Bendigo & Adelaide Bank Ltd. · ASX:BEN
Bendigo & Adelaide Bank — H1 2009 Earnings Presentation
57 slides from Bendigo & Adelaide Bank's earnings presentation, Feb 16, 2009
Slide 1: 2008/09 interim result
Bendigo and For personal use only Adelaide Bank 2008/09 interim result 16 February 2009
Slide 2: Disclaimer
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 For personal use only complete. It is to be read in conjunction with the Banks Interim re
Slide 3: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 4: Overview: growth at profitable prices
72.8% 3.0% For personal use only Cash earnings $122.2m 3 Cash earnings per share 44.3c1 Unchanged Interim dividend $0.28c2 1 Based on previously reported earnings of 43.0c per share December 2007 2 Fully franked 3 Based on the previously reported cash earnings of 70.7m in December 2007 Overview > gr
Slide 5: Overview: a difficult environment
> Market confidence severely impacted For personal use only > Reduced availability and increased cost of wholesale funding > Slowing economy > Investment and deposit flows back to the banking sector > Pressure on non-bank funds and distribution channels > Distinctions in strategies employed by banks
Slide 6: Overview: our strategy
> BEN will be Australia’s leading customer connected banking group For personal use only > Our strategy is to - > build the customer base and markets we serve > expand our branch network and exceed customer expections > consolidate position as provider of choice in partner advised markets > complete
Slide 7: Overview: our response
> Strengthened balance sheet For personal use only > Increased retail funding > in real terms > as % of balance sheet > Increased capital > Continued focussed strategy > Growth in retail network > Growth at profitable prices > Committed to restructuring partner channels > Continued investment in tec
Slide 8: Overview: the role of a bank
> The important role of a bank has been reaffirmed For personal use only > They play a vital role in functioning domestic economies > They are still the most efficient way of delivering capital and funding to the local economy and small business > Connection and relevance to local markets and custom
Slide 9: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 10: Financial performance: acquisition accounting
Accounting standard impacts following the merger: For personal use only > Acquisition previously reported at essentially face value > Completed purchase price allocation > Valuation of intangible assets acquired > Fair value adjustments finalised – some assets and liabilities revalued > Allocated go
Slide 11: Financial results: creating shareholder value (previously reported)
Previously reported For personal use only December December Change Six months trading 2007* 2008 07-08 Cash earnings ($m) 70.7 122.2 72.8% Cash earnings per share (c) 43.0 44.3 3.0% Profit after tax before 76.1 118.8 56.1% significant items ($m) Interim dividend (c) 28.0 28.0 steady *Dec 2007 interi
Slide 12: Financial results: creating shareholder value (restated)
Restated December December Change For personal use only Six months trading 2007* 2008 07-08 Cash earnings ($m) 85.8 122.2 42.4% Cash earnings per share (c) 52.2 44.3 15.1 Profit after tax before 86.4 118.8 37.5 significant items ($m) Interim dividend (c) 28.0 28.0 steady *Dec 2007 interim figures re
Slide 13: Financial results: quality earnings
For personal use only Operating Other income $42.5m Expenses Profit on cash basis ($m) Net interest ($96.3m) income $118.5 mil $117.2m Provision for Preference Doubtful Debts Income Tax/ Shares Other non ($21.8m) Minority interest Dividends cash items ($9.2m) ($0.2m) $4.2m $122.2m $85.8m December 20
Slide 14: Financial results: protecting margin
Analysis of net interest margin (%)* For personal use only Liability Liability Mix Pricing Asset Mix Asset Pricing 0.17 (0.33) (0.12) 0.09 Free Funding 0.03 1.65 1.49 June 2008 December 2008 Financial Results > Protecting margin 14
Slide 15: Financial results: continuing to invest in the business
150.0 For personal use only Operating expenses ($m)* First half 2007 First half 2008 Restated 104.5 69.9 47.6 26.3 27.8 20.6 7.5 18.4 5.6 5.3 16.2 9.9 10.5 Salaries and Information Fees and Property, Plant Intangibles Occupancy Other operating staff-related technology Commissions and Equipment amort
Slide 16: Cost to income ratio
Cost to income ratio (%)* For personal use only 67.9% 66.5% 60.5% 58.3% 2005 2006 2007* 2008 * Restated *2007 figures include one month Adelaide Bank and six months Bendigo Bank. Financial results > continuing to invest in the business 16
Slide 17: Financial performance: significant items
Significant items (post tax) December 2008 ($m) For personal use only Cash flow hedge reserve movements (43.7) Equity investment impairment (4.7) Integration costs (13.8) Head office excess costs (1.3) Proceeds on sale of Visa shares 5.2 TOTAL (58.3) Financial performance > significant items 17
Slide 18: Financial results: growth in shareholder value
Cash earnings per share (cents) Group dividends (cents) 52.2 (restated) For personal use only 9.2 3% growth 65 58 52 43.0 44.3 37 34 30 steady 28 28 22 24 2007 2008 2005/06 2006/07 2007/08 Dec 08 Interim Final Financial results > growth in shareholder value 18
Slide 19: Group credit: conservative provisioning
Loan loss provisions and reserves ($m) > Total group provisions of $157m as at For personal use only General Collective Specific December 2008 (0.41%)* (0.34%)* (0.32%)* 41.0 22.1 18.0 32.5 36.8 37.1 Risk Weighted Assets 51bps of total 80.8 76.2 78.8 * Percentage December June December of gross loan
Slide 20: Group credit: conservative and specific provisions
Composition of specific provisions For personal use only Change since Value ($m) June 08 ($m) Residential 7.93 0.79 Commercial 24.44 18.28 Margin lending 4.37 0 Consumer 3.74 0.29 Group credit > Conservative and specific provisions 20
Slide 21: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 22: Retail banking: strong performance
> Retail banking is back in vogue For personal use only > Strong positioning* > customer numbers 50,000 > branches 24 > market leading customer satisfaction > market leading customer avocacy > Continued demand for Community Bank® - 19 new branches in 2008* > Significant investment in distribution is
Slide 23: Retail banking: growth in deposits
31.5% Retail branch deposits For personal use only Retail deposits ($m) Composition of retail deposits 66 63 54 56.5% 15.06 15.11 15.17 15.31 15.36 15.73 17.05 17.76 18.47 18.76 19.16 19.80 43.5% Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Dec 2008 > Strong gr
Slide 24: Retail banking: funding trends
> Community Bank®network remains relatively immature For personal use only > Liability growth strongest in first seven years of branch life Deposits per Community Bank® branch Community Bank® branches by age 35 30 25 CAGR 20.6% No. of branches 20 $’000 15 10 22,931 29,367 33,190 48,771 58,809 47,204
Slide 25: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 26: Funding structure: conservative profile
On-balance sheet funding Combined on and off For personal use only balance sheet funding > We have not used the government guarantee in Securitsation wholesale markets Wholesale Retail 83% Retail 64% 17% 23% Wholesale 13% Funding structure > conservative profile 26
Slide 27: Funding structure: low risk profile
Balance at Balance at $millions Change (12-months - %) 31/12/07 31/12/08 For personal use only Wealth/HNW/Corporate 8,078.3 7,574.5 (6.2%) Branches 15,061.3 19,800.1 31.5% Total Retail 23,139.6 27,374.6 18.3% Short term domestic 4,974.8 3,426.2 (31.1%) ECP 1,260.4 267.7 (78.8%) Domestic MTN 1,238.8
Slide 28: Capital adequacy: maintaining conservative approach
Total group capital (%) For personal use only Tier 1 Tier 2 10.78% > Conservative capital for 10.43% our balance sheet and 2.91% 2.79% risk profile > Levels remain well in access of ICAAP 7.52% 7.99% measurement > Continue to allocate capital to the most 30 June 31 December profitable areas 2008 200
Slide 29: Capital adequacy: maintaining conservative approach
SRP & DRP For personal use only Placement +0.13% RWA growth Retained +0.92% -0.42% Earnings Intangibles > Further capital movement +0.08% -0.38% 10 > Macquarie Margin 9 8 Lending acquisition 7 ~ $52m (Jan 09) 10.43% 10.78% 6 > Other 5 4 3 2 1 0 December June 2008 2008 Capital adequacy > maintaining
Slide 30: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 31: Partner Advised Banking: a strategic focus
> Customers are choosing this channel For personal use only > Partner advised businesses remain a key provider of competition in domestic markets > We are, and will continue, to re-shape these businesses > We have remained open for business through these channels, and remain committed to our partner
Slide 32: Third party mortgages: managing for the new world
> Variable cost base For personal use only > Commissions have been adjusted > Focus on achieving an appropriate economic return Portfolio size ($bn) $25 $20 $15 Billions $10 $5 $0 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Third party mortgages > managing for
Slide 33: Margin lending: strong future growth prospects
> Strong growth prospects as confidence returns to market > Portfolio decline has been in line with equity market falls For personal use only > Macquarie margin lending purchase - active customer numbers now >31k Macquarie 6 Portfolio size ($b) Customer account numbers* purchase 30,000 5 27,000 Macq
Slide 34: Wealth deposits: strong funding capability
> Significant liabilities generation For personal use only > Leverages multi-product distribution strategy through financial planners and stock brokers > Continued growth expected in current environment Wealth deposits > strong funding capability 34
Slide 35: Funds: cash and fixed income specialists
> Challenging times for funds management For personal use only > Remains a key strategic focus > We have not locked up any funds > Funds will return strongly when confidence re-emerges Funds > cash and fixed income specialists 35
Slide 36: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 37: Group credit: maintaining quality
> Gross impaired loans remain near historically low > Maintaining a vigilant approach For personal use only 0.87 0.71 Gross impaired loans/total assets (%) 0.50 0.37 0.21 0.19 0.14 0.12 0.08 0.08 0.08 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Group credit > maintaining quality 37
Slide 38: Group credit: granular portfolio
> Top 20 exposures = $663.5m (1.38% of total assets) For personal use only > Only 6 loans greater than $30m > All top exposures performing well > Diversity by geography and industry Group credit > granular portfolio 38
Slide 39: Group risk: diversity by purpose
> Mortgages form the majority of loans by purpose and security For personal use only > Unsecured consumer lending a minor part of the portfolio - and performing strongly Group loans by purpose > Margin lending credit quality remains Commercial exceptional 14.3% Margin Lending 5.5% > Commercial portf
Slide 40: Group credit: diversity by geography
Group lending by geography Business lending by industry For personal use only > Diversity by geography > Remain 5% underweight in troubled 1% Properties and business services 5% NSW and QLD sectorsConstruction Health and community service NSW Cultural and recreational services Vic 24.0% Other 33% 28
Slide 41: Group risk - mortgages: total mortgage arrears remain steady
LoDoc vs Standard - 90d+ balances and rates For personal use only $350m 1.40% $300m 1.20% $250m 1.00% $200m 0.80% $150m 0.60% $100m 0.40% $50m 0.20% 0 0.00% Jul 07 Aug 07 Sep 07 Apr 08 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Standard 90d+$ Lo
Slide 42: Group risk - mortgages: maintaining a vigilant approach
> 90+ day arrears levels are increasing – from a very low base For personal use only > Of those in 90+ day arrears: > Average historical LVR is 69.2% > 57.8% are fully verified > 42.2% are lo-doc > LMI insurance covers more than 69% of all MIP loans > Pro-actively reviewing and changing business pra
Slide 43: Group risk - lo-doc mortgages
> High levels of LMI in lo-doc portfolio (all loans more than 60% LVR) For personal use only > Full valuations for all lo-doc loans – regardless of LMI status > While 90+ day arrears trends higher, actual losses remain low > Charged at a 1% premium over standard variable rates 90+ day arrears - loss
Slide 44: Group credit: minimal exposure to commercial property development
Business lending portfolio ($000’s) Business lending by industry For personal use only Property State Total portfolio development Other 5% 1% 5% only Victoria/Tasmania 2,855,774 194,764 2652,157 33% 18% South Australia/NT 696,731 55,460 640,992 4% 5% 4% New South Wales/ACT 693,505 7,559 685,876 4% 8
Slide 45: Group risk - other: exceptional credit performance
1.4% 1.2% 1.0% For personal use only 0.8% 0.6% 0.4% Personal loan arrears 90d+ 0.2% 0% Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 1.8% > Consumer 1.6% arrears low and 1.4% falling 1.2% 1.0% > Margin lending 0.8% 0.6%
Slide 46: Agenda
Rob Hunt Overview Managing Director For personal use only David Hughes Financial result Chief Financial Officer Mike Hirst Retail Bank Chief Executive – Retail Bank Mike Hirst Capital and funding Chief Executive – Retail Bank Jamie McPhee Partner Advised Banking Chief Executive – Partner Advised Ban
Slide 47: Summary: a solid result
> Improved cash EPS For personal use only > All businesses making a contribution > Strong and growing retail franchises > Growing customer base > Merger integration on track > Diverse revenue streams > We are managing for these challenging times Summary > a solid result 47
Slide 48: Summary: the future
> We will maintain a disciplined approach - “Growth at profitable prices” For personal use only > We are well positioned > Conservative balance sheet structure with improved levels of retail funding > Excellent brand, positioning, and customer connection > Capacity to selectively grow business units
Slide 49: Questions
For personal use only Questions 49
Slide 50: Appendix
For personal use only Appendix 50
Slide 51: Group risk: high levels of LMI insurance
> LMI insurance covers more than 60% of all MIP loans Mortgagee in possession LMI details For personal use only 160 100% 90% 140 80% 120 59 48 52 54 50 49 52 55 50 48 55 54 70% 100 60% 80 50% 40% 60 30% 40 90 75 74 81 83 86 88 88 87 89 97 94 20% 20 10% 0 0% Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08
Slide 52: Group MIP loans: non LMI loans managed closely
Group MIP loans For personal use only 100% > 54 properties with no LMI coverage 90 > Total group exposure $29.8m No LMI > Average current LVR of 80% 80 coverage > Only 2 properties with a LVR greater than 90% 70 60 50 LMI covered > 94 loans with LMI insurance 40 30 20 10 Dec 2008 Group risk: mortgag
Slide 53: Group 90+ day arrears: non LMI loans managed closely
Group 90+ day arrears 100% > 434 loans 90+ day arrears with no LMI For personal use only > 331 of these have an LVR less than 80% 90 38% > 87 of these have an LVR between 80% and 90% no LMI 80 > 16 of these have an LVR of 90%+, with a total exposure of $4.82m (includes non-LMI loans in MIP) 70 60 50
Slide 54: Group mortgagee in possession loans
Group mortgagee in possession loans For personal use only $ value State Number (m) NSW 83 $38.8 0% Victoria 21 $6.1 22% Queensland 32 $16.2 5% 2% South Australia 3 $0.5 56% Other 9 $4.1 14% 1% Group risk > diversity by geography 54
Slide 55: Group risk: margin lending self-calibrating portfolio
> Margin calls effectively re-calibrate portfolio LVR > Unweighted LVR increasing due to more granular portfolio with fewer single stock loans For personal use only 100% 90% 80% Portfolio gearing 70% 60% 50% 40% 30% 20% 10% Max LVR Average LVR Utilisation 0% Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08
Slide 56: Merger integration: progress and opportunity
> On track to achieve 80% of synergy target by second full year of merger For personal use only > $33.1m of run-rate reduction achieved (54.8% of target) Merger integration > progress and opportunity 56
Slide 57: Further information
Will Rayner Head of Investor Relations For personal use only Bendigo and Adelaide Bank Limited Level 5 169 Pirie Street Adelaide South Australia 5000 Tel: +61 8 8220 7764 Mob: +61 437 794 366 Fax: +61 8 8300 6839 Email: wrayner@adelaidebank.com.au Further information 57
Bendigo and Adelaide Bank — H1 2009 Earnings Presentation on 6ix