Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2014 Earnings Presentation
33 slides from Bank Of Queensland's earnings presentation, Oct 9, 2014
Slide 1: Results presentation for the full year ended 31 August 2014
Results presentation for the full year ended 31 August 2014 9 October 2014 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 2: Agenda
Agenda Jon Sutton Result overview Acting Chief Executive Officer Anthony Rose Financial overview Chief Financial Officer Jon Sutton Summary & outlook Acting Chief Executive Officer 2
Slide 3: Record profit in FY14
Record profit in FY14 FY14(1) FY13 Change Statutory net profit after tax $260.5m $185.8m 40% Cash earnings after tax $301.2m $250.9m 20% Underlying profit before tax (Cash) $521.7m $477.4m 9% Net interest margin 1.82% 1.69% 13bps Cost-to-income ratio (Cash) 43.9% 44.3% 40bps Return on avera
Slide 4: Clear, simple strategy remains unchanged
Clear, simple strategy remains unchanged 4
Slide 5: FY14 highlights
FY14 highlights Focused on delivering Increased EPS, dividends, ROTE and ROE shareholder returns Strong TSR outcome for financial year of 39%(1) Disciplined approach to Continued focus on profitable growth and margin management lending growth Ongoing asset quality improvement Balance sheet s
Slide 6: Revenue growth reflects strong margin management
Revenue growth reflects strong margin management Decisive action taken to improve funding mix and reduce reliance on ‘hot’ money Funding costs assisted by two credit rating upgrades Growing assets through higher margin segments – particularly Business Banking expansion BOQ exit margin(1) con
Slide 7: Ongoing management of cost to income ratio
Ongoing management of cost to income ratio Cost to income ratio down 40 bps to 43.9% Investing in new channels Broker expansion support Business Banking build-out Significant business investment in productivity and efficiency New IT services contract Investment spend timing is in advan
Slide 8: Asset quality improvement evident
Asset quality improvement evident (1) Continued progress on improving portfolio quality 525.3 - impaired assets down 25% in FY14, 45% from FY12 381.6 Commercial arrears trends showing further improvement 287.6 Sound risk management frameworks and practices embedded in lending processes across
Slide 9: Disciplined approach to growth in a challenging market
Disciplined approach to growth in a challenging market Retail Business Banking Remain disciplined in a competitive mortgage Growing where we are most competitive – high market – prioritising credit quality & margin touch relationship based service Broker presence growing but still under- Mai
Slide 10: BOQ Specialist performance on track
BOQ Specialist performance on track Acquisition completed 31 July $2.6bn in Lending assets at end of August; 19,000 high value customers Business has grown $215m in assets from announcement(1) to end of August Successful launch of new BOQ Specialist brand Delivers leadership position in ni
Slide 11: Culture & capability uplift driving customer satisfaction
Culture & capability uplift driving customer satisfaction Net Promoter Scores – August 2014(1) Retail customer satisfaction metrics remain high BOQ ANZ CBA NAB WBC Continue to outperform in Business Banking +16.8 -5.9 +1.3 +0.2 -7.1 customer satisfaction Record score in latest East & Partners
Slide 12: Progress towards management targets
Progress towards management targets FY15+ Target Metrics(1) FY14 Results (from 2H12) BOQ asset growth -Retail 0.1x system 1.2x system -Business(2) 1.7x system 1.5x system Net Interest Margin 181bps Low-Mid 160s Expense growth 6% < Inflation Cost to Income 43.8% Low 40s Bad & Doubtful Debts
Slide 13: Financial overview
Financial overview Anthony Rose Chief Financial Officer
Slide 14: Strong financial performance
Strong financial performance 20% increase in cash earnings to FY14 FY13 FY14 v FY13 $301.2m Net interest income $761.2m $694.4m 10% Net interest income growth driven Non interest income $168.4m $162.4m 4% by margin expansion Total income $929.6m $856.8m 8% Expense uplift due to investment in O
Slide 15: Loan portfolio – focus on quality
Loan portfolio – focus on quality Muted lending growth with disciplined approach to pricing and risk Better quality book with geographic diversification continuing – QLD down to 54% from 60% in 2H12 Continued Business Banking momentum – 1.7x system(1) (2) 38.3 34.3 35.1 33.4 (1) Excluding the
Slide 16: Deposit funding composition improved
Deposit funding composition improved Focus on composition given subdued asset growth – reduced reliance on high cost retail segments Deposits to Loan ratio maintained comfortably 26.6 BOQ within target range of 65-70% Specialist Access to wholesale and middle market counterparties enhanced wit
Slide 17: Proactive margin management
Proactive margin management Strong 10bps improvement on 1H14 2.18% 2.10% Tailwinds 2.05% Deposit pricing adjustments with lower lending growth ( ) ( ) Rating upgrades reducing wholesale ( ) costs and opening up counterparty limits Free funding cost from excess capital Headwinds High margin
Slide 18: Other income
Other income 86.8 Continued pressure on banking fee income 82.5 81.6 BOQS & 79.9 BOQ Finance equipment sales lower due to VMA customer inertia/lower reinvestment APS210 will shift component of other income to NII Strategies to offset include Business Banking expansion (fee income) and financ
Slide 19: Cost-to-income controlled
Cost-to-income controlled Cost-to-income down to 43.9% from 45.7% in 2012 Expense growth of 6% excluding BOQ Specialist - above target, driven by one-off premises reconfiguration and frontline investment Significant digitisation investment well advanced for 2015 rollout New IT outsourcing co
Slide 20: Consistent improvement in impairment expense
Consistent improvement in impairment expense (1) Ongoing reduction in impairment expense On track to achieve FY15 management target of 20bps (1) Excluding BOQ Specialist 20
Slide 21: Continued success in realisation of impaired assets
Continued success in realisation of impaired assets (1) (1) 460 381.6 308 298.4 287.6 193 (1) Excluding BOQ Specialist 21
Slide 22: Positive arrears trends
Positive arrears trends Housing arrears at consistent and manageable levels Revised risk appetite and origination framework driving reductions in commercial arrears BOQ Finance portfolio stable (1) Housing including Lines of Credit (2) Excluding BOQ Specialist 22
Slide 23: BOQ Specialist forecasts unchanged
BOQ Specialist forecasts unchanged BOQ Specialist on track to perform in line with expectations Reconfirming financial metrics from announcement: $38m post-tax earnings in FY15 (before synergies), remain committed to EPS accretion expectations Cash ROE dilutive in FY15, but expected to be ca
Slide 24: Maintainable capital generation
Maintainable capital generation Capital strength maintained with Total Capital at 12.02% and Common Equity Tier 1 at 8.63% Internal capital generation Underlying capital generation supporting dividend growth 24
Slide 25: Remain well capitalised vs peers
Remain well capitalised vs peers (1) Source: latest published S&P reports and company reports 25
Slide 26: Summary & outlook
Summary & outlook Jon Sutton Acting Chief Executive Officer
Slide 27: FY15 opportunities for growth – Retail
FY15 opportunities for growth – Retail Retail channel initiatives Retail channels: source of lending applications National expansion across ~2,500 accredited brokers by end of FY15 Scaling new channels of ‘Sweating’ recent digital asset refreshes and growth driving leads through to sales channel
Slide 28: FY15 opportunities for growth – Business Banking
FY15 opportunities for growth – Business Banking Diversifying by product, geography, industry Commercial Loans: diversifying loan book geographically sector and asset class Profitable growth through focus on margin management, improved credit quality and pricing for risk Building competitive a
Slide 29: Other FY15 growth and productivity initiatives
Other FY15 growth and productivity initiatives Virgin Money Australia tracking to expectations; retail banking strategy planning underway St Andrew’s continues to diversify revenue streams Digitisation underway – intensive paper based system has been worst in class “Time to Yes” Digitised le
Slide 30: Case for change made to Financial System Inquiry
Case for change made to Financial System Inquiry We’ve made a strong case for change in 3 key areas: Narrowing of the gap on risk weightings Current regulatory capital settings are 3x anticompetitive in the case of low-risk, homogenous residential mortgages Removing the ‘too big to fail’ fundi
Slide 31: Summary & outlook
Summary & outlook Record full year cash earnings of $301.2m and further increase in shareholder 1 returns Continued execution of four pillar strategy with key priority to drive profitable 2 growth across all business lines 3 BOQ Specialist provides additional growth opportunity 4 Focus on cost disci
Slide 32: Important notices
Important notices Financial amounts All dollar values are in Australian dollars (A$) and financial data is presented as at the date stated. Pro-forma financial information and past information provided in this Presentation is for illustrative purposes only and is not represented as being indicative
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