Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2023 Earnings Presentation
72 slides from Bank Of Queensland's earnings presentation, Oct 11, 2023
Slide 1: Investor Materials
INVESTOR MATERIALS Full year ended 31 August 2023
Slide 2: Important information and disclaimer
2023 FULL YEAR RESULTS PRESENTATION Important information and disclaimer This is a presentation of general background information about Bank of Queensland ABN 32 009 656 740 and its consolidated entities (BOQ’s) activities at the date of this document. It is in summary form, does not purport to be c
Slide 3: Contents
2023 FULL YEAR RESULTS PRESENTATION Contents FY23 Results Presentation 4 About BOQ 36 Divisional Results 43 Net Interest Margin 49 Portfolio Quality 52 Capital, Funding & Liquidity 62 Economic Assumptions 68 Abbreviations 71 3
Slide 4: FY23 Results Presentation
FY23 RESULTS PRESENTATION 11 OCTOBER 2023 Full Year ended 31 August 2023
Slide 5: Acknowledgement of Traditional Custodians
BOQ Group acknowledges the Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of the land where we live and work. We pay our respects to Elders past and present. Artwork proudly created for Bank of Queensland (BOQ) by the Harristown Clontarf Academy, Toowoomba.
Slide 6: Agenda
2023 FULL YEAR RESULTS PRESENTATION Agenda Introduction Outlook & summary Jessica Smith, General Manager Investor Relations & ESG Patrick Allaway, Managing Director & Chief Executive Officer Results overview Q&A Patrick Allaway, Managing Director & Chief Executive Officer Patrick Allaway, Managing D
Slide 7: Results Overview
RESULTS OVERVIEW Patrick Allaway Managing Director & Chief Executive Officer
Slide 8: Key messages
2023 FULL YEAR RESULTS PRESENTATION Key messages 1. Delivered $450m after tax cash earnings and $124m statutory profit after tax 2. Result reflects a business in transformation addressing decade long legacy issues combined with a highly competitive market on both the asset and liability side 3. Take
Slide 9: FY23 results
2023 FULL YEAR RESULTS PRESENTATION FY23 results Higher total income offset by a return to normalised loan impairment expense and increased costs driven by inflation and transformation investment. Statutory earnings impacted by one-off items Key financial results ($m) 1 FY23 FY23 v FY22 Total income
Slide 10: Retail banking overview
2023 FULL YEAR RESULTS PRESENTATION Retail banking overview More customers banking with us, as digital strategy is executed, providing a better customer experience. Housing book decline driven by prioritisation of economic return over volume growth in a highly competitive market Summary Home lending
Slide 11: Business banking overview
2023 FULL YEAR RESULTS PRESENTATION Business banking overview Targeted lending growth and optimisation of margins delivering higher income, improved returns and lower CTI Summary Lending growth2 ($bn) › Total income grew 14% in FY23 reflecting optimisation of margins 1.7 across both lending and depo
Slide 12: Customer experience
2023 FULL YEAR RESULTS PRESENTATION Customer experience Elevating our customer voice and experience through a transformed operating model Our Vision: To be the bank customers choose 149-year QLD heritage Customer focused Improving NPS Dedicated Group Executive Supporting local Supported 3.7k custome
Slide 13: Transforming the business
2023 FULL YEAR RESULTS PRESENTATION Transforming the business Making bold choices about our business to address legacy issues, build a future fit bank, uplift performance and drive shareholder value Our strategic pillars are driving decisive action Addressing › Higher relative funding costs STRENGTH
Slide 14: Strengthening BOQ
2023 FULL YEAR RESULTS PRESENTATION Strengthening BOQ A focus on building stronger foundations through financial and operational resilience, and improved risk culture › BOQ has acknowledged its failings and underlying weakness in risk management and compliance matters › Embracing Court Enforceable U
Slide 15: Strengthening BOQ: Court Enforceable Undertakings
2023 FULL YEAR RESULTS PRESENTATION Strengthening BOQ: Court Enforceable Undertakings Remedial Action Plans finalised and submitted to APRA and AUSTRAC Program rQ AML First Program Strengthen risk culture, governance, and financial and operational resilience to be An enterprise-wide remediation and
Slide 16: Simplifying BOQ
2023 FULL YEAR RESULTS PRESENTATION Simplifying BOQ Simplifying our operating model and processes to reduce complexity, duplication, operational risk and costs. BOQ is targeting a cost productivity program of $200m over three years FY23 FY24-FY26 Executive team reduced from 12 to 8 Horizontally inte
Slide 17: Digitising BOQ
2023 FULL YEAR RESULTS PRESENTATION Digitising BOQ Digital strategy improving customer experience, providing strong deposit growth and lower cost to serve. All FY23 milestones achieved to plan and on budget FY2021 - 2023 FY2024 - 2025 Post FY2025 VMA and BOQ transaction and savings launched on new c
Slide 18: Digitising BOQ
2023 FULL YEAR RESULTS PRESENTATION Digitising BOQ Strong growth with digital strategy starting to deliver Deposit balance Customer +267% growth on FY22 +103% growth on FY22 Net transaction Avg. savings account growth since +19% balance per 3x launch of digital customer on FY22 platforms Retail cust
Slide 19: Optimising BOQ
2023 FULL YEAR RESULTS PRESENTATION Optimising BOQ Increasing competition requires a simple, low-cost, scalable operating model with prudent allocation of capital focused on return on equity MATERIAL PERFORMANCE UPLIFT FY26 FINANCIAL TARGETS SOLID FOUNDATIONS TO BE DRIVEN BY REAFFIRMED Completed int
Slide 20: Living our purpose and values
2023 FULL YEAR RESULTS PRESENTATION Living our purpose and values Building a sustainable business by supporting our customers and communities, creating an exceptional people experience and reducing our operational footprint Customers and communities Enriching our people Environmental commitments Sup
Slide 21: Financial Detail
FINANCIAL DETAIL Racheal Kellaway Chief Financial Officer
Slide 22: Financial performance
2023 FULL YEAR RESULTS PRESENTATION Financial performance Revenue growth offset by higher costs and normalised loan impairment expense Key financial results ($m) 1 FY23 FY22 FY23 v FY22 2H23 1H23 2H23 v 1H23 Net interest income 1,600 1,505 6% 768 832 (8%) Non-interest income 142 153 (7%) 72 70 3% To
Slide 23: Non-cash items
2023 FULL YEAR RESULTS PRESENTATION Non-cash items 2H23 statutory result included final costs of ME integration and restructuring provision to simplify the Group Reconciliation of cash earnings to statutory net profit after tax ($m) FY23 FY22 2H23 1H23 Cash earnings after tax1 450 491 194 256 Goodwi
Slide 24: Key elements
2023 FULL YEAR RESULTS PRESENTATION Key elements Income up on FY22 but down in second half, impacted by lending contraction and decline in NIM Total income1 ($m) $1,742m Net interest margin1 (%) $1,658m 902 1.79 1.74 831 840 1.70 827 1.58 1H22 2H22 1H23 2H23 1H22 2H22 1H23 2H23 Growth in lending GLA
Slide 25: Financial resilience
2023 FULL YEAR RESULTS PRESENTATION Financial resilience Strong balance sheet with conservative settings held through the period Liquidity strength Funding strength 164% 83% 154% 74% 75% 75% 145% 149% 70% 139% 128% 68% 68% 67% 69% 119% 122% 125% 64% 112% FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22
Slide 26: Net interest margin
2023 FULL YEAR RESULTS PRESENTATION Net interest margin Competitive pressure on lending and deposits continued across the industry Summary 1H24 considerations › Competition and retention discounting continuing to impact asset margins › Competition for lending › Strong competition for retail deposits
Slide 27: Operating expenses
2023 FULL YEAR RESULTS PRESENTATION Operating expenses Inflation and technology costs partially offset by productivity and synergy benefits Operating expenses ($m) FY24 considerations › Inflationary pressures partly offset by (8) simplification, low single digit growth in the 59 (29) 11 5 underlying
Slide 28: ME Integration
2023 FULL YEAR RESULTS PRESENTATION ME Integration Integration program complete with targeted synergies delivered Expense synergy profile ME Integration costs1 FY22 1H23 2H23 FY22 1H23 2H23 Synergies annualised run rate $47m $60m $72m ME Integration program costs $81m $18m $21m Cumulative (target $1
Slide 29: Transformation investment
2023 FULL YEAR RESULTS PRESENTATION Transformation investment Commitment to delivering on the transformation supported by material investment in the business Investment spend ($m) Summary › Increase in investment spend largely due to final ME Integration costs associated with 167 property and ME cor
Slide 30: Provisioning and loan impairment expense
2023 FULL YEAR RESULTS PRESENTATION Provisioning and loan impairment expense Increased provisioning levels taking into account forward looking overlays in light of changing economic conditions Loan impairment expense Impaired assets ($m) LIE/GLA (bps) 194 (4) 7 8 9 36 153 133 114 63 38 31 28 34 37 5
Slide 31: Funding & liquidity
2023 FULL YEAR RESULTS PRESENTATION Funding & liquidity Strategic growth in customer deposits demonstrating digital strategy is delivering Summary › Strong liquidity position, diversified funding approach through multiple retail and wholesale channels › Spot FY23 LCR of 154%, average FY23 LCR of 147
Slide 32: Capital strength
2023 FULL YEAR RESULTS PRESENTATION Capital strength Strong CET1 ratio providing financial resilience in a period of economic uncertainty whilst continuing to invest in transformation Summary › CET1 above management target range at 10.91%, $65m in surplus capital held › Capital overlay of $50m appli
Slide 33: Outlook & Summary
BOQ GROUP OUTLOOK & SUMMARY
Slide 34: FY24 Outlook
2023 FULL YEAR RESULTS PRESENTATION FY24 Outlook › Australian economy resilient supported by solid fundamentals with low unemployment and strong cash savings › Increasing risk into FY24 due to elevated cost of living and the lagged impact of sustained high interest rates › We will support our custom
Slide 35: Summary
2023 FULL YEAR RESULTS PRESENTATION Summary › Strong financial position to support our customers and deliver our transformation priorities to strengthen, simplify, digitalise and optimise BOQ › Committed to our risk remediation programs with both APRA and AUSTRAC › Our Simplification program is redu
Slide 36: About BOQ Group
ABOUT BOQ GROUP
Slide 37: 2023 FULL YEAR RESULTS PRESENTATION
2023 FULL YEAR RESULTS PRESENTATION 37
Slide 38: BOQ Group
2023 FULL YEAR RESULTS PRESENTATION BOQ Group Unique brands in niche segments serving customers for 149 years Our differentiators Key statistics for FY23 › Unique brands with proud history c. 10k BOQ Business › OMB network deeply anchored in local communities c. 570k BOQ c. 1.4m c. 30k Specialist ›
Slide 39: Distribution network
2023 FULL YEAR RESULTS PRESENTATION Distribution network Summary FY23 branch numbers at 147 (incl. transaction centres) 1 23 › The franchise network remains a key differentiator for BOQ and is 12 84 2,322 10 32 pivotal to the Bank’s deposit raising capabilities and growth in 6 1,536 2,520 mortgages
Slide 40: Distribution footprint movements
2023 FULL YEAR RESULTS PRESENTATION Distribution footprint movements Aug-23 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 12 2 2 6 0 0 0 22 Owner managed branches 84 19 11 7 1 2 1 125 Total 96 21 13 13 1 2 1 147 Aug-22 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 17 4 5 10 - - -
Slide 41: Cultural transformation
2023 FULL YEAR RESULTS PRESENTATION Cultural transformation Cultural transformation delivering improved outcomes for our people and business Engagement Culture Safe to speak up Alignment of role to strategy August 2020 August 2020 May 2020 August 2020 59% 54% 58% 72% August 2023 August 2023 August 2
Slide 42: Balanced portfolio for growth and geographic diversity
2023 FULL YEAR RESULTS PRESENTATION Balanced portfolio for growth and geographic diversity Well diversified portfolio across Retail and Business Banking Summary FY23 Cash profit by division1 (%) › Well diversified portfolio, with 45% of profits from Retail Banking and 45% 55% from Business Banking ›
Slide 43: Divisional Results
DIVISIONAL RESULTS
Slide 44: Divisional performance
2023 FULL YEAR RESULTS PRESENTATION Divisional performance Positive NII growth in BOQ Business and Retail Bank, NPAT down due to higher costs and normalised impairment expenses Retail Business FY23 FY221 FY23 v FY221 FY23 FY22 FY23 v FY22 Net interest income 929 919 1% 686 593 16% Non-interest incom
Slide 45: Home lending performance
2023 FULL YEAR RESULTS PRESENTATION Home lending performance Moderated housing growth, reflecting decision to prioritise economic return over volume growth Housing metrics Housing application volumes (# ‘000) Quality Growth Portfolio FY23 Flow FY23 29.4 3.2 23.7 20.5 20.9 LVR > 90% (%) 1.8 1.5 12.2
Slide 46: Lending to households (APRA data)
2023 FULL YEAR RESULTS PRESENTATION Lending to households (APRA data) Lending to Households (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share Major 1 13.50% 14.19% 1.66% 2.7 3.1 4.8 5.14% Major 5 7.61% 6.69% 0.70% 1.5 1.5 2.0 13.32% International 1 6.33% 6.55% 0.76% 1.3 1.4 2.2 1.38% R
Slide 47: Business lending
2023 FULL YEAR RESULTS PRESENTATION Business lending A continued focus on growth in strategic segments and portfolio and return optimisation as system growth slowed Summary Growth in SME and corporate lending GLAs ($m) › FY23 growth was driven by the healthcare and agriculture sectors, 740 owner-occ
Slide 48: Lending to business (APRA data)
2023 FULL YEAR RESULTS PRESENTATION Lending to business (APRA data) Lending to Businesses (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share International 3 15.10% 21.01% 0.00% 2.6 3.4 0.0 2.08% Major 2 7.89% 4.76% 0.55% 1.3 0.8 0.6 21.00% Major 1 7.21% 7.22% 0.11% 1.2 1.2 0.1 1.95% Reg
Slide 49: Net Interest Margin
NET INTEREST MARGIN
Slide 50: Net interest margin – FY22 to FY23
2023 FULL YEAR RESULTS PRESENTATION Net interest margin – FY22 to FY23 Funding cost benefits from rising interest rates offset by retention discounting and competition Headwinds Tailwinds › Front book pricing due to elevated competition › Benefits from rising rate environment › Retention discounting
Slide 51: Replicating portfolio & uninvested capital and low cost deposits
2023 FULL YEAR RESULTS PRESENTATION Replicating portfolio & uninvested capital and low cost deposits Summary Replicating portfolio 5% › Replicating portfolio has an investment term of 5 years, this remains appropriate in current 4% market conditions Replicating portfolio return › For every 25bps cas
Slide 52: Portfolio Quality
PORTFOLIO QUALITY
Slide 53: Collective provisioning
2023 FULL YEAR RESULTS PRESENTATION Collective provisioning Prudent economic forecasts reflective of a changing environment Provision model assumptions Economic forecasts (calendar year) (%)1 › Increased collective provisioning primarily due to higher levels in Base Downside BOQ Business driven by r
Slide 54: Portfolio quality
2023 FULL YEAR RESULTS PRESENTATION Portfolio quality Housing, Commercial and Asset finance arrears normalising, reflecting the economic environment Summary Commercial arrears (bps) › To align reporting to industry practice and BOQ’s risk management approach, arrears methodology has been adjusted to
Slide 55: Housing loan portfolio
2023 FULL YEAR RESULTS PRESENTATION Housing loan portfolio Diversified portfolio with conservative LVR lending Summary Housing portfolio by geography (%) › Housing portfolio diversified across geography and channel 6% QLD › 98% of customers with LVR =<90%, with FY23 flow above 90% at 10% 31% NSW & A
Slide 56: Asset finance portfolio
2023 FULL YEAR RESULTS PRESENTATION Asset finance portfolio Portfolio remains well diversified Summary Asset finance by geography (%) › Broad industry spread reducing concentration of Asset finance 10% QLD portfolio 4% 30% NSW › Arrears improving following BOQ’s 1H23 approach to work with 9% VIC cus
Slide 57: Commercial portfolio
2023 FULL YEAR RESULTS PRESENTATION Commercial portfolio Growth across core SME target segments and optimisation of corporate lending Summary Commercial by geography (%) › Commercial portfolio diversified geographically with a diverse 3% channel mix 6% QLD › The portfolio is well secured with less t
Slide 58: Business Bank lending portfolio
2023 FULL YEAR RESULTS PRESENTATION Business Bank lending portfolio Well diversified and underpinned by quality security Summary › Business Bank portfolio diversified geographically with a diverse channel mix › The portfolio is well secured with less than c.13% of unsecured lending › Diversified pro
Slide 59: Industry and geographic split over time
2023 FULL YEAR RESULTS PRESENTATION Industry and geographic split over time1 Enhanced geographic and sector diversification over time Housing loans - geographic split over time (%) Summary FY23 Balance Outstanding (%) 31% 30% 23% 10% 6% › Enhanced geographic diversification, Queensland FY17 Balance
Slide 60: Emerging risks
2023 FULL YEAR RESULTS PRESENTATION Emerging risks Macro economic environment Outlook for credit losses Commercial real estate › Cash rates are close to their peak. The › Specific provisions remain low, collective › Sector risks emerging given economic central-case view is that there will be no rate
Slide 61: Interest rate impacts
2023 FULL YEAR RESULTS PRESENTATION Interest rate impacts Supporting our home loan customers as higher rates flow through the economy Summary BOQ’s fixed rate maturity towers3 › Home loan customers remain resilient with 49% having a repayment $6.2bn buffer of one year or more1 › Home loans with mini
Slide 62: Funding & Liquidity
FUNDING & LIQUIDITY
Slide 63: Term funding facility maturities
2023 FULL YEAR RESULTS PRESENTATION Term funding facility maturities Prudent liquidity management maintained as TFF maturities are repaid and pre-funded Summary BOQ TFF maturities ($bn) › Total TFF drawdown smaller for BOQ compared to peers, 1,245 1,112 representing a lesser portion of total liabili
Slide 64: Term deposits
2023 FULL YEAR RESULTS PRESENTATION Term deposits Summary › FY23 term deposit growth of 15% › Customers continue to seek yield from higher interest paying products, increased competition throughout FY23 › Favourable BOQ TD carded rates in 1H23 moderated in 2H23, but remained favourable to long-term
Slide 65: Hedging costs - basis risk
2023 FULL YEAR RESULTS PRESENTATION Hedging costs - basis risk Summary Long term basis risk avg - 20 bps › The impacts of hedging costs had a +1bp NIM impact in FY23 0.60% › Basis exposure has increased over the half driven by a larger portfolio of variable rate loans › Liability side of the balance
Slide 66: Funding
2023 FULL YEAR RESULTS PRESENTATION Funding Summary Deposit to loan ratio (%) › Loan growth funded through stable funding sources, including customer deposits and long term wholesale funding 80% 83% › Strategic focus on customer deposits has seen an increase to the 74% 75% deposit to loan ratio of 8
Slide 67: Credit rating
2023 FULL YEAR RESULTS PRESENTATION 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 (1) The Bank monitors rating agency developments closely and is rated by Standard & Poor’s (S&P), Fitch Ratings and Moody’
Slide 68: Economic Assumptions
ECONOMIC ASSUMPTIONS
Slide 69: Macro economic environment
2023 FULL YEAR RESULTS PRESENTATION Macro economic environment1 Economic growth slowing with declining, but still elevated inflation Macro economic › Economic growth is slowing with a forecast modest rise in the unemployment rate › Inflation is likely to decline over financial-year 2024, uncertainty
Slide 70: Housing, business lending and deposit outlook
2023 FULL YEAR RESULTS PRESENTATION Housing, business lending and deposit outlook1 Economic growth slowing with declining, but still elevated inflation Housing outlook Business lending outlook Deposits outlook › A modest rise in the unemployment rate to › Business order books and capex › Household s
Slide 71: Abbreviations
ABBREVIATIONS business
Slide 72: Abbreviations
2023 FULL YEAR RESULTS PRESENTATION Abbreviations 3LOD: Three lines of defense CLF: Committed Liquidity Facility NPAT: Net Profit After Tax 1H: First half of financial year DPD: Days past due NPS: Net Promoter Score 2H: Second half of the financial year ECDD: Enhanced Customer Due Diligence NSFR: Ne