asset Pricing & Funding Costs & Capital & Low 2H17 Mortgage Offset 2H17 Pro-forma Mix Mix Cost Deposits adj 2H17 CONSIDERATIONS S
Slide 21: Non Interest Income
NON INTEREST INCOME SUMMARY NON INTEREST INCOME BREAKDOWN ($M) Banking fees remain under pressure St Andrew's income now stabilised Trading income opportunities diminished 175 Profit on 16 disposal(') Vendor finance entity disposal supported Other income i Trading Income I Insurance VENDOR FINANCE E
Slide 22: Expenses
EXPENSES De SUMMARY OPERATING EXPENSE BREAKDOWN ($M) 1% underlying growth from FY16 $3m additional costs from Cashflow Finance acquisition IT Expenses increased due to higher software amortisation Efficiency programs delivered targeted savings Investing in growth businesses of BOQ Specialist and Vir
Slide 23: Asset Quality
ASSET QUALITY SUMMARY LOAN IMPAIRMENT EXPENSE BY PRODUCT (bps)) ¢ Loan impairment expense down to 11bps of GLA in FY17 + |mpaired assets down 17% on FY16 + Lower volume of <$5m new impaired assets + $29m new impaired asset — last large legacy exposure, outside risk appetite at 2012 review IMPAIRED A
Slide 24: Strong Provision Coverage
STRONG PROVISION COVERAGE SUMMARY * Specific Provisioning and Total Provisioning coverage strong + Final legacy watchlist exposure now specifically provisioned + Provisioning coverage compares favourably with peers + Reduction in legacy collective provision model adjustment + New Collective Provisio
Slide 25: Arrears
ARREARS SUMMARY COMMERCIAL ARREARS (bps) * Commercial arrears remain stable + Housing portfolio continues to perform well + BOQ Finance arrears below sustainable levels 131 135 123 122 = 30DPD a1 88 = 89 gg~Sg ODP Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 HOUSING ARREARS (bps) BOQ FINANCE ARREARS (bps) ia
Slide 26: Capital
CAPITAL COMMON EQUITY TIER 1 MOVEMENTS 0.65% — 0.09% 0.01% mae) Toon (0.06%) (0.02%) (0.06%) Underlying capital generation 14bps 1Hi7 Cash earnings RWA Dividend net Securitisation Vendor Capitalised AFS Reserves Other 2HIT movement af DAP. Finance entity software disposal SUMMARY CAPITAL MANAGEMENT
Slide 27: Summary & Outlook
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 28: External Environment
EXTERNAL ENVIRONMENT ¢ Conduct and culture focus intensifying Industry ¢ Increasing regulatory & political scrutiny ¢ Technology transforming customer experience ¢ National economy improving, but consumers cautious * QLD doing well, but mixed across regions * Slowing credit growth Economic Bank of Q
Slide 29: Strategic Priorities
Strategic priorities 3 STRATEGIC FOCUS pillar Increase frontline staff to support BOQ Business growth support deeper relationships Implement new FX digital platform transformation initiatives 3. Continuous improvement focused on productivity and customer experience Customer in charge Grow the right
Slide 30: Outlook
OUTLOOK 1 — Current market conditions favour niche segment strategy 2 — _ Virgin Money & BOQ Specialist provide avenues for growth 3 — Remain cautious about outlook for housing market 4 — Building momentum in transformation delivery 5 — Strong capital position provides flexibility Bank of Queensland
Slide 31: Appendix
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 32: Housing Portfolio
HOUSING PORT SUMMARY HOUSING PORTFOLIO LVR BANDS ¢ Broker settlements increased to 28% including Virgin Money + Interest only settlements trending to less than 30% + Room for growth under 10% investor cap 12% wa 17% 2 19% 44% Less than 40% HB 40-60% 61-80% Hi 81-90% HB Greater than 90% PORTFOLIO MET
Slide 33: Exposure to High Risk Sectors
EXPOSURE TO HIGH RISK SECTORS APARTMENT CONSTRUCTION EXPOSURES“) LENDING TO RESIDENTIAL APARTMENT CONSTRUCTION * $181m current exposure to residential construction | + 28 developments across 3 states, completing 2018 through 2019 + Well diversified intra-state OTHER HIGHER RISK SECTORS + No material
Slide 34: Abbreviations
ABBREVIATIONS 1H: First half of financial year 2H: Second half of financial year 30DPD: 30 days past due QODPD: 90 days past due ADI: Authorised Deposit-taking Institution ALM: Asset & Liability Management APRA: Australian Prudential Regulation Authority APS: ADI Prudential Standards Apts: Apartment
Slide 35: Disclaimer
DISCLAIMER BS 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 conjunction with BOQ’s other periodic and continuous disclosure a