Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2016 Earnings Presentation
49 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 8, 2016
Slide 1: Results Presentation for the full year ended 30 June 2016
2 = © @ D =) © ‘= 9 Q = @ a. = O LL Results Presentation For the full year ended 30 June 2016 Mike Hirst Richard Fennell Managing Di director Chief Financial Officer > | Bendigoand AdelaideBank
Slide 2: Disclaimer
This document is a presentation of general background information about the Group’s activities current at the date of the presentation. It is For personal use only information in a summary form and no representation or warranty is made as to the accuracy, completeness or reliability of the informati
Slide 3: Overview, Financial performance, Summary and outlook, Appendices
For personal use only Overview Financial performance Summary and outlook Appendices 3
Slide 4: Mike Hirst, Group Managing Director
For personal use only Mike Hirst Group Managing Director 4
Slide 5: Our FY16 result
Our FY16 result For personal use only Financial performance Cash earnings of $439.3m Net interest margin up 1bps to 2.17%3 Cash earnings per share 95.6¢ Total operating expenses up 1.5%2 Statutory profit after tax $415.6m Return on average tangible equity 12.94% 4 Full year dividend of
Slide 6: Outside our control, some control, within our control
For personal use only Outside our Control Some Control Within our Control Macro Customer Trust & economic Regulation Disruption Digitalisation in charge security conditions 6
Slide 7: Our focus
For personal use only Our focus 77
Slide 8: Voice, capability, connection
For personal use only VOICE CAPABILITY CONNECTION RETAIL DEPOSITS UP 8% 1. Based on APRA statistics (loans to households : owner occupied & investment and housing loans securitised) 8
Slide 9: Richard Fennell, Chief Financial Officer
For personal use only Richard Fennell Chief Financial Officer 9
Slide 10: Financial performance - at a glance
Financial performance - at a glance Change Change For personal use only FY16 FY15 FY16 - FY15 2H16 - 2H15 Cash earnings $439.3m $432.4m 1.6% 0.5% Statutory NPAT $415.6m $423.9m (2.0%) 5.2% Cash EPS 95.6¢ 95.1¢ 0.5% (0.8%) Net interest margin 2.16% 2.20% (4 bps) - Expense to income ratio 56.0% 55.1%
Slide 11: 2H16 growth outcome
2H16 growth outcome For personal use only Source: APRA statistics June 2016 Note - Data is based on 6 month growth (annualised) and BEN includes Rural Bank 11
Slide 12: Housing lending growth
Housing lending growth 1 For personal use only Growth momentum regained Improved performance in Broker Direct channel follows relaunch of Adelaide Bank proposition Mortgage Manager portfolio stabilised New retail mortgage “Connect Package” product driving strong customer interest Source: Com
Slide 13: Cash earnings growth
Cash earnings growth For personal use only Accelerated lending growth in 2H16 Margin management a focus Costs actively managed to the environment Continued strong underlying credit performance 1 1 1. After tax 13
Slide 14: Net interest margin
Net interest margin For personal use only NIM pressure reflects competitive lending and funding environment with unprecedented low interest rates Asset pricing impact due to competition and customer preference for fixed rates, partially offset by variable lending portfolio repricing during 1H16
Slide 15: Focus on efficiency
Focus on efficiency For personal use only Expense impacts • Wage inflation approximately 2% • FTE lower by 97 • Staff costs include redundancy costs of $6.1m • Project Reset material contribution to efficiency gains FY16 - $7m, and $15m estimated for FY17 • Targeting flat cost growth for FY17 1 1.
Slide 16: Business segment performance (half on half)
Business segment performance (half on half) Expanded partner relationships For personal use only Strong growth in rural seasonal lending Community Bank balance sheet growth 9% Alliance Bank growth of 13% Strong 6 month growth in Melbourne metro Flat housing prices impacted Home
Slide 17: Industry leading funding position
Industry leading funding position For personal use only Leveraging core strengths of the retail brand and distribution network Strong growth in new and existing customer deposits, retail deposits up 8% in FY16 Indicative NSFR approximately 115% LCR of 118% at 30 June 2016 17
Slide 18: Capital position reflects low risk balance sheet
Capital position reflects low risk balance sheet For personal use only 3 5 1 4 1. Shows pro-forma impact to capital adequacy ratios of the Rural Finance acquisition which was completed on 1 July 2014 2. S&P RAC ratio, Major 2,3 & 4 as at 30 Sept 2015, Major 1 as at 31 Dec 2015 & BEN as at 30 June 20
Slide 19: Bad and doubtful debts
Bad and doubtful debts For personal use only Bad and doubtful debts charge of $44.1 million, down 35% from prior year Portfolio remains well secured, with low LVRs Agribusiness credit trends returning to normal after spike from QLD cattle exposures $4m collective provision overlay for rural
Slide 20: Great Southern paying down as expected
Great Southern paying down as expected Total loans net of specific provisions has reduced by 47%, For personal use only from $323.8m to $171.3m since 31 December 2014 Specific and collective provisions at June 2016 were $23.7m and $19.1m respectively Collective provision overlay tested and red
Slide 21: Arrears remain benign
Arrears remain benign For personal use only Note - Data excludes commercial arrangement loans 21
Slide 22: Homesafe investment property portfolio
Homesafe investment property portfolio For personal use only Average annual return on completed contracts since inception 9.1%, pre funding costs $6.4m of overlay was released in 2H16, reducing the total overlay on the value of the portfolio to $23.6m This total overlay reflects an assumed 3%
Slide 23: Homesafe investment property portfolio
Homesafe investment property portfolio 1 For personal use only 1. Income contribution sensitivities based on portfolio balance as at 30 Jun 16 with no new or completed contracts over the 12 months 23
Slide 24: Mike Hirst, Group Managing Director
For personal use only Mike Hirst Group Managing Director 24
Slide 25: Summary and outlook
Summary and outlook For personal use only 1 Maintaining our premium position with customers 2 Managing as an advanced bank 3 Significant investments coming on stream in risk, productivity and digital 4 Strong capital position (particularly under Basel II) 5 Strong credit position 6 Strong funding po
Slide 26: Questions
For personal use only Questions 26
Slide 27: Appendices
For personal use only Appendices 27
Slide 28: Our vision, purpose and strategy
ae For personalise only Our vision is to be Australia’s most customer connected bank vision, strate J purpose —— — Our strategy is to focus on the success of our customers, people, partners and communities lili — We do this by: + Taking a 100 year view + Listening and responding + Respecting every c
Slide 29: Strategy & Purpose
For personal use only Strategy & Purpose 29
Slide 30: Measures of success
Measures of success For personal use only • New to lost customers • Diversity • Average products per • Partner advocacy • Staff engagement customer • Partner performance • Productivity • Customer advocacy • Cash EPS • Credit loss % risk • ROTE weighted assets • ROA • Liquidity & Funding • RAROC 30 3
Slide 31: Positive earnings progression
Positive earnings progression For personal use only 31
Slide 32: A complete portfolio of businesses
A complete portfolio of businesses For personal use only Brand Segment Business Provides a full range of consumer and business banking Local Connection products and solutions Partner Connection Third party banking, wealth and protection solutions Agribusiness Solutions for agricultural farm business
Slide 33: Unique and valued customer proposition
Unique and valued customer proposition Bendigo Bank Leveraged For personal use only #1 in the Forrester’s Australian Customer Experience Index1 • #1 in Customer satisfaction5 • #1 in Stockbroker satisfaction8 • #2 in Credit card satisfaction6 • #1 in Customer satisfaction8 Best rated Australian
Slide 34: Diverse geographic footprint
Diverse geographic footprint For personal use only 1540 ATM’s 523 branches 1 4 7 4 126 348 48 48 68 37 13 3 43 7 2 89 4 114 24 14 100 101 16 51 16 8 4 390 806 187 86 22 58 140 11 514 311 Community Bank® 26 2 9 11 Bendigo branded (3rd party) ATM’s 220 8 14 11 34
Slide 35: The Community Bank model
The Community Bank® model 18 years old For personal use only Over $148m in community grants1 since inception – delivering tangible benefits for these communities and our business 311 Community Bank branches with more than 90 in communities where there is no alternative provider Proven, reliabl
Slide 36: Growth in residential loan approvals
Growth in residential loan approvals 2 For personal use only 11% growth in Offset portfolio since June 2015 44% of home loan customers are ahead of minimum repayments, with 28% of customers 3 or more repayments ahead1 1. Excludes amounts held in Offset facilities 2. Data excludes Rural Bank, Rur
Slide 37: Specific provisions
Specific provisions For personal use only Represented by Provision as % of each Retail Business 3rd Party Delphi Great Rural Rural Alliance Consumer Wealth BEN total portfolio’s Mortgages Lending Mortgages Bank Southern Bank Finance Partners gross loans June 2015 0.03% 0.52% 0.60% 0.03% 0.03% 6.19%
Slide 38: Funding
Funding For personal use only 1. Company data 38
Slide 39: Key capital ratios & LVR breakdown
Key capital ratios & LVR breakdown For personal use only 1H15 2H15 1H16 2H16 Common equity tier 1 8.14 8.17 8.24 8.09 Additional tier 1 1.88 2.43 2.44 2.31 Tier 1 Capital 10.02 10.60 10.68 10.40 Jun-16 Tier 2 2.17 1.97 1.98 1.81 Total regulatory capital 12.19 12.57 12.66 12.21 Risk weighted assets (
Slide 40: Secure and low risk loan portfolios
Secure and low risk loan portfolios For personal use only Residential Mortgages3 Jun-16 Jun-15 Jun-14 Owner occupied 62.4% 64.8% 65.1% 98.4% secured Investment 37.6% 35.2% 34.9% Lo Doc 2.4% 2.9% 3.9% 97.8% secured by mortgages and Retail mortgages 54.9% 53.6% 52.0% listed securities Third Party
Slide 41: Agri-business diversification
Agri-business diversification For personal use only Improved channel distribution Well diversified portfolios by industry and geography 41
Slide 42: Technology investment
Technology investment For personal use only 42
Slide 43: Local Connection
Local Connection For personal use only Melbourne Small & Sydney Business Broaden mobile face-to-face distribution Deepen penetration into small business communities Build sustainable & mutually profitable Customer partnerships Mobile Distribution Partnerships Accelerate investment in Melbourne & Syd
Slide 44: Local Connection – Current state
Local Connection – Current state For personal use only • Australia’s 5th largest retail bank • National mortgage market share 2% • 44%1 of Group FY16 cash earnings • Local Connection - truly unique model • Loan portfolio $31.7bn2 (Community Banks) • Deposit portfolio $40.9bn2 • Enviable reputation •
Slide 45: Partner Connection
Partner Connection For personal use only Performance Test and Measures Learn Leverage new system and performance measurement capabilities Execute on Portfolio Funding opportunities Partner Wealth cost to income improvement Centric Holistic Efficient Distribution delivery Model Local Connection align
Slide 46: Partner Connection – Current state
Partner Connection – Current state For personal use only • Third Party Mortgage proposition challenged by partner specific and channel skew issues • Maintaining strong market share in • 39%1 Group FY16 cash earnings Margin Lending • Loan portfolio $20.1bn2 • Well positioned for wholesale funding • D
Slide 47: Agribusiness
Agribusiness For personal use only Target Future growth farmers Targeting growth markets aligned with our specialisation and experience Enabling future farmers Customer Innovation and knowledge partnerships Industry Knowledge opportunities partnerships Aligned systems, processes, people and partners
Slide 48: Agribusiness – Current state
Agribusiness – Current state For personal use only • 9% market share • Very strong brands • 17%1 of Group FY16 cash earnings • Deep expertise in cropping, beef, sheep and • Loan portfolio $6.0bn2 dairy • Deposit portfolio $3.6bn2 • Strong portfolio in Victoria and WA • Award winning products3,4 • Ou
Slide 49: Contact
Contact For personal use only Analysts Media Travis Crouch Silvana Arena Head of Investor Relations Head of Public Relations Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 3 5485 6261 Tel: +61 8 8220 7784 Mob: +61 418 552 922 Mob: +61 402 110 445 Email: travis.crouch@be
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