Bank of Queensland Limited

Welcome to BOQ Group FY25 results. Following the formal presentation, there will be a Q&A session for investors and analysts. The audio queue is now open and I will hand over to Jessica Smith.

Good morning and welcome to BOQ's financial results presentation for the full year ended 31st of August 2025. My name is Jessica Smith and I'm the General Manager of Investor Relations and Corporate Affairs at BOQ. On behalf of the management team, I would like to acknowledge the traditional custodians of the land we are meeting on today, the Gadigal people of the Eora nation. We pay our respects to elders past and present. I'm joined in the room today by BOQ's managing director and chief executive officer, Patrick Alloway, and our chief financial officer, Rachel Kelleway, who will present the results. We are also joined by BOQ's executive team. Following the briefing, there will be an opportunity for questions. I will now hand over to Patrick.

Thank you, Jess. And good morning, everyone. And thank you for joining us today. I'm pleased to take you through our FY25 results. I have three key messages to leave you with today. We've improved financial performance, grown our strong business bank franchise, and our retail bank transformation is well progressed. In 2023, we reset our strategy to become a simpler specialist bank with a superior customer experience and enhanced shareholder returns. We outlined four strategic pillars to transform BAQ, strengthen, simplify, digitize and optimize performance. We are now well progressed through this ambitious program of work to uplift operational resilience, simplify the way we operate, scale customer growth with improved digital experiences, and shift our balance sheet mix to deliver more sustainable returns. Turning to our strong performance on slide eight. This year, we delivered on what we said we would do. One, we supported more customers with a greatly improved experience for the 44% of retail customers now on the digital bank. Two, We improved key financial metrics with a 12% uplift in cash earnings, 70 basis point improvement in return on equity, 210 basis point reduction in our cost to income ratio, and an eight basis point uplift in margin. Three, we delivered on our retail bank transformation commitments. We converted 114 franchise branches on time and on budget, creating a high returning proprietary channel. we are well progressed in customer migration and launched our digital mortgage. Four, we shifted balance sheet mix, recycling low returning capital to support 14% commercial lending growth. Five, we progressed our remedial action plans with 44% of activities now closed. And finally, six, we simplified our business, which resulted in a 4% reduction in underlying costs. we will achieve the $250 million productivity target as we exit FY26. With capital above target range, strong funding position, and well-secured portfolio, we are well-placed to continue the structural shift of our balance sheet and growth in higher returning segments. The Board declared a final dividend of 20 cents, a full-year dividend uplift of 12%. Turning to slide nine, outlining the financial results. The 12% growth in cash earnings to $383 million was driven by increasing revenue and a flat cost base. We've maintained discipline and growth, and our focus on returns delivered an improvement in return on equity to 6.4%. There are adjustments to the statutory earnings this year, including the impairment of goodwill apportioned to the retail bank, reflecting uncertainty in relation to industry structural shifts and restructuring costs to simplify our distribution channels and operations. Consistent discipline execution of our strategy is generating tangible financial and operational benefits and an uplift in returns to shareholders. Rachel will speak to the financials in more detail shortly. Turning to slide 10, We are the bank of choice for one and a half million Australian households and businesses with 3% customer growth on last year. The customer voice remains at the heart of everything we do as we continue to invest in bankers and technology to provide a superior customer experience. This includes improvements over the past 12 months in the experience on our new digital platform, contact centre-grade of service, hardship response times, and faster resolution of customer complaints. We're providing additional support to customers through migration of our heritage systems and have provided support and individual solutions to over 4,000 customers this year facing financial difficulty. To help protect customers from scams, we've introduced biometric capability in the digital bank, which has had an average intervention rate of 98%. We also introduced cryptocurrency restrictions, recognising the prevalence of investment scams. In building on our foundational strength in Queensland, we launched our Bank of Queenslanders campaign, increased the number of bankers in regional growth corridors and announced partnerships with the Royal Queensland Show, the ECHA and the Queensland Rugby Union. We're investing in more bankers to leverage our strong heritage and competitive strength supporting Queenslanders. An important aspect of our business is how we contribute to the communities in which we operate. For us this year, that has meant deepening our partnership with Orange Sky Australia, who provide important support for vulnerable Australians. Our cultural transformation remains at the forefront of our broader transformation. This year, against a backdrop of significant change, Our people experience index increased two percentage points to 73%. Our risk culture index increased 3% and we're particularly pleased to note 83% of our people feel safe to speak up. Turning now to slide 11, how our strategic pillars are driving progress. Our strengthened pillar is building stronger operational foundations to ensure we deliver better customer, people and risk outcomes. We're delivering a stronger bank with improved operational resilience, risk maturity and culture. We're well progressed through delivery of our remedial action plans and continue to engage productively with our regulators. Our simplification pillar is driving material productivity benefits. We're reducing complexity across our ways of working and products, simplifying distribution channels, decommissioning heritage technology, optimising the cost of our supply chains and improving processes. Our digitised pillar is transforming the retail bank to a scalable, low cost to serve digital model, improving the experience for customers and our people, and will allow us to be more effective in competing in a highly commoditised retail market. Our digital end-to-end bank is largely built and customer migration and scaling to the platform is now the focus. In FY26, we will complete MEE customer migration and decommission MEE heritage systems. The next important proof point in our transformation, delivering a step change improvement to both our cost base and operational resilience. Our optimized pillar is focused on improving returns, which we are progressing across a number of initiatives, including the organic shift in the mix of assets and liabilities on the balance sheet, and progressing third party product partnerships, leveraging our distribution capabilities to grow non-interest income, initially for superannuation and insurance products. The next step in exploring off balance sheet partnerships with forward flow agreements to scale customer growth and non-interest income. This provides optionality as to which assets we hold on our balance sheet or through partners. enabling scalable growth with capital efficiency. As we announced in August, we're exploring a whole of loan sale agreement for up to $3.8 billion of our equipment finance portfolio, which would include a forward flow origination and servicing arrangement. This segment of our portfolio is ideal for a partnership as it would allow us to scale customer demand without balance sheet limitations for more cyclically exposed assets. To be clear, this is not a sale of the business. Our asset finance business remains core to our strategy. There would be no impact to our customers who would continue to receive a dedicated support through BAQ. We're in an active process with strong indicative demand. We will provide a detailed update to the market if the transaction proceeds. Turning to slide 12 for more detail on our $250 million productivity program. This has well progressed and we expect the full run rate benefits to now be delivered on exit of FY26. Having delivered more than 50% of the program, the remaining key components to be delivered in FY26 are the decommissioning of MEE heritage and the operating model restructure announced in August. Our considered approach to customer migration has shifted the sequencing of materially annualized cost savings benefits from decommissioning 40 technology platforms and vendors, which will now flow to the expense line in FY27. We will drive further benefits through our recent strategic partnership with Capgemini, a leading technology and transformation company. This partnership will unlock greater operating efficiencies and scalability in technology and business processing and leverage AI in improving how we service our customers and operate. Turning now to slide 13 and the growth of the digital bank. The build of our digital bank has been a considerable success. And what sets it apart in the market is that it is fully digital end-to-end, including the customer interface, backend processing, and documentation. The end-to-end build enables migration and full decommissioning of our heritage core banking platform, reducing complexity and duplication of costs. The benefit to customers is a reliable, secure and intuitive banking experience with extensive self-serve capabilities. This year, we completed migration for the majority of me deposit customers. We now have 474,000 customers on the digital bank with over $10 billion in deposits. Mean mortgage migration has now commenced with completion targeted for the first half of 2026. Moving to slide 14. As I said earlier, 44% of our retail deposit customers are now on the digital platform. And in August, 81% of new to group deposits were originated through the digital bank. We're seeing a greater representation of active digital customers in a younger demographic. with strong average balances, increasing our ability to service more of their banking needs. The digital bank is core to our deposit strategy, growing stable funding for the group. The initial phase of the digital home loan rollout has shown early success. We're delivering conditional approval in less than 90 seconds and unconditional approval on the same day. We've seen a 20% reduction in the cost to originate compared to heritage. And on delivery of the full functionality through FY26 and FY27, we will reduce our cost to originate and service home loans by half. Turning to slide 15 and how we're optimising our balance sheet. An important part of our strategy to optimise returns is the structural shift of both the asset and liabilities on the balance sheet. Intentionally running off home lending and reallocating capital to business lending, which we accelerated in FY25, has resulted in improved asset mix. We've increased business lending mix on the balance sheet now by 4% to now 17% of our portfolio. We're also focused on optimising the mix of home lending origination, the converted proprietary branch channel, combined with our origination on our lower cost to serve digital platform will improve home lending returns. In a period of deliberate low growth, we've built capacity in our funding base for future growth and reduced wholesale funding in favour of deposit customers. While the shift towards a more optimal customer deposit mix takes time, we're seeing strong performance in the digital bank. In considering asset growth, we will continue to exercise discipline. We've flagged that FY25 will likely be the peak of home lending contraction. We expect slowing decline in FY26 before returning to growth in FY27. Early indications from the digital home loan launch provide confidence in this approach, and we're targeting the vast majority of new home lending on the digital bank by the end of FY27. Turning to slide 16 for an overview of our retail bank, for which FY25 has been a considerable year of transformation. The retail bank delivered cash earnings of $109 million, a year-on-year improvement of 24% in an increasingly competitive environment. This performance was driven by an uplift in margin, primarily from the conversion of the branches to our proprietary channel, and productivity initiatives to lower our cost to serve, partially offset by GLA decline. The retail bank performance continues to reflect our conscious decision to focus on transformation and returns as we reposition to a scalable, low cost to serve digital bank and recycle low returning capital. We again grew home lending on our low cost to originate me channel, Supporting the remix of our balance sheet, the clients in both VMA and BOQ home lending were on plan as broker origination on heritage platforms remained pause for these brands and we converted and consolidated the BOQ branch network. We've seen branches return to pre-conversion levels of origination and are focused on supporting customers evolving preferences with a strong national digital platform complemented by a targeted BOQ physical footprint predominantly in Queensland. Finally, on the retail bank this month, we entered into a distribution partnership with Virgin Australia to leverage their 13 million Velocity frequent flyer members to grow both transaction accounts and home lending. Turning now to slide 17 for an update of the progress on our specialist business bank. The business bank delivered cash earnings of $279 million, an increase of 10% on FY24. This was driven by a 6% increase in income and 3% increase in expenses, including our investment in new bankers. Commercial lending increased by $1.6 billion, representing a 14% growth rate, driven by core strength in healthcare, agriculture and well-secured commercial property. During the year, we simplified our product offering in the asset finance business, ceasing origination in cash flow finance. On an underlying basis, assets finance grew by $237 million, or 3%. predominantly through innovated leasing and structured finance. The BOQ specialist housing portfolio runoff reflected our decision to reset pricing to a more sustainable return, aligned to our broader home lending strategy. The business bank had a 20 basis point uplift to margin in the half, primarily driven by the branch conversion and deposit mix, offsetting increased competition. Our banker value proposition is enabling the hire of quality bankers in a competitive market for talent. We've now onboarded 35 new business bankers and will continue focusing on attracting quality bankers in targeted growth corridors, particularly in Queensland. I will now hand to Rachel to provide more detail on the financials. Thank you.