Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY22 Earnings Presentation
82 slides from Bank Of Queensland's earnings presentation, Oct 12, 2022
Slide 1: BOQ Group FY22 Investor Materials
BOQ GROUP FY22 INVESTOR MATERIALS Full year ended 31 August 2022
Slide 2: Important information and disclaimer
Important information and disclaimer BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 2
Slide 3: Contents
Contents FY22 Results Presentation 4 About BOQ 44 Transformation & Integration Detail 51 Divisional Results 54 Portfolio Quality 62 Capital, Funding & Liquidity 71 Economic Assumptions 78 Abbreviations 81 BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 3
Slide 4: FY22 Results Presentation
FY22 RESULTS PRESENTATION 12 OCTOBER 2022 Full Year ended 31 August 2022 BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 4
Slide 5: Agenda
Agenda Introduction › Cherie Bell, General Manager Investor Relations & Integration Results Overview › George Frazis, Managing Director & CEO Financial Detail › Racheal Kellaway, Chief Financial Officer Summary & Outlook › George Frazis, Managing Director & CEO Q&A › George Frazis, Managing Director
Slide 6: Acknowledgement of Traditional Custodians
BOQ Group is proud to acknowledge the Traditional Custodians of the land on which we gather today and pay our respects to their Elders past and present. We extend that respect to Aboriginal and Torres Strait Islander peoples here today Artwork proudly created for Bank of Queensland (BOQ) by the Harr
Slide 7: Results Overview
RESULTS OVERVIEW George Frazis Managing Director & CEO BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 7
Slide 8: FY22 results overview
FY22 results overview 1. Reported statutory NPAT up 15% to $426m1. Cash earnings declined 5%1 to $508m, given the prior year loan impairment benefit, with underlying profit up 1% › Income up by 1% impacted by ME GLAs decline prior to ownership and NIM pressure, recovering in second half › Expenses f
Slide 9: FY22 Results
FY22 Results Higher underlying profit driven by disciplined lending growth and cost management Key financial results ($m) FY22 FY22 v FY21 Total income 1,682 1% Operating expenses (937) 0% Underlying profit 745 1% Loan impairment expense (13) Large Cash profit before tax 732 (5%) Income tax expense
Slide 10: Key elements of the result
Key elements of the result Income growth partly offset by impact of legacy ME lending decline prior to BOQ ownership and NIM pressures Total income ($m) Net interest margin (%) – FY21 to FY22 +2.4% (0.06) 847 851 1.86 (0.06) 826 831 1.74 1H21 2H21 1H22 2H22 FY21 Underlying Liquidity FY22 Net interes
Slide 11: Diversified quality lending and deposit growth
Diversified quality lending and deposit growth across retail and business banking Solid lending growth continuing with uplift in housing and business lending Growth in lending GLAs ($m)1 Customer deposit balances ($bn)1 +7% +164% 5,502 56.5 60.5 96 5.8 1,064 34.7 5.4 4.8 6.4 2,082 24.3 23.3 3.6 2.8
Slide 12: Business banking performance
Business banking performance Our focus on growing medium sized family businesses is delivering higher revenue and return Summary Growth in SME lending GLAs ($m) › Differentiated model with specialist bankers, owner managers and risk officers 563 +398% focused on niche medium sized family businesses
Slide 13: Revenue and portfolio quality
Revenue and portfolio quality FY22 focus on quality growth with NIM momentum in Q4 Optimising NIM through the cycle Quality portfolio growth › 2H22 NIM up 1bp to 1.75% › Business and housing loans backed by collateral, with minimal › Fixed rate lending applications elevated through 1H22 have cash fl
Slide 14: Operating expenses and impairments
Operating expenses and impairments Expenses held flat with synergies and productivity savings funding growth and digital investment Operating expenses flat in FY22 Impairments › Synergies of $38m delivered against first year target of $30- › Loan impairment expense of $13m for FY22, due to increased
Slide 15: Building a sustainable business
Building a sustainable business Supporting the transition towards decarbonisation, supporting our communities and enriching our people Environmental commitments Supporting our communities Enriching people Supporting our customers to transition – Supporting regional areas – growing our Building a fut
Slide 16: Strategy Update
STRATEGY UPDATE George Frazis Managing Director & CEO BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 16
Slide 17: Our purpose and strategic pillars
Our purpose and strategic pillars We have refreshed our purpose and evolved our strategy Group Purpose Strategic EXCEPTIONAL CLOUD BASED, SUSTAINABLE ENRICHING Pillars CUSTOMER EXPERIENCE DIGITAL BANK PROFITABLE GROWTH PEOPLE Through loved brands, caring With at scale unit costs, With improving stre
Slide 18: Good progress against our strategy
Good progress against our strategy Focused execution on key priorities is delivering results EXCEPTIONAL CUSTOMER CLOUD BASED, SUSTAINABLE ENRICHING EXPERIENCE DIGITAL BANK PROFITABLE GROWTH PEOPLE All brands and Differentiated digital Successful acquisition Delivering improved returns Increased cap
Slide 19: Executing on the ME integration
Executing on the ME integration Integration program well progressed and clear pathway to a single retail digital core banking platform Integration benefits flowing Synergy and integration cost profile FY21 FY22 FY23 FY24+ › Synergies accelerated and increased from original expectations of $70- $80m
Slide 20: Multi-brand strategy provides tailored solutions
Multi-brand strategy provides tailored solutions to niche segments Through loved brands, caring bankers, building life-long relationships, and enriching communities EXCEPTIONAL CUSTOMER EXPERIENCE Retail Bank: Business Bank: Providing distinctive value propositions Specialist relationship banking, n
Slide 21: Clear digital transformation benefits
Clear digital transformation benefits Increased confidence in the benefits for customers, our people and shareholders from the transformation CLOUD BASED, DIGITAL BANK Differentiated approach to transformation Clear benefits to be delivered Truly end-to-end digital transformation plan across retail
Slide 22: Simplifying our technology to cloud, digital
Clear approach to simplifying our technology to cloud, digital Retail and Business platforms will have clear customer offerings Retail Bank Business Bank Intelligent customer data infrastructure on Azure Public Cloud Common Retail Banking Core Common Business Banking Core Temenos Cloud – v.22 Temeno
Slide 23: Clear digital transformation plan
Clear digital transformation plan Phased approach to ensure successful execution and staged delivery of benefits, reducing risks CLOUD BASED, DIGITAL BANK 2021/2023 2024/2025 Post 2025 Scaled Growth, Personalised through Data Digital Deposits & Payments Hub Digital Home, Personal & Business Loans In
Slide 24: Results for transaction and deposit customers
Starting to realise results for transaction and deposit customers Digital bank is enabling scale, superior customer experience through simplified and faster processes and attracting new customers Current Measure Legacy (new platform) CLOUD BASED, Customers on new Retail platform1 (% of SUSTAINABLE N
Slide 25: Customer migration approach
Customer migration approach Clear plan for customer migration to ensure good customer experience and retention EXCEPTIONAL CLOUD BASED, CUSTOMER EXPERIENCE DIGITAL BANK Seamless migration of customers Retail Business enabled by robust technology approach › ME customer data cleaned and products › Mos
Slide 26: Investing in the business for sustainable profitable growth
Investing in the business to deliver sustainable profitable growth Our superior customer proposition and transformation program will deliver tangible outcomes SUSTAINABLE PROFITABLE GROWTH Investment spend profile Target financial benefits by FY26 by executing on our organic strategy1 › FY23 overall
Slide 27: Clear strategy to improved returns
Clear strategy to improved returns We have a clear pathway to enhanced CTI and ROE performance Current priorities Medium-term outcomes Long-term outcomes › Growing at an attractive ROTE › Improved customer experience through better › Simpler organisation, and agile tools, self service capabilities a
Slide 28: Financial Detail
FINANCIAL DETAIL Racheal Kellaway Chief Financial Officer BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 28
Slide 29: Financial performance
Financial performance Solid financial performance delivering 1% uplift in underlying profit and positive jaws for the year Key financial results ($m) FY22 FY21 FY22 v FY21 2H22 1H22 2H22 v 1H22 Net interest income 1,529 1,539 (1%) 788 741 6% Non-interest income 153 134 14% 63 90 (30%) Total income 1
Slide 30: Net interest income
Net interest income NII shape benefiting from ME balance sheet turnaround and higher NIMs resulting in 6% NII growth in 2H22 Summary NII down 1% year on year, up 6% half on half › 1H22 NII impacted by lower ME balances prior to acquisition and NIM impacts from elevated fixed rate lending › 2H22 bene
Slide 31: Net interest margin
Net interest margin Underlying 2H22 NIM up 4bps from funding cash rate benefits, partially offset by continued impact of competition Summary Net interest margin – FY21 to FY22 (%) › NIM recovery in 2H22 with funding cost and replicating portfolio benefits (0.34%) 0.03% (0.03%) offsetting increasing
Slide 32: Net interest margin future considerations
Net interest margin future considerations Benefits expected to continue from rising rate environment NIM Driver 1H23 Medium Term Competition continuing Competition continuing Asset pricing & mix Fixed rate normalised Optimising portfolio mix and for Basel III impacts Optimising portfolio mix and for
Slide 33: Non-interest income
Non-interest income Strong non-interest income for the year with one-off benefits in 1H22 Summary Non-interest income breakdown ($m) Non interest income increased by $19m for the year $153m › Underlying banking fees stabilising with product simplification offset by increases in business 90 volumes $
Slide 34: Operating expenses
Operating expenses Productivity and synergy benefits offsetting increased expenses from volume growth and investment spend Operating expenses ($m) FY23 considerations +0% › Spot FTE reduction of 8% in FY22 providing ongoing benefits 20 (30) › Headwinds from inflation pressures and regulation 26 impa
Slide 35: Transformation investment
Transformation investment Ongoing investment to deliver transformation roadmap Investment spend ($m) Summary › Overall investment increased primarily due to integration costs in the period 331 › Material capital investment in FY22 focused on new cloud digital retail banking platform and key foundati
Slide 36: Provision and loan impairment expense
Provision and loan impairment expense Sound provisioning levels maintained in light of changing economic conditions Housing, asset finance and commercial arrears 90DPD (bps) Impaired assets ($m) 91 93 84 243 221 38 194 88 61 32 80 153 77 36 78 59 55 63 38 20 24 24 54 15 111 128 95 61 Feb-21 Aug-21 F
Slide 37: Provisioning levels
Provisioning levels Well provisioned, with coverage above regional peers excluding impact of ME (acquisition accounting and lower risk housing exposure) Summary Provisions & GRCL to GLA1 (%) › Specific provision levels remain low due to low arrears and increased asset valuations › Excluding ME, cove
Slide 38: Impacts of interest rate rises for home loan customers
Impacts of interest rate rises for home loan customers Housing customers have a comfortable buffer for future interest rate rises Summary Fixed rate maturity impacts and towers › 53% of home loan customers have a repayment1 buffer of one › Fixed rate maturity tower peak in 1H24, in line with high le
Slide 39: Funding & liquidity
Funding & liquidity Increasing deposit portfolio supporting business growth Summary Funding mix ($bn)1 91.5 › Deposit to loan ratio broadly stable at 74% 83.5 19.4 › Growth in transaction accounts of 19% 17.7 50.8 9.3 11.6 › Cash rate increases driving growth in term deposits as customers seek yield
Slide 40: Capital
Capital Investing in growth and transformation Summary CET1 (%) – FY21 to FY22 › CET1 remains above the target range, at 9.57% for 2H22 1.14% (0.51%) › Solid quality growth generating earnings (0.68%) › Continued investment in transforming the business (0.19%) 0.09% (0.08%) › Impact of c.6bps in 2H2
Slide 41: Summary & Outlook
SUMMARY & OUTLOOK BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 41
Slide 42: FY22 summary
FY22 summary › Supporting our customers and people through ongoing changing times › Solid financial performance during FY22, delivering positive jaws and sustainable quality growth across retail and business bank › Quality loan growth offsetting heightened industry margin pressure during first half
Slide 43: Outlook
Outlook FY23 outlook1 › Australia remains well placed given low unemployment, high level of accumulated household saving, strong business order books, robust growth in capex spending plans and high terms of trade. Increased business spending in response to increased consumer spending relative to pre
Slide 44: About BOQ Group
ABOUT BOQ GROUP BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 44
Slide 45: Unique brands in niche segments serving customers for 148 years
BOQ UNIQUE BRANDS IN NICHE SEGMENTS SERVING CUSTOMERS FOR 147 YEARS Unique brands in niche segments serving customers for 148 years Our differentiators Key statistics for FY22 › Unique brands with proud history › Deeply anchored in local communities c.530k BOQ Retail c.10k BOQ Business c.1.3m1 c.240
Slide 46: Distribution footprint
Distribution footprint Summary › FY22 branch numbers at 154 (incl. transaction centres) 1 27 › The franchise network remains a key differentiator for BOQ and is pivotal to the Bank’s deposit raising capabilities and growth in 14 36 17 73 1,964 mortgages and SME lending 7 6 1,299 2,262 10 5 1,166 3 6
Slide 47: Distribution footprint movements
Distribution footprint movements Distribution footprint movements Aug-22 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 17 4 5 10 - - - 36 Owner managed branches 73 19 10 5 1 2 1 111 Transaction centres 7 - - - - - - 7 Total 97 23 15 15 1 2 1 154 Aug-21 QLD NSW / ACT VIC WA NT TAS SA Total
Slide 48: Cultural transformation
Cultural transformation Cultural transformation delivering improved outcomes for our people and business Alignment of role to Engagement Culture Safe to speak up Strategy execution strategy August 2020 August 2020 May 2020 May 2020 August 2020 59% 54% 58% 51% 72% August 2022 August 2022 August 2022
Slide 49: Multi brand strategy
Multi UNIQUE brand BRANDS INstrategy NICHE SEGMENTS SERVING CUSTOMERS FOR 147 YEARS Our multi brand strategy allows us to target attractive segments with brands and value propositions that work Retail Bank Business Bank The Human Touch The Optimiser The Striver Specialised Business & Private Banking
Slide 50: Balanced portfolio for growth and geographic diversity
Balanced portfolio for growth and geographic diversity Combination of BOQ and ME has diversified the portfolio Summary FY22 Cash profit by division1 (%) › Well diversified profit, with 49% of profits from Retail Banking and 51% from Business Banking 49% › Lending portfolio diversified geographically
Slide 51: Transformation & Integration Detail
TRANSFORMATION & INTEGRATION DETAIL BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 51
Slide 52: Executing on the ME integration
Executing on the ME integration Integration program well progressed and synergies ahead of schedule ME returned to growth Single ADI Technology integration Consolidated team and Outperformed on Improved time to yes well progressed capability build synergy benefits ME Bank ADI licence handed back del
Slide 53: Integration update
Integration update Integration program delivering ahead of plan Expense synergy profile Integration costs2 1H22 FY22 FY23 FY24+ FY21 FY22 FY23 FY24+ Synergies annualised run rate $33m $47m c.$70 - $80m $95m+ Integration costs $13m $81m c.$40m c.$5m Delivered percentage1 44% 63% 100% 125%+ Cumulative
Slide 54: Divisional Results
DIVISIONAL RESULTS BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 54
Slide 55: Divisional performance
Divisional performance Positive growth in underlying profit in BOQ Business with Retail Bank down 1% ($m) Retail bank Business bank FY22 FY21 FY22 v FY21 FY22 FY21 FY22 v FY21 Net interest income 943 981 (4%) 593 555 7% Non-interest income 98 85 15% 50 48 4% Total income 1,041 1,066 (2%) 643 603 7%
Slide 56: Retail banking overview
Retail banking overview Summary Improved home lending growth ($m)1 › Total income decreased 2% as margin degradation more than offset +263% 3,810 high non-interest income in the year 1,051 1,468 › Retail customer deposit growth of $3.3bn, reflecting 1.3x system, driven 1,439 by 20% transaction accou
Slide 57: Home lending performance
Home lending performance Quality growth in housing, with net growth and application volumes providing revenue tailwinds, whilst maintaining good turnaround times Quality housing growth metrics Housing application volumes (# ‘000) Quality Growth Portfolio FY22 Flow FY22 +6% LVR > 90% (%) 2.6 1.3 50.1
Slide 58: Business banking overview
Business banking overview Summary Strong housing and business lending growth ($bn) › Total income grew 7%, reflecting strong lending balance growth of 8% +55% 1.8 and focused margin management in an environment of increasing 0.1 competition 1.1 1.1 › Lending momentum was underpinned by above system
Slide 59: Lending to households (APRA data)
Lending to households (APRA data) Lending to Households (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share Major 1 35.71% 21.61% 1.46% 5.0 3.6 3.2 4.76% International 1 16.47% -3.03% -0.25% 2.3 Neg Neg 1.36% Regional 1 12.53% 18.14% 1.44% 1.7 3.0 3.2 2.39% Major 2 11.61% 17.95% 0.40% 1.
Slide 60: Lending to business (APRA data)
Lending to business (APRA data) Lending to Businesses (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share International 1 34.87% 8.57% -2.39% 2.4 0.6 Neg 0.40% International 2 15.22% 47.25% 3.54% 1.0 3.4 4.7 1.58% System 14.56% 13.87% 0.75% Major 4 14.33% 18.20% 0.88% 1.0 1.3 1.2 19.57%
Slide 61: Business lending (RBA data)
Business lending (RBA data) Solid business growth with focus on SME Small and medium (rolling 3m growth rate) – RBA Large (rolling 3m growth rate) – RBA 30.0% 30.0% 25.0% 25.0% 22.8% 20.0% 20.0% 15.0% 15.0% 10.0% 10.0% 10.0% 7.7% 5.0% 10.2% 5.0% 0.0% 0.0% -5.0% -5.0% -10.0% -10.0% -15.0% -15.0% Aug-
Slide 62: Portfolio Quality
PORTFOLIO QUALITY BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 62
Slide 63: Provision and loan impairment expense
Provision and loan impairment expense Prudent economic forecasts reflective of a changing environment Provision model assumptions Economic forecasts (calendar year) (%)1 Base Downside › The base case scenario reflects BOQ’s forward looking economic 2022 2023 2024 2022 2023 2024 assumptions and is su
Slide 64: Portfolio quality
Portfolio quality Housing and Commercial arrears trends broadly improving over the year Summary Commercial arrears (bps) › Low unemployment, rising house prices and increased household deposits supporting lower housing arrears 174 171 143 › Commercial arrears continue to normalise to pre COVID-19 le
Slide 65: Housing loan portfolio
Housing loan portfolio Strong risk management with diversified portfolio and conservative LVR lending Summary Housing portfolio by LVR (%) › Housing portfolio diversified across geography and channel 3% Up to and including 13% 60% › 97% of customers with LVR<90%, with FY22 flow above 90% at 1.3% 33%
Slide 66: Asset finance portfolio
Asset finance portfolio Portfolio remains well diversified Summary Asset finance by geography (%) › Broad industry spread reducing concentration of asset finance portfolio 9% › Exposure to the construction sector is well spread across a mix of light 5% QLD and heavy vehicles and yellow goods, with s
Slide 67: Business portfolio
Business portfolio Strong growth across the core distribution channels of Business Banking, BOQS & owner managed branches Summary Business by geography (%) › Business portfolio well diversified geographically with a diverse channel mix 6% 2% QLD › The portfolio is well secured with less than c.8% of
Slide 68: Business portfolio
Business portfolio Business lending primarily underpinned by quality security Summary › c.8% of the business exposure is unsecured › All industries and brands are predominantly secured › Property and construction contribute 41% to the business exposure with the vast majority of these industries bein
Slide 69: Industry and geographic split over time
Industry and geographic split over time1 Enhanced geographic and sector diversification over time Housing loans – geographic split over time (%) Summary FY22 Balance Outstanding (%) 31% 30% 23% 10% 6% › Enhanced geographic diversification, Queensland housing portfolio reducing FY17 Balance Outstandi
Slide 70: Emerging risks
Emerging risks Macro economic environment Construction industry › Strong post covid economic rebound › Sector risks emerging given recent impacts from supply chain and rising cost impacts › Historically low unemployment forecast to remain › Construction industry comprises 9% of BOQ’s commercial port
Slide 71: Capital, Funding & Liquidity
CAPITAL, FUNDING & LIQUIDITY BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 71
Slide 72: Term deposits benefiting from lower pricing relative to BBSW
Term deposits benefiting from lower pricing relative to BBSW, new money of $1.7bn Summary › FY22 term deposit growth of 14% › 2H22 saw a strategic pivot to term deposits due to relatively low cost of funding › Favourable carded rates in 2H22 well below elevated BBSW vs normalised rates positioned ab
Slide 73: Replicating portfolio and uninvested capital
Replicating portfolio and uninvested capital and low cost deposits Summary Replicating portfolio (%) › Replicating portfolio investment term moved from 3 5% years to 5 years in FY22 › Additional $1bn of uninvested low cost deposits 4% were invested into the replicating portfolio early in 2H22 3% › $
Slide 74: Hedging costs - basis risk
Hedging costs - basis risk Summary Long term basis risk avg - 21bps › The impacts of hedging costs had a flat NIM impact in 2H22 0.6% › The basis exposure has started to normalise since HY22 as fixed rate lending has slowed and term deposits growth has increased during the period › Current sensitivi
Slide 75: Yield curve movements
Yield curve movements Summary Yield curve movements (%) › Swap yields have continued to increase significantly in 2H22 as central banks commence lifting cash rates in response to inflationary 4.0 3.64 3.65 3.69 3.73 pressures 3.40 › This has created challenges for industry NIM 3.0 2.46 2.14 2.02 1.8
Slide 76: Funding
Funding Summary Deposit to loan ratio (%) › Loan growth funded through stable funding sources, including customer deposits and long term wholesale funding › Deposit to loan ratio of 74% despite the increase in loan growth in the year 70% 74% 75% 74% 2 2 FY19 FY20 FY21 FY22 Uses & sources of funding
Slide 77: Credit rating
Credit rating Current debt ratings1 Rating Agency Short Term Long Term Outlook S&P A-2 BBB+ Positive Fitch F2 A- Stable Moody’s P-2 A3 Stable BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation (1) The Bank monitors rating agency developments closely and is rated by Standard & Poor's (S&P
Slide 78: Economic Assumptions
ECONOMIC ASSUMPTIONS BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 78
Slide 79: Macro economic environment
Macro economic environment1 Economic growth to be strong but with elevated inflation Macro economic › Economic growth will likely slow over the next 1-2 years with a forecast modest rise in the unemployment rate › Inflation will likely peak by end-2022 › This will likely result in interest rates pea
Slide 80: Housing, business lending and deposits outlook
Housing, business lending and deposits outlook1 Housing outlook Business lending outlook Deposits outlook › Unemployment low at c.3.5% in calendar › Business order books and capex intentions › System deposit growth was elevated over 2023 and likely to stay low are currently elevated COVID-19 › Consu
Slide 81: Abbreviations
ABBREVIATIONS BANK OF QUEENSLAND LIMITED 2022 Full Year Results Presentation 81
Slide 82: Abbreviations
Abbreviations 1H: First half of financial year CTI: Cost-to-income ratio NII: Net Interest Income 2H: Second half of financial year CLF: Committed Liquidity Facility NM: Not meaningful 30DPD: 30 days past due DPD: Days past due NPAT: Net Profit After Tax 90DPD: 90 days past due EPS: Earnings per Sha