Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — 1H24 Earnings Presentation
70 slides from Bank Of Queensland's earnings presentation, Apr 17, 2024
Slide 1: 1H24 Investor Materials
17 APRIL 2024 1H24 INVESTOR MATERIALS Half year ended 29 February 2024
Slide 2: Important information and disclaimer
2024 HALF 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
2024 HALF YEAR RESULTS PRESENTATION Contents 1H24 Results Presentation 4 About BOQ Group 33 Transformation Detail 41 Divisional Results 45 Portfolio Quality 52 Funding & Liquidity 60 Economic Assumptions 66 Abbreviations 69 3
Slide 4: 1H24 Results Presentation
1H24 RESULTS PRESENTATION 17 APRIL 2024 Half year ended 29 February 2024
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
2024 HALF YEAR RESULTS PRESENTATION Agenda Introduction Outlook & summary Jessica Smith, General Manager Investor Relations & Patrick Allaway, Managing Director & Chief Executive Officer Corporate Affairs Q&A Results overview Patrick Allaway, Managing Director & Chief Executive Officer Patrick Allaw
Slide 7: Results Overview
RESULTS OVERVIEW Patrick Allaway Managing Director & Chief Executive Officer
Slide 8: Key messages
2024 HALF YEAR RESULTS PRESENTATION Key messages 1. Delivered $172m after tax cash earnings and $151m statutory profit after tax 2. Earnings continue to reflect structural disadvantages, a highly competitive market across both lending and deposits, cost inflation and investment in our transformation
Slide 9: 1H24 results
2024 HALF YEAR RESULTS PRESENTATION 1H24 results Lower cash earnings reflects our FY24 outlook statement of legacy structural disadvantages, a business in transformation, portfolio and margin contraction in a highly competitive market and ongoing cost inflation Key financial results ($m) 1H24 1H24 v
Slide 10: Retail banking overview
2024 HALF YEAR RESULTS PRESENTATION Retail banking overview Continue to hold our position in 1H24 on home lending contraction while returns remain below cost of capital Summary Home lending growth ($m) › Total income down 19% on 1H23, reflecting margin contraction in the 1,598 home lending portfolio
Slide 11: Business banking overview
2024 HALF YEAR RESULTS PRESENTATION Business banking overview Steady lending balances reflecting repayment of large development loans and competitive SME sector Summary Lending growth1 ($m) › Total income down 4% on 1H23 reflecting steady lending assets and 724 a disciplined approach to credit and m
Slide 12: Our vision
2024 HALF YEAR RESULTS PRESENTATION Our vision To be the bank customers choose 150 years of supporting our Supporting >220k home customers, local communities, myBOQ and ME Go app store ownership dreams and helping and people with a strong QLD rating increasing to +4 stars >170k businesses grow herit
Slide 13: Living our purpose and values
2024 HALF YEAR RESULTS PRESENTATION Living our purpose and values Building social capital through banking supporting our customers and communities, creating an exceptional people experience and reducing our operational footprint Customers and communities Enriching our people Environmental commitment
Slide 14: Our transformation
2024 HALF YEAR RESULTS PRESENTATION Our transformation Delivery of our transformation on plan, building a sustainable, future fit and simplified bank with improved returns Addressing Delivering through our strategic pillars › A challenging economic landscape Improved risk culture, STRENGTHEN › Highe
Slide 15: Strengthening BOQ
2024 HALF YEAR RESULTS PRESENTATION Strengthening BOQ Embracing our court enforceable undertakings to build stronger foundations through financial and operational resilience, and improved risk culture1 Achievements to date 2H24 focus Program rQ Strengthen risk culture, governance, and financial ✓ RA
Slide 16: Simplifying BOQ
2024 HALF YEAR RESULTS PRESENTATION Simplifying BOQ Simplifying our operating model and processes to reduce complexity, duplication, operational risk and progressing the FY26 $200m program Progress FY26 Targets Operations shared service function Horizontally integrated structure OPERATING Removed >2
Slide 17: Digitising BOQ
2024 HALF YEAR RESULTS PRESENTATION Digitising BOQ Continuing to scale our digital bank with improved customer engagement and value creation SCALING ENGAGING CREATING DIGITAL TRANSFORMATION ROADMAP 1H24 completed › Consolidated contact centre platform 23% +24 ~$32k Retail customers now on the NPS fo
Slide 18: Optimising BOQ
2024 HALF YEAR RESULTS PRESENTATION Optimising BOQ Elevating focus to improve shareholder returns. Evaluating additional ways to achieve FY26 <50% CTI and >9.25% ROE targets, with less dependence on home lending margin recovery BUILDING OFF OUR STRONG FOUNDATIONS 150-year strong heritage Financial r
Slide 19: Financial Detail
FINANCIAL DETAIL Racheal Kellaway Chief Financial Officer
Slide 20: Financial performance
2024 HALF YEAR RESULTS PRESENTATION Financial performance Impacted by a competitive operating environment and an uplift in risk, compliance and technology investment Key financial results ($m) 1H24 2H23 1H24 v 2H23 1H23 1H24 v 1H23 Net interest income 725 768 (6%) 832 (13%) Non-interest income 70 72
Slide 21: Non-cash items
2024 HALF YEAR RESULTS PRESENTATION Non-cash items Statutory NPAT of $151m includes sale of New Zealand asset portfolio Reconciliation of cash earnings to statutory net profit after tax ($m) 1H24 2H23 1H23 Cash earnings after tax 172 194 256 Sale of New Zealand asset portfolio 1 (19) - - Amortisatio
Slide 22: Key elements
2024 HALF YEAR RESULTS PRESENTATION Key elements Deliberate shift to focus on returns and prudent capital allocation Total income1 ($m) Net interest margin1 (%) 902 1.79 840 1.70 827 1.58 1.55 795 2H22 1H23 2H23 1H24 2H22 1H23 2H23 1H24 Lending GLAs1 ($bn) Customer deposit balances ($bn) 81.2 81.9 8
Slide 23: Operating environment
2024 HALF YEAR RESULTS PRESENTATION Operating environment Changing operating environment has required disciplined management decisions as a response › Supporting our customers through the challenging economic cycle › Moderated housing growth prioritising economic return over volume growth, requiring
Slide 24: Net interest margin
2024 HALF YEAR RESULTS PRESENTATION Net interest margin Competition continued to impact margins, partially offset by replicating portfolio and optimised liquids portfolio Summary 2H24 considerations › Competition and retention discounting continuing to impact asset margins › Competition to continue
Slide 25: Operating expenses
2024 HALF YEAR RESULTS PRESENTATION Operating expenses High inflation and continued investment in technology, risk and compliance partially offset by simplification Operating expenses ($m) 2H24 considerations › Low single digit growth in the underlying cost 1.2% BAU expense growth base 22 (14) (4) ›
Slide 26: Transformation investment
2024 HALF YEAR RESULTS PRESENTATION Transformation investment Commitment to delivering on the transformation supported by material investment in the business Investment spend ($m) Summary 167 › Lower total investment spend due to the finalisation of the ME Integration program 159 153 › Continuing to
Slide 27: Provisioning and loan impairment expense
2024 HALF YEAR RESULTS PRESENTATION Provisioning and loan impairment expense Portfolio quality remains sound, arrears increasing post period of historic lows Loan impairment expense Impaired assets ($m) LIE/GLA (bps) 153 133 7 8 9 4 38 114 116 31 54 29 35 65 34 37 63 58 28 61 15 37 22 23 2H22 1H23 2
Slide 28: Funding & liquidity
2024 HALF YEAR RESULTS PRESENTATION Funding & liquidity Strong liquidity coverage demonstrating prudent approach to financial resilience Liquidity strength Funding strength 154% 83% 82% 80% 139% 143% 75% 132% 126% 128% 69% 71% 125% 122% 67% 67% 2H22 1H23 2H23 1H24 2H22 1H23 2H23 1H24 Liquidity cover
Slide 29: Capital strength
2024 HALF YEAR RESULTS PRESENTATION Capital strength Strong capital buffers providing financial resilience and supporting investment in transforming the business Summary › CET1 above management target range at 10.76% › Includes a $50m capital overlay as determined by APRA in relation to BOQ’s Court
Slide 30: Outlook & Summary
BOQ GROUP OUTLOOK & SUMMARY
Slide 31: FY24 Outlook
2024 HALF YEAR RESULTS PRESENTATION FY24 Outlook › Australian economy resilient supported by strong fundamentals despite growing below the long run average › Higher interest rates and inflation have resulted in a modest rise in unemployment, declining business confidence and low consumer confidence
Slide 32: Summary
2024 HALF YEAR RESULTS PRESENTATION Summary › Clear strategy to address our legacy issues and deliver BOQ as a stronger and simpler bank focused on specialised segments › Strong financial resilience the foundation to support our customers and deliver our transformation priorities › Embracing our ris
Slide 33: About BOQ Group
ABOUT BOQ GROUP
Slide 34: BOQ Group
2024 HALF YEAR RESULTS PRESENTATION BOQ Group Serving customers for 150 years with differentiated brands attracting niche segments Our differentiators Key statistics for 1H24 › Unique brands with proud history › OMB network deeply anchored in local communities c. 10k BOQ Business c. 580k BOQ › Highl
Slide 35: 2024 HALF YEAR RESULTS PRESENTATION
2024 HALF YEAR RESULTS PRESENTATION 35
Slide 36: How we create value
2024 HALF YEAR RESULTS PRESENTATION How we create value Customer Finance Personalised experiences delivered through Access to funding through customer multi-brand offering, new digital capability, deposits, wholesale and capital markets to and BOQ’s unique relationship model support operations and e
Slide 37: Distribution network
2024 HALF YEAR RESULTS PRESENTATION Distribution network Summary 1H24 branch numbers at 143 (incl. transaction centres) 1 25 › The franchise network remains a key differentiator for BOQ and is 12 82 2,395 9 33 pivotal to the Bank’s deposit raising capabilities and growth in 6 1,413 2,532 mortgages a
Slide 38: Distribution footprint movements
2024 HALF YEAR RESULTS PRESENTATION Distribution footprint movements Feb-24 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 12 1 2 6 - 1 - 22 Owner managed branches 82 19 10 7 1 1 1 121 Total 94 20 12 13 1 2 1 143 Aug-23 QLD NSW / ACT VIC WA NT TAS SA Total Corporate branches 12 2 2 6 - - -
Slide 39: Cultural transformation
2024 HALF YEAR RESULTS PRESENTATION Cultural transformation Cultural transformation delivering improved outcomes for our people and business Legacy Engagement PX Engagement index1 Safe to speak up Alignment of role to index strategy August 2020 September 2022 August 2020 August 2020 59% 70% 58% 72%
Slide 40: Balanced portfolio for growth and geographic diversity
2024 HALF YEAR RESULTS PRESENTATION Balanced portfolio for growth and geographic diversity Well diversified portfolio across Retail and Business banking Summary 1H24 Cash profit by division1 (%) › Well diversified and balanced portfolio. 30% of profits from Retail banking and 70% from Business banki
Slide 41: Transformation Detail
TRANSFORMATION DETAIL
Slide 42: Remedial Action Plans
2024 HALF YEAR RESULTS PRESENTATION Remedial Action Plans Embracing Court Enforceable Undertakings as a platform to further strengthen the Bank Court Enforceable Undertakings – Key Terms Remedial Action Plans finalised and submitted: › Addressing underlying weaknesses › Setting clear and measurable
Slide 43: Program rQ and AML First
2024 HALF YEAR RESULTS PRESENTATION Program rQ and AML First Program rQ AML First Program Strengthen risk culture, governance, and financial and operational resilience to be An enterprise-wide remediation and transformation program designed to address Objective a stronger, simpler and digitally enab
Slide 44: Digitising BOQ roadmap
2024 HALF YEAR RESULTS PRESENTATION Digitising BOQ roadmap Digital strategy improving customer experience, providing strong deposit growth and lower cost to serve FY21 - 23 FY24 - 25 Post FY25 VMA and BOQ transaction and savings launched on new cloud Digital mortgage for all brands on new cloud digi
Slide 45: Divisional Results
DIVISIONAL RESULTS
Slide 46: Divisional performance
2024 HALF YEAR RESULTS PRESENTATION Divisional performance Retail Business 1H24 1H23 1H24 v 1H23 1H24 1H23 1H24 v 1H23 Net interest income 393 500 (21%) 329 339 (3%) Non-interest income 46 45 2% 21 24 (13%) Total income 439 545 (19%) 350 363 (4%) Operating expenses (366) (349) 5% (158) (146) 8% Unde
Slide 47: Home lending performance
2024 HALF YEAR RESULTS PRESENTATION Home lending performance Moderated housing growth, reflecting decision to prioritise economic return over volume growth Housing metrics Housing application volumes (# ‘000) Portfolio 1H24 Flow 1H24 23.7 20.5 20.9 18.8 LVR > 90% (%) 1.8 0.8 2.0 1.8 0.8 0.2 LVR > 80
Slide 48: Interest rate impacts
2024 HALF YEAR RESULTS PRESENTATION Interest rate impacts Supporting our home loan customers as they transition to a higher interest rate environment Summary BOQ’s fixed rate mortgage maturity towers3 › Fixed rate maturity tower peaked in 1H24, in line with high levels of $6.4bn fixed rate lending t
Slide 49: Lending to households (APRA data)
2024 HALF 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 10.12% 5.39% 0.14% 2.4 1.3 0.5 5.29% Major 2 7.75% 6.91% 0.43% 1.8 1.7 1.6 13.54% International 1 7.12% 5.80% 0.00% 1.7 1.5 Neg 2.69% Re
Slide 50: Business bank
2024 HALF YEAR RESULTS PRESENTATION Business bank Investing in the business to deliver a stronger platform for future growth STRENGTHEN SIMPLIFY DIGITISE OPTIMISE Strengthening of core risk Simplification of the Investments into Undertaking activities to and compliance business delivering an foundat
Slide 51: Lending to business (APRA data)
2024 HALF YEAR RESULTS PRESENTATION Lending to business (APRA data) Lending to Businesses (APRA) Multiple (APRA) YTD (A) 3M (A) 1M YTD 3M 1M Market share Major 1 13.25% 15.72% -0.36% 2.0 2.9 Neg 2.01% Regional 1 10.58% 6.30% 0.92% 1.6 1.2 1.7 0.88% Major 2 7.26% 7.30% 0.88% 1.1 1.4 1.6 25.45% Major
Slide 52: Portfolio Quality
PORTFOLIO QUALITY
Slide 53: Collective provisioning
2024 HALF YEAR RESULTS PRESENTATION Collective provisioning Prudent provisioning reflective of a changing environment Provision model assumptions Economic forecasts (calendar year) (%)1 › Base case reflects BOQ’s forward looking economic assumptions and is Base Downside supported by RBA forecasts wh
Slide 54: Housing loan portfolio
2024 HALF 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 10% › ~98% of customers with LVR =<90%, with 1H24 flow above 90% at 31% NSW &
Slide 55: Asset finance portfolio
2024 HALF YEAR RESULTS PRESENTATION Asset finance portfolio Portfolio remains well diversified Summary Asset finance by geography (%) › Broad industry spread reducing concentration of Asset finance QLD 10% portfolio 3% 30% NSW 10% › Asset finance portfolio diversified across geography and channel VI
Slide 56: Commercial portfolio
2024 HALF YEAR RESULTS PRESENTATION Commercial portfolio Continued focus on target segments and optimisation of SME and corporate portfolio mix Summary Commercial by geography (%) › Commercial portfolio diversified geographically with a diverse 3% channel mix 6% QLD › The portfolio is secured with l
Slide 57: Business Bank lending portfolio
2024 HALF 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.11% of unsecured lending › No material ind
Slide 58: Industry and geographic split over time
2024 HALF YEAR RESULTS PRESENTATION Industry and geographic split over time1 Enhanced geographic and sector diversification over time Housing loans - geographic split over time (%) Summary 1H24 Balance Outstanding (%) 31% 30% 23% 10% 6% › Enhanced geographic diversification, Queensland FY17 Balance
Slide 59: Emerging risks to portfolio quality
2024 HALF YEAR RESULTS PRESENTATION Emerging risks to portfolio quality Macro economic environment Outlook for credit losses Commercial real estate › Cash rates are likely at their peak. We look › Loan impairment expense remains at › Sector risks remain given economic for any rate reduction in 2024
Slide 60: Funding & Liquidity
FUNDING & LIQUIDITY
Slide 61: Term deposits
2024 HALF YEAR RESULTS PRESENTATION Term deposits Summary › Lower funding requirements have resulted in the ability to moderate TD growth in 1H24 as cost of TD’s increased through the period › TD carded rates returning to more normalised spreads to BBSW albeit still below pre-COVID cost of funds › C
Slide 62: Replicating portfolio and uninvested capital and low cost deposits
2024 HALF YEAR RESULTS PRESENTATION Replicating portfolio and 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% Replicating Portfolio Return market conditions › For every 25bps c
Slide 63: Hedging costs - basis risk
2024 HALF 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 1H24 0.60% › Basis exposure has increased over the half driven by a larger portfolio of variable rate loans › Current sensitivity given inc
Slide 64: Funding
2024 HALF 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% 82% › Strategic focus on customer deposits has seen an increase to the 75% deposit to loan ratio of 2
Slide 65: Credit rating
2024 HALF YEAR RESULTS PRESENTATION Credit rating Current debt ratings1 Rating Agency Short Term Long Term Outlook S&P A-2 A- Stable Fitch F2 A- Stable Moody’s P-2 Baa1 Stable (1) The Bank monitors rating agency developments closely and is rated by Standard & Poor’s (S&P), Fitch Ratings and Moody’s
Slide 66: Economic Assumptions
ECONOMIC ASSUMPTIONS
Slide 67: Macro economic environment
2024 HALF YEAR RESULTS PRESENTATION Macro economic environment1 Economic growth has slowed with declining but still elevated inflation Macro economic › Economic growth has moderated with a gradual slowing of the labour market › Inflation will decline further over 2024 although uncertainty surrounds
Slide 68: Housing, business lending and deposit outlook
2024 HALF 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 › Some increas
Slide 69: Abbreviations
ABBREVIATIONS business
Slide 70: Abbreviations
2024 HALF 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