profit update

1
Adelaide Bank Limited
Level 5
169 Pirie Street
Adelaide SA 5000
Date of lodgement: 15-Dec-2004
Title: Open Briefing. Adelaide Bank. Business Update & Profit Guidance
Record of interview:
corporatefile.com.au
In FY04, Adelaide Bank Limited reported a 33 percent increase in NPAT to $68.2
million, an ROE of 17.6 percent and EPS growth of 17.3 percent. How does your
first half 2005 performance to date compare with your expectations?
MD Barry Fitzpatrick
With November’s results already in, we’ve so far achieved a first half performance
slightly above our expectations, driven by continued strong growth in assets.
corporatefile.com.au
In your AGM, you reported $1.77 billion worth of mortgage approvals in the first
quarter of 2005, a 7 percent increase from the previous corresponding period.
What factors are sustaining growth amidst a general softening of the demand for
home loans?
MD Barry Fitzpatrick
Adelaide Bank is a small player in a very large market estimated at $603 billion,
where we currently have a market share of 2 percent.
Our loan approvals for the first five months are 9.5 percent higher than for the
same period last year.
We’re now achieving an increased penetration of the national broker market. In
the first five months of this year, close to 12 percent of our approvals were 2
generated through brokers, compared with only 1.6 percent in the same period last
year. We’re currently writing about 3 percent of new mortgage loan approvals.
We’re targeting to achieve a 5 percent market share of loan approvals.
corporatefile.com.au
Has there been a relaxation of your lending policy criteria in an effort to sustain
volume growth?
CFO Frank Lupoi
No, we have not relaxed our lending policy criteria at all, and we still remain at the
conservative end of the spectrum. Our lending policy hasn’t changed.
corporatefile.com.au
Has there been any deterioration in your asset quality KPIs or an increase in bad
debt experience?
CFO Frank Lupoi
Our performance remains in line with our target of being within the top quartile of
all Australian banks. Our level of arrears and non-accrual loans has not materially
changed from our year end figures.
corporatefile.com.au
In FY04, your Business Lending portfolio increased to $1.18 billion, up 9 percent
from FY03. What opportunities and challenges lie ahead in growing your share of
the $406 billion business lending market?
MD Barry Fitzpatrick
We’re continuously focusing on our South Australian business as well as niche
markets on a national basis, particularly in the areas of aged care, rural and
structured finance. We believe those niche markets will provide ample opportunity
for growth. We will not be expanding into segments of the business banking
market where we believe we don’t have the expertise.
corporatefile.com.au
Retail Deposits amounted to $7.8 billion in FY04. What growth have you
experienced in the year to date and to what extent are you competing on price?
MD Barry Fitzpatrick
Retail Deposits have grown by 6 percent in the first five months of 2005,
representing 14 percent annualised growth. We currently have a 1.6 percent share
of the retail deposit market, which is estimated to be $500 billion, so there is
ample scope for growth.
We have a relatively small amount of low-rate deposits that are subject to
predatory pricing pressures and, as a consequence, we are not susceptible to the
same predatory issues and margin pressures as our peers. We’ve avoided
competing on price in the face of higher rates being offered by other banks.