Bank Of Queensland Limited · ASX:BOQ
Bank Of Queensland — FY2016 Earnings Presentation
36 slides from Bank Of Queensland's earnings presentation, October 2016
Slide 1: FY16 Results Presentation for the year ended 31 August 2016
FOR THE YEAR ENDED 31 AUGUST 2016 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 2: Jon Sutton, CEO and Anthony Rose, CFO
JON SUTTON Managing Director & CEO ANTHONY ROSE Chief Financial Officer JON SUTTON Managing Director & CEO Bank of Queensland Limited FY16 Results Presentation
Slide 3: Vision, strategy, target segments and strategic pillars
Vision … Strategy … Focus on niche segments that value a more intimate customer relationship Retail banking Business banking Target Aussie Achievers Hospitality & segments … Today’s Families SME Medical & Dental Tourism Heartland Mid-market Niche Agribusiness Asset- Leading Lifesty
Slide 4: Increased profit in a changing operating environment
Increased profit in a changing operating environment Niche specialist businesses delivering strong results Strong asset quality Significant focus on productivity and deposits Progressing well with execution of strategy Bank of Queensland Limited FY16 Results Presentation
Slide 5: FY16 key metrics
357 360 97.3 95.6 301 89.5 248 78.1 74 76 66 10.4 10.7 10.3 58 9.4 Bank of Queensland Limited FY16 Results Presentation
Slide 6: FY16 key metrics continued
1.97 1.94 2,549 1.82 2,177 1.69 742 581 46.0 46.8 115 44.3 43.9 86 74 67 (1) FY14 excludes the addition of the BOQ Specialist portfolio Bank of Queensland Limited FY16 Results Presentation
Slide 7: Commercial loan book growth 13%
• Commercial loan book growth 13% • Portfolio growth of 3% in a flat market • High margin business • Focus on higher margin business • Benign loss experience continues • Impairment expense within expected range • Housing loan book growth of $1.5bn • High quality residential loan portfolio • Bankers
Slide 8: The business is now much better placed to operate sustainably
• The business is now much better placed to operate FY13 FY16 sustainably through the inevitable economic cycles • 65% of housing loans written from FY13 onwards, under more conservative risk settings • Limited exposure to apartment development hotspots • Sound risk management has meant no significa
Slide 9: Revenue under pressure across the sector
2,567 • Revenue under pressure across the sector – lower credit 2,197 growth and ‘lower for longer’ interest rate environment • Net Interest Margin impacted by market dynamics post- Commercial & May RBA cut: lower yield curve and higher TD spreads BOQ Finance • Prioritised margin over growth in 2H16
Slide 10: Elevated focus on productivity and efficiency programs
• Elevated importance and focus on productivity and efficiency programs 520 • Additional efficiency initiatives underway within current expense profile 500 • 4% underlying expense growth in FY16; targeting 1% underlying growth in FY17 One-off expenses +4% Underlying expenses Additional savings $15m
Slide 11: Strategic pillar FY16 priorities and progress
Strategic pillar FY16 priorities FY16 progress 1. Expand BOQ accredited brokers to 4,000 Customer in charge 2. Roll out Virgin Money mortgage product 3. Digital enablement 4. Ongoing branch network optimisation 1. Continue to increase customer deposits Grow the right way 2. Maintain discipli
Slide 12: Anthony Rose, Chief Financial Officer
ANTHONY ROSE Chief Financial Officer Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 13: FY16 financial results summary
FY16 FY16 v FY15 Net interest income $937m 3% Non interest income $173m (4%) Total income $1,110m 2% Operating expenses ($520m) 4% Underlying profit $590m 1% Loan impairment expense ($67m) (9%) Profit before tax $523m 2% Income tax expense ($163m) 4% Cash earnings after tax $360m 1% Cash basic earni
Slide 14: Total lending up 5% on FY15
43.2 • Total lending up 5% on FY15 38.4 41.0 35.3 • Geographic mix improving – down to 48% QLD BOQ Finance • Strong 1H16 growth in Housing Commercial • Prioritised margin over growth in 2H16 due to funding conditions and price competition Retail • Focus on growing higher margin segments in 2H16 1,95
Slide 15: BOQ Specialist delivered strong contribution
• BOQ Specialist delivered strong contribution Broker • Branch network remains consistent source of BOQ settlements Specialist • Industry wide increase in refinancing activity Corporate • Broker solid growth in 1H16 but slowed significantly in 2H16 with less competitive new business pricing OMB FY13
Slide 16: Solid contribution from Business Banking niche
• Solid contribution from Business Banking niche segments • BOQ Specialist & BOQ Finance performing well Retirement Medical & Dental living growth • Lower quality business running off, being replaced by of 150% to growth of 13% higher quality business to $2.7bn ~$300m FY13 FY16 495 401 BOQ Finance 3
Slide 17: $2.2bn in lending growth funded by deposits
45.4 46.1 Long Term • $2.2bn in lending growth funded by deposits with 43.5 43.4 Wholesale transaction account growth of $320m • Limited wholesale market issuance required to meet Wholesale upcoming maturities Deposits • Deposit to Loan ratio 68% Customer Deposits FY15 FY16 9.3 9.1 9.1 8.6 Senior Un
Slide 18: Term deposit run-off and reinvestment rates
Run-off rate Reinvestment rate Rate differential Average reinvestment differential (3.25%) in FY16 33bps average from Dec to Aug Average TD special spread Average TD rate 20bps long term average spread (1) Source: Bloomberg Bank of Queensland Limited FY16 Results Presentation (2) Spreads above 3-mth
Slide 19: Front book vs back book housing impact ongoing
Third party costs Net interest margin • Front book vs back book housing impact ongoing Element 1H16 2H16 change • Hedging costs have remained elevated, albeit down Asset pricing benefits +6bps +9bps +3bps from peak Front book pricing & mix (4bps) (5bps) (1bp) • Capital & Low Cost Deposits – returns
Slide 20: Non-interest income: BOQ Finance equipment sales assisted Other income
• Good performance in BOQ Finance equipment sales assisted ‘Other’ income • Customer shift to lower fee products such as Clear Path mortgage product • Change in interchange fee arrangements reduced result by $4m • St Andrew’s Insurance transitioning to new agreement and product mix as expected; clai
Slide 21: Underlying expense growth of 4% in FY16
• Underlying expense growth of 4% in FY16, including planned step-up in amortisation • Cost to Income ratio up to 46.8%; 45.5% ex one-offs 256 264 • Virgin Money mortgage roll-out added $3m in 2H16, 256 244 expected to add $9m in FY17 Operating model • Targeting 1% underlying expense growth in FY17,
Slide 22: Continued improvement in asset quality
• Continued improvement in asset quality BOQ Finance • Commercial portfolio performance in 2H16 particularly pleasing; no new impaired assets >$5m Commercial • Retail portfolio benefiting from mix impact of new BOQ Specialist housing loans Group Total Retail 259 86 237 240 232 82 80 74 BOQ Finance E
Slide 23: Improving trends across all portfolios
• Improving trends across all portfolios • BOQ Specialist growth contributing to improvement • BOQ Finance impacted by QLD & WA downturn in particular (1) Includes BOQ Specialist Bank of Queensland Limited FY16 Results Presentation (2) Housing excluding Lines of Credit
Slide 24: Capital position compares well against peers
• Capital position compares well against peers, particularly given BOQ’s more conservative risk weightings • Basel 4 should level the playing field further; Potential upside in SME risk weights • Good progress made towards advanced accreditation if size of the prize warrants accelerating that step I
Slide 25: Initiatives for advanced accreditation application
Initiatives in place Credit policy framework Credit models Credit risk Collective Provision/GRCL Application for Advanced Lending origination systems Operating model & framework Operational Governance framework implementation risk Incident management system Asset Liability Management (ALM) System Ma
Slide 26: Jon Sutton, Managing Director & CEO
JON SUTTON Managing Director & CEO Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 27: Economic, industry and regulatory environment
• Low interest rates and low unemployment supporting economic growth Economic • QLD benefiting from tourism • Mining investment downturn impacting some regions • Lower credit growth • ROE impacted by lower for longer interest rates Industry • Conduct and culture focus • Rapidly changing customer exp
Slide 28: Vision, strategy and FY17 priorities
Vision … Strategy … Focus on niche segments that value a more intimate customer relationship There’s always a better Customer in charge Grow the right way Loved like no other way 1. Expansion of mortgage 1. Optimise deposit pricing 1. Complete roll out of 1. Invest in leadership and FY17 priorities
Slide 29: Subdued revenue growth across the industry to persist
Subdued revenue growth across the industry to persist Focus on growing in high margin segments Maintain risk discipline Deliver additional efficiency program benefits Continue with execution of strategy Bank of Queensland Limited FY16 Results Presentation
Slide 30: Appendix: for the year ended 31 August 2016
FOR THE YEAR ENDED 31 AUGUST 2016 Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 31: Bank of Queensland Limited
Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
Slide 32: Quality continues to improve under revised risk appetite
• Quality continues to improve under revised risk appetite Less than 40% • Higher proportion of fixed rate lending in FY16 40-60% • Line of credit portfolio continues to reduce 60-80% 80-90% 90%+ Metrics (%) 2H15 1H16 2H16 Metrics (%) 2H15 1H16 2H16 Owner occupied 58 57 58 Owner occupied 63 56 59 In
Slide 33: $215m current exposure to residential apartment construction
Lending to residential apartment construction Concentration Apartment construction exposures(1) • $215m current exposure to residential Limit - $131m construction Exposure - $51m • 30 developments across 3 states, majority NT QLD # Apts - 433 completing 2016 through 2017 WA • Highest concentration i
Slide 34: Glossary of terms
1H: First half of financial year FTP: Funds transfer pricing 2H: Second half of financial year FY: Financial year 30DPD: 30 days past due GLA: Gross Loans & Advances 90DPD: 90 days past due GRCL: General Reserve for Credit Losses AFS: Available for sale KPI: Key performance indicator ALM: Asset & Li
Slide 35: Important notice
This is a presentation of general background information about Bank of Queensland Limited’s (BOQ’s) activities at the date of this document. It is in summary form and does not purport to be complete. It should be read in conjunction with the BOQ’s other periodic and continuous disclosure announcemen
Slide 36: Firs Possible to
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