Liberty Financial Group Ltd · ASX:LFG
Liberty Financial — FY2023 Earnings Presentation
37 slides from Liberty Financial's earnings presentation, Aug 28, 2023
Slide 1: Liberty Financial Group FY23 Full Year Results
Liberty Financial Group FY23 Full Year Results 28 August 2023
Slide 2: Presenting Today
Presenting Today James Boyle Peter Riedel Chief Executive Officer Chief Financial Officer |2
Slide 3: Agenda
Agenda 01 Highlights 02 Results Analysis 03 Business Update 04 Outlook 05 Summary 06 Questions |3
Slide 4: Highlights
01 Highlights |4
Slide 5: Highlights
Highlights Continued portfolio growth through diversification % Lower NIM as cost of funds increase while maintaining yield Sound underlying performance with increased provisions Strong balance sheet with 15% underlying ROE Expected increase in arrears being effectively managed Continued improvement
Slide 6: Financial Highlights
Financial Highlights % Underlying NPATA Net revenue NIM $187m ($231m) $610m ($635m) 2.76% (3.08%) (19%) (4%) (32bps) BDD Cost to income Distribution 13bps (0bps) 26.6% (22.7%) 45bps (49bps) +13bps +390bps (8%) |6 *Balances represent: FY23 (FY22) change between the periods
Slide 7: Operating Highlights
Operating Highlights Average financial assets New assets originated Impaired loans $13.2b ($12.6b) $5.4b ($5.6b) $198m ($152m) +5% (2%) +31% FTE Staff Broker NPS Customer NPS 546 (524) 82 (81) 59 (64) +4% +1% (8%) |7 *Balances represent: FY23 (FY22) change between the periods
Slide 8: Results Analysis
_ 02 Results Analysis \ t
Slide 9: Profit Performance
Profit Performance Statutory NPATA ($m) Underlying NPATA ($m) $231.1 $231.1 $192.9 $192.9 $6.3 $186.6 FY22 FY23 FY22 FY23 Reduction in statutory NPATA (FY23 v FY22) due to: One-time impact of moving to full ownership of ALI explains • Lower net interest margin to 2.76% (from 3.08% in FY22) differenc
Slide 10: Profit Drivers
Profit Drivers Total Revenue ($m) BDD (bps) Increase in impaired loans driving $645.4 11 higher specific provisions (4bp) $564.2 Total revenue growth +51% (2H23 Increase in collective provision $428.5 (6bp) to reflect mix shift towards v 2H22) and +14% (2H23 v 1H23) driven by increased yield given R
Slide 11: Revenue
Revenue Average Assets ($b) Average asset growth 5% (2H23 v Lending Income ($m) 2H22) and 2% (2H23 v 1H23) $12.7 $13.0 $13.3 $40 driven by Secured and Financial $38 $36 Movement in lending income Services segments between periods largely consistent New originations $2.6b with movement in new loan (v
Slide 12: Cost of Funding
Cost of Funding Cost of Funding Term Funding ($b) 5.17% 3.3 9.8 8.9 1.4 8.4 3.88% 1.78% (1.9) (1.9) 1.65% 1.88% 3.39% 1.59% 2.23% 0.29% Jun-22 Repaid New Dec-22 Repaid New Jun-23 2H22 2H23 Issues Issues 1H23 Average funding benchmark cost 339bps in 2H23 (increase of FY23 Term issuance $4.7b supporti
Slide 13: BDD
BDD 2H22 (1 bps) 2H23 (11 bps) 3 5 6 2 4 (4) 0 (4) Realised Loss Specific Specific Collective Realised Loss Specific Specific Collective Provision Provision Provision Provision Provision Provision (Release) (Increase) (Release) (Increase) 1H23 (2 bps) 4 Impairment expense 11bps in 2H23 driven by: 2
Slide 14: Loss Provisions
Loss Provisions Provisions by Nature ($m) Portfolio by Stage Collective Provision $74 ($m) by Stage ($m) $64 $65 Specific provisions at 2H23 $13,531 $62 ($12m) consistent with 1H23 $13,171 $53 $54 and 2H22 $12,935 $198 $5 $62 $135 $4 $53 $54 $152 $5 $6 Increase in collective provisions $383 $263 $30
Slide 15: Expected Credit Loss
Expected Credit Loss ECL by Segment ($m) ECL Economic Scenarios ($m) $107 $9.7 $62.1 $54.0 $62 ($1.2) $12.1 $46 $41 $13.3 ($0.4) $40.2 (-) ($21m) ($16m) $45m $30.5 ECL Movement Calculated 100% 100% 100% ECL upside baseline downside $10.2 $9.9 Expected Dec-22 Residential Secured Fin Serv Jun-23 Loss
Slide 16: Operating Expenses
Operating Expenses Operating expenses ($m) 2H22 1H23 2H23 Personnel 42 45 48 Operating costs stable 2H23 v 1H23; lower net Other 31 35 34 revenue explains increase in cost to income ratio Cash expenses 73 80 82 Personnel cost 2H23 v 2H22 reflects wage inflation and FTE increase to 546 (from 524) to
Slide 17: Distribution
Distribution 49c 46c 45c Final distribution 24 cents for 7-month period to 28c 30-Jun-23 to be paid 31-Aug-23 24c 24c FY23 distribution of 45 cents provides 12% yield based on 30 June 2023 security price of $3.63 FY23 payout ratio 75% NPAT 22c 21c 21c FY24 distribution expected to move toward the mi
Slide 18: Financial Position
Financial Position $m Jun-22 Jun-23 All wholesale facilities due for renewal in FY23 extended ($3.5b) Cash 654 1,342 New facility established to support Secured asset growth Financial assets 12,916 13,535 ($500m) Strong liquidity position with aggregate wholesale limits Loans to related parties 140
Slide 19: Business Update
03 Business Update | 19
Slide 20: Business Update
Business Update Steady originations with continued portfolio growth Residential impacted by slower demand and higher discharges Continued growth in SME and SMSF lending Momentum supported by new distribution partnerships Fin Services benefitting from growth in PL lending Increase in arrears managed
Slide 21: Segment Loan Origination
Segment Loan Origination Residential ($'m) Secured ($m) $1,879 $1,047 Record FY23 new originations $1,747 FY23 originations ($3.0b) 23% $960 below record FY22 originations ($2.0b) 43% increase over FY22 $1,301 ($3.9b) reflecting slower credit $714 ($1.4b) growth given interest rate cycle 5% increase
Slide 22: Segment Loan Portfolio
Segment Loan Portfolio Residential ($m) Secured ($m) $8,654 $4,732 $8,348 $4,206 $8,093 $3,754 Continued growth in Secured loan Portfolio growth continues to be portfolio driven by growth in auto impacted by higher than trend finance lending, with steady discharges and amortisation discharges and am
Slide 23: Portfolio Risk
Portfolio Risk +30 Day Delinquency +90 Day Delinquency 4.4% 1.5% 3.4% 1.2% 3.3% 1.0% 2H22 1H23 2H23 2H22 1H23 2H23 Increase in impairment repayment variation support continues Early-stage delinquency higher at Jun-23 v Jun-22 driven by higher Proportion of Stage 3 customers making repayments has rem
Slide 24: Relative Value Drivers
Relative Value Drivers Net Interest Margin Cost to Income Ratio 2.75% 56.1% 54.9% 54.9% 51.5% 2.07% 2.06% 47.5% 1.95% 1.94% 45.3% 1.75% 1.77% 1.79% 43.5% 42.8% 42.0% 1.51% LFG Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Non-Bank 1Non-Bank 2 LFG Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Non-Bank 1Non-B
Slide 25: ESG, People and Culture
ESG, People and Culture Recertified B Corporation with +30% improved score Carbon audit completed to prepare for 2030 Initiated Innovate Reconciliation Action Plan Improved diversity, inclusion and belonging metrics MFAA Diversity and Inclusion award winner 2023 Introduced green solutions to all len
Slide 26: Outlook
04 Outlook | 26
Slide 27: Outlook
Outlook Economic indicators support subdued credit growth Refinance activity to continue as fixed rate loans expire Increasing provisions from change in economic cycle % NIM reduces further as funding cost remains elevated Inflationary pressure impacting operating expenses Customer demand for improv
Slide 28: Summary
05 Summary | 28
Slide 29: Summary
Summary Diverse customer solutions driving asset growth Leading peer NIM despite elevated cost of funds Leading ROE to leverage ratio in industry Strong liquidity and capital position to support growth Ongoing investment in diversifying customer solutions Ongoing investment in digital customer solut
Slide 30: Questions
06 Questions | 30
Slide 31: Appendix
Appendix | 31
Slide 32: Who is LFG?
Who is LFG? Liberty Financial Durable Business Model Diversified Portfolio Started 1997 and only investment Advanced risk-management grade non-bank (BBB-/positive/A-3) capabilities Pioneered specialty finance industry Proprietary technology supports in Australia and New Zealand operations $13.5b Ove
Slide 33: Products and Services
Products and Services Residential Finance Financial Services Australian mortgages Personal loans • Personal loans in Australia • Prime and custom lending for residential owner occupier and investment properties SME loans • SME loans in Australia New Zealand mortgages General insurance underwriting a
Slide 34: Segment Performance
Segment Performance Portfolio Net Contribution 3% 3% 3% 4% 5% 8% 9% 8% 8% 12% 27% 28% 29% 32% 35% 44% 43% 43% 44% 44% 70% 69% 68% 64% 60% 48% 48% 49% 48% 43% 2H21 1H22 2H22 1H23 2H23 2H21 1H22 2H22 1H23 2H23 Residential Secured Fin Services Residential Secured Fin Services Net Revenue 34% 34% 33% 34
Slide 35: Reconciliation Statutory to Underlying
Reconciliation Statutory to Underlying $m FY22 FY23 Statutory NPAT 219 181 IP amortisation 12 12 Statutory NPATA 231 193 Commission income (23) Commission expense 7 Contingent consideration expense 10 Tax effect of adjustments - 5 Tax cost base reset benefit (5) Total adjustments - (6) Underlying NP
Slide 36: Disclaimer
Disclaimer The information provided in this presentation and any information supplied in connection with this No offer of securities presentation (“Presentation”) has been prepared by Liberty Financial Group Limited (ACN 125 611 574) This Presentation is not, and does not constitute, an offer to sel
Slide 37: Thank you
Thank you | 37
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