Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2019 Earnings Presentation
53 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 12, 2019
Slide 1: Results presentation for the full year ended 30 June 2019
For personal use only Results presentation For the full year ended 30 June 2019 1
Slide 2: Agenda
For personal use only Agenda 2
Slide 3: Overview
For personal use only Overview Marnie Baker Managing Director 3
Slide 4: Overview FY19: Reshaping for the future
Overview FY19 : Reshaping for the future For personal use only Consistently ranked in Net promoter score2 top 10 most trusted Cash earnings after tax Net interest increased 2.5 to brands in Australia3 down 6.6% to margin maintained at 24.8 9th most $415.7 million 2.36% trusted brand Over 21 years Re
Slide 5: FY19 financial result
FY19 financial result For personal use only Excluding Homesafe Statutory net profit ($m) 376.8 434.5 (13.3%) unrealised loss $24.1m3 Cash earnings ($m) 415.7 445.1 (6.6%) Underlying earnings ($m)1 435.7 447.1 (2.5%) Excluding Cost to income (%) 59.2 55.6 +360 bps remediation $16.7m3 and redundancies
Slide 6: Proactive and customer focussed approach to remediation
Proactive and customer focussed approach to remediation For personal use only » Comprehensive review undertaken Remediation $16.7m » Conservative in identifying and Advice $7.9m applying any remediation needs Insufficient documentation to demonstrate that services had been provided to Bendigo Financ
Slide 7: Disciplined execution delivers positive momentum
Disciplined execution delivers positive momentum For personal use only Reduce complexity 2H19 Achievements: » Simplified organisational structure » Lending growth momentum: Invest in capability » Sold Bendigo Financial Planning • Mortgages: +4.3% » Handed back Rural Bank ADI licence Tell our story •
Slide 8: Resetting priorities and building on our strengths
Resetting priorities and building on our strengths For personal use only » Right sizing the business » Adoption of new technologies » Decommissioning legacy Better » Increased investment in platforms customer relationship managers » Improving business processes outcomes » Adaptive people and a stron
Slide 9: Focussing on key markets
Focussing on key markets Consumer Business Agribusiness For personal use only » Expanding white label » Investing in Relationship » Execution of new mortgage offering with Banking model to support partnership agreement with Connective and Aussie growth and differentiated Elders Home Loans partnershi
Slide 10: Delivering strong customer growth FY19
Delivering strong customer growth FY19 For personal use only 4x growth in net customers 93.5% Customer retention increased to 109,081 21,077 8,323 -6,450 Existing Millennials Small to medium Family corporate customers businesses farms +0.3% +453% +5% +11% customer retention1 customer growth customer
Slide 11: FY19 financials
For personal use only FY19 financials Travis Crouch Chief Financial Officer 11
Slide 12: Financial performance
Financial performance For personal use only FY19 FY18 FY19 vs FY18 2H19 vs 2H18 ($m) ($m) Net interest income $1,304.2 $1,323.6 (1.5%) (1.2%) Other income $295.3 $281.2 5.0% 8.8% 1 Homesafe $14.1 $16.2 (13.2%) (4.6%) Operating expenses2 $954.5 $900.9 5.9% 7.7% Credit $50.3 $70.6 (28.8%) 2.1% Cash ea
Slide 13: Underlying earnings
Underlying earnings ($m) For personal use only -2.5% 447.1 8.3 435.7 11.7 38.9 415.7 376.8 2 2 FY18 underlying earnings 1 FY19 NPAT Cash earnings adjustments FY cash earnings after tax Remediation Redundancies FY19 underlying earnings 1 FY18 cash earnings excludes after tax remediation costs ($0.4m)
Slide 14: Lending growth profile
Lending growth profile 3 Residential lending Residential lending Business lending Total lending Total lending For personal use only 4.3% 3.5% 3.6% 3.0% 2.0% 12 months1 1.1% -2.7% -5.1% Residential lending Business Lending Total lending 12.8% 4.3% 3.4% 3.6% 2.7% 2.6% 6 months 0.8% 2 (annualised) -1.2
Slide 15: Net interest margin
Net interest margin For personal use only Historical NIM (%) » June 2019 exit margin 2.41% 2.36 2.37 2.35 2.37 2.36 2.36 » Active management of price/volume balance 0.38 0.39 0.40 0.40 0.38 0.40 » Underlying yield curve reductions improved wholesale deposit pricing in 2H19 1.98 1.98 1.95 1.97 1.98 1
Slide 16: Income
Income For personal use only FY19 FY18 FY19 vs 2H19 vs ($m) ($m) FY18 2H18 » Reduction in fee income due to changes in customer behaviour and product options available to customers Net interest income $1,304.2 $1,323.6 (1.5%) (1.2%) » Introduction of lending retention team has resulted in decrease i
Slide 17: Operating expenses
Operating expenses » Underlying operating expenses increased by 2.6% FY19 FY18 FY19 vs For personal use only ($m) ($m) FY18 » Increase in staff costs due to new Elders Agri-finance staff from March 2019 (+$5.5m) and increased investment in Group Risk and Staff costs $506.6 $495.0 2.3% People & Cultu
Slide 18: Consumer division
Consumer division For personal use only FY19 FY18 FY19 vs FY18 » Solid growth in mortgages of $1.3bn, above system in 2H19, ($m) ($m) through Retail and Third Party channels Net interest income $816.9 $817.7 ($0.8) » Deposit growth of $1.2bn reflecting careful margin management Other income $222.8 $
Slide 19: Business division
Business division For personal use only FY19 FY18 FY19 vs FY18 ($m) ($m) » Lower NII reflects the contraction in the commercial property lending portfolio and increased margin pressure Net interest income $324.0 $339.7 ($15.7) » Positive growth achieved across other segments with margin maintained o
Slide 20: Agribusiness division
Agribusiness division For personal use only FY19 FY18 FY19 vs FY18 ($m) ($m) » Strong margin management, despite continued extreme pricing competition Net interest income $163.3 $166.2 ($2.9) » Credit quality reflects conservative underwriting standards, historically high commodity prices and rising
Slide 21: Homesafe investment property portfolio
Homesafe investment property portfolio » Proceeds on contracts completed during 2H19 exceeded carrying value For personal use only by $0.7m or 3.3% Homesafe portfolio & funding balance ($m) 735.7 734.5 » Average annual return on completed contracts since inception is 9.9%, pre funding costs 452.3 40
Slide 22: Bad and doubtful debts
Bad and doubtful debts Bad and doubtful debts composition ($m) For personal use only 46.3 » All core portfolios remain well secured and portfolio 5.3 performance remains sound 0.7 25.5 24.3 24.8 » FY19 BDD charge 8bps of gross loans, below long term average 27.2 2.7 9.8 3.3 2.1 2.3 8.6 » Provision c
Slide 23: Arrears
Arrears Residential Agribusiness For personal use only 3.0% 0.8% 2.0% 0.4% 1.0% 0.0% 0.0% Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Res 90d+ Agri 90d+ Credit cards & Personal loans Business & Commercial 2.0% 8.5 2.0% 1.0% 1.0% 0.0% 0.0% 6.5 Jun-17 Dec-17 Jun-18 Dec-18 Jun
Slide 24: Residential portfolio key metrics
Residential portfolio key metrics 1 Home Loans 90+ days past due - by state For personal use only Residential portfolio and settlement metrics3 Jun-19 Dec-18 2.0% Retail mortgages 58% 58% 1.5% Third Party mortgages 42% 42% 1.0% Lo Doc 1% 2% Owner occupied 63% 63% 0.5% Owner occupied P&I 86% 84% 0.0%
Slide 25: Funding mix
Funding mix For personal use only Funding profile (%) » Funding mix continues to be a strength, providing flexibility to 5.7 4.3 5.4 fund asset growth and manage cost of funding in low rate 14.1 13.3 12.9 environment 41.3 44.0 43.3 » Retail deposit balances increased from June 2018 to improve Retail
Slide 26: Capital
Capital For personal use only Historical CET1 (%) » 30 bps increase in CET1 since June 2018 » Organic capital generation reflects stability in the balance sheet and 8.92 the continuing movement to lower risk exposures 8.76 8.61 8.62 » Increase in deferred tax asset driven by one off charge in collec
Slide 27: Summary and outlook
For personal use only Summary and outlook Marnie Baker Managing Director 27
Slide 28: Our strength
Our strength For personal use only » Number 1 for Customer Experience in Australia for fourth year running1 » Consistently ranked in Top 2 banks for customer satisfaction2 » 9th most trusted brand in Australia and consistently ranked in top 103 » Positive growth in key priority markets » Focussed on
Slide 29: Continually evolving regulatory environment
Continually evolving regulatory environment For personal use only » Increasing regulatory focus » We continue to: » Invest in risk management and compliance capabilities » Continues to favour larger participants » Take a transparent approach with regulatory agencies » Expect similar pace in FY20 » E
Slide 30: Economic outlook
Economic outlook 1 Wage price index – quarterly growth (%) For personal use only 5.0 GDP growth Housing market 4.0 GDP forecast of +2% Uptick in auction clearance supported by a cash rate rates in Melbourne, 3.0 which has fallen to 1% Sydney, regional Tasmania 2.0 1.0 Business confidence 0.0 Mar-99
Slide 31: Reshaping our business: Australia's bank of choice
Reshaping our business : Australia’s bank of choice For personal use only Seamless » Enhanced ability to utilise new technologies customer and capabilities experience » New management team » Modernise and simplify our architecture » New vision and strategy » Streamlining of processes Medium-term » D
Slide 32: Questions
For personal use only Questions 32
Slide 33: Appendix
For personal use only Appendix 33
Slide 34: Appendix index
Appendix index For personal use only Section Page Number Awards 35 Digital 36 – 38 Residential lending 39 – 41 Community Bank® model 42 Business portfolio 43 Agribusiness portfolio 44 Provisions 45 Capital ratios 46 Funding and liquidity 47 Dividends 48 Great Southern 49 Physical presence 50 Statuto
Slide 35: We are well placed
For personal use only We are well placed 35
Slide 36: Up: Australia's first next-gen digital bank
(k) (m) 200 1.8 For personal use only 160 1.35 Australia’s first next-gen 120 0.9 80 digital bank 40 0.45 0 0 Sep-18 Dec-18 Mar-19 Jun-19 • Technology-led banking Number of Accounts (LHS) Transactions per month (RHS) • Helping customers spend wisely and save effortlessly • 100,000+ customers, 86% ne
Slide 37: Designed and built in partnership with Ferocia
Designed and built in partnership with Ferocia For personal use only 500,000+ cloud infrastructure provisions Platform availability checked every 5 secs 11,000,000+ production system checks 99.97% Up platform availability 65,000+ merchants identified since launch + 37 37
Slide 38: Tic:Toc digital home loans
For personal use only » Tic:Toc’s proprietary artificial intelligence creates significant efficiency gain in home loan assessment compared to traditional processes. Reflected in a customer experience delivering a completed application, assessment, approval and customer contract dispatched Tic:Toc -
Slide 39: 2H19 residential lending
2H19 residential lending For personal use only Retail - settlements breakdown ($m)1 Third Party Banking – settlements breakdown ($m)1 $2000m $1600m $1600m $1200m $1200m $800m $800m $400m $400m $m $m Customers OO PI OO IO INV PI INV IO OO PI OO IO INV PI INV IO 1H18 2H18 1H19 2H19 1H18 2H18 1H19 2H19
Slide 40: Residential portfolio
Residential portfolio Exposure by State For personal use only 1 Retail - portfolio ($b) 22.8 22.4 22.3 21.7 21.2 Customers 15% Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 9% 11% Third Party Banking - portfolio ($b)1 Revenue 24% 3.9 3.5 3.6 3.4 3.5 Costs 12.9 39% 12.5 12.1 12.2 12.6 Jun-17 Dec-17 Jun-18 Dec-1
Slide 41: Residential portfolio
Residential portfolio For personal use only Retail lending - purpose (%) Retail lending - payment type (%) 20.7 21.7 20.6 19.4 18.4 17.3 34.8 34.5 33.5 33.0 32.7 32.8 63.7 63.8 66.1 68.1 69.8 71.4 65.2 65.5 66.5 67.0 67.3 67.2 15.6 14.5 13.4 12.5 11.8 11.3 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 C
Slide 42: The Community Bank model
The Community Bank® model For personal use only » Community banking is based on a ‘profit with purpose’ model, which means profits are returned directly to the community which has generated them » Over $220m in community contributions1 since inception, enabling tangible economic and social benefits
Slide 43: Business portfolio
Business portfolio For personal use only » Customer Segmentation model now established, with over 6,000 Segment Growth Rates customers transitioned from previous operating model to align to 15.0% our Relationship Banking proposition 10.0% » Small Business portfolio was the first established and saw
Slide 44: Agribusiness portfolio
Agribusiness portfolio Exposure by State For personal use only Exposure by industry 5% 9% 4% Dairy 8% Sheep Beef Sheep/Beef 31% 14% Grain Grain/Sheep/Beef Hort./Vit. Customers 10% 15% 15% Other 19% 16% Revenue Agribusiness portfolio ($b) 17% 6.0 5.9 5.7 35% 5.6 5.4 3% Jun-17 Dec-17 Jun-18 Dec-18 Jun
Slide 45: Specific provisions
Specific provisions For personal use only Specific provision Specific provisions breakdown ($m) balance ($m) 100.00 128.5 80.00 Represented by 60.00 40.00 20.00 Customers - Consumer - Retail Consumer - Third Party Business Banking Agribusiness Great Southern Total Jun-18 Jun-19 Revenue Provision as
Slide 46: Key capital ratios
Key capital ratios For personal use only Group economic capital (GEC) & Group standardised 2H19 1H19 2H18 1H18 regulatory capital (GSRC)1 (%) (%) (%) (%) Common Equity Tier 1 8.92% 8.76% 8.62% 8.61% GEC = $2.63b GSRC = $4.93b Additional Tier 1 2.39% 2.39% 2.34% 2.37% Customers Credit risk Market ris
Slide 47: Funding and liquidity
Funding and liquidity Liquidity coverage ratio – 3 month average3 For personal use only 1 Wholesale funding composition Jun-19 Mar-19 Dec-18 Sep-18 ($b) ($b) ($b) ($b) 10% High quality liquid assets 4.29 4.91 4.44 3.92 45% Committed liquidity facility 2.99 2.98 3.48 3.48 Total LCR liquid assets 7.28
Slide 48: Long term shareholder returns
Long term shareholder returns For personal use only Dividend (cps) » Dividend yield over the last ten years has averaged in excess of 6 per cent1 » History of consistently rewarding shareholders with a high-yielding dividend 34 34 35 35 33 33 30 30 31 30 15 2 33 34 34 35 35 30 30 30 31 28 28 FY09 FY
Slide 49: Great Southern
Great Southern For personal use only » Great Southern portfolio has paid down significantly and is adequately provisioned » Past due 90 days of $34.9m, down 18.7% from 30 June 2018 » Specific provision of $26.8m, up $16.9m from 30 June 2018 » Collective provision of $8.8m, down $26.2m from 1 July 20
Slide 50: Physical presence
For personal use only Physical presence 50
Slide 51: Reconciliation
Reconciliation FY19 FY18 For personal use only ($m) ($m) Statutory Profit after tax $376.8 $434.5 Fair value adjustments $0.3 $0.8 Homesafe unrealised adjustments $29.5 ($26.8) Hedging revaluation ($7.4) ($1.2) Loss on sale of business $1.6 $1.2 Integration costs Customers $0.5 $5.3 Impairment charg
Slide 52: For personal use only
Analysts – Nicole Rooke Head of Investor Relations For personal use only T: +61 3 5485 6286 M: +61 431 442 808 E: nicole.rooke@bendigoadelaide.com.au Alex Hartley Manager Investor Relations T: +61 8 8300 6290 M: +61 478 435 218 E: alex.hartley@bendigoadelaide.com.au Media – Simon Fitzgerald Head of
Slide 53: Disclaimer
Disclaimer For personal use only This document is a presentation of general background information about the Group’s activities current at the date of the presentation. It is information in a summary form and no representation or warranty is made as to the accuracy, completeness or reliability of th
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