Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — FY2012 Earnings Presentation
58 slides from Bendigo & Adelaide Bank's earnings presentation, Aug 20, 2012
Slide 1: Bendigo and Adelaide Bank 2012 full year results
For personal use only Bendigo and Adelaide Bank 2012 full year results August 20, 2012 1
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 information in a summary form and does not purport to be complete. It is to be read in conjunction with the Bank’s full year results filed with the Australian
Slide 3: Agenda
For personal use only • Results overview • Financial performance • Strategy and outlook Agenda 3
Slide 4: Results overview
For personal use only Mike Hirst Group Managing Director Results overview 4
Slide 5: Our result
Our result Financial performance • Statutory profit after tax $195.0m - statutory profit after tax For personal use only • Statutory profit after tax before specific items $312.0m • Statutory earnings affected by $95.1m goodwill write-down in wealth cash generating unit in 1H12 • Full year dividend
Slide 6: Our result
Our result Capital • Recent capital management initiatives1 materially boost Core Tier 1 levels by 42bps management For personal use only • Provides pro-forma Core Tier 1 levels of 8.09% and Tier 1 ratio of 8.82% Business strength • 80% retail funded2 • Cost efficiencies reinvested into key strategi
Slide 7: Improved balance sheet strength
Improved balance sheet strength Capital For personal use only • Prudent and pro-active approach to balance sheet management • Basel III Tier One Hybrid Capital issue to be launched 1H133 • Recent non-dilutive capital initiatives include sale of stake in IOOF, and subordinated notes in Torrens RMBS p
Slide 8: A year of consolidation and investment
A year of consolidation and investment • Material improvement in capital levels For personal use only • Equity raising (December 2011) and share purchase plan (March 2012) • Sale of IOOF stake (August 8) • Sale of Torrens RMBS B-notes (announced today) • BEN now exceeds all expected Basel III minimu
Slide 9: Financial overview
For personal use only Richard Fennell Chief Financial Officer Financial overview 9
Slide 10: Financial overview key metrics
$m FY June 2010 FY June 2011 FY June 2012 change (pcp) Net profit after tax ($m) 242.6m 342.1m 195.0m 43.0% Cash earnings ($m) 291.0m 336.2m 323.0m 3.9% For personal use only Cash EPS 83.3¢ 92.3¢ 84.2¢ 8.8% Dividend per share1 58.0¢ 60.0¢ 60.0¢ –– Cost to income 58.1% 57.4% 59.1% 1.7% Cost to averag
Slide 11: Cash earnings movement
Cash earnings movement For personal use only • Cash earnings impacted by Homesafe trust contribution, long service leave calculation adjustment, and staff related costs Financial overview 11
Slide 12: Group performance
Group performance • EPS metrics impacted by December 2011 capital raising and share purchase plan in March 2012 For personal use only • Dividends maintained at 30 cents • Steady cash basis earnings Financial overview 12
Slide 13: Net interest margin (%)
Net interest margin (%) For personal use only • Impact on NIM in early 2H mitigated by active balance sheet management • NIM recovery in late 2H through pricing initiatives Financial overview 13
Slide 14: Net interest margin
Net interest margin For personal use only Financial overview 14
Slide 15: Marginal retail funding
Marginal retail funding For personal use only $18bn $11bn Financial overview *Source: Company data 15
Slide 16: Return on equity and return on tangible equity
Return on equity (ROE) and return on tangible equity (ROTE) For personal use only • Maintain ROTE discipline on investments and initiatives Cash ROTE • Medium-term returns to be driven by strong ROTE, and efficiency focus 16.9% • December 2011 capital Cash basis ROE 16.4% raising impacted 2H2012 14.
Slide 17: Efficiency focus remains
Efficiency focus remains Cost-to-income (CTI) • Increased CTI primarily a factor of new initiatives For personal use only and lower income • CTI of 59.1% for June-12 (including BOCA) • Long-term target of 55% remains • Cost to average assets shows continued improvement Staff movement • BOCA and stra
Slide 18: Capitalised software
Capitalised software For personal use only • Capitalised software held flat FY12 • FY11 increase includes significant investment in customer facing systems (not core banking systems) • Investment in Basel II Advanced systems will lead to further growth Financial overview 18
Slide 19: Financial overview – retail banking
• Profit up 1.7% vs pcp For personal use only • Increased allocation of central costs – amortisation of new CRM system • Continued investment in branch distribution • Interest income reflects volume off-setting margin compression • Credit quality remains sound Financial overview – retail banking 19
Slide 20: Financial overview – third party banking
For personal use only • Profit up 5.3pc v pcp driven by portfolio growth • Operating expenses reduced • Scalable business model, with sustainable commission structure Financial overview – third party banking 20
Slide 21: Momentum in mortgages
$m TPM - originations per month 500 Momentum in mortgages 400 For personal use only 300 • Retail mortgage growth above system 200 • Third party mortgages have faced strong price competition in FY12, 100 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 howeve
Slide 22: Financial overview – Rural Bank
For personal use only • Profit up 28pc v pcp • Credit expenses returned to long-term average • Further growth potential through distribution alliances • Roll-out of Australia Post distribution continues • Expense growth largely reflects investment in distribution Financial overview – Rural Bank 22
Slide 23: Financial overview – wealth
For personal use only • Profit down 22.5pc v pcp • Material fall in interest income due to $868m reduction of margin lending portfolio • Improvement in operating costs and other income • Resources re-allocated from Margin Lending Financial overview - wealth 23
Slide 24: Bank of Cyprus integration
Bank of Cyprus integration For personal use only • Transfer of business completed 31 July 2012 • FY12 synergies exceeded target by over $800k • FY13 target synergies also expected to exceeded • Re-branding to be announced 1H13 Financial overview – Bank of Cyprus 24
Slide 25: Funding remains a strength
Funding remains a strength • No Government Guaranteed wholesale funding For personal use only Financial overview 25
Slide 26: Retail deposits
Retail deposits • Term deposits priced to manage liquidity • Successful growth and retention strategies in place For personal use only • Not a price leader – value proposition driven • Term deposit retention rate consistently above 80% $18bn $11bn Financial overview *Source: Company data 26
Slide 27: Capital
• Material improvement in Tier 1 capital ratios over the reporting period Capital • June 2012 Core Tier 1 approx 7.67% • Pro-forma Core Tier 1 after capital initiatives approx 8.09% For personal use only • Significant hybrid capacity to improve capital efficiency (subject to market conditions and re
Slide 28: Core Tier 1 materially higher
Core Tier 1 materially higher For personal use only • Continuing improvement in Core Tier 1 levels • Post balance date initiatives: – IOOF and B-note sale • August 17 Core Tier 1 of 8.09% Financial overview 28
Slide 29: Provisioning has grown and remains conservative
Provisioning has grown and remains conservative • Provisioning reflects conservative low risk nature of portfolio, prudent underwriting standards and benign bad debt experience For personal use only • Impaired assets flat • Economic overlay increased to $5.5m Total provisions and reserves for doubtf
Slide 30: Total provisions and reserves for doubtful debts
Total provisions and reserves for doubtful debts ($m) • Total provisions increased $14.5 million over the For personal use only past six months • Rural Bank specific provisions have increased to $38.9m (Jun-12) vs $33.7m (Dec-11) • Great Southern represents $20.7m of total provisions • Collective re
Slide 31: Financial overview – arrears
For personal use only Financial overview 1. ‘90d+ excluding arrangements’ data only excludes those retail residential mortgage arrangements from October 2011 to June 2012 31
Slide 32: Strategy and outlook
For personal use only Mike Hirst Group Managing Director Strategy and outlook 32
Slide 33: We have built a model that provides opportunity and growth
We have built a model that provides opportunity and growth • Communities have proven to be great partners in For personal use only banking, and together we have opened more than 290 Community Bank® branches in 12 years (more than 60 in the last three years) • More than $80m in community grants over
Slide 34: Community Bank footings growth
Community Bank® footings growth Community Bank® loans Community Bank® deposits Community Bank® footings For personal use only Strategy and outlook 34
Slide 35: Robust foundations for volatile times
Robust foundations for volatile times Customer satisfaction1 100% • Continued maturation of Community Bank® 89.5% 90% and retail network For personal use only 80% 78.0% 77.9% 77.5% 76.4% • Opportunities in Bendigo Wealth 70% • Rural Bank recovery 60% • S&P rating upgrade in the past 12 months 50% •
Slide 36: Vision supported by our people
Vision supported by our people For personal use only • Superior and improving staff advocacy and engagement measures – 88% of staff are proud to work for BEN – 77% would recommend BEN as a great place to work – 17% improvement in overall engagement since 2010 – 15% improvement in job engagement sinc
Slide 37: In summary…. Outlook
In summary…. • Performance in line with industry experience For personal use only • Providing a sound platform for growth • Material improvement in capital position with opportunity for further efficiency • Maintaining industry-leading funding profile • Strong liquidity position • Maintenance of hig
Slide 38: Appendices
For personal use only Appendices 38
Slide 39: A well diversified business
A well diversified business Business Segment Business conditions For personal use only • Difficult and uncertain market conditions remain Domestic bank operating four • Unique community, customer, and partner proposition distinct brands • Ratings upgrade reflects sound credit quality and capital pos
Slide 40: A well diversified business
A well diversified business Business Segment Business conditions For personal use only Margin lending, wealth management, • Launch of ‘SmartStart Super’ superannuation • Independent provider of choice in select products • Increased investment in IT and distribution capability • Growing brand and dis
Slide 41: Half on half performance
Half on half performance For personal use only • Retail, Third Party and Rural Bank continue to perform • Wealth affected by loss of confidence in equity markets, resultant goodwill impairment of $95.1m • Margin pressure due to deposit funding-hedging costs and asset mix Overview 41
Slide 42: Operating expenses
Operating expenses For personal use only • Increase since June 2011 of 1.1pc (ex BOCA) Financial overview 42
Slide 43: Specific provisions
Specific provisions 45 FY2011 FY2012 Millions 40 35 For personal use only 30 25 20 Represented by 15 10 5 - Consumer Retail Mortgages 3rd Party Commercial / Portfolio Funding Rural Bank Wealth Bank of Cyprus Mortgages Business (includes Great Southern) Portfolio Funding Provision as % of Retail 3rd
Slide 44: A diversified business
A diversified business For personal use only Business performance - financials Note: Figures exclude central functions 44
Slide 45: Geographic spread
2168 ATM’s 486 branches For personal use only 1 4 8 0 12 164 346 50 46 73 51 50 3 42 22 25 11 109 5 74 113 317 16 49 61 445 954 76 87 191 135 169 802 28 2 295 Community Bank® 9 8 Bendigo branded (3rd party) ATM’s 412 22 Geographic spread 45
Slide 46: Systematic growth in retail
Systematic growth in retail For personal use only • 19 Community Bank® branches opened in FY2012 • 15-20 branches to be opened in FY2013 • Relatively immature network Deposits per Community Bank® branch Community Bank® branches by age Community Bank® and retail 46
Slide 47: Growth – retail banking
Growth – retail banking • Continued growth in retail network For personal use only • Strong pipeline for Community Bank® branches. Retail banking Source: BEN internal data. Notes: 2001 includes FABS acquisition, 2007 includes ADB merger. Excludes alliances and private franchises. 47
Slide 48: Third-Party Banking
Third-Party Banking For personal use only • Fewer competitors in the market • Variable cost base • Strong price competition in FY12 Third-Party mortgage business 48
Slide 49: Margin Lending turnaround dependent on equity market risk appetite
Margin Lending turnaround dependent on equity market risk appetite For personal use only • Wealth business affected by lack of confidence in markets • Write-down in business of $95.1m • Strong long term relationships with many financial advisory firms • Margins remain strong • Continued excellent cr
Slide 50: Towards a resolution
Towards a resolution • Reducing portfolio and borrowers • Court date now set for M+K class action – October 2012 For personal use only Great Southern 50
Slide 51: Secure and low risk loan portfolios
Secure and low risk loan portfolios • 98.2% secured For personal use only • 97.8% secured by mortgages and listed securities • Residential lending – arrears have improved in FY12 – average LVR 61.8%2 • Margin lending – average LVR 45% – 87% of portfolios held ≥ 4 stocks – negligible arrears Credit 1
Slide 52: Construction portfolio
Construction portfolio 3% For personal use only • $728m of loans (3.2% decrease since Dec-11) • 1.5% of total loans • $145k average loan size • $33m largest loan size • Geographic spread • $40m impaired loans • $6m in arrears (0.8% 90 days+) Credit 52
Slide 53: Group exposures
Group exposures – total $48.8bn Mortgages Jun-12 Dec-11 Jun-11 Owner occupied 63.2% 63.0% 62.7% Investment 37.0% 37.0% 37.3% For personal use only Lo Doc 6.5% 7.0% 7.5% Retail mortgages 51.7% 50.2% 49.4% Third Party mortgages 48.3% 49.8% 50.6% Mortgages with LMI 42.5% 42.7% 44.6% Average LVR 61.8% 6
Slide 54: LVR trends
LVR trends For personal use only • No material change in LVR trends of new business written • LMI required for high LVR loans Credit 54
Slide 55: MIP geographic distribution
MIP geographic distribution For personal use only MIP #: 0.00% MIP Blce: $0.00m Portfolio: $209m %MIP/Port Blce: 0.00% MIP #: 36.44% MIP Blce: $24.76m Portfolio: $7,713bn MIP #: 11.02% %MIP/Port Blce: 0.32% MIP Blce: $7.54m Portfolio: $5,016bn %MIP/Port Blce: 0.15% MIP #: 11.86% MIP Blce: $25.44m Po
Slide 56: Commercial – industry split
Commercial – industry split For personal use only Credit 56
Slide 57: Loans under management
Loans under management For personal use only Rural Bank – loan diversity 57
Slide 58: Analysts and media contacts
Analysts Media For personal use only Will Rayner Lauren Andrew Head of Capital and Investor Relations Head of Media and Communications Bendigo and Adelaide Bank Limited Bendigo and Adelaide Bank Limited Tel: +61 8 8220 7764 Tel: +61 3 5485 7109 Mob: +61 437 794 366 Mob: +61 407 340 283 Email: will.r
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