connections
Strengthening connections with our customers and communities
Full Financial Report 2006
Report by Chairman and Managing Director
Bendigo Bank in 2005/2006 achieved an after-tax profit
of $100 million for the first time.
Profit available for distribution to Ordinary Shareholders was
$109.2 million. Even adjusted for one-off significant items,
the figure was still $100.8 million, a healthy 10 per cent
improvement on the previous year.
At the start of the financial year, we aimed to increase cash
earnings per share (EPS) by 10 per cent.
We achieved an increase of 11.8 per cent, to 73.2 cents per
share. EPS after significant items was 78.0 cents per share.
Directors declared total shareholder dividends of 52.0 cents
per share, fully franked.
Our earnings performance continued a strong and steady
trend. In each of the past five years we have increased cash
EPS by more than 10 per cent. This is the best measure of
our financial progress, as it reflects our ability to improve
returns to shareholders.
Please turn to Pages 13 and 24 for a more detailed
explanation of our financial results, the first to be prepared
under new international accounting standards.
Our continued earnings progress is pleasing, as it reflects
our determination to build a business that can provide
shareholders with sustainable earnings growth. We will
improve our chances of achieving this by remaining relevant to
our customers and strongly connected with our communities.
This will build commitment from customers to buy from us and
remain loyal to us, thereby generating sustainable revenues.
These are likely to produce improved profit performance and
therefore value for shareholders.
Present indications are that we remain on course. Customer
satisfaction and advocacy ratings remain near all-time highs
and continue to lead the banking industry. Our contribution to
the prosperity and well-being of our communities is increasing.
And shareholder wealth – dividends plus capital growth – is
growing.
Strategy set in 1995
The footings for success were set with our conversion to
bank status in 1995. We were convinced there was a place in
banking for a bank prepared to work with its customers and
communities for their benefit. If we could establish strong
connections with them, and be relevant to their futures, there
was a better chance they would opt to buy from us, remain
loyal to us, and advocate us to others. We wanted the Bendigo
Bank brand to mean something special.
The company you see today is the result of more than
a decade of orderly progression towards our ideal of a
national financial services company with the ability to
add value beyond the simple provision of products and
services.
In 1995 we faced three challenges to become a
long-term part of the banking system. Put simply,
we had to:
> Be able to reach more customers around Australia.
> Our Wealth Solutions and Business Banking divisions
are increasing their value in most of our markets, and
> Our alliances and joint venture companies continue to
grow and contribute to our profit performance.
Expansion continues
These outcomes have been produced by a strategy that
has remained consistent since bank conversion and
continues to produce steady expansion.
> We continue to open around 30 branches each year,
> Provide them with a wider product choice.
fuelling future growth.
> Develop our own skills to support those products,
> Customer numbers continue to grow by a net
to comply with ever-widening licensing requirements,
and to contribute to communities in ways other than
banking.
We approached these tasks in a measured way.
We couldn’t afford to do them all at once and there have
always been – and remain – more growth opportunities
than we can afford to pursue. And so we ration our
capital accordingly, always bearing in mind our intention
to improve shareholder returns year on year.
Branded retail strategy is working
Started just 11 years ago, this branded retail banking
strategy is now starting to mature. Consider the
evidence:
> We are raising deposits and loans almost equally
in every market we enter, a testament to the brand
value.
> Half our branches are outside Victoria
(only one was in 1995).
> One-third of our branches are less than four years
old, and based on our past experience we expect will
continue to grow strongly.
> The growth we are achieving is at profitable prices,
with our gross margin exceeding those of other retail
banks. We believe our fair but competitive pricing
properly reflects our commitment to quality customer
service.
> We are diversifying our revenues to reduce the risk of
a downturn in one sector.
> Community engagement is proving to greatly assist
customer acquisition and retention.
6,500 per month. Our brand advertising is supported
by strong word of mouth support, with four-in-ten
customers prepared to actively advocate our brand.
> Our Wealth Solutions division – which is underpinned
and supported through our own Sandhurst Trustees
company – is achieving good results and is
positioning us for continued growth into the future.
> Bendigo Investment Services was reshaped and
relaunched as Bendigo Financial Planning, which
aims to provide customers with transparent, unbiased
advice and we anticipate continued growth in future.
By June 2007 we expect to increase adviser coverage
across our network, with many of the new advisers
emerging from our in-house associate adviser
program.
> All markets are now serviced by our business
bankers.
> Our joint ventures and alliances are growing at very
acceptable rates.
Achieving our current position has required heavy
investment, and we have expensed most of this.
Future earnings will be little impacted by amortisation
of past investments. We will continue with judicious
investments while demand for our brand remains strong.
Strategic priorities unchanged
Our strategic priorities remain unchanged:
> Grow at profitable prices (rather than chase market
share with unsustainably low pricing).
>
Increase profit and earnings per share performance
(shareholder value) in a sustainable way.
> Further diversify our revenue base.
> Continue to invest while demand for Bendigo remains
strong.
> Further strengthen the connections with our
customers and communities (to improve the
likelihood of strong relationships).
> Bring to maturity the branches, Wealth Solutions
division and alliances in which we have invested.
> Focus on maintaining high credit standards and
producing good credit management outcomes.
> Continue to enhance the Group’s risk management
capabilities.
Looking ahead
We are planning for continued growth. Builders are well
advanced on our new head office in Bendigo,
due for completion in mid-2008 in time for the Company’s
150th anniversary celebrations. This complex will be
one of the largest commercial developments in regional
Australia and it will confirm the City of Greater Bendigo
as a leading inland city. We are grateful for financial
assistance provided by the Victorian Government and for
the co-operation of the City of Greater Bendigo.
Both were quick to recognise the advantages of an inner
city complex that will ultimately house 1,000 staff in the
commercial heart of Bendigo.
As part of the building project, we will this year invest
$10 million in a new, off-site technology centre on
the outskirts of Bendigo. This centre will allow for
considerable growth in our business.
We conduct our business in an evermore competitive
environment. Competition will further intensify as
overseas banks and non-bank competitors continue to
enter markets once the preserve of Australian financial
services companies. Experience has shown us capable
of adapting our business to grow profitably in changing
markets.
Our future in a more competitive market will be secured
by our relevance to our customers and communities.
If Bendigo is seen to be valuable to them, then we will
win our share of business.
For this reason, we will continue to broaden our community
engagement activities such as our Lead On youth
and community development program and community
foundation. We will ensure all our regions have the skills
to undertake these activities.
In early 2006, we brought our company and community
owned branches together under the one division. It had
been necessary to quarantine our Community Bank®
division while the model was being developed and proven,
but with 182 branches and a proven track record, it is
no longer necessary. Both networks will learn from each
other.
Having attracted more than one million customers to the
Bendigo brand, we are now focused on deepening the
relationships we have with them. Research shows that
most customers are happy for us to make relevant product
offers to them and we are therefore investing in sales,
retention and value-add programs. These will be monitored
to ensure they are focused on improving outcomes for
customers, not just on achieving sales.
Customer service and community relevance remain our
longest standing competitive advantages and we will
continue to invest in the people and technology needed to
maintain standards.
We anticipate growing revenues from Wealth Solutions and
Business Banking as they become more fully integrated
into our customer offering. Our alliances and joint
ventures, too, are expected to further improve their profit
contributions. And of course we will continue to open more
branches across Australia.
For all these reasons, we remain confident about our
capacity to further improve shareholder returns. We are
targeting an increase in cash earnings per share of around
10 per cent in 2006/2007.
Board renewal
In March 2006, Richard Guy OAM stood down as
Chairman after 19 years at the helm of our Company.
In August 2006, he resigned as a Director from the Board
he first joined in 1982. All shareholders will join us in
thanking Richard for his long service and congratulating
him on his leadership during a long period of sustained
change and growth for the Company.
‘What will have Bendigo Bank pressed on the screen in 20 years time? It will have nothing to do with
product, price and feature because they can be replicated overnight. It will not be convenience, because
all banks will be convenient. It will be whether our bank is relevant to customers – to their families,
their communities and their aspirations. Our business model aims to build stronger connections with our
customers and communities so there is a greater likelihood they will buy and stay. That’s what will make
our business sustainable for the long term.’
Rob Hunt – Managing Director
Richard joined a building society with 12 Victorian
branches, $176 million in assets and an after-tax profit
of $2.7 million. He leaves a bank with 335 branches
across Australia, assets under management of
$17 billion and an after-tax profit of more than
$100 million.
He chaired the Company through the development
phase of the community banking and broader community
engagement strategies that are producing sustainable
growth, and he proudly – and we think rightly – claims
his greatest achievement was to encourage the Bendigo
culture which keeps this organisation at the forefront
of customer service in Australian banking. Over 18
of his 19 years as Chairman, Richard and our current
Managing Director, Rob Hunt, formed a team that led the
emergence of a new style of banking. This achievement
will be writ large in our company’s history. Richard Guy
has been a tremendous ambassador for the Bendigo and
represented us with great distinction in many and varied
forums. We thank him for his enormous contribution and
wish him and his family well for the future.
Our succession planning ensured a smooth transition to
the leadership of new Chairman Robert Johanson,
a Director of 18 years standing and Deputy Chairman
for the past five years. We also appointed two new
Directors who bring new perspectives and ideas to the
table. Profiles of Deborah Radford and Tony Robinson are
presented on Page 43 of this report.
Finally
Our business model looks incredibly complex with
company and Community Bank®branches, some private
franchises, agencies, subsidiaries, joint ventures,
alliances and third party arrangements. In fact, though,
the Bendigo Group is built on the four basic businesses
featured in this report:
• Distribution of banking and other services
• Product manufacture or importing
• Technology, and
• Balance sheet and risk management.
Above all these is our community engagement strategy.
This year we produced a separate report outlining
some of the social benefits this is producing. Entitled
Bendigo Bank in the community, it is available on our
website or by request to our Customer Help Centre on
1300 361 911.
The strength of our business lies in our connections with
our past and those we are developing with our customers
and communities today. From our past we take a service
ethic and reputation that have enabled us to attract
more customers. For our future we are committed to
further strengthening the connections we have with our
customers and communities. Both depend on the ability
of our staff to deliver the Bendigo way of banking and we
thank them for their ongoing commitment to our success.
Robert N Johanson
Chairman
Rob Hunt AM
Managing Director
ABN 11 068 049 178
FULL FINANCIAL REPORT
For the period ending
30 JUNE 2006
BENDIGO BANK LTD
ABN 11 068 049 178
TABLE OF CONTENTS
Five Year History
Five Year Comparison
Corporate Information
Directors’ Report
Remuneration Report
Income Statement
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Income tax expense
Average balance sheet and related interest
Summary of significant accounting policies
Segment information
Profit from continuing activities
1 Corporate information
2
3
4
5 Underlying profit
6
7
8 Capital adequacy and ace ratio
9
Earnings per ordinary share
10 Dividends
11 Return on average ordinary equity
12 Net tangible assets per ordinary share
13 Cash flow information
14 Cash and cash equivalents
15 Financial assets available for sale -
securities
16 Financial assets available for sale – share
investments
17 Held to maturity financial assets
18 Loans and other receivables
19
Impairment of loans and advances
20 Particulars in relation to controlled entities
21
Investments in associates and joint venture
using the equity method
Full Financial Report
Period ending 30 June 2006
22 Property, pant and equipment
Intangible assets and goodwill
23
Impairment testing of goodwill and
24
intangibles with indefinite lives
25 Other assets
26 Deposits
27 Financial liabilities
28 Provisions
29 Subordinated debt
30
Issued capital
31 Reserves
32 Minority interest
33 Employee benefits
34 Bendigo Employee Share Ownership Plan
35 Auditor’s remuneration
36 Director and executive disclosures
37 Related party disclosures
38 Financial risk management objectives and
policies
39 Financial instruments
40 Commitments and contingencies
41 Fiduciary activities
42 Events after balance sheet date
43
Impact on adoption of AIFRS
Directors Declaration
Independent Audit Report
Additional information
Page
76
77
78
80
81
82
82
83
83
84
85
85
86
87
88
92
95
97
103
104
104
105
113
114
116
Page
3
4
5
6
12
33
34
35
36
38
38
38
55
58
60
60
63
65
66
67
68
69
69
70
70
70
71
72
73
74
74
2
BENDIGO BANK LTD
ABN 11 068 049 178
FIVE YEAR HISTORY
The Bendigo Group
Financial Performance year ended 30 June
Disclosures prepared under AIFRS
Full Financial Report
Period ending 30 June 2006
Interest income
Interest expense
Net interest income
Other income
Bad & doubtful debts expense (net of bad debts recovered)
Other expenses
Profit before income tax expense
Income tax expense
Net (profit)/loss attributable to minority interest
Profit after income tax expense
Profit appropriations not available to ordinary shareholders
Profit available for distribution to ordinary shareholders
Financial Position at 30 June
Total assets
Loans and receivables
Cash and cash equivalents
Financial assets and derivatives
Other assets
Equity
Deposits
Subordinated debt
Other liabilities
Share Information
Net tangible assets per ordinary share
Earnings per ordinary share - cents
Cash basis earnings per ordinary share - cents
Dividends per ordinary share:
Interim - cents
Final - cents
Total - cents
Ratios
Return on average assets
Return on average ordinary equity
2006
$m
907.5
592.4
315.1
201.8
7.0
344.2
165.7
(49.0)
-
116.7
(7.5)
109.2
15,196.1
12,436.7
479.8
1,854.3
425.3
899.5
Comparatives prepared under previous AGAAP
(1)
2004
2003
$m
$m
2005
$m
815.0
528.9
286.1
172.9
13.6
309.9
135.5
615.5
361.9
253.6
157.5
13.8
282.0
115.3
(41.2)
(35.8)
0.4
94.7
-
94.7
13,858.6
11,392.4
442.0
1,615.7
408.5
720.7
0.3
79.8
-
79.8
11,284.5
9,372.6
315.1
1,220.2
376.6
676.4
500.6
278.3
222.3
125.6
15.3
243.3
89.3
(30.2)
(0.1)
59.0
-
59.0
9,256.6
7,504.0
288.5
1,130.0
334.2
552.7
13,599.8
12,572.2
10,148.9
8,241.2
307.1
389.7
$4.78
78.0
73.2
22.0
30.0
52.0
262.1
303.6
$4.21
67.5
65.5
19.0
26.0
45.0
199.3
259.9
204.7
258.1
$4.40
60.2
58.5
17.0
23.0
40.0
$3.80
46.8
50.2
13.5
20.0
33.5
2002
$m
447.0
254.4
192.6
99.6
22.0
205.8
64.4
(15.7)
0.1
48.8
-
48.8
7,967.7
6,209.5
354.6
1,085.3
318.3
494.4
6,988.5
161.4
323.4
$3.38
41.1
44.8
12.0
17.0
29.0
0.75%
15.14%
0.75%
13.98%
0.78%
12.99%
0.69%
11.06%
0.65%
10.24%
1 Figures for 2005 include the acquisition of Oxford Funding Pty Ltd effective 1 May 2005.
Comparatives for financial years 2004 and prior are not prepared under AIFRS. The main adjustments that would make the figures comply with AIFRS are:
Profit -
Balance sheet -
goodwill and trustee licence are not amortised under AIFRS.
movements in general provision for doubtful debts (general reserve for credit losses) reflect as appropriations of profit under AIFRS rather than
expense under AGAAP.
loan application fees and loan origination fees are recognised on an effective interest rate basis (deferred and amortised) and are disclosed as
net interest income under AIFRS.
general provision for doubtful debts now disclosed as general reserve for credit losses in equity
establishment of new collective provision for doubtful debts under AIFRS. This provision is treated as a general provision for prudential purposes.
specific provisions for doubtful debts are assessed on the basis of discounted estimated future cash flows under AIFRS. Future cash flows
were not discounted under AGAAP.
loans to employees in relation to employee share ownership plan disclosed as reduction of equity under AIFRS.
assets and liabilities of securitisation trusts are consolidated under AIFRS.
share investments are carried at fair value under AIFRS.
derivative financial instruments are carried at fair value under AIFRS.
computer software assets have been reclassified from property, plant & equipment to intangible assets under AIFRS.
deferred tax assets and liabilities have been recognised in relation to asset revaluation reserves under AIFRS.
More detailed explanations of the adjustments are disclosed in the "Impact on Adoption of AIFRS" note to the financial statements under the heading "Notes to reconciliations".
3
BENDIGO BANK LTD
ABN 11 068 049 178
FIVE YEAR COMPARISON
The Bendigo Group
Key Trading Indicators
Retail deposits - branch sourced
Number of depositors' accounts
Total loans approved
Number of loans approved
Liquid assets and cash equivalents
Total assets
Liquid assets & cash equiv as proportion of total assets
(1)
Number of branches
Average deposit holdings per branch
Number of staff (excluding Community Banks)
(4)
Assets per staff member
(4)
(5)
($'000)
Staff per million dollars of assets
Dissection of Loans by Security
Residential loans
Commercial loans
Unsecured loans
Other
Gross loans
Dissection of Loans by Security
(%)
(5)
Residential loans
Commercial loans
Unsecured loans
Other
Total
Asset Quality
Non-accruing loans
Specific provisions
Net impaired loans
Net impaired loans % of gross loans
Specific provision for impairment
Specific provision % of gross loans less unearned
income
Collective provision
General reserve for credit losses (general provision)
Collective provision (net of tax) & GRCL (general provn)
as a % of risk-weighted assets
Loan write-offs as % of average total assets
($m)
($m)
($m)
($m)
(%)
($m)
(FTE)
($m)
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
(%)
Full Financial Report
Period ending 30 June 2006
Disclosures prepared under AIFRS
Comparatives prepared under previous AGAAP
2006
2005
2004
2003
2002
12,497.6
11,502.8
10,771.4
1,309,957
6,189.6
66,227
2,334.1
15,196.1
15.36
335
32.2
2,343
6.486
0.15
9,278.1
2,574.4
415.1
230.0
74.24
20.60
3.32
1.84
100.00
14.9
(9.0)
5.9
0.05
9.1
0.07
8.8
40.6
0.55
0.04
9,259.8
8,293.3
1,201,627
1,094,884
5,872.6
65,498
2,057.7
6,077.8
72,063
1,535.3
13,858.6
11,284.5
14.85
(6)
302
30.7
2,214
5.990
0.17
(2)
8,629.2
2,217.8
490.6
165.2
75.02
19.28
4.26
1.44
13.61
276
30.0
2,063
5.470
0.18
7,110.9
1,774.1
492.9
92.0
9,469.9
75.09
18.73
5.20
0.98
6,823.4
974,788
4,822.8
70,175
1,418.5
9,256.6
15.32
246
27.6
1,904
4.862
0.21
5,602.5
1,446.5
463.5
71.4
7,583.9
73.87
19.07
6.11
0.95
5,637.9
850,979
3,637.2
47,325
1,439.9
7,967.7
18.07
215
26.2
1,754
4.543
0.22
(3
4,583.2
1,239.5
403.4
52.7
6,278.8
72.99
19.74
6.42
0.85
100.00
100.00
100.00
100.00
16.7
(8.6)
8.1
0.07
8.6
0.08
-
60.3
0.55
0.06
12.9
(8.0)
4.9
0.05
8.1
0.09
-
53.4
0.55
0.07
16.4
(10.6)
5.8
0.08
10.7
0.14
-
43.8
0.55
0.08
20.6
(8.7)
11.9
0.19
9.8
0.16
-
35.7
0.55
0.11
1 Includes Community Bank branches.
2 Includes staff increases from the acquisition of Oxford Funding Pty Ltd.
3 Includes staff increases from the acquisition of Bendigo Investment Services.
4 These ratios do not take into account off-balance sheet assets under management, which totalled $1.6 billion at 30 June 2006 (2005: $1.3 billion).
5 For the purposes of this dissection, overdrafts and personal loans secured by residential and commercial property mortgages
are included in residential and commercial loan categories respectively.
6 Revised due to reclassification of some outlets.
Comparatives for financial years 2004 and prior are not prepared under AIFRS. The main adjustments that would make the figures comply with AIFRS are:
Profit -
goodwill and trustee licence are not amortised under AIFRS.
movements in general provision for doubtful debts (general reserve for credit losses) reflect as appropriations of profit under AIFRS rather than expense under
AGAAP.
loan application fees and loan origination fees are recognised on an effective interest rate basis (deferred and amortised) and are disclosed as net interest income
under AIFRS.
Balance sheet - general provision for doubtful debts now disclosed as general reserve for credit losses in equity.
establishment of new collective provision for doubtful debts under AIFRS. This provision is treated as a general provision for prudential purposes.
specific provisions for doubtful debts are assessed on the basis of discounted estimated future cash flows under AIFRS. Future cash flows were not discounted
under AGAAP.
loans to employees in relation to employee share ownership plan disclosed as reduction of equity under AIFRS.
assets and liabilities of securitisation trusts are consolidated under AIFRS.
share investments are carried at fair value under AIFRS.
derivative financial instruments are carried at fair value under AIFRS.
computer software assets have been reclassified from property, plant & equipment to intangible assets under AIFRS.
deferred tax assets and liabilities have been recognised in relation to asset revaluation reserves under AIFRS.
Please note that only Key Trading Indicators based on asset values are impacted by AIFRS.
More detailed explanations of the adjustments are disclosed in the "Impact on Adoption of AIFRS" note to the financial statements under the heading "Notes to reconciliations".
4
BENDIGO BANK LTD
ABN 11 068 049 178
CORPORATE INFORMATION
Full Financial Report
Period ending 30 June 2006
This annual report covers both Bendigo Bank Limited as an individual entity and the consolidated
entity comprising Bendigo Bank Limited and its subsidiaries.
A description of the Group’s operations and of its principal activities is included in the review of
operations and activities in the Directors’ Report. The Directors’ Report is not part of the financial
report.
Directors
R N Johanson – Chairman
R G Hunt AM – Managing Director
N J Axelby
J L Dawson
D J Erskine
R A Guy OAM*
T J O’Dwyer
D L Radford
K E Roache
A D Robinson
*retired from the Board on 31 August 2006
Company Secretary
D A Oataway
Registered Office
Bendigo Bank Limited
Second Floor
Fountain Court
Bendigo Victoria 3550
Telephone (03) 5433 9339
Fax (03) 5433 9690
Principal place of business
Fountain Court
Bendigo Victoria 35550
Share Registry
Securities Registry
Bendigo Bank Limited
Second Floor
Fountain Court
Bendigo Victoria 3550
Telephone (03) 5433 9549
Fax (03) 5433 9029
Auditors
Ernst & Young
Australia
5
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
DIRECTORS’ REPORT
Your Board of Directors has pleasure in presenting the 141st Financial Report of Bendigo Bank
Limited and its controlled entities for the year ended 30 June 2006.
DIRECTORS
The names and details of the company's directors in office during the financial year and until the date
of this report are as follows.
Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities.
The particulars of the qualifications, experience, special responsibilities and age of each director as at
the date of this report are as follows:
NAME, AGE,
QUALIFICATIONS
AND INDEPENDENCE
STATUS
Robert Johanson
Chairman
(55 years)
BA, LLM (Melb)
MBA (Harvard)
Independent director
Rob Hunt AM
Managing Director
(55 years)
FAICD
Doctor of University
(honoris causa) La
Trobe University, 1999
Executive Director and
Chief Executive Officer
TERM OF OFFICE
SPECIAL
RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE
RELATIONSHIPS
Director for 19
years and
appointed as
chairman during
2006. Previously
deputy chairman
for 5 years.
Committees
Governance (Chair)
Risk (Chair)
Audit
Group and joint venture
company directorships
Community Telco Australia
Pty Ltd
Elders Rural Bank Ltd
Homesafe Solutions Pty Ltd
(Chair)
in respect
Mr Johanson has expertise in corporate
strategy, capital and risk management.
He has provided independent corporate
advice
to capital market
transactions to a wide range of public
and private companies. Mr Johanson is a
member of the Finance Committee and
Chairman of the Investment Committee
of the University of Melbourne and a
director of the Robert Salzer Foundation
Ltd. He is also a member of the
Takeovers Panel.
Mr Johanson is a director of Grant
Samuel Group Pty Ltd (and subsidiaries).
Grant Samuel provides professional
advisory services to the Group on normal
commercial terms and conditions. The
the 2006
services provided during
financial year related
the Group
to
property review, subsidiary, alliance and
joint venture activities and initiatives, and
strategic developments.
Employee since
1973 and
appointed CEO in
1988.
Appointed to Board
in 1990.
Committees
Governance
Risk
Property
IT Strategy
Group and joint venture
company directorships
Community Telco Australia
Pty Ltd (Chair)
Community Sector
Enterprises Pty Ltd
Elders Rural Bank Ltd
Tasmanian Banking
Services Ltd
Mr Hunt is also chair of a
number of subsidiary
companies involved in
community engagement
activities.
6
Based in Bendigo, Mr Hunt has led the
Bank’s development from a provincial
building
nationally
represented, uniquely positioned and
diverse banking and financial services
group.
society
to
a
Mr Hunt is the architect of the Bank’s
Community Banking™ and other alliance
arrangements.
He
is also Chairman of Bendigo
Community Telco Ltd. He is a Councilor
of the ABA, a member of the BCA, the
Prime Minister’s Community Business
Victorian
Partnership
Government’s
Economy
Advisory Board.
the
Innovation
and
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
TERM OF OFFICE
SPECIAL
RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE
RELATIONSHIPS
NAME, AGE,
QUALIFICATIONS
AND INDEPENDENCE
STATUS
Neal Axelby
(56 years)
Dip CM
ACIS, FAICD, AIMM
Independent director
Director for 6 years.
Committees
Credit
Governance
Risk
Group and joint venture
company directorships
Sunstate Lenders Mortgage
Insurance Pty Ltd
A Queensland-based director, Mr Axelby
has had 15 years combined years of
experience as an employee and director
in the finance industry before joining the
board. He also has 22 years experience
in senior management positions in the
private sector. Mr Axelby is a director of
Ipswich & West Moreton United Friendly
Society Dispensary Ltd and several
private companies.
Mr Axelby was a director of First
Australian Building Society Limited
(FABS) which was acquired by Bendigo
Bank in 2000.
A Bendigo-based director, Ms Dawson
spent 10 years with Arthur Andersen in
the audit and IT controls division. Ms
Dawson has experience in the areas of
financial reporting and audit, IT internal
control reviews, internal audit and risk
management. Ms Dawson is a director of
Coliban Region Water Authority and a
member of
the Victorian Regional
Development Advisory Committee.
Ms Dawson was engaged by Bendigo
Bank during the period 1995 to 1999,
initially as a contractor and then as an
employee.
Ms Dawson was a shareholder of Central
Victorian Removals Pty Ltd (ceased
November 2005). Central Victorian
Removals provided relocation services to
Bendigo Bank on normal commercial
terms and conditions.
A Bendigo-based director, Mr Erskine is
a mechanical engineer and chairman of
several private companies. Mr Erskine
has an extensive background
in
manufacturing and property development
and experience in international trade. Mr
Erskine is the chairman of Australian
Technical College, Bendigo. He is also a
director of Bendigo Community Telco
Ltd.
Jennifer Dawson
(41 years)
B Bus (Acc)
FCA, MAICD
Independent director
Director for 7 years.
*Seeking re-
election at 2006
AGM
Committees
Audit (Chair)
Property
Credit
Group and joint venture
company directorships
Community Sector Banking
Pty Ltd
Community Sector
Enterprises Pty Ltd
Donald Erskine
(60 years)
Independent director
Director for 7 years.
*Seeking re-
election at 2006
AGM
Committees
Credit
Property (Chair)
IT Strategy
Group and joint venture
company directorships
Community Telco Australia
Pty Ltd (Mr Erskine
resigned as a director of the
subsidiary on 18 August
2005)
7
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
NAME, AGE,
QUALIFICATIONS
AND INDEPENDENCE
STATUS
Richard Guy OAM
(61 years)
B App Sc
M Sc (London)
Independent director
TERM OF OFFICE
SPECIAL
RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE
RELATIONSHIPS
Director for 25
years. Retired as
chairman during
2006.
Committees
Governance
Audit
Property
Mr Guy retired from
the board on 31
August 2006
Group and joint venture
company directorships
Elders Rural Bank Ltd
(retired on 31 December
2005)
development
A Bendigo-based director, Mr Guy is an
engineer by trade and is chairman of
Crystal Industries Group. Mr Guy was
chairman of the Bank from 1986 to
2006 through a period of rapid growth
and
the
conversion to Bank status in 1995, a
number of mergers, joint ventures and
the introduction of Community Bank®.
Mr Guy is a director of Bendigo Mining
the
Limited, a company
Australian Stock Exchange,
and
member of various community and
charitable organisations.
listed on
including
BDO
chairs
A Queensland-based director, Mr
O’Dwyer
Kendalls
(Chartered Accountants). He was a
partner in the firm for 28 years and
headed its corporate finance division
prior to being appointed its independent
Chairman.
Mr O’Dwyer is chairman of Metal Storm
Ltd, MFS Ltd, Brumby’s Bakeries
Holdings Ltd and a director of
Queensland Theatre Company Ltd.
Mr O’Dwyer was a director of First
Australian Building Society Limited
which was acquired by Bendigo Bank in
2000.
in both
specialising
A Melbourne based director, Ms
Radford is an economics graduate with
the public and
experience
private sector.
Ms Radford has
extensive experience in the banking
sector,
credit,
acquisitions and property transactions.
Ms Radford is a Director of Forestry
Tasmania, Melbourne Market Authority,
City West Water and Deb Radford &
Associates, a consultancy company
advising on government business
enterprises.
in
Director for 6 years.
Terence O’Dwyer
(56 years)
B Com, Dip Adv Acc
FCA, FAICD
Independent director
Committees
Audit
Risk
IT Strategy (Chair)
Group and joint venture
company directorships
Sunstate Lenders Mortgage
Insurance Pty Ltd
Deborah Radford
(50 years)
B.Ec
G. Dip Finance &
Investment – Securities
Institute of Australia
Independent director
Director appointed
February 2006
*Seeking election at
2006 AGM
Committees
IT Strategy
Credit
Group and joint venture
company directorships
Nil
8
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
TERM OF
OFFICE
SPECIAL
RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE
RELATIONSHIPS
NAME, AGE,
QUALIFICATIONS AND
INDEPENDENCE
STATUS
Kevin Roache
(66 years)
LLB, B Com, ASCPA,
FAICD
Barrister & Solicitor of the
Supreme Court of
Victoria
Independent director
Director for 15
years.
*Seeking re-
election at 2006
AGM
Committees
Credit (Chair)
Risk
Governance
Group and joint venture
company directorships
Nil
A Geelong-based director, Mr Roache
has extensive experience in advising
clients on business and taxation issues.
Mr Roache is the past President of the
Geelong Business Club, member of the
Finance Committee
of Geelong
Chamber of Commerce, member of
Committee
former
Chairman of Barwon Health Geelong
and has been a board member of many
community
charitable
and
organisations.
for Geelong, a
Mr Roache was a director of Capital
Building Society, the business of which
was integrated into Bendigo Bank in
1992. Mr Roache is the Chairman of
partners in Coulter Roache Laywers
which provides legal services to the
Group on normal commercial terms and
conditions.
financial services
director, Mr
A Melbourne-based
Robinson is the chief executive officer
of OAMPS Limited, which provides
broking and
for
insurance, risk management, workers’
compensation and occupational health
and safety, financial planning services
and superannuation. He was also a
director of VECCI.
Mr Robinson’s
previous management positions include
joint managing director of Falkiners
Stockbroking, managing director of
WealthPoint, chief financial officer of
Link Telecommunications and general
manager corporate services at Mayne
Nickless.
Antony Robinson (49
years)
B Com
ASA
MBA (Melbourne)
Independent director
Director appointed
April 2006
*Seeking election
at 2006 AGM
Committees
Risk
Governance
Group and joint venture
company directorships
Nil
9
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Share Issues
The following share classes were issued during the financial year:
Ordinary shares
Ordinary shares issued under the Dividend Reinvestment Plan
Ordinary shares issued in lieu of dividends under the Bonus Share Scheme
Total ordinary shares issued
Share Options
During the year, or since the end of the financial year, no entity within the economic entity
has granted to any person an option to take up shares in the economic entity. There are no
outstanding options in relation to shares.
Ordinary Share Dividends Paid or Recommended
Dividends paid:
Final dividend 2005 of 26.0¢ per share, paid September 2005
Interim dividend 2006 of 22.0¢ per share, paid March 2006
Dividend recommended:
No.
of shares
1,451,293
292,999
1,744,292
$34.3 million
$29.1 million
Final dividend 2006 of 30.0¢ per share, declared by the directors on 14 August 2006,
payable 29 September 2006
$40.1 million
All dividends were fully franked
Shareholders electing to receive dividends in the form of shares received the following ordinary
shares, paid in full:
September 2005
March 2006
In addition, shareholders electing to receive bonus shares in lieu of dividends received the
following ordinary shares, paid in full:
September 2005
March 2006
Preference Share Dividends Paid or Recommended
Dividends paid:
90.80 cents per share, paid 15 September 2005
62.19 cents per share, paid 15 December 2005
61.62 cents per share, paid 15 March 2006
62.68 cents per share, paid 15 June 2006
Dividend announced:
866,908
584,385
168,244
124,755
$0.8 million
$0.6 million
$0.5 million
$0.6 million
A dividend of 131.68¢ per security for the period 15 June 2006 to 14 September 2006
(inclusive), announced on 14 August 2006, payable 15 September 2005
$1.2 million
All dividends were fully franked
Operating and Financial Review
Principal Activities
The principal activities of the Company and its controlled entities during the financial year were the
provision of a range of banking and other financial services, including retail banking, business banking
and commercial finance, funds management, treasury and foreign exchange services (including trade
finance), superannuation, financial advisory and trustee services. There was no significant change in
the nature of the activities of the economic entity during the year.
10
BENDIGO BANK LTD
ABN 11 068 049 178
Consolidated Result
Full Financial Report
Period ending 30 June 2006
The consolidated profit from ordinary activities of the economic entity, after providing for income tax,
amounted to $116.7 million (2005 - $94.7million).
Review of Operations and Operating Results
An operational and financial review, including information on the operations, financial position and
business strategies and prospects of the economic entity is set out in the Report by Chairman and
Managing Director contained in the Concise Annual Report. Certain information in respect to
business strategies and prospects has not been disclosed where the disclosure is likely to result in
unreasonable prejudice to the Company or its controlled entities.
Significant Changes in the State of Affairs
Total equity increased from $720.7 million to $899.5 million, an increase of $178.8 million or 24.8 per
cent. Contributed ordinary equity increased by $17.8 million, due to shares issued under the dividend
reinvestment plan.
Contributed preference share equity increased by $45.3 million due to payment in June 2006 of the
second and final instalment of $50 per share on the 900,000 $100 face value shares on issue.
Reserves increased by $74.8 million. The major contributor to this increase was the establishment of
the general reserve for credit losses of $40.6 million and $6.5 million for associate companies. Asset
revaluation reserves also increased by $25.0 million, predominantly due to the AIFRS requirement to
adjust our share investments to fair value. The remaining $2.7 million increase was attributable to
unrealised gains/losses on hedges in compliance with AIFRS hedge accounting principles.
Significant After Balance Date Events
On 14 August 2006 the Bank declared a final dividend for ordinary shares and announced a dividend
for preference shares, details of which are shown above.
On 1 September 2006 the Bank announced it has contracted to sell its new headquarters in Bendigo
for $100 million in a sale-and-leaseback transaction arranged by Societe Generale Corporate &
Investment Banking (SGCIB).
A consortium of investors arranged by SGCIB will purchase both the new development and the bank’s
existing Fountain Court building adjacent. The sale will occur on 1 September 2008 – after completion
of the new building – with Bendigo taking a long-term lease.
Except as referred to in the Report by Chairman and Managing Director, or dealt with elsewhere in
the consolidated financial report, there were no matters or circumstances which arose since the end
of the financial year to the date of this report which significantly affected or may significantly affect the
operations of the economic entity, the results of those operations, or the state of affairs of the
economic entity in subsequent financial years.
Likely Developments and Results
Disclosure of information relating to major developments in the operations of the Group and the
expected results of those operations in future financial years, which, in the opinion of the directors, will
not unreasonably prejudice the interests of the Group, is contained in the Report by Chairman and
Managing Director accompanying this Full Financial Report.
11
BENDIGO BANK LTD
ABN 11 068 049 178
REMUNERATION REPORT
Full Financial Report
Period ending 30 June 2006
The Directors of the Company present this Remuneration Report for the Company and for the
consolidated entity for the year ended 30 June 2006. This Remuneration Report is prepared in
accordance with section 300A of the Corporations Act and Accounting Standard AASB 124 “Related
Party Disclosures” and forms part of the Directors’ Report. The disclosures have been audited other
than where indicated.
The Group’s policy in respect to non-executive and executive remuneration is available from
the Bank’s web site.
Group Performance
The following overview of the Company’s development and performance is provided as background
information to assist shareholders in their consideration of the Remuneration Report and to explain
the link between Group performance and executive remuneration.
Bendigo Bank has developed to become a nationally represented, diversified financial services
enterprise which is in the top 120 companies listed on the Australian Stock Exchange. The Bank has
maintained a consistent branded retail strategy, focussed on the interests and prospects of our
customers and communities. This is supported by a strategically focussed investment program and
commitment to our corporate and social responsibilities. Through this strategy Bendigo Bank has
built a brand that is well recognised, respected and sought after. Through continued commitment to
the strategy, the maturity of investments to date and further investment, the Bank expects to deliver to
shareholders improved, and sustainable, growth in shareholder value.
The accompanying charts set out the Company’s key financial performance measures for the financial
year ended 30 June 2006, and the four previous financial years, to illustrate the consequences of the
Company’s performance on shareholder value and returns.
12
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The Company has experienced growth in after-tax earnings averaging 27% per year since 2001
resulting in:
• An increase in the Company’s share price, from $6.60 at 30 June 2001 to $12.90 at 30 June
2006, of $6.30 [$3.03 for 2006].
• Growth in EPS, from 28.2 cents per share (2001) to 72.0 cents per share (2006), of approximately
123% [15.6% for 2006]; and
• An increase in dividends, from 26 cents per share (2001) to 52 cents per share (2006), of 26
cents per share [7 cents per share for 2006].
The Company has announced a final dividend of 30 cents per share on 14 August 2006, payable on
29 September 2006. This results in a total dividend payable by the Bank for the 2006 financial year of
52 cents per share (fully franked) which represents a 15.6% increase on the previous year.
As at 30 June 2006 the Company’s share price has increased by $3.03 against the Company’s share
price as at 30 June 2005, which represents an increase of 31%.
The Company conducted an on-market share buy-back of 2.85 million shares during the 2005
financial year. This reduced the number of ordinary shares on issue and had a positive impact on
EPS.
This financial report includes a specific disclosure in respect to the key terms and estimated financial
impact of the Bank’s equity plans on shareholder returns. The disclosure is presented at Note 34.
During the 5 year period ended 30 June 2006, the total shareholder return, calculated on the basis of
the gain in the Bank’s share price and notional reinvestment of dividends paid during the same 5 year
period, equates to 140%.
Under a prospectus dated 16 March 2005, Bendigo Bank issued 900,000 Bendigo Preference
Shares, at a face value of $100 per share, to raise $90 million in share capital. The capital raising has
diversified the Bank’s Tier 1 capital base and was structured to assist the Bank in aligning after-tax
profit performance with ordinary shareholder returns.
Non-Executive Director Fees
Objectives and Structure:
The Board has adopted a policy in respect to non-executive director fees with the following objectives.
• To attract and retain appropriately qualified and experienced directors.
• To remunerate directors fairly having regard to their responsibilities, including providing
leadership and guidance to management.
• To build sustainable shareholder value by encouraging a longer-term strategic perspective, by not
linking fees to the results of Bendigo Bank.
As the focus of the Board is to build sustainable shareholder value by taking a longer-term strategic
perspective, there is no direct link between non-executive directors’ fees and the annual results of the
Bank. In accordance with the Board policy, non-executive director remuneration comprises the
following elements.
• Base fee.
• Superannuation Guarantee Charge (“SGC”) payments - currently at 9% of directors’ fees.
A committee fee previously applied to membership of the Board credit committee ceased on 31
October 2005.
Non-executive director fees and SGC payments are determined by the Board within the aggregate
limit approved by shareholders. The current aggregate director fee limit which was approved by
shareholders at the 2005 Annual General Meeting is $1,200,000 per annum.
13
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The Chairman receives twice the base fee paid to other directors to recognise and compensate for
the Chairman’s additional time commitment. Non-executive directors do not receive bonuses or
incentive payments, nor participate in the Bank’s equity participation plans. Non-executive directors
are entitled under the Company’s constitution to be reimbursed for business related expenses.
Non-executive director fees are reviewed annually by the Board to ensure that the structure and
amount are appropriate for the circumstances of the Bank. Fees for non-executive directors are
decided by the Board based on the recommendation of the Governance Committee. The Board
determined that annual non-executive director fee payments may be increased annually by the CPI
index should the Governance Committee not recommend a general fee payment increase.
The Committee takes into account survey data and peer analysis to determine the level of director
fees paid in the market by companies of a relatively comparable size and complexity, particularly in
the banking and finance sector, and to ensure that fees and payments reflect the demands and the
scope of responsibilities of directors. The assessment takes into account the remuneration policies of
the Bank, changes in the nature and operations of the Group including industry developments which
impact the responsibilities and risks associated with the role of director.
At the date of this report, the base fee paid to each non-executive director is $90,000 per annum. This
base fee was effective from 1st November 2005, based upon independent advice obtained from a
remuneration consultant and took into account the Board’s decision to wind-up the Bank’s retirement
benefit arrangement as at 31 August 2005 and to cease the payment of separate committee and
subsidiary fees. The fee will increase to $93,600 per annum effective 1st November 2006, reflecting a
CPI increase.
Details of the membership of the Governance Committee, and its responsibilities in relation to
remuneration arrangements, are set out on page 44 of the Concise Annual Report. The fees of non-
executive directors for the year are detailed in the table that accompanies this report.
Non-Executive Directors’ Retirement Benefits - No Longer Offered
A retirement benefit scheme was in place for non-executive directors since Bank conversion on 1 July
1995. Directors in office as at December 2003 were entitled to receive retirement benefit equal to the
aggregate of the remuneration paid to the director during the three-year period before retirement
(including superannuation contributions by the Company), provided the director had served at least
nine years.
Last year, the Board decided to wind-up the current arrangement with non-executive director
retirement benefit entitlements being crystalised as at 31 August 2005. Each eligible director has a
period of up to 4 years from August 2005 to inform the Bank as to the manner in which their
respective entitlements are to be paid, provided the cost to the Bank is the same.
The Bank will continue to pay statutory superannuation guarantee charge payments to current and
new non-executive directors.
Details of the retirement benefit accruals for the period to 31 August 2005 and the aggregate
entitlements payable to each director as at 31 August 2005 are disclosed in the non-executive director
remuneration table and associated notes that accompany this report.
14
BENDIGO BANK LTD
ABN 11 068 049 178
Executive Remuneration
Objectives and Structure:
Full Financial Report
Period ending 30 June 2006
The Board has adopted a policy in respect to executive remuneration with the following objectives.
• To motivate executive management to manage and lead the business successfully and to drive
strong long-term organisational growth in line with the strategy and business objectives.
• To drive successful organisational performance by incorporating an annual performance incentive
and establish longer-term performance objectives.
• To further drive longer-term organisational performance through an equity-based reward
structure.
• To make sure that there is transparency and fairness in executive remuneration policy and
practices.
• To deliver a balanced solution addressing all elements of total pay – base pay, incentive pay
(cash and shares), and benefits including loans.
• To make sure appropriate superannuation arrangements are in place for executives.
• To contribute to appropriate attraction and retention strategies for executives.
The Group has pursued a long term “branded retail banking strategy” which has required a
significantly different focus and direction to that typically taken by other organisations in the sector.
The Board and Managing Director have sought to maintain a remuneration framework that provides
the desired flexibility and reward structure to support this strategy whilst recognising the need to
provide remuneration arrangements which are aligned with shareholder interests and commensurate
with executive roles, responsibilities and market relativities.
The strategy has involved a significant investment program by the Group which has included
acquisitions, expansion of the Group’s product range and the distribution network through joint
ventures, Community Bank® and alliance activities, and investments into a range of community
enhancement initiatives.
These investments have a medium to longer-term maturity profile with the objective of generating
sustainable improvement in shareholder value. This has been reflected in the Company’s short and
long term incentive remuneration arrangements for senior executives. The arrangements have been
designed to balance the reward for annual performance and provide sufficient flexibility to allow for
rewards to be tailored to recognise the development of business opportunities that present
themselves during a year or programs that stretch across more than one reporting period.
To achieve the above objectives, executive remuneration arrangements have been structured to
comprise:
• Fixed annual remuneration
Incentive arrangements
•
• Superannuation guarantee charge payments (currently 15% for the Managing Director and 9% for
other executives)
It is the objective of the Board, and Managing Director, to achieve a balance between fixed
remuneration and incentive components that takes into account market relativities and aligns
executive remuneration with shareholder interests. The incentive based component of the total
remuneration package for the Managing Director was 31% and for the executives, including
executives who are key management personnel and executives identified in the executive
remuneration table that accompanies this report (“Named Executives”), ranged between 20% and
30% of their total remuneration package.
The incentive arrangements in place during the 2006 year included the following components:
• an annual (cash) incentive; and
• equity participation
There have been no issues of equity to the Named Executives since November 2004. The Bank
announced on 19 October 2005 that a review would be undertaken in respect to the Bank’s
remuneration arrangements. The outcomes of the review, including proposed changes to the long-
term incentive arrangements, have been described in the “Long term incentives” section of this report.
15
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The incentive arrangements in place during the year were designed to reward the achievement of
annual financial goals, individual performance criteria and to drive continued improvement in
sustainable shareholder value. There were no long term incentive grants during the year while the
Bank was reviewing its long term incentive arrangements. The Bank has completed that review and
has introduced a new Executive Incentive Plan (the “Plan”) for senior executives (including the
Managing Director) and a new Employee Share Plan for general staff. A description of the Plans are
set out in the 2006 Notice of Annual General Meeting.
The remuneration arrangements apply to the Managing Director, executives (including the Named
Executives) and the Company Secretary of Bendigo Bank.
The Board decides the remuneration arrangements for the Managing Director, including the
proportions of fixed remuneration and incentive arrangements, and considers whether any change to
the nature or amount should be made to the arrangements, on an annual basis.
The Managing Director, also on an annual basis, reviews and determines the nature and amount of
remuneration for executives (including the Company Secretary), including the proportions of fixed
remuneration and incentive arrangements.
Fixed annual remuneration:
The terms of employment for executives, including the Managing Director, provide for a base salary
component. It is intended that executive base salaries take into account market relativities having
regard to the need for Bendigo Bank to attract, motivate and retain the appropriate executive
management. The base salary is a specified dollar amount that the executive may receive in a form
agreed by the Company.
The base salary component is set by reference to appropriate benchmark information relevant to the
executive’s role, responsibilities, experience and expertise.
Executives are given the opportunity to receive their base salary in a variety of forms including cash
and non-cash (salary sacrifice) benefits such as motor vehicle, superannuation contributions and
expense payment arrangements. Executives are able to structure their salary sacrifice arrangements
so that the payments are optimal for the recipient, provided they are made available at the same
economic cost (including applicable fringe benefits tax) to the Bank.
Managing Director:
In setting the fixed remuneration arrangements for the Managing Director, the Board surveys the
range of comparable remuneration arrangements in the market, particularly in the banking and
finance sector, to ensure that the remuneration arrangements take into account market relativities and
also take into account the particular experience, expertise and strategic direction that the Managing
Director brings to the role. The Board’s assessment has regard to changes in the size, nature and
complexity of the Group’s business activities and relevant industry developments which impact the
Managing Director’s role and responsibilities.
Other executives:
In setting the fixed remuneration arrangements for other executives, the Managing Director takes into
account general market and peer information, relative to the particular role and responsibilities of the
executive.
Incentive Arrangements:
It is the Board’s objective that the incentive arrangements for the Managing Director comprise short-
term annual (STI) and long-term (LTI) incentive components. The board has set a targeted
remuneration mix for the Managing Director of:
Fixed: 40%
30%
STI:
30%
LTI:
16
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The Board and Managing Director have set a targeted allocation value of 30% of fixed annual reward
for participation by other executives in the new Executive Incentive Plan.
Details of the short-term incentive arrangements for the 2006 financial year and the new long-term
incentive arrangements are set out below.
Annual Incentive Arrangements
As discussed above, the Managing Director’s and executive remuneration packages for the 2006 year
included an annual incentive component which rewards both annual financial goals and longer term
performance. Payment of any part of the incentive component is at the discretion of the Board in
respect of the Managing Director and at the discretion of the Managing Director for executives.
The maximum amount of the cash incentive is set by the Board for the Managing Director, taking into
account market data. The Managing Director sets the maximum for other executives, taking into
account the executive’s particular role and responsibilities.
The amount of the annual incentive component paid to executives, including the Managing Director, is
contingent primarily upon the Group achieving budgeted profit performance and in addition, subject to
the discretion of the Board and Managing Director, the technical competence, leadership, operational
management performance and achievement of agreed business outcomes. The amounts are set
following the year-end profit announcement.
The objective of the incentive component is to link the annual financial performance of the group, and
the achievement of individual business priorities which enhance the future prospects of the company
with the remuneration received by executives. The total potential annual cash incentive is set for each
executive with operational responsibilities at a level which provides an appropriate incentive to
achieve the business and financial targets and at a cost that is reasonable to the Company in its
circumstances.
Managing Director:
The Managing Director’s annual cash incentive component for the year ended 30 June 2006 was
based upon a mix of quantitative and qualitative performance measures and was set at a maximum of
$600,000.
The quantitative element focused on the achievement of EPS growth calculated at the rate of $40,000
for every one cent per share increase in the Bank’s reported normalised EPS ratio above the
normalised EPS ratio achieved for the 2005 financial year, with a maximum of $400,000 payable.
The Board selected the EPS measure as it represents a publicly available performance measure that
appropriately reflects the short-term interests of shareholders. The Board considers that the use of the
Bank’s EPS ratio ensures that an appropriate focus is placed upon both profit performance and
effective application of shareholder capital, given the Bank must adhere at all times to the minimum
capital requirements set by the Australian Prudential Regulation Authority.
The Board has set qualitative performance measures in respect to the balance of the annual cash
incentive ($200,000) that focus on the continued progress of the Group strategy and reinforcement of
the Bank’s positioning, the achievement of major business priorities confirmed by the Board, and:
• Continued progress of the Bank to enable an increase in the Bank’s credit rating;
• Continued progress of the rationalisation of the Group’s property and premises requirements;
• Continued development of the Group’s wealth management business;
• Succession planning and development of management; and
• Continued enhancement of the Group’s reporting framework.
The above qualitative and quantitative performance measures were selected by the Board to reflect a
balance between measures which provide an annual profit-based incentive and measures which
provide incentive to generate further sustainable shareholder value during the short to medium term.
17
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The performance of the Managing Director is reviewed by the Board on an annual basis in two
stages. The Chairman conducts an assessment of the Managing Director’s performance as part of the
annual Board and director performance process completed prior to year-end. The outcomes of the
assessment are presented to the non-executive directors by the Chairman.
The non-executive directors complete the second stage of the assessment process, after the Group’s
year-end profit result announcement, at which time the Board determines the amount of the incentive
payment based upon the achievement of the agreed performance measures. The Board also
determines at the same time the following year’s fixed remuneration and incentive arrangements
including performance criteria.
Other Executives:
The annual incentive component for other executives is primarily determined on the basis of the
Group’s normalised EPS performance. Details of the Bank’s EPS performance is set out in the Group
Performance section of this report. At the discretion of the Managing Director, payment of the annual
incentive component may also take into account the executive’s technical competence, leadership,
operational management performance and achievement of relevant business outcomes for the year.
Generally the amount of the annual incentive paid to other executives is contingent upon the
achievement of targeted EPS performance, aligned with the market guidance issued by the Bank. The
Managing Director will also take into account the individual performance achievements of the
executive member. The incentive paid to executives is based upon an assessment of the Group’s
actual EPS performance and the extent to which the executive has discharged their position
responsibilities and achieved objectives.
Executives may also participate in the bonus pool that is allocated amongst Group employees.
Executives only participate in the bonus pool if Company performance exceeds the Board approved
budget performance. The amount of any payment from the bonus pool to executives is determined by
the Managing Director. Amounts paid from the bonus pool allocation to executives for the 2006
financial year are disclosed in the accompanying remuneration tables. No amounts were paid from
the bonus pool allocation to executives for the 2006 financial year.
Long term incentives:
Executive Incentive Plan: Executives
There were no long term incentive payments or grants of shares to the Named Executives in the
financial year ending 30 June 2006 due to the pending establishment of a new executive incentive
plan.
The Board considers it important that executives, including the Managing Director, have ongoing
share ownership in the company.
The Company’s new Executive Incentive Plan (Plan) is designed to link executive reward with the key
performance drivers which underpin sustainable growth in shareholder value – including both share
price and returns to shareholders. Participation is offered to executives, including the Managing
Director, as decided by the Board.
Offers to participate in the Plan will be made to 11 executives and the Managing Director shortly after
the 2006 Annual General Meeting.
Overview of the Plan
The Plan provides for grants of options and performance rights (“Instruments”) to key executives,
including the Managing Director. Under the Plan, eligible executives are granted options and
performance rights subject to performance conditions set by the Board. If the performance conditions
are satisfied during the relevant performance period, the options and performance rights will vest. The
performance conditions and performance periods for the 2007 grants are set out below.
Options and performance rights are granted at no cost to the executive. The Plan rules provide that
the Board may determine that a price is payable upon exercise of an option or exercisable
performance right. The exercise price for options will generally be the market price of the shares at
the grant date, and no exercise price will apply to exercisable performance rights.
18
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Executives are entitled to vote and to receive any dividend, bonus issue, return of capital or other
distribution made in respect of shares they are allocated on vesting and exercise of their performance
rights and options, as applicable.
The 2007 grants are subject to a dealing restriction. Executives are not entitled to sell, transfer or
otherwise deal with the shares allocated to them until 2 years after the end of the initial performance
period.
If an executive ends their employment with the Company before the performance conditions for the
options or performance rights have been met, the options and performance rights that have not yet
vested will lapse.
However, if the executive’s employment ends because of death, disability, redundancy, or if the Board
consents, the Board may decide that a number of options and performance rights vest.
If there is a takeover or change of control of the Company, the Board may decide that unvested
options or performance rights vest, having regard to the Company’s pro rata performance against the
relevant performance conditions.
If an executive were to act fraudulently, dishonestly or, in the Board’s opinion, in breach of his or her
legal duties, any unvested options or performance rights will lapse.
Performance Conditions
The performance condition for options to be granted to executives in 2007 will be based on the
Company’s total shareholder return (“TSR”). The performance condition for performance rights
granted to executives in 2007 will be based on the Company’s compound growth in cash basis
earnings per share (“EPS”), both measured over a 3 year initial performance period.
Total Shareholder Return (“TSR”)
TSR measures changes in the market value of the Company’s shares over the performance period
and the value of dividends on the shares during that period (dividends are treated as if they were re-
invested).
The use of a TSR based hurdle ensures an alignment between comparative shareholder return and
reward for the executives and provides a relative, external market performance measure, having
regard to the TSR performance of other companies in a comparator group. For the purpose of the
2007 grants under the Plan, the comparator group consists of ASX 200 companies (excluding
financials, property trusts and resources) (“Peer Group”).
Earnings Per Share (“EPS”)
Cash basis EPS will be calculated as the reportable earnings which reflect the underlying operating
performance of the business, as approved by the Board. The EPS based hurdle is a fundamental
indicator of financial performance, both internally and externally and links directly to the Company’s
long-term objective of growing earnings.
For the purpose of the 2007 grants under the Plan, the EPS performance condition involves a
comparison between the cash basis EPS for the last financial year of the performance period against
the cash basis EPS for the first financial year of the performance period.
19
BENDIGO BANK LTD
ABN 11 068 049 178
Vesting schedule – Options
Full Financial Report
Period ending 30 June 2006
Options granted in 2007 will vest in accordance with the following table.
Company’s TSR ranking against TSR of Peer Group
Percentage of options that vest
TSR below 50th percentile
TSR at the 50th percentile
TSR between 51st and 74th percentile
Nil
50%
An additional 2% of options will vest for every
percentage increase.
TSR at or above 75th percentile
100%
Vesting schedule – performance rights
Performance rights granted in 2007 will vest as set out below. At the end of the performance period,
the growth in the Company’s cash basis EPS must equal or exceed 10% per annum, calculated on a
compound basis.
Company’s compound growth in EPS
Percentage of performance rights that vest
EPS growth less than 10%
EPS growth at or above 10%
Nil
100%
The Board has a discretion to increase or decrease by 20% the number of performance rights
provided under the 2007 grant based on an assessment of whether cash basis EPS growth was due
to factors controllable by the Company or external factors.
Retesting
To the extent that the performance conditions attaching to options and performance rights granted in
2007 are not satisfied at the end of the initial performance period, the options and performance rights
that do not vest, will be carried forward and retested as described below.
Options: will be retested after a further 6 months and, if still not satisfied, they may be retested one
final time after another 6 months.
Performance rights: will be retested only once, after 12 months.
Any options or performance rights that have not vested at the end of the additional 12 month period
will lapse.
Terms of grant to Managing Director
It is proposed that options and performance rights will be granted to the Managing Director in three
separate tranches if shareholder approval is obtained at the Company’s 2006 Annual General
Meeting.
In the 2007 financial year, it is intended that options and performance rights will be granted in two
separate tranches, commencing concurrently. Tranche 1 will consist of 120,349 options and 19,043
performance rights and will have an initial performance period of 2 years. Tranche 2 will consist of
160,465 options and 25,391 performance rights and have an initial performance period of 3 years.
Tranche 3, which will be granted in the 2008 financial year, will also have a 3 year initial performance
period.
The performance conditions attaching to Tranches 1 and 2 are those noted above, which apply to all
executives participating in the Plan, except that Tranche 1 has an initial performance period of 2
years. The performance conditions for Tranche 3 will be determined by the Board before the start of
the 2008 financial year and will be reported in the Company’s 2007 Remuneration Report. It is
intended that the performance conditions for Tranche 3 will consist of either or both of TSR and EPS
hurdles and will be consistent with those applicable to other executives receiving grants under the
Plan at that time.
20
BENDIGO BANK LTD
ABN 11 068 049 178
Employee Share Plan: General Staff
Legacy Plan
Full Financial Report
Period ending 30 June 2006
The Company has discontinued the existing loan-based Employee Share Ownership Plan (“Plan”)
which was open to all employees in the Group, including the Managing Director and executives. The
Plan will continue as a legacy plan until such time as the loans provided to fund share purchases
under the Plan have been repaid. There have been no issues of shares under this Plan since
November 2004.
Further details of the major terms and conditions of the Plan are set out in this financial report at Note
34.
New Plan
As announced on 23 May 2006, the Bank has established a new loan-based limited recourse
Employee Share Plan (“Plan”). The Plan is substantially the same as the Legacy plan. However, it is
only available to general staff. Executives (including the Managing Director) may not participate in it.
Under the terms of the Plan, shares were issued at the prevailing market value, and not at a discount
or nil cost. The shares must be paid for by the staff member (this included issues to the Managing
Director and other executives). The Plan provided staff members with an interest-free loan for the sole
purpose of acquiring Plan shares. Net cash dividends after personal income tax obligations are
applied to reduce the loan balance. Staff (including executives) cannot deal in the shares until the
loan has been repaid.
The Board has recently approved, on the recommendation of the Managing Director, a share issue to
general staff under the Plan. The share issue was completed during September 2006.
Issues under the Plan are valued and treated in accordance with applicable accounting requirements.
Executive Employment Contracts:
It is the Group’s policy that executive employment contracts will not be for fixed terms and are not to
include a provision for payment on early termination, without Board approval. To date executive
members, other than the Managing Director, are employed under the prevailing employment terms
and conditions of the Group as set out in the standard employment letter signed by the executive. The
respective remuneration arrangements are determined in accordance with Group employment
practices.
The employment letter signed by executives does not contain a separate provision in respect to early
termination other than in the case of the chief financial officer which provides for a 6 month
termination notice period, except in the case of non-performance.
The notice period applicable to other executives ranges between three to four weeks, depending on
the executive’s length of service.
At the date of this report the only contract the Board has approved which contains a specific provision
for payment on early termination is the employment contract entered into between the Bank and the
Managing Director. Details of the contract terms are set out below.
21
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Employment Contract – Managing Director:
The current employment agreement with the Group’s Managing Director commenced on 1 July 2001
and expires on 30 June 2007. As announced on 19 October 2006 the Managing Director has agreed
to extend the agreement and from 1 July 2007 Mr Hunt’s employment as Managing Director will be
open-ended. A summary of the key elements of the employment agreement follows.
The agreement provides for termination payments to be made in certain circumstances and the
payment varies depending on the circumstances as explained below. In each case, it includes
payment in lieu of statutory leave entitlements.
Bendigo Bank may terminate the agreement without cause by giving 12 months’ notice or, at its
option, payment of pro-rata gross salary, in lieu of the required notice, together with any accrued but
unused statutory leave entitlements including any that would have accrued in that period. Bendigo
Bank may also terminate the agreement for cause, including illegal conduct or gross misconduct,
including serious neglect of duties, which in the reasonable opinion of the Board is injurious to the
Company, provided that Mr Hunt is given the opportunity to defend himself before termination. In that
case, Mr Hunt is entitled to payment of his pro rata gross salary and benefits to the date of termination
and payment in lieu of any accrued but unused statutory leave entitlements as at that date.
Mr Hunt may terminate the agreement by giving Bendigo Bank not less than six months’ written
notice. Mr Hunt is entitled to the pro rata gross salary and benefits for the duration of the six-month
notice period. Bendigo Bank may at its sole election make a payment in lieu of the notice period.
Mr Hunt may also treat the agreement as terminated if without cause Bendigo Bank acts or proposes
to act to diminish the job content, status, responsibility or authority of Mr Hunt or reduce his gross
salary. In that case, Bendigo Bank is required to pay Mr Hunt an amount equivalent to 12 months’
gross salary, together with any accrued but unused statutory leave entitlements including any that
would have accrued in that period.
The agreement provides for participation in any equity participation plan, other than the general staff
plan and for issues of equity instruments at least every two years during the term of the agreement.
22
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Details of the remuneration of directors and executives of the group for the 2006 financial year.
(a) Details of Key Management Personnel
The directors and executives, including key management personnel (being the directors of the
Bank and the executives who have the authority and responsibility for planning, directing and
controlling the activities of the Group), and the five most highly remunerated executives of the
Group and the Company for the 2006 financial year.
(i) Directors
Robert N Johanson
Robert G Hunt AM
Neal J Axelby
Jennifer L Dawson
Donald J Erskine
Richard Guy OAM
Terence J O’Dwyer
Deborah L Radford
Kevin E Roache
Antony D Robinson
(ii) Executives:
Marnie A Baker (1)
Gregory D Gillett
Richard H Hasseldine
Michael J Hirst
Russell P Jenkins (1)
Vicky M Kelly
K Craig Langford
Chairman (non executive) - appointed chairman 28 March 2006
Managing Director
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive) - retired from the Board on 31 August 2006
Director (non-executive)
Director (non-executive) - appointed 27 February 2006
Director (non-executive)
Director (non-executive) - appointed 24 April 2006
Chief General Manager, Solutions
Chief General Manager, Strategy and Human Resources
Chief General Manager, Group Delivery
Chief Operating Officer
Chief General Manager, Retail and Distribution
Chief Information Officer
Chief Financial Officer
1 Mr Jenkins and Ms Baker became Key Management Personnel following changes to their position
responsibilities implemented during September 2005. Other than the retirement of Mr R A Guy noted above,
there were no other changes in respect to the group’s key management personnel between the reporting date
and the date the financial report was authorised for issue.
23
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
(b) Remuneration of Key Management Personnel
The remuneration details of directors and named executives for the financial year ended 30 June
2006 (consolidated) are set out in the following tables.
Non-Executive
Directors
Short-Term
Post Employment
Long-Term
Share - Based
Payment
Total
Salary & fees
(1)
Cash Bonus
(At-Risk)
(2)
Non
Monetary
Benefits
(3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Incentive Plans &
Long Service
Leave Accrual (7)
Options &
Shares
(8)
R N Johanson (9)
107,500
N J Axelby
86,822
J L Dawson
88,534
D J Erskine
86,822
R A Guy OAM (9)
147,500
T J O'Dwyer
85,000
D L Radford
31,150
K E Roache
87,551
A D Robinson
17,300
Total
738,179
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,675
(1,025)
7,814
814
7,964
3,611
7,814
3,277
13,275
(5,682)
7,650
1,582
2,804
-
7,880
2,488
1,557
-
66,433
5,065
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
116,150
95,450
100,109
97,913
155,093
94,232
33,954
97,919
18,857
809,677
24
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Remuneration of Key Management Personnel (continued)
Executives
Short-Term
Post Employment
Long-Term
Share - Based
Payment
Total
Total
Performance
Related
Salary &
fees
Cash Bonus
(At-Risk)
(2)
Non Monetary
Benefits
(3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Incentive Plans &
Long Service
Leave Accrual
(7)
Options &
Shares
(8)
R G Hunt AM
769,315
559,000
36,500
245,146
177,687
M A Baker
261,797
90,000
13,799
15,165
30,202
G D Gillett
328,940
160,000
53,905
30,741
48,702
R H Hasseldine
138,144
110,000
132,698
14,641
35,294
M J Hirst
377,150
185,000
54,483
16,601
53,169
R P Jenkins
310,700
90,000
15,539
17,243
33,906
V M Kelly
320,943
120,000
32,717
28,825
40,458
K C Langford
344,546
160,000
66,029
28,415
50,452
Total
2,851,535
1,474,000
405,670
396,777
469,870
-
-
-
-
-
-
-
-
-
10,276
22,019
12,812
6,318
14,272
27,412
16,089
16,753
125,951
-
-
-
-
-
-
-
-
-
1,797,924
31%
432,982
21%
635,100
25%
437,095
25%
700,675
26%
494,800
559,032
18%
21%
666,195
24%
5,723,803
25
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Remuneration of Key Management Personnel (continued)
The remuneration details for the financial year ended 30 June 2005 (consolidated) are set out in the following
tables.
Non-Executive
Directors
Short-Term
Post Employment
Long-Term
Salary & fees
(1)
Cash
Bonus
(At-Risk)
(2)
Non
Monetary
Benefits (3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Incentive Plans
& Long Service
Leave Accrual
(7)
Total
Total
Performance
Related
Share -
Based
Payment
Options &
Shares
(7)
R N Johanson
71,618
N J Axelby
76,883
J L Dawson
73,069
D J Erskine
76,883
R A Guy OAM (9)
143,236
T J O'Dwyer
71,618
K E Roache
78,968
Total
592,275
-
-
-
-
-
-
-
-
-
-
3,814
-
-
-
-
3,814
-
-
-
-
-
-
-
-
6,446
(7,735)
6,919
18,728
7,374
25,553
6,919
25,067
12,891
(14,114)
6,446
12,271
7,107
9,119
54,102
68,889
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,329
102,530
109,810
108,869
142,013
90,335
95,194
719,080
-
-
-
-
-
-
-
-
26
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Remuneration of Key Management Personnel (continued)
Executives
Short-Term
Post Employment
Long-Term
Salary
Cash Bonus
(At-Risk)
(2)
Non
Monetary
Benefits
(3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Incentive Plans
& Long Service
Leave Accrual
(7)
Total
Total
Performance
Related
Share -
Based
Payment
Options &
Shares
(8)
R G Hunt AM
600,753
450,000
30,625
162,882
130,102
G D Gillett
304,907
160,000
43,472
29,650
42,296
R H Hasseldine
165,512
100,000
95,570
13,816
31,867
M J Hirst
264,939
160,000
77,441
15,651
39,981
V M Kelly
311,519
100,000
29,364
27,778
33,875
K C Langford
281,519
150,000
60,346
27,328
39,981
Total
1,929,149
1,120,000
336,818
277,105
318,102
-
-
-
-
-
-
-
10,865
9,615
5,062
7,306
9,293
9,525
51,666
-
-
-
-
-
-
-
1,385,227
33%
589,940
27%
411,827
24%
565,318
28%
511,829
20%
568,699
26%
4,032,840
Notes:
1.
Includes fees payable to members of the credit committee members up to 31 October 2005. The amounts
paid comprise Mr K Roache $2,550 (2005 $7,350) ; Ms J Dawson $1,822 (2005 $5,265); Mr D Erskine
$1,822 (2005 $5,265) ; and Mr N Axelby $1,822 (2005 $5,265) .
2. The percentage of the incentive payment for the financial year approved by the Board for payment to the
Managing Director is 93% (7% forfeited). The percentage of the incentive payments for the financial year
approved by the Managing Director for payment to the specified executives is 100% (2005 100%). A
minimum level of performance must be achieved before any annual incentive is paid, Therefore, the
minimum potential value of the annual incentive which was granted in respect of the 2006 financial year
was nil. The maximum value of annual incentive grants made during the 2006 financial year is the amount
specified in this table. The incentive payments will be paid during September 2006.
3.
“Non monetary’ relates to the salary sacrifice components of short-term compensation.
4.
“Other” relates to the interest free loan provided under the Employee Share Ownership Plan. A notional
benefit is calculated using the average outstanding loan balance and the bank’s average cost of funds.
Details in respect to loans provided to the executive under the Employee Share Ownership Plan are
disclosed in the full financial statements at Note 36.
5. Represents superannuation contributions made on behalf of directors and named executives in
accordance with the Superannuation Guarantee Charge legislation.
6. Represents amounts provided for by the company during the financial year in relation to the contractual
retirement benefit payment to which the non-executive director will be entitled upon retirement from office.
As disclosed in the 2005 Concise Annual Report, the retirement benefit entitlements were crystalised as at
31 August 2005 with the following entitlements payable: RA Guy $341,052; RN Johanson $170,434; NJ
Axelby $93,471; JL Dawson $126,326; DJ Erskine $125,506; TJ O’Dwyer $87,782; KE Roache $191,722.
The respective entitlements are to be paid-out by the Bank in accordance with each director’s instructions
over the next few years. The final retirement benefit entitlements have been adjusted for Superannuation
Guarantee Charge contributions and associated earnings.
7. The amounts disclosed relate solely to long service leave accruals.
27
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Remuneration of Key Management Personnel (continued)
8. For the reasons set out in this report, no equity grants were made to the Managing Director or the named
executives during the 2006 financial year. Accordingly, 0% of the remuneration for the Managing Director
and named executives for the 2006 financial year consisted of options and rights. There were no equity
and other remuneration components paid to non-executive directors in accordance with the non-executive
director remuneration policy.
During the 2005 year 300,000 ordinary shares were issued to the Group Managing Director under the
terms of the Employee Share Ownership Plan, as approved by shareholders at the 2004 Annual General
Meeting. The shares were issued fully paid (funded by an interest-free loan) at market value. An
approximate fair value of the 300,000 shares issued, based on the valuation methodology under AASB2
“Share-based payment”, ranges between $420,000 and $515,000. The benefit of the interest-free loan is
disclosed in the remuneration table in the “Short-Term - Other” column in respect to the Managing
Director.
During the 2005 year, the Board approved the sale of a percentage of the Bank’s ownership in Bendigo
Community Telco Limited to the Managing Director, the details of which are disclosed in the related party
note to the full financial statements. As part of the Managing Director’s remuneration arrangements, the
Board approved a benefit of a deferred payment arrangement for the Managing Director to finance the
purchase of the shares. The benefit of the deferred payment arrangement is also included as
remuneration under “Short -Term - Other” column in respect to the Managing Director.
9. Fees include Chairman’s allowance of $62,500 (2005 $71,618) paid to Mr R A Guy and Chairman’s
allowance of $22,500 paid to Mr R N Johanson.
28
BENDIGO BANK LTD
ABN 11 068 049 178
Meetings of directors
Full Financial Report
Period ending 30 June 2006
The number of meetings of the Bank’s directors (including meetings of committees of directors) held during the
year ended 30 June 2006 and the number attended by each director were:
Board of
directors
Meetings
Audit
Credit
Risk
Property
Governance
IT Strategy
Meetings in Committees
A
9
4
9
9
B
7
3
9
7
Attended by:
R A Guy OAM
R N Johanson
R G Hunt AM
N J Axelby
J L Dawson
D J Erskine
T J O’Dwyer
D L Radford1
A
16
16
16
16
16
16
16
5
B
13
15
14
16
16
15
16
5
K E Roache
16
16
A D Robinson2
3
2
A
B
A
B
11
11
11
4
11
11
11
11
4
9
6
6
6
6
6
1
5
6
6
5
6
1
1 DL Radford was appointed to the Board on 27 February 2006.
2 AD Robinson was appointed to the Board on 24 April 2006.
Insurance of Directors and Officers
A
4
3
4
4
B
3
3
3
4
A
1
1
1
1
B
-
1
1
1
A
B
4
6
6
6
2
4
5
5
6
2
4
1
4
1
A = Number held
B = Number attended
During or since the financial year end, the Company has paid premiums to insure certain officers of
the company and related bodies corporate. The officers of the Company covered by the insurance
policy include the directors listed above, the secretary and directors or secretaries of controlled
entities who are not also directors and secretaries of Bendigo Bank Limited, and general managers of
each of the divisions of the economic entity.
Disclosure of the nature of the liability and the amount of the premium is prohibited by the
confidentiality clause of the contract of insurance. The Company has not provided any insurance for
an independent auditor of the Company or a related body corporate.
Indemnification of Officers
The constitution stipulates that the Company is to indemnify, to the extent permitted by law, each
officer or employee of the Company against liabilities (including costs, damages and expenses
incurred in defending any proceedings or appearing before any court, tribunal, government authority
or other body) incurred by an officer or employee in, or arising out of the conduct of the business of
the Company or arising out of the discharge of the officer's or employee's duties.
As provided under the Company's constitution, the Company has entered into deeds providing for
indemnity, insurance and access to documents for each director who held office during the year. The
deed requires the Company to indemnify, to the extent permitted by law, the director against all
liabilities (including costs, damages and expenses incurred in defending any proceedings or
appearing before any court, tribunal, government authority or other body) incurred by the director in,
or arising out of conduct of the business of the Company, an associated entity of the Company or in
the discharge of their duties as a director of the Company, a subsidiary or associated company.
29
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Directors' Interests in Equity
The relevant interest of each director (in accordance with section 205G of the Corporations Act 2001)
in shares of the company or a related body corporate at the date of this report is as follows:
Director
R N Johanson
R G Hunt AM(1)
N J Axelby
J L Dawson
D J Erskine
R A Guy OAM
T J O’Dwyer
D L Radford
A D Robinson
K E Roache
Ordinary shares
Preference shares
178,401
808,954
26,461
12,765
230,908
324,623
50,300
1,000
2,500
40,643
500
-
50
100
-
200
-
-
-
200
(1) Includes 740,000 shares issued under the Bendigo Employee Share Ownership Plan.
Environmental Regulation
The consolidated entity's operations are not subject to any significant environmental regulations under
either Commonwealth or State legislation. However, the Board believes that the consolidated entity
has adequate systems in place for the management of its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to the consolidated entity.
Company Secretary
David A Oataway B Bus, CA, ACIS
Mr Oataway has been the company secretary of Bendigo Bank Limited for eight years. Prior to this
position he held roles within the Bank's internal audit and secretariat departments. Prior to joining the
Bank he was employed by Melbourne and Bendigo based chartered accounting firms.
Auditor Independence and Non-audit Services
The Company’s audit committee has conducted an assessment of the independence of the external
auditor for the year ended 30 June 2006. The assessment was conducted on the basis of the
Company’s audit independence policy and the requirements of the Corporations Act 2001. The
assessment included a review of non-audit services provided by the auditor and an assessment of the
independence declaration issued by the external auditor for the year ended 30 June 2006. The audit
committee's assessment confirmed that the independence requirements have been met. The audit
committee’s assessment was accepted by the full Board. A copy of the auditor’s independence
declaration is provided at the end of this Directors’ Report.
30
BENDIGO BANK LTD
ABN 11 068 049 178
Non-Audit Services
Details of all non-audit services for the year ended 30 June 2006:
(a) Audit related fees:
Full Financial Report
Period ending 30 June 2006
In its capacity as the Group’s external auditor, Ernst & Young are periodically engaged to
provide assurance services to the Group in accordance with Australian Auditing Standards. All
assignments are subject to engagement letters in accordance with Australian Auditing
Standards. They include audit services required for regulatory and prudential purposes and the
amounts shown are GST exclusive.
Service Category
APRA Prudential Standard APS310 report
Australian Financial Services Licences
APRA Prudential Standard GPS220 report
Sub total – audit related fees
Fees
paid/payable
(excluding GST)
$
52,000
41,000
16,000
109,000
Entity
Bendigo Bank Limited
Note 1
Sunstate Lenders Mortgage
Insurance
Note 1: Amount attributed to Bendigo Bank and subsidiary companies: Sandhurst Trustees Limited, Victorian Securities
Corporation Ltd, Worley Securities Pty Ltd, Bendigo Investment Services Limited and National Assets Securitisation
Corporation
(b) Non-audit related fees
Non-audit services are those services paid or payable to the Group’s external auditor, Ernst &
Young, which do not relate to the audit requirements of the Corporations Act.
Service
Tax compliance services
Tax advice – (R&D, GST and other advice)
Sub total – non-audit related fees
Total
Entity
Bendigo Bank Limited
Bendigo Bank Limited
Fees
paid/payable
(excluding GST)
$
85,543
90,541
176,084
285,084
The Audit Committee has reviewed the nature and scope of the above non-audit services provided by
the external auditor. In doing so, the Audit Committee has assessed that the provision of those
services is compatible with the general standard of independence for auditors imposed by the
Corporations Act.
This assessment was made on the basis that the non-audit services performed did not represent the
performance of management functions or the making of management decisions, nor were the dollar
amounts of the non-audit fees considered sufficient to impair the external auditor's independence. As
noted previously, this Audit Committee's assessment has been reviewed and accepted by the full
Board.
31
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Auditor's Independence Declaration to the Directors of Bendigo Bank Limited
In relation to our audit of the financial report of Bendigo Bank Limited for the year ended 30 June
2006, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Brett Kallio
Partner
12 September 2006
Ernst & Young
Liability limited by the Accountants Scheme, approved
under the Professional Standards Act 1994 (NSW).
Signed in accordance with a resolution of the Board of Directors
R N Johanson
Chairman
R G Hunt AM
Managing Director
12 September 2006
32
BENDIGO BANK LTD
ABN 11 068 049 178
INCOME STATEMENT
for the year ended 30 June 2006
Revenue
Net interest income
Interest income
Interest expense
Net interest income
Other revenue
Dividends
Fees - asset products
- liability products and electronic delivery
- trustee, management & other services
- other
Commissions
- wealth solutions
- insurance
- other
Other revenue
Total other revenue
Income
Profit on sale of SMF shares
Other income
Total income
Share of associates' net profits (losses) accounted
for using the equity method
Total income after interest expense
Expenses
Bad and Doubtful Debts on loans and receivables
Bad and Doubtful Debts
Bad and Doubtful Debts recovered
Total bad and doubtful debts on loans and receivables
Other expenses
Borrowing costs
Staff and related costs
Occupancy costs
Amortisation of intangibles
Property, plant & equipment costs
Fees and commissions
Other
Total other expenses
Profit before income tax expense
Income tax expense
Net profit
Net (profit)/loss attributable to minority interest
230
Net profit attributable to members of Bendigo Bank Limited
Basic earnings per ordinary share (cents per share)
Diluted earnings per ordinary share (cents per share)
Franked dividends per ordinary share (cents per share)
Full Financial Report
Period ending 30 June 2006
Note
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
6
32
9
9
10
907.5
592.4
315.1
2.7
21.4
62.6
9.0
10.7
31.9
7.3
2.4
13.5
161.5
15.5
2.6
18.1
22.2
516.9
7.3
(0.3)
7.0
0.3
170.8
29.3
5.6
9.9
18.9
109.4
344.2
165.7
(49.0)
116.7
-
116.7
78.0
78.0
52.0
815.0
528.9
286.1
1.6
26.7
53.5
9.6
9.4
29.0
6.8
1.8
4.5
142.9
-
9.7
9.7
20.3
459.0
14.1
(0.5)
13.6
0.4
154.8
26.2
3.6
9.1
17.4
98.4
309.9
135.5
(41.2)
94.3
0.4
94.7
67.5
67.5
45.0
844.2
538.2
306.0
31.3
19.1
62.3
2.5
10.3
0.4
5.2
2.4
15.3
148.8
15.5
0.6
16.1
-
741.5
464.3
277.2
26.4
24.5
53.2
1.6
9.2
0.4
4.6
1.9
10.0
131.8
-
7.9
7.9
-
470.9
416.9
6.6
(0.3)
6.3
0.3
154.2
38.6
3.7
8.8
15.5
105.0
326.1
138.5
(33.6)
104.9
-
104.9
14.0
(0.5)
13.5
0.4
140.0
31.5
2.8
7.8
14.3
94.4
291.2
112.2
(25.8)
86.4
-
86.4
33
BENDIGO BANK LTD
ABN 11 068 049 178
BALANCE SHEET
as at 30 June 2006
Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Amounts receivable from controlled entities
Investments in associates and joint ventures
Property, plant & equipment
Intangible assets and goodwill
Deferred tax assets
Other assets
Total Assets
Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Income tax payable
Provisions
Deferred tax liabilities
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
Equity
Parent entity interest
Issued capital -ordinary
Perpetual non-cumulative redeemable convertible
preference shares
ESOP shares
Reserves
Retained earnings
Total parent entity interest in equity
Total minority interest
Total Equity
Full Financial Report
Period ending 30 June 2006
Note
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
14
14
39
15
16
20
17
18
21
22
23
6
25
14
26
39
27
6
28
6
29
30
30
31
32
270.8
209.0
28.4
360.9
94.4
-
1,370.6
12,436.7
-
143.5
81.1
89.6
27.4
83.7
15,196.1
166.3
13,599.8
20.0
140.0
9.9
37.4
16.1
307.1
14,296.6
899.5
253.1
188.9
3.1
-
42.5
-
1,570.1
11,392.4
-
118.1
47.5
90.4
35.8
116.7
13,858.6
143.3
12,572.2
6.3
111.3
8.3
32.0
2.4
262.1
13,137.9
720.7
214.4
209.0
28.4
360.9
225.5
151.2
1,291.8
11,948.0
40.1
-
40.9
13.5
26.9
58.9
14,609.5
166.3
13,063.1
22.2
110.8
9.9
36.4
15.2
307.1
13,731.0
878.5
115.9
182.6
3.1
-
157.9
145.6
1,505.9
10,762.6
10.0
-
29.0
7.2
36.0
93.9
13,049.7
143.3
11,800.3
6.2
80.3
8.3
31.1
1.7
262.1
12,333.3
716.4
564.1
546.3
564.1
546.3
88.3
(25.6)
78.8
194.5
900.1
(0.6)
899.5
43.0
(30.0)
4.0
157.8
721.1
(0.4)
720.7
88.3
(25.6)
69.0
182.7
878.5
-
878.5
43.0
(30.0)
1.0
156.1
716.4
-
716.4
34
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
CASH FLOW STATEMENT
for the year ended 30 June 2006
Note
Consolidated
Bendigo Bank
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and other items of a similar nature received
Interest and other costs of finance paid
Receipts from customers (excluding interest)
Payments to suppliers and employees
Dividends received
Income taxes paid
Net cash flows from operating activities
13
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows for purchases of property, plant and equipment
Cash proceeds from sale of property, plant and equipment
Cash paid for purchases of intangible software
Cash paid for purchases of equity investments
Cash proceeds from sale of equity investments
Net increase in balance of loans outstanding
Net increase in balance of investment securities
Net cash increase on derecognition of a subsidiary
Net cash received/(paid) on acquisition of a subsidiary
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid for buyback of shares
Proceeds from issue of preference shares
Net increase in balance of retail deposits
Net increase/(decrease) in balance of wholesale deposits
Proceeds from issue of subordinated debt
Repayment of subordinated debt
Dividends paid
Repayment of ESOP shares
Payment of share issue costs
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents held
Add cash and cash equivalents at the beginning of the financial period
Cash and cash equivalents at the end of financial year
14
2006
$m
904.8
(573.6)
158.9
(288.4)
15.1
(45.6)
171.2
(44.6)
5.8
(9.0)
(28.7)
2.2
(976.1)
(161.5)
0.7
-
(1,211.2)
-
44.9
1,286.2
(277.5)
75.0
(30.1)
(48.1)
4.4
-
1,054.8
14.8
298.7
313.5
2005
$m
815.6
(522.2)
133.3
(332.1)
12.6
(41.6)
65.6
(16.5)
9.4
(6.8)
(34.4)
13.9
(1,342.3)
(350.8)
-
14.6
(1,712.9)
(27.0)
45.0
987.2
729.2
85.0
(22.5)
(36.5)
1.4
(2.0)
1,759.8
112.5
186.2
298.7
2006
$m
838.3
(519.4)
117.0
(267.6)
31.3
(40.1)
159.5
(17.0)
1.7
(8.8)
(28.7)
0.4
(1,151.1)
(146.8)
-
-
(1,350.3)
-
44.9
1,281.3
(34.7)
75.0
(30.1)
(48.1)
4.4
-
1,292.7
101.9
155.2
257.1
2005
$m
739.4
(461.1)
98.8
(288.0)
26.2
(37.0)
78.3
(15.4)
7.3
(5.3)
(16.0)
107.5
(1,672.3)
(331.6)
-
(19.8)
(1,945.6)
(27.0)
45.0
989.7
818.4
85.0
(22.5)
(36.5)
1.4
(2.0)
1,851.5
(15.8)
171.0
155.2
35
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of Bendigo Bank Limited
Minority
interest
Total
equity
Issued
capital
ESOP
Perp non-cum
shares
redeem conv
Retained
earnings
Other
reserves
Total
pref shares
$m
$m
$m
$m
$m
$m
$m
$m
CONSOLIDATED
At 1 July 2004
Opening AGAAP balance
551.6
-
AIFRS opening balance adjusts:
Goodwill impairment
Adjust lease (rent) costs
Tax effect of asset reval reserve
ESOP shares
Adjusted AIFRS open bal
Transfer from ass reval reserve
Tax effect of asset reval reserve
Total income and expenses
recognised directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Share buy-back
Reduction in ESOP shares
Equity dividends
Other
At 30 June 2005
At 1 July 2005
-
-
-
-
551.6
-
-
-
-
21.7
(27.0)
-
-
-
546.3
-
-
-
(31.4)
(31.4)
-
-
-
-
-
-
1.4
-
-
(30.0)
-
-
-
-
-
-
-
-
-
-
43.0
-
-
-
-
43.0
119.6
(3.4)
(0.1)
-
-
116.1
2.3
-
2.3
94.7
97.0
-
-
-
(55.1)
(0.2)
157.8
5.4
-
-
1.2
-
6.6
(2.3)
(0.3)
(2.6)
-
(2.6)
-
-
-
-
-
4.0
676.6
(0.2)
676.4
(3.4)
(0.1)
1.2
(31.4)
642.9
(0.3)
(0.3)
94.7
94.4
64.7
(27.0)
1.4
(55.1)
(0.2)
721.1
-
-
-
-
(0.2)
-
-
(0.2)
(0.2)
-
-
-
-
-
(3.4)
(0.1)
1.2
(31.4)
642.7
(0.3)
(0.3)
94.5
94.2
64.7
(27.0)
1.4
(55.1)
(0.2)
(0.4)
720.7
Opening balance b/fwd
546.3
(30.0)
43.0
157.8
4.0
721.1
(0.4)
720.7
AIFRS opening balance adjustments:
Adjust carrying value of
share investments
Tax effect - adjust carrying
value of share investments
Discounting of specific
provisions
Fair value adjustments
Fair value adjusts-associates
Establish general reserve
for credit losses (GRCL)
Establish GRCL-associates
Deferred loan application fees
Other open bal adjusts-assoc
Adjusted opening balance
Net gains on AFS fin assets
Gains/(losses) on c/flow hedges
Gains/(loss) on c/flow h-assoc
Total income and expenses
recognised directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from Asset reval res
Movements in GRCL
Move in GRCL-associates
Equity dividends
-
-
-
-
-
-
-
-
-
546.3
-
-
-
-
-
-
17.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30.0)
-
-
-
-
-
-
-
4.4
-
-
-
-
At 30 June 2006
564.1
(25.6)
-
-
-
-
-
-
-
-
-
43.0
-
-
-
-
-
-
-
45.3
-
-
-
-
-
88.3
36
-
-
(0.3)
0.1
(0.8)
-
-
(7.4)
(1.0)
148.4
-
-
-
-
116.7
116.7
-
-
-
0.3
(3.9)
(1.1)
(65.9)
194.5
25.5
(7.5)
-
-
-
36.7
4.8
-
0.6
64.1
7.3
2.3
0.4
10.0
-
10.0
-
-
-
(0.3)
3.9
1.1
-
78.8
25.5
(7.5)
(0.3)
0.1
(0.8)
36.7
4.8
(7.4)
(0.4)
771.8
7.3
2.3
0.4
10.0
116.7
126.7
17.8
45.3
4.4
-
-
-
(65.9)
900.1
-
-
-
-
-
-
-
-
-
(0.4)
-
-
-
-
(0.2)
(0.2)
-
-
-
-
-
-
-
25.5
(7.5)
(0.3)
0.1
(0.8)
36.7
4.8
(7.4)
(0.4)
771.4
7.3
2.3
0.4
10.0
116.5
126.5
17.8
45.3
4.4
-
-
-
(65.9)
(0.6)
899.5
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to equity holders of Bendigo Bank Limited
Issued
capital
ESOP
Perp non-cum
shares
redeem conv
Retained
earnings
Other
reserves
Total
Equity
$m
$m
$m
$m
$m
$m
pref shares
BENDIGO BANK
At 1 July 2004
Opening AGAAP balance
551.6
AIFRS opening balance adjusts:
Goodwill impairment
Adjust lease (rent) costs
Tax effect of asset
revaluation reserve
ESOP shares
-
-
-
-
Adjusted AIFRS open bal
551.6
Transfer from ass reval reserve
Tax effect of asset
revaluation reserve
Total income and expenses
recognised directly in equity
Profit for the year
Total income for the year
Issue of share capital
Share buy-back
Reduction in ESOP shares
Equity dividends
Other
At 30 June 2005
At 1 July 2005
Opening balance b/fwd
AIFRS open bal adjusts:
Adj carrying value of
share investments
Tax effect - adj carry
value of share investments
Discounting of specific
provisions
Fair value adjustments
Fair value - swaps
Establish general reserve
for credit losses (GRCL)
Deferred loan application fees
Adjusted opening bal
Net gains on AFS finan assets
Gains/(losses) on c/flow hedges
Total income and expense
for the year recognised
directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from Asset reval res
Movements in GRCL
Equity dividends
Other
-
-
-
-
(31.4)
(31.4)
-
-
-
-
-
-
-
1.4
-
-
(30.0)
-
-
-
-
-
-
-
-
-
-
-
43.0
-
-
-
-
43.0
125.5
2.0
679.1
(2.2)
(0.1)
-
-
123.2
1.7
-
1.7
86.4
88.1
-
-
-
(55.1)
(0.1)
156.1
-
-
0.9
-
2.9
(1.7)
(0.2)
(1.9)
-
(1.9)
-
-
-
-
-
(2.2)
(0.1)
0.9
(31.4)
646.3
-
(0.2)
(0.2)
86.4
86.2
64.7
(27.0)
1.4
(55.1)
(0.1)
1.0
716.4
-
-
-
-
-
21.7
(27.0)
-
-
-
546.3
546.3
(30.0)
43.0
156.1
1.0
716.4
-
-
-
-
-
-
-
546.3
-
-
-
-
-
17.8
-
-
-
-
-
-
-
-
-
-
-
-
-
(30.0)
-
-
-
-
-
-
-
4.4
-
-
-
-
-
-
(0.3)
0.1
(0.3)
(1.2)
(6.9)
147.5
-
-
-
104.9
104.9
-
-
-
-
(3.9)
(65.9)
0.1
182.7
-
-
-
-
-
-
-
43.0
-
-
-
-
-
-
45.3
-
-
-
-
-
88.3
37
25.5
(7.5)
-
-
-
36.7
-
55.7
7.1
2.3
9.4
-
9.4
-
-
-
-
3.9
-
-
69.0
25.5
(7.5)
(0.3)
0.1
(0.3)
35.5
(6.9)
762.5
7.1
2.3
9.4
104.9
114.3
17.8
45.3
4.4
-
-
(65.9)
0.1
878.5
At 30 June 2006
564.1
(25.6)
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The financial report of Bendigo Bank Limited (the Company) for the year ended 30 June 2006 was
authorised for issue in accordance with a resolution of the directors on 12 September 2006.
Bendigo Bank Limited is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian stock exchange.
The domicile of Bendigo Bank Limited is Australia.
The Group’s functional and presentation currency is AUD ($).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation
Bendigo Bank Limited is a “prescribed corporation” in terms of the Corporations Act 2001. Financial
reports prepared in compliance with the Banking Act are deemed to comply with the accounts
provisions of the Corporations Act 2001.
The financial report is a general purpose financial report which has been prepared in accordance with
the Banking Act, applicable Accounting Standards, Corporations Act 2001 and the requirements of
law so far as they are applicable to Australian banking corporations.
The financial report has been prepared in accordance with the historical cost or amortised cost for
loans and receivables and financial liabilities, except for investment properties, land and buildings,
derivative financial instruments and available-for-sale financial assets which are measured at their fair
value. The carrying value of recognised assets and liabilities that are hedged with fair value hedges
are adjusted to record changes in the fair values attributable to the risks that are being hedged
through the income statement or at amortised cost where appropriate.
The amounts contained in the financial statements have been rounded off under the option available
to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class
Order applies. The Class Order allows for rounding to the nearest $'00,000.
2.2 Statement of Compliance
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures
that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
This is the first annual financial report prepared based on AIFRS and comparatives for the year ended
30 June 2005 have been restated accordingly except for the adoption of AASB 132 and AASB 139,
as the group has adopted the exemption under AASB 1 to apply these standards from 1 July 2005.
2.3 Reconciliations and descriptions of transition impacts
Reconciliations and descriptions of the impact of transition from previous AGAAP to AIFRS are
provided in Note 43 – Impact of Adoption of AIFRS:
• AIFRS equity at 1 July 2004, 30 June 2005 and 1 July 2005; and
• AIFRS profit for the year ended 30 June 2005.
38
BENDIGO BANK LTD
ABN 11 068 049 178
2.4 Changes in accounting policies
Full Financial Report
Period ending 30 June 2006
The accounting policies are consistent with those applied in the previous financial year and
corresponding interim period, with the exception of changes resulting from the adoption of AIFRS.
Where an accounting policy has been changed as a result of the adoption of AIFRS, the AIFRS
compliant policy is set below.
2.5 Significant accounting judgments, estimates and assumptions
(i) Significant accounting judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognised in the financial statements:
Operating Lease Commitments – Group as Lessor
The entity has entered into commercial property leases on its investment property portfolio. The
entity has determined that it retains all the significant risks and rewards of ownership of these
properties and has thus classified the leases as operating leases.
(ii) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates
and assumptions of future events. The key estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of certain assets and liabilities within the
next annual reporting period are:
Impairment of goodwill and intangibles with indefinite useful lives.
The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at
least on an annual basis. This requires an estimation of the recoverable amount of the cash-
generating units to which the goodwill and intangibles with indefinite useful lives are allocated.
The assumptions used in this estimation of recoverable amount and the carrying amount of
goodwill and intangibles with indefinite useful lives are discussed in note 24.
Impairment of financial assets and property, plant & equipment.
The group has to make a judgment as to whether an impairment trigger is evident at each
balance date. If a trigger is evident the asset must be tested for impairment, which requires the
estimation of future cash flows and the use of an appropriate discount rate.
Employee benefits (leave provisions)
The carrying amount of leave liabilities is calculated based on assumptions and estimates of
when employees will take leave and the prevailing wage rates at the time the leave will be taken.
Long service leave liability also requires a prediction of the number of employees that will achieve
entitlement to long service leave.
(iii) Recently issued or amended standards not yet effective.
Except for the revised AASB 119 “Employee Benefits” (issued December 2005), Australian
Accounting Standards that have recently been issued or amended but are not yet effective have
not been adopted for the annual reporting period ending 30 June 2006:
39
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Affected Standard(s)
Nature of change to
accounting policy
Application date
of standard
AASB
Amendment
2004-3
2005-1
2005-4
AASB 1: First –time adoption of AIFRS
AASB 101: Presentation of Financial
Statements
AASB 124: Related Party Disclosures
AASB 139: Financial
Recognition and Measurement
Instruments:
AASB 139: Financial
Instruments:
Recognition and Measurement, AASB
132: Financial Instruments: Disclosure
and Presentation, AASB 1: First-Time
adoption of AIFRS, AASB 1023:
General
Insurance Contracts, AASB
1038: Life Insurance Contracts
Application
date for
Group
1 July 2006
No change
to accounting
policy required. Therefore no
impact.
1 January 2006
No change
to accounting
policy required. Therefore no
impact.
No change
to accounting
policy required. Therefore no
impact.
1 January 2006
1 July 2006
1 January 2006
1 July 2006
2005-5
AASB 1: First-Time adoption of AIFRS,
Instruments:
AASB 139: Financial
Recognition and Measurement
No change
to accounting
policy required. Therefore no
impact.
1 January 2006
1 July 2006
No change
to accounting
policy required. Therefore no
impact.
No change
to accounting
policy required. Therefore no
impact.
1 January 2006
1 July 2006
1 January 2006
1 July 2006
No change
to accounting
policy required. Therefore no
impact.
1 January 2007
1 July 2007
2005-6
AASB 3: Business Combinations
2005-9
2005-10
AASB 4: Insurance Contracts, AASB
Insurance Contracts,
1023 General
AASB 139: Financial
Instruments:
Recognition and Measurement and
AASB 132: Financial
Instruments:
Disclosure and Presentation
of
Presentation
AASB 132: Financial
Instruments:
Disclosure and Presentation, AASB
Financial
101:
Statements, AASB 114: Segment
Reporting, AASB 117: Leases, AASB
133: Earnings per Share, AASB 139:
Financial Instruments: Recognition and
Measurement, AASB 1: First-Time
adoption of AIFRS, AASB 4: Insurance
Contracts, AASB
1023: General
Insurance Contracts and AASB 1038:
Life Insurance Contracts
2006-1
AASB 121: The Effects of Change in
Foreign Currency Rates
to accounting
No change
policy required. Therefore no
impact.
1 January 2006
1 July 2006
New or revised Standard/UIG
Affected Standard(s)
Nature of change to
accounting policy
Application date
of standard
AASB 119: Employee Benefits
AASB 7: Financial Instruments: Disclosures
UIG 4: Determining whether an Arrangement contains a
Lease
UIG 5: Rights to Interest in Decommissioning,
Restoration and Environmental Rehabilitation Funds
No change
to accounting
policy required. Therefore no
impact.
No change
to accounting
policy required. Therefore no
impact.
No change
to accounting
policy required. Therefore no
impact.
to accounting
No change
policy required. Therefore no
impact.
40
1 January 2006
1 January 2007
Application
date for
Group
1 July 2006
Group will
early adopt 1
July 2006
1 January 2006
1 July 2006
1 January 2006
Not
applicable to
group
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
New Standard/UIG
Affected Standard(s)
Nature of change to
accounting policy
Application date
of standard*
UIG 7: Applying the Restatement Approach under AASB
129 Financial Reporting in Hyperinflationary Economies
1 March 2006
Application
date for
Group
1 July 2006
UIG 8: Scope of AASB 2
1 May 2006
1 July 2006
UIG 9: Reassessment of Embedded Derivatives
1 June 2006
1 July 2006
2.6
Basis of consolidation
The consolidated financial statements comprise the financial statements of Bendigo Bank Limited and
all of its controlled entities (the group).
A controlled entity is any entity (including special purpose entities) over which Bendigo Bank Limited
has the power to govern directly or indirectly decision-making in relation to financial and operating
policies, so as to require that entity to conform with the objectives of Bendigo Bank Limited.
Controlled entities prepare financial reports for consolidation in conformity with group accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
The financial statements of controlled entities are prepared for the same reporting period as the
parent company.
All inter-company balances and transactions between entities in the economic entity have been
eliminated on consolidation. Where a controlled entity has been sold or acquired during the year its
operating results have been included to the date control ceased or from the date control was
obtained.
Minority interests represent the interests of Community Exchanges Australia Limited and Community
Telco Australia Limited (until August 2005), not held by the group.
2.7 Securitisations
Securitised positions are held through a number of Special Purpose Entities (“SPEs”). As the Bank is
exposed to the majority of the residual risk associated with these SPEs, their underlying assets,
liabilities, revenues and expenses are reported in the Bank’s consolidated balance sheet and income
statement.
2.8 Trustee and funds management activities
Controlled entities of the Bank act as the Trustee and/or Manager for a number of funds. The assets
and liabilities of these funds are not included in the consolidated financial statements. The parent
entity does not have direct or indirect control of the funds as defined by Accounting Standard AASB
127 " Consolidated and Separate Financial Statements". Commissions and fees generated by the
funds management activities are brought to account when earned.
2.9
Investments in associates and joint ventures using the equity method
The group's investment in associates is accounted for under the equity method of accounting in the
consolidated financial statements. These are entities in which the group has significant influence and
which is neither a subsidiary nor a joint venture. The financial statements of associates are used by
the group to apply the equity method. The reporting dates of the associates and the group are
identical and both use consistent accounting policies.
41
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The investments in the associates are carried in the consolidated balance sheet at cost plus post-
acquisition changes in the group's share of the results of operations of the associates, less any
impairment in value. The income statement reflects the share of the results of operations of the
associates.
Where there have been changes recognised directly in the associates' equity, the group recognises
its share of any changes and discloses this, when applicable in the consolidated statement of
changes in equity.
2.10 Foreign currency transactions and balances
Both the functional and presentation currency of Bendigo Bank Limited and its subsidiaries is
Australian dollars (AUD). Transactions in foreign currencies are initially recorded in the functional
currency at the exchange rates ruling on the date of the transaction.
All amounts are expressed in Australian currency and all references to "$" are to Australian dollars
unless otherwise stated. Amounts receivable and payable in foreign currencies at balance date are
converted at the rates of exchange ruling at that date. Exchange differences relating to amounts
payable and receivable in foreign currencies are brought to account as exchange gains or losses in
the income statement in the financial year in which the exchange rates change.
2.11
Property, plant & equipment
Cost and valuation
Plant and equipment is measured at cost less accumulated depreciation and any impairment in value.
Land is measured at fair value. Buildings are measured at fair value less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Asset category
Freehold buildings
Leasehold improvements
Office furniture & equipment
Computer hardware
Motor vehicles
2006
Years
40
3 - 10
5
3
5
2005
Years
40
3 - 10
5
3
5
Impairment
On transition to AIFRS, management identified cash generating units and applicable impairment
indicators in accordance with AASB 136 "Impairment of Assets".
The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. If any such indication exists and
where the carrying values exceed the estimated recoverable amount, the assets or applicable cash-
generating units are written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
42
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Impairment losses are recognised in the income statement, unless they relate to revalued assets.
Impairment losses of revalued assets are recognised in the revaluation reserve.
Revaluations
Following initial recognition at cost, land and buildings are carried at a revalued amount which is the
fair value at the date of the revaluation less any subsequent accumulated depreciation on buildings
and accumulated impairment losses.
Fair value is determined by reference to market-based evidence, which is the amount which the
assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing
seller in an arm's length transaction as at the valuation date.
Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of
the balance sheet unless it reverses a revaluation decrease of the same asset previously recognised
in the income statement.
Any revaluation deficit is recognised in the income statement unless it directly offsets a previous
surplus of the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve is made to retained earnings for the
depreciation relating to the revaluation surplus. In addition, any accumulated depreciation as at the
revaluation date is eliminated against the gross carrying amount of the asset and the net amount is
restated to the revalued amount of the asset.
Upon disposal, any revaluation reserve relating to the particular asset being disposed is transferred to
retained earnings.
Valuations are performed every three years (or more often if circumstances require) ensuring that the
carrying amount does not differ materially from the asset's fair value at the balance sheet date.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) is included in the income statement in the
year the item is derecognised.
2.12
Intangibles assets - goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business
combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities at date of acquisition.
Following initial recognition, goodwill is measured at cost less any accumulated impairment loss.
Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events
or changes in circumstances indicate that the carrying value may be impaired.
On transition to AIFRS, management identified cash generating units and applicable impairment
indicators in accordance with AASB 136 "Impairment of Assets".
Goodwill with respect to business combinations completed prior to 1 July 2004 has been allocated to
identified cash generating units expected to benefit from the synergies of the combination.
Impairment testing was performed by management on transition to AIFRS, resulting in some
impairment of goodwill not previously recognised under AGAAP. Goodwill was found to be impaired
under AIFRS due to the new testing methodologies prescribed under AIFRS. Impairment losses on
transition have been recognised in retained earnings at 1 July 2004.
43
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
For business combinations after 1 July 2004 any goodwill acquired is allocated to each of the cash
generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the cash generating unit to which
the goodwill relates.
Where the recoverable amount of the cash generating unit is less than the carrying amount, which
includes the allocated goodwill, an impairment loss is recognised in the income statement, with the
goodwill being impaired first. Impairment losses of goodwill are not subsequently reversed.
Where goodwill forms part of a cash generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the cash generating unit retained.
2.13
Intangibles assets - other
Acquired both separately and from a business combination
Intangible assets acquired separately are capitalised at cost and from a business combination are
capitalised at fair value as at the date of acquisition.
Following initial recognition, the cost model is applied to the class of intangible assets.
The useful lives of these intangible assets are assessed to be either finite or indefinite.
Where amortisation is charged on assets with finite lives, this expense is taken to the income
statement. Intangible assets, excluding development costs, created within the business are not
capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.
Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of
indefinite life intangibles, annually, either individually or at the cash generating unit level. Useful lives
are also examined on an annual basis and adjustments, where applicable, are made on a prospective
basis.
The only intangible asset with an indefinite life currently carried by the group is the trustee licence
relating to Sandhurst Trustees Limited.
Computer software
Computer software, other than software that is an integral part of the computer hardware, is
capitalised as intangible software and amortised on a straight-line basis over the useful life of the
asset.
Research and development costs
Research costs are expensed as incurred.
Development expenditure incurred on an individual project is carried forward when it is probable the
future economic benefits attributable to the asset will flow to the group.
Following the initial recognition of the development expenditure, the cost model is applied requiring
the asset to be carried at cost less any accumulated amortisation and accumulated impairment
losses.
Any expenditure carried forward is amortised over the period of expected future sales from the related
project or expected useful life.
The carrying value of development costs is reviewed for impairment annually when the asset is not
yet in use, or more frequently when an indicator of impairment arises during the reporting period
indicating that the carrying value may not be recoverable.
44
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
A summary of the policies applied to the group's intangible assets is as follows:
Trustee Licence
Computer software/
Development costs
Acquired in business
combination
Useful lives
Method used
Internally
generated/acquired
Finite
Indefinite
Not amortised or revalued Usually not in excess of 5
years – straight line (major
software systems – 7 years)
Internally generated or
acquired
Acquired
Finite
Amortised to reflect period
and pattern of economic
benefits
Acquired
Impairment test/
recoverable amount testing
Annually and where an
indicator of impairment
exists
Annually and where an
indicator of impairment
exists
Annually and where an
indicator of impairment
exists
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in the
income statement where the asset is derecognised.
2.14 Classification of financial instruments
From 1 July 2004 to 30 June 2005
The group has applied previous AGAAP in the comparative information on financial assets within the
scope of AASB 132 and AASB 139. Under AGAAP, measurement of financial instruments is at cost
and market value, with certain derivatives not recognised on balance sheet.
Financial instruments are classified under the previous AGAAP both on initial and subsequent
recognition as follows:
Loans & receivables -
Held to maturity -
Held for trading -
Available for sale (share investments) -
Non-trading liabilities -
measured at cost
measured at cost
measured at cost
measured at deemed cost
measured at cost
Transition 1 July 2005
The nature of adjustments to comply with AASB 132 and 139 are the classification of available for
sale, held to maturity and financial assets at fair value through profit or loss.
At the date of transition, any changes to carrying amounts were recognised directly in retained
earnings. Under AIFRS, all derivatives are recorded at fair value in the balance sheet.
Financial instruments are classified into one of five categories, which determines the accounting
treatment of the financial instrument.
The classifications are:
Loans & receivables - measured at amortised cost
measured at amortised cost
Held to maturity -
measured at fair value with changes in fair value charged to the income
Held for trading -
statement
measured at fair value with changes in fair value taken to equity
Available for sale -
Non-trading liabilities - measured at amortised cost
All derivative contracts are recorded at fair value in the balance sheet.
45
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
2.15 Financial assets and financial liabilities
From 1 July 2005
All investments are initially recognised at cost, being the fair value of the consideration given and
including acquisition charges associated with the investment. After initial recognition, investments,
which are classified as held for trading and available-for-sale, are measured at fair value. Gains or
losses on investments held for trading are recognised in the income statement. The group currently
does not have any investments held for trading.
Gains or losses on available-for-sale investments are recognised as a separate component in equity
until the investment is sold, collected or otherwise disposed of, or until the investment is determined to
be impaired, at which time the cumulative gain or loss previously reported in equity is included in the
income statement.
Treasury financial assets
From 1 July 2005
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified
as held-to-maturity where the group has the positive intention and ability to hold to maturity.
Investments intended to be held for an undefined period are not included in this classification.
Investments that are intended to be held to maturity are subsequently measured at amortised cost
using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition, over the
period to maturity.
For investments carried at amortised cost, gains and losses are recognised in income when the
investments are derecognised or impaired, as well as through the amortisation process.
Treasury financial liabilities
From 1 July 2005
All treasury funding instruments are initially recognised at cost, being the fair value of the
consideration given and including charges associated with the issue of the instrument. They are
subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition, over the
period to maturity.
For liabilities carried at amortised cost, gains and losses are recognised in income when the
instruments are derecognised. Treasury funding instruments that are hedged are treated in
accordance with the accounting policy for hedges.
Funding instruments that are issued in currencies other than AUD and are not part of an effective
hedge relationship are accounted for at amortised cost. These transactions are restated to AUD
equivalents each month with adjustments taken directly to income. The group does not currently
have any such transactions, as all liabilities denominated in foreign currencies are hedged.
Financial assets - Equity investments
From 1 July 2005
Investment securities available for sale consist of securities that are not actively traded by the
economic entity.
46
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Fair value of quoted investments in active markets are based on current bid prices. If the relevant
market is not considered active (or the securities are unlisted), the economic entity establishes fair
value by using valuation techniques, including recent arm's length transactions, discounted cash flow
analysis, option pricing models and other valuation techniques commonly used by market
participants.
Purchases and sales of financial assets and liabilities that require delivery of assets/securities within
the time frame, and generally established by regulation or convention in the market place are
recognised on the settlement date ie. the date that the group receives or pays the principal sum.
2.16 Asset quality – loans and receivables
From 1 July 2005
Loans and receivables are carried at amortised cost, using the effective interest method. The
effective interest rate calculation includes the contractual terms of loan together with all fees,
transaction costs and other premiums or discounts.
Loan provisioning
From 1 July 2004 to 30 June 2005
All loans are kept under continuous management review and provisions made for all identified
doubtful debts as and when they arise.
Specific provisioning
A specific provision is made for all identified doubtful debts and is recognised when there is
reasonable doubt over the collectability of principal and interest in accordance with the loan
agreement. All bad debts are written off against the specific provision in the period in which they are
classified as irrecoverable.
The provision is determined by specific identification and by estimation of expected losses in relation
to loan portfolios where specific identification is impractical. These portfolios include unsecured credit
cards, overdrawn accounts and personal loans, unsecured mortgage loans (property realisation
shortfalls) where provisions are calculated as follows:
(a) accounts in default past due 90 to 180 days - 10% of account balance is provided; and
(b) accounts in default past due over 180 days - 100% of account balance is provided.
In addition, a general provision is maintained to cover doubtful debts which are not yet identified. The
level of the general provision is determined having regard to asset growth, economic conditions, the
level of risk weighted assets and other general risk factors.
Adjustment on transition 1 July 2005
On transition to AIFRS on 1 July 2005, the general provision has been reversed to retain earnings. A
collective impairment provision and a general reserve for credit losses has been recognised in place
of the general provision.
From 1 July 2005
All loans are subject to continuous management review to assess whether there is any objective
evidence that any loan or group of loans is impaired.
Impairment loss is measured as the difference between the loan's carrying amount and the value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at
the loan's original effective interest rate.
Impairment losses are recognised in the income statement.
47
BENDIGO BANK LTD
ABN 11 068 049 178
Specific provision
Full Financial Report
Period ending 30 June 2006
A specific provision is made for all identified impaired loans and is recognised when there is
reasonable doubt over the collectability of principal and interest in accordance with the loan
agreement. All bad debts are written off against the specific provision in the period in which they are
classified as not recoverable.
The provision is determined by specific identification and by estimation of expected losses in relation
to loan portfolios where specific identification is impractical, based on historical impairment
experience for these portfolios. These portfolios include unsecured credit cards, overdrawn accounts
and personal loans, unsecured mortgage loans (property realisation shortfalls) where provisions are
calculated based on historical loss experience.
Collective provision
Where individual loans are found not to be impaired they are grouped together according to their risk
characteristics and are then assessed for impairment. Based on historical loss data and current
available information for assets with similar risk characteristics, the appropriate collective provision is
raised. Adjustments to the collective provisions are recognised as an expense in the income
statement.
General reserve for credit losses
In addition a general reserve for credit losses is maintained to cover risks inherent in the loan
portfolios. Movements in the general reserve for credit losses are recognised as an appropriation of
retained earnings.
Australian Prudential Regulation Authority (APRA) requires that banks maintain a general reserve for
credit losses at a minimum level of 0.50% of risk weighted assets (net of tax). In certain
circumstances the collective provision can be included in this assessment.
2.17 Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the statement of cash flows, cash includes cash on hand and in banks, short-term
money market investments readily convertible into cash within 2 working days, net of outstanding
overdrafts.
Bank overdrafts are carried at amortised cost. Interest is charged as an expense as it accrues.
2.18 Other financial liabilities
From 1 July 2004 to 30 June 2005
Liabilities for trade creditors and other amounts are carried at amortised cost, which is the fair value of
the consideration to be paid in the future for goods and services received, whether or not billed to the
consolidated entity. Payables to related parties are carried at the principal amount.
Interest, when charged by the lender, is recognised as an expense on an accrual basis.
Deferred cash settlements are recognised at the present value of the outstanding consideration
payable on the acquisition of an asset discounted at prevailing commercial borrowing rates.
From 1 July 2005
Liabilities for trade creditors and other amounts are carried at amortised cost, which is the fair value of
the consideration to be paid in the future for goods and services received, whether or not billed to the
consolidated entity. Payables to related parties are carried at the amortised cost.
Interest, when charged by the lender, is recognised on an effective interest rate basis.
48
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Deferred cash settlements are recognised at the present value of the outstanding consideration
payable on the acquisition of an asset discounted at prevailing commercial borrowing rates.
Interest, when charged on payables to related parties, is recognised as an expense on an accrual
basis using the effective interest method.
2.19 Reserve fund
The Trustee Companies Act 1984 requires that a reserve fund be maintained to provide for the event
of the appointment of a liquidator, a receiver and manager or an administrator of a trustee company.
In such an event, the monies in the reserve fund are available to be utilised in accordance with
Section 39 (3) of the Trustee Companies Act 1984.
Sandhurst Trustees Limited complies with the Act by setting aside the value of at call investments,
freehold property and other financial assets to the reserve fund.
2.20 Deposits
From 1 July 2004 to 30 June 2005
All deposits and borrowings are initially recognised at cost. Interest, issue costs, discounts or
premiums are amortised on an accruals basis.
From 1 July 2005
All deposits and borrowings are initially recognised at cost, being the fair value of the consideration
received net of issue costs associated with the borrowing. After initial recognition, interest-bearing
borrowings are subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any issue costs, and any discount or premium on
settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and
as well as through the amortisation process.
2.21 Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation
to make a future sacrifice of economic benefits to other entities as a result of past transactions or
other past events, and it is probable that a future sacrifice of economic benefits will be required and a
reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the
expected cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as
a finance cost.
A provision for dividend is not recognised as a liability unless the dividend is declared, determined or
publicly recommended on or before the reporting date.
2.22 Employee benefits
Wages and Salaries, Annual leave, Sick leave and Directors' Retirement Provision
Liabilities for wages and salaries have been recognised and measured as the amount which the
economic entity has a present obligation to pay, at balance date, in respect of employees' service up
to that date. Liabilities have been calculated at nominal amounts based on wage and salary rates
current at balance date and include related on-costs. Wages and salaries liabilities are recognised in
payables.
49
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Annual leave liabilities are accrued on the basis of full pro rata entitlement at their nominal amounts,
being the amounts estimated to apply when the leave is paid. Sick leave bonus liability has been
calculated at balance date in accordance with the relevant group policy, which provides entitlement
dependent on an individual employees’ years of service and unused sick leave.
Directors’ retirement provision is accrued in accordance with the board approved arrangement. The
entitlement is calculated on the basis of pro rata years of service up to a maximum of nine years.
Directors' retirement provision accruals have ceased with effect 31 August 2005, due to the
crystallisation of entitlements at that date as disclosed in the Bendigo Bank Limited Financial Report
30 June 2005.
Long Service Leave
Long service leave has been assessed at full pro rata entitlement in respect of all employees with
more than five year’s service. The amount provided meets the requirement of Accounting Standard
AASB 119 "Employee Benefits", which requires the assessment of the likely number of employees
that will ultimately be entitled to long service leave, the estimated salary rates that will apply when the
leave is paid, discounted to take account of the time value of money.
Annual leave, sick leave, Directors’ retirement and long service leave liabilities are recognised in
provisions.
Superannuation
Contributions are made to an employee accumulation superannuation fund and are charged to
expenses when incurred.
2.23 Share based payments
The Company has discontinued the existing loan-based Employee Share Ownership Plan (“Plan”).
There have been no issues of shares under this Plan since November 2004. The Plan will continue as
a legacy plan until such times as the loans provided to fund share purchases under the Plan have
been repaid.
Shares issued under the current ESOP are deemed to have been issued under an employee share
option. The value of the shares issued is included in issued capital at the issue price.
The unpaid portion of the issued shares, reflected in the outstanding balance of interest-free loans
advanced to employees, is accounted for as ESOP shares. The outstanding loan value of the ESOP
shares is deducted from equity in the balance sheet.
2.24 Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are charged as expenses over the period of the lease on a straight-line basis unless another
systematic basis is more representative of the time pattern of the benefit.
The economic entity has no leases deemed to be finance leases where substantially all the risks and
benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to
entities within the economic entity.
2.25 Revenue
From 1 July 2004 to 30 June 2005
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised.
Interest income, interest expense and fee income is brought to account on an accruals basis in the
income statement.
50
BENDIGO BANK LTD
ABN 11 068 049 178
From 1 July 2005
Full Financial Report
Period ending 30 June 2006
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised.
Interest, fees and commissions
Control of a right to receive consideration for the provision of, or investment in, assets has been
attained. Interest, fee and commission revenue is brought to account on an accruals basis. Interest
is accrued using the effective interest rate method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial instrument.
Loan origination and loan application fees
Loan origination and application fees are amortised as a component of the calculation of the effective
interest rate method in relation to originated loans. They therefore reduce the interest recognised in
relation to this portfolio of loans.
The average life and interest recognition pattern of loans in the relevant loan portfolios is reviewed
annually to ensure the amortisation methodology is appropriate.
Loan origination fees are amortised on a straight-line basis over the 3 year average life of loans in the
portfolio, as the results of this method are not materially different from the results generated from the
use of the effective interest method.
Loan application fees are amortised on a straight-line basis over the average life of loans in the
respective loan product categories. The amortisation periods are between 24 and 40 months.
Unearned income
Unearned income on the economic entity's personal lending and leasing is brought to account over
the life of the contracts on an actuarial basis.
Dividends
Dividends are recognised when control of a right to receive consideration for the investment in assets
is established.
2.26
Borrowing costs
Borrowing costs are recognised as an expense when incurred unless they are incurred in relation to
qualifying assets.
Borrowing costs for qualifying assets are capitalised as part of the cost of that asset.
2.27 Income tax
The income tax for the period is the tax payable on the current period's taxable income based on the
national income tax rate, adjusted for changes in deferred tax assets and liabilities and unused tax
losses.
The group has adopted the balance sheet liability method of tax effect accounting, which focuses on
the tax effects of transactions and other events that affect amounts recognised in either the balance
sheet or a tax-based balance sheet.
Deferred tax assets and liabilities are recognised for temporary differences, except where the
deferred tax asset/liability arises from the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
51
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, and the carry-forward of unused tax
assets and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow
all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax balances are
reviewed annually to determine whether they should be recognised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the
income statement.
2.28 Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
- where the GST incurred on a purchase of goods and services is not recoverable from the
taxation authority, in which case the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable; and
-
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from or payable to the taxation authority is included as part of
receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on
a gross basis, the GST component of cash flows arising from investing and financing activities, which
are recoverable from or payable to the taxation authority are classified as operating cash flows.
2.29 Derecognition of financial instruments
The derecognition of a financial instrument takes place when the group no longer controls the
contractual rights that comprise the financial instrument, which is normally the case when the
instrument is sold, or all the case flows attributable to the instrument are passed through to an
independent third party.
2.30 Derivative financial instruments
From 1 July 2004 to 30 June 2005
The Group uses derivative financial instruments to hedge its interest rate and foreign exchange risk.
These derivatives are accounted for on the same basis as the underlying exposure. The premiums or
periodic payments related to off-balance sheet financial instruments are amortised over the life of the
instrument to match revenue arising from the hedged asset or liability.
Realised gains or losses are brought to account as and when they occur.
Interest rate swaps that are hedges of balance sheet positions are accounted for on an accruals
basis. Interest receipts and payments made under these swaps are recognised in the income
statement when they are receivable or due to be paid.
52
BENDIGO BANK LTD
ABN 11 068 049 178
From 1 July 2005
Full Financial Report
Period ending 30 June 2006
The group uses derivative financial instruments such as foreign currency contracts and interest rate
swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such
derivative financial instruments are stated at fair value.
The fair value of forward exchange contracts is calculated by reference to current forward exchange
rates with similar maturity profiles. The fair value of interest rate swap contracts is determined by
reference to market values for similar instruments.
For the purpose of hedge accounting, hedges are classified as either fair value hedges when they
hedge the exposure to changes in the fair value of a recognised asset or liability, or cash flow hedges
where they hedge exposure to variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a forecasted transaction.
In relation to fair value hedges which meet the conditions for hedge accounting, any gain or loss from
remeasuring the hedging instrument at fair value is recognised immediately in the income statement.
Any gain or loss attributable to the hedged risk on remeasurement of the hedged item is adjusted
against the carrying amount of the hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment
is amortised to the income statement such that it is fully amortised by maturity.
In relation to cash flow hedges, to hedge firm commitments which meet the conditions for special
hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be
an effective hedge is recognised directly in equity and the ineffective portion is recognised in the
income statement.
When the hedged firm commitment results in the recognition of an asset or liability, then, at the time
the asset or liability is recognised, the associated gains or losses that had previously been recognised
in equity are included in the initial measurement of the acquisition cost or other carrying amount of the
asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are
transferred to the income statement in the same year in which the hedged firm commitment affects
the net profit and loss, for example when the future sale actually occurs.
For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in
fair value are taken directly to net profit or loss for the year.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or
exercised, or no longer qualifies for hedge accounting.
At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is
kept in equity until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in
equity is transferred to net profit or loss for the year.
2.31
Issued ordinary capital
Issued and paid up ordinary capital is recognised at the fair value of the consideration received by the
company. Any transaction costs (net of any tax benefit) arising on the issue of ordinary shares are
recognised directly in equity as a reduction of the share proceeds received.
2.32 Perpetual preference capital
Perpetual non-cumulative redeemable convertible preference capital is recognised at the fair value of
the consideration received by the company. Any transaction costs (net of any tax benefit) arising on
the issue of preference shares are recognised directly in equity as a reduction of the share proceeds
received.
53
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
2.33 Earnings per ordinary share (EPS)
Basic EPS is calculated as net profit attributable to members, adjusted to exclude cost of servicing
equity (other than dividends), preference share dividends and movements in general reserve for credit
losses, divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
- costs of servicing equity (other than dividends), preference share dividends and movements
in general reserve for credit losses; the after tax effect of dividends and interest associated
with dilutive potential ordinary shares that have been recognised as expenses; and
- other non-discretionary changes in revenues or expenses during the period that would result
from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares,
adjusted for any bonus element.
Cash basis EPS is calculated as net profit attributable to members, adjusted for:
- after tax intangibles amortisation (except intangible software amortisation); and
- after tax significant income and expense items
- costs of servicing equity (other than dividends), preference share dividends and movements
in general reserve for credit losses
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
54
BENDIGO BANK LTD
ABN 11 068 049 178
3. SEGMENT INFORMATION
Full Financial Report
Period ending 30 June 2006
The group’s primary reporting format is business segments and its secondary format is geographical
segments.
The operating businesses are organised and managed according to the nature of products and
services provided and the key delivery channels, with each segment representing a strategic business
unit that offers a different delivery method and/or different products and services.
Retail banking
Net interest revenue, predominantly derived from the provision of first mortgage finance less the
interest paid to depositors; and fee revenue derived from the provision of banking services delivered
through the company-owned branch network.
Community banking
The group’s share of interest predominantly derived from the provision of first mortgage finance less
the interest paid to depositors; and fee revenue derived from the provision of banking services
delivered through the community bank branch network.
Wealth creation
Commission received as Responsible Entity for managed investment schemes and for corporate
trusteeships and other trustee and custodial services. Fees, commission and interest from the
provision of financial planning services.
Joint ventures, Alliances and corporate support
Share of profit from equity accounted investments in associates, revenue from alliances and minor
subsidiaries and unallocated corporate support business units.
55
BENDIGO BANK LTD
ABN 11 068 049 178
a.
Business segments
Full Financial Report
Period ending 30 June 2006
The following tables present revenue and profit information and certain asset and liability
information regarding business segments for the years ended 30 June 2006 and 2005.
For the twelve months ended 30 June 2006
Revenue
Net interest income
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity
accounted investments
Total income after interest expense
External income after interest expense
Intersegment income after interest
expense
Total income after interest expense
Results
Segment result
Internal cost allocations
Consolidated entity profit from continuing operations
before income tax expense
Income tax expense
Minority interests
Consolidated entity profit from continuing operations
after income tax expense
Assets
Segment assets
Originated and managed assets
Equity accounted assets
Total assets
Liabilities
Segment liabilities
Funds under management
Total liabilities
Other segment information
Non-cash expenses
Depreciation and amortisation
Amortisation of intangibles
Impairment losses recognised in profit & loss
Non-cash expenses other than
depreciation & amortisation
Acquisition of property, plant and equipment,
intangible assets and other non-current assets
Retail
Community
Banking
Banking
$m
$m
259.4
48.5
103.0
0.5
103.5
25.1
-
25.1
Wealth
Solutions
J/Ventures,
Alliances & Corp
Supp't
$m
7.2
41.3
2.3
43.6
$m
-
10.2
(2.8)
7.4
Total
$m
315.1
179.6
-
179.6
-
-
-
22.2
22.2
48.5
2.3
50.8
26.6
(1.6)
25.0
149.5
715.1
-
864.6
179.3
1,181.0
1,360.3
0.3
0.2
-
32.4
(2.8)
29.6
(49.9)
61.0
11.1
3,791.8
(1,925.6)
143.5
2,009.7
3,498.1
(2,966.1)
532.0
0.3
0.1
5.5
10.0
(12.6)
516.9
-
516.9
165.7
-
165.7
(49.0)
-
116.7
15,052.6
-
143.5
15,196.1
14,296.6
-
14,296.6
12.4
5.6
5.5
19.7
0.8
100.3
109.3
73.6
-
73.6
43.2
(22.2)
21.0
3,320.0
228.8
-
3,548.8
4,007.3
416.2
4,423.5
1.2
0.6
-
3.7
0.2
362.4
0.5
362.9
145.8
(37.2)
108.6
7,791.3
981.7
-
8,773.0
6,611.9
1,368.9
7,980.8
10.6
4.7
-
18.6
8.0
56
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Business segments (continued)
For the twelve months ended 30 June 2005
Revenue
Net interest income
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity
accounted investments
Total income after interest expense
External income after interest expense
Intersegment income after interest
expense
Total income after interest expense
Results
Segment result
Internal cost allocations
Consolidated entity profit from continuing operations
before income tax expense
Income tax expense
Minority interests
Consolidated entity profit from continuing operations
after income tax expense
Assets
Segment assets
Originated and managed assets
Equity accounted assets
Total assets
Liabilities
Segment liabilities
Funds under management
Total liabilities
Other segment information
Non-cash expenses
Depreciation and amortisation
Amortisation of intangibles
Impairment losses recognised in profit & loss
Non-cash expenses other than
depreciation & amortisation
Acquisition of property, plant and equipment,
intangible assets and other non-current assets
b. Geographic segments
Retail
Community
Banking
Banking
$m
$m
242.5
37.2
81.5
3.8
85.3
21.5
0.3
21.8
Wealth
Solutions
J/Ventures,
Alliances & Corp
Supp't
$m
6.4
38.3
0.2
38.5
$m
-
11.3
(4.3)
7.0
Total
$m
286.1
152.6
-
152.6
-
-
-
20.3
20.3
324.0
3.8
327.8
133.7
(30.8)
102.9
7,503.6
956.4
-
8,460.0
6,124.2
1,266.1
7,390.3
10.2
2.8
-
26.7
11.9
58.6
0.3
58.9
33.7
(17.6)
16.1
2,622.3
148.7
-
2,771.0
3,141.3
301.0
3,442.3
0.4
0.3
-
3.9
0.5
44.7
0.2
44.9
25.0
(1.6)
23.4
141.9
750.3
-
892.2
169.3
1,140.7
1,310.0
0.3
0.1
-
6.0
0.2
31.7
(4.3)
27.4
(56.9)
50.0
(6.9)
3,472.7
(1,855.4)
118.1
1,735.4
3,703.1
(2,707.8)
995.3
0.4
0.4
-
(10.3)
64.8
459.0
-
459.0
135.5
-
135.5
(41.2)
0.4
94.7
13,740.5
-
118.1
13,858.6
13,137.9
-
13,137.9
11.3
3.6
-
26.3
77.4
Bendigo Bank Limited and controlled entities operate predominantly in the geographic areas of
all Australian states and the Australian Capital Territory providing banking and financial
services.
57
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
4.
PROFIT FROM CONTINUING ACTIVITIES
Profit before income tax expense has been determined as follows:
(a) Revenue:
Interest income
Controlled entities
Investment securities
Other persons/entities
Cash and liquid assets
Investment securities
Loans and other receivables
Securitisation
Total interest income
Interest expense
Controlled entities
Retail deposits
Wholesale - domestic
Other persons/entities
Deposits
Retail
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation
Total interest expense
Net interest income
Other revenue
Dividends
Controlled entities
Associates
Other
Distribution from unit trusts
Fees
Assets
Liabilities & electronic delivery
Trustee, management & other services
Other
Commissions
Insurance
Wealth solutions
Other
Other
Income from property
Foreign exchange revenue
Other
Total other revenue
Income
Profit on sale of SMF shares
Other income
Profit on disposal of property, plant & equipment
Profit on sale of other investments
Other
Total other income
Share of associates' net profits (losses) accounted for using
the equity method
1.1
1.2
1
1.4
1.5
1.6
1.7
1.8
1.9
10.4
10.3
10
10.2
2
2.5
2.7
5
3.4
3.2
3
6
4.3
8
8.1
8.2
8.4
8.6
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
-
3.0
97.0
774.3
33.2
907.5
-
-
444.1
46.2
53.5
19.8
28.8
592.4
315.1
-
-
2.5
0.2
2.7
21.4
62.6
9.0
10.7
103.7
7.3
31.9
2.4
41.6
0.5
5.0
8.0
13.5
-
1.2
83.9
682.3
47.6
815.0
-
-
376.1
46.8
46.5
17.1
42.4
528.9
286.1
-
-
1.5
0.1
1.6
26.7
53.5
9.6
9.4
99.2
6.8
29.0
1.8
37.6
0.8
3.9
(0.2)
4.5
0.1
3.3
91.7
744.8
4.3
844.2
-
0.4
434.9
29.6
53.5
19.8
-
538.2
306.0
16.2
12.6
2.5
-
31.3
19.1
62.3
2.5
10.3
94.2
5.2
0.4
2.4
8.0
9.3
5.0
1.0
15.3
0.6
1.0
80.1
654.6
5.2
741.5
0.6
-
366.5
33.6
46.5
17.1
-
464.3
277.2
13.7
11.2
1.5
-
26.4
24.5
53.2
1.6
9.2
88.5
4.6
0.4
1.9
6.9
5.7
3.9
0.4
10.0
161.5
142.9
148.8
131.8
15.5
(0.1)
0.9
1.8
2.6
-
0.3
1.0
8.4
9.7
15.5
(0.3)
0.8
0.1
0.6
22.2
20.3
-
-
0.3
0.5
7.1
7.9
-
Total income after interest expense
516.9
459.0
470.9
416.9
58
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
PROFIT FROM CONTINUING ACTIVITIES (continued)
Consolidated
Bendigo Bank
2006
$m
6.2
1.1
-
-
(0.3)
7.0
0.3
133.9
13.3
1.4
2.1
0.6
8.2
2.6
8.7
170.8
15.9
0.2
2.3
0.3
0.2
3.2
7.2
29.3
1.6
3.9
0.1
5.6
9.9
-
9.9
18.9
22.2
28.3
11.7
18.4
22.2
-
-
6.6
109.4
351.2
165.7
2005
$m
7.3
-
6.7
0.1
(0.5)
13.6
0.4
121.8
11.7
1.9
1.4
1.0
7.2
1.8
8.0
154.8
12.6
0.4
2.0
0.4
0.1
3.4
7.3
26.2
0.3
3.3
-
3.6
9.0
0.1
9.1
17.4
19.8
23.9
9.1
16.0
23.4
0.3
0.1
5.8
98.4
323.5
135.5
2006
$m
5.7
0.9
-
-
(0.3)
6.3
0.3
120.6
12.1
1.3
2.0
0.5
7.4
2.2
8.1
154.2
26.6
-
2.3
0.2
0.1
2.9
6.5
38.6
-
3.7
-
3.7
8.8
-
8.8
15.5
21.2
27.1
11.3
18.4
19.8
-
-
7.2
105.0
332.4
138.5
2005
$m
6
7.5
-
.5
-
(0.5)
13.5
0.4
109.8
10.6
1.5
1.2
1.1
6.5
1.6
7.7
140.0
19.2
0.1
2.0
0.3
0.1
3.1
6.7
31.5
-
2.8
-
2.8
7.7
.1
0
7.8
14.3
18.9
22.8
8.8
15.9
22.1
.3
0
.1
0
5.5
94.4
304.7
112.2
(b) Expenses
Expenses
Bad and doubtful debts
Specific provisions
Collective provision
General provision
Bad debts written off
Bad debts recovered
Total bad and doubtful debts
Borrowing costs
Other expenses
Staff and related costs
Salaries and wages
Superannuation contributions
Provision for annual leave
Provision for long service leave
Other provisions
Payroll tax
Fringe benefits tax
Other
Occupancy costs
Operating lease rentals
Depreciation of buildings
Amortisation of leasehold improvements
Property rates
Land tax
Repairs and maintenance
Other
Amortisation of intangibles
Amortisation of intangible assets
Amortisation of intangible software
Impairment losses on goodwill
Property, plant & equipment costs
Depreciation of property, plant & equipment
Losses on disposal of property, plant & equipment
Fees and commissions
Administration expenses
Communications, postage and stationery
Computer systems and software costs
Advertising & promotion
Other product & services delivery costs
General administration expenses
Decrements arising from the revaluation of investments
Provision for directors' retirement allowance
Other
Total expenses
Profit before income tax expense
28
28.3
28.2
28.5
12
20
20.1
20.2
20.3
20.7
20.4
20.5
20.6
22
22.1
22.2
22.4
22.5
22.6
22.9
33.1
33.2
33.3
27
27.1
11
13
14
14.3
14.5
15
31
34
50
59
BENDIGO BANK LTD
ABN 11 068 049 178
5. UNDERLYING PROFIT
Full Financial Report
Period ending 30 June 2006
Underlying profit shows the growth in the core business of the economic entity
Consolidated
Bendigo Bank
Profit after income tax expense
Add,
Bad and doubtful debts expense (net of bad debts recovered)
Amortisation of intangibles (except software amortisation)
Significant items
Income tax expense (Note 6)
Underlying profit
6.
INCOME TAX EXPENSE
Major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax
Relating to origination and reversal of temporary differences
Imputation credits
Other items
Income tax expense reported in the income statement
Statement of changes in equity
Deferred income tax related to items charged or credited directly in equity
Net gain on hedge of net investment
Tax effect of collective provisions
Income tax benefit reported in equity
A reconciliation between tax expense and the product of accounting profit
before income tax multiplied by the group's applicable income tax rate is
as follows:
Income tax expense attributable to:
Accounting profit before income tax
The income tax expense comprises amounts set aside as:
Provision attributable to current year at statutory rate, being
prima facie tax on accounting profit before tax
under (over) provision in prior years
tax credits and adjustments
Fair value revaluations on property, plant & equipment
Capital allowances
Expenditure not allowable for income tax purposes
Deferred tax movement
Other non assessable income
Tax effect attributable to associates
Post-employment Benefits
Movement in loan provisions
Movement in provisions
Tax effect of franking credits
Other
Income tax expense reported in the consolidated income statement
Effective income tax rate
60
2006
$m
116.7
7.0
1.7
(11.2)
49.0
163.2
57.6
(1.9)
(3.3)
(6.4)
3.0
49.0
(10.9)
2.5
(8.4)
2005
$m
94.7
13.6
0.3
(3.5)
41.2
2006
$m
104.9
6.3
-
(9.5)
33.6
2005
$m
86.4
13.5
-
(2.2)
25.8
146.3
135.3
123.5
46.8
-
(2.7)
(5.3)
2.4
41.2
-
-
-
45.1
(1.9)
(3.2)
(6.4)
-
33.6
(10.8)
2.5
(8.3)
33.8
0.1
(2.8)
(5.3)
-
25.8
-
-
-
165.7
135.5
138.5
112.2
49.7
(1.9)
(6.4)
0.7
0.1
2.3
(3.3)
(4.7)
(2.0)
1.1
2.8
0.5
1.9
8.2
49.0
29.6%
40.7
-
(5.3)
0.9
0.1
0.8
(2.7)
(2.5)
0.8
0.9
0.6
0.4
1.6
4.9
41.2
30.4%
41.6
(1.9)
(6.4)
0.6
0.1
2.3
(3.2)
(4.7)
-
1.0
2.6
0.6
1.9
(0.9)
33.6
24.3%
33.7
0.1
(5.3)
0.8
.1
0
0.8
(2.8)
(2.2)
-
.1
1
.5
0
.5
0
.6
1
(3.1)
25.8
23.0%
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
INCOME TAX EXPENSE (continued)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
Revaluations of land and buildings to fair value
Revaluations of available-for-sale financial assets to fair value
Deferred gains and losses on foreign exchange contracts
Deferred expenses
Other
Deferred tax liabilities
Deferred tax assets
Post-employment benefits
Deferred gains and losses of interest rate swaps
Expenses tax depreciable
Revaluation of land and buildings
Revaluation of plant and equipment
Adjustment to provisions
Prepaid income
Adjustment to loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
Bendigo Bank
Deferred income tax liabilities
Revaluations of land and buildings to fair value
Revaluations of available-for-sale financial assets to fair value
Deferred expenses
Other
Deferred tax liabilities
Deferred tax assets
Post-employment benefits
Revaluations of interest rate swaps to fair value
Expenses tax depreciable
Revaluation of land and buildings
Revaluation of plant and equipment
Adjustments to provisions
Prepaid income
Adjustment to loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
Balance sheet
Income statement
2006
$m
(0.2)
(13.4)
-
(2.4)
(0.1)
(16.1)
6.8
-
0.6
3.1
1.7
4.4
1.2
5.3
4.3
27.4
(0.1)
(13.0)
(2.1)
-
(15.2)
6.5
0.6
0.6
2.7
1.5
4.3
1.2
5.2
4.3
26.9
2005
$m
(0.3)
0.8
-
(2.8)
(0.1)
(2.4)
5.7
-
0.7
2.6
1.6
3.9
1.3
19.0
1.0
35.8
(0.1)
0.8
(2.4)
-
(1.7)
5.5
-
0.6
2.2
1.4
3.8
1.3
20.1
1.0
35.9
2006
$m
-
3.3
(0.1)
(0.4)
0.1
(1.1)
(0.6)
-
(0.5)
(0.2)
(0.5)
0.1
(0.3)
(3.1)
(3.3)
-
3.1
(0.3)
(0.1)
(1.0)
(0.6)
-
(0.5)
(0.1)
(0.6)
0.1
(0.1)
(3.1)
(3.2)
2005
$m
-
-
-
(0.4)
-
(0.9)
-
(0.1)
(0.5)
(0.3)
(0.4)
.1
1
(0.6)
(0.6)
(2.7)
-
-
(0.4)
-
(1.1)
-
(0.1)
(0.5)
(0.3)
(0.5)
.1
1
(0.5)
(0.5)
(2.8)
At 30 June 2006, there is no unrecognised deferred income tax liability (2005: Nil) for taxes that would
be payable on the unremitted earnings of certain of the group's subsidiaries, associates or joint
ventures, as the group has no liability for additional taxation should such amounts be remitted.
61
BENDIGO BANK LTD
ABN 11 068 049 178
Tax Consolidation
Full Financial Report
Period ending 30 June 2006
Effective 1 July 2002, for the purposes of income taxation, Bendigo Bank Limited and its 100% owned
subsidiaries formed a tax consolidated group. Members of the group entered into a tax sharing
arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a stand
alone basis. In addition the agreement provides for the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations. At the balance date, the
possibility of default is remote. The head entity of the tax consolidated group is Bendigo Bank
Limited.
There has not been any material effect on tax assets or liabilities as a result of any revised tax
legislation. Bendigo Bank Limited formally notified the Australian Tax Office of its adoption of the tax
consolidation regime upon the lodgement of its 2003 income tax return.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding
agreement provides for the allocation of current taxes to members of the tax consolidated group on a
stand alone taxpayer basis, while deferred taxes are allocated to members of the tax
consolidated
group in accordance with the principle of AASB 112 Income Taxes. Allocations under the tax funding
agreement are made at the end of each month.
The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the
subsidiaries inter-company accounts with the tax consolidated group head company, Bendigo Bank
Limited. Because under UIG 1052 Tax Consolidation Accounting the allocation of current taxes to tax
consolidated group members on the basis of accounting profits is not an acceptable method of
allocation given the group's circumstances, the difference between the current tax amount that is
allocated under the tax funding agreement and the amount that is allocated under an acceptable
method is recognised as a contribution/distribution of the subsidiaries' equity accounts.
In preparing the accounts of Bendigo Bank Limited for the current year, the following amounts have
been recognised as tax-consolidation contribution adjustments:
Total increase/(reduction) to tax expense of Bendigo Bank Limited
Total increase/(reduction) to inter-company assets of Bendigo Bank Limited
Total increase/(reduction) to equity accounts of Bendigo Bank Limited
Bendigo Bank
2006
$m
(0.1)
0.1
-
2005
$m
5.2
(5.2)
-
62
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
7. AVERAGE BALANCE SHEET AND RELATED INTEREST
For the twelve month period ended 30 June 2006
Average balances and rates
Interest earning assets
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables - company
Loans and other receivables - alliances
Securitisation interest earning assets
Total interest earning assets
Non interest earning assets
Property, plant & equipment
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities and equity
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation interest bearing liabilities
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net interest margin
Note
1
2,3
2
4
5
Impact of community bank/alliances profit share arrangements
Net interest margin before community bank/alliances share of net interest income
Less impact of community bank/alliances share of net interest income
Net interest margin
Average
Interest
Average
Balance
12 mths
Rate
$m
$m
%
3.0
97.0
603.0
211.6
914.6
33.2
947.8
277.6
206.8
46.2
53.5
19.8
603.9
28.8
632.7
203.9
1,697.0
8,267.3
3,190.3
13,358.5
463.1
13,821.6
63.6
(21.6)
428.2
470.2
14,291.8
6,763.5
3,958.9
842.8
914.6
294.0
12,773.8
448.6
13,222.4
265.5
803.9
1,069.4
14,291.8
13,821.6
(13,222.4)
947.8
(632.7)
315.1
1.47
5.72
7.29
6.63
6.85
7.17
6.86
4.10
5.22
5.48
5.85
6.73
4.73
6.42
4.79
6.86
(4.79)
2.07
2.28
2.76
0.48
2.28
1 Average balance is based on monthly closing balances from 30 June 2005 through 30 June 2006 inclusive, with the exception of Wholesale domestic, which is based on a daily
closing balance.
2 Interest payments to alliance partners are net values in the Income Statement. Interest income and expense values have been increased by $40.3m to reflect the gross amounts.
3 Interest income includes $7.2m of application fee income reclassified under AIFRS.
4 Interest spread is the difference between the average interest rate earned on assets and the average interest rate paid on funds.
5 Interest margin is the net interest income as a percentage of average interest earning assets.
63
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
AVERAGE BALANCE SHEET AND RELATED INTEREST (continued)
For the twelve month period ended 30 June 2005
Average
Interest
Average
Balance
12 mths
Rate
Note
$m
$m
%
Average balances and rates
Interest earning assets
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables - company
Loans and other receivables - alliances
Securitisation interest earning assets
Total interest earning assets
Non interest earning assets
Property, plant & equipment
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation interest bearing liabilities
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net interest margin
1
2
2
3
4
Impact of community bank/alliances profit share arrangements
Net interest margin before community bank/alliances share of net interest income
Less impact of community bank/alliances share of net interest income
Net interest margin
1.2
83.9
555.8
158.6
799.5
47.6
847.1
250.9
157.3
46.8
46.5
17.1
518.6
42.4
561.0
125.0
1,482.1
7,804.8
2,440.5
11,852.4
685.6
12,538.0
53.9
(66.7)
324.7
311.9
12,849.9
6,372.4
3,079.9
821.5
779.7
247.3
11,300.8
669.6
11,970.4
209.1
670.4
879.5
12,849.9
12,538.0
(11,970.4)
847.1
(561.0)
286.1
0.96
5.66
7.12
6.50
6.75
6.94
6.76
3.94
5.11
5.70
5.96
6.91
4.59
6.33
4.69
6.76
(4.69)
2.07
2.28
2.68
0.40
2.28
1 Average balance is based on monthly closing balances from 30 June 2004 through 30 June 2005 inclusive, with the exception of Wholesale domestic, which is based on a daily
closing balance.
2 Interest payments to alliance partners are net values in the Income Statement. Interest income and expense values have been increased by $32.1m to reflect the gross amounts.
3 Interest spread is the difference between the average interest rate earned on assets and the average interest rate paid on funds.
4 Interest margin is the net interest income as a percentage of average interest earning assets.
64
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
8. CAPITAL ADEQUACY AND ACE RATIO
a. Capital adequacy
The Australian Prudential Regulation Authority (APRA) guidelines require capital to be allocated
against credit and market risks. Banks must maintain a ratio of qualifying capital (comprising tier
1 and tier 2 capital), to risk weighted assets, and off-balance sheet exposures determined on a
risk weighted basis, of which at least half must be tier 1 capital. The Bank adopted the ‘standard
model’ approach prescribed by APRA to measure market risk. The resultant capital after
applying a numeric conversion factor, forms part of risk weighted assets.
The group has reported under AIFRS for the financial year commencing 1 July 2005. APRA has
amended its prudential regulations in response to the implementation of AIFRS and that these
changes take effect 1 July 2006. Therefore, capital adequacy calculations continue to be made
under previous AGAAP for the 2005/06 financial year.
Risk weighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying Capital
Tier 1
Contributed capital
Retained profits & reserves
Less,
Intangible assets
Net future income tax benefit
Other adjustments as per APRA advice
Total Tier 1 capital
Tier 2
General reserve for credit losses
Subordinated debt
Asset revaluation reserves
Less,
Subsidiary investment residual
Total Tier 2 capital
Less,
Investments in non-consolidated subsidiaries or associates and other bank's
capital instruments
Total qualifying capital
Consolidated
As at
June 2006
$m
8.33%
2.44%
10.77%
As at
June 2005
$m
8.01%
2.38%
10.39%
652.4
166.7
77.2
17.9
10.5
713.5
46.7
307.1
3.0
356.8
9.0
347.8
138.2
923.1
589.3
128.1
79.0
14.2
11.4
612.8
42.2
262.1
3.0
307.3
9.2
298.1
115.7
795.2
Total risk weighted assets
8,566.9
7,655.1
65
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
CAPITAL ADEQUACY AND ACE RATIO (continued)
b. Adjusted common equity (“ACE”)
Adjusted common equity is one measure considered by Standard & Poor’s in evaluating the
Bank’s credit rating. The ACE ratio has been calculated in accordance with the Standard &
Poor’s methodology.
Adjusted Common Equity
Tier 1 capital
Deduct:
Preference share capital
Subsidiary investment residual
Investments in non-consolidated subsidiaries or associates and other banks'
capital instruments
Total Adjusted Common Equity
Consolidated
As at
As at
June 2006
June 2005
$m
$m
713.5
612.8
88.3
9.0
138.2
478.0
43.0
9.2
115.7
444.9
Adjusted Common Equity ratio to risk weighted assets
5.58%
5.81%
9.
EARNINGS PER ORDINARY SHARE
Share ratios
Basic earnings per ordinary share
Diluted earnings per ordinary share
Cash basis earnings per ordinary share
Earnings used in the calculation of earnings per ordinary share
Net profit
Net loss attributable to minority interests
Distributions paid on preference shares
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
Earnings used in calculating basic earnings per ordinary share
Earnings used in calculating diluted earnings per ordinary share
After tax intangibles amortisation (excluding amortisation of intangible software)
After tax significant income and expense items
Earnings used in calculating cash basis earnings per ordinary share
C o ns o lida t e d
2 0 0 6
2 0 0 5
C e nt s pe r s ha re C e nt s pe r s ha re
78.0
78.0
73.2
$ m
116.7
-
(2.5)
(3.9)
(1.1)
109.2
109.2
1.7
(8.4)
102.5
67.5
67.5
65.5
$ m
94.3
0.4
-
-
-
94.7
94.7
0.3
(3.0)
92.0
Weighted average number of ordinary shares
N o . o f s ha re s
N o . o f s ha re s
Weighted average number of ordinary shares used in basic earnings per ordinary share 140,057,705
140,391,946
The above weighted average number of ordinary shares is also used in the calculation of diluted and cash basis earnings
per ordinary share as there are no dilutive potential ordinary shares.
Conversions, calls, subscription or issues after 30 June 2006
There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares
since the reporting date and before the completion of this financial report.
66
BENDIGO BANK LTD
ABN 11 068 049 178
10.
DIVIDENDS
Dividends paid or proposed
Ordinary shares
Dividends paid during the year
current year
Interim dividend (22.0 cents per share) (2005 - 19.0 cents per share)
previous year
Final dividend (26.0 cents per share) (2005 - 23.0 cents per share)
Full Financial Report
Period ending 30 June 2006
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
29.1
25.3
29.1
25.3
34.3
63.4
29.8
55.1
34.3
63.4
29.8
55.1
Dividends proposed since the reporting date, but not recognised as a liability
Final dividend (30.0 cents per share) (2005: 26.0 cents per share)
40.1
34.3
40.1
34.3
All dividends paid were fully franked. Proposed dividends will be fully franked out of existing franking credits or out of franking credits arising from
payment of income tax provided for in the financial statements for the year ended 30 June 2006.
Preference shares
Dividends paid during the year
90.80 cents per share paid on 15 September 2005 (2005: Nil)
62.19 cents per share paid on 15 December 2005 (2005: Nil)
61.62 cents per share paid on 15 March 2006 (2005: Nil)
62.68 cents per share paid on 15 June 2006 (2005: Nil)
Dividend franking account
Balance of franking account as at end of financial year
Franking credits that will arise from the payment of income tax provided for in the
financial report
Impact of dividends proposed or declared before the financial report was authorised
for issue but not recognised as a distribution of equity holders during the period
The tax rate at which dividends have been franked is 30% (2005: 30%).
Dividends proposed will be franked at the rate of 30% (2005: 30%).
Dividend paid
Dividends paid by cash or satisfied by the issue of shares under the dividend
reinvestment plan during the year were as follows:
Paid in cash
Satisfied by issue of shares
0.8
0.6
0.5
0.6
2.5
-
-
-
-
-
0.8
0.6
0.5
0.6
2.5
95.4
9.9
(18.1)
87.2
-
-
-
-
-
79.6
8.3
(15.5)
72.4
48.1
17.8
65.9
36.5
18.6
55.1
48.1
17.8
65.9
36.5
18.6
55.1
Dividend Reinvestment Plan
The Dividend Reinvestment Plan provides shareholders with the opportunity of converting their
entitlement to a dividend into new shares. The issue price of the shares is equal to the volume
weighted average share price of Bendigo Bank shares traded on the Australian Stock Exchange over
the ten trading days following the Record Date. Shares issued under this Plan rank equally with all
other ordinary shares.
Bonus Share Scheme
The Bonus Share Scheme provides shareholders with the opportunity to elect to receive a number of
bonus shares issued for no consideration instead of receiving a dividend. The issue price of the
shares is equal to the volume weighted average price of Bendigo Bank shares traded on the
Australian Stock Exchange over the ten trading days following the Record Date. Shares issued under
this scheme rank equally with all other ordinary shares.
The last date for the receipt of an election notice for participation in either the Dividend Reinvestment
Plan or Bonus Share Scheme for the 2006 final dividend was 1 September 2006.
67
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
11.
RETURN ON AVERAGE ORDINARY EQUITY
Return on average ordinary equity
Pre-significant items return on average ordinary equity
Cash basis return on average ordinary equity
Reconciliation of earnings used in the calculation of return on average ordinary equity
Net profit for the year
(Profit)/loss attributable to minority interests
Distributions paid on preference shares
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
Earnings used in calculation of return on average ordinary equity
After tax significant income and expense items
Earnings used in calculation of pre-significant items return on average ordinary equity
After tax intangibles amortisation (excluding amortisation of intangible software)
Earnings used in calculation of cash basis return on average ordinary equity
Reconciliation of ordinary equity used in the calculation of return on average ordinary equity
Total equity
Preference share net capital
General reserve for credit losses
General reserve for credit losses - associates
Minority interest
Ordinary equity
Average ordinary equity
Consolidated
2006
%
2005
%
15.14
13.98
13.97
13.54
14.21
13.58
$m
$m
116.7
-
(2.5)
(3.9)
(1.1)
109.2
(8.4)
100.8
1.7
102.5
899.5
(88.3)
(40.6)
(6.5)
0.6
764.7
94.3
0
.4
-
-
-
94.7
(3.0)
91.7
0.3
92.0
720.7
(43.0)
-
-
0.4
678.1
721.4
677.4
68
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
12.
NET TANGIBLE ASSETS PER ORDINARY SHARE
Net tangible assets per ordinary share
$
4.78
$
4.21
Reconciliation of net tangible assets used in calculation of net tangible assets
per ordinary share
Net assets
Intangibles
Preference shares - face value
General reserve for credit losses
General reserve for credit losses - associates
Minority interest
Net tangible assets
$m
899.5
(89.6)
(90.0)
(40.6)
(6.5)
0.6
673.4
$m
720.7
(90.4)
(45.0)
-
-
0.4
585.7
Number of ordinary shares on issue at reporting date
140,850,961
139,106,669
13.
CASH FLOW INFORMATION
Reconciliation of cash flow from operations with profit after income tax
Profit after tax
Non-cash items
Doubtful debts expense
Amortisation
Depreciation
Revaluation (increments)/decrements
Share of associates' net (profits)
Dividends received/(accrued) from associates
Profits on sale of investment securities
(Profits)/losses on sale of property, plant & equipment
Changes in assets and liabilities
Increase/(decrease) in tax provision
Increase/(decrease) in deferred tax liability
(Increase)/decrease in accrued interest
Increase in accrued employees entitlements
Increase/(decrease) in other accruals, receivables and provisions
Net cash flows from/(used in) operating activities
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
116.7
94.3
104.9
7.3
5.6
12.4
5.4
(22.2)
12.5
(16.5)
0.1
1.6
5.3
14.2
3.7
25.1
171.2
14.1
3.6
11.3
0.7
(20.3)
11.3
(8.0)
(1.7)
8.4
(8.8)
(3.7)
3.7
(39.3)
65.6
6.6
3.7
11.1
7.2
-
-
(14.6)
0.3
1.6
4.4
15.4
3.5
15.4
159.5
2005
$m
86.4
14.0
2.8
9.9
0.3
-
(0.3)
(6.6)
(1.2)
(3.7)
(7.5)
(1.3)
4.5
(19.0)
78.3
Cash flows presented on a net basis
Cash flows arising from the following activities are presented on a net basis in the statement of cash flows:
Investment securities, Retail deposits, Wholesale deposits and Subordinated debt.
69
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
14.
CASH AND CASH EQUIVALENTS
Notes, coin and cash at bank
Investments at call
Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents includes:
Cash and cash equivalents
Due from other financial institutions
Due to other financial institutions
Consolidated
Bendigo Bank
2006
$m
268.0
2.8
270.8
270.8
209.0
(166.3)
313.5
2005
$m
247.7
5.4
253.1
253.1
188.9
(143.3)
298.7
2006
$m
213.1
1.3
214.4
214.4
209.0
(166.3)
257.1
2005
$m
113.7
2.2
115.9
115.9
182.6
(143.3)
155.2
Cash and cash equivalents are items readily convertible into cash and generally repayable on demand. Amounts due to and from other financial institutions
relate to inter-bank settlement processes and are generally repaid within 2 working days.
15.
FINANCIAL ASSETS AVAILABLE FOR SALE - SECURITIES
Negotiable securities
Negotiable certificates of deposit
Government securities
Maturity analysis
Not longer than 3 months
Longer than 3 and not longer than 12 months
205.1
155.8
360.9
179.1
181.8
360.9
-
-
-
-
-
-
205.1
155.8
360.9
179.1
181.8
360.9
Negotiable certificates of deposit held have an average maturity of 45 days (2005: nil) with effective interest rates of 5.66% to 5.90% (2005: nil).
Government securities held have an average maturity of 152 days (2005: nil) with effective interest rates of 5.80% to 5.97% (2005: nil).
16.
FINANCIAL ASSETS AVAILABLE FOR SALE – SHARE INVESTMENTS
Share investments at fair value (2005: at deemed cost)
Listed share investments
Unlisted share investments
Share investments at cost
Shares in associates
Other share investments
Total share investments
91.7
2.7
94.4
-
-
-
94.4
22.3
20.2
42.5
-
-
-
42.5
91.5
2.7
94.2
131.3
-
131.3
225.5
Available for sale share investments consist of investments in ordinary shares and units in unit trusts, and therefore have no fixed maturity date or
coupon rate.
Fair value of share investments is determined as follows:
Listed shares - quoted market price at balance date.
Unlisted shares - estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates.
Management believes the estimated fair values resulting from the valuation techniques and recorded in the balance sheet and the related
changes in fair values recorded in equity are reasonable and the most appropriate at the balance sheet date.
Other share investments at cost are measured at cost as fair value cannot be reliably measured for these unlisted investments.
Prior to 2006 financial year all share investments were carried at deemed cost under previous AGAAP.
-
-
-
-
-
-
22.2
20.2
42.4
115.5
-
115.5
157.9
70
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
17.
FINANCIAL ASSETS HELD TO MATURITY
Negotiable securities
Bank accepted bills of exchange
Negotiable certificates of deposit
Government securities
Other
Non negotiable securities
Deposits - banks
Deposits - other
Other
Maturity analysis
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Over 5 years
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
19.8
252.3
745.4
338.4
1,355.9
5.3
3.1
6.3
14.7
1,370.6
605.0
527.2
238.1
0.3
1,370.6
73.3
368.9
715.0
409.9
1,567.1
-
2.8
0.2
3.0
1,570.1
1,131.2
120.6
317.8
0.5
1,570.1
-
207.8
745.4
338.4
1,291.6
-
-
0.2
0.2
1,291.8
548.7
504.7
238.1
0.3
1,291.8
24.8
356.0
715.0
409.9
1,505.7
-
-
0.2
0.2
1,505.9
1,067.0
120.6
317.8
0.5
1,505.9
Bills of exchange and promissory notes held have an average maturity of 49 days (2005: 23 days) with an effective interest rate of 5.61% to 5.96% (2005:
5.44%). Negotiable certificates of deposit held have an average maturity of 103 days (2005: 61 days) with effective interest rates of 5.83% to 6.20% (2005:
5.42% to 6.15%). Government securities held have an average maturity of 81 days (2005: 61 days) with effective interest rates of 5.53% to 5.92% (2005:
5.26% to 5.46%). Other securities includes deposits with banks and other parties made with an average maturity of 690 days (2005: 704 days) with
effective interest rates of 5.78% to 6.35% (2005: 5.56% to 5.99%).
71
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
18.
LOANS AND OTHER RECEIVABLES
Overdrafts
Credit cards
Term loans
Lease receivables
Factoring receivables
Other
Accrued interest
Gross loans and other receivables
less:
Specific provision for impairment (Note 19)
Collective provision for impairment (Note 19)
Unearned income
less:
General provision for impairment (Note 19)
Net loans and other receivables
Impaired loans
Non-accruing loans
- without provisions
- with provisions
less specific impairment provisions
Net impaired loans
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
2,736.9
111.4
9,220.2
321.3
46.8
-
60.7
2,311.8
92.8
8,706.6
296.1
40.6
-
55.0
2,779.2
111.4
8,737.8
319.2
3.6
-
56.4
2,353.7
92.8
8,080.4
294.3
-
-
49.8
12,497.3
11,502.9
12,007.6
10,871.0
(9.1)
(8.8)
(42.7)
(8.6)
-
(41.6)
(8.6)
(8.6)
(42.4)
(8.6)
-
(41.4)
12,436.7
11,452.7
11,948.0
10,821.0
-
12,436.7
(60.3)
11,392.4
-
11,948.0
(58.4)
10,762.6
0.6
14.3
(9.0)
5.9
0.8
15.8
(8.6)
8.0
0.6
12.9
(8.5)
5.0
0.8
15.8
(8.6)
8.0
Net impaired loans % of loans and other receivables
0.05%
0.07%
0.04%
0.07%
Portfolios Facilities - past due 90 days, not well secured
less impairment provisions
Net Portfolio Facilities
Loans past due 90 days
Accruing loans past due 90 days, with adequate security balance
Amount in arrears
Accruing loans past due 90 days balance includes $13.9 million (2003: $5.0 milllion)
of loans due to their review date expirying more than 90 days ago, but
which are not in payment default.
Interest income recognised and forgone
Interest income recognised in respect of impaired loans
Interest income forgone in respect of impaired loans
1.8
(0.2)
1.6
74.0
5.2
1.5
(0.1)
1.4
55.2
4.8
1.8
(0.2)
1.6
74.0
5.2
1.5
(0.1)
1.4
55.2
4.8
0.1
-
0.2
1.0
0.1
-
0.2
1.0
Interest income recognised is the interest income actually received subsequent to these balances becoming non-accrual or restructured.
Interest income forgone is the gross interest income that would have been recorded during the financial year had the interest on such loans been
included in income.
Loans by geographic location (1) (2)
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia / Northern Territory
Western Australia
Tasmania
Overseas/Other
1
Geographic location determined from the customer postcode/address.
Maturity analysis (2)
At call / overdrafts
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Longer than 5 years
2
Balances exclude specific and general provisions for doubtful debts and unearned revenue.
72
7,088.7
1,625.7
246.6
1,935.7
324.9
770.2
462.5
43.0
6,620.8
1,517.5
238.5
1,724.7
304.6
630.6
430.9
35.3
6,778.2
1,553.8
228.7
1,874.2
310.1
762.9
461.4
38.3
6,232.2
1,425.5
223.5
1,625.1
282.0
620.2
429.4
33.1
12,497.3
11,502.9
12,007.6
10,871.0
2,909.7
1,149.5
679.7
3,822.3
3,936.1
12,497.3
2,458.2
1,193.4
659.0
2,940.6
4,251.7
11,502.9
2,900.0
1,144.5
660.8
3,776.5
3,525.8
12,007.6
2,453.2
1,177.8
643.7
2,872.8
3,723.5
10,871.0
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
LOANS AND OTHER RECEIVABLES (continued)
Overdraft facilities are made available to customers on a secured or unsecured basis and are withdrawable by the bank.
Effective base interest rates range from 6.95% to 13.40% (2005: 6.70% to 12.20% and interest is charged on a monthly basis.
Casual overdrafts incur an additional 6.00% (2005: 6.00%) overlimit fee.
Credit card facilities are made available to customers on an unsecured basis. Customers can choose between various
products, offering the option of "interest free" days, no "interest free" days and various interest rates. Interest is charged on a
monthly basis with effective interest rates ranging from 6.99% to 17.15% (2005: 13.4% to 16.4%).
Term loans (mortgage loans) are offered to customers as a variety of products, all being secured by mortgage security.
Products offer variable or fixed interest rates, short and long-term payment periods, with or without monthly fees. Interest is
charged on a monthly basis with effective interest rates ranging from the bank's cost of funds to 9.05% (2005: 9.15%).
Term loans (personal loans) are offered on a secured or unsecured basis with terms ranging from one to seven years. Interest
is fixed and charged on a monthly in arrears basis ranging from 10.50% to 11.95% (2005: 9.45% to 14.45%).
Lease receivables are finance leases with terms of one to five years. The average earning rate implicit in the leases is 7.50%
(2005: 7.54%). All leases are secured by the asset that is subject of the lease.
Factoring receivables are offered to customers as a variety of products by assignment of book debts. Products offered are full
service, partnership and confidential debtor finance. Some of these are combinations of fixed fees and daily interest on funds
employed, others are fees per day based on a set fee. On average these are revolving facilities with debt term on average
between 30 and 50 days.
Other loans are generally short-term and are normally settled within 30 days.
Accrued interest on loans is normally charged to the loan accounts in the month following accrual.
19.
IMPAIRMENT OF LOANS AND ADVANCES
Specific provision for impairment
Opening balance
AIFRS transition adjustments - 1 July 2005
Charged to income statement
Impaired debts written-off applied to specific impairment provision
Closing balance
Collective provision for impairment
Opening balance
AIFRS transition adjustments - 1 July 2005
Charged to income statement
Impaired debts written-off applied to specific impairment provision
Closing balance
General reserve for credit losses (2005: General provision)
Opening balance
AIFRS transition adjustments - 1 July 2005 - write-back general provision
AIFRS transition adjustments - 1 July 2005 - create general reserve for credit losses
Provision acquired
Charged to equity (2005: charged to income statement)
Closing balance
Bad and doubtful debts expense
Specific provisions for impairment
Collective provision
General provision
Impaired debts written off
Consolidated
Bendigo Bank
2006
$m
8.6
0.5
6.4
(6.4)
9.1
-
7.9
0.9
-
8.8
60.3
(60.3)
36.7
-
3.9
40.6
-
0.9
-
6.4
7.3
2005
$m
8.1
-
7.5
(7.0)
8.6
-
-
-
-
-
53.4
-
-
0.3
6.6
60.3
0.5
-
6.6
7.0
14.1
2006
$m
8.6
0.5
5.7
(6.2)
8.6
-
7.7
0.9
-
8.6
58.4
(58.4)
36.7
-
3.9
40.6
(0.5)
0.9
-
6.2
6.6
2005
$m
8.1
-
7.5
(7.0)
8.6
-
-
-
-
-
51.9
-
-
-
6.5
58.4
0.5
-
.5
6
7.0
14.0
Ratios
Specific provision as % of gross loans less unearned income
Collective provision (net of tax) & General reserve for credit losses
as a % of risk-weighted assets
0.07%
0.08%
0.55%
0.55%
73
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
20.
PARTICULARS IN RELATION TO CONTROLLED ENTITIES
(1)
(2
Name
Chief entity
Bendigo Bank Limited
Directly Controlled Operating Entities
BBL Caroline Springs Pty Ltd
BBL (SSKB) Financial Services Pty Ltd
BBS Nominees Pty Ltd
Bendigo Finance Pty Ltd
Bendigo Investment Services Ltd
Bendigo Superannuation Ltd
Bensand Services Pty Ltd
(4)
Cass Comm Limited
Community Developments Australia Pty Ltd
(3)
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Community Exchanges Australia Pty Ltd
First Australian Building Society Ltd
Sunstate Lenders Mortgage Insurance Pty Ltd
Fountain Plaza Pty Ltd
National Mortgage Market Corporation Pty Ltd
National Assets Securitisation Corporation Pty Ltd
Asia Pacific Receivables Corporation Pty Ltd
Oxford Funding Pty Ltd
Sandhurst Trustees Ltd
Sandhurst Nominees (Victoria) Ltd
Sandhurst Custodians Ltd
Sandhurst Nominees (Canberra) Ltd
Bendigo Asset Management Limited
Victorian Securities Corporation Ltd
Worley Securities Pty Ltd
1 Non-Operating controlled entities are excluded from the above list.
2 All entities are 100% owned and incorporated in Australia, unless otherwise specified.
3 In July 2006, Bendigo Investment Services Ltd changed its name to Bendigo Financial Planning Ltd.
4 Formerly Cassa Commerciale Australia Ltd.
Extent of Interest
If not 100%
Principal
Activities
Banking
55%
Investment company
Investment company
Administration company
Leasing finance
Financial advisory services
Superannuation trustee
Investment company
Financial services
Community initiatives
Community initiatives
Community initiatives
Community initiatives
Holding company
Mortgage insurance
Property owner
Mortgage origination & m'ment
Securitisation manager
Securitisation
Invoice discounting
Trustee company
Nominee company
Custodian company
Nominee company
Investment manager
Financial services
Financial advisory services
INVESTMENTS IN ASSOCIATES AND JOINT VENTURE USING THE EQUITY
METHOD
21.
Name
Elders Rural Bank Ltd
Tasmanian Banking Services Ltd
Community Sector Enterprises Pty Ltd
Homesafe Solutions Pty Ltd
Caroline Springs Fin Serv Pty Ltd
Silver Body Financial Services Pty Ltd
Community Telco Australia Pty Ltd
Strategic Payment Services Pty Ltd
Ownership
interest held by
consolidated entity
Balance date
2006
%
50.0
50.0
50.0
50.0
50.0
50.0
50.0
40.0
2005
%
50.0
50.0
50.0
50.0
50.0
50.0
90.0
-
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
(i) Principal activities of associated companies
Elders Rural Bank Ltd - bank
Tasmanian Banking Services Ltd - financial services
Community Sector Enterprises Pty Ltd - financial services
Homesafe Solutions Pty Ltd - financial services
Caroline Springs Financial Services Pty Ltd - financial services
Silver Body Financial Services Pty Ltd - financial services
Community Telco Australia Pty Ltd - telecommunication services
Strategic Payment Services Pty Ltd - payment processing services
All associate companies were incorporated in Australia.
74
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
INVESTMENTS IN ASSOCIATES AND JOINT VENTURE USING THE EQUITY METHOD
(continued)
Total
(ii) Share of associates' revenue and profits
Share of associates':
- revenue
- profit before income tax
- income tax expense
- profit after income tax
Share of associates' operating profits after income tax:
Elders Rural Bank Ltd
Tasmanian Banking Services Ltd
Community Sector Enterprises Pty Ltd
Homesafe Solutions Pty Ltd
Caroline Springs Financial Services Pty Ltd
Silver Body Financial Services Pty Ltd
Community Telco Australia Pty Ltd
Strategic Payment Services Pty Ltd
BSX Group Holdings Ltd
The consolidated entity's share in the retained profits and reserves of associated
companies is not available for payment of dividends to shareholders of
Bendigo Bank Limited until such time as those profits and reserves are
distributed by the associated companies.
(iii) Carrying amount of investments in associates
Balance at the beginning of financial year
- carrying amount of investment in associate acquired during the year
- carrying amount of investment in associate sold during the year (2005: BSX)
- dividends received from associates
- share of associates' net profits (losses) for the financial year
- share of associates' movements in retained earnings for the financial year
- share of associates' movements in reserves for the financial year
Carrying amount of investments in associates at the end of the financial year
Represented by:
Investments at equity accounted amount:
- Elders Rural Bank Ltd
- Tasmanian Banking Services Ltd
- Community Sector Enterprises Pty Ltd
- Homesafe Solutions Pty Ltd
- Caroline Springs Financial Services Pty Ltd
- Silver Body Financial Services Pty Ltd
- Community Telco Australia Pty Ltd
- Strategic Payment Services Pty Ltd
- BSX Group Holdings Limited
2006
$m
51.1
22.2
6.7
15.5
16.1
0.8
-
(0.6)
(0.1)
(0.1)
(0.5)
(0.1)
-
15.5
118.1
18.4
-
(12.5)
15.5
3.6
0.4
143.5
137.6
1.9
0.1
0.4
0.2
0.2
2.2
0.9
-
143.5
2005
$m
35.8
20.3
6.4
13.9
13.7
0.7
0.2
(0.3)
-
-
-
-
(0.4)
13.9
101.1
14.8
(0.4)
(11.3)
13.9
-
-
118.1
115.1
1.7
0.1
0.7
0.3
0.2
-
-
-
118.1
There are no impairments losses relating to investments in associates.
(iv) The consolidated entity's share of the assets and liabilities of associates
in aggregate
Assets
Liabilities
Net Assets
(v) Amount of retained profits of the consolidated entity attributable to
associates
Total
Elders Rural Bank Limited
2006
2005
2006
2005
1,640.8
1,519.3
121.5
68.4
1,313.4
1,217.5
95.9
52.9
1,631.7
1,516.3
115.4
1,309.6
1,216.8
92.8
Subsequent events affecting an associate's profits/losses for the ensuing year (if any) are disclosed in the Events after Balance Day note.
The consolidated entity's share of associates' commitments and contingent liabilities (if any) are disclosed in the Commitments and Contingencies note.
75
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
22.
PROPERTY, PLANT AND EQUIPMENT
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
(a) Carrying Value
Property
Freehold land - at fair value
(1)
Freehold buildings - at fair value
Accumulated depreciation
(1
Leasehold improvements - at cost
Accumulated depreciation
Other
Plant, furniture, fittings, office equipment & vehicles - at cost
Accumulated depreciation
(b) Reconciliations
(1)
Freehold land
Carrying amount at beginning of financial year
Additions
Revaluations
Disposals
(1)
Freehold buildings
Carrying amount at beginning of financial year
Additions
Revaluations
Disposals
Depreciation expense
Leasehold improvements - at cost
Carrying amount at beginning of financial year
Acquisitions
Additions
Disposals
Depreciation expense
Plant, furniture, fittings, office equipment & vehicles
Carrying amount at beginning of financial year
Acquisitions
Additions
AIFRS reclassification of software to intangible assets
Disposals
Depreciation expense
If land and buildings were measured using the cost model the carrying amounts would be as follows:
Land
Buildings
Accumulated depreciation and impairment
Net carrying amount
5.0
5.0
8.0
(0.4)
7.6
24.7
(10.3)
14.4
27.0
111.1
(57.0)
54.1
81.1
6.5
-
-
(1.5)
5.0
11.0
0.2
-
(3.3)
(0.3)
7.6
5.0
-
11.9
(0.2)
(2.3)
14.4
25.0
-
39.9
-
(1.1)
(9.7)
54.1
2.7
8.5
(3.8)
7.4
6.5
6.5
11.3
(0.3)
11.0
13.4
(8.4)
5.0
22.5
77.1
(52.1)
25.0
47.5
9.1
-
-
(2.6)
6.5
13.3
2.4
-
(4.3)
(0.4)
11.0
2.2
0.1
4.9
(0.2)
(2.0)
5.0
32.0
0.3
12.2
(6.9)
(1.0)
(11.6)
25.0
3.6
10.3
(3.8)
10.1
0.2
0.2
0.2
-
0.2
24.7
(10.3)
14.4
14.8
73.9
(47.8)
26.1
40.9
0.2
-
-
-
0.2
1.7
-
-
(1.5)
-
0.2
4.9
-
11.9
(0.2)
(2.2)
14.4
22.2
-
13.2
-
(0.5)
(8.8)
26.1
0.1
0.1
-
0.2
0.2
0.2
1.7
-
1.7
13.2
(8.3)
4.9
6.8
63.6
(41.4)
22.2
29.0
2.5
-
-
(2.3)
0.2
3.3
1.6
-
(3.1)
(0.1)
1.7
2.2
-
4.9
(0.2)
(2.0)
4.9
26.3
-
10.2
(4.7)
(0.8)
(8.8)
22.2
0.1
1.6
(0.1)
1.6
1
The fair values of freehold land and buildings on freehold land have been determined by reference to director valuations, based upon independent valuations previously
o
buyer and a knowledgeable willing seller in an arm's length transaction at the valuation date. The effective date of the revaluation was 30 June 2004.
btained. The independent valuations are performed on an open market basis, being the amounts for which the assets could be exchanged between a knowledgeable willing
Included in plant & equipment (consolidated) at 30 June 2006 is an amount of $25.791 mill (2005: Nil)
relating to expenditures in relation to the construction of a new Head Office development in Bendigo,
Victoria.
76
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
23.
INTANGIBLE ASSETS AND GOODWILL
Consolidated
Bendigo Bank
(a) Carrying value
Intangible assets
Customer list - at cost
Accumulated amortisation
Computer software - at cost
Accumulated amortisation
Trustee licence - at cost
Accumulated impairment
Goodwill
Purchased goodwill - at cost
Accumulated impairment
Goodwill on consolidation - at cost
Accumulated impairment
(b) Reconciliations
Intangible assets
Customer list
Carrying amount at beginning of financial year
Additions/fair value adjustment
Amortisation charge
Computer software
Carrying amount at beginning of financial year
AIFRS transition reclassification from property, plant & equipment
Additions
Disposals
Amortisation charge
Trustee licence
Carrying amount at beginning of financial year
Goodwill
Purchased goodwill
Carrying amount at beginning of financial year
Impairment
Goodwill on consolidation
Carrying amount at beginning of financial year
Additions/(purchase price adjustment)
Impairment
Intangible assets
Finite useful life
2006
$m
4.6
(2.0)
2.6
19.5
(5.9)
13.6
8.4
-
8.4
2.2
(2.2)
-
66.3
(1.3)
65.0
89.6
4.3
(0.1)
(1.6)
2.6
10.4
-
10.1
(3.1)
(3.8)
13.6
8.4
8.4
-
-
-
67.3
(2.2)
(0.1)
65.0
89.6
2005
$m
4.6
(0.3)
4.3
23.3
(12.9)
10.4
8.4
-
8.4
2.2
(2.2)
-
68.5
(1.2)
67.3
90.4
-
4.6
(0.3)
4.3
-
6.9
6.8
-
(3.3)
10.4
8.4
8.4
2.2
(2.2)
-
53.0
15.5
(1.2)
67.3
90.4
2006
$m
-
-
-
18.7
(5.2)
13.5
-
-
-
2.2
(2.2)
-
-
-
-
13.5
-
-
-
-
7.2
-
10.0
-
(3.7)
13.5
-
-
-
-
-
-
-
-
13.5
2005
$m
-
-
-
18.3
(11.1)
7.2
-
-
-
2.2
(2.2)
-
-
-
-
7.2
-
-
-
-
-
4.7
5.3
-
(2.8)
7.2
-
-
2.2
(2.2)
-
-
-
-
7.2
The customer list was acquired through a business combination (Oxford Funding Pty Ltd) and has
been capitalised at fair value. The customer list has been assessed as having a finite life and is
amortised using a method that reflects the pattern of the economic benefits of the asset over a period
of 5 years.
Computer software includes internally developed software and software that is not an integral part of
the related hardware. Intangible software is capitalised at cost and is amortised over the assessed
useful life of the asset on a straight line basis. This is generally a period of between 2.5 years and 7
years (major software items).
77
BENDIGO BANK LTD
ABN 11 068 049 178
Indefinite useful life
Full Financial Report
Period ending 30 June 2006
The trustee licence represents an intangible asset purchased through the effect of a business
combination (Sandhurst Trustees Limited). The useful life of this asst has been estimated as indefinite
and the cost method utilised for measurement. The asset is assessed as having an indefinite life as
the authorisation for Sandhurst Trustees Limited to trade as a trustee company has no end period.
Revocation of the authority is unlikely and would occur only in the event of non-compliance with
conditions under which authorisation is granted. Sandhurst Trustees Limited has specific compliance
procedures in place to ensure these conditions are met.
Goodwill
The goodwill
combinations.
items represent
intangible assets purchased
through
the effect of business
24.
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE
LIVES
Goodwill acquired through business combinations have been allocated to cash generating units, or
groups of cash generating units, which are reportable segments for internal reporting, for impairment
testing as follows:
Sandhurst Trustees Limited
Goodwill has been allocated to the cash generating unit (CGU) of Sandhurst Trustees Limited (STL).
The recoverable amount of the STL CGU has been determined based on a fair value calculation
using the projected cash flows for 2005/06 and applying a multiple of 12 (2005:12). Management
believe this multiple is appropriate for this business. For impairment testing purposes, the fair value
has been allocated on the basis of 80% of the fair value relates to the trustee licence and 20% of the
fair value relates to the goodwill.
The multiple would have to decline to 1.1 before impairment would be evident.
Worley Securities Pty Ltd
Goodwill has been allocated to the cash generating unit of Worley Securities Pty Ltd (Worleys).
The recoverable amount of the Worleys CGU has been determined based on a value in use
calculation using cash flow projections based on financial budgets and projections approved by senior
management covering a five-year period.
The pre-tax discount rate applied to cash flow projections is 18.5% (2005: 18.8%). The terminal value
of the CGU has been calculated using a multiple of 5 (2005: 5), which is considered by management
to be appropriate for a company of this nature.
The results of this test have required a goodwill write-down of $88,981 (2005: Nil). The goodwill
relating to this cash generating unit is now written-off to zero.
Benhold Pty Ltd (IOOF Building Society)
Goodwill for IOOF has been allocated to the group of cash generating units comprising branches in
the state of Victoria, Australia.
The recoverable amount of the IOOF group of branches has been determined based on a value in
use calculation using the projected after-tax cash flows for 2005/06 of the group of units and applying
a multiple of 12 (2005:12). Management believes this multiple is appropriate for the group of
branches.
The multiple would have to decline to 4.5 before impairment would be evident.
78
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Victorian Securities Corporation Limited
Goodwill has been allocated to the cash generating unit of Victorian Securities Corporation Limited
(VSCL).
The recoverable amount of the VSCL CGU has been determined based on a fair value calculation
using the projected 2005/06 VSCL after-tax profit and a multiple of 12
(2005:12). Management
believes this multiple is appropriate for a business of this nature.
The multiple would have to decline to 7.5 before impairment would be evident.
First Australian Building Society Limited
Goodwill for First Australian Building Society Limited (FABS) has been allocated to the group of cash
generating units comprising the branches located in the state of Queensland, Australia. The
recoverable amount of the FABS group of units has been determined based on a fair value calculation
using the projected 2005/06 after-tax profit for the group of units and a multiple of 12 (2005:12).
Management believes this multiple is appropriate for this group of cash generating units.
The multiple would have to decline to 4 before impairment would be evident.
Oxford Funding Pty Ltd
Goodwill has been allocated to the cash generating unit of Oxford Funding Pty Ltd (Oxford).
The recoverable amount of the Oxford CGU has been determined based on a value in use calculation
using cash flow projections based on financial budgets and projections approved by senior
management covering a five-year period.
The pre-tax discount rate applied to cash flow projections is 16.5% (2005:11.2%). The terminal value
of the unit has been calculated using a multiple of 10 (2005: 10), which is considered by management
to be appropriate for a company of this nature in the factoring industry.
The multiple would have to decline to 6.2 before impairment would be evident.
Intangible assets with indefinite lives
Sandhurst Trustees Limited trustee licence
The recoverable amount of the STL cash generating unit has been determined based on a fair value
calculation using the projected cash flows for 2005/06 and applying a multiple of 12 (2005:12).
Management believe this multiple is appropriate for this business. For impairment testing purposes,
the fair value has been allocated on the basis of 80% of the fair value relates to the trustee licence
and 20% of the fair value relates to the goodwill.
The multiple would have to decline to 1.5 before impairment would be evident.
Multiples
Multiples used in impairment testing - management believe that the appropriate multiples to be used
in impairment testing of the majority of cash generating units within the group fall within the range 8 to
12. This range has been derived taking into account a number of relevant factors that would influence
the multiple relating to businesses within the Bendigo Bank group.
Carrying amount of goodwill allocated to each of the cash generating units or group of cash
generating units
Carrying amount of goodwill and intangible assets
Sandhurst Trustees Limited
- goodwill
- trustee licence
Worley Securities Pty Ltd
Benhold Pty Ltd (IOOF Building Society)
Victorian Securities Corporation Limited
First Australian Building Society Limited
Oxford Funding Pty Ltd
- goodwill
- customer list
Total value allocated
79
2006
$m
0.8
8.4
-
13.7
2.7
34.6
13.2
2.6
76.0
2005
$m
0.8
8.4
0.1
13.7
2.7
34.6
15.4
4.3
80.0
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Key assumptions used in value in use calculation for the cash generating units or groups of
cash generating units for 30 June 2006 and 30 June 2005
The following describes each key assumption on which management has based its cash flow
projections when determining the value in use of the cash generating units or groups of cash
generating units:
Oxford Funding Pty Ltd
Income and expense projections have been based on historical trends, together with expectations of
senior management with regard to business growth and expense increases. The 2005/06 (2005:
2004/05) cash flows are based on year-to-date February 2006 actual performance plus forecasts to
June 2006. The four years after 2005/06 are based on a cash flow growth of 10% per annum (2005:
10%), which is believed by management to be appropriate for this cash generating unit. The
company was purchased by Bendigo Bank in April 2005 and now has access to the business banking
distribution network of the bank, which should assist the company to achieve its projections.
25.
OTHER ASSETS
Accrued income
Reserve fund
Prepayments
Sundry debtors
Consolidated
Bendigo Bank
2006
$m
21.1
10.5
6.3
45.8
83.7
2005
$m
22.9
9.5
4.7
79.6
116.7
2006
$m
15.8
-
6.3
36.8
58.9
2005
$m
19.3
-
.5
4
70.1
93.9
Other assets are generally non-interest bearing and are short-term by nature.
Sundry debtors are normally settled within 30 days.
The Reserve fund is required to be maintained by Sandhurst Trustees Limited under the Trustee Companies Act 1984, to provide for the event of the
appointment of a liquidator, a receiver and manager or an administrator of a trustee company. The at call investments component of the fund attracts
interest at an effective interest rate of 5.64% (2005: 5.14%). The managed fund and share investments component attract an effective yield of 7.83%
(2005: 3.46%). The land and buildings component is carried at fair value, based on an independent valuation as at 30 June 2004.
80
BENDIGO BANK LTD
ABN 11 068 049 178
26.
DEPOSITS
Retail
Branch network
Treasury sourced
Wholesale
Domestic
Offshore
Deposits by geographic location
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia/Northern Territory
Western Australia
Tasmania
Off-shore/other
Maturity analysis
At call
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Longer than 5 years
Full Financial Report
Period ending 30 June 2006
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
10,771.5
575.3
11,346.8
1,439.8
813.2
2,253.0
13,599.8
8,066.1
1,540.2
84.7
1,916.9
197.4
802.2
268.6
723.7
13,599.8
5,874.1
4,365.1
2,141.0
1,219.3
0.3
13,599.8
9,260.0
783.2
10,043.2
1,386.3
1,142.7
2,529.0
12,572.2
7,640.2
1,349.2
101.2
1,606.0
166.8
635.0
210.9
862.9
12,572.2
4,646.9
4,332.1
1,882.1
1,710.7
0.4
12,572.2
10,595.3
588.3
11,183.6
1,066.3
813.2
1,879.5
13,063.1
7,730.3
1,485.7
82.2
1,829.6
191.1
780.0
261.0
703.2
13,063.1
5,507.0
4,283.5
2,057.1
1,215.2
0.3
13,063.1
9,092.4
792.7
9,885.1
772.5
1,142.7
1,915.2
11,800.3
6,910.0
1,335.0
101.0
1,578.4
166.0
633.2
210.6
866.1
11,800.3
4,651.0
4,254.8
1,805.7
1,088.4
0.4
11,800.3
Deposits-retail branch network consist of a variety of investor products on an at call or term deposit basis. Interest is payable
monthly, quarterly, half-yearly or at maturity of the deposit, depending on the product features. Certain transactions attract
fees, which are generally charged on a monthly basis - these fees can be reduced, or eliminated, by customers depending on
the number and value of "relationships" the customer has with the economic entity. Carded interest rates range from 0% to
5.00% (2005: 0% to 5.55%).
Deposits-retail treasury sourced include certificates of deposit issued with an average maturity of 51 days (2005: 64 days) with
effective interest rates of 5.36% to 6.26% (2005: 4.60% to 6.98%) and term deposits, fixed and floating rate notes and 11am
call deposits. Fixed term deposits have an average maturity of 128 days (2005: 393 days). 11am call monies are available at
call. Interest rates on this group of deposits range from 5.0% to 6.4% (2005: 3.84% to 7.40%).
Deposits-wholesale domestic deposits include certificate of deposits with an average maturity of 72 days (2005: 62 days) with
effective interest rates of 5.65% to 6.08% (2005: 4.77% to 5.82%). Fixed term deposits have an average maturity of 1007 days
(2005: 436 days). 11am call monies are available at call. Interest rates on this group of deposits range from 5.5% to 6.6%
(2005: 5.00% to 6.60%).
Deposits-wholesale offshore comprise a Euro medium term note program (EMTN) and a Euro commercial paper program
(ECP). At balance date, the principal of borrowings under the EMTN program was AUD530.2 million (2005: AUD 464.5
million), taking account of the conversion inherent in the cross currency swaps. The average interest rate in BBSW +.4448%
(2005: +.5303%) and rates are reset on a quarterly basis. The notes on issue mature on 26 March 2007, 10 September 2007
and 1 April 2008.
ECPs on issue have an average maturity of 148 days (2005: 37 days) with an effective interest rate of 5.68% to 6.27% (2005:
5.69%).
81
BENDIGO BANK LTD
ABN 11 068 049 178
27.
FINANCIAL LIABILTIES
Sundry creditors
Accrued expenses and outstanding claims
Payables are non-interest bearing and are generally settled within 30 days.
28.
PROVISIONS
(a) Balances
Employee benefits (Note 33)
Other loss events
Rewards program
Property Rent
Dividends
Full Financial Report
Period ending 30 June 2006
Consolidated
2006
$m
2005
$m
34.0
106.0
140.0
47.3
64.0
111.3
Bendigo Bank
2006
$m
18.6
92.2
110.8
2005
$m
33.5
46.8
80.3
Consolidated
Bendigo Bank
2006
$m
32.4
0.4
2.6
1.9
0.1
37.4
2005
$m
28.6
1.1
2.2
-
0.1
32.0
2006
$m
31.4
0.4
2.6
1.9
0.1
36.4
2005
$m
27.8
1.1
2.1
-
0.1
31.1
Provision for other loss events is in relation to possible losses associated with outstanding legal issues. These are expected to be resolved within 12
months of balance date.
Provision for rewards program is to recognise the liablility to customers in relation to points earned by them under the Bendigo Bank Rewards Program
and is measured on the basis of full value of points outstanding at balance date. As reward points "expire" after three years, the balance will be utilised, or
forfeited within a three year period.
Provision for property rent is to recognise the difference between actual property rent paid and the property rent expense recognised in the income
statement. The value recognised in the income statement is in accordance with AASB 117 "Leases" whereby the lease expense is to be recognised on a
straight-line basis over the period of the lease. The provision is expected to be utilised over the period of the respective leases, typically a period
between three and ten years. However, it is expected that a balance will continue as old leases expire and are replaced by new leases.
Provision for dividend represents the residual carried forward balance in relation to shareholders that participate in the dividend reinvestment plan. It is
expected that the current balance will be utilised within a 12 month period. However, an ongoing balance will continue unless all outstanding balances
are paid to shareholders upon ceasing participation in the dividend reinvestment plan.
(b) Movements
Employee benefits
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Other loss events
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Rewards program
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Property Rent
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Dividends
Opening balance
Additional dividends provided
Dividends paid during the year
Closing balance
28.6
17.6
(13.8)
32.4
1.1
0.5
(1.2)
0.4
2.2
1.6
(1.2)
2.6
-
1.9
-
1.9
0.1
63.6
(63.6)
0.1
24.8
21.5
(17.7)
28.6
0.7
6.8
(6.4)
1.1
1.6
2.4
(1.8)
2.2
-
-
-
-
0.1
55.1
(55.1)
0.1
27.8
16.9
(13.3)
31.4
1.1
0.5
(1.2)
0.4
2.1
1.6
(1.1)
2.6
-
1.9
-
1.9
0.1
63.6
(63.6)
0.1
23.4
20.9
(16.5)
27.8
0.7
6.8
(6.4)
1.1
1.6
2.3
(1.8)
2.1
-
-
-
-
0.1
55.1
(55.1)
0.1
82
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
29.
SUBORDINATED DEBT
Subordinated capital notes
Rollover notes - series 1
Maturity analysis
Not longer than 3 months
Longer than 5 years
Consolidated
Bendigo Bank
2006
$m
294.0
13.1
307.1
13.1
294.0
307.1
2005
$m
249.0
13.1
262.1
-
262.1
262.1
2006
$m
294.0
13.1
307.1
13.1
294.0
307.1
2005
$m
249.0
13.1
262.1
-
262.1
262.1
Subordinated capital notes have an average maturity of 7.64 years (2005: 7.85 years) with effective interest rates of 6.29% to 7.95% (2005: 6.43% to 7.55%).
Rollover notes - series 1 were issued on 19 October 2001. The maturity date in 19 October 2011 and interest is either floating, at the 180 bank bill rate plus
a margin of 1.50% per annum, or fixed and floating. The fixed rate of 7.00% per annum applies until 19 October 2006, when these notes revert to the floating
rate as previously described.
30.
ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid - 140,850,961 (2005: 139,106,669)
Preference shares of $100 face value fully paid - 900,000 (2005: 900,000 paid to $50)
Consolidated
Bendigo Bank
2006
$m
564.1
88.3
652.4
2005
$m
546.3
43.0
589.3
2006
$m
564.1
88.3
652.4
2005
$m
546.3
43.0
589.3
Effective 1 July 1998, the corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the parent
does not have authorised capital nor par value in respect of its issued shares.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Preference share (BPS) dividends are non-cumulative and are payable quarterly in arrears, at the discretion of he directors, based on a dividend rate
equal to the sum of the 90 day bank bill rate plus the initial margin multiplied by one minus the company tax rate. It is expected that dividends paid will be
fully franked. The BPS are perpetual, but may be redeemed by Bendigo Bank subject to prior approval of APRA.
Movement in ordinary shares on issue
Opening balance - 1 July
Shares issued under:
Bonus share scheme - 168,244 @ $11.07; 124,755 @ $14.01;
(2005: 229,806 @ $9.74; 148,221 @ $9.89)
Dividend reinvestment plan - 866,908 @ $11.07; 584,385 @ $14.01;
(2005: 1,107,312 @ $9.74; 792,975 @ $9.89)
Employee share plan - Nil (2005: 300,000@ $9.99)
Share buy back program - Nil (2005: 2,850,000 @ $9.46 average price)
Closing balance - 30 June
Movements in preference shares on issue
Opening balance 1 July - 900,000 partly paid to $50 (2005: Nil)
Shares issued - Nil (2005: 900,000 partly paid to $50)
Payment of unpaid portion of existing shares
Share issue expenses offset by tax benefit
Closing balance 30 June - 900,000 fully paid to $100 (2005: 900,000 partly paid to $50)
546.3
551.6
-
17.8
-
-
564.1
43.0
-
45.0
0.3
88.3
-
18.7
3.0
(27.0)
546.3
-
45.0
-
(2.0)
43.0
83
BENDIGO BANK LTD
ABN 11 068 049 178
31.
RESERVES
Full Financial Report
Period ending 30 June 2006
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
Asset revaluation reserve
(a) Nature and purpose
The asset revaluation reserve is used to record increments and decrements in
the value of non-current assets. The reserve can only be used to pay dividends
in limited circumstances.
(b) Movements
Opening Balance
AIFRS transition adjustment - after tax value of revaluations
Transfer asset revaluation reserve to retained earnings (sold assets)
Transfer asset revaluation reserve to retained earnings (revalued buildings depn)
Net revaluation increments
Tax effect of net revaluation increments
Closing Balance
Net unrealised gains reserve
(a) Nature and purpose
The net unrealised gains reserve is used to record unrealised gains and losses on
investments in the available for sale portfolio.
(b) Movements
Opening Balance
Net unrealised gains/(losses)
Cash flow hedge reserve
(a) Nature and purpose
The cash flow hedge reserve records the portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective hedge.
(b) Movements
Opening Balance
Net gains on cash flow hedges
Cash flow hedge reserve - associates
(a) Nature and purpose
Associates record the group's share of the portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective hedge.
(b) Movements
Opening Balance
Net gains on cash flow hedges
General reserve for credit losses
(a) Nature and purpose
The general reserve for credit losses records the value of a reserve maintained to
recognised credit losses inherent in the group's lending portfolio, but not yet
identified. The bank is required to maintain general provisions (includes general reserve
for credit losses and collective provision) by APRA at a minimum level of 0.50% (net of tax)
of risk-weighted assets.
(b) Movements
Opening Balance
Creation of GRCL on transition to AIFRS
Increase in general reserve for credit losses
General reserve for credit losses - associates
(a) Nature and purpose
The general reserve for credit losses - associates records the group's share of
an associate company's GRCL in accordance with equity accounting.
(b) Movements
Opening Balance
Creation of GRCL on transition to AIFRS
Increase in general reserve for credit losses
4.0
18.0
(14.3)
(0.2)
24.9
(3.3)
29.1
-
(0.1)
(0.1)
-
2.3
2.3
-
0.4
0.4
-
36.7
3.9
40.6
-
4.8
1.7
6.5
5.4
1.2
(2.3)
-
-
(0.3)
4.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.0
18.0
(14.3)
-
24.8
(3.3)
26.2
-
(0.1)
(0.1)
-
2.3
2.3
-
-
-
-
36.7
3.9
40.6
-
-
-
-
2.0
0.9
(1.7)
-
-
(0.2)
1.0
-
-
-
-
-
-
-
.
-
-
-
-
-
-
-
-
Total reserves
78.8
4.0
69.0
1.0
84
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
32. MINORITY INTEREST
Interest in:
Ordinary shares
Retained earnings
Reconciliation of minority equity interest in controlled entities:
Opening balance
Add share of operating loss
Derecognition of minority interest
Other
Closing balance
33.
EMPLOYEE BENEFITS
Employee benefits liability
Provision for annual leave
Provision for other employee payments
Provision for long service leave
Provision for sick leave bonus
Provision for employee on costs
Directors' retirement allowance
Aggregate employee benefits liability
Consolidated
Bendigo Bank
2006
$m
-
(0.6)
(0.6)
(0.4)
-
(0.2)
-
(0.6)
12.0
4.0
10.6
1.8
3.6
0.4
32.4
2005
$m
0.3
(0.7)
(0.4)
(0.2)
(0.3)
-
0.1
(0.4)
10.6
3.6
8.6
1.5
3.2
1.1
28.6
2006
$m
2005
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11.5
4.0
10.3
1.7
3.5
0.4
31.4
10.1
3.6
8.3
.5
1
3.2
.1
1
27.8
It is anticipated that annual leave provided at balance date will be paid in the ensuing 12 month period.
Other employee payments are expected to be paid in September 2006.
Long service leave is taken with agreement between employee and employer, or on termination of employment.
Sick leave bonus is paid to entitled employees on termination of employment.
Directors' retirement allowance was discontinued as at 31 August 2005. Further details are provided in the 2006 Remuneration Report.
85
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
34.
BENDIGO EMPLOYEE SHARE OWNERSHIP PLAN
Legacy Plan
The Company has discontinued the existing loan-based Employee Share Ownership Plan (“Plan”)
which was open to all employees in the Group, including the Managing Director and executives.
The Plan will continue as a legacy plan until such time as the loans provided to fund share
purchases under the Plan have been repaid. There have been no issues of shares under this Plan
since November 2004.
The general design of the Plan is consistent with the New Plan as described below.
The market value of the Company’s shares at balance date was $12.90. At this price there is
currently no shortfall liability on any loan made under this plan.
New Plan
As announced on 23 May 2006, the Bank has established a new loan-based limited recourse
Employee Share Plan (“Plan”). The Plan is substantially the same as the Legacy Plan. However, it
is only available to general staff, and executives (including the Managing Director), may not
participate in it.
Under the terms of the Plan, shares will be issued at the prevailing market value. The shares must
be paid for by the staff member. The Plan provides staff members with an interest-free loan for the
sole purpose of acquiring Plan shares. Dividends paid on shares issued under the plan are applied
primarily to repay the loans. Staff cannot deal in the shares until the loan has been repaid.
When a staff member ceases their employment, they are required to repay their loan within three
months, unless they retire, then they have six months to repay. The plan allows staff to request the
plan administrator to sell their employee shares to repay their loan. In the event that the proceeds
of sale of the shares is insufficient to fully repay the loan, the shares are forfeited to the Company’s
nominee in discharge of the loan.
The Board has recently approved, on the recommendation of the Managing Director, a share issue
to general staff under the Plan. The share issue was completed during September 2006.
Issues under the Plan are valued and expensed in accordance with applicable accounting
requirements.
86
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Employee share and loan values
Consolidated
Employee Share and Loan Values
Value of unlisted employee shares on issue at 30 June 2006 -
4,798,426 shares @ $12.90 (2005 - 5,251,744 shares @ $9.87)
Value of outstanding employee loans at beginning of year relating to employee shares
Value of new loans relating to employee shares issued during year
Value of repayments of loans during year
Value of outstanding employee loans at end of year relating to employee shares
2006
$m
61.9
30.0
-
(4.4)
25.6
2005
$m
51.8
31.4
3.0
(4.4)
30.0
Number of employees with outstanding loan balances
1,461
1,710
Indicative cost of funding employee loans
Average balance of loans outstanding
Average cost of funds
After tax indicative cost of funding employee loans
Earnings per ordinary share - actual
Earnings per ordinary share - adjusted for interest foregone
- cents
- cents
27.6
31.0
4.79%
4.31%
0.9
78.0
78.6
0.9
67.5
68.1
The cost of employee interest-free loans is calculated by applying the bank's average cost of funds
for the financial year to the average outstanding balance of employee loans for the financial year.
This cost is then tax-effected at the company tax rate of 30% (2005: 30%).
Earnings per ordinary share - adjusted is calculated by adding the after tax indicative cost of funding
employee loans to profit available for distribution to ordinary shareholders. This adjusted earnings
figure is divided by the weighted average number of ordinary shares.
35.
AUDITOR’S REMUNERATION
Chief entity auditors
The auditor of Bendigo Bank Limited is Ernst & Young
Amounts received, or due and receivable by the auditors for:
-auditing the financial statements of the chief entity and
any other entity in the economic entity
-taxation services in relation to the chief entity and
any other entity in the economic entity
-other services in relation to the chief entity and
any other entity in the economic entity
Consolidated
Bendigo Bank
2006
$
2005
$
2006
$
2005
$
612,456
523,977
612,456
468,332
176,084
138,128
152,103
138,128
109,000
897,540
215,297
877,402
109,000
873,559
195,211
801,671
87
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
36.
DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Details of key management personnel
The directors and executives, including key management personnel (being the directors of the
Bank and the executives who have the authority and responsibility for planning, directing and
controlling the activities of the Group), and the five most highly remunerated executives of the
Group and the Company for the 2006 financial year.
(i) Directors
Robert N Johanson
Robert G Hunt AM
Neal J Axelby
Jennifer L Dawson
Donald J Erskine
Richard Guy OAM
Terence J O’Dwyer
Deborah L Radford
Kevin E Roache
Antony D Robinson
(ii) Executives
Chairman (non executive) - appointed chairman 28 March 2006
Managing Director
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
- appointed 27 February 2006
- appointed 24 April 2006
- retired from the Board on 31 August 2006
Chief General Manager, Solutions
Chief General Manager, Strategy and Human Resources
Marnie A Baker (1)
Gregory D Gillett
Richard H J Hasseldine Chief General Manager, Group Delivery
Michael J Hirst
Russell P Jenkins (1)
Vicky M Kelly
K Craig Langford
Chief Operating Officer
Chief General Manager, Retail and Distribution
Chief Information Officer
Chief Financial Officer
(1) Mr Jenkins and Mrs Baker became Key Personnel following changes to their position responsibilities implemented
during September 2005. There were no other changes in respect to the group’s key management personnel between the
reporting date and the date the financial report was authorized for issue.
(b) Compensation of key management personnel
The company has applied the exemption under Corporations Amendments Regulation 2006
which exempts listed companies from providing remuneration disclosures in relation to their key
management personnel in their annual financial reports by Accounting Standard AASB 124
“Related Party Disclosures”. These remuneration disclosures are provided in the “Remuneration
Report” section of the Directors’ Report designated as audited.
88
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(c) Shareholdings of directors and named executives (including their related parties)
Shares held in
Bendigo Bank Ltd
Directors
R N Johanson
Balance 1 July 2005
Net Change
Balance 30 June 2006
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
267,393
-
1,000
R G Hunt AM
81,202
740,000
N J Axelby
J L Dawson
D J Erskine
R A Guy OAM
T J O’Dwyer
D L Radford
K E Roache
A D Robinson
Executives
M A Baker
G D Gillett
R H Hasseldine
M J Hirst
V M Kelly
34,752
15,998
242,121
724,488
50,300
-
42,578
-
-
-
-
-
-
-
-
-
4,550
2,313
150
150
57,850
139,410
45,000
50,000
2,622
129,000
K C Langford
450
123,367
R P Jenkins
14,777
76,160
-
100
150
-
200
-
-
200
-
500
-
-
-
-
-
-
5,057
31,010
6,807
632
-11,010
17,211
-
1,000
1,475
2,500
179
91
-
-
-
-
586
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
272,450
-
1,000
112,212
740,000
41,559
16,630
231,111
741,699
50,300
1,000
44,053
2,500
-
-
-
-
-
-
-
-
4,729
2,404
150
150
57,850
139,410
45,000
50,000
2,622
129,000
450
123,367
15,363
76,160
-
100
150
-
200
-
-
200
-
500
-
-
-
-
-
-
Total
1,483,844
1,360,787
2,150
55,538
0
0
1,539,382
1,360,787
2,150
All equity transactions with directors and named executives have been entered into under terms and
conditions no more favourable than those the entity would have adopted if dealing at arm’s length
other than shares issued under the Employee Share Ownership Plan. Issue of shares under the
Employee Share Ownership Plan are made under conditions disclosed in Note 34.
89
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(d) Loans to directors and named executives (including their related parties)
(i) Details of aggregates of loans to directors and named executives (including their related parties) are as
follows:
Balance
at
beginning
of period
$’000
2006
2005
2006
2005
30,951
20,080
5,476
3,738
Directors1
Executives1
Total directors and executives
2006
2005
34,433
23,818
Interest
charged
Interest
not
charged
Write-off
Balance at
end of
period
Number of
group
30 June 2006
$’000
$’000
$’000
$’000
$’000
1,775
1,552
172
67
1,953
1,618
147
163
152
114
299
277
-
-
-
-
-
-
28,719
30,951
5,138
3,482
33,856
34,433
7
7
7
5
14
12
1 Balances include loans provided to the Managing Director and executives in connection with share issues
under the employee share ownership plan.
(ii) Details of individuals (including their related parties) with loans above $100,000 in the reporting period
are as follows:
Balance
at
beginning
of period
$’000
Interest
charged
Interest
not
charged
Write-off
Balance
at end of
period
Highest
owing in
period
$’000
$’000
$’000
$’000
$’000
Directors
R N Johanson
N J Axelby
J L Dawson
D J Erskine
R A Guy OAM
K E Roache
R G Hunt AM
Staff share loan
BCT share loan
Executives
M A Baker
Staff share loan
Loans
K C Langford
Staff share loan
Loans
M J Hirst
Staff share loan
R J Hasseldine
Staff share loan
R P Jenkins
Staff share loan
Loans
V Kelly
Staff share loan
Loans
G Gillett
Staff share loan
Loans
811
293
689
21,159
211
1,463
1,253
5,073
176
327
85
615
185
355
314
373
1,209
625
436
666
286
62
19
44
1,442
10
112
86
-
-
-
6
-
2
-
-
-
82
-
58
-
24
90
-
-
-
-
-
-
-
139
8
15
-
28
-
17
15
17
-
29
-
31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
670
294
243
20,273
91
1,424
738
4,811
176
306
81
571
-
338
298
827
306
689
21,607
211
1,765
1,253
5,073
176
327
85
615
185
355
314
347
1,050
373
1,209
579
530
617
420
625
594
666
420
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(d) Loans to directors and named executives (including their related parties) (continued)
Terms and conditions of the loans
Staff Share Loans provided to Mr R G Hunt and Executives are under the terms of Bank’s
Employee Share Ownership Plan (“Plan”). Details of the Plan’s terms and conditions are provided
at Note 33 to the financial statements
Loans totalling $20,272,715 were made to companies controlled by Mr D J Erskine. The loans
were provided in connect with property development and commercial property investment
arrangements in which Mr Erskine is associated. The loans were made in accordance with the
Bank’s prevailing lending terms and conditions.
(e) Other transactions of directors and director related entities
Mr K Roache as partner of the legal firm Coulter Roache has provided legal services to Bendigo
Bank Ltd by way of mortgage document preparation based on normal commercial terms and
conditions. The amount paid or payable during the year totalled $5,402 (2005: $46,600). The
firm also leases its office premises from Bendigo Bank under a formal lease arrangement. The
lease arrangement was determined on the basis of prevailing market terms and conditions.
Mr R Johanson is a director of the Grant Samuel Group, which provided consulting services to
Bendigo Bank Ltd based on normal commercial terms and conditions. A protocol, approved by
the Board, has been established for the engagement of Grant Samuel by the Bank which includes
arrangements for dealing with conflicts of interest.
The services are provided in accordance with scheduled fee rates which were discussed and
approved by the Board in the absence of Mr Johanson. The amount paid or payable during the
year totalled $832,115 (2005: $462,528).
During the year, a related entity of Ms J Dawson provided relocation services to Bendigo Bank
Ltd, on normal terms and conditions. The amount paid or payable during the year totalled
$14,860 (2005: $26,852).
Associate company directorships:
Mr R Johanson is non-executive directors of Elders Rural Bank Limited, an associate entity of
Bendigo Bank. Mr Johanson was paid a director fee of $59,000 plus Superannuation Guarantee
Charge by Elders Rural Bank Limited in connection with the directorship. Mr R Guy was also non-
executive director of Elders Rural Bank Limited, an associate entity of Bendigo Bank, for the six
months ended 31 December 2005. Mr Guy was paid a director fee of $28,000 plus
Superannuation Guarantee Charge by Elders Rural Bank Limited in connection with the
directorship.
91
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
37. RELATED PARTY DISCLOSURES
Ultimate Parent Entity
Bendigo Bank Limited is the ultimate parent entity.
Wholly owned group transactions
Bendigo Bank Limited is the parent entity of all entities listed in Note 20 - Particulars in relation to
controlled entities. Transactions undertaken during the financial year with those entities are eliminated
in the consolidated financial report.
The transactions principally arise from the provision of administrative, distribution, corporate and the
general banking services.
Additionally, Bendigo Bank pays operating costs and banks receipts on behalf of certain controlled
entities which are financed via unsecured interest free intercompany loans. The loans have no fixed
repayment date. Amounts due from and due to controlled entities at balance date are shown in the
Balance Sheet. The balance of these inter-company loans is included in the Amount owing to/(from)
subsidiaries column of the table below.
Interest received or receivable from and paid or payable to controlled entities and dividends received
and receivable from controlled entities is disclosed in Note 4 - Profit from continuing activities and is
included in the table below.
Material transactions between Bendigo Bank and its subsidiaries during the period were as follows:
Bendigo Finance Pty Ltd
Worley Securities Pty Ltd
National Mortgage Market Corporation Limited
National Assets Securitiisation Pty Ltd
Fountain Plaza Pty Ltd
Victorian Securities Corporation Limited
Bendigo Investment Services Limited
Benhold Pty Ltd
IOOF Building Society Pty Ltd
Cass Comm Pty Ltd
Community Developments Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Sandhurst Trustees Limited
Oxford Funding Pty Ltd
First Australian Building Society Limited*
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
Net receipts
Supplies,
Net amount
and fees
fixed assets
owing
paid to
and services
to/(from)
subsidiaries
charged to
subsidiaries
subsidiaries
at 30 June
$m
(0.8)
0.1
0.9
-
3.7
3.2
0.1
0.3
4.8
2.6
(7.8)
(0.9)
8.3
8.1
-
-
-
-
7.2
2.6
-
(1.3)
0.1
(0.1)
8.5
8.6
(1.0)
(39.1)
1.4
88.2
$m
-
-
0.9
1.0
3.1
5.5
0.2
-
26.8
1.0
3.1
3.1
8.7
7.9
-
-
-
-
-
-
1.0
0.6
0.4
0.5
8.7
7.6
0.1
-
-
-
$m
(2.3)
(1.5)
(0.2)
(0.2)
4.4
3.8
0.8
0.9
(22.7)
(0.7)
(7.7)
3.2
0.2
0.6
(5.2)
(5.2)
20.4
20.4
2.0
(5.2)
(5.6)
(4.6)
(1.4)
(1.1)
(1.4)
(1.2)
(40.2)
(39.1)
(5.1)
(3.7)
* The 2005 net receipts figure for First Australian Building Society includes a return of capital to Bendigo Bank Limited of $95.2 million.
92
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Bendigo Bank provides funding and guarantee facilities to several subsidiary companies as detailed in
the following table. The balance outstanding on these facilities is included in the amount owing
to/(from) subsidiaries in the above table.
Subsidiary
Sandhurst Trustees Limited
Bendigo Asset Management Limited
Bendigo Investment Services Limited
Victorian Securities Corporation Limited
Community Exchanges Australia Pty Ltd
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Oxford Funding Pty Ltd
Facility
Standby
Overdraft
Guarantee
Standby
Guarantee
Overdraft
Overdraft
Overdraft
Guarantee
Overdraft
Guarantee
Security
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Limit
$m
20.0
2.0
-
10.0
-
1.3
0.2
0.8
-
59.0
5.3
Drawn at
30 June 2006
$m
-
1.9
-
-
-
1.2
0.2
0.1
-
44.3
-
Guarantees disclosed in the above table with a zero limit are less than $0.1 million.
All funding and guarantee facilities are provided to subsidiary companies on normal commercial terms
and conditions.
Several subsidiary companies have bank accounts and investment funds held with Bendigo Bank
Limited under normal terms and conditions. These balances are included in the amount owing
to/(from) subsidiaries in the above table.
The following dividends received by Bendigo Bank Limited from subsidiary companies are included in
the net receipts/fees paid column of the above table:
Sandhurst Trustees Limited
2006
2005
There were no material transactions between subsidiary companies.
$m
16.2
13.7
93
BENDIGO BANK LTD
ABN 11 068 049 178
Other related party transactions
Securitised and sold loans
Full Financial Report
Period ending 30 June 2006
The bank securitised or sold loans totalling $325 million (2005: $304 million) during the financial year.
Of this total, $325 million (2005: $297.5 million) were sold to the Common Funds managed by
Sandhurst Trustee Limited, $Nil million (2005: $6.5 million) were substitutions into our securitisation
programs.
Associated Entities
Bendigo Bank Limited has investments in associated entities as disclosed in Note 21 - Investments in
associates. The group has transactions with the associated entities, principally relating to
commissions received and paid, services and supplies procured from associates and fees charged in
relation to the provision of banking, administrative and corporate services. These revenue and
expense items are included in the relevant values disclosed in Note 4 - Profit from continuing
activities. The transactions are conducted on terms and conditions no more favourable than those
which it is reasonable to expect would have been adopted if dealing with the associated entities at
arm's length in the same circumstances.
During the financial year, transactions took place between Bendigo Bank group and associate
companies as follows:
Elders Rural Bank Ltd
Tasmanian Banking Services Ltd
Community Sector Enterprises P/L
Caroline Springs Financial Services Pty Ltd
Silver Body Financial Services P/L
Commissions
Supplies and Amount owing
and fees paid
services
to/(from)
to associates
provided to
associates at
associates
30 June
$m
1.0
0.8
7.7
7.3
2.4
1.9
0.2
0.2
0.2
-
$m
3.2
2.7
5.8
5.3
2.2
1.5
0.4
0.5
0.6
-
$m
0.4
0.3
0.4
0.2
(0.1)
-
-
-
-
-
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
Dividends received and receivable from associated entities are disclosed in Note 4 - Profit from
continuing activities.
Bendigo Bank Limited provides loans, guarantees and/or overdraft facilities to associated companies
in connection with cash flow management, and the payment of administration costs on behalf of the
associated companies. The loans have agreed repayment terms which vary according to the nature
of the facility. The outstanding balances of these loans are disclosed in the above table.
94
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
38.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICES
The recognition and management of risk is an essential element of the Group’s strategy. The Board,
being ultimately responsible for the management of risks associated with the Group’s activities, has
established an integrated framework of committee structures, policies and controls to identify, assess,
monitor and manage risk.
The risk management strategy is based upon risk principles approved by the Board and is
underpinned by a system of delegations, passing from the Board through Board committees, the
Managing Director and management committees to the business.
In accordance with the Bendigo Bank’s Board Charter, the Board is responsible for oversight of the
establishment, implementation, review and monitoring of risk management strategy, systems and
policies, taking into account the risk tolerance of the Group, the overall business strategy and
management expertise.
The Board has established specific audit, risk, credit, governance and IT strategy committees. Each
committee operates under a formal charter (reviewed annually) that is approved by the full Board.
Whilst the Board has responsibility for establishing the priorities and the Group’s appetite for risk, the
Managing Director and other executive management are responsible for developing strategies and
business plans commensurate with the risk appetite set by the Board.
The Executive Committee has responsibility for managing and monitoring the day to day activities of
the Group (including the management of risk) and implementing the Board approved strategies and
plans.
To support risk management at the executive management level dedicated functions charged with
responsibility for monitoring, measuring and evaluating risk are in place.
The role of the risk management functions is to facilitate the implementation of the risk policies
associated specifically with both quantifiable and unquantifiable risks arising from the activities of the
Group. Group Risk and the Strategic Finance Unit ensure that a discipline is in place to identify the
risks faced by the Group and that controls to manage these risks are adequate and functioning
effectively. The Units have direct access to the Board through the BBL Credit and Risk Committees.
The Group’s Internal Audit function is an independent function that operates under a charter and
annual audit plan approved by the BBL Audit Committee. The Board, on recommendation of the BBL
Audit Committee, approves the appointment of the head of internal audit.
The independent internal audit function, incorporating Credit Inspection, oversees all functions across
the Group and has direct access to the Board through the BBL Audit Committee.
The risk management framework of the Group is based on:
• Core Risk Principles – overriding principles governing all activities and risk monitoring
procedures; and
• Specific Risk Policies and Procedures – appropriate policies, procedures and processes
implemented to manage specific risks.
The Board, and the industry regulator, have identified the key risks to which the Bank is exposed as
being credit, liquidity, market (includes interest rate and currency) and operational risk. Specific risk
management structures have been developed and implemented by the Group to manage these risks.
In addition to managing risk categories below the Board and Executive manage strategic and
reputation risk.
Credit Risk
Credit risk is the potential that the Group will suffer a financial loss due to the unwillingness or inability
of a counterparty to fully meet their contractual debts and obligations.
The BBL Credit Committee is responsible for monitoring adherence to credit policies, practices and
procedures within the Group. The Board has established levels of delegated lending authority under
which various levels of management and the BBL Credit Committee can approve transactions.
95
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Group Credit Risk has responsibility for providing the framework, policies, analysis and reporting for
managing credit risk throughout the Group.
A standard risk grading methodology is applied to assess, measure and report the quality of lending
assets. The maximum credit lending exposure at balance date is the outstanding value of those
assets and does not include the value of any security held.
Liquidity Risk
Liquidity risk is the inability to access funds, both anticipated and unforeseen, which may lead to the
Group being unable to meet its obligations in an orderly manner as they arise or forgoing investment
opportunities.
Group Strategic Finance is responsible for implementing liquidity risk management strategies in
accordance with approved policies and adherence is monitored by the Asset Liability Management
Committee and Board Risk Committee. This includes maintaining prudent levels of liquid reserves
and a diverse range of funding options to meet daily, short-term and long-term liquidity requirements.
Liquidity scenarios are calculated under stressed and normal operating conditions to assist in
anticipating cash flow needs and providing adequate reserves.
Interest rate risk
Interest rate risk is the potential for loss of earnings to the Group due to adverse movements in
interest rates.
Interest rate risk is managed through the Balance Sheet Management unit using gap analysis and
simulation modelling techniques. The objective is to enhance the Group’s earnings performance by
minimising fluctuations in net interest income and market value that may occur over time as a result of
adverse changes in interest rates.
Monitoring of adherence to policies, limits and procedures are controlled through the Asset Liability
Management Committee and the BBL Risk Committee.
Currency risk
Currency risk is the risk of loss of earnings to the Group due to adverse movements in exchange
rates. Currency risk of the Group arises from foreign currency wholesale funding activities and
customer related foreign exchange transactions.
It is the policy of the Group to hedge foreign currency wholesale funding and to manage its exposure
in relation to customer related foreign exchange transactions within approved limits and policy
requirements. Group Strategic Finance is responsible for managing currency risk under the
supervision of the Asset Liability Management Committee and BBL Risk Committee.
Trading occurs when positions are taken in financial instruments, equities, foreign exchange or
commodity markets with the objective of achieving a benefit from the actual or expected differences
that arise between the buying price and selling price, or from other price or interest rate variations.
Generally the benefits arising from these differences would be realised in a short to medium term time
period.
The Group’s policy does not permit the operation of a trading book. Trading positions in financial
instruments, equities, foreign exchange or commodity markets are not to be taken. Derivatives such
as interest rate swaps are utilised only to mitigate interest rate exposures in the balance sheet and to
maintain interest margin.
Concentrations of Risk
There is no significant concentration of risk other than those disclosed in this financial report.
Operational risk
Operational Risk is defined as the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events.
The Operational Risk Management Policy and Framework, in line with Basel II and the Australian
Standard on operational risk, has been developed and is maintained by Group Operational Risk. The
Group considers both the internal and external environment when it monitors and assesses
operational risk.
96
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
The policy is approved by the Board and applies to the whole of the Group. It defines operational risk
management roles and responsibilities. The Executive Committee and each individual Executive
member have day to day responsibility and accountability for the management of operational risk in
their line. In line with their role each staff member also has a responsibility to manage risk.
In addition to this overarching policy the Board has approved key policies relating to compliance,
business continuity, anti money laundering and fraud control.
Group Operational Risk has a role to support the Executive Committee and the business to develop,
implement, monitor and report on the effectiveness of implementation of the policy.
Group Operational Risk reports to the BBL Risk Committee on the status of the implementation of the
framework and implications of significant risks and risk events.
Insurance risk
Insurance risk is the risk that the true value of insurance liabilities, both outstanding claims liability and
premiums liability, will be greater than the estimated value of insurance liabilities. Monitoring of
individual claims is part of the Group’s credit risk process. Also, premiums are earned in accordance
with independent actuarial advice and are reviewed by an approved actuary.
Reinsurance risk
Reinsurance risk is the risk of purchasing insufficient reinsurance protection to limit insurer losses
during catastrophic events. Reinsurance risk is managed through a contract with Radian Insurance
Inc.
39.
FINANCIAL INSTRUMENTS
Fair value
Disclosed below is the estimated fair value of the economic entity's financial instruments presented in
accordance with the requirements of AASB 132 "Financial Instruments: Disclosure and Presentation”
(2005: AASB 1033 “Presentation and Disclosure of Financial Instruments”).
A financial instrument is defined by AASB 132 (2005: AASB 1033) as any contract that gives rise to
both a financial asset of one entity and a financial liability or equity instrument of another entity. A
financial liability is a contractual obligation either to deliver cash or another financial asset to another
entity, or, to exchange financial instruments with another entity under conditions that are potentially
unfavourable.
Methodologies
The methodologies and assumptions used depend on the terms and risk characteristics of the various
instruments and include the following:
Cash and cash equivalents, due to and from other financial institutions
The carrying values of certain on-balance sheet financial instruments approximate fair values. These
include cash and short-term cash equivalents, due to and from other financial institutions and accrued
interest receivable or payable. These instruments are short-term in nature and the related amounts
approximate fair value and are receivable or payable on demand.
Derivatives (assets and liabilities)
The fair value of exchange-rate and interest-rate contracts, used for hedging purposes, is the
estimated amount the Group would receive or pay to terminate the contracts at reporting date. The
fair value of these instruments are disclosed in Note 39.
97
BENDIGO BANK LTD
ABN 11 068 049 178
Fair value (continued)
Full Financial Report
Period ending 30 June 2006
Financial assets - available for sale and held to maturity (treasury)
The fair value of financial assets available for sale and held to maturity, including bills of exchange,
negotiable certificates of deposit, government securities and bank and other deposits, which are
predominantly short-term, is measured at amortised book value.
Financial assets - available for sale (share investments and shares in controlled entities)
The fair value of share investments is based on market value for listed share investments and
carrying values for unlisted share investments.
Loans and other receivables
The carrying value of loans and other receivables is net of specific and collective provisions for
doubtful debts (2005: Specific and general provisions).
For variable rate loans, excluding impaired loans, the carrying amount is a reasonable estimate of fair
value. The net fair value for fixed loans is calculated by utilizing discounted cash flow models (ie the
net present value of the portfolio future principal and interest cash flows), based on the maturity of the
loans. The discount rates applied are based on the current benchmark rate offered for the average
remaining term of the portfolio plus an add-on of the average credit margin of the existing portfolio,
where appropriate.
The net fair value of impaired loans is calculated by discounting expected cash flows using a rate
which includes a premium for the uncertainty of the flows.
Other assets
This category includes items such as sundry debtors, which are short-term by nature and the carrying
amount is therefore a reasonable estimate of fair value.
Deposits
The fair value of call, variable rate and fixed rate deposits repricing within six months is the carrying
value at balance date. The fair value of other term deposits is calculated using discounted cash flow
models, based on the deposit type and its related maturity.
Other financial liabilities
This category includes items such as sundry creditors which are short-term by nature and the carrying
amount is therefore a reasonable estimate of fair value.
Subordinated debt and other debt
The fair value of subordinated debt is calculated based on quoted market prices, where applicable.
For those debt issues where quoted market prices were not available, a discounted cash flow model
using a yield curve appropriate to the remaining maturity of the instrument is used.
98
BENDIGO BANK LTD
ABN 11 068 049 178
Fair value (continued)
Summary
Full Financial Report
Period ending 30 June 2006
The following table provides comparison of carrying and net fair values for each item discussed
above, where applicable:
CONSOLIDATED
Financial Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Financial assets held to maturity
Loans and other receivables
Investments in associates and joint ventures accounted for using the equity method
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Subordinated debt
BENDIGO BANK
Financial Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Amounts receivable from controlled entities
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Subordinated debt
Carrying value
Net fair value
2006
$m
2005
$m
2006
$m
2005
$m
270.8
209.0
28.4
360.9
94.4
1,370.6
12,436.7
143.5
83.7
166.3
13,599.8
20.0
140.0
307.1
214.4
209.0
28.4
360.9
225.5
151.2
1,291.8
11,948.0
40.1
58.9
166.3
13,063.1
22.2
110.8
307.1
253.1
188.9
3.1
-
42.5
1,570.1
11,392.4
118.1
116.7
143.3
12,572.2
6.3
111.3
262.1
115.9
182.6
3.1
-
157.9
145.6
1,505.9
10,762.6
10.0
93.9
143.3
11,800.3
6.2
80.3
262.1
270.8
209.0
28.4
360.9
94.4
1,370.6
12,773.5
143.5
83.7
166.3
13,364.8
20.0
140.0
299.2
214.4
209.0
28.4
360.9
225.5
151.2
1,291.8
12,282.9
40.1
58.9
166.3
12,834.3
22.2
110.8
299.2
253.1
188.9
3.1
-
42.5
1,570.1
11,724.0
118.1
116.7
143.3
12,367.4
6.3
111.3
253.4
115.9
182.6
3.1
-
157.9
145.6
1,505.9
11,090.3
10.0
93.9
143.3
11,601.0
6.2
80.3
253.4
99
BENDIGO BANK LTD
ABN 11 068 049 178
Interest rate risk
Full Financial Report
Period ending 30 June 2006
The economic entity's exposure to interest rate risks of financial assets and liabilities, both recognised
and unrecognised at the balance date are disclosed in the following table.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and liabilities.
These mismatches are managed as part of the overall asset and liability management process.
AS AT 30 JUNE 2006
Floating
interest
Fixed interest rate repricing :
Non-interest
Total
Weighted
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
& 6 months & 12 months
& 5 years
After
5 years
bearing
carrying value
average
per
effective
Balance sheet
interest rate
CONSOLIDATED
$m
$m
$m
$m
$m
$m
$m
$m
%
Assets
Cash and cash equivalents
171.6
Due from other financial institutio
n
Financial assets available for sal
e
Financial assets held to maturity
Loans and other receivables
Derivatives
Other assets
Total assets
Liabilities
-
-
15.2
7,095.1
-
-
-
-
179.1
656.0
1,217.2
-
-
-
-
181.8
619.8
392.2
-
-
-
-
-
79.6
456.0
-
-
-
-
-
-
-
-
-
-
3,224.8
19.0
-
-
-
-
7,281.9
2,052.3
1,193.8
535.6
3,224.8
19.0
Due to other financial institutions
-
-
-
-
3,802.8
4,064.8
2,843.1
2,766.0
-
-
-
-
172.0
-
-
135.1
-
-
-
-
3,802.8
4,236.8
2,978.2
2,766.0
24.8
-
24.8
-
-
-
-
-
-
-
-
-
Deposits
Derivatives
Subordinated debt
Other liabilities
Total liabilities
Equity
99.2
209.0
94.4
-
32.4
28.4
425.3
888.7
166.3
98.3
20.0
-
203.4
488.0
899.5
270.8
209.0
455.3
1,370.6
12,436.7
28.4
425.3
15,196.1
166.3
13,599.8
20.0
307.1
203.4
14,296.6
899.5
3.47
-
5.80
5.84
7.42
-
-
-
-
4.44
-
6.90
-
-
-
AS AT 30 JUNE 2005
Floating
interest
Fixed interest rate repricing :
Non-interest
Total
Weighted
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
& 6 months & 12 months
& 5 years
After
5 years
bearing
carrying value
average
per
effective
Balance sheet
interest rate
CONSOLIDATED
$m
$m
$m
$m
$m
$m
$m
$m
%
Assets
Cash and cash equivalents
Due from other financial institutio
n
Financial assets available for sale
Financial assets held to maturity
Loans and other receivables
Derivatives
Other assets
Total assets
Liabilities
159.3
-
-
-
33.0
6,981.4
1,189.9
1,205.2
-
-
-
-
-
-
318.2
392.6
-
-
-
-
29.0
418.4
-
-
-
-
-
-
-
-
2,352.2
11.9
-
-
-
-
7,173.7
2,395.1
710.8
447.4
2,352.2
11.9
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Other liabilities
Total liabilities
4,672.8
3,907.3
2,790.7
1,038.3
-
-
-
-
151.9
-
-
99.2
-
-
-
-
4,672.8
4,059.2
2,889.9
1,038.3
Equity
-
-
-
-
-
54.8
-
11.0
-
65.8
-
-
-
-
-
-
-
-
93.8
188.9
42.5
-
30.7
3.1
408.5
767.5
143.3
108.3
6.3
.
154.0
411.9
253.1
188.9
42.5
1,570.1
11,392.4
3.1
408.5
13,858.6
143.3
12,572.2
6.3
262.1
154.0
13,137.9
720.7
720.7
3.32
0.00
0.00
5.65
7.32
0.00
-
-
-
4.44
0.00
6.91
-
-
-
100
BENDIGO BANK LTD
ABN 11 068 049 178
Interest rate risk (continued)
Full Financial Report
Period ending 30 June 2006
AS AT 30 JUNE 2006
Floating
interest
Fixed interest rate repricing :
Non-interest
Total
Weighted
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
& 6 months & 12 months
& 5 years
After
5 years
bearing
carrying value
average
per
effective
Balance sheet
interest rate
BENDIGO BANK
$m
$m
$m
$m
$m
$m
$m
$m
%
Assets
Cash and cash equivalents
135.6
Due from other financial institution
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
-
-
-
-
Loans and other receivables
6,675.5
-
-
179.4
-
619.6
1,214.2
-
-
-
-
181.5
-
592.6
382.2
-
-
-
-
-
-
79.6
445.6
-
-
-
-
-
-
-
-
-
-
-
-
3,183.1
19.0
-
-
-
-
-
-
6,811.1
2,013.2
1,156.3
525.2
3,183.1
19.0
Due to other financial institutions
-
-
-
-
3,811.3
3,637.5
2,764.4
2,733.5
-
-
-
-
172.0
-
-
135.1
-
-
-
-
3,811.3
3,809.5
2,899.5
2,733.5
20.4
-
20.4
-
-
-
-
-
-
-
-
-
Derivatives
Other assets
Total assets
Liabilities
Deposits
Derivatives
Subordinated debt
Other liabilities
Total liabilities
Equity
78.8
209.0
225.5
151.2
-
28.4
28.4
180.3
901.6
166.3
96.0
22.2
-
172.3
456.8
878.5
214.4
209.0
586.4
151.2
1,291.8
11,948.0
28.4
180.3
14,609.5
166.3
13,063.1
22.2
307.1
172.3
13,731.0
878.5
3.44
-
5.80
5.87
7.59
-
-
-
-
4.38
-
6.90
-
-
-
AS AT 30 JUNE 2005
Floating
interest
Fixed interest rate repricing :
Non-interest
Total
Weighted
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
& 6 months & 12 months
& 5 years
After
5 years
bearing
carrying value
average
per
effective
Balance sheet
interest rate
BENDIGO BANK
$m
$m
$m
$m
$m
$m
$m
$m
%
Assets
Cash and cash equivalents
40.1
Due from other financial institution
Financial assets available for sale
Shares in controlled entities
-
-
-
-
-
Financial assets held to maturity
Loans and other receivables
0.7
6,400.1
1,169.8
1,199.2
Derivatives
Other assets
Total assets
Liabilities
-
-
6,440.9
2,369.0
-
-
-
306.4
386.2
-
692.6
-
-
-
29.0
409.0
-
-
-
-
2,288.9
-
-
438.0
2,288.9
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Other liabilities
Total liabilities
4,667.0
3,243.5
2,715.9
1,010.4
-
-
152.1
-
99.1
-
-
-
4,667.0
3,395.6
2,815.0
1,010.4
Equity
-
-
-
-
-
46.2
10.9
-
57.1
-
-
-
-
-
11.9
-
11.9
-
-
-
-
-
-
75.8
182.6
157.9
145.6
-
67.3
3.1
176.1
808.4
143.3
117.3
6.2
.
121.4
388.2
115.9
182.6
157.9
145.6
1,505.9
10,762.6
3.1
176.1
13,049.7
143.3
11,800.3
6.2
262.1
121.4
12,333.3
716.4
716.4
1.99
0.00
0.00
0.00
5.65
7.29
0.00
-
-
-
4.35
0.00
6.91
-
-
-
101
BENDIGO BANK LTD
ABN 11 068 049 178
Derivative financial instruments
Full Financial Report
Period ending 30 June 2006
The economic entity uses derivatives primarily to hedge banking operations and for asset and liability
management. Some derivatives transactions may qualify as either cashflow or fair value hedges.
The accounting treatment of these hedges is outlined in Note 2.30 Derivative Financial Instruments.
The economic entity is exposed to volatility in interest cash flows inherent in its loan portfolio and that
of the securitisation vehicles. Interest rate swaps are used to hedge the risk that this volatility creates.
All swaps that are part of a hedge relationship have been designated as cashflow hedges. As at 30
June 2006 the fair value of outstanding derivatives designated as cashflow hedges by the bank was
$9.6 million positive value.
During the 2006 financial year the economic entity recognised a loss of less than $0.1 million due to
hedge ineffectiveness. As at 30 June 2006 the fair value of outstanding derivatives designated as
cashflow hedges by the economic entity was $7.4 million positive value.
Value of derivatives as at 30 June
Consolidated 2006
Consolidated 2005
Notional
Amount
Asset
Revaluation
Liability
Revaluation Net Fair Value
Notional
Amount
Asset
Revaluation
Liability
Revaluation Net Fair Value
Interest Rate Swaps
Cross Currency
Swaps
Foreign Exchange
Contracts
$m
2,529.1
530.2
40.5
Total Derivatives
3,099.9
$m
24.6
3.8
0.2
28.6
$m
(17.2)
(10.1)
(0.3)
(27.6)
$m
7.4
(6.3)
(0.1)
1.0
$m
2,715.7
717.2
40.9
3,473.8
$m
1.7
3.1
0.4
5.2
$m
(13.1)
(78.9)
(0.2)
$m
(11.4)
(75.8)
0.2
(92.2)
(87.0)
Outstanding interest rate swaps have interest rates on the receivable legs ranging from 4.50% to
7.13% and on the payable legs the rates range from 4.81% to 7.39%. All swaps mature between the
dates 13 July 2006 and 30 June 2020. The average term to maturity is 672 days.
102
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
40.
COMMITMENTS AND CONTINGENCIES
Commitments
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
Outstanding expenditure and credit related commitments as at 30 June 2006. Except where specified, all commitments are payable within one year.
Operating lease commitments - group as lessee
The group has entered into commercial property leases and commercial leases on certain motor vehicles and items of office equipment. These leases
have an average life of between 3 and 7 years. Some property leases include optional renewal periods included in the contracts. There are no restrictions
placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Capital expenditure commitments
Capital expenditure commitments not provided for in the financial statements,
payable not later than one year
Later than 1 year but not later than 5 years
Other expenditure commitments
Sponsorship commitments not paid as at balance date, payable not later than one
year
42.9
74.1
13.0
130.0
47.0
18.7
65.7
1.1
27.0
51.2
19.2
97.4
45.6
45.3
90.9
1.4
42.8
73.9
13.0
129.7
47.0
18.7
65.7
1.0
26.7
50.8
19.2
96.7
45.6
45.3
90.9
1.3
Credit related commitments
Gross loans approved, but not advanced to borrowers, payable not later than one year
425.5
375.0
425.5
330.7
Credit limits granted to clients for overdrafts and credit cards
Total amount of facilities provided
Amount undrawn at balance date
Normal commercial restrictions apply as to use and withdrawal of the facilities
4,304.9
1,456.6
3,651.5
1,246.9
4,361.6
1,471.0
3,651.5
1,205.0
Superannuation commitments
The economic entity participates in an employer sponsored superannuation plan, being a defined
contribution plan which provides benefits to employees of the entities in the economic entity on
retirement, death or disability.
The benefits under the plan are based on accumulated contributions and earnings for each employee.
Employees contribute various percentages of their gross income and the company also contributes at
least the minimum as required under the superannuation guarantee legislation.
The bank pays an annual insurance premium to provide death, total permanent disability and salary
continuance cover for members of the superannuation.
103
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Contingent liabilities and contingent assets
(a) Contingent Liabilities
Guarantees
The economic entity has issued guarantees on behalf of clients
Other
Documentary letters of credit & performance related obligations
Consolidated
Bendigo Bank
2006
$m
2005
$m
2006
$m
2005
$m
98.3
77.6
98.3
77.6
13.6
14.7
13.6
14.7
As the the probability and value of guarantees, letters of credit and performance related obligations that may be called on is unpredictable, it is not practical
to state the timing of any potential payment.
(b) Contingent Assets
As at 30 June 2006, the economic entity does not have any contingent assets.
41.
FIDUCIARY ACTIVITES
The economic entity conducts investment management and other fiduciary activities as trustee,
custodian or manager for a number of funds and trusts, including superannuation and approved
deposit funds, unit trusts and mortgage pools. The amounts of the funds concerned, which are not
included in the economic entity's statement of financial position are as follows:
Funds under trusteeship
Assets under management
Funds under management
Consolidated
2006
$m
3,429.2
1,941.4
1,028.3
2005
$m
3,289.7
1,875.2
977.8
As an obligation arises under each type of duty the amount of funds has been included where that
duty arises. This may lead to the same funds being shown more than once where the economic
entity acts in more than one capacity in relation to those funds eg manager and trustee. Where
controlled entities, as trustees, incur liabilities in respect of these activities, a right of indemnity exists
against the assets of the applicable trusts. As these assets are sufficient to cover liabilities, and it is
therefore not probable that the Group companies will be required to settle them, the liabilities are not
included in the financial statements. Bendigo Bank does not guarantee the performance or
obligations of its subsidiaries.
42.
EVENTS AFTER BALANCE SHEET DATE
No matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the economic entity, the results of those
operations, or the state of affairs of the economic entity in subsequent financial years.
On 14 August 2006 the Bank declared a final dividend, details of which are disclosed in the directors'
report and in Note 10.
On 1 September 2006 the Bank announced it has contracted to sell its new headquarters in Bendigo
for $100 million in a sale-and-leaseback transaction arranged by Societe Generale Corporate &
Investment Banking (SGCIB).
A consortium of investors arranged by SGCIB will purchase both the new development and the bank’s
existing Fountain Court building adjacent. The sale will occur on 1 September 2008 – after completion
of the new building – with Bendigo taking a long-term lease.
104
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
43.
IMPACT ON ADOPTION OF AIFRS
Explanation of transition
The group has prepared these financial statements using Australian Standards that are equivalent
to International Financial Reporting Standards ("AIFRS"). As these financial statements are for the
first full year reported in accordance with AIFRS, it is necessary to explain how the transition from
previous AGAAP to AIFRS affected the previously reported financial position, financial performance
and cash flows since 30 June 2004 (ie. the balance sheets as at 1 July 2004, 30 June 2005 and1
July 2005; and the income statements and cash flow statements for the financial year ended 30
June 2005).
In accordance with AIFRS, the comparative information has been restated using the new
accounting standards from 1 July 2004, with the exception of AASB 132 "Financial Instruments:
Presentation and Disclosure" and AASB 139
Instruments: Recognition and
Measurement". As permitted by the transitional provisions of AASB 1, management has elected
not to apply these standards to the comparative information, and therefore apply them from 1 July
2005. Comparative information for financial instruments has been prepared on the basis of the
economic entity's accounting policies under the previous AGAAP. The adjustments required on
transition to AIFRS have been made retrospectively, with the majority being made against opening
retained earnings, at the respective dates.
"Financial
AIFRS has not changed the economics of the business, or the risks being carried, or affected the
economic entity's ability to borrow funds or make dividend distributions.
Reconciliations from previous AGAAP to AIFRS
The following pages contain detailed reconciliations from previous AGAAP to AIFRS in accordance
with AASB 1. Notes to the reconciliations are provided to explain the reason and impact of the
changes on transition to AIFRS.
105
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
IMPACT OF ADOPTION OF AIFRS (continued)
Income Statement reconciliations for the year ended 30 June 2005
Income statement item
Note
Consolidated
$m
Previous
AGAAP
Transition
impact
AIFRS
Note
Previous
AGAAP
Transition
impact
AIFRS
Bendigo Bank
$m
Income
Net interest income
Interest income
Interest expense
Net interest income
Other revenue
Dividends
Fees
- asset products
- liability products, electronic delivery
- trustee, management & other
- securitisation
- other
Commissions
- wealth solutions
- insurance
- other
Other revenue
Income
Total other income
Share of associates' profit
Total income after interest expense
Expenses
Bad and doubtful debts
Bad and doubtful debts
Bad debts recovered
Total bad and doubtful debts
Other expenses
Borrowing costs
Staff and related costs
Occupancy costs
Amortisation of intangibles
Property, plant and equipment
Fees and commissions
Other expenses
Total expenses
Profit before income tax expense
Income tax expense
Net profit
Net loss - outside equity interest
Net profit attributable to members
of Bendigo Bank Limited
(a) (l)
(a)
(a)
(a)
(a)
(a)
(n)
(q)
(p)
(b) (m)
(m) (n)
(a)
(a) (l) (n)
(q)
767.4
486.6
280.8
1.6
26.0
53.5
9.3
5.0
9.4
29.0
6.8
1.8
4.3
23.1
169.8
20.5
471.1
14.1
(0.5)
13.6
0.4
154.8
26.0
4.7
13.7
16.6
109.9
326.1
131.4
(41.3)
90.1
0.3
90.4
47.6
42.3
5.3
-
0.7
-
0.3
(5.0)
-
-
-
-
0.2
(13.4)
(17.2)
(0.2)
(12.1)
-
-
-
-
-
0.2
(1.1)
(4.6)
0.8
(11.5)
(16.2)
4.1
0.1
4.2
0.1
(a) (l)
(a)
(a)
(a)
(a)
(n)
(p)
(b) (m)
(m) (n)
(a) (l) (n)
815.0
528.9
286.1
1.6
26.7
53.5
9.6
-
9.4
29.0
6.8
1.8
4.5
9.7
152.6
20.3
459.0
14.1
(0.5)
13.6
0.4
154.8
26.2
3.6
9.1
17.4
98.4
309.9
135.5
(41.2)
94.3
0.4
4.3
94.7
736.3
464.2
272.1
26.4
24.5
53.2
1.6
4.9
9.2
-
4.6
2.2
10.1
19.5
156.2
-
428.3
14.0
(0.5)
13.5
0.4
140.0
31.4
0.6
11.8
14.3
104.7
303.2
111.6
(25.8)
85.8
-
85.8
5.2
0.1
5.1
-
-
-
-
(4.9)
-
0.4
-
(0.3)
(0.1)
(11.6)
(16.5)
-
(11.4)
-
-
-
-
-
0.1
2.2
(4.0)
-
(10.3)
(12.0)
0.6
-
0.6
-
741.5
464.3
277.2
26.4
24.5
53.2
1.6
-
9.2
0.4
4.6
1.9
10.0
7.9
139.7
-
416.9
14.0
(0.5)
13.5
0.4
140.0
31.5
2.8
7.8
14.3
94.4
291.2
112.2
(25.8)
86.4
-
0.6
86.4
106
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
IMPACT OF ADOPTION OF AIFRS (continued)
Balance Sheet reconciliation as at 1 July 2004
Balance Sheet item
Note
Assets
Cash and cash equivalents
Due from other financal institutions
Derivatives
Share investments
Fin assets Held-to-maturity
Loans and other receivables
Investments accounted for using
the equity method
Property, plant & equipment
Intangible assets and goodwill
Deferred tax assets
Other financial assets
Total Assets
(a)
(a)
(a) (o)
(m)
(b) (m)
(r)
(a)
Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Amounts payable to controlled entities
Income tax payable
Provisions
Deferred tax liabilities
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
(a)
(a) (p)
(r)
Equity
Parent entity interest
Issued capital
ESOP shares
Reserves
Retained profits
Total parent entity interest in equity
Total minority interest
Total Equity
(o)
(r)
(b) (j) (p)
Consolidated
$m
Previous
AGAAP
Transition
impact
AIFRS
Note
Previous
AGAAP
Transition
impact
AIFRS
Bendigo Bank
$m
157.5
157.6
-
27.3
1,220.2
9,372.6
101.1
56.6
63.7
32.8
95.1
11,284.5
128.9
10,148.9
-
88.7
-
6.8
27.2
8.3
199.3
10,608.1
676.4
551.6
-
5.4
119.6
676.6
(0.2)
676.4
34.2
-
-
-
7.5
651.2
-
(2.1)
(1.4)
0.5
(3.9)
686.0
-
708.5
-
11.9
-
-
-
(0.7)
-
719.7
(33.7)
-
(31.4)
1.2
(3.5)
(33.7)
-
(33.7)
191.7
157.6
-
27.3
1,227.7
10,023.8
101.1
54.5
62.3
33.3
91.2
11,970.5
128.9
10,857.4
-
100.6
-
6.8
27.2
7.6
199.3
11,327.8
642.7
551.6
(31.4)
6.6
116.1
642.9
(0.2)
642.7
(m)
(b) (m)
(p)
(r)
(o)
(r)
(b) (j) (p)
142.6
157.5
-
368.8
1,174.3
9,197.7
-
34.3
2.2
32.8
67.9
11,178.1
128.9
9,988.6
-
73.4
67.9
6.8
25.8
8.3
199.3
10,499.0
679.1
551.6
-
2.0
125.5
679.1
-
679.1
-
-
-
-
-
-
-
(2.0)
(0.2)
-
-
(2.2)
-
-
-
0.1
31.4
-
-
(0.9)
-
30.6
(32.8)
-
(31.4)
0.9
(2.3)
(32.8)
-
(32.8)
142.6
157.5
-
368.8
1,174.3
9,197.7
-
32.3
2.0
32.8
67.9
11,175.9
128.9
9,988.6
-
73.5
99.3
6.8
25.8
7.4
199.3
10,529.6
646.3
551.6
(31.4)
2.9
123.2
646.3
-
646.3
Consolidated
as at 1 July 2004
$m
Bendigo Bank
as at 1 July 2004
$m
Equity under previous AGAAP
Recognition of shares in relation to
Employee Share Ownership Plan
Write-off of goodwill assessed as impaired on transition
1 July 2004
Adjust recognisition of lease (rent) costs on transition
1 July 2004
Recognise tax effect of asset revaluation reserves on transition
1 July 2004
Equity under AIFRS
676.4
(31.4)
(3.4)
(0.1)
1.2
642.7
679.1
(31.4)
(2.2)
(0.1)
0.9
646.3
107
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
IMPACT OF ADOPTION OF AIFRS (continued)
Balance Sheet reconciliation as at 30 June 2005
Balance Sheet item
Note
Consolidated
$m
Previous
AGAAP
Transition
impact
AIFRS
Note
Previous
AGAAP
Transition
impact
AIFRS
Bendigo Bank
$m
(a)
(f)
(a)
(a) (o)
Assets
Cash and cash equivalents
Due from other financal institutions
Derivatives
Fin assets AFS - share invests
Fin assets Held-to-maturity
Loans and other receivables
Amounts rec'ble from controlled entities
Investments accounted for using
the equity method
Property, plant & equipment
Intangible assets and goodwill
Deferred tax assets
Other financial assets
Total Assets
(m)
(b) (m)
(r)
(a)
Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Income tax payable
Provisions
Deferred tax liabilities
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
(a)
(f)
(a) (p)
(e) (r)
y
Equit
Parent entity interest
Issued capital
ESOP shares
Reserves
Retained profits
Total parent entity interest in equity
Total minority interest
Total Equity
(o)
(r)
(b) (j) (p)
135.2
188.9
-
42.5
1,541.7
10,938.2
-
118.2
58.0
79.0
35.4
125.0
13,262.1
143.3
11,958.2
-
106.2
8.3
32.0
2.9
262.1
12,513.0
749.1
589.3
-
3.1
157.1
749.5
(0.4)
749.1
117.9
-
3.1
-
28.4
454.2
-
(0.1)
(10.5)
11.4
0.4
(8.3)
596.5
-
614.0
6.3
5.1
-
-
(0.5)
-
624.9
(28.4)
-
(30.0)
0.9
0.7
(28.4)
-
(28.4)
253.1
188.9
3.1
42.5
1,570.1
11,392.4
-
118.1
47.5
90.4
35.8
116.7
13,858.6
143.3
12,572.2
6.3
111.3
8.3
32.0
2.4
262.1
13,137.9
720.7
589.3
(30.0)
4.0
157.8
721.1
(0.4)
720.7
(f)
(o)
(m)
(b) (m)
(r)
(f)
(f)
(f)
(e) (r)
(o)
(r)
(b) (j) (p)
115.9
182.6
-
303.5
1,505.9
10,762.6
41.0
-
36.2
1.6
35.4
97.0
13,081.7
143.3
11,800.3
-
86.2
8.3
31.1
3.0
262.1
12,334.3
747.4
589.3
-
0.3
157.8
747.4
-
747.4
-
-
3.1
-
-
-
(31.0)
-
(7.2)
5.6
0.6
(3.1)
(32.0)
-
-
6.2
(5.9)
-
-
(1.3)
-
(1.0)
(31.0)
-
(30.0)
0.7
(1.7)
(31.0)
-
(31.0)
115.9
182.6
3.1
303.5
1,505.9
10,762.6
10.0
-
29.0
7.2
36.0
93.9
13,049.7
143.3
11,800.3
6.2
80.3
8.3
31.1
1.7
262.1
12,333.3
716.4
589.3
(30.0)
1.0
156.1
716.4
-
716.4
Consolidated
as at 30 June 2005
$m
Bendigo Bank
as at 30 June 2005
$m
Equity under previous AGAAP
749.1
Equity under previous AGAAP
Recognition of shares in relation to Employee Share
Ownership Plan
(30.0)
Recognition of shares in relation to Employee
Share Ownership Plan
Write-off of goodwill assessed as impaired on transition -
1 July 2004
Adjust recognisition of lease (rent) costs on transition -
1 July 2004
Recognise tax effect of deferred assets and liablilities in
relation to revaluations of fixed assets and share investments
AIFRS adjustments to profit for the period
as per income statement reconciliations above
Other minor adjustments
Equity under AIFRS
Write-off of goodwill assessed as impaired on
transition - 1 July 2004
Adjust recognisition of lease (rent) costs on
transition - 1 July 2004
Recognise tax effect of deferred assets and
liablilities in relation to revaluations of fixed
assets and share investments
AIFRS adjustments to profit for the period
as per income statement reconciliations above
(3.4)
(0.1)
0.9
4.3
(0.1)
720.7
747.4
(30.0)
(2.2)
(0.1)
0.7
0.6
716.4
108
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
IMPACT OF ADOPTION OF AIFRS (continued)
Balance Sheet reconciliation as at 1 July 2005
Balance Sheet item
Note
Consolidated
$m
Transition
impact of
132/139
AIFRS
30 June
2005
Note
AIFRS
1 July
2005
Bendigo Bank
$m
AIFRS
30 June
2005
Transition
impact of
132/139
(h)
(e)
(h)
(c) (d) (f) (g)
Assets
Cash and cash equivalents
Due from other financal institutions
Derivatives
Fin assets AFS - securities
Fin assets AFS - share invests
Fin assets Held-to-maturity
Loans and other receivables
Amounts rec'ble from controlled entities
Investments accounted for using
the equity method
Property, plant & equipment
Intangibles
Deferred tax assets
Other financial assets
Total Assets
(d) (k)
(c) (d)
Liabilities
Due to other financial institutions
Deposits
Derivatives
Financial liabilities
Income tax payable
Provisions
Deferred tax liabilities
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
(f) (g)
(f)
(l)
(c)
(e) (r)
Equity
Parent entity interest
Issued capital
ESOP shares
Reserves
(d) (e) (f) (g)
(h) (i) (r)
(c) (k) (l)
Retained profits
Total parent entity interest in equity
Total minority interest
Total Equity
253.1
188.9
3.1
-
42.5
1,570.1
11,392.4
-
118.1
47.5
90.4
35.8
116.7
13,858.6
143.3
12,572.2
6.3
111.3
8.3
32.0
2.4
262.1
13,137.9
720.7
589.3
(30.0)
4.0
157.8
721.1
(0.4)
720.7
-
-
-
295.1
25.5
(295.1)
63.0
-
4.0
-
-
(12.3)
-
80.2
-
(1.0)
12.0
10.5
(0.1)
-
7.7
-
29.1
51.1
-
-
59.5
(8.4)
51.1
-
51.1
253.1
188.9
3.1
295.1
68.0
1,275.0
11,455.4
-
122.1
47.5
90.4
23.5
116.7
13,938.8
143.3
12,571.2
18.3
121.8
8.2
32.0
10.1
262.1
13,167.0
771.8
589.3
(30.0)
63.5
149.4
772.2
(0.4)
771.8
(f)
(h)
(e)
(h)
(c) (d) (f) (g)
(c) (d)
(f) (g)
(f)
(l)
(c)
(e) (r)
(d) (e) (f) (g)
(h) (i) (r)
(c) (k) (l)
115.9
182.6
3.1
-
303.5
1,505.9
10,762.6
10.0
-
29.0
7.2
36.0
93.9
13,049.7
143.3
11,800.3
6.2
80.3
8.3
31.1
1.7
262.1
12,333.3
716.4
589.3
(30.0)
1.0
156.1
716.4
-
716.4
-
-
-
295.1
25.5
(295.1)
61.3
-
-
-
-
(12.1)
-
74.7
-
(1.0)
12.3
9.8
(0.1)
-
7.6
-
28.6
46.1
-
-
54.7
(8.6)
46.1
-
46.1
AIFRS
1 July
2005
115.9
182.6
3.1
295.1
329.0
1,210.8
10,823.9
10.0
-
29.0
7.2
23.9
93.9
13,124.4
143.3
11,799.3
18.5
90.1
8.2
31.1
9.3
262.1
12,361.9
762.5
589.3
(30.0)
55.7
147.5
762.5
-
762.5
Equity under AIFRS - 30 June 2005
720.7
Equity under AIFRS - 30 June 2005
716.4
Consolidated
as at 1 July 2005
$m
Bendigo Bank
as at 1 July 2005
$m
Adjust carrying value of AFS financial assets (share
investments) to fair value
25.5
Adjust carrying value of AFS financial assets
(share investments) to fair value
Tax effect of fair value adj to share investments
(7.5)
Tax effect of fair value adj to share investments
Discounting of specific provisions (tax effected)
(0.3)
Discounting of specific provisions (tax effected)
Fair value adjustments to financial assets, financial
liabilities and derivatives on transition:
- group
- associates
Establishment of general reserve for credit losses
and collective provision:
- group
- associates
Deferred loan application fee income (tax effected)
Fair value adjustments to financial assets, financial
liabilities and derivatives on transition
Establishment of general reserve for credit losses
and collective provision:
Deferred loan application fee income
(tax effected)
0.1
(0.8)
36.7
4.8
(7.4)
771.8
109
25.5
(7.5)
(0.3)
(0.2)
35.5
(6.9)
762.5
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
IMPACT OF ADOPTION OF AIFRS (continued)
Notes to reconciliations:
Where specific explanations have not been provided, minor adjustments to figures are due to
rounding only.
(a) Consolidation of special purpose securitisation trusts. These trusts were not consolidated under
previous AGAAP. Under AASB 127: Consolidated and Separate Financial Statements and
UIG Interpretation 112: Consolidation - Special Purpose Vehicles the consolidated entity is
considered to control the securitisation vehicles, resulting in their consolidation. The income
statement no longer reports management fees and other fees earned from the special purpose
trusts. Instead, the income statement reports gross interest income earned on mortgage loans,
interest expense accrued to noteholders, movements in the fair values of derivatives (unless the
rules for cash flow hedging are met), and other income and expense items of the trusts. The
underlying mortgage loans and liabilities to noteholders (along with derivatives) held by the
special purpose trusts are reported on the consolidated balance sheet.
(b) Goodwill assessed as impaired under new AIFRS testing methodology. Written-off on transition
(1 July 2004). The goodwill items were not found to be impaired under the previous AGAAP
due to different testing methodology.
The Bank has elected under AASB 1 First Time Adoption of Australian Equivalents to
International Reporting Standards not to restate the classification and accounting treatment of
business combinations that occurred prior to the transition date in preparing the opening AIFRS
consolidated balance sheet.
Goodwill is not amortised under AIFRS, resulting in a decrease in restated amortisation of
goodwill and intangibles and an increase in the restated carrying value of goodwill. The carrying
amount of goodwill is subject to impairment testing at least annually. Any impairment loss is to
be reflected in the income statement.
(c)
Increase in specific loan provisions on transition ($0.5 m). Future cash flows relating to loan
impairment assessments are discounted to present value under AIFRS. The discount unwinds
during the period between the initial recognition of the provision and the eventual recovery of the
written down amount, resulting in the recognition of income.
The future cash flows were not discounted for impairment assessment purposes under previous
AGAAP. The adjustment also has the effect of increasing deferred tax assets as the increase is
a temporary timing difference.
Establishment of a collective provision for doubtful debts on transition ($7.7 m). This provision is
to recognise losses that are inherent in the loan portfolios, but have not yet been identified. The
balance of this provision (net of tax) will be included with the group general reserve for credit
losses to comply with the APRA requirement that banks maintain a general provision (net of tax)
at a minimum level of 0.50% of risk-weighted assets.
(d) Write-back of general provision for doubtful debts and creation of general reserve for credit
losses ($60.3 m). AIFRS does not allow a general provision, but a general reserve is permitted
due to the APRA requirement that ADI's maintain a general reserve for credit losses.
This change has also impacted our associate company, Elders Rural Bank (ERB) and we have
therefore also reflected our share of the ERB adjustments in our financial statements as we
equity account our investment in ERB.
Movements in the general reserve for credit losses are recognised as an appropriation (in
equity), rather than in the income statement. This will have the effect of increasing reported
profit, but the amount available for distribution to ordinary shareholders will be unchanged when
compared to the previous AGAAP.
110
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
(e) Fair value adjustment to the carrying value of share investments on transition ($25.5 m). The
adjustment is reflected in asset revaluation reserve. The recognition of deferred tax liability in
relation to the adjustment reduces the asset revaluation reserve ($7.5 m).
Under previous AGAAP, the consolidated entity recorded share investments at deemed cost.
Under AIFRS these investments are carried at fair value, with fair value movements reflected in
equity.
(f) Recognition of derivatives, which are primarily interest rate swaps, on balance sheet at fair
value. Under previous AGAAP only accrued interest was recognised on balance sheet.
Under AIFRS, all derivatives, including those used for balance sheet hedging purposes, are
recognised on balance sheet and carried at fair value. Movements in the carrying amounts of
derivatives are recognised in earnings, unless hedge accounting is applied.
(g) Fair value adjustment to hedged financial instruments previously carried at amortised cost.
Adjustment through the income statement for ineffectiveness of hedges.
Financial instruments classified as hedged are now carried at fair value, with fair value
movements reflected in the income statement. Financial instruments assessed as effectively
hedged have their fair value movements offset by the fair value movement in the hedge
instrument (derivative).
(h) Recognition of available for sale financial instruments at fair value which were previously carried
at amortised cost.
AIFRS has required that a porfolio of our investment securities be categorised as available for
sale. This portfolio is carried at fair value, with movements in fair value reflected in equity. This
could result in volatility in equity reserves, depending on future movements in fair values. This
portfolio contains selected investments to minimise the impact of fair value movements.
Consolidated
(i) The above 1 July 2005 changes impact reserves as follows -
Creation of general reserve for credit losses (after tax value)
Creation of general reserve for credit losses (after tax value) - associates
Increase asset revaluation reserve for fair value adjustment to share investments
(tax effected)
(j) The above 1 July 2004 changes impact retained earnings as follows -
Write-off of goodwill that was assessed as impaired on transition
Accrued lease payments due to change in recognition pattern on transition
$m
36.7
4.8
18.0
59.5
(3.4)
(0.1)
(3.5)
(k) The above 1 July 2005 changes impact retained earnings as follows -
Fair value adjustments to financial assets, liabilities and derivatives on transition
0.1
Transition adjustments - associates
Increase in specific loan provisions on transition (tax effected)
Deferred loan application fee income (tax effected)
(0.8)
(0.3)
(7.4)
(8.4)
111
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
(l) Loan origination fees re-categorised to interest income in accordance with AASB 139. Any fee
income or expense integral to the yield of an originated financial instrument, net of any direct
instrument. This change will
incremental costs, must be deferred over the expected life of the
not impact reported earnings, but requires the re-categorisation of the fee amortisation from
operating expenses to interest income.
Loan application fees have also been re-categorised to interest income in accordance with AASB
139. These fees were recognised under previous AGAAP on an as earned (received) basis. As
these fees are deferred over the expected life of the loans under AIFRS, this has resulted in a
transition adjustment against retained earnings at 1 July 2005 of $10.5 million ($7.4 million tax
effected).
(m) On transition, computer software assets have been reclassified from property, plant & equipment
to intangible assets. The amortisation of these assets is unchanged, but is now reclassified from
depreciation of plant & equipment to amortisation of intangibles.
(n) Reclassification of proceeds on sale of property, plant and equipment and book value of sold
assets to profit or loss on sale of property, plant and equipment. Reclassification of proceeds on
sale of other non-current assets and book value of sold assets to profit or loss on sale of other
non-current assets.
(o) Reclassification of loans associated with the Employee Share Ownership Plan ("ESOP"). Under
previous AGAAP, shares issued under the ESOP were included in issued capital and the
outstanding balance of loans advanced to employees taking up the shares was reported as
loans and receivables. Under AIFRS, the shares issued continue to be reported as issued
capital.
The value of equity outstanding (ie. the outstanding balance of loans) falls under the AASB 2
Share Based Payments definition of treasury shares and must be deducted from equity in the
balance sheet. The effect of this change is a reclassification of the outstanding balance of loans
in relation to the ESOP from loans and receivables to ESOP shares in issued capital.
(p) Under AASB 117 Leases, lease payments under an operating lease are recognised as an
expense on a straight-line basis
unless another systematic basis is more representative of the
time pattern of the user's benefit. The application of this standard has resulted in changes to the
amount of lease expense recognised.
On transition to AIFRS as at 1 July 2004 we have recognised a lease liability to reflect previous
year leasing expense not recognised under previous AGAAP. The transition adjustment is made
against retained earnings.
Lease expense and lease liabilities have been increased for the restated comparatives for
2004/05.
(q) Share of AIFRS restated 2004/05 profit for associate company (Elders Rural Bank Limited).
(r) AASB 1020 Income Tax requires a balance sheet approach, rather than the previous income
based methodology. This requires us to recognise the tax effect of asset revaluation reserve
and reflect the adjustment in deferred tax balances.
Explanation of material adjustments to the cash flow statements
There are no material differences between the cash flow statements presented under AIFRS and
those presented under AGAAP other than the inclusion of cash flows in relation to the
securitisation trusts.
112
BENDIGO BANK LTD
ABN 11 068 049 178
DIRECTORS DECLARATION
Full Financial Report
Period ending 30 June 2006
In accordance with a resolution of the directors of Bendigo Bank Limited, we state that:
In the opinion of the directors:
(a)
the financial report, and additional disclosures included in the directors report
designated as audited, of the company and of the consolidated entity are in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company's and consolidated entity's financial
position as at 30 June 2006 and of their performance for the year ended on that
date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the directors
in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June
2006.
On behalf of the Board
R N Johanson
Chairman
12 September 2006
R G Hunt AM
Managing Director
113
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
Independent audit report to members of Bendigo Bank Limited
Matters relating to the Electronic Presentation of the Audited Financial Report
This audit report relates to the financial report of Bendigo Bank Limited (the company) for the year
ended 30 June 2006 included on the company’s web site. The company’s directors are responsible
for the integrity of the company’s web site. We have not been engaged to report on the integrity of the
company’s web site. The audit report refers only to the statements named below. It does not provide
an opinion on any other information which may have been hyperlinked to/from these statements. If
users of this report are concerned with the inherent risks arising from electronic data communications
they are advised to refer to the hard copy of the audited financial report to confirm the information
included in the audited financial report presented on this web site.
Scope
The financial report, remuneration disclosures and directors’ responsibility
The financial report comprises the balance sheet, income statement, statement of changes in equity,
statement of cash flows, accompanying notes to the financial statements, and the directors’
declaration for Bendigo Bank Limited (the company) and the consolidated entity, for the year ended
30 June 2006. The consolidated entity comprises both the company and the entities it controlled
during that year.
The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of
Accounting Standard 124 Related Party Disclosures (“remuneration disclosures”), under the heading
“Remuneration Report” on pages 12 to 28 of the directors’ report, as permitted by Corporations
Regulation 2M.6.04.
The directors of the company are responsible for preparing a financial report that gives a true and fair
view of the financial position and performance of the company and the consolidated entity, and that
complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This
includes responsibility for the maintenance of adequate accounting records and internal controls that
are designed to prevent and detect fraud and error, and for the accounting policies and accounting
estimates inherent in the financial report. The directors are also responsible for the remuneration
disclosures contained in the directors’ report.
Audit approach
We conducted an independent audit of the financial report in order to express an opinion to the
members of the company. Our audit was conducted in accordance with Australian Auditing
Standards in order to provide reasonable assurance as to whether the financial report is free of
material misstatement and the remuneration disclosures comply with Accounting Standard AASB 124
Related Party Disclosures. The nature of an audit is influenced by factors such as the use of
professional judgement, selective testing, the inherent limitations of internal control, and the
availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that
all material misstatements have been detected.
114
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2006
We performed procedures to assess whether in all material respects the financial report presents
fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards
in Australia, and other mandatory financial reporting requirements in Australia, a view which is
consistent with our understanding of the company’s and the consolidated entity’s financial position,
and of their performance as represented by the results of their operations and cash flows and whether
the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures.
We formed our audit opinion on the basis of these procedures, which included:
•
•
examining, on a test basis, information to provide evidence supporting the amounts and
disclosures in the financial report and the remuneration disclosures; and
assessing the appropriateness of the accounting policies and disclosures used and the
reasonableness of significant accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting
when determining the nature and extent of our procedures, our audit was not designed to provide
assurance on internal controls.
We performed procedures to assess whether the substance of business transactions was accurately
reflected in the financial report and the remuneration disclosures. These and our other procedures
did not include consideration or judgement of the appropriateness or reasonableness of the business
plans or strategies adopted by the directors and management of the company.
Independence
We are independent of the company and the consolidated entity and have met the independence
requirements of Australian professional ethical pronouncements and the Corporations Act 2001. We
have given to the directors of the company a written Auditor’s Independence Declaration a copy of
which is included in the directors’ report. In addition to our audit of the financial report and the
remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the
financial statements. The provision of these services has not impaired our independence.
Audit opinion
In our opinion:
1.
(a)
(b)
2.
the financial report of Bendigo Bank Limited is in accordance with:
the Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position of Bendigo Bank Limited and the
consolidated entity at 30 June 2006 and of their performance for the year ended on
that date; and
complying with Accounting Standards in Australia and the Corporations Regulations
2001; and
(ii)
other mandatory financial reporting requirements in Australia.
the remuneration disclosures that are contained on pages 12 to 28 of the directors’ report
comply with Accounting Standard AASB 124 Related Party Disclosures.
Ernst & Young
Brett Kallio
Partner
Melbourne
12 September 2006
115
BENDIGO BANK LTD
ABN 11 068 049 178
ADDITIONAL INFORMATION
1. MATERIAL DIFFERENCES
Full Financial Report
Period ending 30 June 2006
There are no material differences between the information supplied in this report and the
information in the preliminary final report supplied by Bendigo Bank Ltd to the Australian Stock
Exchange on 14 August 2006.
2. AUDIT COMMITTEE
As at the date of the Directors' Report the economic entity had an audit committee of the Board
of Directors.
3. CORPORATE GOVERNANCE PRACTICES
The corporate governance practices adopted by Bendigo Bank Ltd are detailed in the Corporate
Governance section of the Group's Concise Annual Report for 2006.
4. SUBSTANTIAL SHAREHOLDERS
As at 18 August 2006 there were no substantial shareholders in Bendigo Bank Ltd as defined by
the Listing Rules of the Australian Stock Exchange Ltd.
5. DISTRIBUTION OF SHAREHOLDERS
Range of Securities as at 18 August 2006 in the following categories:
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of Holders
Securities on Issue
6.
MARKETABLE PARCEL
Fully paid
Ordinary
Shares
24,912
20,120
2,886
1,571
69
49,558
Fully Paid
Employee
Shares
BPS
Preference
Shares
456
851
83
38
4
1,432
3,449
34
4
1
1
3,489
136,165,493
4,685,468
900,000
Based on the closing price of $13.50 on 18 August 2006, the number of holders with less than a
marketable parcel of the Company's main class of securities (Ordinary Shares) as at 18 August
2006 was 1,330.
7. UNQUOTED SECURITIES
The number of unquoted equity securities that are on issue and the number of holders of those
securities are shown in the above table under the heading of Fully Paid Employee shares.
116
BENDIGO BANK LTD
ABN 11 068 049 178
8. MAJOR SHAREHOLDERS
Full Financial Report
Period ending 30 June 2006
Names of the 20 largest holders of Fully Paid Ordinary Shares, including the number of shares
each holds and the percentage of ordinary share capital that number represents as at 18 August
2006 are:
FULLY PAID ORDINARY SHARES
Rank Name
1 J P Morgan Nominees Australia Limited
2 Westpac Custodian Nominees Limited
3 Milton Corporation Limited
4 National Nominees Limited
5 Citicorp Nominees Pty Limited
6 Leesville Equity Pty Ltd
7 Cogent Nominees Pty Limited
8 ANZ Nominees Limited (Cash Income a/c)
9 Choiseul Investments Limited
10 Argo Investments Limited
11 AMP Life Limited
12 Invia Custodian Pty Limited (Wilson Invmt Fund Ltd a/c)
13 Brickworks Investment Company Limited
14 Anthony Detata Nominees Pty Ltd
15 Mansbridge, Ian George
16 Warbont Nominees Pty Ltd (Unpaid Entrepot a/c)
17 Sandhurst Trustees Ltd (SISF a/c)
18 HSBC Custody Nominees (Australia) Limited - GSCO ECSA
19 UBS Wealth Management Australia Nominees Pty Ltd
20 Tobin (Estate of), Mary Alison Lorraine
Number of fully paid
Ordinary Shares
Percentage held of
Issued Ordinary Capital
3,737,888
3,105,826
2,954,743
2,097,797
1,631,542
1,340,477
1,134,514
935,244
710,250
591,940
496,070
495,463
349,942
320,488
319,151
297,320
293,136
292,914
285,846
228,346
21,618,897
2.65%
2.21%
2.10%
1.49%
1.16%
0.95%
0.81%
0.66%
0.50%
0.42%
0.35%
0.35%
0.25%
0.23%
0.23%
0.21%
0.21%
0.21%
0.20%
0.16%
15.35%
BBS Nominees Pty Ltd, trustee for the Bendigo Employee Share Ownership Plan, held 4,685,468 unlisted shares as at
the date of this report. These shares have not been included in the above table.
Names of the 20 largest holders of Bendigo Preference Shares, including the number of shares
each holds and the percentage of preference share capital that number represents as at 18
August 2006 are:
FULLY PAID PREFERENCE SHARES
Rank Name
Number of fully paid
Preference Shares
Percentage held of
Issued Preference Capital
1 J P Morgan Nominees Australia Limited
2 Citicorp Nominees Pty Limited
3 Cogent Nominees Pty Limited
4 Edwards, JF & JR
5 ANZ Nominees Limited
6 Perry, BW & EM
7 Cambooya Pty Ltd
8 M F Custodians Ltd
9 Pavwood Pty Limited
10 Jackson, PD
11 Leesville Equity Pty Ltd
12 Scenic Tours Pty Ltd
13 Cambooya Pty Ltd (Foundation a/c)
14 Hadges, JT
15 Rome Pty Ltd
16 Pavwood Pty Limited (Put a/c)
17 Australian Executor Trustees Limited
18 Andre, RM
19 Bond Street Custodians Limited
20 Brencorp No. 11 Pty Limited
117
233,940
17,000
10,000
8,293
5,100
5,046
5,000
5,000
4,800
4,000
4,000
3,000
2,500
2,500
2,428
2,100
2,097
2,000
2,000
2,000
25.99%
1.89%
1.11%
0.92%
0.57%
0.56%
0.56%
0.56%
0.53%
0.44%
0.44%
0.33%
0.28%
0.28%
0.27%
0.23%
0.23%
0.22%
0.22%
0.22%
BENDIGO BANK LTD
ABN 11 068 049 178
9. VOTING RIGHTS
Full Financial Report
Period ending 30 June 2006
The holders of ordinary shares are entitled to vote at meetings of shareholders in the first
instance by a show of hands of the shareholders present and entitled to vote. If a poll is called,
each shareholder has one vote for each fully paid share held.
Holders of partly paid shares have a vote which carries the same proportionate value as the
proportion that the amount paid up on the total issue price bears to the total issue price of the
share.
In the case of an equality of votes the Chairman has, on both a show of hands and at a poll, a
casting vote in addition to the vote to which the Chairman may be entitled as a shareholder,
proxy, attorney or duly appointed representative of a shareholder.
118
Bendigo Bank Limited
Second Floor
Fountain Court
Bendigo, Victoria 3550
Telephone (03) 5433 9339
Facsimile (03) 5433 9690
www.bendigobank.com.au
<1> Concise Annual Report 2006
(S11741)(09/06)