full annual report10
customer
Aiming to be Australia’s leading
customer-connected bank
Our customers value good service, they want us acting
in the best interests of them and their communities
and they want to feel appreciated for their business.
This is our point of difference; it’s what our customers
value and it’s what sets us apart from our competitors.
Mike Hirst, Managing Director
I believe in treating customers as individuals. It’s about providing quality customer service and seeing
things through the eyes of a customer.
Matthew Bellingham, Insurance
It’s about working along side our customers to identify their wants or needs and find solutions that add value
beyond what any traditional banking service would provide.
Trudy Ellery, Environment and Sustainability
Customer-connected means supporting the communities I work with to achieve real and lasting outcomes
to secure their future prosperity.
Tim Meade, Community Strengthening
For me, customer-connected means never losing sight of the value in helping others to achieve their goals
and in turn making a real contribution to strengthening our business.
Silvana Arena, Media and Communications
Our bank aims to treat all of our customers – be they the communities we support, our customers,
partners or our staff – with respect all of the time. We do this while delivering quality products, services
and outcomes.
Trevor Hanns, Community Bank®
We want our customers to recognise Bendigo and Adelaide Bank as a bank they can trust and is looking
out for them and their interests.
Katarnya Murdoch, Project Enable
Contents
3 Financial Calendar
14 Community Bank®
22 Our People
4 Chairman’s Report
16 Community Enterprise Foundation™
24 Executives
5 Managing Director’s Report
18 Environment and Sustainability
25 Directors
8 Banking and Wealth
20 Sponsorships, Scholarships and
26 Full Financial Report
Initiatives
2
investor
Performing to reward
those who support us
Profit after tax ($mil)
Dividends (cents per share)
242.6
198.3
52.0
65.0
58.0
58.0
43.0
121.8
116.7
83.8
06
07
08
09
10
06
07
08
09
10
Share Price ($) at 30 June
Earnings per share (EPS - cents)
15.20
12.90
10.93
8.18
6.95
111.1
87.7
81.9 82.9
83.3
EPS
Cash EPS
81.5
73.2
67.4
62.9
25.6
06
07
08
09
10
06
07
08
09
10
Financial Calendar
2010
30.09.10 Distribution of Final Dividend
11.10.10 Bendigo Step Up Preference
Share Dividend
01.11.10 Bendigo Reset Preference
Share Dividend
03.11.10 Annual General Meeting
15.12.10 Bendigo Preference Share
Dividend
Proposed 2011
11.07.11 Bendigo Step Up Preference Share Dividend
10.01.11 Bendigo Step Up Preference Share Dividend
08.08.11 Announcement of Final Results and Final
14.02.11 Announcement of Interim Results and
Interim Dividend
28.02.11 Interim Ex-Dividend Date
Dividend
29.08.11 Final Ex-Dividend Date
02.09.11 Final Dividend Record Date
04.03.11 Interim Dividend Record Date
15.09.11 Bendigo Preference Share Dividend
15.03.11 Bendigo Preference Share Dividend
30.09.11 Distribution of Final Dividend
31.03.11 Distribution of Interim Dividend
10.10.11 Bendigo Step Up Preference Share Dividend
11.04.11 Bendigo Step Up Preference Share Dividend
01.11.11 Bendigo Reset Preference Share Dividend
02.05.11 Bendigo Reset Preference Share Dividend
02.11.11 Annual General Meeting
15.06.11 Bendigo Preference Share Dividend
15.12.11 Bendigo Preference Share Dividend
3
investor
Chairman’s Report
The 2009/10 financial year was
a period of strong recovery for
Bendigo and Adelaide Bank.
Our profitability has been largely
restored and we now look forward
to opportunities for growth.
It is three years since the start
of the Global Financial Crisis, an
event which has fundamentally
changed the market for financial
services around the world.
Australia largely avoided the
most severe implications of the
crisis; but, here too, a number
of participants disappeared and
the Australian market is now
dominated by the four major
banks and depends on them to a
far greater extent.
Your bank too has profoundly
changed.
Three years ago Bendigo Bank and
Adelaide Bank merged to grow the scale
of the business and diversify its funding
and asset bases. The crisis certainly
challenged the wholesale part of the
funding mix. But the underlying strength
of the businesses meant that we did not
need to rely on uneconomic government
emergency supported funding. Instead
we concentrated on developing our
lower risk conservative business.
Our operating margins were badly
affected by the dramatic cuts to
interest rates in 2008/09 and our
profitability suffered. Along with all
other banks, we raised a significant
amount of additional capital. Some
was raised quickly through placements
to institutions, which was necessary
given the extremely volatile markets, but
most was offered to and raised from our
traditional retail shareholding base.
There is now largely a new management
team at the bank. Mike Hirst became
Chief Executive in July 2009 and we
have a new executive team. The whole
organisation has embraced the
changes as we tackle the opportunities
presented by the new market place.
We thank everyone for their efforts and
commitment.
Through the year, we farewelled Kevin
Roache and Kevin Osborn as directors
and Jamie McPhee as a director and
executive. We thank them for their great
work for the company over many years.
152
Years of service
$52.1 bil
Total assets under management
Top 80
ASX listed company
Only bank
Headquartered in regional Australia
4
Jim Hazel and David Matthews have
joined the board. They were selected for
their strong ties to their communities
and diverse experience in the banking
industry. They have already made
important contributions.
During the last year, the profitability of
the business has largely recovered.
The financial performance in 2009/10
as recorded in this annual report has
been very strong, albeit on a larger
capital base than before the crisis.
We are now growing the business again
but without compromising our traditional
conservatism and commitment to serve
our customers and their communities.
The most important lesson that the
financial system has had to learn through
the recent crisis is an old lesson; that
is, how crucial the values are by which
organisations and individuals operate.
At Bendigo and Adelaide Bank we know
that if we can help our customers,
partners and their communities prosper
in a sustainable and responsible way,
then we too will prosper. If we remain
true to those values then we will be able
to take advantage of the opportunities
presented by the disruptions to the
market place during the crisis.
Thank you for your continued support.
Robert Johanson
Chairman
> Chairman, Robert Johanson, launches the Walker
Street Community Kindergarten which was supported
by Victoria’s Clifton Hill Community Bank® Branch
with a $20,000 donation.
60-70%
Board target for percentage
of cash earnings paid as dividends
Profit
Declared every year since first
established in 1858
investor
Managing Director’s
Report
Bendigo and Adelaide Bank
holds a privileged position in
the Australian financial services
market. Our identity is strong
and our point of difference is
unchallenged. There is no other
bank that can genuinely connect
with its customers, partners and
communities the way we do.
This is thanks to our unique
business model, which forges
sustainable relationships
and adds value to all our
stakeholders. This advantage
can largely be attributed to our
staff, who strive to work as one
team in order to achieve our
vision of being Australia’s leading
customer-connected banking
group.
Customer-connected
Our way of doing business pleases
people and for us that equates to
good business. For many years we
have led customer advocacy scores
in Australia and boast a world-class
rating. We are one of the leading
Australian banks for customer
satisfaction and the most trusted
bank.
This is clear evidence that when we
say we’re listening to our customers
and communities, we mean it. It has
taken 150 years of strong performance,
innovation, good deeds and genuine
contributions to support community
enterprise to achieve this remarkable
record.
February 2010 and with a highly
regarded service proposition and strong
demand for alternative offerings, the
fundamentals for this business are
strong.
But we’re not resting on our laurels.
We’re looking at new ways to connect
through initiatives like Plan Big, our
online engagement forum which
encourages people to share their
aspirations and experiences and to
support each other in achieving tangible
outcomes.
Growth
Current trends in financial services,
post GFC, place a high value on the
type of traditional banking in which we
specialise. There is huge scope for us
to grow and drive more opportunity from
our relatively immature branch network.
An increased emphasis on advice and
service is just one of the ways we will
deliver greater value for our customers
and attract new ones.
Our retail network continues to grow
both assets and liabilities and there
is strong demand for the Community
Bank®business model, with more than
60 communities currently campaigning
to establish their own branch. These
measures provide the foundations for
continued growth.
The recovery in our Third Party
Mortgages business has been
supported by significant improvements
in securitisation markets. This portfolio
has shown encouraging growth since
Leveraged Equities, our margin lending
business, continues to reflect the
general uncertainty and volatility
seen in equity markets since late
2007. However, an exceptional credit
performance and strong margins
allowed margin lending to contribute
substantial profit to the group. This
business continues to grow market
share and reinforces our claim as the
independent Australian margin lending
provider of choice.
Our remaining wealth businesses are
expected to take advantage of improving
market fundamentals. Rationalisation
and consolidation of the industry,
and potential benefits from planned
regulatory and legislative changes are
likely to provide long term benefits to
this sector.
Rural Bank – our joint venture
business with Elders Limited – has
announced its net profit after tax
increased to $55.4 million, which
is a 23 per cent increase on the
previous year. This result – achieved
in challenging business conditions for
many agricultural commodities – reflects
the strength of the business’ operating
model and margin improvements for the
period. Retail deposits continue to fund
in excess of 95 per cent of Rural Bank’s
lending.
$242.6 mil
$291.0 mil
83.3 cents
Statutory profit after tax
Cash earnings
Cash earnings per share
190%
59.7%
32.4%
Increase in statutory profit after tax
Increase in cash earnings
Increase in cash earnings per share
5
Outlook
All businesses right across our strongly
diversified banking group are in a great
position to take advantage of new
opportunities as economic conditions
stabilise and improve.
Thanks to staff support of our unpaid
leave program, we have maintained
capacity throughout the GFC and we are
now fully equipped to generate further
growth, funding and efficiency through
our highly skilled people.
Bendigo and Adelaide Bank is a
different proposition; we connect with
our customers and partners, add value
to the products we offer by providing
exceptional service and give our
customers an opportunity to generate
positive outcomes for communities right
across Australia, simply by banking with
us.
This is what makes us relevant,
connected and valued and why we
will continue to grow and succeed.
I genuinely believe we can be
considered the first alternative for
banking in Australia.
Mike Hirst
Managing Director
Funding
In December 2009, we successfully
completed a $1 billion Residential
Mortgage Backed Securitisation
(RMBS). In March 2010, we completed
a second RMBS transaction, with
the issue upsized from $650
million to $1.1 billion. In July 2010,
we successfully concluded another
RMBS with a value of $1.5 billion.
This is a good indication that our
position as a lender is trusted and our
access to funding is secure.
The bank also raised nearly
$300 million in new capital through
its placement and entitlement offer
and has completed almost all merger
integration tasks to realise more than
$60 million in cost synergies. We’ve
also restructured the organisation to
better reflect our strategy and assist us
in implementing initiatives that make
it easier for customers to do business
with us.
Efficiency
Our reported costs increased over the
period due predominantly to the full
year contribution of the Macquarie
margin lending business, nine months
contribution of a consolidated Rural
Bank and our acquisition of Tasmanian
Banking Services in February 2010.
On a comparative basis costs grew
marginally due to increases in certified
staff salaries. All these investments
are poised to make great contributions
to our balance sheet in the future.
We will continue to drive new
efficiencies across the group and take
an opportunistic approach to merger
and acquisition opportunities.
> Managing Director, Mike Hirst (centre back),
joins bank staff volunteering at the Adelaide Festival.
Great Southern
We are actively dealing with the fall out
from the collapse of Great Southern.
The bank had provided loans to growers
that invested in the agricultural based
schemes managed by the company.
Our first priority was to support the
borrowers and growers and preserve
their opportunity to realise the value
in the asset they initially invested in.
This is primarily complete.
We must now ensure debts are repaid
by the people who borrowed money from
us and have had use of it for what they
wanted. We have started action in the
courts and our normal collection action
to ensure that debt is honoured. A class
action has also been launched against
us and we welcome our day in court for
the opportunity to vindicate our course
of action.
Profit
Our full year result showed a significant
rebound in profit for the group compared
with the previous financial year. Our
cash earnings were up and our net
interest margin also grew, allowing us
to announce a dividend in line with our
policy of paying out 60 to 70 per cent of
cash earnings as dividends.
We have delivered a strong result
and we have done it while
fundamentally restructuring
the business to ensure it
is sustainable and self
sufficient through
the business cycle,
enabling us to
deliver shareholder
returns in line
with recovering
profitability.
58 cents
Total full year dividend per share
34.9%
Increase in total full year dividend
6
$300.0 mil
Capital raised through placement
and entitlement offers 2009/10
0.97%
Residential mortgage 90-day arrears,
down from 1.08% in 2009
$2.1 bil
Raised through RMBS issues
2009/10
2.19%
Business lending 90-day arrears,
down from 2.21% in 2009
Profit on cash basis ($m)
Cost to income reduced
$85 4. 6
$ 1 2 . 7
$291
Cash basis
earnings
$
2
8
1.7
Income
Operating expenses
Non recurring items
before tax
Income tax expense
Net profit/loss attributable
to non-controlling interest
Bad and doubtful debts
Expenses
Net interest income
Total non interest income
Share of joint venture
net profits
64.4%
57.7%
Jun 09
Jun 10
Contribution by profit
Group loan portfolio
Retail
44%
27%
Third Party
11%
Rural Bank
18%
Wealth
Monthly Net Interest Margin (%)
Residential Mortgages
66.1%
Unsecured (1.9%)
Other (0.4%)
8.0%
Listed securities
and managed funds
23.6%
Commerical Mortgages
2.60
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
Jul09
Aug09
Sep09
Oct09
Nov09
Dec09
Jan10
Feb10
Mar10
Apr10
May10
Jun10
Gross
Net Community Bank® & Alliances
0.97%
$3.3 bil
Market capitalisation
as at 30 June 2010
A2
Moody’s credit rating
61%
Ordinary shares owned
by retail investors
BBB+
Standard and Poor’s
credit rating
39%
Ordinary shares owned
by institutional investors
BBB+
Fitch Ratings Services credit rating
7
community
customer
Retail Banking
Contributing to the success of
customers and communities
Our retail network continued to grow
and experience strong demand, as
evidenced in the last quarter when
system growth was matched or
exceeded in all portfolios including
mortgages, non-mortgage lending,
business lending and household
deposits.
Bendigo Bank continued to excel in
customer advocacy, satisfaction and
trust surveys with our staff aiming
to set new industry standards in
customer service. This, along with our
wide range of products and services
and connection to the community, has
seen the bank’s customer base grow
to more than 1.35 million.
To meet the needs of our increasing
customer base we extended our
branch network, opening 23 new
branches (22 Community Bank®
branches and one company owned
branch) over the financial year.
Demand remains strong for the
Community Bank®initiative, with more
than 60 communities around Australia
currently looking to introduce the
banking model to their community.
In addition, we fully integrated
all former Tasmanian Banking
Services branches into the network,
boosting our branch numbers in
Tasmania to 15.
We’re actively educating our staff,
we have made an investment into a
customer relationship management
system and we have introduced our
transition to advice program which
is designed to increase the skills of
selected branch staff, so more can
provide limited financial advice.
These investments in people and
infrastructure will better position us to
have more meaningful conversations
with our customers, increase the
amount of banking our current
customers do with us and attract new
customers.
Access and Payment Systems
Improving customer convenience and
access to banking services has been
the driving force behind an effort to
increase the number of ATMs Bendigo
Bank customers can transact at.
We have made a significant
investment in new machines and a
number of agreements with other
financial service providers have given
our customers twice as many places
to access their money.
The biggest boost to our ATM services
was achieved in July 2010, through
a network sharing agreement with
Suncorp Bank which allows Bendigo
Bank customers to use Suncorp ATMs
without incurring a direct charge fee.
The agreement improves the spread of
our ATM network with greater access
in Brisbane, Sydney and other parts of
Australia.
All the Bendigo staff I have had dealings with, either in person or on the
phone, have been courteous and friendly. I think that Bendigo’s customer
service is the best and it is for this reason that I will stay with Bendigo.
Bernice Shepherd, Bendigo Bank customer, Launceston
1.35 mil
Bendigo Bank customers
448
Bendigo Bank branches
1180
Bendigo Bank ATMs, almost 1900
ATMs post Suncorp sharing agreement
547
Total customer service outlets
8
23
394
New Bendigo Bank branches
2009/10
New Bendigo Bank ATMs 2009/10,
with a further 720 ATMs post Suncorp
sharing agreement
When you choose to do your banking with our retail arm, Bendigo Bank,
we make a commitment to ensure your best interests are our first priority.
We have a wide range of personal bank accounts, products and services to
meet your investment, saving and everyday banking needs.
Agencies
Business Banking
Bendigo Financial Planning
Customer Service Agencies make
up almost 20 per cent of our retail
network, complete around 700,000
transactions each year and serve more
than 40,000 customers, often in small
or remote communities.
Increasingly, our agencies are
becoming a starting point for
communities looking to establish
their own Community Bank®branch
and there are currently more than
10 Community Bank®campaigns
underway in agency locations.
Our Business Banking portfolio
continued to grow with $875 million
added to our balance sheet, an
increase of 10.7 per cent.
Funding challenges generated new
opportunities, with many small and
medium enterprises (SMEs) looking
for a new place to do their banking.
We will focus on servicing these
SMEs over the coming year, a move
supported by the addition of new
business banking staff.
Our business bankers have delivered
industry leading customer service.
In June 2010, Business Review Weekly
released survey results which showed
91.4 per cent of Bendigo Bank’s
business customers are satisfied
with our service. This was the highest
result achieved by an Australian bank.
Regulators are now moving to
introduce a fee-for-service model
across the financial planning industry,
but this change will not impact
us, as in 2006 we recognised and
implemented this practice as the best
way to provide independent advice.
To reinforce our ability to provide
independent product and service
advice to our customers, we have
ensured Bendigo Financial Planning
is not aligned to an in-house funds
management business. This means
our advisers can select from a wide
range of products and can provide
advice on a broad range of investment
options.
Bendigo Financial Planners are
salaried employees of the bank and do
not rely on commission, so the advice
you receive is free from any conflicts
of interest.
Bendigo Financial Planning is available
at more than 470 locations around
Australia.
I have been dealing with the Bendigo Bank for the last 16 years and have
found them to be very professional with the advice they give, the staff are
friendly and also very prompt with everything they do. I have recommended
the Bendigo Bank on several occasions and would have no hesitation in
recommending them in the future.
Ken Filbey, Bendigo Bank customer, Ballarat
99
Agencies
700,000
Agency transactions each year
$5.8 bil
Business Banking
assets under management
12.5%
472
Bendigo Financial Planning locations
Fee-for-service
Increase in Business Banking
assets under management
Model introduced in 2006 to provide
independent advice
9
community
?
?
Total funding driven by
retail deposits
Retail banking deposit growth
Wholesale
10%
Term Debt (1%)
17%
Securitisation
72%
Retail
n
o
l
l
i
B
$23.9
$25.6
$15.5
$17.2
$8.4
$8.4
June 09
June 10
Retail call deposits
Retail term deposits
Total retail branches and agencies
Total ATMs
1
4
9
11
3
40
8
58
12
27
50
43
17
169
30
337
26
9
7
114
64
4
12
42
11
94
53
288
189
Bendigo Bank
259
Community Bank®
99
Agents
ACT
2
2
86
56
113
9
6
ACT
11
2
8
404
56
125
19
5
878
Bendigo Bank ATMs
720
Shared ATMs
302
Bendigo Branded
(3rd Party) ATMs
$47.0 bil
Retail banking total assets and
liabilities under management
$21.4 bil
Retail banking assets
under management
$25.6 bil
Retail banking liabilities
under management
9.0%
11.5%
7.1%
Increase in retail banking total
assets and liabilities under management
Increase in retail banking
assets under management
Increase in retail banking
liabilities under management
10
??
partner
Responsive service
delivery to our partners
Third Party Lending and Wealth Deposits
Adelaide Bank is our dedicated intermediary bank, providing
partners with responsive wholesale banking opportunities and a
range of cash management solutions.
Third Party Mortgages
Wealth Deposits
After suffering falling lending volumes
during the depths of the GFC, our
Third Party Mortgage business is
experiencing a recovery, supported
by significant improvements in
securitisation markets over the
past year. The fundamentals for this
business are sound.
This portfolio has grown by $250 million
since February 2010, following strong
demand for a partner focussed
alternative to the major banks.
We are poised to make a significant
investment in a new platform to
support this part of our business.
The introduction of this system will
provide us with an opportunity to make
a compelling offer to brokers and
mortgage bankers.
We were proud recipients of three
major awards in Mortgage Professional
Australia magazine’s 2010 Brokers
on Banks survey. Brokers awarded
Adelaide Bank one gold medal for
its fast turnaround times and two
silver medals for satisfaction with
our credit policy and phone support.
We appreciate this recognition and
strive to continue to improve our
performance to ensure we are the
first choice of partner for mortgage
professionals.
Despite a decrease in Wealth
Deposits liabilities under management
for the full year, there was significant
growth in the last half of the financial
year, with the portfolio increasing
10.7 per cent to $3.8 billion.
Considering the past year’s
challenging market conditions and
competitive environment, we have
successfully managed our margins
and more than $100 million was
added to our term deposit book,
placing us in a strong position and
ahead of funding targets.
We introduced differential pricing for
Adelaide Bank Term Deposits which
lead to a 21 per cent growth in our
Wealth Advised Deposits compared
with the previous year.
We continued to exceed our partners’
expectations, highly rated for our
service, value proposition and
consistent in-market rates.
Greater efficiencies were also
introduced to remove capacity
constraints and allow for higher
volumes, improved service levels and
reduced business risk.
$13.5 bil
Third Party Mortgages assets
under management
Gold medal
Awarded by Mortgage Professional
Australia for fast turnaround times
$3.8 bil
Wealth Deposits
liablities under management
17.0%
Two silver medals
7.7%
Decrease in Third Party Mortgages
assets under management
Awarded by Mortgage Professional Australia
for credit policy and phone support
Decrease in Wealth Deposits
liabilities under management
11
partner
Providing opportunities
to build wealth and prosperity
Wealth Financing
Investment Solutions
and Trustee Services
As Australia’s foremost margin lender, Leveraged
Equities specialises in industry leading wealth
financing solutions that allow flexibility within
investment portfolios.
Established in 1888, Sandhurst Trustees is a highly
experienced provider of investment solutions and
trustee services that create, enhance and protect
wealth.
Against an operating environment of volatile equity markets,
market consolidation and cautious customer sentiment,
Leveraged Equities has performed exceptionally well.
Our managed funds and superannuation solutions
under trusteeship at the end of the financial year were
$2.6 billion.
Our share of Australia’s margin lending increased to
19 per cent during the year, profit margins were stable and
credit quality in the portfolio was strong. This affirms our
proposition of industry leading service and effective risk
management practices.
Our responsible lending business model and exceptional
customer service are among the reasons Leveraged
Equities remains the preferred margin lender for many
partners, financial advisers and customers.
Following the acquisition of the Macquarie margin loan
portfolio, we successfully merged the customer database
in November 2009. The performance of the acquired
portfolio has delivered growth and profitability results above
expectation.
Market and adviser sentiment will have a big influence over
the next 12 months and economic volatility will correlate
closely with the growth of our portfolio. Regulatory changes
will also have an impact on the margin lending industry and
to a lesser extent on our operating practices.
We have been at the forefront of discussions and
negotiations for an appropriate regulatory framework that
meets the needs of customers and our business.
However, with a strong market position and having
achieved growth in a difficult period, we are exceedingly
well positioned to take advantage of any improvement in
sentiment.
The GFC created a challenging environment for Sandhurst
Trustees, with the government guarantee on bank deposits
attracting funds away from mortgage funds like ours.
Many mortgage funds either closed or limited redemption
requests. Both of our funds (Select Mortgage Fund and
Investment Common Fund) which predominately invest in
mortgage securities, have remained open and continue to
pay all redemption requests to customers. We are one of a
handful of financial institutions that continue to do so.
This commitment to our customers and confidence in
the strength of our business reinforces that we put our
customers first.
Our Sandhurst Future Leaders Fund was recognised by the
Australian Financial Review, winning its Smart Investor Blue
Ribbon Award 2009 for the best small-cap fund in Australia.
In August 2010, our intention to acquire a 24 per cent
stake in Linear Asset Management was announced.
This acquisition will provide us with an opportunity
to advance our wealth strategy by partnering with an
organisation that offers a strong value proposition to
investors and advisers. This investment will also give us
access to a high growth, low (ongoing) capital intensive
industry sector and additional funding.
We are ready to take advantage of improving market
fundamentals. Rationalisation and consolidation of the
industry and potential benefits from planned regulatory and
legislative changes are likely to provide long-term benefits
for us in this sector.
$3.7 bil
Leveraged Equities
assets under management
8.8%
Increase in Leveraged Equities
assets under management
12
28,364
Leveraged Equities clients
100,470
Sandhurst Trustees clients
$2.6 bil
Sandhurst Trustees
funds under trusteeship
4.0%
Increase in Sandhurst Trustees
funds under trusteeship
partner
Joint Ventures
Innovative partnerships which deliver
specialised products and services
Our joint ventures enable us to offer an expanded range of specialist financial
products and services. This not only adds to the diversity of our business but allows
us to better serve our customers.
The Homesafe Solutions joint venture is another
great example of Bendigo and Adelaide Bank’s
acknowledgment of its social responsibilities.
The group owns 50 per cent of the joint venture which
was launched in July 2005.
The Homesafe Debt Free Equity Release product
enables senior Australians to supplement their
retirement savings by selling a part of the future sale
proceeds of their home. This provides them with an
opportunity to remain in their home and community for
their lifetime.
It is the only product of its kind available and is currently
offered in certain areas of Sydney and Melbourne.
In addition to its own products and services, Bendigo and
Adelaide Bank also offers a range of agribusiness products
manufactured by Rural Bank under the Bendigo Bank
Agribusiness banner.
Rural Bank is a 60 per cent majority owned subsidiary
of Bendigo and Adelaide Bank, with more than 30,000
customers in farming communities across Australia
introduced via Bendigo Bank and Elders Limited.
In August 2009, Rural Bank announced it would pursue
further growth by broadening its distribution platform.
This followed its rebranding from Elders Rural Bank to Rural
Bank and culminated in the establishment of a distribution
partnership with Ray White Rural in June 2010. This has
launched a new era for a business that has grown to a point
where it can take on a more independent identity.
Rural Bank also opened its first city based branches in
Adelaide and Perth. This will enhance its profile in these
locations and improve customer access, with 43 per cent
of Rural Bank’s deposit funds coming from metropolitan
markets.
Money Magazine highlighted the value of the Rural Bank
online term deposit, recognising and awarding it in the Best
of the Best Awards.
They give you the money as a lump sum, there’s no loan attached, there’s nothing to
pay back. You sell a percentage of the house for cash in hand. Homesafe has been
very good for our lifestyle and it helps us to have the freedom to do what we want.
Joanne and Michael Bowie, Homesafe Solutions customers, Sydney
$55.4 mil
Rural Bank net profit after tax
$8.0 bil
$158.9 mil
Rural Bank assets and liabilities
under management
Homesafe Solutions
assets under management
23%
Increase in Rural Bank
net profit after tax
30,000
Rural Bank customers
1300
Homesafe Solutions customers
13
community
community
Community Bank®
Supporting those
?
?
who support us
We had 600 fun run participants from
special needs schools all around South East
Queensland and just as many family, friends
and teachers came along to support them.
With help from our Community Bank®branch,
local staff and the community, we organised an
action-packed day to make the kids smile.
Gavin McNab, Branch Manager,
Margate Community Bank® Branch
1998
Community Bank®
network established
259
22
New Community Bank®
branches 2009/10
$17.9 bil
Community Bank® assets and
liabilities under management
$41.0 mil
$14.7 mil
Community Bank® branches
14
Profits returned to support local
communities since 1998
Dividends paid to Community Bank®
shareholders since 1998
??
Supporting those
who support us
Community Bank®branches provide communities with more than just
quality banking services. They deliver employment opportunities for local
people, keep capital in the community, are a local investment option for
shareholders and provide a source of revenue for important community
projects as determined by the community.
Government funding was cut for the Kool Kids Club, an early intervention program
aimed at indigenous and disadvantaged children. Our Community Bank®branch
contributed $50,000 to save the service and keep the after-school and holiday
programs running. The activities are designed to challenge and enhance the
children’s abilities and life skills.
Janet Kidson, Treasurer, Clovelly Community Financial Services
The $500,000 Moriac Medical Centre is a grassroots initiative designed to
meet a vital community need. The community worked with Hesse Rural Health,
consulted the council and partnered with the Community Bank®branch and we
have ended up with a great medical facility that will benefit our local people.
Libby Coker, Mayor, Surf Coast Shire
West Beach and Districts Community Bank®Branch donated $20,000 to
purchase and cover the operating costs of a new rescue boat and motor. One of
the first rescue operations was performed by five junior lifesavers who saved the
life of a local woman.
Peter Hodgkison, Branch Manager,
West Beach & District Community Bank® Branch
Our Community Bank®branch has been open for almost two years, but we’ve had
great support with many people in the community choosing to bank with us. This
has allowed us to start to make community grants. Even a small donation, like the
the one we gave to the Bruce Rock Swimming Club can make a huge difference.
Alex Dickson, Branch Manager, Bruce Rock Community Bank® Branch
64,292
Community Bank®
shareholders
548,000
Community Bank®
customers
1638
Community Bank®
directors
1252
Community Bank®
staff
25%
Of Community Bank® branches are the
sole provider of branch banking services
in their local community
75%
Of the last 100 Community Bank®
branches opened had a major bank
already operating in their local community
15
community
Helping you to donate to
those who support others
Community Enterprise Foundation™
Our town was ripped apart by
bushfires on 29 December
2009. More than 200
properties were affected,
with more than 30 families
losing everything. Thanks to
the support of many generous
Australians, Community
Enterprise Foundation™ and
Toodyay Community Bank®
Branch more than $825,000
was raised and distributed to
those most in need.
Richard Dymond,
Chairman, Toodyay
Community Bank® Branch
2005
Community Enterprise
Foundation™ established
2350
Groups and organisations
assisted since 2005
$19.7 mil
280
Distributed to charitable projects
and programs since 2005
Grants programs
conducted since 2005
16
$7.0 mil
Distributed to charitable projects
and programs 2009/10
619
Groups and organisations
assisted 2009/10
Helping you to donate to
those who support others
Community Enterprise Foundation™ is the philanthropic arm of Bendigo
and Adelaide Bank. It was established to make charitable giving more
accessible to everyday Australians who wish to show their support for
causes they believe in.
The Help Out Appeal raised more than $120,000 for six Salvation Army projects.
These included youth accommodation and support services, assistance for young
mums, domestic violence intervention programs, financial counselling and the
Salvos’ Soup Run. Our clients are very grateful for the bank’s support.
Major Andrew Craib, Spokesperson, The Salvation Army
With the support of the Ringwood East community, the Community 30,000 Appeal
has raised more than $28,000 to secure a companion dog for 10-year-old Alexia
Charstone, who battles autism and severe epilepsy. The dog has reduced her
anxiety levels, which will hopefully reduce stress related seizures.
Ray Tonisson, Senior Manager,
Ringwood East and Heathmont Community Bank® branches
The Mothers Milk Bank provides support to families when a new mother or baby
has a life threatening illness or when the child is at risk of an illness that donor
milk may prevent. Bank staff and the foundation have supported our White Shirt
Day Appeal which played a big role in the service’s success.
Marea Ryan, Director, Mothers Milk Bank
This is the fourth time in eight years that a bushfire has struck the Lower
Eyre Peninsula. The fire razed at least 10 homes and destroyed our local SES
headquarters. Through Community Enterprise Foundation™ and the Port Lincoln
Community Bank®Branch, we raised $53,000 to help more than 80 locals rebuild.
Phil Channon, Branch Manager, Port Lincoln Community Bank® Branch
82
Grants programs conducted 2009/10
$150,000
Raised for Mothers Milk
Bank Appeal 2009/10
$100,000
Upper Murray Bushfire Appeal
2009/10
$825,000
Raised for Toodyay Bushfire Appeal
$120,000
Raised for Building Bridges
– Help Out Appeal 2009/10
$53,000
Raised for Port Lincoln
Bushfire Appeal 2009/10
17
community
Implementing change
to sustain us
Environment and Sustainability
Gisborne SES volunteers replaced more than 2500 energy hungry light bulbs
during the Ban the Bulb campaign and raised more than $5000 for a new kitchen
in their headquarters. Across Victoria, 54 communities participated in this year’s
program with more than 1000 volunteers changing about 200,000 light bulbs in
13,000 homes and businesses. This will save 100,000 tonnes of emissions and
has generated $400,000 in income for community groups.
Jason Chuck, Branch Manager, Gisborne and District Community Bank® Branch
200,000
Energy efficient bulbs installed
during Ban the Bulb 2009/10
13,000
Participating homes
and businesses
1000
Ban the Bulb volunteers
18
100,000
Tonnes of emissions saved by
Ban the Bulb 2009/10
$400,000
Income generated for
community groups
$30.0 mil
Forecast savings
on future energy bills
Implementing change
to sustain us
Bendigo and Adelaide Bank is committed to a path of sustainability.
This means reducing our environmental footprint, promoting environmentally
responsible business activities and offering environmentally responsible
products and services.
The Central Victoria Solar City project offers products and services which allow
participants to change their energy use behaviour, make energy efficient home
renovations, trial innovative electricity pricing plans and generate their own local
energy through household solar panels and solar hot water systems. Customers
in Bendigo and Ballarat also have the option to support energy production from
local solar parks.
Neriman Kemal, Spokesperson, Central Victoria Solar City
Knoxbrooke Incorporated is a not-for-profit organisation that provides employment,
training and accommodation services for adults with disabilities in Melbourne’s
eastern suburbs. It operates a number of horticulture businesses including a
wholesale nursery at Mt Evelyn. Thanks to Community Sector Banking we have a
banking product suited to our needs which gives us greater control of our money.
Paul de Stefanis, Financial Controller, Knoxbrooke Incorporated
Zoos Victoria is establishing a purpose-built facility for a group of male gorillas
at Werribee Open Range Zoo, ensuring they have space to roam and continue
to receive excellent care. Thanks to Bendigo Bank Telco which raised $2500 to
support us, we are one step closer to achieving our goal.
Paul Clark, Philanthropy Executive, Zoos Victoria Foundation
Last cropping season farmers grew 5000 hectares of seed to produce biodiesel.
Soon, the biodiesel supplied by the project will be produced entirely in the area,
retaining local capital in our region. It’s ironic our grandfathers planted oats to
feed horses and now we sow seed to feed horsepower.
David Johnson, Chairman, Lockmore Financial Services
346
4577
0.5%
Tonnes of paper recycled
by our staff 2009/10
Tonnes of carbon offsets purchased to
balance 2009/10 travel emissions
Discount on bank’s residential variable rate
available with Generation Green™ home loans
66.5%
Increase in paper recycled
compared with 2008/09
20,000
1.0%
Litres of water saved daily by The Bendigo
Centre’s Recycling Water Treatment Plant
Discount on bank’s standard personal loan
rates available with Generation Green™
secured and unsecured personal loans
19
community
Investing in people and events
that inspire and enrich us
Sponsorships, Scholarships and Initiatives
Essendon Football Club has partnered with Bendigo and
Adelaide Bank to promote literacy and numeracy among
young people. It’s about giving back and with companies such
as the bank and Essendon so steeped in our community, this
is just one of many ways we have chosen to respond to the
community and its needs.
Ian Robson, CEO Essendon Football Club
Essendon
Football Club
Retail sponsorship
Adelaide
Festival of Arts
Corporate sponsorship
Helpmann Academy
of the Arts
Corporate sponsorship
Bendigo
Easter Festival
Retail sponsorship
20
Messenger Local
Business Awards (SA)
Retail sponsorship
Bendigo and Adelaide
Bank Scholarship
Corporate sponsorship
Investing in people and events
that inspire and enrich us
Bendigo and Adelaide Bank supports and contributes to a variety of
community, sport, business, education and arts organisations. We not only
offer financial assistance, but provide access to our network of partners
and skilled staff through our volunteer work.
When you live in the country and want to go to university you have to move away
from the support of your family. The cost of living in the city is high, but with the
help of the scholarship, I’m studying at the University of Melbourne. I have finally
achieved what I worked so hard for at school.
Caitlin Chapman, Bendigo and Adelaide Bank Scholarship recipient
Thanks to the Youth Development Fund I was able to seize a fantastic opportunity,
while making a real and lasting difference to Thai wildlife. I travelled to Thailand
to build new enclosures for gibbons, providing a safe space to rehabilitate these
animals impacted by poaching. The experience reinforced how precious and
vulnerable wild animals are.
Fiona Boyle, Youth Development Fund recipient
The PlanBig website enables us to share information, build partnerships and
support each other. Our community is using PlanBig to garner support for a new
emergency services headquarters so that our community is better protected
from bushfires and natural disasters. For every dollar the community raises, the
Turramurra Community Bank®Branch will match it up to $100,000.
Denice Kelly, Branch Manager, Turramurra Community Bank® Branch
As editor of Lead On’s LOOP publication in Bendigo, I have made important
connections, improved my writing and communication skills and most importantly
had a lot of fun. LOOP allows youth to stand up, speak up and be heard. It gives
them a chance to express themselves through writing, photography or artwork
and puts their passions in print.
Danielle Wheeldon, Editor, LOOP Bendigo
2007
15
6
Bendigo and Adelaide Bank
Scholarship established
Scholarship recipients,
10 new and five ongoing 2009/10
Lead On locations and
two outreach sites
18
Scholarship recipients
since 2007
$5000
Support for each scholarship
recipient in 2009/10
250
Lead On youth participants
21
people
Our people
United as one team
to connect with you
The bank partners with Bendigo Senior Secondary College to
mentor students. I try to give the kids an understanding of the
corporate environment and the various pathways into the finance
industry. The program has also been personally rewarding for me
as it has allowed me to engage with local youth.
Brendan Hamilton, IT Applications Programmer,
Bendigo and Adelaide Bank
4153
Bendigo and Adelaide
Bank Staff
430
2835
Head office staff
1318
Locations Australia-wide
Bendigo Bank branch staff
22
20
School-based traineeships completed
2009/2010
290 staff
undertaking external studies
assistance scheme
United as one team
to connect with you
Bendigo and Adelaide Bank is proud of its people and the diversity of our
employee community. We come together from across the country, always
working towards our goal of becoming Australia’s leading customer-connected
bank. Our employees invest their time to ensure the success of the bank, its
customers, partners and the community.
More than 20 bank employees volunteered 140 hours of their time as support
crew to the 10 teams that participated in the 100 kilometre Oxfam Trailwalker.
Overall the event raised $2.6 million to help provide clean water, shelter and
food to people living in poverty around the world. At the bank we raised more
than $50,000.
Mark Hayes, Alliance Banking, Bendigo and Adelaide Bank
We held our annual insurance and investment conference in Strath Creek close
to the bushfire-devastated area of Flowerdale in Victoria. As part of our team
building activities, we planted more than 400 native seedlings. It was great to
know we were making a positive community contribution.
Richard Forrester, Senior Manager Investment and Protection,
Bendigo and Adelaide Bank
Having the opportunity to take unpaid leave allowed me to spend six weeks at
an orphanage in Ghana. I spent my time teaching classes at a local school and
helping young children learn about colours, numbers and spelling. The journey
really taught me to appreciate the simple things in life.
Megan O’Reilly, Customer Service Officer, Bendigo Bank Brisbane
Bendigo Bank’s Benalla Branch staff serve about 50 meals a month to local
residents through a Meals on Wheels program. We find the experience very
rewarding. It’s fantastic to meet new people and help them out by providing a
nutritious hot meal they may otherwise not be able to provide for themselves.
Jenny Lee, Customer Relationship Manager, Bendigo Bank Benalla
98%
Staff committed to
perform their job well
92%
Staff proud of the work they do
83%
Staff with up to
10 years service
8%
Staff with
10 to 15 years service
4%
Staff with
15 to 20 years service
5%
Staff with over
20 years service
23
people
Executives
Leading to ensure we work as
one team with one vision
Mike Hirst, Managing Director
“I know our whole team is committed to ensuring we are Australia’s leading customer-connected bank. By really
listening to what it is our customers, partners and communities are trying to achieve we can ensure we play a
role in helping them realise their goals. If we do this well, we will certainly achieve our ultimate vision.”
Marnie Baker, Banking and Wealth
“By creating an environment that listens and
genuinely cares about the customer outcome
we have a real opportunity to add value to
customers, communities and partners across
Australia by providing quality solutions that
are relevant to their individual needs.”
Dennis Bice, Retail
“We are looking at ways we can make it easier
for customers to do business with us. We will
continue to deliver products and services to
achieve this and meet customer needs, while
maintaining leading customer satisfaction
levels.”
John Billington,
Wealth and Third Party Banking
“At the heart of our business is the
experience that we create for our customers.
We strive to be the preferred partner in
helping our customers grow in a rapidly
changing financial environment.”
Richard Fennell, Finance and Treasury
“Developing and implementing financial
strategies and solutions for the group is
integral to our success. We must continue
to actively monitor and manage our financial
performance and raise appropriate funding
and capital to meet the bank’s requirements.”
Russell Jenkins,
Customer and Community
“Our focus on our customers and our efforts
with communities beyond banking is our point
of difference, it’s what sets us apart and
it’s why people choose to bank with us. It’s
imperative we recognise each customer and
community’s individual needs and work with
them to achieve their goal.”
Tim Piper, Risk
“Risk is the responsibility of every
employee. Risk is a major component of the
financial landscape and must be managed
effectively. In an ever-changing environment,
we are committed to identifying the right
opportunities for our business to pursue.”
Stella Thredgold, Corporate Resources
“Corporate Resources provides expert advisory
and support services to ensure the business’
success. We are people focussed and aim
to provide our staff and partners with the
resources, technology and skills they need
to perform at their best so they can deliver
industry leading customer service.”
Andrew Watts, Change
“Successful companies respond to the
changing needs of their customers. The newly
created Change team coordinates the many
initiatives undertaken by the bank to ensure we
remain relevant, connected and valued by our
customers and partners. Change is considered
holistically - people, process and technology.”
24
Detailed profiles of our executives can be found online at www.bendigoadelaide.com.au
people
Directors
Driving the strategy and vision
to deliver results
Robert Johanson BA, LLM (Melb), MBA (Harvard)
• Chairman, Bendigo and Adelaide Bank (appointed 2006)
• Governance and HR, Change Framework and IT Governance committees, Bendigo and Adelaide Bank
• Director, Rural Bank
• Chairman, Homesafe Solutions
Mike Hirst BCom (Melb)
• Managing Director and Chief Executive
Officer, Bendigo and Adelaide Bank
(appointed 2009)
David Matthews Dip BIT, GAICD
• Independent Director, Bendigo and
Adelaide Bank (appointed 2010)
• Credit and Risk committees, Bendigo and
• Credit and Risk committees, Bendigo and
Adelaide Bank
• Director, Rural Bank
Adelaide Bank
Kevin Abrahamson
BSc (hons), MA, MBA, FAICD, FFin, FAIM
• Independent Director, Bendigo and
Adelaide Bank (appointed 2007)
• Audit and Change Framework and IT
Governance committees, Bendigo and
Adelaide Bank
Jenny Dawson
BSc (Hons), MA, MBA, FAICD, FFin, FAIM
• Independent Director, Bendigo and Adelaide Bank
(appointed 1999)
• Chair, Audit Committee, Bendigo and Adelaide Bank
• Credit Committee, Bendigo and Adelaide Bank
• Chair, Sandhurst Trustees
• Director, Community Sector Banking and Community
Sector Enterprises
Jim Hazel BEc, FFin
• Independent Director, Bendigo and
Adelaide Bank (appointed 2010)
• Credit, Risk and Governance and HR
committees, Bendigo and Adelaide Bank
Terry O’Dwyer
BCom, Dip Adv Acc, FCA, FAICD
• Independent Director, Bendigo and Adelaide
Bank (appointed 2000)
• Chair, Change Framework and IT Governance
Committee, Bendigo and Adelaide Bank
• Audit and Risk committees, Bendigo and
Adelaide Bank
Deborah Radford
BCom (Melb), ASA, MBA (Melb)
• Independent Director, Bendigo and Adelaide
Bank (appointed 2006)
• Chair, Credit Committee, Bendigo and
Adelaide Bank
• Audit, Change Framework and IT Governance,
Governance and HR committees, Bendigo
and Adelaide Bank
Tony Robinson
BCom (Melb), ASA, MBA (Melb)
• Independent Director, Bendigo and
Adelaide Bank (appointed 2006)
• Chair, Risk and Governance and HR
committees, Bendigo and Adelaide Bank
Detailed profiles of our directors can be found online at www.bendigoadelaide.com.au
25
investor
customer
partner
community
people
Full Financial Report
For the 12 month period ending
30 June 2010
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
TABLE OF CONTENTS
Corporate Governance - Overview
Five Year History
Five Year Comparison
Directors’ Report
Summary of Remuneration Outcomes
2010
Remuneration Report (Audited) FY2010
Income Statement
Balance Sheet
Statement of Comprehensive Income
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Corporate information
Summary of significant accounting policies
Segment results
Profit
Underlying profit
Income tax expense
Average balance sheet and related interest
Capital management
Earnings per ordinary share
1
2
3
4
5
6
7
8
9
10 Dividends
11 Return on average ordinary equity
12 Net tangible assets per ordinary share
13 Cash flow statement reconciliation
14 Cash and cash equivalents
15 Financial assets held for trading
16 Financial assets available for sale - debt
securities
17 Financial assets available for sale - equity
investments
18 Financial assets held to maturity
Loans and other receivables
19
20
Impairment of loans and advances
21 Particulars in relation to controlled entities
22
Investments in joint ventures using the equity
method
Property, plant and equipment
Assets held for sale
23
24
Page
28
42
43
44
48
50
78
79
80
81
85
86
86
86
104
107
109
109
112
114
116
118
119
120
120
121
121
121
122
122
123
124
125
126
128
129
25
26
27
Investment property
Intangible assets and goodwill
Impairment testing of goodwill and intangibles
with indefinite lives
28 Other assets
29 Deposits
30 Other payables
31
Provisions
32 Reset preference shares
Subordinated debt
33
34
Issued capital
35 Retained earnings and reserves
36 Non-controlling interest
Employee benefits
37
Share based payment plans
38
Auditor’s remuneration
39
40
Key management personnel
41 Related party disclosures
42 Risk management
43
44 Derivative Financial Instruments
45 Commitments and contingencies
46
Financial instruments
47
48
49
Standby arrangements and uncommitted credit
facilities
Fiduciary activities
Events after balance sheet date
Business combinations
Directors’ Declaration
Independent Audit Report
Additional information
Page
129
130
132
134
134
134
135
136
136
137
138
140
140
141
147
148
155
159
170
176
178
182
183
183
184
187
188
190
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
CORPORATE GOVERNANCE - OVERVIEW
Bendigo and Adelaide Bank is committed to high standards of corporate governance. The Board believes that Bendigo and
Adelaide Bank’s commitment to integrity in the conduct of its business has been an important element of its success during
its 152-year history. This commitment applies to the dealings by Bendigo and Adelaide Bank with its shareholders,
customers, employees, suppliers, regulators and the community. It is also reflected in Bendigo and Adelaide Bank’s
corporate values.
1. The Board
1.a Role
relation
The Board provides direction to the Bank by approving and
monitoring the Bank’s strategy and financial objectives.
Available from our website, the Board charter sets out the
Board’s detailed responsibilities, including its responsibilities
remuneration,
in
governance, audit,
framework,
technology governance and credit matters. Except in relation
to any matters reserved to the Board under the charter, the
day-to-day management of Bendigo and Adelaide Bank and
its operations is delegated to management.
to committees, nomination,
risk, business change
for
the
test
the purpose of assessing
the quantitative materiality
1.b Composition
The Board believes that the exercise of independent
judgment by directors is an important feature of corporate
governance.
The Board has decided that the majority of directors are to
be independent. The Board Policy (appointment, re-election,
independence, renewal, performance and remuneration)
sets out
the
independence of non-executive directors. An independent
director is a director who is free from any material business
or other association – including those arising out of a
substantial shareholding, involvement in past management
or as a supplier, customer or advisor - that could interfere
with the exercise of their independent judgment. In deciding
materiality,
in
Accounting Standard AASB 1031 are taken into account, as
well as qualitative materiality factors.
Directors must disclose any material personal interest in
accordance with the Corporations Act. Directors must also
comply with the constraints on their participation and voting
in relation to matters in which they may have an interest in
accordance with the Corporations Act.
Each director may from time to time have personal dealings
with Bendigo and Adelaide Bank. Each director may be
involved in other companies or professional firms who may
from time to time have dealings with Bendigo and Adelaide
Bank. Full details of related party dealings are set out in
notes
financial
the Bendigo and Adelaide Bank
statements as required by law.
The Board has assessed each non-executive director as
independent. In making that assessment, the Board has
taken into account the relationships set out on pages 31 to
34 and the following.
No director is, or is associated directly with, a substantial
thresholds
to
shareholder of Bendigo and Adelaide Bank.
No director, except as previously disclosed or disclosed
in the information about directors later in this governance
statement, has ever been employed by Bendigo and
Adelaide Bank or any of its subsidiaries.
No director
is, or
is associated directly with, a
professional adviser, consultant, supplier, customer or
other contractor of Bendigo and Adelaide Bank that is a
material adviser, consultant, supplier, customer or other
contractor under accounting standards.
28
No director has any other connection (eg family ties or
cross-directorships) with Bendigo and Adelaide Bank
which affect independence.
No related party dealing referable to any director is
material under accounting standards.
The Board considers the tenure of long serving directors as
part of its renewal planning. The Board believes that the
term of service on the Board should not be considered as a
factor affecting a director’s ability to exercise unfettered and
independent judgement. It is the view of the Board that
longstanding directors bring an additional level of experience
and understanding of the development of the business and a
depth of perspective to the Board that is of value to the
Board and Company. This is discussed further in the next
section.
The Board policy on independence (refer “Board Policy”) is
available from the website.
1.c Composition, Appointment, Re-Election and
Renewal
Composition and appointment
The Constitution provides that the number of directors is to
be decided by the Board, being not fewer than three and not
more than twelve. The Board currently consists of eight non-
executive directors and the Managing Director. The roles of
the Chairman and Managing Director are separated.
Information on each of the directors is set out on pages 31
to 34.
The policy of Bendigo and Adelaide Bank is to appoint
directors with appropriate skills, knowledge and experience
to contribute to the effectiveness of the Board and to provide
leadership and contribute to the success of Bendigo and
Adelaide Bank.
This involves taking into account the Company’s strategy,
which includes building a long term sustainable business
founded on creating an environment
that encourages
relationships and
customer, community and partner
engagement to deliver prosperity for all stakeholders, which
in turn creates prosperity for the Company.
There is a regular review of the skills, knowledge and
experience represented on the Board, including as part of
the annual performance assessment process, necessary to
deliver the strategy of the group.
A Board skill matrix has been adopted by the Board. The
matrix sets out the types of skills and experience desirable
on the Board and is used to identify potential gaps in skills
and experience within the Board. In developing the matrix,
the Board has taken into account the benefits to the
organisation of having Board representation relating to
strategic points of difference and having an appropriate
blend of tenure and experience to ensure there is an
understanding of the challenges to an organisation through
economic cycles and changes in the market environment.
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
The Board has decided that the desired skills and experience
include various banking and finance related skills as well as
listed company CEO experience and regional and community
understanding.
In addition, as Bendigo and Adelaide Bank aims to be
Australia’s leading customer connected Bank, it is important
that the Board membership supports this strategy. By having
directors from our key franchise locations, including regional
Victoria, South Australia and Queensland, we demonstrate a
these
closer connection with, and commitment
communities and directors are expected
to bring an
understanding of local priorities and ambitions.
to,
1.e Remuneration
The Remuneration Report in the Directors’ Report includes a
discussion of non-executive director and executive
remuneration policies, executive performance and details of
remuneration paid.
1.f Procedures
The Board charter (available from the website) sets out
relevant Board procedural matters. This includes procedures
in relation to a conflict of interest and also provision for
access to independent professional advice at the expense of
Bendigo and Adelaide Bank.
Renewal and re-election
1.g Grant Samuel advisory services
Mr Johanson is a director of Grant Samuel Group Pty Ltd
(and subsidiaries).
The Bank obtains corporate advisory services
from
investment banking and corporate advisory firms. This
includes Grant Samuel.
In choosing a provider for corporate advisory services the
factors the Bank takes into account include the type of
assistance required, the expertise of the firm and individuals
in the firm, their understanding of the Bank and its strategy,
and the cost of the services.
The Bank has a long standing and valuable relationship with
Grant Samuel. Grant Samuel brings a sound understanding
of the Bank, its strategy and its approach to opportunities.
Steps are taken to ensure Grant Samuel also prices work
undertaken competitively.
The Board believes that the engagement of Grant Samuel
does not prejudice the independence of Mr Johanson.
Accordingly, the Board has adopted a protocol for the
engagement of Grant Samuel, and it is unlikely that the Bank
would approve an engagement
the
engagement could impact on the independence of Mr
Johanson. The protocol deals with the following two key
matters:
Appointment
The decision whether to appoint Grant Samuel.
The involvement of Mr Johanson.
it believed
that
if
The appointment may be by the Managing Director if the
matter comes within quantitative materiality guidelines set by
the Board and does not involve a success fee or break fee.
Otherwise the appointment can only be made by the Board.
This includes a consideration of the following:
Confirmation
from Grant Samuel
regarding
the
materiality of the transaction to Grant Samuel.
Confirmation from Mr Johanson regarding the materiality
of the transaction to Mr Johanson and whether Mr
Johanson believes the engagement would interfere with
his exercise of independent judgment as a director.
impact on
the
independence of Mr Johanson, taking into account the
above
the
perspective of the Bank.
confirmations, and materiality
the engagement would
Whether
from
Whether Mr Johanson may be present and participate in
Board discussions and vote on the matter in which Grant
Samuel provides advice.
Whether the engagement of Grant Samuel is in the best
interests of the Bank.
The Board has adopted a renewal policy to ensure the
progressive and orderly renewal of
the Board. Board
members should have a mix of tenure to ensure a periodic
infusion of new members and to avoid a significant number of
directors retiring together. The board takes the view that
having regard to the complexities of the financial services and
banking
the development of expertise and
knowledge of the industry and, specifically of the Bank and
the group, takes time.
industry,
Also having regard to the strategy to build a sustainable
business, corporate memory is important and there is a
benefit in board continuity across economic cycles. The ability
to draw on the knowledge of directors who have experienced
previous economic downturns, market disruptions and
significant industry developments is valued by the Board.
The re-election of directors at the end of their term is not an
automatic process. Before a recommendation to shareholders
is made, the Board makes an assessment and decision. This
includes taking into account the skills, knowledge and
experience needed on the current Board and the statement
by the director seeking re-election.
The policy and procedure for composition, appointment and
re-election and renewal (refer “Board Policy”) is available
from the website.
1.d Performance
The Board charter provides for an annual evaluation of the
Board,
individual directors and Board Committees. An
evaluation took place in the reporting period. The evaluation
of individual directors and the Board was conducted by the
Chairman. The Board (in the absence of the Chairman)
undertook an evaluation of the Chairman. The Chairman of
each Board Committee conducted a performance evaluation
of the Committee and the results were discussed in a Board
meeting.
Suggested changes or ideas for improvement are taken
forward for action if agreed. The Chair also provides feedback
to individual directors on their individual performance where
appropriate.
The performance assessments are conducted using
questionnaires tailored to evaluate the performance of the
Board, non-executive directors, the Managing Director and
each Board Committee. Each year, the Board and Board
Committees set goals and objectives for the next financial
year. The goals and objectives are approved by the full
Board.
The performance assessment process involves consideration
of the performance of the Board and Board Committees
against their respective Charters and the achievement of the
goals and objectives
to board and committee
responsibilities set at the start of the financial year.
linked
Further information on the performance evaluation procedure
(refer “Board Policy”) is available from the website.
29
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Involvement
Engagements
During the year Grant Samuel was engaged to provide advice
on
the
the purchase of Tasmanian Banking Services,
Company’s strategy
the Great Southern managed
investment schemes and the Bank’s Adelaide and Sydney
long term accommodation projects.
for
1.h Rural Bank
Rural Bank Limited became a controlled entity following an
increase in shareholding and approval of amendments to the
shareholders agreement governing
in
October 2009. The operations and performance of Rural
Bank continue to be overseen by a board of directors
comprising representatives from Bendigo and Adelaide Bank
independent
Limited, Elders Limited and a number of
directors.
joint venture
the
A review of the governance and oversight arrangements for
Rural Bank has been completed and appropriate
enhancements to the Bank’s governance arrangements have
been
implemented. Further enhancements will be
progressively implemented over the next financial year in
consultation with the Rural Bank Board. The oversight
arrangements include representation on Rural Bank’s Board,
its board and management committees and the inclusion of
financial information into the group’s reporting structures.
Mr Johanson is not present and does not participate in the
Board decision on whether to engage Grant Samuel. He may
be invited to join the meeting to answer questions or make
additional comments (including if Mr Johanson is aware of
any reason it would not be in the interests of the Bank to
engage Grant Samuel in the matter under consideration), but
then is required to leave the meeting for the discussion and
decision.
is engaged,
there are a number of
If Grant Samuel
restrictions on Mr Johanson’s involvement, including the
following:
The primary responsibility for management of the matter
by Grant Samuel is to be with personnel other than Mr
Johanson.
The work and strategic advice is to be carried out by the
personnel other than Mr Johanson. Contact is to be with
those personnel.
Mr Johanson is to have a review role only in relation to
advice, and if Mr Johanson attends any meetings, he is
to do so as a director of the Bank.
that Mr Johanson can
If
the Board has decided
the matter, Mr
participate
Johanson
independent
assessment of advice provided by Grant Samuel and
raise any concerns with the Managing Director or the
Board, as appropriate.
in decision-making on
is
to make an
required
Umbrella engagement terms have been agreed with Grant
Samuel (without the involvement of Mr Johanson), including
fees, and specific engagements are documented.
30
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
THE BOARD
Current
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Robert Johanson
Chairman
(59 years)
BA, LLM (Melb)
MBA (Harvard)
Independent Director
TERM OF OFFICE
Director for 23 years and appointed as
Chairman during 2006. Previously
Deputy Chairman for 5 years.
*Seeking re-election at 2010 AGM
Mike Hirst
Managing Director (appointed on 3
July 2009)
(52 years)
BCom (Melb)
Executive Director and Chief
Executive Officer
TERM OF OFFICE
Employee since 2001 and appointed
CEO and Managing Director in July
2009.
Mr Johanson has expertise in corporate strategy, capital and risk management. He
has provided independent corporate advice on capital market transactions to a wide
range of public and private companies. Mr Johanson is a member of the Council of
the University of Melbourne, a member of its Finance Committee and Chairman of
the Investment Committee. He is a director of the Robert Salzer Foundation Ltd and
a member of the Takeovers Panel.
Mr Johanson is a director of Grant Samuel Group Pty Ltd (and subsidiaries) which
provides professional advisory services to the Group. Information on the
engagement of Grant Samuel is discussed at Section 1.g.
Group and joint venture company directorships
Rural Bank Ltd
Homesafe Solutions Pty Ltd (Chair)
Committees
Governance & HR
Change Framework & Technology Governance
Mr Hirst has extensive experience in banking, treasury, funds management and
financial markets. Prior to his appointment as Managing Director, Mr Hirst held the
position of Chief Executive Retail Bank and was responsible for the Bank’s retail
business, group solutions and treasury. He previously held the positions of Chief
Operating Officer, responsible for the group’s retail banking business and product
and service delivery, and Chief General Manager Strategy & Solutions, responsible
for product development & management and strategy.
Prior to joining the Bank he had worked for 11 years in senior executive and
management positions with Colonial Ltd including General Manager Treasury. He
also worked with Chase AMP Bank for 3 years and with Westpac for 7 years in
branch banking and finance and planning roles.
He is a director of Treasury Corporation of Victoria, a member of the Australian
Government’s Financial Sector Advisory Council, a member of the Business Council
of Australia, a Councillor of the Australian Bankers’ Association and a director of a
number of the group’s subsidiary companies. He previously held directorships with
Colonial First State Investment Managers, Barwon Health and Austraclear Ltd.
Group and joint venture company directorships
Rural Bank Limited
Committees
Change Framework & Technology Governance (ceased Sept 2009)
Credit
Risk
Kevin Abrahamson
(65 years)
BSc (Hons)
MA
MBA
FAICD, FFin, FAIM
Independent Director
Mr Abrahamson is an Australian finance sector specialist and consultant who joined
the Adelaide Bank Board in 2000. As a specialist in the area of corporate strategy
and information technology, he has worked as a consultant to the financial sector
since 1997 as the head of KD Abrahamson Consultants.
From 1988 to 1997, he held the position of General Manager, Group Services with
Advance Bank and St George Bank. Mr Abrahamson previously was a director of
Fiducian Portfolio Services Limited.
TERM OF OFFICE
Appointed to Board in November 2007
Appointed to Adelaide Bank Board in
2000
Group and joint venture company directorships
Sunstate Lenders Mortgage Insurance Pty Ltd (ceased Oct 2009)
Committees
Audit
Change Framework & Technology Governance
31
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Jenny Dawson
(45 years)
B Bus (Acc)
FCA, MAICD
Independent Director
TERM OF OFFICE
Director for 11 years.
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
currently a member of the Victorian Regional Development Advisory Committee and
is also the inaugural Chairman of the Regional Development Australia Committee
for the Loddon Mallee Region. Her former roles include as a director of Coliban
Region Water Corporation and an employee of the Bank (ceased 1999).
Group and joint venture company directorships
Sandhurst Trustees Limited (Chair) (appointed Sept 2009)
Adelaide Managed Funds Limited (Chair) (ceased Aug 2009)
Community Sector Banking Pty Ltd
Community Sector Enterprises Pty Ltd
Committees
Audit (Chair)
Credit
Jim Hazel
(59 years)
BEc, FFin
Independent Director
TERM OF OFFICE
Appointed in March 2010
*Seeking election at 2010 AGM
Mr Hazel is a prominent South Australian businessman with significant banking
experience and knowledge of the regional banking industry. Mr Hazel was the
chairman of the Company’s majority-owned subsidiary Rural Bank and continues as
a non-executive director of Rural Bank.
Mr Hazel is also chairman of Xenome Limited and RED Fund Management Pty Ltd.
He also serves as a Director on the boards of Impedimed Limited, Motor Accident
Commission and Centrex Metals Limited, and is a board member of the Council on
the Ageing (SA) Inc. and War Veterans’ Homes (Myrtle Bank) Inc. He is a former
director of Becton Property Group Limited and Terramin Australia Limited, and was
a senior executive of Adelaide Bank in the 1990’s. There are no continuing
executives from the time Mr Hazel held this role.
Group and joint venture company directorships
Nil
Committees
Risk
Credit
Governance & HR
Terry O’Dwyer
(60 years)
B Com
Dip Adv Acc
FCA, FAICD
Independent Director
TERM OF OFFICE
Director for 10 years.
*Seeking re-election at 2010 AGM
Mr O’Dwyer is the former chairman and managing partner of BDO 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 and a director of Queensland Theatre
Company Ltd, Backwell Lombard Capital Pty Ltd and Retravision Southern Ltd. He
has previously chaired MFS Limited, Roamfree Ltd and Brumby’s Bakeries Holdings
Ltd and has served on other public company boards and government business
enterprises.
Mr O’Dwyer was a director of First Australian Building Society Limited which was
acquired by Bendigo and Adelaide Bank in 2000.
Group and joint venture company directorships
Sunstate Lenders Mortgage Insurance Pty Ltd (ceased Oct 2009)
Committees
Audit
Risk
Change Framework & Technology Governance (Chair)
32
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
David Matthews
(52 years)
Dip BIT, GAICD
Independent Director
TERM OF OFFICE
Appointed in March 2010
*Seeking election at 2010 AGM
Deb Radford
(54 years)
B.Ec
G. Dip Finance & Investment
Independent Director
TERM OF OFFICE
Director for 5 years.
Tony Robinson
(52 years)
B Com (Melb)
ASA
MBA (Melb)
Independent Director
TERM OF OFFICE
Director for 5 years.
Mr Matthews was an innovative pioneer in the early days of the Community Bank®
network, chairing the first Community Bank® company in Rupanyup and Minyip
and serving as a director since 1998. Mr Matthews has a strong connection to
regional communities and is an advocate and supporter of the Community Bank®
model.
Mr Matthews is currently a co-chairman of the Community Bank® Strategic
Advisory Board (“CBSAB”). The CBSAB was established in 2008 and comprises
representatives from the Bank and from Community Bank® company franchisees.
Its purpose is to provide a forum for discussion between the Bank and Community
Bank® franchisees on strategic issues and opportunities that enhance the
prospects of the Community Bank® model. Mr Matthews is also a Director on the
board of Pulse Australia and Australian Field Crops Association.
Group and joint venture company directorships
Nil
Committees
Risk
Credit
Ms Radford has nearly 20 years experience in the banking industry with both
international and local banks. Following seven years with the Victorian State
Treasury, she ran her own consulting business between 2001 and 2007 advising
the government on commercial transactions. Ms Radford is a Director of Forestry
Tasmania and City West Water.
Group and joint venture company directorships
Nil
Committees
Credit (Chair)
Audit
Change Framework & Technology Governance
Governance & HR
Mr Robinson is employed by Centrepoint Alliance Limited as an executive director
and chief executive officer. He was previously employed as an executive director
and chief executive officer of IOOF Holdings Ltd from 2007 until April 2009 and prior
to that was the managing director and chief executive officer of OAMPS Limited. He
was previously also a director of VECCI. Mr Robinson’s other 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.
Group and joint venture company directorships
Nil
Committees
Risk (Chair)
Governance & HR (Chair)
33
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Former
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Jamie McPhee
(45 years)
BEng (Hons)
MBA
FAICD, SF Fin
Executive Director
TERM OF OFFICE
Appointed to Board in November 2007
and resigned in January 2010.
Appointed to Adelaide Bank Board in
2006
Mr McPhee was the chief executive responsible for the group’s retail, wealth and
partner advised businesses. He previously held the role of Chief Executive Partner
Advised Bank. Mr McPhee joined Adelaide Bank in 1988 within the Treasury
function, and was appointed Group Managing Director of Adelaide Bank in
December 2006. Mr McPhee began his financial services career in the dealing room
of merchant bank Wallace Smith Trust Company based in London. He returned to
Adelaide in 1988 and joined The Co-operative Building Society of South Australia
Limited (which later became Adelaide Bank). He was appointed Chief Manager of
Treasury at the time of the merger between The Co-operative Building Society of
South Australia Limited and the Hindmarsh Building Society in January 1992 and in
1993 was promoted to the organisation’s executive committee.
Group and joint venture company directorships
Adelaide Managed Funds Limited (ceased Aug 2009)
Leveraged Equities Limited (ceased Feb 2010)
Rural Bank Limited (ceased Feb 2010)
Committees
Risk
Credit
Change Framework & Technology Governance
Kevin Osborn
Deputy Chairman
(60 years)
FAICD, FPNA
Independent Director
TERM OF OFFICE
Appointed to Board in November 2007
and resigned in December 2009.
Appointed to Adelaide Bank Board in
2003
Mr Osborn was appointed to the Adelaide Bank Board in 2003. He was formerly the
Chief Executive of Bank One in Australia (now part of JP Morgan Chase). Mr
Osborn is a director of the Economic Development Board of South Australia, and
was formerly a director of the American Chamber of Commerce in Australia, and
ABB Grain Limited.
He is a director on the SA Government Projects Co-ordination Board, and chairs the
Adelaide Desalination Project Committee. Mr Osborn is a Fellow of the National
Institute of Accountants and a Foundation Fellow of the Australian Institute of
Company Directors. The Board approved a protocol that sets out arrangements for
dealing with potential conflicts of interest connected with the financial services
activities of ABB Grain Limited.
Group and joint venture company directorships
Nil
Committees
Credit (Chair)
Audit
Risk
Kevin Roache
(70 years)
LLB, B Com
ASCPA, FAICD
Independent Director
TERM OF OFFICE
Appointed to the Board in 1992 and
retired from the Board in October 2009
Mr Roache has extensive experience in advising clients on business and taxation
issues. Mr Roache is a director of Geelong Community Enterprise Ltd, a former
President of the Geelong Business Club, member of the Finance Committee of
Geelong Chamber of Commerce, treasurer of Committee for Geelong, a former
Chairman of Barwon Health Geelong and has been a board member of many
community and charitable organisations.
Mr Roache was the Chairman of Capital Building Society, the business of which
was integrated into Bendigo and Adelaide Bank in 1992. Mr Roache is the chairman
of partners in Coulter Roache Lawyers which provides legal services to the Group
on normal commercial terms and conditions.
Group and joint venture company directorships
Nil
Committees
Credit
Risk
Governance & HR
34
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
2. Board committees
2.a Composition and responsibilities
To help it discharge specific aspects of its responsibility, the Board has established the following Committees.
COMMITTEE
COMPOSITION –
REQUIREMENTS
MEMBERS
RESPONSIBILITIES
Audit
At least 3 members.
All independent directors.
An independent chair, who is
not chairman of the Board.
Ms Dawson (Chair)
Mr Abrahamson
Mr O’Dwyer
Ms Radford
The role of the Committee is to provide
assistance to the Board in relation to the
following.
External audit function (including prudential
audit requirements).
Internal audit function.
Statutory financial and APRA reporting.
Internal control framework.
Governance &
HR (Human
Resources)
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Robinson (Chair)
Mr Johanson
Mr Hazel
Ms Radford
The role of the Committee is to provide
assistance to the Board in relation to the
following.
Board composition and succession
Risk
Credit
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Robinson (Chair)
Mr O’Dwyer
Mr Hazel
Mr Matthews
Mr Hirst
At least 3 members.
A majority of independent
directors.
An independent chair.
Ms Radford (Chair)
Ms Dawson
Mr Hazel
Mr Matthews
Mr Hirst
Change
Framework &
Technology
Governance
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr O’Dwyer (Chair)
Mr Abrahamson
Mr Johanson
Ms Radford
planning.
Board performance
Remuneration including executive
remuneration policy
Recommend remuneration arrangements
for the CEO and senior executives to the
Board.
Corporate governance matters generally
Key human resource policies.
The role of the Committee is to provide
assistance to the Board in relation to oversight
of risk and includes the establishment,
implementation, review and monitoring of risk
management systems and policies for the
following.
Balance sheet and off-balance sheet risk,
including trading.
Operational risk, including regulatory
compliance, financial crimes, anti-money
laundering and counter terrorism financing
and business continuity.
The role of the Committee is to provide
assistance to the Board in relation to oversight
of the establishment, implementation, review
and monitoring of credit risk management
systems and policies, taking into account the
risk appetite of the Group, the overall business
strategy and management expertise.
The role of the Committee is to provide
oversight and monitoring of the organisation’s
Change and Technology Services functions
including the alignment and engagement of
these functions with the business, systems
stability, technology infrastructure investment,
information security and major project
management.
35
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
2b. Procedures
Membership of all Committees is reviewed annually. Each
Committee is governed by a charter which identifies the
Committee’s role and responsibilities. A Committee may
consult a professional adviser or expert, at the cost of the
Bank, if the Committee considers it necessary to carry out its
duties and responsibilities. A Committee may meet with
the presence of
third parties without
employees and
management. The minutes of each Committee meeting are
tabled and discussed at the next meeting of the Board.
3. Risk management
The management of risk is an essential element of the
Group’s strategy and operations. The risk management
strategy is based on risk principles approved by the Board.
The Board is responsible for overseeing the establishment,
implementation, review and monitoring of risk management
systems, policies and internal controls to manage the Bank’s
material risks. It has established an integrated framework of
committee, policies and controls to identify, assess, monitor
and manage risk. Executive management is responsible for
implementing the policies and controls.
The Bank has established a system of regular reporting from
independent risk, audit and credit functions to the executive
and the board committees on the implementation and
effectiveness of the risk management systems, policies and
internal controls designed to manage the material business
risks outlined below.
The key risk management responsibilities of the risk, credit
and audit committees are outlined at Section 2.a.
The key risks and responsibilities for the Group are:
Credit risk: The risk of financial loss due to the
unwillingness or inability of a counterparty to fully meet
their contractual debts and obligations. The Board
Credit Committee is responsible for setting policies in
relation to credit practices and procedures within the
group and monitoring adherence to these policies. The
Credit Committee (management committee) supports
the Board Credit Committee responsibilities in respect
to credit risk management. Credit support, analysis and
reporting are managed by the Group Credit Risk
business unit.
Interest rate risk: The risk of volatility in earnings due to
adverse movements in interest rates. Interest rate risk
is primarily monitored through the Risk Committee and
the Asset Liability Management Committee and
managed through the Group Treasury.
Liquidity risk: The risk of the inability to access funds
which may lead to an inability to meet obligations in an
orderly manner as they arise or forgone investment
opportunities. Liquidity risk is primarily monitored by the
Risk Committee and the Asset Liability Management
Committee and managed through the Liquidity and
Balance Sheet Management Units within Group
Treasury.
Currency risk: The risk of loss of earnings due to
adverse movements in exchange rates. Currency risk is
primarily monitored by the Risk Committee and the
Asset Liability Management Committee and managed
through the Financial Markets Department and Group
Treasury.
Operational risk: The risk of impact on objectives
resulting from inadequate or failed internal processes,
people and systems or from external events including
legal and reputation risk but excluding strategic risk.
36
Operational Risk is primarily monitored by the Risk
Committee
and Operational Risk Committee
(management committee) and managed through the
Group Operational Risk business unit, incorporating
operational risk, regulatory compliance, fraud prevention
and detection, anti-money laundering and business
continuity. The Audit Committee has primary
responsibility for the oversight of financial reporting risk.
Operational risk is governed by the Group Operational
Risk Framework. The framework is in line with Basel II
(operational risk management) and
the Australian
Standard – AS/NZS 4360:2004 (risk management).
In addition, Group Assurance is the independent internal
audit and credit risk review function that, on a risk basis,
assesses the adequacy and effectiveness of the Bank’s
processes for controlling its activities and managing its risks.
The General Manager Group Assurance has a direct
reporting line to the Audit Committee and an administrative
reporting line to the Executive: Corporate Resources. The
General Manager Group Assurance has direct access to the
Managing Director, the Chair of the Audit Committee and the
Chairman of the Board.
Group Assurance also has direct access to any member of
staff and access to any information relevant to its work.
Reports on
the outcome of assurance programs are
provided to the Audit Committee with those relating to credit
risk also provided to the Credit Committee. The strategic
plan for the function covering internal audit and credit risk
review is approved and monitored by the Audit Committee.
The Group Assurance function is also independent of the
external auditor. External audit considers risk management
in order to assess and understand the Group’s business and
financial risks as well as the effectiveness of internal
controls which may have a significant impact on the financial
statements.
The Managing Director and Chief Financial Officer provide
an annual sign-off to the Board on the matters summarised
below for the Bank and the consolidated entity for the
reporting period.
Whether the financial reports present a true and fair
view, in all material respects, of the Group’s financial
position and performance and are in accordance with
the Corporations Act and comply with the Corporations
Regulations 2001 and Accounting Standards.
the
Whether
financial records of
maintained in accordance with the Corporations Act.
Whether the financial reports are founded on a sound
system of risk management and internal control and that
the system is operating effectively in all material
respects in relation to financial reporting risks.
the Group are
The statements are made on the basis that they provide
a reasonable, but not absolute, level of assurance and
do not imply a guarantee against adverse events or
circumstances that may arise in future periods.
To support this sign off the Bank has implemented due
diligence, verification and certification processes throughout
the business to provide assurance to the Managing Director,
Chief Financial Officer and the Board, both in respect to the
financial statements and the system of risk management
and internal control.
This process, known as the risk declaration, is conducted on
a six-monthly basis in conjunction with the Bank’s half year
and year end
reporting obligations. Further
information on the Bank’s risk management framework,
including risk management responsibilities, reporting and
control arrangements, is presented in the full financial
statements at Note 42.
financial
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
4. External auditor
5. Continuous disclosure and communications
The Audit Committee is responsible for recommending to
the Board the appointment of the external auditor and a
policy in relation to auditor independence, rotation and the
provision of non-audit services by the external auditor, and
for monitoring compliance with the policy.
The Bendigo and Adelaide Bank Board recognises the
importance of making sure that the Bank’s shareholders, and
the broader investment market, are kept informed about the
Bank’s activities and that the Bank meets its continuous
disclosure obligations.
5.a Continuous disclosure
The Bank has a continuous disclosure policy to assist the
Bank in making sure that all price sensitive information is
disclosed to Australian Securities Exchange (“ASX”) under
the continuous disclosure requirements of ASX Listing Rules
and the Corporations Act.
The Board meeting agenda includes continuous disclosure
as a standing item for Board consideration. The Managing
Director, Chairman and executive officers are responsible for
identifying matters or transactions arising between Board
meetings which require disclosure in accordance with the
ASX Listing Rules.
All announcements to be lodged with ASX must first be
approved by an authorised officer, generally the Managing
Director, before release.
The company secretary is responsible for coordinating
communications with ASX and for having systems in place to
ensure that information is not released to external parties
until confirmation of lodgement is received from ASX.
5.b Communications
to
The Bank has also established a communications policy
for all
which provides clear authorities and protocols
communications with parties external
in
particular, investors, ASX, regulatory authorities, media and
brokers.
Bendigo and Adelaide Bank communicates with
shareholders by the following means.
ASX announcements
Shareholder updates
Annual reporting (as well as the full financial
the Bank,
its
statements, it includes annual reviews)
Annual general meetings
Online shareholder question and answer facility
Shareholder question sheet included with annual
general meeting notice
The following material is made available on the Bendigo and
Adelaide Bank website.
Shareholder updates (commencing 2001)
Full
financial statements
(commencing 2000),
shareholder reviews (commencing 2007), and
concise reports (2000 – 2006)
Media releases (for the past four years)
Notices of meeting (commencing 2001)
Webcasting of
results presentation
(following
preliminary final announcement)
Webcasting of annual general meeting
Any material provided in briefings with analysts,
stockbrokers and institutional investors (following
its release to the market).
In addition, there is a link from the Bendigo and Adelaide
Bank website
to
announcements that Bendigo and Adelaide Bank has made
to ASX.
the ASX website
for access
to
The policy on audit independence sets out the factors
regarded as compromising auditor independence. It includes
a requirement for the engagement of the auditor for any non-
audit services to be approved by the Audit Committee before
the engagement, so that the Audit Committee can consider
any impact on the independence of the auditor. The policy
also provides for the Audit Committee to receive the annual
and half-year independence declaration from the auditor. As
required by the Corporations Act, the Audit Committee
provides an annual statement to the Board as to whether the
Audit Committee is satisfied that the provision of non-audit
services is compatible with the independence of the auditor
and the reasons for being so satisfied. To support the
annual statement, in addition to the above arrangements, as
part of the half-year and year-end reporting processes the
audit committee receives a detailed report confirmed by
Group Assurance setting out the nature and scope of all
non-audit services provided during the year, including
respective
includes
confirmation from relevant senior management that they are
not aware of any matters that might impact the auditor’s
independence.
fee amounts. The
report also
The Directors’ Report includes a statement about whether
the directors are satisfied that the provision of non-audit
services is compatible with the independence of the auditor
and the reasons for being so satisfied. In addition, while not
required by the Corporations Act, the policy requires the
Audit Committee to provide the same statement for the half-
year and for the directors to consider it with the auditor’s
half-year independence declaration.
The policy provides that a person who plays a significant
role in the audit must rotate if they have acted in that role for
five successive years or, if they were to act, they would have
played a significant role for more than five out of seven
successive financial years, with a two-year cooling-off
period.
The Corporations Act provides for members to submit
written questions to the Bank for the auditor about the
content of the auditor’s report to be considered at the annual
general meeting, or the conduct of the audit of the annual
financial report to be considered at the annual general
meeting, no later than the fifth business day before the day
on which the annual general meeting is held.
The external audit engagement partner from Ernst & Young
is
that a suitably qualified
representative attends the annual general meeting. The
to provide an
Chairman of
opportunity for the members as a whole at the meeting to
ask the auditor’s representative questions relevant to the
conduct of the audit, the preparation and conduct of the
auditor’s report, the accounting policies adopted by the Bank
in relation to the preparation of the financial statements and
the independence of the auditor in relation to the conduct of
the audit.
The Chairman is also required to allow a reasonable
opportunity for the representative of the auditor to answer
written questions submitted before the meeting.
to make sure
the meeting
is required
required
37
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
6. Corporate conduct
6.c Share trading policy
The staff trading policy imposes restrictions on trading in the
company’s shares and securities by directors, members of
the Executive Committee and other designated employees
(who may have access to price sensitive information). A
black-out period is imposed for the 10 weeks leading up to
each of the half-year and full-year announcements to ASX.
The policy also imposes obligations on these employees and
officers in relation to notifying the Bank before and after
trading. The notifications are reported to the Board. In
addition, all employees and directors are prohibited from
trading if in possession of price sensitive information.
The policy prohibits directors, members of the Executive
Committee and other designated employees from using their
Bendigo and Adelaide Bank securities as part of a margin
loan portfolio. This prohibition does not apply to shares
issued under the group’s loan based share plans as
described in Note 38.
The policy also prohibits
instruments granted under the Executive Incentive Plan.
the hedging of unvested
7. Executives
7.a Performance
The Remuneration Report in the Directors’ Report includes a
discussion of
the annual performance assessment
arrangements for executive management, including the
managing director.
7.b Remuneration, contracts with executives
The Remuneration Report in the Directors’ Report includes a
discussion of executive (including the managing director)
remuneration and contracts.
6a. Code of Conduct and Reporting of Concerns policy
Bendigo and Adelaide Bank’s corporate values provide a
framework to guide interactions within the Group, with
customers, shareholders, suppliers and the community. The
values are teamwork, integrity, performance, engagement,
leadership and passion.
These values have been incorporated in a Code of Conduct
that has been endorsed by the Bank Executive Committee
and adopted by the Board. The Code of Conduct sets out
the Group’s mission statement, being to focus on building
and improving the prospects of customers, communities and
partnerships in order to develop sustainable earnings and
growth for the business, and thus provide increasing wealth
for shareholders. Engagement with communities is central to
the Group’s strategy and stands Bendigo and Adelaide Bank
apart from others in the industry.
The Code of Conduct provides guidelines for directors and
staff, so that there is a common understanding of the values
and expected standards of behaviour, including in relation to
conflicts of interest, staff securities trading and
confidentiality.
The Group’s Reporting of Concerns policy provides a
reference point for reporting concerns, including on an
anonymous basis. This includes a concern, a grievance,
and report of a suspected breach of law or Group policy
(including any breach of the Code of Conduct). The
Reporting of Concerns policy also explains the protection
provided for employees who raise concerns in good faith.
The Group’s Code of Conduct and Reporting of Concerns
policy apply to all Group members.
6.b Regulatory compliance
Bendigo and Adelaide Bank has always placed importance
on being law-abiding, and has a long history of dealing fairly
and ethically with its customers. The Code of Conduct
requires all employees and directors to comply with laws
and policies, and requires directors and officers to promote
compliance.
the Group Operational Risk
Management Framework and the regulatory compliance
policy set out specific
to
compliance with regulatory obligations and management of
regulatory compliance risk. The Board is responsible for
overseeing regulatory compliance and is assisted by the
Risk Committee.
responsibilities
In addition,
relation
in
38
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
The following is a guide to the above discussion in this report about how Bendigo and Adelaide Bank practices meet the
ASX Corporate Governance Council Corporate Governance Principles and Recommendations (and Guides to reporting)
(August 2007). The documents referred to below are available from the Bendigo and Adelaide Bank website
(www.bendigobank.com.au) in the corporate governance section of “About us”.
PRINCIPLE
RECOMMENDATION
1. Lay solid foundations for
management and oversight
1.1 Companies should establish the functions
reserved to the Board and those delegated to
senior executives and disclose those functions.
BENDIGO AND ADELAIDE BANK
PRACTICE
Status: Adopted
Annual report: Section 1.a
Documents on website:
Constitution, Board charter
1.2 Companies should disclose the process for
evaluating the performance of senior executives.
Status: Adopted
Annual report: Section 7.a
Recommendation 1.3: Companies should provide
the information indicated in the Guide to reporting
on Principle 1.
Status: Adopted
Annual report: section 7.a
Directors’ Report p.28
2. Structure the board to add
value
2.1 A majority of the Board should be
independent directors.
2.2 The Chair should be an independent director.
Status: Adopted
Annual report: Section 1.b
Documents on website: Board
Policy (1)
Status: Adopted
Annual report: Section 1.b
2.3 The roles of Chair and Chief Executive Officer
should not be exercised by the same individual.
Status: Adopted
Annual report: Section 1.b
2.4 The Board should establish a nomination
committee.
Status: Adopted
Annual report: Section 2.a
2.5 Companies should disclose the process for
evaluating the performance of the board, its
committees and individual directors.
2.6 Companies should provide the information
indicated in the Guide to reporting on Principle 2.
3. Promote ethical and
responsible decision-making
3.1 Companies should establish a code of
conduct and disclose the code or a summary of
the code as to:
the practices necessary to maintain
confidence in the company’s integrity
The practices necessary to take into
account their legal obligations and the
reasonable expectations of their
stakeholders
the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
Status: Adopted
Annual report: Section 1.d
Documents on website:
Board Policy (1)
Status: Adopted
Annual report: Section 1.b, 1.f, 2.a,
and see Directors’ Report p.31 to
p.34 for director details and p.73 for
director attendance at Committee
meetings
Documents on website:
Constitution, Board charter,
Governance & HR Committee
charter, Committee procedural
rules, Board Policy (1)
Status: Adopted
Annual report: Section 6.a
3.2 Companies should establish a policy
concerning trading in company securities by
directors, senior executives and employees and
disclose the policy or a summary of that policy.
Status: Adopted
Annual report: Section 6.c
Documents on website: Trading
Policy
3.3 Companies should provide the information
indicated in the Guide to reporting on Principle 3.
Status: Adopted
Annual report: Section 6
Documents on website: Code of
conduct, Reporting of concerns,
Trading Policy
(1) Board Policy – Appointment, re-election, independence, renewal, performance and remuneration
39
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
4. Safeguard integrity in
financial reporting
4.1 The Board should establish an audit
committee.
4.2 The audit committee should be structured so
that it:
consists only of non-executive directors
consists of a majority of independent
directors
is chaired by an independent chair, who is
not chair of the board
Status: Adopted
Annual report: Section 2.a
Status: Adopted
Annual report: Section 2.a
has at least three members.
4.3 The audit committee should have a formal
charter.
Status: Adopted
Annual report: Section 2
4.4 Companies should provide the information
indicated in the Guide to reporting on Principle 4.
5. Make timely and balanced
disclosure
5.1 Companies should establish written policies
and procedures designed to ensure compliance
with ASX Listing Rule disclosure requirements
and to ensure accountability at a senior executive
level for that compliance and disclose those
policies or a summary of those policies.
5.2 Companies should provide the information
indicated in the Guide to reporting on Principle 5.
Status: Adopted
Annual report: Section 1.b, 2.a and
see Directors’ Report p.73 for
director attendance at Committee
meetings
Documents on website:
Audit Committee charter,
Committee procedural rules,
Selection and appointment of
external auditor engagement
partners; rotation of external audit
partners, Risk Management
Principles and Systems Description
- Summary
Status: Adopted
Annual report: Section 5
Documents on website:
Continuous Disclosure Policy
Status: Adopted
Annual report: Section 5
Documents on website: Continuous
disclosure policy, Communications
policy
6. Respect the rights of
shareholders
6.1 Companies should design a communications
policy for promoting effective communication with
shareholders and encouraging their participation
at general meetings and disclose their policy or a
summary of that policy.
Status: Adopted
Annual report: Section 5
Documents on website:
Communications policy
Status: Adopted
Annual report: Section 5
Documents on website:
Communications Policy
Status: Adopted
Annual report: Section 3
Documents on website:
Risk Management Principles &
Systems Description - Summary
Status: Adopted
Annual report: Section 3
6.2 Companies should provide the information
indicated in the Guide to reporting on Principle 6.
7. Recognise and manage risk
7.1 Companies should establish policies for the
oversight and management of material business
risks and disclose a summary of those policies.
7.2 The Board should require management to
design and implement the risk management and
internal control system to manage the company’s
material business risks and report on whether
those risks are being managed effectively. The
board should disclose that management has
reported to it as to the effectiveness of the
company’s management of its material business
risks.
40
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
7.3 The Board should disclose whether it has
received assurance from the Chief Executive
Officer (or equivalent) and the Chief Financial
Officer (or equivalent) that the declaration
provided in accordance with section 295A of the
Corporations Act1 is founded on a sound system
of risk management and internal control and that
the system is operating effectively in all material
respects in relation to financial reporting risks.
7.4 Companies should provide the information
indicated in the Guide to reporting on Principle 7.
Status: Adopted
Annual report: Section 3
Status: Adopted
Annual report: Section 3
Documents on website: Risk
Committee, Credit Committee, IT
Committee Overview, Risk
Management Principles and
Systems Description - Summary
8. Remunerate fairly and
responsibly
8.1 The Board should establish a remuneration
committee.
Status: Adopted
Annual report: Section 2.a
8.2 Companies should clearly distinguish the
structure of non-executive directors remuneration
from that of executive directors and senior
executives.
Status: Adopted
Annual report: Section 1.e, and
Directors’ Report under the heading
“Remuneration Report”
8.3 Companies should provide the information
indicated in the Guide to reporting on Principle 8.
Status: Adopted
Annual report: Section 1.e and 2.a,
and see Directors’ Report p.73 for
committee attendance p.54 and
p.70 for remuneration policies
Documents on website:
Governance & HR Committee
charter, Remuneration policy; Board
Policy; Employee Share Plans
41
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FIVE YEAR HISTORY
The Bendigo and Adelaide Bank Group
Financial Performance for the year ended 30 June
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
Profit after income tax expense
Net (profit)/loss attributable to non controlling interest
Adjustments
Cash basis earnings
Financial Position at 30 June
Total assets
Net loans and other receivables
Cash and cash equivalents
Financial assets and derivatives
Other assets
Equity
Deposits and Notes payable
Reset preference share
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
Profit after tax before significant items return on average assets
Return on average assets
Cash basis return on average ordinary equity
Return on average ordinary equity
2010 (1)
$m
2009 (2)
$m
2008 (3)
$m
2007
$m
2,712.2
1,857.6
3,154.7
2,519.7
2,695.6
2,098.1
854.6
280.4
44.7
739.6
350.7
(90.8)
242.6
(17.3)
48.4
291.0
635.0
238.7
80.3
674.1
119.3
(35.5)
83.8
-
97.7
181.5
597.5
272.4
23.1
560.5
286.3
(87.3)
198.3
(0.7)
41.3
239.6
52,141.1
43,521.8
1,040.2
4,848.6
2,730.5
3,880.4
47,114.2
38,740.9
1,148.0
4,360.3
2,780.6
3,118.7
48,049.0
40,105.0
1,608.6
3,647.8
2,113.9
3,297.9
1,058.6
701.5
357.1
205.1
8.2
376.1
177.9
(56.2)
121.8
0.1
(3.3)
118.5
17,001.6
13,773.3
329.1
2,249.0
650.2
1,015.0
2006
$m
907.4
592.4
315.0
201.8
7.0
344.1
165.7
(49.0)
116.7
-
(14.2)
102.5
15,196.1
12,376.0
479.8
1,854.3
486.0
899.5
46,119.0
41,854.3
42,697.1
15,146.6
13,525.8
89.5
532.9
89.5
598.7
89.5
675.8
1,519.3
1,453.0
1,288.7
$5.27
67.4
83.3
28.0
30.0
58.0
0.56%
0.49%
8.40%
6.79%
$4.31
25.4
62.6
28.0
15.0
43.0
0.36%
0.18%
5.79%
2.35%
$5.60
87.7
111.1
28.0
37.0
65.0
0.72%
0.61%
12.29%
9.70%
-
307.2
532.8
$5.40
81.9
82.9
24.0
34.0
58.0
-
307.1
463.7
$4.78
81.5
73.2
22.0
30.0
52.0
0.80%
0.76%
15.38%
15.18%
0.75%
0.80%
14.51%
16.16%
1 Figures for 2010 include the fully consolidated trading of Rural Bank from 1 October 2009, Tasmanian Banking Services from 1 August 2009.
2 Figures for 2009 include the fully consolidated trading of Macquarie margin lending portfolio.
3 Figures for 2008 include the merger with Adelaide Bank effective 30 November 2007.
42
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FIVE YEAR COMPARISON
The Bendigo and Adelaide Bank Group
Financial Performance for the year ended 30 June
Key Trading Indicators
Retail deposits - branch sourced
Number of depositors' accounts - branch sourced
Total loans approved
Number of loans approved
Liquid assets and cash equivalents
Total assets
Liquid assets & cash equiv as proportion of total assets
Number of branches(2)
Average deposit holdings per branch
Number of staff (excluding Community Banks)
Assets per staff member
Staff per million dollars of assets(4)
Dissection of Loans by Security (5)
Residential loans
($'000)
Commercial loans
Margin lending
Unsecured loans
Other
Gross loans
Dissection of Loans by Security (5)
Residential loans
(%)
Commercial loans
Margin lending
Unsecured loans
Other
Total
Asset Quality
Impaired 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 effect) & 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)
(%)
(%)
2010 (1)
2009
2008 (3)
2007
2006
21,876.7
20,799.9
1,812,286 1,754,849
11,916.6
9,137.4
147,069
130,670
5,888.8
5,508.3
52,141.1
47,114.2
11.29
11.69
448
48.8
3,847
13.554
0.07
426
48.8
3,598
13.095
0.08
28,875.5
28,569.4
10,182.1
3,627.0
823.7
191.0
5,987.6
3,475.9
707.1
183.1
14,986.8
1,638,443
8,845.2
81,853
5,256.4
48,049.0
10.94
404
37.1
3,478
13.815
0.07
29,840.4
5,712.3
3,773.8
737.9
193.9
11,641.3
1,418,088
7,018.0
73,236
2,578.1
17,001.6
15.16
357
32.6
2,428
7.002
0.14
10,193.3
2,905.0
90.50
472.4
182.9
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
9,233.0
2,561.9
-
413.1
228.6
43,699.3
38,923.1
40,258.3
13,844.1
12,436.6
66.08
23.30
8.30
1.88
0.44
73.40
15.38
8.93
1.82
0.47
74.12
14.19
9.37
1.83
0.49
73.63
20.98
0.65
3.41
1.33
74.24
20.60
0.00
3.32
1.84
100.00
100.00
100.00
100.00
100.00
257.5
(78.3)
179.2
0.47
79.1
0.18
47.1
104.7
0.54
0.01
223.6
(66.9)
156.7
0.42
67.7
0.18
44.3
86.1
0.54
0.04
59.4
(21.6)
37.8
0.09
22.1
0.06
36.8
76.2
0.51
0.03
18.2
(8.4)
9.8
0.07
8.4
0.06
11.4
45.3
0.55
0.04
14.9
(9.0)
5.9
0.05
9.1
0.07
8.8
40.6
0.55
0.04
1 Figures for 2010 include the fully consolidated trading of Rural Bank from 1 October 2009, Tasmanian Banking Services from 1 August 2009 and Macquarie margin lending portfolio from January 2009.
2 Includes Community Bank branches.
3 Includes staff increases from the merger with Adelaide Bank.
4 These ratios do not take into account off-balance sheet assets under management, which totalled $1.9 billion at 30 June 2010 (2009: $2.4 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.
43
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
DIRECTORS’ REPORT
Your Board of Directors has pleasure in presenting the 146th Financial Report of Bendigo and Adelaide Bank Limited and its
controlled entities for the year ended 30 June 2010.
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.
Current
Robert Johanson (Chairman)
Mike Hirst (Managing Director) (1)
Kevin Osborn (Deputy Chairman) (2)
Kevin Abrahamson
Jenny Dawson
Jim Hazel (3)
David Matthews (3)
Jamie McPhee (4)
Terry O’Dwyer
Deb Radford
Kevin Roache (5)
Tony Robinson
(1) Mr Hirst was appointed as Managing Director on 3 July 2009.
(2) Mr Osborn resigned from the board on 3 December 2009.
(3) Mr Hazel and Mr Matthews were appointed to the board on 1 March 2010.
(4) Mr McPhee resigned from the board on 27 January 2010.
(5) Mr Roache resigned from the board on 26 October 2009.
Particulars of the skills, experience, expertise and responsibilities of the Directors at the date of this report are set out in the
Corporate Governance section of this Report.
Share Issues
The following share classes were issued during the financial year:
Ordinary shares
Ordinary shares issued under an Institutional Entitlement
Ordinary shares issued under a Retail Entitlement
Ordinary shares issued under Employee Share Grant Scheme
Ordinary shares issued under Executive Performance Share Plan
Ordinary shares issued under the Dividend Reinvestment Plan
Ordinary shares issued in lieu of dividends under the Bonus Share Scheme
Ordinary shares issued under upon acquisition of Tasmanian Banking Services Limited
Total ordinary shares issued
Share Options and Rights
Unissued Shares:
No.
of shares
26,618,172
17,854,868
340,039
1,540,360
5,426,807
560,953
781,910
53,123,109
As at the date of this report, there were 1,039,245 unissued ordinary shares under options, 166,191 rights to
unissued ordinary shares and 913,263 performance shares. Refer to notes 38 and 40 of the financial statements
for further details of the rights and options outstanding. The Board may decide how to treat the Participant’s
Options, Performance Shares or Performance Rights to make sure the Participant is neither advantaged nor
disadvantaged as a result of any share issues or reconstructions.
Shares issued as a result of the exercise of options:
During the financial year, 46,076 performance rights vested (2009: 19,043) and 255,918 (2009: nil) performance
shares vested and were automatically exercised to acquire ordinary shares in the Company at a nil exercise price.
No options to acquire ordinary shares in the Company vested during the year.
44
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Ordinary Share Dividends Paid or Recommended
Dividends paid:
Final dividend 2009 of 15.0¢ per share, paid September 2009
Interim dividend 2010 of 28.0¢ per share, paid March 2010
Dividend recommended:
$44.0 million
$97.5 million
Final dividend 2010 of 30.0¢ per share, declared by the directors on 9 August 2010, payable 30
September 2010
$106.1 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 2009
March 2010
In addition, shareholders electing to receive bonus shares in lieu of dividends received the following
ordinary shares, paid in full:
September 2009
March 2010
Preference Share Dividends Paid or Recommended
Dividends paid:
84.60 cents per share paid on 15 September 2009 (2008: 161.60 cents)
86.47 cents per share paid on 15 December 2009 (2008: 152.98 cents)
99.25 cents per share paid on 15 March 2010 (2009: 104.89 cents)
104.63 cents per share paid on 15 June 2010 (2009: 79.12 cents)
Dividend announced:
A dividend of 113.7 cents per security for the period 15 June 2010 to 14 September 2010 (inclusive),
announced on 16 June 2010, payable 15 September 2010
All dividends were fully franked
Step-up Preference Share Dividends Paid or Recommended
Dividend paid:
86.00 cents per share paid on 10 July 2009 (2008: 168.00)
86.00 cents per share paid on 12 October 2009 (2008: 167.00)
98.00 cents per share paid on 12 January 2010 (2009: 138.00)
102.00 cents per share paid on 12 April 2010 (2009: 98.00)
Dividend announced:
A dividend of 110.00¢ per security for the period 10 April 2010 to 9 July 2010 (inclusive), announced on
12 April 2010, payable 12 July 2010
All dividends were fully franked
Reset Preference Share Dividends Paid or Recommended
310.53 cents per share paid on 2 November 2009 (2008: 309.68)
305.47 cents per share paid on 3 May 2010 (2009: 305.47)
1,607,958
3,818,849
304,421
256,532
$0.7 million
$0.8 million
$0.9 million
$1.0 million
$1.1 million
$0.9 million
$0.9 million
$1.0 million
$1.1 million
$1.1 million
$2.8 million
$2.7 million
45
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
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, mortgage distribution through third-parties, business lending,
margin lending, business banking and commercial finance, invoice discounting, 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.
Consolidated Result
The consolidated profit after providing for income tax of the economic entity amounted to $242.6 million (2009 - $83.8 million).
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. 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.
46
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Significant Changes in the State of Affairs
The following significant change in the state of affairs of the chief entity occurred during the financial year:
In August 2009, as part of the acquisition of Tasmanian Banking Services, the Bank issued 781,910 shares at an issue price of
$6.39, increasing share capital by $5.0 million.
In August 2009, 26,618,172 shares were allotted at an issue price of $6.75 to those shareholders participating in the
entitlement offer, increasing share capital by $179.7 million.
In September 2009, 1,607,958 shares were allotted at an issue price of $7.95 to those shareholders participating in the
Dividend Reinvestment Plan, increasing share capital by $12.8 million.
In September 2009, 17,854,868 shares were allotted at an issue price of $6.75 to ordinary shareholders under a Share
Placement Plan, increasing ordinary share capital by $120.5 million.
On 1 October 2010, the Bank’s 60% holding of Rural Bank Limited became a controlling interest, following amendments to the
shareholders’ agreement governing the joint venture.
In December 2009, 1,540,360 shares were allotted at an issue price of $6.56 to those employees participating in the Executive
Performance Share Plan, increasing ordinary share capital by $10.1 million.
In March 2010, 340,039 shares were allotted at an issue price of $10.03 to employees of Bendigo and Adelaide Bank Limited
under the Share Grant Scheme, increasing ordinary share capital by $3.4 million.
In March 2010, 3,818,849 shares were allotted at an issue price of $9.59 to those shareholders participating in the Dividend
Reinvestment Plan, increasing share capital by $36.6 million.
During the financial year, share issue costs of $10.3 million were incurred, reducing share capital.
In the opinion of the directors, there were no other significant changes in the state of affairs of the economic entity that
occurred during the financial year under review not otherwise disclosed in this report or the financial statements.
Significant After Balance Date Events
On 9 August 2010 the Bank declared a final dividend for ordinary shares, on 15 June 2010 announced a dividend for
preference shares and on 12 April 2010 announced a dividend for Step up preference shares, details of which are shown
previously.
On 9 August 2010 the Bank announced its intention, through the signing of a heads of agreement, to purchase 24 per cent of
Linear Asset Management. This business will provide significant scope for growth in the Bank’s wealth deposit and financing
businesses.
On 1 September 2010 the Bank advised of its intention to buy-back on-market a number of shares equal to the number of
shares issued under the dividend reinvestment plan. The number of shares to be bought back is expected to be 3.4 million with
a maximum of 7.4 million. The buy-back will commence on 17 September 2010 and be completed by 31 December 2010,
subject to market conditions.
Except as referred to in the Report by Chairman and Managing Director, above, 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.
47
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF REMUNERATION OUTCOMES 2010
Bendigo and Adelaide Bank is committed to being transparent in reporting its remuneration arrangements. This summary gives
shareholders a concise and easy to understand overview of the group’s remuneration outcomes for the 2010 financial year and
includes information on the actual value of remuneration received by senior executives and some of our remuneration initiatives
during the year. The detailed statutory remuneration disclosures are contained in the Remuneration Report.
Voluntary unpaid leave
initiative
Non executive director
fee freeze
Senior executive salary
freeze
Executive Committee
Changes
Short term incentive
Long term incentive
2009 - 2010 Outcomes
An unpaid leave scheme, which involved employees voluntarily taking 10 days of unpaid annual
leave, was introduced during the year. This initiative helped the business manage its operating costs
while ensuring the business preserved its valuable employee base and ability to service future growth
as conditions improved.
The initiative was well supported, with almost 70 percent of employees, including all senior
executives, participating in the program. Recognising this commitment, employees who participated in
the program would recoup a percentage of the amount contributed (to a maximum of 10 days) if the
Company’s earnings performance exceeded a pre-agreed level. This level was exceeded and
participants were reimbursed for 50 percent of their contributed income. The cost of the recoupment
was included in the 2010 result.
Non-executive director fees were frozen for the year. In addition, the non-executive directors
contributed four percent of their annual fee payment to fund part of the board scholarship for
disadvantaged students.
A pay freeze also applied to senior executives for the year (refer also to executive committee changes
below). As disclosed in the Remuneration Report, the pay freeze has been lifted for the 2011 financial
year in light of improved trading performance and outlook for the Company.
The Managing Director, Mike Hirst announced his new senior executive team on 13 July 2010. Further
appointments were also made during the year. The pay freeze also applied to the new executive
appointments and to executives whose roles changed to new roles with greater responsibilities. This
included the new Managing Director. At his request, his fixed and short term remuneration
arrangements were the same as applied in his previous role as chief executive retail bank.
The Company’s overall performance for the year achieved most of the targets set by the board. In line
with this improved performance and taking into account the pool of funds approved by the board for
the payment of staff bonuses and individual executive performance, senior executives received their
annual cash bonus allocations as set out in the below table.
Executive Incentive Plan (discontinued)
The executive incentive plan set up in 2006, under which executives were issued performance shares
and options with a three year performance period, has been discontinued. Grants were made in the
2007, 2008 and 2009 financial years. None of the 2007 grant vested but some of the 2008
performance rights granted to executives vested as set out in the below table. None of the 2008
options vested and the performance period for the 2009 grant is still to be completed.
Salary Sacrifice, Deferred Share & Performance Share Plan
The structure for equity grants to executives for 2010 has been changed to performance shares:
Shareholders approved an issue of five equal annual parcels of performance shares to the
managing director at the 2009 Annual General Meeting (AGM), with a five year performance
period. No further grants are proposed during the performance period.
The Board also approved an issue of three equal annual parcels of performance shares to other
executives following the 2009 AGM, with a three year performance period.
The shares are subject to a further two year trading restriction.
Half of each annual parcel of performance shares is subject to earnings per share and total
New remuneration
policy
shareholder return TSR tests. The TSR test for the 2010 parcel was partially met and 65 percent
of those performance shares vested. The remaining allocation will be re-tested as part of the
2011 allocation.
The other half of each annual parcel of performance shares is subject to the executive’s
continued employment with the Company. The first employment date under the grant was 30
June 2010, and accordingly, the 2010 parcel vested for executives employed by the Company on
30 June 2010.
A working group was set up to conduct a comprehensive review of the Company’s remuneration
strategy and arrangements taking into account new APRA requirements and shareholder response to
the 2009 Remuneration Report.
The working group was chaired by the chairman of the Governance & HR committee and the
development of the new policy was overseen by the Governance and HR committee who
recommended the final policy to the board. It was adopted by the board in May 2010.
The policy sets out clear links between executive remuneration and the Company’s performance and
the level of risk associated with that performance. Under the policy, the Board has an absolute
discretion to adjust short and long term incentives downwards, to zero if appropriate, if such
adjustments are considered necessary by the board. Key features of the policy are set out in the
statutory Remuneration Report and the policy is available from the Company website
www.bendigoadelaide.com.au.
48
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Governance of
Remuneration
The responsibilities of the Governance and HR committee include remuneration. The membership of
the committee was reviewed during the year and the following changes were made:
The chair of the Risk committee, Mr Tony Robinson has been appointed as chair of the
Governance and HR committee.
Two directors have joined the committee: Ms Deb Radford and Mr Jim Hazel.
The committee now comprises Mr Tony Robinson, Ms Deb Radford, Mr Jim Hazel and Mr Robert
Johanson. The new structure assists in maintaining and enhancing the links between committees in
the consideration of remuneration matters, including remuneration risk.
Actual remuneration received by Senior Executives
The table below sets out the actual remuneration received by Senior Executives in FY2010. The values disclosed in the table
below are different to the tables set out later in the statutory Remuneration Report. This is because, in relation to base pay, the
statutory Remuneration Report amounts include an additional amount representing a notional interest benefit, calculated on the
average balance of interest-free loans provided under the employee share ownership plan calculated at the Company’s average
cost of funds. The amounts in the Remuneration Report also include movements in annual leave accruals.
The disclosure in the table below under the column “Shares” represents the actual value of shares received by Senior Executives
in FY2010 for long term incentive (LTI) grants that have vested. The value disclosed is the market value of the shares at the date
of testing or vesting as explained in the footnote. The amounts disclosed under the Share Based Payments columns in the
Remuneration Report represent the accounting values for current and previous year LTI grants which by law must be disclosed in
the Remuneration Report and include LTI that has not and may never vest if performance or service conditions for vesting are not
met. There were no termination benefits for the below senior executives.
Remuneration received
Remuneration forfeited
Executive 1
(current title)
Base Pay 2
(Fixed annual
remuneration)
Cash Bonus
(Short term
incentive)
Shares 3
(Long term
incentive)
Total
% of cash
bonus not
awarded 4
Value of LTI
that lapsed 5
Mike Hirst
(Managing Director)
Marnie Baker
(Executive: Banking and
Wealth)
Dennis Bice 6
(Executive: Retail Banking)
Richard Fennell
(Executive: Finance and
Treasury (CFO))
Russell Jenkins
(Executive: Customer and
Community)
Tim Piper
(Executive: Risk)
Stella Thredgold 6
(Executive: Corporate
Resources)
Andrew Watts 6
(Executive: Change)
Key management personnel – current members of executive committee
$782,518
$450,000
$1,028,725
$2,261,243
$396,663
$100,000
$205,735
$702,398
$352,455
$50,000
$133,727
$536,182
$374,769
$150,000
$191,695
$716,464
18%
55%
50%
14%
$57,734
$39,501
-
$80,516
$445,935
$80,000
$205,735
$731,670
67%
$44,057
$361,920
$90,000
$145,397
$597,317
$199,434
56%
0%
$80,516
-
$165,434
$34,000
$401,538
$40,000
-
-
$441,538
79%
$33,423
1 Key management personnel: Details of the remuneration paid to former members of the executive committee are provided in the
Remuneration Report.
2 Base pay: This is the total amount of cash salary, non-monetary benefits, company superannuation contributions and annual leave and
long-service leave paid in the financial year.
3 Shares: Value is derived from the LTI if the securities vest. For the purposes of this table, the value is based on the Company’s closing
share price on the day the securities were tested, being 30 June 2010. The vesting date of the shares is anticipated to be in September
2010.
4 % of cash bonus not awarded: This is the percentage of the bonus for the reporting year that the executive did not receive, due to
performance conditions not being satisfied. It does not carry over into future years.
5 Value of lapsed LTI: This is the value of performance rights for the reporting year that have lapsed and are not subject to retesting. The
value is calculated by using the closing share price of the Company’s shares at the date of testing, being 30 June 2010. For the purpose of
this table the value of options that lapsed for the reporting year, and are not subject to re-testing, have not been included as the exercise
price ($14.66) exceeded the market value of the Company’s shares at testing date. The fair value of options that lapsed are disclosed at
table 15 of the Remuneration Report.
6 Key management personnel (KMP) for part of year: Three of the above executives were not KMP’s for the full financial year. Mr
Dennis Bice commenced as a KMP on 6 August 2009, Ms Stella Thredgold commenced as a KMP on 29 April 2010 and Mr Andrew Watts
ceased as a KMP on 13 July 2009 and recommenced as a KMP on 24 December 2009. For the purposes of this table the remuneration
amounts have not been adjusted for the proportion of the year that they were not KMP’s.
49
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
REMUNERATION REPORT (AUDITED) FY2010
The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the
Corporations Act for the Company and the consolidated entity (“Group”) for the year ended 30 June 2010. The information
provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act.
This report forms part of the Directors’ Report and describes the remuneration arrangements established by the Company for
our Non-Executive Directors and Senior Executives (including the Managing Director).
Contents
1. Remuneration Overview
2. Board Oversight of Remuneration
3. New Remuneration Policy to apply to remuneration in FY2011
4. Senior Executive Remuneration FY2009 / 2010
5. Senior Executive Service Agreements
6. Non-Executive Director Remuneration
1. Remuneration Overview
Table 1 - Non-Executive Director remuneration
NON-EXECUTIVE DIRECTORS
Robert Johanson (Chairman)
David Matthews1
Kevin Roache 3
Kevin Abrahamson
Terry O’Dwyer
Tony Robinson
Jenny Dawson
Kevin Osborn 2
Jim Hazel 1
Deb Radford
1 Appointed on 1 March 2010
2 Resigned on 3 December 2009
3 Retired on 26 October 2009
ISSUE
SUMMARY
Base fee
Non-Executive Directors receive a fixed annual fee plus superannuation contributions.
The chairman receives twice the base fee in recognition of the additional time
commitment.
The base fee is reviewed annually with reference to survey data and peer analysis and
taking into account changes to non-executive responsibilities and workloads.
There was no increase in the base fee for the 2010 financial year and the fee was
previously increased by the Board on 1 July 2008.
Non-Executive Directors do not receive additional fees for committee memberships. The
Board may determine additional fees for subsidiary and joint venture appointments.
Directors are also reimbursed for all reasonable travel, accommodation and other
expenses incurred in relation to their role.
DISCUSSION
IN REPORT
Pages
70 & 71
Acquisition of
shares
Non-Executive Directors could elect to enter into a salary-sacrifice arrangement to
acquire shares under the Non-Executive Director Fee Sacrifice Plan approved by
shareholders at the 2008 Annual General Meeting. This plan has been suspended
following changes to the taxation rules that apply to employee share scheme benefits.
Remuneration
received
The base fee for the year was $125,000 ($136,250 including 9% superannuation). From
1 July 2010 the annual base fee was increased by 3.5% to $129,375 ($141,020
including 9% superannuation).
Pages
70 & 71
Pages
71 & 72
The Directors agreed to donate 4% of their annual fee payment to fund the Board
Scholarship Program for the 2010 financial year.
The board also decided the following additional payments for the year:
Sandhurst Trustees Limited and Adelaide Managed Funds Limited. Payment of
$75,519 to J Dawson as chair of these subsidiary companies (AMF 1 July 2009 to
8 August 2009 and STL from 18 September 2009 to 30 June 2010)
Sunstate Lenders Mortgage Insurance Pty Ltd: Payment of director fee of $12,115
to K Abrahamson and T O’Dwyer (paid for part of year until Sunstate ceased
trading on 31October 2009).
Mr Johanson and Mr Hazel are non-executive directors of Rural Bank Limited and were
paid an annual base fee of $58,000 and $120,449 respectively as approved by the
Rural Bank Board. This fee was paid by Rural Bank Limited. Mr Matthews is a co-
chairman of the Community Bank® Strategic Advisory Board and received a fee of
$20,000 for this appointment.
Further details of Non-Executive Director remuneration for the 2010 financial year are
presented at Table 17.
50
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Table 2 - Senior Executive remuneration
SENIOR EXECUTIVES
Throughout this Remuneration Report, we use the term Senior Executives to refer to the 5 most highly remunerated
Company/Group executives and all other Executives who fall within the definition of key management personnel of the Group
(being those persons with authority and responsibility for planning, directing and controlling the activities of the Group) (KMP)
including the Managing Director.
Current
M Hirst 1
M Baker 2
D Bice 3
R Fennell 4
R Jenkins 5
T Piper
S Thredgold 6
A Watts 7
J Billington
Former
R Hunt
J McPhee
A Baum
G Gillett
D Hughes
C Langford
P Riquier
Managing Director & Chief Executive Officer (previously Chief Executive Retail Bank)
Executive: Banking and Wealth (previously Executive: Corporate Resources)
Executive: Retail Banking
Executive: Finance & Treasury (previously Chief General Manager Strategy)
Executive: Customer and Community (previously Chief General Manager Retail)
Executive: Risk
Executive: Corporate Resources
Executive: Organisational Change (previously Chief Information Officer)
Executive: Wealth & Third Party Banking (commenced 1 September 2010)
Managing Director & Chief Executive Officer (ceased as KMP on 3 July 2009)
Executive Director & Chief Executive Banking & Wealth (ceased as KMP on 5 February 2010)
Executive: Wealth & Third Party Banking (ceased as KMP on 30 June 2010)
Chief General Manager Brand Development & Positioning (ceased as KMP on 13 July 2009)
Chief Financial Officer (ceased as KMP on 2 November 2009)
Chief General Manager People & Corporate Services (ceased as KMP on 13 July 2009)
Chief General Manager Business Partners (ceased as KMP on 13 July 2009)
1 Mr Hirst was appointed as Managing Director on 3 July 2009
2 Appointed as Corporate Resources Executive on 13 July 2009 and Banking and Wealth role on 29 April 2010
3 Appointed to Retail Banking Executive role on 6 August 2009
4 Appointed to Finance & Treasury Executive role on 2 November 2009
5 Appointed to Customer and Community Executive role on 13 July 2009
6 Appointed to Corporate Resources Executive role on 29 April 2010
7 Appointed to Business Change Executive role on 24 December 2009
ISSUE
SUMMARY
Elements
Fixed
remuneration
Short-term
incentive
Long-term
incentive
Service
contracts
Remuneration
outcomes
Senior Executive remuneration comprises the following:
Fixed remuneration (including any salary sacrifice arrangements and Company
superannuation contributions).
Performance based “at-risk” remuneration comprising short-term cash incentive
component and a long-term equity based incentive component.
Senior Executive remuneration was frozen for the year.
Fixed remuneration is set taking into account market relativities and having regard to the
Senior Executive’s direct accountability and responsibility for operational management,
strategic direction, decision making and demonstrated leadership.
Senior Executive remuneration arrangements include a performance based at-risk cash
incentive. Payment of the at-risk cash incentive is at the Board’s discretion and is
dependent on the following:
The achievement of targeted financial performance by the Company and the
establishment of a pool of funds approved by the Board for the payment of bonuses.
The level of performance achieved by the Senior Executive including risk
management and compliance.
This links the annual financial performance of the Company, the level of risk associated
with that performance and the achievement of individual business priorities which
enhance the future prospects of the Company with remuneration received by the Senior
Executive. Under the new remuneration policy, one third of annual cash incentives will be
subject to deferral into shares in the Company that cannot be traded for two years.
A long term incentive is provided for executives by way of equity grants, subject to
performance measures or a service condition. The performance measures link reward
with key performance targets that underpin sustainable growth in shareholder value
including both share price and returns to shareholders. As the incentive is awarded in
shares, the service condition provides a retention incentive that is linked to longer term
Company performance and shareholder returns.
The remuneration and other terms of employment for Senior Executives are formalised in
employment agreements. The employment agreements also deal with Senior Executive
duties, conflicts of interest, confidentiality, termination rights, notice periods, post-
employment restraints and entitlements upon termination.
The remuneration structure for Senior Executives is designed to provide the desired
flexibility and reward structure to support the Company’s short term performance targets
as well as the continued investment in its strategy and business objectives that have a
medium to longer term maturity profile. This report describes the Company’s progress
and financial performance for the year (and previous 4 years) and explains how the
performance impacted senior executive remuneration outcomes for these years.
51
DISCUSSION
IN REPORT
Pages
54 to 56
Page 56
Page 57
Page 58
Page 69
Page
57 and 60
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
2. Board Oversight of Remuneration
Table 3 –Board oversight of remuneration
ISSUE
Remuneration
committee
Remuneration
policy
Remuneration on
individual basis
Remuneration in
relation to
categories of
person
Risk adjustment
Deferral
Equity plans
Superannuation
Non-executive
director
remuneration
Tony Robinson (Chairman)
Jim Hazel
COMMENTARY
The Governance & HR Committee (the “Committee”) provides assistance to the Board in relation to
the Company’s remuneration arrangements. The current members of the Committee are independent
non-executive directors:
Robert Johanson
Deb Radford
The committee has responsibility for providing input into the Group’s risk framework in relation to
remuneration risk, in particular, recommending to the Board the remuneration arrangements for the
Senior Executives (including the managing director). Further details of the Committee’s responsibilities
for remuneration are summarised below and in Table 4 New Remuneration Policy. The Committee
charter is also available from the Company’s website.
The Committee’s remuneration responsibilities include conducting regular reviews of, and making
recommendations to the Board on, the remuneration policy taking into account the Company’s
strategy, objectives, risk profile, shareholder interests, regulatory requirements, corporate governance
practices and market developments.
The Committee is required to form an opinion of those persons whose activities, individually or
collectively, may affect the financial soundness of the institution, and for whom a significant portion of
total remuneration is based on performance (“Additional Management Personnel”) as required under
the new remuneration requirements of the Australian Prudential Regulation Authority (“APRA”).
The Committee will make an annual recommendation to the Board on the remuneration of the CEO,
direct reports of the CEO, Additional Management Personnel, and other persons specified by APRA.
The Committee will make an annual recommendation to the Board on the remuneration of categories
of persons covered by the remuneration policy, not addressed above, namely:
(a) Other Responsible Persons (as defined in APRA’s prudential Standard APS 520 Fit and Proper
(excluding the auditor and NEDs)).
(b) Risk and financial control personnel.
This includes recommendations on the following:
Changes in the structure of remuneration arrangements
The basis on which performance based remuneration will be provided, including the pool of funds
available for distribution as bonuses.
The Committee’s responsibilities also include making recommendations to the Board on the exercise
of the Board’s discretion to adjust performance-based components of remuneration (STI and LTI) to
reflect the outcomes of business activities, the risks relating to those activities and the time necessary
for the outcomes of the business activities to be reliably measured.
This includes adjusting performance-based component of remuneration downwards, to zero if
appropriate, where necessary to protect the financial soundness of the Company or to respond to
significant, unexpected or unintended consequences that were not foreseen by the Board.
The Committee recommends to the Board on the threshold for short term incentive payments that will
trigger deferral.
The Committee recommends to the Board equity schemes and monitors tracking of performance
against board approved hurdles for Senior Executives.
The Committee recommends to the Board any material changes to superannuation arrangements.
The Committee recommends to the Board remuneration policies and remuneration for non-executive
directors on the Board and on subsidiary boards.
Independent advice The Committee may consult a professional adviser or expert, at the cost of the Company, if the
Committee considers it necessary to carry out its duties and responsibilities. During the year, the
Governance & HR Committee engaged PricewaterhouseCoopers to provide advisory services in
connection with a comprehensive review of the Company’s remuneration arrangements. The terms of
the engagement were set out in a formal letter approved by the committee.
The engagement included assistance with the development of a new remuneration policy and
supporting structures, and attendance at meetings of a working group (that was chaired by the
chairman of the Governance & HR Committee) that managed the review process. The terms also
required PricewaterhouseCoopers to report on their conclusions and recommendation to the
Governance & HR Committee. The Governance & HR Committee considered this report and made a
number of recommendations to the Board which were adopted in the form of the new remuneration
policy set out in table 4.
52
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
3. New Remuneration Policy to apply to Remuneration in FY2011
A working group, reporting to the Governance & HR Committee, was established during the year to conduct a comprehensive
review of the Company’s remuneration strategy and arrangements taking into account new APRA requirements and
shareholder response to the 2009 Remuneration Report. The review culminated in the development of the new remuneration
policy for the Company that was adopted by the Board in May 2010 on the recommendation of the Governance & HR
Committee. The policy sets clear links between executive remuneration and the Company’s performance and the level of risk
associated with that performance. This new policy builds on the existing remuneration policy and also provides significantly
more detail. The remuneration policy applied by the Board in FY2010 was broadly consistent with the new policy other than
new arrangements that will apply to short term incentive components. A copy of the new policy is available from the
Company’s website.
Table 4 – Key features of new remuneration policy
Issue
Commentary
Philosophy
Fixed
remuneration
Variable: short
term incentive
(“STI”)
STI deferral and
forfeiture
Variable: long
term incentive
(“LTI”)
Risk adjustment:
STI & LTI
Hedging
Maximum % of
variable
remuneration
The following philosophy applies to the remuneration framework at both an organisational and
divisional level:
Remuneration should facilitate the delivery of superior long term results for the business and
shareholders and promote sound risk management principles.
Remuneration should support the corporate values and desired culture.
Remuneration should support the attraction, retention, motivation and alignment of the talent we
need to achieve our business goals.
Remuneration should reinforce leadership, accountability, teamwork and innovation.
Remuneration should be aligned to the contribution and performance of the businesses, teams
and individuals.
Base remuneration is designed to align to the value the senior executive provides to the Group
including the skills and competencies needed to generate targeted results, their sustained contribution
to the team and Group and the value of the role and contribution of the individual in the context of the
external market. Senior executive base remuneration is reviewed annually.
STI is discretionary performance-based remuneration designed to drive and reward medium term
results, reflecting the level and time horizon of risk. This includes financial and non-financial results
and metrics at an organisational, divisional and individual (and team) level. Participation in STI is
recommended by the Governance and HR Committee to the Board for approval, and subject to the
approval, is offered to senior executives at the start of each year.
Senior executive STI payments are funded through a group bonus pool established for the distribution
of STI remuneration. The Board will determine the amount of any bonus pool at the end of each
financial year having regard to key financial and risk measures that include cash earnings in excess of
targeted minimum shareholder return and return on equity. The bonus pool will also be adjusted to
reflect the types and levels of risk involved in achieving the performance, and the overall risk appetite
of the Group.
The Board, on recommendation from the Governance and HR Committee, has discretion as to
whether senior executives will receive an STI payment, and if so, the amount of the incentive
payment. Factors taken into account in determining STI payments include the group’s financial
performance, business unit performance, the individual’s contribution to team performance, individual
performance and their contribution to meeting risk and compliance requirements at a group, team and
individual level.
STI remuneration will be subject to deferral as follows:
One-third of the STI is subject to deferral.
Deferral is for two years from the end of the financial year that the equity is granted.
Deferral is to be into equity.
Dividends on the deferred equity are to be reinvested in equity on the same terms as the
deferred equity on which the dividends accrue.
Forfeiture is to occur if an employee’s employment with the Group ends; if an employee acts
fraudulently or dishonestly and in other cases decided by the Board.
LTI is discretionary equity based remuneration designed to drive and reward long term growth and
sustained Company value and align the interests of shareholders and senior executives. Senior
executives may be invited, at the Board’s discretion, to participate in long term incentive plans.
The Board has discretion, having regard to recommendation of the Governance and HR Committee,
to adjust variable remuneration (STI and LTI) to reflect the following.
The outcomes of business activities.
The risks related to the business activities taking account, where relevant, of the cost of the
associated capital.
The time necessary for the outcomes of those business activities to be reliably measured.
This includes adjusting performance-based components of remuneration downwards, to zero if
appropriate, in relation to persons or classes of persons, if such adjustments are necessary to protect
the financial soundness of the regulated institution or respond to significant unexpected or unintended
consequences that were not foreseen by the Board.
A hedging restriction applies to variable remuneration that comprises equity. An employee may not
enter into a transaction designed to remove the at-risk element of the equity before it has vested.
It is expected that the maximum % of variable remuneration (STI and LTI) generally should not
exceed: 60% of total remuneration (CEO), 55% of total remuneration (other executives) and 50% of
total remuneration (senior managers and others approved by the Board).
53
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
4. Senior Executive Remuneration FY2009/2010
Board policy on Senior Executive remuneration
The Board’s policy on Senior Executive remuneration for the year was designed to attract, retain and motivate Senior
Executives to manage and lead the business successfully including driving organisational growth and performance in line with
the Group’s strategy and business objectives. More specifically, the aims of the remuneration policy included:
motivating executive management to manage and lead the business successfully and to drive strong long-term growth in
line with the strategy and business objectives taking into account risk management and compliance;
driving successful organisational performance by incorporating an annual performance incentive and establish longer-
term performance objectives;
further driving longer-term organisational performance through an equity-based reward structure;
delivering a balanced solution addressing all elements of total pay; and
contributing to appropriate attraction and retention strategies for Senior Executives.
The key aspects of the Company’s remuneration strategy for Senior Executives are discussed below.
Summary of Senior Executive remuneration strategy
The Company has pursued a long term strategy focussed on the interests and prospects of its customers, communities and
partners, and building sustainable shareholder value. The Company’s strategy is built on the vision of being Australia’s leading
customer connected banking group. The Company’s performance based on this strategy is set out on page 61.
The Board has 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 Senior Executive roles, responsibilities and market relativities.
This has been reflected in the design of Senior Executive remuneration including short and long term incentive arrangements.
The arrangements reward annual performance whilst providing sufficient flexibility to allow rewards to be tailored to recognise
the development of business opportunities that present themselves during a year or investments that stretch across more than
one reporting period.
The arrangements have been structured to ensure that the proportion of short-term variable remuneration is tailored to
minimise risks associated with a short-term performance focus and that an appropriate portion involves equity grants with a
sufficiently long performance period aligned with the Company’s strategy and shareholder interests.
In line with the strategy and objectives of the Company, the board has decided (summarised at Table 7) to reduce the
proportion of short-term focussed variable remuneration and to increase the percentage of longer-term focussed variable
remuneration as a proportion of Senior Executive total remuneration in line with the Board’s longer term focus and so that
Senior Executive risk and reward and shareholder interests are further aligned.
Managing Director’s remuneration arrangements
Mike Hirst was appointed as Managing Director and Chief Executive Officer of the Company effective 3 July 2009. The
components of the new Managing Director’s remuneration package are substantially the same as for other Senior Executives.
Accordingly, the sections of this Report explaining these components, including the terms upon which ‘at risk’ remuneration is
awarded under STI and LTI plans, apply to the Managing Director as well as other Senior Executives (except where otherwise
indicated). However, in the interests of clarity and transparency the summary below provides a snapshot of the remuneration
arrangements in place for the Managing Director, as well as cross references to the other sections of the Report where these
arrangements are outlined in further detail.
Having regard to the prevailing market conditions, at the request of Mr Hirst, his 2008/2009 remuneration package remained
unchanged for the 2009/2010 financial year, namely:
The following has been agreed for the 2010/2011 financial year:
$1,250,000 fixed remuneration package.
Eligibility for an STI of up to $300,000 awarded at the discretion of the Board subject to meeting performance targets.
Shareholder approval was obtained at the 2009 Annual General Meeting for the Managing Director’s participation in a long
term incentive (“LTI”) for the initial five year contract period. The LTI involves an entitlement to performance shares in five
equal annual tranches, subject to satisfaction of hurdles including continuing service and relative TSR performance of the
Company over a 5 year period. The performance shares were issued under the Employee Salary Sacrifice, Deferred Share
and Performance Share Plan. The total number of performance shares granted to the Managing Director and their potential
remuneration value is set out in table 13.
Each performance share represents an entitlement to one ordinary fully paid share in the Company and accordingly the
maximum number of shares that may be acquired by the Managing Director is equal to the number of performance shares
issued, being 762,190. A summary of the grants to the Managing Director are set out in the following table:
Table 5 – Grants made to the managing director in FY2010
Performance Shares
(Number)
$796,572 fixed remuneration package.
Eligibility for an STI of up to $548,100 awarded at the discretion of the Board subject to meeting performance targets.
Performance Period
Percentage of
Remuneration Value of
performance rights
Grant A 10%
Grant B 10%
Grant A 10%
Grant B 10%
Grant A 10%
Grant B 10%
Grant A 10%
Grant B 10%
Grant A 10%
Grant B 10%
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Potential
Remuneration
Value
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
$500,000
76,219
76,219
76,219
76,219
76,219
76,219
76,219
76,219
76,219
76,219
54
1 year (1 July 2009 to 30 June 2010)
2 years (1 July 2009 to 30 June 2011)
3 years (1 July 2009 to 30 June 2012)
4 years (1 July 2009 to 30 June 2013)
5 years (1 July 2009 to 30 June 2014)
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
The performance shares were issued at market price to the value of $5 million (i.e. representing an annualised amount over
each of the five years of $1 million). The market price was based on the volume weighted average price of the Company’s
shares traded on the ASX for the 5 days prior to 1 July 2009 (being $6.56). At the end of each financial year during the five
year contract period the following will apply to the 20% of shares that may vest that year, subject to Board discretion:
10% of the total grant may vest dependent on the managing director’s continued service with the Company.
10% of the total grant may vest dependent on the satisfaction of performance criteria. The vesting of performance shares
for this tranche is subject to a gateway hurdle that there has been an improvement in cash EPS compared to the previous
financial year. If this gateway hurdle is not met, these performance shares will not vest that year.
If the gateway hurdle is met, the performance criteria will be the Company’s TSR performance measured against a peer
group (with 65% vesting for performance between the 50th and 75th percentile; 100% vesting for performance over 75th
percentile) tested from the commencement of the contract to the end of the relevant financial year for each tranche.
Any unvested shares will be treated as forming part of the following tranche and will be tested at the end of the following
tranche’s performance period.
The board has decided that all shares that vest under the LTI will be subject to a further two year dealing restriction.
In setting the 5 year performance period (as well as the additional two year dealing restriction), the board had regard to the
term of the Managing Director’s contract and, in particular, the importance of rewarding the Managing Director for also taking a
longer-term perspective on the Company’s progress and performance.
In setting the remuneration value of the entitlement, the Board, having regard to the relatively moderate market setting of
Senior Executive remuneration (in particular for the Managing Director) included a component that was subject to continued
service with the Company. This arrangement was undertaken with the intention of providing the Managing Director with a
further ownership stake in Company aligned with shareholder interests. This component in effect represents a deferred part of
the Managing Director’s fixed reward linked to the long term performance of Company and interests of shareholders. The LTI
will be reviewed at the end of the initial five year contract period.
The percentage proportions of fixed, STI and LTI components which comprise the Managing Director’s total remuneration are
set out in table 7 and the key contractual terms of his service contract are summarised in table 16. The managing director’s
employment terms do not include sign-on or retention benefits.
Former Senior Executives: Termination Benefits
The following table sets out the termination benefit outcomes of Senior Executives for the year:
Table 6 - termination benefit outcomes of Senior Executives for FY2010
Senior
Manager
Ceased as
KMP
Termination Benefit Received
Vesting of LTI securities (1)
Rob Hunt
Anthony Baum
Jamie McPhee
03/07/2009
30/06/2010
05/02/2010 Negotiated payment having regard to the
Nil
Nil
circumstances at the time of resignation and
contribution to Adelaide Bank merger.
David Hughes
02/11/2009
Nil
Craig Langford
13/07/2009 Contractual entitlement to equivalent of
twelve months of annual fixed remuneration
Nil (2)
Nil
Nil
Pro-rata amount of unvested performance rights
having regard to the level of performance against
the performance measures
Pro-rata amount of unvested performance rights
having regard to the level of performance against
the performance measures
(1) Represented by unvested performance rights, options or performance shares. Vesting is at the discretion of the Board in accordance with the
relevant plan rules, Board policy and the circumstances in which employment ended.
(2) Mr Hunt continues to be employed by the Company as strategic advisor - community engagement. Details of Mr Hunt’s annual at-risk
component and incentive component (linked to merger and integration objectives) for the 2009 financial year were disclosed in the 2009
Remuneration report. These incentives were paid to Mr Hunt shortly after he retired as Managing Director. Mr Hunt’s unvested performance
rights and options will continue to be tested in the ordinary course of the terms of these securities. Mr Hunt’s share grants under the
Employee Share Ownership Plan will also continue in the ordinary course of the terms of the plan while Mr Hunt remains an employee of the
Company. Mr Hunt’s continuing employment arrangements do not include incentive or bonus arrangements.
Other Policies
Hedging Restriction (LTI)
The rules for the Company’s long term incentive arrangements prohibit hedging of unvested instruments. A Plan participant
may not enter into a transaction designed to remove the “at-risk” element of an entitlement under the Plan before it vests. Plan
participants may only enter into a transaction designed to remove the “at risk” element of an entitlement under the Plan after it
vests and if the Board has not decided to restrict or prohibit the participant from doing this. If a Plan participant enters into such
a transaction, they must tell the Company Secretary and provide any details requested. At the end of each financial year, the
Company requires formal confirmation from each participant in the Plan that this policy has been adhered to. The above
restrictions are also contained in the Staff Trading Policy. A similar restriction also applies to rural Bank’s long term incentive
arrangement.
The Company treats compliance with the Staff Trading Policy as a serious issue, and takes appropriate measures to ensure
the policy is adhered to. Any employee found to have breached this policy will be subject to appropriate disciplinary action,
which could include forfeiture of the relevant securities and extend to termination of employment. The most appropriate
disciplinary action in a particular case would be determined by the board taking into account the circumstances of the breach.
Margin Loan Facility Restriction
The Staff Trading Policy also prohibits designated officers, including Non-Executive Directors and Senior Executives, from
using the Company’s securities as collateral in any margin loan arrangements. The restriction was adopted by the Board on 28
April 2008.
55
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Components of Remuneration: FY2009/2010
The remuneration for Senior Executives has the following components:
a. Fixed Remuneration (including any salary sacrifice arrangements and Company superannuation);
b. Performance Based “at-risk” Remuneration comprising:
Short-Term Incentive Component - cash payment that is subject to annual Company performance, including Board
discretion to establish a bonus pool from which annual incentives can be paid, and the level of individual performance.
Long-Term Incentive Component - As explained at Table 10, a new arrangement was introduced for the 2010 financial
year involving grants of performance shares under the Employee Salary Sacrifice, Deferred Share and Performance
Share Plan.
It is the objective of the Board to achieve a balance between fixed remuneration and incentive components that take into
account market relativities and align Senior Executive remuneration with shareholder interests. The incentive arrangements in
place during the year were designed to reward the achievement of annual financial goals, individual performance criteria and
growth in shareholder value.
The relative proportions of Senior Executive remuneration that were ‘‘at-risk’’ (including the relative proportion that is
performance-based) are set out in Table 7 below. The table also sets out the relative proportions for the 2011 year.
Table 7 - Proportion of fixed and at-risk remuneration
Managing Director/CEO
Other Senior Executives
2010
2011
2010
2011
% of Total Aggregate Remuneration (annualised) *
Fixed Remuneration
‘At risk’ – performance-based
FAR
29%
49%
STI**
20%
12%
LTI**
51%
39%
Between 41% and 83%
Between 15% and 27%
Between 0% and 36%
Between 48% and 62%
Between 15% and 21%
Between 23% and 31%
* Aggregate Remuneration is comprised of fixed annual reward (including base salary, superannuation and allowances),
STI at-risk available for the F’10 year and the remuneration value of LTI grants for the F’10 year.
** These amounts are subject to ‘target’ performance levels being achieved, and in the case of the LTI, this is also subject
to continued service with the Company.
(a)
Fixed remuneration FY2010
The terms of employment for all Senior Executives contain a fixed remuneration component expressed as a dollar amount.
The fixed remuneration package is inclusive of a base salary and Company superannuation.
The base salary includes any salary sacrifice or deductions from salary resulting from participation in benefit programs
available to Senior Executives. This amount of remuneration is not ‘at risk’ but is set by reference to appropriate benchmark
information for an individual’s role, responsibilities, experience and expertise.
It is intended that Senior Executive base salaries take into account market relativities having regard to the need for the
Company to attract, motivate and retain the appropriate executive management. The base salary is a specified amount and
Senior 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. Senior
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 Company.
In setting the Managing Director’s fixed remuneration arrangements, 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 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.
In setting the fixed remuneration arrangements for other Senior Executives, the Board takes into account general market and
peer information, relative to the particular role and responsibilities of the Senior Executive.
A pay freeze applied to Senior Executives for the 2010 financial year in response to the market environment and challenges
facing the Company. The pay freeze also applied to the new executive appointments made during the year and to executives
whose roles changed to new roles with greater responsibilities during the year. This included the new Managing Director. At
his request, his fixed and short term remuneration arrangements remained at the same level that applied in his previous role
as chief executive retail bank.
The pay freeze has been lifted for the 2011 financial year in light of improved trading performance and outlook for the
company. The Board has approved, on recommendation from the Governance & HR Committee, changes to the remuneration
arrangements of Senior Executives including increases in fixed remuneration taking into account changes in roles and
responsibilities that occurred during the year. These increases were made with the objective of keeping senior executive
salaries in line with the mid-range of market based remuneration benchmarks.
56
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
(b)
Table 8 – Summary of Short Term Incentive (STI)
Performance-based ‘at risk’ remuneration FY2010
What is the STI?
Who participates in
the STI?
Why does the Board
consider the STI an
appropriate incentive?
Are performance
conditions imposed?
What are the
performance
conditions and why
were these conditions
chosen?
When and how are the
performance
conditions measured
and who assesses the
performance?
The Senior Executive remuneration packages include an annual cash incentive component which
rewards the achievement of annual financial goals, taking into account risk management and
compliance, and Senior Executive contributions to longer term growth and performance. The
maximum amount of the Senior Executive cash incentive is set by the Board taking into account
market data and the Senior Executive’s particular role and responsibilities.
All Senior Executives and other senior management as decided by the Board.
The objective of the incentive is to link a reasonable proportion of senior executive remuneration
with the annual financial performance of the company and the achievement of individual business
priorities which enhance the future prospects of the Company. The total potential annual cash
incentive is set for each Senior Executive with operational responsibilities at a level which provides
an appropriate incentive to achieve business and financial targets and at a cost that is reasonable to
the Company in its circumstances.
The STI is based on target performance conditions designed to drive short and medium term results
and at a level that reduces incentive for potentially inappropriate behaviour and risk taking. Payment
of the STI for Senior Executives and other participants is at the discretion of the Board and is based,
in the first instance, on the achievement of the Company’s target annual financial performance and
the level of individual executive performance.
Managing Director
The Managing Director’s annual cash incentive component for the year ended 30 June 2010 was
based upon a mix of quantitative and qualitative performance measures and was set at a maximum
of $548,100. The quantitative element, weighted at 60% for 2010 year, focused on the Group
achieving its targeted cash EPS performance and the qualitative element, weighted at 40% for the
2010 year, focused on the continued progress of the Group strategic priorities including:
Brand positioning objectives;
Growth at profitable prices, revenue diversity and customer relationship objectives;
Customer, product, distribution and community engagement objectives; and
Other internal and organisational priorities.
Other Senior Executives
The amount of the annual incentive component paid to other Senior Executives is primarily
contingent upon the Company achieving its targeted cash EPS performance set by the Board and
the establishment of a pool of funds approved by the Board for the payment of staff bonuses.
Payment of the annual incentive component may also take into account the Senior Executive’s
technical competence, leadership, operational management performance and achievement of
relevant business outcomes for the year.
The Board selected the cash EPS measure as it represents a publicly available performance
measure that appropriately reflects the short-term interests of shareholders. The Company’s cash
EPS ratio ensures that an appropriate focus is placed upon both profit performance and effective
application of shareholder capital.
The performance conditions are measured following Board approval of the Company’s year-end
profit result announcement. The year-end profit result includes, subject to the achievement of
targeted profit performance and consideration of risk management and compliance, a Board
approved group bonus pool established for the payment of STI remuneration. The achievement of
the quantitative cash EPS performance condition for Senior Executives is measured on the basis of
the Company’s reported cash EPS ratio.
The non-executive directors conducted the assessment of the Managing Director’s performance,
taking into account the quantitative and qualitative measures set by the Board, at which time the
Board determined the amount of the incentive payment based upon the achievement of the agreed
performance measures.
The Managing Director assessed the performance of other senior executives and, taking into
account the group bonus pool available for the payment of STI awards and bonuses to group
employees, proposed the annual STI payments for other Senior Executives for consideration by the
Governance & HR Committee and decision by the Board.
How well were the
performance
conditions met in the
2010 financial year?
The Group recorded an after-tax profit of $242.6 million, an increase of 190% on the previous
financial year, and a cash earnings result of $291.0 million representing a 60% increase on the
previous financial year. The Company’s overall performance for the year achieved most of the
targets set by the Board. Information on the STI payments made, including the percentages of STI
paid and percentages forfeited for the Senior Executives are presented in Table 12.
What deferral
arrangements apply?
There was no deferral arrangement in relation to STI payments for the 2010 financial year. Under
the new remuneration policy, one third of any future STI remuneration will be subject to deferral into
equity for two years from the end of the financial year in respect of which the equity is granted.
57
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Long Term Incentive (LTI) FY2010
Table 9 - Summary of LTI arrangements
The Board considers it important that Senior Executives have ongoing share ownership in the Company. The Company has
established the following long term incentive arrangements:
Salary Sacrifice, Deferred Share and
Performance Share Plan
Executive Incentive Plan
Established
2008
Status
Current -
2006
Discontinued -
Participants
Nature of
Grants
First grant made in December 2009
Last grant made in November 2008
Senior Executives (including the current
Managing Director) and other senior management
approved by the Board.
Senior Executives (including the former
Managing Director) and other senior
management approved by the Board.
Grants of performance shares subject to
performance and service conditions set by the
Board. If the performance or service conditions
are not satisfied during the performance period,
the Performance Shares lapse and the Senior
Executives derive no value from the grants.
Grants of Options and Performance Rights
subject to performance conditions set by the
Board. If the performance conditions are not
satisfied during the performance period, the
Options and Rights lapse and the Senior
Executives derive no value from the grants.
Description
Refer Table 8
Refer below Table 8
The Company has also established a loan-based limited recourse Employee Share Ownership Plan (“ESOP”). The ESOP was
open to general staff and senior executives (including the Managing Director) and was used by the Company as the long-term
incentive arrangement prior to introducing the Executive Incentive Plan. Information on the Employee Share Ownership Plan,
including share grants and loan details are disclosed at Notes 38 and 40 of the Financial Statements.
Grants to Senior Executives
Shareholders at the 2006 annual general meeting approved the grant of instruments under the discontinued Executive
Incentive Plan in three tranches to the former Managing Director. The first grant, Tranches 1 and 2, was made to the former
Managing Director shortly after the 2006 annual general meeting. Tranche 3 was granted to the former Managing Director in
July 2007. There were no further grants to the former Managing Director.
The first offer to other Senior Executives to participate in that Plan was also made shortly after the 2006 Annual General
Meeting (“2007 grant”). The offer was made to all executive committee members of the Company at the time of the offer
(including the current Managing Director). A second offer to the same Senior Executives was made in July 2007 (“2008 grant”).
A third grant to Senior Executives was made in November 2008 (“2009 grant”). The grant was made in accordance with the
terms as described in Table 5.
As disclosed in the 2008 remuneration report, the Company made a replacement grant of Performance Rights to the former
executives of Adelaide Bank on terms which, taken as a whole, were economically equivalent to the terms of the Adelaide
Bank offer. The replacement grant was made in December 2007. For the replacement grant to satisfy the above mentioned
“economically equivalent” requirement it was necessary to make a grant on different terms to some of those for the Executive
Incentive Plan. A summary of the differences was presented in the 2008 remuneration report.
Shareholders at the 2009 annual general meeting approved a grant of Performance Shares to the current Managing Director
under the current Plan as explained earlier in this report. Shortly after this approval, the Board approved a grant of
performance shares to other Senior Executives on terms consistent with the terms of the Managing Director’s grant, but
applying a 3 year performance period.
Details of the instruments granted to Senior Executives under the above grants are presented in the remuneration tables that
accompany this report.
Table 10 - Key features of current plan: Salary Sacrifice, Deferred Share and Performance Share Plan (“Plan”)
What is the purpose
of the LTI?
Who participates in
the LTI?
What proportion of
total remuneration
does the LTI
represent?
How is reward
delivered under the
LTI?
Grants of Performance Shares under the plan are designed to link Senior Executive reward with
key performance measures that underpin sustainable longer-term growth in shareholder value
including both share price and returns to shareholders.
The Managing Director and other Senior Executives as decided by the Board.
In the case of the Managing Director, the grant under the LTI has been structured to equate to 51%
of his total annual remuneration. In the case of other Senior Executives, the grants under the LTI
are structured to equate to between 0% and 36% of their total annual remuneration.
The LTI involves an entitlement to Performance Shares in five equal annual tranches for the
Managing Director and three equal annual tranches for other Senior Executives.
Grant A - 50% of each annual tranche is subject to an EPS gateway hurdle of an increment in the
cash EPS performance of the Company for the performance period. If that hurdle is met, the grant is
then subject to a TSR performance hurdle.
Grant B - The other 50% of each annual tranche is subject to continuing service with the Company.
Each Performance Share represents an entitlement to one ordinary share in the Company.
Accordingly, the maximum number of shares that may be acquired by the Senior Executives is
equal to the number of Performance Shares issued (subject to the achievement of performance
hurdles over the relevant performance period and continuing service with the Company).
58
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Do participants pay
for the Performance
Shares?
What rights are
attached to the
Performance
Shares?
Performance Shares have been granted at no cost to the Senior Executives and no exercise price
applies.
Senior 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 of their Performance
Shares. The grants are subject to a dealing restriction and Senior 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. In addition, Senior Executives may not enter into any transaction designed to
remove the “at-risk” element of an instrument before it vests (Refer to above section “Other Policies”
and subheading “Hedging restrictions”).
What are the hurdles
and performance
conditions?
The vesting of the Performance Shares is subject to a gateway cash EPS hurdle, of an increment in
the cash EPS performance of the Company for the performance period. The performance condition
for Performance Shares granted under the plan is based on the Company’s total shareholder return
(“TSR”) measured over 5 years in the case of the Managing Director and 3 years in the case of
other Senior Executives.
Why were the
performance
conditions and
periods chosen?
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. The
gateway cash EPS hurdle ensures that a minimum level of improvement in the Company’s
performance and capital efficiency is achieved before any Performance Shares can vest.
How is EPS
measured?
How is TSR
measured?
Why does the
Company think the
TSR hurdle is
appropriate?
What are the Plan’s
vesting terms –
Performance
Shares?
The TSR based hurdle ensures an alignment between comparative shareholder return and reward
for the Senior Executives and provides a relative, external market performance measure, having
regard to the TSR performance of other companies in a comparator group. For the Managing
Director, in setting the 5 year performance period (and 2 year dealing restriction) the Board had
regard to the term of the Managing Director’s contract and, in particular, the importance of
rewarding the Managing Director for also taking a longer-term perspective on the Company’s
progress and performance. The Board also had regard to the retention of senior executives.
Cash basis EPS will be calculated as the reportable earnings approved by the Board. For the
purpose of the grants, the EPS gateway involves determining whether there has been an
improvement in the cash basis EPS from the previous financial year.
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 Managing Director and Senior 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 grants under the Plan, the comparator group consists of ASX 100
companies (excluding the Company, property trusts and resources).
Performance Shares granted under the Plan will vest in accordance with the following table
provided the EPS gateway condition has been met.
Company’s TSR ranking against TSR of Peer
Group
Percentage of Performance Shares that
vest
TSR below 50th percentile
Nil
TSR between 50th percentile and 75th percentile 65%
TSR above 75th percentile
100%
Does the Plan
provide for
retesting?
To the extent that the performance conditions attaching to Performance Shares granted under the
Plan are not satisfied at the end of the relevant tranche’s performance period, the Performance
Shares that do not vest will be carried forward and retested as described below.
Performance Shares that do not vest will be treated as forming part of the following tranche and will
be tested together with other Performance Shares at the end of the following tranche’s performance
period. The Board believes that retesting in these circumstances is appropriate because it ensures
that Senior Executives are not disadvantaged by short-term average performance over a longer-
term period of strong performance.
If a Senior Executive ends their employment with the Company before the performance conditions
for the Performance Shares have been met, the Performance Shares that have not yet vested will
lapse. However, if the Senior Executive’s employment ends because of death, disability,
redundancy, or any other reason approved by the Board for this purpose, the Board may, in its
discretion decide that a number of Performance Shares vest.
If a Senior Executive were to act fraudulently, dishonestly or, in the Board’s opinion, in breach of his
or her legal duties, any unvested Performance Shares will lapse.
What if a Senior
Executive ceases
employment?
What if a Senior
Executive breaches
their duties?
59
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
What happens in the
event of a change in
control?
If there is a takeover or change of control of the Company, the Board may, in its discretion decide
that unvested Performance Shares vest, having regard to the Company’s pro rata performance
against the relevant performance conditions.
What about
Performance Shares
that were tested in
FY2010?
Tranche 1 of the 2010 Performance Share grant was tested in August 2010. The TSR test that
applies to Grant A was partially met and 65% of those performance shares vested. The
Performance Shares that did not vest will be carried forward and retested as explained above. The
Performance Shares issued to Senior Executives vested for continuing executives as the service
condition was satisfied but lapsed for each Senior Executive who ceased employment with the
Company. Details of vested securities are presented at Tables 12 and 13.
Discontinued plan - Executive Incentive Plan
The terms of the discontinued plan and grants under it were similar to those described above for the current Plan, and the
rationale for choosing the performance conditions was the same. The differences are set out below. The instruments are
Options and Performance Rights, each Option or Performance Right representing one share. The proportion of remuneration
represented by the LTI was as follows:
- Former Managing Director: between 23% and 27% of total remuneration
- Senior Executives: between 23% and 12% of total remuneration
Options
The performance condition is TSR. It is measured over a 3 year performance period, and is measured in the same way as for
Performance Shares under the current Plan, except the comparator group consists of ASX 200 companies (excluding property
trusts and resources). Options granted to date under the Plan 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
Nil
50%
TSR between 51st and 74th percentile
An additional 2% of Options will vest for
every percentage increase.
TSR at or above 75th percentile
100%
Options will be retested after a further 6 months from the end of the performance period and, if the conditions are still not
satisfied, the Options may be retested one final time after another 6 months. To the extent they do not meet the performance
conditions at the last retest, they lapse after the retest.
Performance Rights
The performance condition is cash basis EPS. It is measured over a 3 year performance period, and is measured in the same
way as for Performance Shares under the current Plan. For Performance Rights granted in 2007 and 2008 the Board set a
three year 10% EPS performance hurdle for Performance Right grants. The performance hurdle was consistent with the
Board’s view on the longer term sustainable EPS performance of the sector at the time of the grants. The Board set a 5% EPS
performance hurdle for the 2009 Performance Right grant. The performance hurdle was consistent with the Board’s view on
the longer term sustainable EPS performance of the sector taking into account the impacts of the global financial crisis and
economic outlooks.
Performance Rights granted to date under the Plan will vest as set out below. At the end of the relevant 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 5% (10% for previous
grants)
Nil
EPS growth at or above 5% (10% for
previous grants)
100%
The Board has discretion to increase or decrease by 20% the number of Performance Rights provided under the Plan based
on an assessment of whether cash basis EPS growth was due to factors controllable by the Company or external factors.
Performance Rights will be retested only once, 12 months after the end of the performance period, and to the extent they do
not meet the performance conditions, lapse after the retest.
Outcomes
The FY2007 offer was tested in August 2009 and was retested in August 2010. The unvested rights and options lapsed. The
FY2008 offer was tested in August 2010 and none vested. They will be retested in FY2011.
The replacement offer made to former executives of Adelaide Bank in FY2008 (Tranche 1 having a 2 year performance period)
was tested in August 2009 and retested in August 2010 along with Tranche 2 of the same grant. Some of the Tranche 1 grant
vested and none of Tranche 2 vested. All outstanding rights lapsed as there is no further retest under the grant.
Details of securities vested under the Plan are presented at Tables 12 and 13. This includes securities vested in the previous
and current year to former Adelaide Bank executives. It also includes securities vested in the current year for two departing
executives, where the Board exercised its discretion to vest securities pro rata having regard to contribution and length of
service.
60
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Company Performance
The following overview of the Company’s progress and performance is provided as background information to assist
shareholders in their consideration of the Remuneration Report and particularly to explain the link between the Company’s
performance and Senior Executive remuneration.
The Company announced on 9 August 2010 a statutory after-tax profit of $242.6 million. The Company’s cash earnings result
was $291.0 million, a 60% increase on the previous financial year. The cash earnings result equated to 83.3 cents per share
and represents a 32% increase on the previous financial year. Information on the Company’s share price performance is
presented below. The improved earnings performance and profit result was attributable to an improvement in the operating
environment, a strong rebound in net interest margin, a prudent and responsible approach to funding and growth, responsible
cost management and continued sound credit quality across the Company’s businesses. The Company continues to fund the
majority of its business through retail deposits and successfully launched three residential mortgage backed securities
transactions raising more than $3.5 billion. The Company’s average net interest margin for the year improved from 1.78% for
2009 to 1.80% for 2010.
The retail business continued to grow with strong demand evident for the Community Bank® model. The Company
purposefully adopted a strategy of retaining capacity and capability within the businesses during the global financial crisis. This
preserved the Company’s ability to service future growth as conditions improved and as evidenced in the last quarter when
system growth was matched or exceeded for all business portfolios. The “Bendigo Bank” retail brand continues to produce
consistent industry leading measures of customer satisfaction, advocacy, trust, sustainability and corporate responsibility. The
performance of the Company’s third party mortgages business recovered over the year and the margin lending business,
although stifled by investor uncertainty and equity market volatility, again made a substantial profit contribution.
the Company’s key
The accompanying graphs set out
financial
performance measures for the financial year ended 30 June 2010, and the
four previous financial years, to illustrate the consequences of the
Company’s performance on shareholder value and returns and the link to
Senior Executive remuneration.
The Company delivered on its promise of improved earnings and profit
performance while managing the effects of the global financial crisis. The
Company’s performance for the past year, and four previous years, is
summarised as follows:
A decrease of $1.69 (17%) in the Company’s share price from $9.87 at 30
June 2005 to $8.18 at 30 June 2010. The share price increased by $1.23
in 2010 (18%). During the same period the All Ordinaries Index increased
by 2.25% (FY2010 - 9.5%) and the S&P/ASX 200 Financials Index
increased by 0.6% (FY2010 - 8.8%);
An increase in cash EPS of 10.1 cents (14%) from 73.2 cents for 2006 to
83.3 cents for 2010. The cash EPS increased by 20.4 cents (32%) for
2010; and
An increase in dividend of 6 cents per share (11.5%) from 52 cents per
share for 2006 to 58 cents per share for 2010. The dividend increased by
15 cents per share (35%) for 2010.
The below graph shows the Bank’s TSR performance against the S&P/ASX
200 Accumulation Index over the 5 year period to 30 June 2010. (Source:
IRESS)
Further details of the Company’s recent performance are set out in the
Chairman’s and Managing Director’s Review on pages 4 and 5 of this
Annual Report.
Performance against key short and long term metrics
The charts illustrate the progress in the
key performance indicators used by the
Board to measure and compare the
company’s year-on-year performance
over the past 5 years. The performance
indicators include the cash EPS ratio
used as a key performance indicator for
Senior Executive STI payments. It is
the key performance
also one of
indicators
the
exception of 2009, the Company has
achieved
targeted cash EPS
performance for the past five years.
for LTI grants. With
its
The second key performance indicator used for the LTI is the Company’s TSR performance. The Company’s market relative
TSR performance has underperformed the comparator group and not achieved the targeted percentile ranking for the 2007,
2008 and 2009 performance periods. The percentile ranking was partially achieved for the 2010 performance period.
61
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
REMUNERATION PAID (Details of the remuneration paid to the Senior Executives are set out in Table 11 below)
All values are in A$ unless otherwise stated.
Table 11 – Senior Executive remuneration paid for FY2010 and FY2009
Short-term Employee Benefits
Post-employment benefits
Cash
Salary 1
Bonuses
(STI) 2
Non-
Monetary
Benefits 3
Other4
Super-
annuation
benefits 5
Other
Other Long-
term
employee
benefits 6
Termination benefits
Share-based Payments 7, 8
Total
Termination
Other
Performance
Rights
Options
Senior Executives of the Company and the Group
Current
M Hirst
2010
2009
M Baker
2010
2009
D Bice 9
2010
R Fennell
2010
2009
R Jenkins
2010
2009
T Piper
2010
2009
S Thredgold 9
2010
A Watts 9
2010
2009
780,118
450,000
727,533
-
1,991
2,992
11,117
16,579
350,860
100,000
20,287
9,329
331,855
-
36,463
14,247
14,462
92,822
19,824
45,473
294,507
45,192
13,451
4,062
25,753
346,038
150,000
3,374
339,312
-
18,059
-
-
432,579
80,000
3,745
9,967
371,617
-
20,329
15,474
357,478
90,000
3,284
320,483
-
17,488
24,224
5,885
1,923
-
-
-
217,701
22,307
5,552
318,095
-
47,979
1,328
3,764
21,319
45,606
19,073
50,093
20,659
44,775
2,407
11,138
27,017
62
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,498
36,844
5,865
12,099
33,247
-
-
6,286
10,231
43,135
-
641
3,328
13,628
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,310,287
109,837
2,689,310
140,210
140,612
1,157,592
287,538
47,463
841,166
68,242
68,519
576,898
141,046
-
557,258
260,128
21,667
802,526
99,973
21,667
524,617
293,090
53,013
897,753
76,191
76,499
620,434
206,106
21,667
742,329
99,973
21,667
504,386
-
-
35,080
23,014
58,850
23,014
307,382
59,084
528,417
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Short-term Employee Benefits
Post-employment benefits
Cash
Salary 1
Bonuses
(STI) 2
Non-
Monetary
Benefits3
Other4
Super-
annuation
benefits 5
Other
Other Long-
term
employee
benefits6
Termination benefits
Share-based Payments 7, 8
Total
Termination
Other
Performance
Rights
Options
Senior Executives of the Company and the Group (Cont…)
Key management personnel – former members of executive committee
A Baum
2010
2009
G Gillett 9
2010
2009
D Hughes 9
2010
2009
R Hunt 9
2010
2009
C Langford 9
2010
2009
J McPhee 9
2010
2009
P Riquier 9
2010
2009
P Hutchison 10
2010
380,439
346,724
3,329
326,009
110,981
329,673
5,329
-
-
-
-
-
-
-
3,553
18,950
-
-
20,729
48,305
477
3,715
685
102,440
27,217
54,612
4,509
42,222
-
-
11,371
45,986
178
743
335
1,066,688
1,500,000
54,300
223,296
271,800
110,069
367,329
477,001
765,819
9,186
220,716
-
-
-
-
-
-
6,685
8,556
93,340
25,453
40,823
66,338
981
47,288
3,659
11,913
-
-
13,248
60,156
86,112
83,840
1,030
29,700
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,114
-
70
7,534
-
-
59
18,732
9,203
8,252
11,903
31,622
241
7,687
-
-
-
-
-
-
-
-
762,000
-
300,000
-
-
-
Others included in the 5 most highly remunerated executives in the group
421,337
225,000
17,160
-
18,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
293,212
23,000
814,046
106,123
23,000
543,102
1,989
83,032
1,989
12,254
83,369
684,213
-
-
126,861
96,898
21,000
535,779
1,215
1,215
9,076
214,599
216,054
3,565,469
-
-
909,761
89,870
90,238
734,638
-
-
919,498
375,782
86,667
1,421,981
1,466
84,589
635
13,538
18,333
408,313
225,000
-
907,247
63
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
1 Cash salary amounts include the net movement in the KMP’s annual leave accrual for the year. In addition, there was a salary freeze for the 2010 financial year and the reason for the apparent
increase in fixed remuneration for the Senior Executives in this year’s remuneration report reflects the timing of the annual salary review that took place in September 2008. The 2009 fixed
remuneration amounts do not represent a full year of fixed remuneration at the level set at the time of the review. The 2010 fixed remuneration amounts represent a full year at the 2009 setting.
2 This amount represents STI payments to Senior Executives for 2010, which are expected to be paid in September 2010.
3 “Non-monetary” relates to sacrifice components of KMP salary.
4 “Other” relates to the notional value of the interest free loan benefit provided under the group’s employee share plans. A notional benefit is calculated using the average outstanding loan balance and
the bank’s average cost of funds. Details on loans provided to the Senior Executive under the employee share plans are disclosed in the full financial statements at Note 40.
5 Represents superannuation contributions made on behalf of key management personnel in accordance with the Superannuation Guarantee Charge legislation.
6 The amounts disclosed relate to movements in long service leave entitlement accruals.
7 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year. The fair value of
equity instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not
related to or indicative of the benefit (if any) that individual Senior Executives may ultimately realise should the equity instruments vest. The fair value of Performance Rights, Options and
Performance Shares as at the date of their grant has been determined in accordance with AASB 124 applying a Black-Scholes-Merton valuation method incorporating a Monte Carlo simulation
option pricing model to estimate the probability of achieving the TSR hurdle and the number of options and performance shares vesting. The assumptions underpinning these valuations are set out in
Note 38 to the financial statements.
8 The amortised value of Performance Rights, Options and Performance Shares as a percentage of total remuneration was: M Hirst 53% (2009: 17%), J McPhee 0% (2009: 23%), M Baker 40% (2009:
18%), A Baum 39% (2009: 17%), D Bice 25% (2009: 0%), R Fennell 35% (2009: 18%), G Gillett 43% (2009: 20%), D Hughes 0% (2009: 17%), R Hunt 24% (2009: 12%), R Jenkins 39% (2009: 18%),
C Langford 0% (2009: 20%), T Piper 31% (2009: 18%), P Riquier 16% (2009: 17%), S Thredgold 0% (2009: 0%), A Watts 15% (2009: 17%).
9 These executives were not KMP’s for the full financial year. Mr Dennis Bice commenced as a KMP on 6 August 2009, Ms Stella Thredgold commenced as a KMP on 29 April 2010 and Mr Andrew Watts ceased
as a KMP on 13 July 2009 and recommenced as a KMP on 24 December 2009. The remuneration amounts disclosed above represent the full financial year’s remuneration adjusted for the proportion of the year
that they were not KMP’s. In addition, Mr Gillett, Mr Hunt and Mr Riquier are continuing employees of the Company. The remuneration details provided in the above table have also been adjusted for the proportion
of the year they were not KMP’s. The remuneration details for Mr Hughes, Mr Langford and Mr McPhee represent the remuneration paid for the period up to ceasing employment with the Company (including any
termination benefits).
10 Mr Paul Hutchison is the managing Director and Chief Executive Officer of Rural Bank Limited, a controlled entity of the Company from 1 October 2009. The remuneration information for Mr
Hutchison represents the pro-rata amount of his remuneration for period that Rural Bank limited was a controlled entity.
64
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
The percentages of maximum STI paid and not achieved for FY2010 are detailed in the table below.
Table 12 – Percentage of STI paid and forfeited for Senior Executives
Senior Executives
Current
Mike Hirst
Marnie Baker
Dennis Bice (5)
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold (5)
Andrew Watts (5)
Former
Anthony Baum
Greg Gillett (4)
David Hughes
Rob Hunt (4)
Craig Langford
Jamie McPhee
Philip Riquier (4)
Other
Actual STI payment
(1)(2) (3)
Actual STI payment
as % of maximum
STI
% of maximum STI
payment forfeited
$450,000
$100,000
$50,000
$150,000
$80,000
$90,000
$34,000
$40,000
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
82%
45%
50%
86%
33%
44%
100%
21%
0%
n/a
0%
n/a
0%
0%
n/a
18%
55%
50%
14%
67%
56%
0%
79%
100%
n/a
100%
n/a
100%
100%
n/a
Paul Hutchison
$300,000
100%
0%
(1) STI constitutes a cash incentive earned during fiscal 2010.
(2) A minimum level of performance must be achieved before any STI is paid as outlined in the STI summary at Table 8. Therefore, the minimum
potential value of the STI which was granted in respect of the year was nil. The maximum potential value of grants under the STI is the actual
amount of STI paid. There was no deferral of STI components for the 2010 financial year.
(3) The grant date for the STI payments was in September 2010
(4) Mr Hunt, Mr Gillett and Mr Riquier did not participate in the 2010 short-term incentive arrangement.
(5) The amounts disclosed represent the full STI payment. The amounts disclosed in the Remuneration Report have been adjusted for the
proportion of the financial year that the Senior Executive was a KMP.
65
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
EQUITY INSTRUMENTS GRANTED AS REMUNERATION
As part of its remuneration strategy, the Company granted Performance Shares during the year to the following Senior
Executives. There were no grants of performance rights or options under the executive incentive plan during the year.
Table 13 – Performance Shares granted in FY2010
Senior Executive
Instrument
Number of
Performance Shares
granted (a) (b)
Future years
payable (c)
Fair value per
Performance
Maximum value
of grant (e)
Share (d)
Current
Mike Hirst
Performance Shares
762,190
2010 to 2014
(Tranches 1 to 5)
Marnie Baker
Performance Shares
91,458
2010 to 2012
(Tranches 1 to 3)
Dennis Bice
Performance Shares
59,448
2010 to 2012
(Tranches 1 to 3)
Richard Fennell
Performance Shares
80,028
2010 to 2012
(Tranches 1 to 3)
Russell Jenkins
Performance Shares
91,458
2010 to 2012
(Tranches 1 to 3)
Tim Piper
Performance Shares
59,448
2010 to 2012
(Tranches 1 to 3)
Former
Anthony Baum (f)
Performance Shares
91,458
2010 to 2012
(Tranches 1 to 3)
Jamie McPhee (f)
Performance Shares
304,872
2010 to 2013
Refer below
table
Refer below
table
Refer below
table
Refer below
table
Refer below
table
Refer below
table
Refer below
table
Refer below
table
$5,332,283
$679,380
$441,601
$594,474
$679,380
$441,601
$679,380
$2,201,557
(Tranches 1 to 4)
Performance
Period
1.7.09 to 30.6.10
1.7.09 to 30.6.11
1.7.09 to 30.6.12
1.7.09 to 30.6.13
1.7.09 to 30.6.14
Valuation
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Grant A
(TSR Hurdle)
$7.19
Grant B
(Service Condition)
$8.56
$6.61
$6.19
$5.70
$5.02
$8.19
$7.83
$7.50
$7.17
(a) The grants made to Senior Executives occurred on 11 December 2009 and constituted 100% of the grants available for the year and were made
on the terms summarised at Table 10. As the Performance Shares only vest on satisfaction of performance and service conditions which are to
be tested in future financial periods, none of the Senior Executives forfeited Performance Shares during 2010 except as explained at (e) below.
(b) The following current and former senior executives did not participate in the 2010 performance share grant: Mr Hunt, Mr Langford, Mr Hughes, Mr
Gillett, Mr Riquier, Ms Thredgold and Mr Watts.
(c) Performance Shares vest subject to performance and continued service over the period 1 July 2009 to 30 June 2014 for the Managing Director
and 1 July 2009 to 30 June 2012 for other Senior Executives. Performance shares lapse where the performance or service condition are not
satisfied. As the Performance Shares only vest on satisfaction of performance and service conditions which are to be tested in future financial
periods, none of the Senior Executive forfeited Performance Shares during the 2010 financial year except as explained at (e) below. The exercise
price for the Performance Shares is nil and the expiry dates are 2014 for the Managing Director and 2012 for other Senior Executives.
(d) The fair values were calculated as at the grant dates of 11 December 2009. An explanation of the pricing model used to calculate these values is
set out in Note 38 to the financial statements.
(e) The maximum value of the grant has been estimated based on the fair value per performance Share. The minimum total value of the grant, if the
applicable performance conditions are not met, is nil.
(f) Mr Baum and Mr McPhee forfeited all of their unvested Performance Shares upon ceasing employment with the Company in accordance with the
terms of the grant.
66
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Table 14 sets out details of the movement in the number of Performance Rights and Options held by Senior Executives during
the year.
Table 14 – Movement in Performance Rights, Performance Shares and Options in FY2010 (number)
Senior Executive
Instrument
Movements in number
Granted (a)
Balance at 1
July 2009
Vested (b)
Forfeited/La
psed (c)
Balance at 30
June 2010
Current
Mike Hirst
Marnie Baker
Dennis Bice
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold
Andrew Watts
Former
Anthony Baum
Greg Gillett
David Hughes
Rob Hunt
Craig Langford
Jamie McPhee
Philip Riquier
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
38,683
248,862
-
17,511
109,414
-
-
-
-
18,238
47,445
-
19,587
122,500
-
18,238
47,445
-
-
-
-
15,404
97,195
-
19,360
50,365
-
21,396
134,017
-
17,677
45,985
-
47,914
402,352
-
23,204
145,534
-
69,490
189,781
-
15,432
40,146
-
-
-
762,190
-
-
91,458
-
-
59,448
-
-
80,028
-
-
91,458
-
-
59,448
-
-
-
-
-
-
-
-
91,458
-
-
-
-
-
-
-
-
-
-
-
-
-
-
304,872
-
-
-
-
-
125,761
-
-
25,151
-
-
16,348
1,406
-
22,008
-
-
25,151
1,406
-
16,348
-
-
-
-
-
-
1,493
-
25,151
-
-
-
11,344
-
-
-
-
-
14,207
-
-
5,192
-
-
1,190
-
-
7,058
44,601
-
4,829
30,516
-
-
-
-
9,843
-
-
5,386
34,038
-
9,843
-
-
-
-
-
4,086
25,822
-
17,867
50,365
66,307
5,944
37,559
-
6,333
45,985
-
25,391
160,465
-
8,997
145,534
-
64,298
189,781
304,872
8,328
-
-
31,625
204,261
636,429
12,682
78,898
66,307
-
-
43,100
6,989
47,445
58,020
14,201
88,462
66,307
6,989
47,445
43,100
-
-
-
11,318
71,373
-
-
-
-
15,452
96,458
-
-
-
-
22,523
241,887
-
-
-
-
-
-
-
5,914
40,146
-
(a) The grant values are calculated using the fair value of performance Shares as at the grant date – see table 15.
(b) On the vesting (and automatic exercise) of each Performance Right and Performance Share, the holder receives one fully paid ordinary share in the
Company.
(c) These represent Performance Rights and Options granted in 2006/07 that lapsed at the end of the 2010 financial year as the
performance conditions were not satisfied and the unvested Performance Rights and Options that were forfeited upon
cessation of employment with the Company.
67
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Table 15 sets out details of changes in the value of Performance Rights and Options(a) and Performance
Shares held by Senior Executives during the year.
Table 15 – Movement in Performance Rights, Performance Shares and Options in FY2010 (value)
Senior Executive
Instrument
Granted
Vested(a)
Exercised
Forfeited/Lapsed(b)
Current
Mike Hirst
Marnie Baker
Dennis Bice
Richard Fennell
Russell Jenkins
Stella Thredgold
Tim Piper
Andrew Watts
Former
Anthony Baum
Greg Gillett
David Hughes
Rob Hunt
Craig Langford
Jamie McPhee
Philip Riquier
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
Performance Rights
Options
Performance Shares
-
-
$5,332,283
-
-
$679,380
-
-
$441,601
-
-
$594,474
-
-
$679,380
-
-
-
-
-
$441,601
-
-
-
-
-
$679,380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$2,201,557
-
-
-
-
-
$1,028,725
-
-
$205,735
-
-
$133,727
$11,670
-
$180,025
-
-
$205,735
-
-
-
$11,670
-
$133,727
-
-
-
$12,392
-
$205,735
-
-
-
$103,230
-
-
-
-
-
$118,202
-
-
$43,094
-
-
$17,588
-
-
-
-
$1,028,725
-
-
$205,735
-
-
$133,727
$11,670
-
$180,025
-
-
$205,735
-
-
-
$11,670
-
$133,727
-
-
-
$12,392
-
$205,735
-
-
-
$103,230
-
-
-
-
-
$118,202
-
-
$43,094
-
-
$17,588
-
-
$91,119
$92,324
-
$62,342
$63,168
-
-
-
-
$139,125
-
-
$69,533
$70,459
-
-
-
-
$139,125
-
-
$52,750
$53,452
-
$216,672
$69,000
$473,645
$76,737
$77,747
-
$66,801
$62,999
-
$327,798
$332,163
-
$93,785
$270,714
-
$773,654
$260,000
$2,201,557
$117,710
-
-
(a)
The value of vested and exercised Performance Shares is based on the Company’s closing share price on the date of
testing (as there is no exercise price payable in respect to Performance Shares). The value of each Performance
Share on the date of testing was $8.18. The shares are scheduled to vest in September 2010.
The value of vested and exercised Performance Rights is based on the Company’s closing share price on the date of
vesting (as there is no exercise price payable in respect to Performance Rights). The value of each Performance Right
on the date of vesting was $8.30 with the exception of Mr Hughes - $9.10 and Mr Langford - $8.32.
(b)
The value of each Performance Right and Option on the date it lapses or is forfeited will be calculated using the fair value of the Performance
Rights and Options. An explanation of the pricing model used to calculate this value is set out in Note 38 to the financial statements.
68
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
5. Senior Executive Service Agreements
The remuneration and other terms of employment for Senior Executives are formalised in Service Agreements. Each
agreement provides for the payment of performance-related cash STI component and participation in the Company’s LTI
component. The material terms of the Service Agreements for the Senior Executives at the date of this report are set out
below.
Applies To
Managing Director (Mr
Hirst)
All Senior Executives (a)
Managing Director (Mr
Hirst)
Table 16 – Summary of Service Agreements
About the Contract
Contractual Provision
What is the duration of the
contracts?
Fixed term of 5 years, subject to the termination provisions
summarised below, and then continuing unless otherwise
agreed by the company or managing director.
What notice must be
provided by a Senior
Executive to terminate a
Service Agreement
without cause?
What notice must be
provided by the Company
to terminate a Service
Agreement without
cause? (b)
What payments must be
made by the Company for
termination by the
Company without cause?
What are notice and
payment requirements for
termination for cause?
On-going until notice is given by either party.
12 months’ notice.
No notice period required if material change in duties or
responsibilities.
6 months’ notice.
All Senior Executives(c)
No notice period required if material change in duties or
responsibilities.
12 months’ notice or payment in lieu.
All Senior Executives
Payment of gross salary in lieu of period of notice (including
payment of accrued / unused leave entitlements calculated to
end of relevant notice period).
Senior Executives
Termination for cause does not require a notice period.
Payment of pro-rata gross salary and benefits (including
payment of accrued / unused leave entitlements) is required to
date of termination.
Senior Executives
Are there any post-
employment restraints?
12 month non-competition and non-solicitation (employees,
customers and suppliers) restriction.
Managing Director (Mr
Hirst)
12 month non-solicitation restriction.
Senior Executives (c)
(a)
(b)
“Senior Executives” does not include Mr Dennis Bice and Ms Stella Thredgold. Mr Bice and Ms Thredgold are employed on the Company’s standard
employment terms that apply to salaried employees. These terms include a four week notice period.
“Senior Executives” also does not include Mr McPhee, whose employment terms were set out in the 2009 Remuneration report. His terms of
employment, at the date he ceased employment with the Company, were the same as summarised above with the exception of a 12 month non-
solicitation restriction.
In certain circumstances, such as a substantial diminution of responsibility, the Company may be deemed to have terminated the employment of a
Senior Executive and will be liable to pay a termination benefit as outlined at the row titled “What payments must be made by the Company for
termination without cause”.
(c) Being the current Senior Executives listed at Table 1 excluding the Managing Director (Mr Hirst).
69
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
6. Non-Executive Director Remuneration
The table below sets out the key principles that underpin the Board’s policy on Non-Executive Director remuneration:
Table 17 – Principles underpinning remuneration policy for Non-Executive Directors
Principle
Comment
Aggregate Board fees are
approved by shareholders
The current aggregate fee pool for Non-Executive Directors of $1,700,000 was
approved by shareholders at the 2008 Extraordinary General Meeting.
Remuneration structured to
preserve independence and
encourage longer term
perspective
Reviews of fee arrangements
Fees are set by reference to key
considerations
(Note: Some benefits are payable outside of the shareholder-approved cap –
refer Table 18 for details)
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 Company. In accordance with the
Board policy, Non-Executive Director remuneration comprises the following
elements.
Base fee; and
Superannuation
Non-Executive Directors do not receive bonuses or incentive payments, nor
participate in the Company’s employee equity participation plans.
Approval for issues of shares to non-executive directors under a fee-sacrifice
share plan was obtained at the 2008 Annual General Meeting. This plan was
discontinued following changes to taxation rules that apply to employee share
scheme benefits.
Non-Executive Director fees are reviewed annually by the Board to ensure that
the structure and amounts are appropriate for the circumstances of the
Company. Fees for Non-Executive Directors are decided by the Board based on
the recommendation of the Governance & HR Committee.
Non-Executive Director fees are set by reference to considerations including:
The demands and the scope of responsibilities of Non-Executive Directors
Fees paid by peer companies and companies of similar market capitalisation
The Governance & HR Committee takes into account changes in director
responsibilities and time commitments during the year, at both the board and
committee level, as well as 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, including 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 Company,
any significant changes in the nature and operations of the Company including
industry developments which impact the responsibilities and risks associated
with the role of director.
The Board decided that there would be no increase to the annual non-executive
director fees for the 2010 financial year. The directors also agreed, for the 2010
financial year, to donate 4% of their annual fee payment to the Board’s
scholarship program for underprivileged students.
The Board has decided that from 1 July 2010 the annual base fee would
increase by 3.5% to $129,375 ($141,020 including 9% superannuation).
No retirement benefits
No additional benefits are paid to Non-Executive Directors upon their retirement
from office (i.e. in addition to their superannuation entitlements).
Regular reviews of remuneration
The Board periodically reviews its approach to Non-Executive Director
remuneration to ensure it remains in line with general industry practice and best
practice principles of corporate governance.
70
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Table 18 – Components of remuneration for Non-Executive Directors
Element
Board fees
Other fees/benefits
Post-employment
benefits
Equity/NED Share
Plan
Details/
Explanation
The base fee per
annum was:
$125,000 for Board
members from 1
July 2008 (refer
also Table 17).
$250,000 for Chair
to recognise extra
time commitment.
The base fee per
annum from 1 July
2010 increased by
3.5% to $129,375
($258,750 for Chair).
No additional
committee fees.
Fee payments may be
increased annually by
the CPI index should
the Governance and
HR Committee not
recommend a general
fee increase.
The Company
obtained shareholder
approval at the 2008
AGM for a Non-
Executive Director
Fee Sacrifice Plan
(“Plan”) under which
Non-Executive
Directors may elect to
sacrifice part of their
fees to acquire shares
in the Company. This
Plan has been
suspended as a result
of the Government’s
changes to the
taxation of employee
share schemes.
Superannuation
contributions are
made on behalf of the
Non-Executive
Directors at a rate of
9%, which satisfies
the Company’s
statutory
superannuation
obligations.
Non-Executive
Directors appointed
prior to 31 August
2005 were entitled to
a retirement benefit
under the Company’s
legacy retirement
benefit scheme. The
scheme was closed at
the above date, all
entitlements were
crystallised and have
been paid to the Non-
Executive Directors.
1 The Board may
determine
additional fees for
appointments to
subsidiary or joint
venture boards.
2 Non-Executive
Directors are
permitted to be
paid additional
remuneration for
special services
on behalf of the
Company. No
such fees were
paid during the
year.
3 Non-Executive
Directors are
entitled under the
Company’s
Constitution to be
reimbursed for all
reasonable travel,
accommodation
and other
expenses incurred
in attending
meetings or when
engaged on
company
business.
Included in
shareholder
approved cap?
Yes
Yes – 1 & 2
Yes (Superannuation) N/A
No – 3
71
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Remuneration Paid
Details of Non-Executive Directors’ remuneration are set out in Table 19.
Table 19 – Non-Executive Director Remuneration for FY2010 and FY2009
Short-term benefits
Post-employment benefits
Fees 1
Non-monetary
benefits2
Superannuation
Contributions3
Retirement
Benefits
Total
Share-based
payments
Non-Executive
Director Share
Plan
Current
R Johanson
(Chairman)
2010
2009
K Abrahamson 5
2010
2009
J Dawson 5
2010
2009
J Hazel 6
2010
2009
D Matthews 5 6
2010
2009
T O’Dwyer 5
2010
2009
D Radford
2010
2009
A Robinson
2010
2009
Former
K Osborn 4
2010
2009
K Roache 7
2010
2009
245,000
250,000
47,095
73,577
195,519
210,000
34,615
-
54,615
-
132,115
160,000
120,000
125,000
57,500
68,093
56,192
125,000
41,539
125,000
-
-
85,020
86,423
-
-
-
-
-
-
-
-
-
-
62,500
56,907
-
-
-
-
22,500
22,500
12,340
14,400
18,047
18,900
3,245
-
3,245
-
12,340
14,400
11,250
11,250
11,250
11,250
5,192
11,250
3,894
11,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
267,500
272,500
144,455
174,400
213,566
228,900
37,860
-
57,860
-
144,455
174,400
131,250
136,250
131,250
136,250
61,384
136,250
45,433
136,250
1 Fee amounts exclude the 4% ($5,000) director contribution to the board scholarship program for FY2010.
2 Represents fee sacrifice component of base director fee amount.
3 Company superannuation contributions paid in accordance with the Superannuation Guarantee Legislation.
4 Resigned on 3 December 2009.
5 The fees paid to Mr Abrahamson and Mr O’Dwyer include an additional fee of $12,115 relating to their directorship on Sunstate Lenders Mortgage
Insurance Pty Ltd for the period 1 July 2009 to 31 October 2009. The fees paid to Ms Dawson include an additional fee of $75,519 as chairman of
(subsidiaries) Adelaide Managed Funds Ltd for the period 1July 2009 to 8 August 2009 and Sandhurst Trustees Ltd for the period 18 September
2009 to 30 June 2010. Fees paid to Mr Matthews include $20,000 for his appointment as co-chairman of the Community Bank® Strategic Advisory
Board.
6 Appointed on 1 March 2010.
7 Retired on 26 October 2009.
72
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Meetings of directors
The number of meetings of the Bank’s directors (including meetings of committees of directors) held during the year ended 30
June 2010 and the number attended by each director were:
Board of
directors
Meetings
Audit
Credit
Risk
Governance
IT Strategy
Meetings in Committees
Attended by:
R Johanson
M Hirst
K Osborn1
K Abrahamson
J Dawson
J McPhee2
T O’Dwyer
D Radford
K Roache3
A Robinson
D Matthews4
J Hazel4
A
16
16
9
16
16
10
16
16
8
16
4
4
B
15
16
8
14
15
9
16
16
6
15
4
4
A
B
A
B
A
B
A
4
B
4
4
8
8
8
8
4
7
8
7
7
11
5
11
6
11
3
4
4
11
5
9
6
11
2
4
4
6
3
3
6
6
2
2
6
3
3
6
6
2
2
4
4
1
4
4
1
A
6
6
3
6
6
B
6
5
3
6
6
A = Number eligible to attend
B = Number attended
1 Mr Osborn resigned from the Board 3 December 2009.
2 Mr McPhee resigned from the Board 27 January 2010.
3 Mr Roache retired from the Board 26 October 2009.
4 Mr Matthews and Mr Hazel were appointed to the Board on 1 March 2010.
Insurance of Directors and Officers
During or since the financial year end, the Company has paid premiums to insure certain officers of the company and its
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 and Adelaide
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 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.
73
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
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
Ordinary shares
Preference
shares
Step-Up
Preference
Shares
Reset
Preference
Shares
R N Johanson
M J Hirst
K D Abrahamson
J L Dawson
T J O’Dwyer
D L Radford
A D Robinson
D Matthews
J Hazel
233,314
59,288 1
19,284
20,001
68,575
1,900
5,966
1,540
5,145
500
-
-
100
-
-
-
-
-
-
-
90
-
-
-
-
-
-
-
-
129
-
-
-
-
-
-
Performance
Rights &
Options
-
1,049,735
-
-
-
-
-
-
-
1 Includes 50,000 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 and Adelaide Bank Limited for twelve 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 2010. 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 2010. 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.
74
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Non-Audit Services
Non-audit services are those services paid or payable to the Group’s external auditor, Ernst & Young (Australia), which do not relate to
Group statutory audit engagements.
Details of all non-audit services for the year ended 30 June 2010:
(a)
Audit related fees (Regulatory):
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 Licence Audits
Trust Deed Report – Euro Medium Term Note Program
Trust Deed Report - Victorian Securities Trust
Sub total – Audit related fees (Regulatory)
Fees
(excluding GST)
$
108,799
68,234
25,750
11,588
214,371
Entity
Bendigo and Adelaide Bank
Limited
(1) Refer below
Bendigo and Adelaide Bank
Limited
Bendigo and Adelaide Bank
Limited
(1) Amount attributed to Bendigo and Adelaide Bank and subsidiary companies: Sandhurst Trustees Limited, Victorian
Securities Corporation Limited, Adelaide Managed Funds Limited, Leveraged Equities Nominees Proprietary Limited, Bendigo
Financial Planning Limited and National Assets Securitisation Corporation
(b)
Audit related fees (Non-regulatory):
In its capacity as the Group’s external auditor, Ernst & Young are periodically engaged to provide assurance and related
services not required by statute or regulation but are reasonably related to the performance of the audit or review of the
Group's financial statements which are traditionally performed by the external auditor. These services include assurance of the
Group's credit assessments and reviews of the Group's acquisition accounting and tax consolidation processes. The amounts
shown are GST exclusive.
Service Category
Independent Accountants Report
Fees
(excluding GST)
$
7,983
Entity
Victorian Securities Corporation
Limited
Sub total – Audit related fees (Non-regulatory)
7,983
(c)
Non audit related fees:
Service
Tax advice
Professional Services
Sub total – non audit related fees
Total – non audit services
Fees
(excluding GST)
$
Entity
986,004
Bendigo and Adelaide Bank
Limited
Bendigo and Adelaide Bank
Limited
243,595
1,229,599
1,451,953
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.
75
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Auditor’s Independence Declaration to the Directors of Bendigo and Adelaide Bank
Limited
In relation to our audit of the financial report of Bendigo and Adelaide Bank Limited for the financial year ended 30 June 2010, 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.
Ernst & Young
T M Dring
Partner
Melbourne
8 September 2010
Liability limited by a scheme approved under
Professional Standards Legislation
76
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
This Directors Report is signed in accordance with a resolution of the Board of Directors
Robert Johanson
Chairman
8 September 2010
Mike Hirst
Managing Director
77
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INCOME STATEMENT
for the year ended 30 June 2010
Note
Consolidated
Income
Net interest income
Interest income
Interest expense
Total Net interest income
Other revenue
Dividends
Fees
Commissions
Other revenue
Total other revenue
Other income
Ineffectiveness in cash flow hedges
Realised accounting gain on the sale of equity investments
Other
Share of joint ventures net profit/losses
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
Staff and related costs
Occupancy costs
Amortisation of intangibles
Property, plant & equipment costs
Fees and commissions
Impairment loss on equity investments
Property revaluation
Integration costs
Employee shares shortfall
Other
Total other expenses
Profit before income tax expense
Income tax (expense)/benefit
Net profit for the period
Net (profit) attributable to non-controlling interest
Net profit attributable to owners of the parent
4
4
4
4
4
4
4
4
4
22
4
4
4
4
4
4
4
4
4
4
4
6
230
2010
$m
2,712.2
1,857.6
854.6
6.3
201.6
40.9
33.5
282.3
(33.9)
19.9
(0.6)
(14.6)
12.7
1,135.0
50.9
(6.2)
44.7
334.7
57.7
38.2
13.4
37.9
-
10.2
35.1
(2.6)
215.0
739.6
350.7
(90.8)
259.9
(17.3)
242.6
2009
$m
3,154.7
2,519.7
635.0
2.2
203.0
47.7
22.7
275.6
(93.6)
26.0
(0.2)
(67.8)
30.9
873.7
86.2
(5.9)
80.3
296.8
54.8
32.7
13.9
22.2
10.0
-
41.4
5.3
197.0
674.1
119.3
(35.5)
83.8
-
83.8
Earnings per share for profit attributable to the ordinary equity holders of the parent:
Basic earnings per ordinary share (cents per share)
Diluted earnings per ordinary share (cents per share)
Franked dividends per ordinary share (cents per share)
9
9
10
67.4
62.9
58.0
25.6
25.6
43.0
Parent
2010
$m
2,032.6
1,361.1
671.5
111.8
182.5
16.0
72.9
383.2
(37.4)
0.3
(0.6)
(37.7)
-
1,017.0
40.0
(6.0)
34.0
302.0
83.7
31.4
12.4
19.8
-
-
27.8
(2.6)
201.3
675.8
307.2
(63.1)
244.1
-
244.1
2009
$m
1,842.4
1,435.0
407.4
147.4
166.2
13.8
31.6
359.0
(36.4)
25.9
(12.0)
(22.5)
-
743.9
63.7
(4.0)
59.7
241.1
68.8
20.8
12.0
18.3
9.2
-
37.0
5.3
166.3
578.8
105.4
8.2
113.6
-
113.6
78
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
BALANCE SHEET
as at 30 June 2010
Assets
Cash and cash equivalents
Due from other financial institutions
Amounts receivable from controlled entities
Assets held for sale
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Current tax asset
Other assets
Financial assets available for sale - equity investments
Derivatives
Loans and other receivables - investment
Net loans and other receivables
Investments in joint ventures accounted for
using the equity method
Shares in controlled entities
Property, plant & equipment
Deferred tax assets
Investment property
Intangible assets and goodwill
Total Assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Loans payable to securitisation trusts
Income tax payable
Provisions
Deferred tax liabilities
Reset preference shares
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
Equity
Equity attributable to equity holders of the parent
Issued capital - ordinary
Perpetual non-cumulative redeemable convertible preference shares
Step up preference shares
Employee Share Ownership Plan (ESOP) shares
Reserves
Retained earnings
Total parent interests
Total non-controlling interests
Total Equity
Note
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
760.5
279.7
-
-
3,985.2
261.5
482.8
-
618.2
111.7
7.4
541.0
42,980.8
7.2
-
103.6
201.0
158.9
1,641.6
52,141.1
195.5
37,076.2
9,042.8
263.6
777.3
-
73.1
89.1
120.7
89.5
532.9
48,260.7
3,880.4
3,361.7
88.5
100.0
(27.7)
(22.3)
234.5
3,734.7
145.7
3,880.4
912.6
235.4
-
-
3,882.3
-
344.9
84.4
512.3
84.1
49.0
505.7
38,235.2
225.9
-
115.9
212.0
115.6
1,598.9
47,114.2
196.3
31,879.8
9,974.5
436.4
665.9
-
-
62.7
91.7
89.5
598.7
43,995.5
3,118.7
3,003.9
88.5
100.0
(32.7)
(185.3)
144.3
3,118.7
-
3,118.7
615.0
279.0
694.9
-
3,986.3
2,039.3
97.4
-
460.8
3.0
130.8
541.0
35,636.6
-
653.6
85.4
146.5
-
1,481.6
46,851.2
194.3
33,504.2
1,156.4
220.3
820.8
6,406.7
59.9
76.9
129.9
89.5
393.7
43,052.6
3,798.6
3,361.7
88.5
100.0
(27.7)
29.5
246.6
3,798.6
-
3,798.6
527.5
235.4
765.7
-
5,613.3
-
266.4
84.4
660.4
5.9
124.7
505.7
34,598.4
-
460.6
93.8
186.8
-
1,476.7
45,605.7
196.3
31,894.1
2,102.4
486.2
903.3
6,033.4
-
62.7
95.5
89.5
598.7
42,462.1
3,143.6
3,003.9
88.5
100.0
(32.7)
(159.5)
143.4
3,143.6
-
3,143.6
14
14
24
15
16
18
28
17
44
19
19
22
23
6
25
26
14
29
29
44
30
6
31
6
32
33
34
34
34
34
35
35
79
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2010
Note
Consolidated
Parent
Available for sale financial assets revaluation
Transfer available for sale assets revaluation to income
Transfer available for sale assets impairment loss to income
Asset revaluation reserve - property
Net gain/(loss) on cash flow hedges taken to equity
Net gain/(loss) on cash flow hedges taken to equity - joint ventures
Net gain/(loss) on reclassification from cash flow hedge reserve to income
Net unrealised gain/(loss) on investments in available for sale portfolio
Actuarial gain/(loss) on superannuation defined benefits plan
Tax effect on items taken directly to or transferred from equity
35
35
35
35
35
35
35
35
35
35
Net income/(loss) recognised directly in equity
Profit for the year
Total comprehensive income for the period
Total comprehensive income for the period attributable to:
Non-controlling interest
Members of the Parent
2010
$m
31.6
-
-
4.7
132.8
11.9
33.7
0.3
2.8
(64.5)
153.3
259.9
413.2
17.8
395.4
2009
$m
(34.3)
19.1
0.9
-
(526.2)
(12.2)
86.7
-
(6.6)
96.9
(375.7)
83.8
(291.9)
-
(291.9)
2010
$m
(1.1)
0.2
-
-
228.5
-
35.8
0.2
2.8
(78.9)
187.5
244.1
431.6
-
431.6
2009
$m
(36.8)
19.8
0.1
-
(436.3)
-
29.5
-
(2.4)
93.9
(332.2)
113.6
(218.6)
-
(218.6)
80
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2010
Issued ordinary
ESOP
Preference
Retained
Employee
Asset revaluation
Asset revaluation
Net unrealised
Cash flow
Cash flow
General reserve
General reserve
Total
capital
shares
shares
earnings
benefits
reserve - property
reserve - AFS
gains reserve
hedge reserve
hedge reserve
for credit losses
for credit losses
Attributable to owners of Bendigo and Adelaide Bank Limited
Non-
controlling
interest
Total
equity
$m
$m
$m
$m
3,003.9
-
(32.7)
-
188.5
-
CONSOLIDATED
At 1 July 2009
Opening balance b/fwd
Acquired in business combination
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Transactions with owners in their
capacity as owners:
Shares issued
Share issue expenses
Reduction in Employee Share
Ownership Plan shares
Movement in general reserve for
credit losses (GRCL)
Movement in GRCL - joint ventures
Share based payment
Equity dividends
Acquisition Accounting Amortisation Unwind
Other
At 30 June 2010
-
-
-
368.1
(10.3)
-
-
-
-
-
-
5.0
-
-
-
-
-
-
3,361.7
-
-
-
-
-
-
(27.7)
reserve
$m
13.6
-
-
-
-
-
-
-
144.3
-
242.6
4.0
246.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
188.5
(18.6)
11.1
-
(148.9)
-
-
234.5
-
-
6.7
-
-
-
20.3
share investments
joint ventures
joint ventures
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
2.1
-
-
1.5
1.5
-
-
-
-
-
-
-
-
-
3.6
5.5
-
-
22.0
22.0
-
-
-
-
-
-
-
-
-
27.5
-
-
-
0.3
0.3
-
-
-
-
-
-
-
-
-
0.3
(295.4)
-
-
116.7
116.7
-
-
-
-
-
-
-
-
-
(178.7)
(8.3)
-
-
8.3
8.3
-
-
-
-
-
-
-
-
-
-
86.1
-
11.1
-
3,118.7
-
-
131.6
3,118.7
131.6
-
-
-
-
-
-
18.6
-
-
-
-
-
104.7
-
-
-
-
-
-
242.6
152.8
17.3
0.5
259.9
153.3
395.4
17.8
413.2
368.1
(10.3)
5.0
-
-
-
368.1
(10.3)
5.0
-
(11.1)
-
-
-
-
-
-
-
6.7
(148.9)
-
-
3,734.7
(0.2)
-
-
(17.8)
15.1
(0.8)
145.7
(0.2)
-
6.7
(166.7)
15.1
(0.8)
3,880.4
81
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
STATEMENT OF CHANGES IN EQUITY (continued…)
for the year ended 30 June 2009
Full Financial Report
Period ending 30 June 2010
Attributable to owners of Bendigo and Adelaide Bank Limited
Non-
controlling
interest
Total
equity
Issued ordinary
ESOP
Preference
Retained
Employee
Asset revaluation
Asset revaluation
Net unrealised
Cash flow
Cash flow
General reserve
General reserve
Total
capital
shares
shares
earnings
benefits
reserve - property
reserve - AFS
gains reserve
hedge reserve
hedge reserve
for credit losses
for credit losses
$m
$m
$m
$m
reserve
$m
share investments
joint ventures
joint ventures
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
2,706.3
(37.4)
188.5
269.9
12.4
2.1
-
-
-
299.8
(2.2)
-
-
-
-
-
-
4.7
-
-
-
-
-
3,003.9
-
-
-
-
-
(32.7)
-
-
-
-
-
-
83.8
(6.9)
76.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
188.5
(9.9)
(1.8)
-
(190.4)
(0.4)
144.3
-
-
1.2
-
-
13.6
-
-
-
-
-
-
-
-
-
-
-
2.1
14.8
-
(9.3)
(9.3)
-
-
-
-
-
-
-
-
5.5
-
-
-
-
-
-
-
-
-
-
-
-
-
51.9
-
(347.3)
(347.3)
-
-
-
-
-
-
-
-
(295.4)
3.9
-
(12.2)
(12.2)
-
-
-
-
-
-
-
-
(8.3)
76.2
9.3
3,297.9
-
-
-
-
-
-
9.9
-
-
-
-
86.1
-
-
-
-
-
-
-
1.8
-
-
-
11.1
83.8
(375.7)
(291.9)
299.8
(2.2)
4.7
-
-
1.2
(190.4)
(0.4)
3,118.7
-
-
-
-
-
-
-
-
-
-
-
-
-
3,297.9
83.8
(375.7)
(291.9)
299.8
(2.2)
4.7
-
-
1.2
(190.4)
(0.4)
3,118.7
CONSOLIDATED
At 1 July 2008
Opening balance b/fwd
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Transactions with owners in their
capacity as owners:
Shares issued
Share issue expenses
Reduction in Employee Share
Ownership Plan shares
Movement in general reserve for
credit losses (GRCL)
Movement in GRCL-joint ventures
Share based payment
Equity dividends
Transfer of business - Adelaide Bank
At 30 June 2009
82
Full Financial Report
Period ending 30 June 2010
Total
equity
3,143.6
-
244.1
187.5
431.6
368.1
(10.3)
5.0
-
3.9
(148.8)
-
5.5
3,798.6
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
STATEMENT OF CHANGES IN EQUITY (continued…)
for the year ended 30 June 2010
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
ESOP
Preference
Retained
Employee
Asset Revaluation
Asset Revaluation
Net Unrealised
Cash Flow
General Reserve
capital
shares
shares
earnings
Benefits
Reserve - Property
Reserve - AFS
Gains Reserve
Hedge Reserve
For Credit Losses
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Reserve
Share Investments
2.3
-
-
(0.6)
(0.6)
-
-
-
-
-
-
-
-
-
-
0.2
0.2
-
-
-
-
-
-
-
(261.8)
-
-
185.4
185.4
-
-
-
-
-
-
-
86.1
-
-
-
-
-
-
-
0.1
-
-
-
1.7
0.2
(76.4)
86.2
3,003.9
-
(32.7)
-
188.5
-
13.6
-
0.3
-
PARENT
At 1 July 2009
Opening balance b/fwd
Acquired in business combination
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Transactions with owners in their
capacity as owners:
Shares issued
Share issue expenses
Reduction in Employee Share
Ownership Plan shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Equity dividends
Acquisition Accounting Amortisation Unwind
Other
At 30 June 2010
143.4
-
244.1
2.5
246.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
188.5
(0.1)
-
(148.8)
-
5.5
246.6
-
3.9
-
-
-
17.5
-
-
-
368.1
(10.3)
-
-
-
-
-
-
5.0
-
-
-
-
-
3,361.7
-
-
-
-
-
(27.7)
-
-
-
-
-
-
-
-
-
-
-
0.3
83
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
STATEMENT OF CHANGES IN EQUITY (continued…)
for the year ended 30 June 2009
Full Financial Report
Period ending 30 June 2010
Total
equity
3,232.6
-
113.6
(332.2)
(218.6)
-
-
299.8
(2.2)
-
4.7
-
-
1.0
(190.9)
17.2
3,143.6
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
ESOP
Preference
Retained
Employee
Asset Revaluation
Asset Revaluation
Net Unrealised
Cash Flow
General Reserve
capital
shares
shares
earnings
Benefits
Reserve - Property
Reserve - AFS
Gains Reserve
Hedge Reserve
For Credit Losses
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Reserve
Share Investments
PARENT
At 1 July 2008
Opening balance b/fwd
Acquired in business combination
Comprehensive income:
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Transactions with owners in their
capacity as owners:
Shares issued
Share issue expenses
Reduction in Employee Share
Ownership Plan shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Equity dividends
Transfer of business - Adelaide Bank
At 30 June 2009
2,706.3
-
(37.4)
-
188.5
-
246.1
-
113.6
(2.7)
110.9
-
-
-
12.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
188.5
(39.9)
-
(190.9)
17.2
143.4
-
1.0
-
-
13.6
-
-
-
299.8
(2.2)
-
-
-
-
-
-
4.7
-
-
-
-
3,003.9
-
-
-
-
(32.7)
13.6
-
-
(11.3)
(11.3)
-
-
-
-
-
-
2.3
-
-
-
-
-
-
-
-
-
-
-
-
56.4
-
-
(318.2)
(318.2)
-
-
-
-
-
-
(261.8)
46.2
-
-
-
-
-
-
-
39.9
-
-
86.1
0.3
-
-
-
-
-
-
-
-
-
-
-
0.3
84
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
CASH FLOW STATEMENT
for the year ended 30 June 2010
Note
Consolidated
Parent
2010
$m
2,591.2
(1,835.7)
250.3
(630.9)
17.3
(44.2)
348.0
(17.7)
0.6
(32.3)
4.2
(0.1)
(5.8)
4.3
(1,240.1)
243.3
-
42.7
-
(1,000.9)
320.0
1,538.4
(52.1)
51.0
(237.0)
(99.5)
(20.1)
(949.5)
5.0
(10.3)
545.9
(107.0)
951.7
844.7
2009
$m
3,059.1
(2,481.6)
236.3
(646.7)
34.9
(74.7)
127.3
(21.2)
0.9
(26.1)
102.5
(9.7)
(80.2)
42.1
2,833.2
(987.9)
(1,482.0)
-
-
371.6
192.8
4,911.7
(4,429.0)
-
(80.0)
(142.2)
-
(1,341.9)
4.7
(2.2)
(886.1)
(387.2)
1,338.9
951.7
2010
$m
1,940.1
(1,332.1)
278.9
(625.6)
120.3
(133.2)
248.4
(10.9)
0.5
-
-
-
(13.3)
1.7
(57.1)
(690.5)
-
-
5.5
(764.1)
320.0
1,649.1
(44.8)
30.0
(237.0)
(99.5)
-
(963.7)
5.0
(10.3)
648.8
133.1
566.6
699.7
2009
$m
1,749.8
(1,415.1)
251.4
(700.0)
36.1
(59.4)
(137.2)
(8.4)
0.7
-
-
(9.5)
(101.8)
112.6
679.8
(4,134.4)
-
-
129.2
(3,331.8)
192.8
4,977.6
(2,483.5)
-
(80.0)
(142.2)
-
1,042.0
4.7
(2.2)
3,509.2
40.2
526.4
566.6
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 effective interest)
Payments to suppliers and employees
Dividends received
Income taxes paid
Net cash flows from operating activities
13
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for purchases of property, plant and equipment
Cash proceeds from sale of property, plant and equipment
Cash paid for purchases of investment property
Cash proceeds from sale of investment property
Cash paid for purchases of intangible software
Cash paid for purchases of equity investments
Cash proceeds from sale of equity investments
Net (increase)/decrease in balance of loans and other receivables outstanding
Net (increase)/decrease in balance of investment securities
Net cash paid on acquisition of a portfolio
Net cash received/(paid) on acquisition of a subsidiary
Proceeds from discontinued operations
Net cash flows from/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares
Net increase/(decrease) 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
Dividends paid non controlling entity
Net increase/(decrease) in balance of notes payable
Repayment of ESOP shares
Payment of share issue costs
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
14
85
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The financial report of Bendigo and Adelaide Bank Limited (the Company) for the year ended 30 June 2010 was authorised for
issue in accordance with a resolution of the directors on 8 September 2010.
Bendigo and Adelaide Bank Limited is a company limited by shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange.
The domicile of Bendigo and Adelaide Bank Limited is Australia.
The registered office of the Company is:
The Bendigo Centre
PO Box 480
Bendigo, Victoria
Australia 3552
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
Bendigo and Adelaide 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,
Australian Accounting Standards, Corporations Act 2001 and the requirements of law so far as they are applicable to Australian
banking corporations, including the application of ASIC Class Order 10/654 allowing the disclosure of Parent entity financial
statements due to Australian Financial Services Licensing obligations.
The financial report has been prepared in accordance with the historical cost, 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 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 one hundred thousand dollars ($’00,000).
86
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).
Recently issued or amended standards not yet effective.
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 2010:
Application
date of
standard*
1 January
2010
Application
date for
Group*
1 July 2010
Impact on
Group
financial
report
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB 2009-5
Further
Amendments to
Australian
Accounting
Standards
arising from the
Annual
Improvements
Project
[AASB 5, 8,
101, 107, 117,
118, 136 & 139]
The amendments to some Standards result
in accounting changes for presentation,
recognition or measurement purposes,
while some amendments that relate to
terminology and editorial changes are
expected to have no or minimal effect on
accounting except for the following:
The amendment to AASB 117 removes the
specific guidance on classifying land as a
lease so that only the general guidance
remains. Assessing land leases based on
the general criteria may result in more land
leases being classified as finance leases
and if so, the type of asset which is to be
recorded (intangible vs. property, plant and
equipment) needs to be determined.
The amendment to AASB 101 stipulates
that the terms of a liability that could result,
at anytime, in its settlement by the issuance
of equity instruments at the option of the
counterparty do not affect its classification.
The amendment to AASB 107 explicitly
states that only expenditure that results in a
recognised asset can be classified as a
cash flow from investing activities.
The amendment to AASB 118 provides
additional guidance to determine whether
an entity is acting as a principal or as an
agent. The features indicating an entity is
acting as a principal are whether the entity:
► has primary responsibility for providing
the goods or service;
► has inventory risk;
► has discretion in establishing prices;
► bears the credit risk.
The amendment to AASB 136 clarifies that
the largest unit permitted for allocating
goodwill acquired in a business
combination is the operating segment, as
defined in IFRS 8 before aggregation for
reporting purposes.
The main change to AASB 139 clarifies that
a prepayment option is considered closely
related to the host contract when the
exercise price of a prepayment option
reimburses the lender up to the
approximate present value of lost interest
for the remaining term of the host contract.
The other changes clarify the scope
exemption for business combination
contracts and provide clarification in relation
to accounting for cash flow hedges.
87
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Application
date for
Group*
1 July 2010
1 July 2013
Application
date of
standard*
1 January
2010
1 January
2013
Impact on
Group
financial
report
The Group
has share
based
payment
arrangements
that may be
affected by
these
amendments.
However, the
Group has not
yet
determined
the extent of
the impact, if
any.
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB 2009-8 Amendments to
Australian
Accounting
Standards –
Group Cash-
settled Share-
based Payment
Transactions
[AASB 2]
AASB 2009-
11
Amendments to
Australian
Accounting
Standards arising
from AASB 9
[AASB 1, 3, 4, 5,
7, 101, 102, 108,
112, 118, 121,
127, 128, 131,
132, 136, 139,
1023 & 1038 and
Interpretations
10 & 12]
This Standard makes amendments to
Australian Accounting Standard AASB 2
Share-based Payment and supersedes
Interpretation 8 Scope of AASB 2 and
Interpretation 11 AASB 2 – Group and
Treasury Share Transactions.
The amendments clarify the accounting for
group cash-settled share-based payment
transactions in the separate or individual
financial statements of the entity receiving
the goods or services when the entity has
no obligation to settle the share-based
payment transaction.
The amendments clarify the scope of AASB
2 by requiring an entity that receives goods
or services in a share-based payment
arrangement to account for those goods or
services no matter which entity in the group
settles the transaction, and no matter
whether the transaction is settled in shares
or cash.
The revised Standard introduces a number
of changes to the accounting for financial
assets, the most significant of which
includes:
►
►
►
►
►
►
two categories for financial assets
being amortised cost or fair value
removal of the requirement to
separate embedded derivatives in
financial assets
strict requirements to determine
which financial assets can be
classified as amortised cost or fair
value, Financial assets can only be
classified as amortised cost if (a)
the contractual cash flows from the
instrument represent principal and
interest and (b) the entity’s purpose
for holding the instrument is to
collect the contractual cash flows
an option for investments in equity
instruments which are not held for
trading to recognise fair value
changes through other
comprehensive income with no
impairment testing and no
recycling through profit or loss on
derecognition
reclassifications between
amortised cost and fair value no
longer permitted unless the entity’s
business model for holding the
asset changes
changes to the accounting and
additional disclosures for equity
instruments classified as fair value
through other comprehensive
income
88
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Reference
Title
Summary
AASB 2009-
12
AASB 2009-
13
AASB 2009-
14
Amendments to
Australian
Accounting
Standards
[AASBs 5, 8,
108, 110, 112,
119, 133, 137,
139, 1023 &
1031 and
Interpretations
2, 4, 16, 1039 &
1052]
Amendments to
Australian
Accounting
Standards
arising from
Interpretation
19
[AASB 1]
Amendments to
Australian
Interpretation –
Prepayments of
a Minimum
Funding
Requirement
Interpretation
19***
Interpretation
19
Extinguishing
Financial
Liabilities with
Equity
Instruments
Application
date for
Group*
1 July 2011
1 July 2010
1 July 2011
1 July 2010
Impact on
Group
financial
report
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Application
date of
standard*
1 January
2011
This amendment makes numerous editorial
changes to a range of Australian
Accounting Standards and Interpretations.
The amendment to AASB 124 clarifies and
simplifies the definition of a related party as
well as providing some relief for
government-related entities (as defined in
the amended standard) to disclose details
of all transactions with other government-
related entities (as well as with the
government itself)
This amendment to AASB 1 allows a first-
time adopter may apply the transitional
provisions in Interpretation 19 as identified
in AASB 1048.
1 July 2010
1 January
2011
1 July 2010
These amendments arise from the issuance
of Prepayments of a Minimum Funding
Requirement (Amendments to IFRIC 14).
The requirements of IFRIC 14 meant that
some entities that were subject to minimum
funding requirements could not treat any
surplus in a defined benefit pension plan as
an economic benefit.
The amendment requires entities to treat
the benefit of such an early payment as a
pension asset. Subsequently, the remaining
surplus in the plan, if any, is subject to the
same analysis as if no prepayment had
been made.
This interpretation clarifies clarifies that
equity instruments issued to a creditor to
extinguish a financial liability are
“consideration paid” in accordance with
paragraph 41 of IAS 39. As a result, the
financial liability is derecognised and the
equity instruments issued are treated as
consideration paid to extinguish that
financial liability.
The interpretation states that equity
instruments issued in a debt for equity swap
should be measured at the fair value of the
equity instruments issued, if this can be
determined reliably. If the fair value of the
equity instruments issued is not reliably
determinable, the equity instruments should
be measured by reference to the fair value
of the financial liability extinguished as of
the date of extinguishment.
89
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Application
date of
standard*
1 July 2010
Application
date for
Group*
1 July 2010
Impact on
Group
financial
report
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
1 July 2011
1 January
2011
The Group
has not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB 2010-
3
AASB 2010-4
Amendments to
Australian
Accounting
Standards
arising from the
Annual
Improvements
Project
[AASB 3, AASB
7, AASB 121,
AASB 128,
AASB 131,
AASB 132 &
AASB 139]
Further
Amendments to
Australian
Accounting
Standards
arising from the
Annual
Improvements
Project [AASB 1,
AASB 7, AASB
101, AASB 134
and
Interpretation 13]
Limits the scope of the measurement
choices of non-controlling interest at
proportionate share of net assets in the
event of liquidation. Other components of
NCI are measured at fair value.
Requires an entity (in a business
combination) to account for the
replacement of the acquiree’s share-based
payment transactions (whether obliged or
voluntarily), i.e., split between consideration
and post combination expenses.
Clarifies that contingent consideration from
a business combination that occurred
before the effective date of AASB 3
Revised is not restated.
Eliminates the requirement to restate
financial statements for a reporting period
when significant influence or joint control is
lost and the reporting entity accounts for the
remaining investment under AASB 139.
This includes the effect on accumulated
foreign exchange differences on such
investments.
Emphasises the interaction between
quantitative and qualitative AASB 7
disclosures and the nature and extent of
risks associated with financial instruments.
Clarifies that an entity will present an
analysis of other comprehensive income for
each component of equity, either in the
statement of changes in equity or in the
notes to the financial statements.
Provides guidance to illustrate how to apply
disclosure principles in AASB 134 for
significant events and transactions
Clarify that when the fair value of award
credits is measured based on the value of
the awards for which they could be
redeemed, the amount of discounts or
incentives otherwise granted to customers
not participating in the award credit
scheme, is to be taken into account.
90
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3
Basis of consolidation
The consolidated financial statements comprise the financial statements of Bendigo and Adelaide Bank Limited and all of its
controlled entities (“the Group”). Interests in joint ventures are equity accounted and are not part of the consolidated group.
A controlled entity is any entity (including special purpose entities) over which Bendigo and Adelaide Bank Limited has the
power to govern directly or indirectly decision-making in relation to financial and operating policies, so as to obtain benefits from
their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the group controls another entity.
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.
Investments in subsidiaries held by Bendigo and Adelaide Bank Limited are accounted for at cost in separate financial
statement of the parent entity.
The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting
involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent
liabilities assumed at the date of acquisition.
Minority interest not held by the group are allocated their share of net profit after tax in the income statement and are presented
within equity in the consolidated balance sheet, separately from parent shareholders’ equity.
2.4 Business combinations
The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments
or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or
assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a
business combination, the fair value of the instruments is their published price at the date of exchange unless, in rare
circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value
and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the
issue of equity instruments are recognised directly in equity.
Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell),
all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the
business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as
goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the
subsidiary, the difference is recognised as a gain in the income statement, but only after a reassessment of the identifiable and
measurement of the net assets acquired.
Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Changes in accounting policies
2.5
The accounting policies are consistent with those applied in the previous financial year and corresponding interim period except
as follows:
The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as at 1
July 2009
AASB 8 Operating Segments, effective 1 July 2009
AASB 7 Financial Instruments: Disclosures, effective 1 July 2009
AASB 123 Borrowing Costs, effective 1 July 2009
AASB 101 Presentation of Financial Statements, effective 1 July 2009
AASB 2008-1 Share-based Payments: Vesting Conditions and Cancellations, effective 1 July 2009
AASB 3 (Revised) Business Combinations, effective 1 July 2009
AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project,
effective 1 July 2009
AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate, effective 1 July 2009
AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments,
effective 1 July 2009
When the adoption of the Standard or Interpretation is deemed to have an impact on the financial statements or performance of
the Group, its impact is described below:
91
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AASB 7 Financial Instruments: Disclosures
The amended Standard requires additional disclosures about fair value measurement and liquidity risk. Fair value
measurements related to all financial instruments recognised and measured at fair value are to be disclosed by source of inputs
using a three level fair value hierarchy, by class. In addition, a reconciliation between the beginning and ending balance for level
3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The
amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used
for liquidity management. The fair value measurement disclosures are presented in note 43. The liquidity risk disclosures are
not significantly impacted by the amendments and are presented in note 43.
AASB 8 Operating Segments
AASB 8 replaced AASB 114 Segment Reporting upon its effective date. The Group concluded that the operating segments
determined in accordance with AASB 8 are the same as the business segments previously identified under AASB 114. AASB 8
disclosures are shown in note 3, including the related revised comparative information.
AASB 101 Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only
details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity
and included in the new statement of comprehensive income. The statement of comprehensive income presents all items of
recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present
one statement.
AASB 123 Borrowing Costs
The revised AASB 123 requires capitalisation of borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset. The Group's previous policy was to expense borrowing costs as they were incurred. In
accordance with the transitional provisions of the amended AASB 123, the Group has adopted the Standard on a prospective
basis. Therefore, borrowing costs are capitalised on qualifying assets with a commencement date on or after 1 January 2009.
The Group did not capitalise any borrowing costs in the current year.
AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate
The amendments delete the reference to the “cost method” making the distinction between pre and post acquisition profits no
longer relevant. All dividends received are now recognised in profit or loss rather than having to be split between a reduction in
the investment and profit and loss. However the receipt of such dividends requires an entity to consider whether there is an
indicator of impairment of the investment in that subsidiary. The receipt of dividends by Bendigo and Adelaide Bank Limited
during the year did not impact the recoverability of the investment in the subsidiary. The amendments further clarify cases or
reorganisations where a new parent is inserted above an existing parent of the group. It states that the cost of the subsidiary is
the previous carrying amount of its share of equity items in the subsidiary rather than its fair value. The adoption of these
amendments did not have any impact on the financial position or the performance of the Group.
Annual Improvements Project
In May 2008 and April 2009 the AASB issued omnibus of amendments to its Standards as part of the Annual Improvements
Project, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions and
application dates for each amendment. The adoption of the following amendments resulted in changes to accounting policies
but did not have any impact on the financial position or performance of the Group.
AASB 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and
liabilities are included in measures that are used by the chief operating decision maker. As the Group's chief operating decision
maker does review segment assets and liabilities, the Group has continued to disclose this information in note 3.
AASB 101 Presentation of Financial Statements: assets and liabilities classified as held for trading in accordance with AASB
139 Financial Instruments: Recognition and Measurement are not automatically classified as current in the statement of
financial position. The Group amended its accounting policy accordingly and analysed whether management's expectation of
the period of realisation of financial assets and liabilities is in accordance with AASB 101. This did not result in any re-
classification of financial instruments between current and non-current in the statement of statement of financial position.
AASB 116 Property, Plant and Equipment: replace the term "net selling price" with "fair value less costs to sell". The Group
amended its accounting policy accordingly, which did not result in any change in the financial position.
AASB 120 Accounting for Government Grants and Disclosures of Government Assistance: loans granted with no or low interest
will not be exempt from the requirement to impute interest. Interest is to be imputed on loans granted with below-market interest
rates. This amendment did not impact the Group as the government assistance received is not loans but direct grants.
AASB 123 Borrowing Costs: the definition of borrowing costs is revised to consolidate the two types of items that are considered
components of “borrowing costs” into one - the interest expense calculated using the effective interest rate method calculated in
accordance with AASB 139. The Group has amended its accounting policy accordingly which did not result in any change in its
statement of financial position.
92
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AASB 128 Investment in Associates: an investment in an associate is a single asset for the purpose of conducting the
impairment test, including any reversal of impairment. Any impairment is not separately allocated to the goodwill included in the
investment balance. Any impairment is reversed if the recoverable amount of the associate increases. The Group has amended
its impairment accounting policy accordingly. The amendment had no impact on the Group’s financial position or performance.
The Group has amended its impairment accounting policy accordingly.
AASB 136 Impairment of Assets: when discounted cash flows are used to estimate “fair value less cost to sell” additional
disclosure is required about the discount rate, consistent with disclosures required when the discounted cash flows are used to
estimate “value in use”. The Group has amended its disclosures accordingly in note 27. The amendment also clarified that the
largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in AASB 8
before aggregation for reporting purposes. The amendment has no impact on the Group as the annual impairment test is
performed before aggregation.
AASB 138 Intangible Assets: expenditure on advertising and promotional activities is recognised as an expense when the
Group either has the right to access the goods or has received the service. This amendment has no impact on the Group
because it does not enter into such promotional activities.
2.6
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.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable
that future taxable profits will be available to utilise those temporary differences.
(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 27.
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.
Impairment of non-financial assets other than goodwill
The group assess impairment of all assets at each reporting date by evaluating conditions specific to the group and to
the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is
determined. This involves value in use calculations, which incorporate a number of key estimates and assumptions.
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.
Superannuation defined benefit plan
Various actuarial assumptions are required when determining the group’s superannuation obligations. The bank’s policy
on superannuation defined benefit plan is disclosed in Note 2.24 and Note 45.
Loan provisioning
The group determines whether loans are impaired on an ongoing basis. This requires an estimation of the value of future
cash flows. The bank’s policy for calculation of loan loss allowance is disclosed in Note 2.13.
93
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Assets held for sale – head office development asset
The fair value carrying amount of the head office development was determined based on estimates of cost to completion
and other variables associated with a development of this nature.
Income tax
As a result of recent changes to the taxation legislation through the passing of Tax Laws Amendment (2010 Measures
No,1) Bill 2010 which received Royal Assent on 3 June 2010, Bendigo & Adelaide Bank Limited is in the process of
preparing private ruling requests to be lodged with the Australian Taxation Office with respect to the potential deductions
for certain assets that were acquired as part of the acquisition of Adelaide Bank Limited. The potential tax deduction
could
$49.6m).
Due to the recent enactment of the legislation and the very limited history in its application, there is uncertainty as to the
availability of this deduction and accordingly the financial effect of any potential tax deductions arising from tax
legislative changes have not been brought to account in the financial report.
$165.2 million
approximately
effected:
range
from
(tax
nil
nil
to
to
2.7
Securitisations
Securitised positions are held through a number of Special Purpose Entities (“SPEs”). As the Bank is exposed to the majority of
the residual risk associated with these SPEs, their underlying assets, liabilities, revenues and expenses are reported in the
Bank’s consolidated balance sheet and income statement. At each reporting period, the Bank reassess the requirement to
consolidate these SPEs in accordance with AASB 127 and significant judgement is exercised.
2.8
Trustee and funds management activities
Controlled entities of the Bank act as the Trustee and/or Manager for a number of funds. The assets and liabilities of these
funds are not included in the consolidated financial statements. The parent entity does not have direct or indirect control of the
funds as defined by Accounting Standard AASB 127 "Consolidated and Separate Financial Statements". Commissions and
fees generated by the funds management activities are brought to account when earned.
Foreign currency transactions and balances
2.9
Both the functional and presentation currency of Bendigo and Adelaide Bank Limited and each of its subsidiaries is Australian
dollars (AUD). Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling on
the date of the transaction.
All amounts are expressed in Australian currency and all references to "$" 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.
2.10 Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the cash flow statement, 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.
2.11 Classification of financial instruments
Financial instruments in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified into one of
five categories, which determine the accounting treatment of the financial instrument.
The classification depends on the purpose for which the instruments were acquired. Designation is re-evaluated at each
financial year end, but there are restrictions on reclassifying to other categories.
The classifications are:
Loans & receivables -
Held to maturity -
Held for trading -
Available for sale -
Non-trading liabilities -
measured at amortised cost
measured at amortised cost
measured at fair value with changes in fair value charged to the income statement
measured at fair value with changes in fair value taken to equity
measured at amortised cost
All derivative contracts are recorded at fair value in the balance sheet.
2.12 Financial assets and financial liabilities
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.
All regular way purchases and sales of financial assets are recognised on the settlement date ie. the date the Group settles the
purchase of the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require
delivery of the assets within the period established generally by regulation or convention in the market place.
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.
94
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Treasury financial assets – held to maturity
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 – deposits and subordinated debt
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 the income statement 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 are accounted for at amortised cost. These transactions are
restated to AUD equivalents each month with adjustments taken directly to income.
Financial assets – available for sale share investments
Investment securities available for sale consist of securities that are not actively traded by the economic entity.
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.
2.13 Loans and receivables
Loans and receivables are carried at amortised cost, using the effective interest method. The effective interest rate calculation
includes the contractual terms of loans together with all fees, transaction costs and other premiums or discounts.
Loans with renegotiated terms are accounted for in the same manner, taking account of any change to the terms of the loan.
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.
Deferred costs include costs associated with the acquisition, origination or securitisation of loan portfolios. These costs are
amortised through the income statement over the life of the loans in these portfolios.
Specific provision
A specific provision is recognised for all impaired loans 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 or 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
Individual loans not subject to specific provisioning 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 provision are recognised in the
income statement.
General reserve for credit losses
Australian Prudential Regulation Authority (“APRA”) requires that banks maintain a general reserve for credit losses to cover
risks inherent in loan portfolios. In certain circumstances the collective provision can be included in this assessment.
Movements in the general reserve for credit losses are recognised as an appropriation of retained earnings.
95
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.14
Investments in joint ventures accounted for using the equity method
The group's investment in joint ventures 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 is not a subsidiary. The financial statements of
joint ventures are used by the group to apply the equity method. The accounting policies of the joint ventures and the group are
consistent.
The investments in the joint ventures 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 joint ventures, less any impairment in value. The income statement reflects the
share of the results of operations of the joint ventures.
Where there have been changes recognised directly in the joint ventures’ equity, the group recognises its share of any changes
and discloses this, when applicable, in the consolidated statement of changes in equity. The cumulative post acquisition
changes in reserves are adjusted against the carrying amount of the investment.
Dividends receivable from joint ventures are recognised in the parent entity’s income statement, while in the consolidated
financial statements they reduce the carrying amount of the investment.
When the group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any unsecured
long-term receivables and loans, the group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the joint venture.
2.15
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
Plant & equipment
2010
Years
40
3 - 10
2 - 10
2009
Years
40
3 - 10
2 - 10
Impairment
Management has 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 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.
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 statement of comprehensive income and 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.
The fair value of property, plant and equipment is assessed at each reporting date. Also, external 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.
96
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
2.16
Investment properties
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of
replacing part of an investment property at the time the cost is incurred if the recognition criteria are met, and excludes the costs
of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance
sheet date and discounts for any restrictions on the ability to realise the investment property due to contractual obligations.
Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in
which they arise.
Investment properties are derecognised either when they have been disposed of or when the investment property is
permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the
retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by ending of owner-
occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are
made from investment property when, and only when, there is a change in use, evidenced by commencement of owner-
occupation or commencement of development with a view to sale.
For a transfer from investment property to owner-occupied property or inventories, the deemed cost of property for subsequent
accounting is its fair value at the date of change in use. If the property occupied by the Group as an owner-occupied property
becomes an investment property, the Group accounts for such property in accordance with the policy stated under ‘Property,
plant and equipment’ up to the date of change in use. For a transfer from inventories to investment property, any difference
between the fair value of the property at that date and its previous carrying value is recognised in profit or loss. When the
Group completes the construction or development of a self-constructed investment property, any difference between the fair
value of the property at that date and its previous carrying amount is recognised in profit or loss.
Goodwill
2.17
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.
Management has identified cash generating units and applicable impairment indicators in accordance with AASB 136
"Impairment of Assets".
Goodwill with respect to business combinations is allocated to identify cash generating units expected to benefit from the
synergies of the combination.
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.
2.18
Intangible assets
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.
97
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
A summary of the policies applied to the group's intangible assets (excluding goodwill) is as follows:
Trustee Licence
Computer software/
Development costs
Intangible assets
acquired in business
combination
Useful lives
Method used
Indefinite
Not amortised or revalued
Internally generated/acquired
Acquired
Finite
Usually not in excess of 5 years
– straight line (major software
systems – 7 years)
Internally generated or 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.
Trade and other payables
2.19
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.
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.
2.20 Reserve fund
Up until May 2010, the Trustee Companies Act 1984 required 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. Sandhurst Trustees Limited
complied with the Act by setting aside the value of at call investments, freehold property and other financial assets to a reserve
fund.
Deposits
2.21
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.
2.22 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.
98
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
2.23 Employee benefits
Wages and Salaries, Annual leave and Sick leave
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.
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.
Long Service Leave
Long service leave has been assessed at full pro rata entitlement in respect of all employees with more than one 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 and long service leave liabilities are recognised in provisions.
Superannuation
Accumulation fund
Contributions are made to an employee accumulation superannuation fund and are charged to expenses when incurred.
Defined benefit plan
Contributions made to the defined benefit plan by entities within the consolidated entity are added to the superannuation asset
in the balance sheet. Any actuarial gains or losses are applied to the retained earnings with other fund movements being
recognised in the statement of comprehensive income.
2.24 Share based payments
The Group provides benefits to its employees (including key management personnel) in the form of share-based payments,
whereby employees render services in exchange for shares, rights or options over shares.
There are a number of plans in place to provide these benefits:
1.
the Employee Share Plan (“ESP”), which provides benefits only to the general staff. Executives (including the
Managing Director) may not participate in it.
Under the terms of the ESP, shares are issued at the prevailing market value at the time of the issues. The shares must be
paid for by the staff member. The ESP provides staff members with an interest-free loan for the sole purpose of acquiring
Bendigo and Adelaide Bank 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.
The unpaid portion of the issued shares, reflected in the outstanding balance of interest-free loans advanced to employees, is
accounted for as ESP shares. The outstanding loan value of the ESP shares is deducted from equity in the balance sheet.
The cost of issues under the plan is measured by reference to the fair value of the equity instruments at the date at which they
are granted. Shares granted under the ESP, vest immediately and are expensed to the Income Statement with the employee
benefits reserve increasing by a corresponding amount.
The last issue under this plan was made in January 2008.
2.
the Employee Share Grant Scheme
This Plan was introduced in 2008 and is open to employees (excluding directors and senior executives) of Bendigo and
Adelaide Bank and its subsidiaries. Employees may be granted shares annually up to a maximum number determined by the
Directors having regard to the Bank’s performance. When an eligible employee accepts an invitation to participate in the
Scheme, the trustee of the Scheme will acquire shares on behalf of the employee and hold the shares on trust for the employee.
Three years after the trustee acquires the shares, they will be transferred to the employee.
The cost of issues under the Scheme is measured by reference to the fair value of the equity instruments at the date at which
they are granted. Shares granted under the Scheme vest immediately and are expensed to the Income Statement with the
employee benefits reserve increasing by a corresponding amount.
99
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3. Employee Salary Sacrifice, Deferred Share and Performance Share Plan
This Plan was introduced in September 2008 as the Employee Salary Sacrifice and Deferred Share Plan, as a vehicle for
employees to purchase shares in the Bank via salary sacrifice. It was amended in August 2009 to allow for the grant of
performance shares. Performance shares may be granted to any person employed by or on behalf of a group company who the
Board decides are eligible to receive grants. The employee will not have beneficial title to the underlying shares until the
relevant performance conditions have been met. The shares will be held by a trustee until that time.
The cost of equity-settled transactions under this Plan is measured by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined with the assistance of an external valuer using a binomial model.
The cost of equity-settled transactions is recognised, together with a corresponding increase to employee benefits reserve, over
the period in which the performance conditions are fulfilled (the vesting period), ending on the date on which the relevant
executive becomes fully entitled to the award.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings
per share.
4.
the Executive Incentive Plan (“EIP”), which provides for grants of performance options and rights to key executives,
including the Managing Director.
Under the EIP, 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 cost of these equity-settled transactions under the EIP is measured by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined with the assistance of an external valuer using a binomial
model.
The cost of equity-settled transactions is recognised, together with a corresponding increase to employee benefits reserve, over
the period in which the performance conditions are fulfilled (the vesting period), ending on the date on which the relevant
executive becomes fully entitled to the award.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings
per share.
2.25 Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
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.
2.26 Financial guarantees
Bank guarantees have been issued by the bank on behalf of customers whereby the bank is required to make specified
payments to reimburse the holders for a loss they may incur because the customer fails to make a payment.
The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach.
In order to estimate the fair value under this approach the following assumptions have been made:
Probability of default (PD): This represents the likelihood of the guaranteed party defaulting in a 1 year period and is
assessed on historical default rates.
Loss given default (LGD): This represents the proportion of the exposure that is not expected to be recovered in the
event of a default by the guaranteed party and is based on historical experience.
Exposure to default (EAD): This represents the maximum loss that Bendigo and Adelaide Bank is exposed to if the
guaranteed party were to default. The model assumes that the guaranteed loan/facility/contract is at maximum
possible exposure at the time of default.
The value of the financial guarantee over each future year of the guarantees’ life is then equal to PD x LGD x EAD, which is
discounted over the contractual term of the guarantee, to reporting date to determine the fair value. The discount rate adopted
is the five year Commonwealth government bond yield at 30 June. The contractual term of the guarantee matches the
underlying obligations to which it relates.
As guarantees issued by the bank are fully secured and the bank has therefore never incurred a loss in relation to financial
guarantees, the LGD (proportion of the exposure that is not expected to be recovered) is zero. This results in the fair value of
financial guarantees to be zero.
Therefore, the fair value of financial guarantees has not been included in the balance sheet. The nominal value of financial
guarantees is disclosed in the “Contingent liabilities” note of this financial report.
100
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.27 Revenue
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 recognised as components of the calculation of the effective interest rate method in
relation to originated loans. They therefore affect 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 for loan origination fees is appropriate.
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.
Loan portfolio premium
The loan portfolio premium is included as part of net loans and receivables in the balance sheet. The amortisation of the loan
portfolio premium is charged to the Income statement on an effective yield basis and is included in net interest income.
Day 1 Profit
Where the transaction price in a non-active market is different to the fair value from other observable market transactions in the
same instrument or based on a valuation technique whose variables include only data from observable markets, the Bank
immediately recognises the difference between the transaction price and fair value (a 'Day 1' profit) in the income statement in
'Other income'.
Dividends
Dividends are recognised when control of a right to receive consideration for the investment in assets is established.
Borrowing costs
2.28
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.
2.29 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.
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.
2.30 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.
101
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.31 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 cash flows attributable to the
instrument are passed through to an independent third party.
2.32 Derivative financial instruments
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 discounting the expected future cash flows associated
with the swaps. Discount rates are determined by reference to swap curves available through independent market data
providers.
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 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.
The group tests each of the designated cash flow hedges for effectiveness on a monthly basis both retrospectively and
prospectively using regression analysis. A minimum of 30 data points is used for regression analysis and if the testing falls
within the 80:125 range the hedge is considered highly effective and continues to be designated as a cash flow hedge.
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.
Issued ordinary capital
2.33
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.
2.34 Hybrid capital instruments
Perpetual non-cumulative redeemable convertible preference shares
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. Dividends on the shares are recognised as a distribution of equity.
Reset preference shares
These instruments are classified as debt within the Balance sheet and distributions to the holders are treated as interest
expense in the Income statement.
Step up preference shares
These instruments are classified as equity and the dividends are recognised as a distribution of equity.
2.35
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)
and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.
102
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Diluted EPS is calculated as net profit attributable to members, adjusted for:
costs of servicing equity (other than dividends), preference share dividends; 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) and preference share dividends
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
103
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
3.
SEGMENT RESULTS
Segment information
The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive
management team (chief operating decision makers) in assessing performance and determining the allocation of resources.
The operating segments are identified 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. Discrete financial information about each of these operating businesses is reported to the executive management
team on a monthly basis.
The segments presented reflect changes to the structure which were implemented during the year, including recognition of
Rural Bank as a single operating segment. The comparatives have been restated to reflect the changed structure.
Segment assets and liabilities reflect the value of loans and deposits directly managed by the operating segment. All other
assets of the group are managed centrally.
Types of products and services
Retail banking
Net interest income predominantly derived from the provision of first mortgage finance less interest paid to depositors; and fee
income from the provision of banking services delivered through the company-owned branch network and the Group's share of
net interest and fee income from the Community Bank branch network.
Third party banking
Net interest income and fees derived from the manufacture and processing of residential home loans, distributed through
mortgage brokers, mortgage managers and predominantly mortgage originators and Alliance partners.
Wealth
Fees, commissions and interest from the provision of financial planning services, margin lending activities and wealth deposit
distribution. Commission received as Responsible Entity for managed investment schemes and for corporate trusteeships and
other trustee and custodial services.
Rural Bank
Profit share from equity accounted investment in the joint controlled entity to September 2009. From 1 October 2009, the
consolidated results of the Rural Bank joint venture. The principal activities of Rural Bank are the provision of banking services
to agribusiness, rural and regional Australian communities.
Central functions
Functions not relating directly to a reportable operating segment.
Accounting policies and inter-segment transactions
The accounting policies used by the group in the reporting segments internally are the same as those contained in note 2 of the
accounts.
Revenue and expenses associated with each business segment are included in determining their result. Transactions between
business segments are based on agreed recharges between operating segments. Segment net interest income is recognised
based on an internally set transfer pricing policy based on pre-determined market rates of return on the assets and liabilities of
the segment.
Major customers
Revenues from no one single customer amount to greater than 10% of the Group's revenues.
104
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
For the year ended 30 June 2010
Full year ended
####
Net interest income
Other income
Share of net profit of equity accounted
investments
Total segment income
Operating expenses
Credit expenses
Segment result
For the year ended 30 June 2009
Retail
banking
$m
Operating segments
Third party
banking
$m
Wealth
$m
Rural
Bank
$m
Total operating
segments
$m
Central
functions
$m
414.9
131.6
-
546.5
546.5
244.2
18.8
283.5
215.2
125.5
99.0
94.2
32.7
5.3
854.6
263.8
-
11.6
11.6
-
309.4
309.4
120.9
15.7
158.2
158.2
42.7
115.9
115.9
37.7
3.7
6.9
172.8
111.8
71.3
1,130.0
1,130.0
445.5
45.1
639.4
-
17.9
1.1
19.0
19.0
251.4
2.0
(234.4)
Full year ended
####
Net interest income
Other income
Share of net profit of equity accounted
investments
Total segment income
Operating expenses
Credit expenses
Segment result
Retail
banking
$m
Operating segments
Third party
banking
$m
352.4
120.8
-
473.2
473.2
214.5
33.7
225.0
204.4
93.1
-
297.5
297.5
118.3
33.2
146.0
Wealth
$m
78.2
32.7
-
-
-
32.8
110.9
110.9
38.5
32.8
32.8
-
6.9
-
65.5
32.8
Rural
Bank
$m
Total operating
segments
$m
Central
functions
$m
635.0
246.6
32.8
914.4
914.4
371.3
73.8
469.3
-
28.8
(1.9)
26.9
26.9
242.7
(0.4)
(215.4)
Total
$m
854.6
281.7
12.7
1,149.0
1,149.0
696.9
47.1
405.0
Total
$m
635.0
275.4
30.9
941.3
941.3
614.0
73.4
253.9
Reportable segment assets
As at 30 June 2010
As at 30 June 2009
Reportable segment liabilities
As at 30 June 2010
As at 30 June 2009
Retail
banking
$m
21,383.6
19,154.0
Operating segments
Third party
banking
$m
13,510.4
16,287.0
Wealth
$m
3,730.9
3,364.0
Rural
Bank
$m
4,164.0
-
Total operating
segments
$m
42,788.9
38,805.0
Central
functions
$m
9,352.2
8,309.2
Total
$m
52,141.1
47,114.2
25,592.0
23,941.0
482.9
767.0
3,849.0
4,172.0
3,818.2
-
33,742.1
28,880.0
6,584.7
7,264.5
40,326.8
36,144.5
105
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SEGMENT RESULTS (continued)
Reconciliation between segment and statutory results
The table below reconciles the segment result back to the relevant statutory result presented in the financial report.
Reconciliation of total segment income to group income
Total segment income
Ineffectiveness in cash flow hedges
Profit on sale of other non-current assets
Total group income
Reconciliation of segment result to group profit before tax
Total segment result
Ineffectiveness in cash flow hedges
Profit on sale of other non-current assets
Movement in collective provision
Non recurring expense items
Group profit before tax
Reconciliation of segment expenses to group total expenses
Segment operating expenses
Non recurring expense items
Total group expenses
Reconciliation of segment credit expenses to bad and doubtful debts on loans and receivables
Segment credit expenses
Movement in collective provision
Bad and doubtful debts on loans and receivables
Reportable segment assets
Total assets for operating segments
Total assets
Reportable segment liabilities
Total liabilities for operating segments
Securitisation funding
Total liabilities
Consolidated
Jun-10
Full year
$m
Jun-09
Full year
$m
1,149.0
(33.9)
19.9
1,135.0
405.0
(33.9)
19.9
2.4
(42.7)
350.7
696.9
42.7
739.6
47.1
(2.4)
44.7
Group
As at
Jun-10
$m
941.3
(93.6)
26.0
873.7
253.9
(93.6)
26.0
(6.9)
(60.1)
119.3
614.0
60.1
674.1
73.4
6.9
80.3
As at
Jun-09
$m
52,141.1
52,141.1
47,114.2
47,114.2
40,326.8
7,933.9
48,260.7
36,144.5
7,851.0
43,995.5
Geographical Information
The allocation of revenue and assets is based on the geographical location of the customer. The group operates in all Australian
states and territories, providing banking and other financial services.
106
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
PROFIT
4.
Profit before income tax expense has been determined as follows:
(a) Income:
Interest income
Controlled entities
Cash and cash equivalents
Financial assets (treasury) held for trading, available for sale
and held to maturity
Loans and other receivables
Other persons/entities
Cash and cash equivalents
Financial assets (treasury) held for trading
Financial assets (treasury) available for sale
Financial assets (treasury) held to maturity
Loans and other receivables
Total interest income
Interest expense
Controlled entities
Wholesale - domestic
Other persons/entities
Deposits
Retail
Wholesale - domestic
Wholesale - offshore
Other borrowings
Notes payable
Reset preference shares
Subordinated debt
Total interest expense
Total net interest income
Other revenue
Dividends
Controlled entities
Joint ventures
Other
Distribution from unit trusts
Fees
Assets
Liabilities & electronic delivery
Securitisation income
Trustee, management & other services
Trading profit/(loss) - held for trading securities
Other
Commissions
Wealth solutions
Insurance
Other
Other
Income from property
Foreign exchange income
Factoring products income
Other
Other income
Ineffectiveness in cash flow hedges
Profit/(loss) on disposal of property, plant & equipment
Realised accounting gain on the sale of equity investments
Gain/(loss) on transfer of Adelaide business
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
-
-
-
28.3
155.7
8.8
26.6
2,492.8
2,712.2
-
-
-
47.9
142.0
31.7
81.6
2,851.5
3,154.7
0.2
387.0
607.3
37.2
155.8
3.1
8.0
834.0
2,032.6
19.3
196.4
13.2
46.5
74.6
31.6
67.8
1,393.0
1,842.4
-
-
4.7
11.2
1,213.2
199.3
25.0
383.7
5.4
31.0
1,857.6
854.6
-
-
6.2
0.1
6.3
61.8
93.4
13.4
9.7
4.1
19.2
201.6
25.4
13.0
2.5
40.9
1.4
12.6
11.3
8.2
33.5
(33.9)
(0.6)
19.9
-
(14.6)
1,394.1
354.6
68.5
654.1
5.6
42.8
2,519.7
635.0
-
-
2.1
0.1
2.2
58.7
94.7
20.1
10.8
(0.4)
19.1
203.0
28.9
15.4
3.4
47.7
1.4
8.4
10.6
2.3
22.7
(93.6)
(0.2)
26.0
-
(67.8)
1,087.3
195.2
25.1
17.8
5.4
25.6
1,361.1
671.5
103.6
8.1
0.1
-
111.8
54.1
92.8
13.1
0.3
4.1
18.1
182.5
0.8
12.0
3.2
16.0
30.5
12.6
11.3
18.5
72.9
(37.4)
(0.6)
0.3
-
(37.7)
1,126.7
194.9
52.5
14.0
6.1
29.6
1,435.0
407.4
111.3
34.0
2.1
-
147.4
52.3
88.4
9.7
0.4
(1.4)
16.8
166.2
0.7
9.8
3.3
13.8
21.9
8.4
3.9
(2.6)
31.6
(36.4)
0.1
25.9
(12.1)
(22.5)
1.1
1.4
1.3
1.2
1
1.5
1.6
1.7
2.1
2.2
1.8
10.4
10.3
10
10.2
2
2.5
2.8
2.7
2.9
5
3.2
3.4
3
6
4.3
8
2.3
8.2
8.3
107
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
PROFIT (continued)
(b) Expenses
Bad and doubtful debts
Specific provision
Collective provision
Bad debts written off
Bad debts recovered
Staff and related costs
Salaries, wages and incentives
Superannuation contributions
Provision for annual leave
Provision for long service leave
Other provisions
Payroll tax
Fringe benefits tax
Executive equity transactions expense
Other
Occupancy costs
Operating lease rentals
Depreciation of buildings
Amortisation of leasehold improvements
Property rates and outgoings
Land tax
Repairs and maintenance
Utilities
Cleaning
Other
Amortisation of intangibles
Amortisation of intangible assets
Amortisation of intangible software
Property, plant & equipment costs
Depreciation of property, plant & equipment
Fees and commissions
Impairment loss on equity investments
Employee shares shortfall/(gain)
Property revaluation
Integration costs
Other
Administration expenses
Communications, postage and stationery
Computer systems and software costs
Advertising & promotion
Other product & services delivery costs
Impairment loss - shares in controlled entities
Impairment loss - assets available for sale, equity investments
Consultancy expense
Legal expense
Travel expense
General administration expenses
Other
Listing and rating agency costs
Total other
28
28.3
28.2
28.5
20
20.1
20.2
20.3
20.7
20.4
20.5
20.8
20.6
22
22.1
22.2
22.4
22.5
22.6
22.7
22.8
22.9
33.1
33.2
27
11
13
14
14.3
14.5
31
15
50
12
108
Consolidated
Parent
2010
$m
46.3
(0.1)
4.7
(6.2)
44.7
276.3
23.4
3.6
3.0
0.1
14.7
2.8
4.3
6.5
334.7
33.9
-
5.0
2.9
0.2
5.6
3.7
3.1
3.3
57.7
29.9
8.3
38.2
13.4
37.9
-
(2.6)
10.2
35.1
32.1
58.1
16.8
38.8
-
0.1
10.7
4.8
7.6
43.8
0.3
213.1
1.9
215.0
2009
$m
57.5
7.5
21.2
(5.9)
80.3
245.0
21.5
0.5
3.7
2.0
11.2
3.1
3.3
6.5
296.8
32.7
0.8
3.7
3.0
0.1
4.7
3.5
3.4
2.9
54.8
26.2
6.5
32.7
13.9
22.2
10.0
5.3
-
41.4
33.2
53.4
13.2
32.7
-
-
9.9
6.6
8.1
34.8
3.7
195.6
1.4
197.0
2010
$m
36.2
(0.9)
4.7
(6.0)
34.0
250.7
21.2
2.4
2.0
0.1
13.3
2.3
4.3
5.7
302.0
61.7
-
4.9
2.9
0.2
4.2
3.6
3.1
3.1
83.7
23.5
7.9
31.4
12.4
19.8
-
(2.6)
-
27.8
30.2
53.6
14.9
36.8
2.5
0.3
10.0
4.5
6.7
37.4
2.6
199.5
1.8
201.3
2009
$m
42.0
7.6
14.1
(4.0)
59.7
197.9
17.7
0.4
4.1
1.8
8.6
2.2
3.3
5.1
241.1
50.0
0.2
3.7
2.5
0.1
3.8
3.1
3.1
2.3
68.8
14.9
5.9
20.8
12.0
18.3
9.2
5.3
-
37.0
29.4
45.7
11.8
31.2
4.9
-
7.8
5.1
6.0
31.5
(8.0)
165.4
0.9
166.3
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
UNDERLYING PROFIT
5.
Underlying profit shows the growth in the core business of the economic entity
Profit after income tax expense
Add,
Bad and doubtful debts expense (net of bad debts recovered)
Amortisation of intangibles (excluding software amortisation)
Significant items before tax
Income tax expense - total (Note 6)
Underlying profit before income tax
6.
INCOME TAX EXPENSE
Major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Imputation credits
Adjustments in respect of current income tax of previous years
Deferred income tax
Adjustments in respect of deferred income tax of previous years
Relating to origination and reversal of temporary differences
Income tax expense/(benefit) reported in the income statement
Statement of changes in equity
Deferred income tax related to items charged or credited directly in equity
Net gain/(loss) on cash flow hedge
Net gain/(loss) on revaluation of investments
Net gain on revaluation of land and buildings
Other
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
Consolidated
2010
$m
242.6
44.7
29.9
56.7
90.8
464.7
2009
$m
83.8
80.3
26.2
127.7
35.5
353.5
Consolidated
2009
$m
2010
$m
Parent
2010
$m
2009
$m
112.9
(12.2)
(4.4)
(0.3)
(5.2)
90.8
52.9
9.6
1.7
0.3
64.5
(8.4)
(15.0)
0.7
-
58.2
35.5
33.6
(5.0)
(1.4)
0.3
27.5
47.7
(9.6)
17.9
(10.6)
17.7
63.1
78.9
(0.3)
-
0.3
78.9
(99.4)
(14.9)
1.4
-
104.7
(8.2)
(38.0)
(5.6)
(1.4)
0.3
(44.7)
350.7
119.3
307.2
105.4
109
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INCOME TAX EXPENSE (continued)
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
Expenditure not allowable for income tax purposes
Expenditure subject to Research & Development Tax Concessions
Other non assessable income
Tax effect of franking credits
Other
Income tax expense/(benefit) reported in the consolidated income statement
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Land, buildings and improvements
Revaluations of available-for-sale financial assets to fair value
Deferred gains of interest rate swaps
Intangible assets on acquisition
Deferred expenses
Lease receivable
Prepayments
Other
Deferred tax liabilities
Deferred tax assets
Accrued expenses
Deferred expenses
Merger costs
Intangible liabilities on acquisition
Post-employment benefits
Deferred losses of interest rate swaps
Expenses tax depreciable
Losses available for offset against future taxable income
Land, buildings and improvements
Plant and equipment
Movement in provisions
Prepaid income
Revaluations of available-for-sale financial assets to fair value
Movement in loan provisions
Other
Deferred tax assets
Consolidated
Parent
2010
$m
105.2
(4.7)
(12.2)
5.4
(5.0)
(2.0)
3.7
0.4
90.8
2009
$m
35.8
0.7
(15.0)
1.4
(3.1)
(1.3)
4.5
12.5
35.5
2010
$m
92.2
7.3
(9.6)
4.7
(5.0)
(29.0)
2.9
(0.4)
63.1
Balance sheet
Consolidated
2010
$m
2009
$m
Parent
2010
$m
(1.6)
(19.8)
-
(52.2)
(23.0)
(13.1)
(1.9)
(9.1)
(120.7)
0.7
2.8
0.1
2.8
15.3
73.4
1.5
0.5
7.5
1.6
9.0
33.0
3.0
41.6
8.2
201.0
(0.4)
3.1
(11.9)
(62.0)
(13.0)
(0.5)
0.3
(7.3)
(91.7)
0.6
9.6
0.2
14.8
13.3
108.6
1.4
10.2
6.1
(4.4)
5.5
12.0
0.7
34.6
(1.2)
212.0
(0.2)
0.5
(39.6)
(42.5)
(23.0)
(13.0)
(2.1)
(10.0)
(129.9)
0.2
2.8
0.1
6.2
14.6
63.2
1.4
0.4
6.9
0.0
8.4
1.3
3.0
32.1
5.9
146.5
2009
$m
31.6
1.4
(14.9)
4.9
(3.1)
(35.9)
4.5
3.3
(8.2)
2009
$m
(0.2)
3.1
(14.6)
(62.0)
(13.0)
(0.5)
(0.7)
(7.6)
(95.5)
0.6
9.6
0.2
14.8
13.3
116.7
1.3
0.0
6.1
(4.5)
5.5
1.2
0.7
34.5
(13.2)
186.8
110
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INCOME TAX EXPENSE (continued)
Income Tax Payable
Tax payable/(receivable) attributable to members of the tax consolidated group
Tax payable/(receivable) attributable to subsidiaries who are not members of
the tax consolidated group
Balance sheet
Consolidated
2009
$m
2010
$m
2010
$m
Parent
2009
$m
59.9
(84.4)
59.9
(84.4)
13.2
-
-
-
73.1
(84.4)
59.9
(84.4)
At 30 June 2010, there is no unrecognised deferred income tax liability (2009: Nil) for taxes that would be payable on the
unremitted earnings of certain of the group's subsidiaries or joint ventures, as the group has no liability for additional taxation
should such amounts be remitted.
Tax consolidation
Effective 1 July 2002, for the purposes of income taxation, Bendigo and Adelaide Bank Limited and its 100% owned subsidiaries
formed a tax consolidated group. Members of the group entered into a tax sharing agreement in order to allocate income tax
liabilities to the wholly-owned subsidiaries 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 and Adelaide Bank Limited.
Bendigo and Adelaide 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 group allocation method based on a notional
standalone calculation, while deferred taxes are calculated by members of the tax consolidated group in accordance with the
principle of Accounting Standard 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 and Adelaide Bank Limited. The tax funding
agreement is in accordance with AASB Interpretation 1052 Tax Consolidation Accounting (UIG 1052). Where the tax funding
agreement is not in accordance with UIG 1052, 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.
Taxation of Financial Arrangements
The tax laws amendment (Taxation of Financial Arrangements) Act 2009 (TOFA legislation) was enacted during the year ended
30 June 2009. The TOFA legislation provides a framework for the taxation of financial arrangements, potentially providing a
closer alignment between tax and accounting requirements. The regime also includes comprehensive tax hedging rules that
allow the tax recognition of gains and losses on many hedged instruments to be matched to the accounting recognition of gains
and losses of the underlying hedged items.
TOFA is mandatory for the Bendigo and Adelaide Bank Limited for tax years beginning on or after 1 July 2010. An early
adoption choice is available in certain circumstances for tax years beginning on or after 1 July 2009. In addition, there are
specific transitional provisions in relation to the taxation of existing financial arrangements at the transition date (i.e. there is a
choice to bring pre commencement financial arrangements into the new regime subject to a balancing adjustment being
calculated on transition to be returned over four tax years).
The Australian Taxation Office is still clarifying the application of TOFA through the release of Fact Sheets and further legislation
is expected that will help determine the overall impact TOFA will have on Bendigo and Adelaide Bank Limited. As a result,
Bendigo and Adelaide Bank Limited continues to assess the potential affect of TOFA legislation and whether Bendigo and
Adelaide Bank Limited will bring pre commencement financial arrangements into the TOFA regime.
111
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
7.
AVERAGE BALANCE SHEET AND RELATED INTEREST
For the twelve month period ended 30 June 2010
A v e ra ge
Int e re s t
A v e ra ge
B a la nc e
12 m t hs R a t e
Footnote
$ m
$ m
%
Average balances and rates
Interest earning assets
Cash and investments
Loans and other receivables - company
Loans and other receivables - alliances
Total interest earning assets
Non interest earning assets
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Notes payable
Reset preference shares
Subordinated debt
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity (average balance)
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net free liabilities
Net interest margin
1
2
2
3
4
5,859.5
35,172.0
6,401.5
47,433.0
(118.9)
2,871.3
2,752.4
50,185.4
22,203.6
9,319.9
3,020.0
609.5
9,388.5
89.5
584.5
45,215.5
1,330.5
3,639.4
4,969.9
50,185.4
219.4
2,193.6
373.1
2,786.1
3.74
6.24
5.83
5.87
873.6
413.5
199.3
25.0
383.7
5.4
31.0
1,931.5
3.93
4.44
6.60
4.10
4.09
6.03
5.30
4.27
5.87
(4.27)
1.60
0.20
1.80
2.09
0.29
1.80
47,433.0
(45,215.5)
2,786.1
(1,931.5)
854.6
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 A verage balance is based o n mo nthly clo sing balances fro m 30 June 2009 thro ugh 30 June 2010 inclusive.
2 Interest payments to alliance partners are net values in the Inco me Statement. Interest inco me and expense values have been increased by $ 73.9m to
reflect the gro ss amo unts.
3 Interest spread is the difference between the average interest rate earned o n assets and the average interest rate paid o n funds.
4 Interest margin is the net interest inco me as a percentage o f average interest earning assets.
112
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
AVERAGE BALANCE SHEET AND RELATED INTEREST (continued)
For the twelve month period ended 30 June 2009
A v e ra ge
Int e re s t
A v e ra ge
B a la nc e
12 m t hs R a t e
Footnote
$ m
$ m
%
Average balances and rates
Interest earning assets
Cash and investments
Loans and other receivables - company
Loans and other receivables - alliances
Total interest earning assets
Non interest earning assets
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Notes payable
Reset preference shares
Subordinated debt
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity (average balance)
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net free liabilities
Net interest margin
1
2
2
3
4
303.2
2,514.0
396.2
3,213.4
4.95
7.57
6.59
7.09
990.5
462.3
354.6
68.5
654.1
5.6
42.8
2,578.4
6,125.4
33,201.9
6,008.7
45,336.0
(76.2)
3,185.7
3,109.5
48,445.5
18,802.7
8,177.8
4,803.4
981.1
10,235.3
89.5
652.5
43,742.3
1,654.0
3,049.2
4,703.2
48,445.5
45,336.0
(43,742.3)
3,213.4
(2,578.4)
635.0
5.27
5.65
7.38
6.98
6.39
6.26
6.56
5.89
7.09
(5.89)
1.20
0.20
1.40
1.66
0.26
1.40
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 A verage balance is based o n mo nthly clo sing balances fro m 30 June 2008 thro ugh 30 June 2009 inclusive.
2 Interest payments to alliance partners are net values in the Inco me Statement. Interest inco me and expense values have been increased by $ 58.7m to
reflect the gro ss amo unts.
3 Interest spread is the difference between the average interest rate earned o n assets and the average interest rate paid o n funds.
4 Interest margin is the net interest inco me as a percentage o f average interest earning assets.
113
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
8.
CAPITAL MANAGEMENT
a. Capital management
Bendigo and Adelaide Bank Limited key capital management objectives are to:
Optimise the level and use of capital resources to enhance shareholder value through maximising financial performance;
Maintain a sufficient level of capital above the regulatory minimum to provide a buffer against loss arising from
unanticipated events, and allow the Group to continue as a going concern;
Ensure that capital management is closely aligned with the Group’s business and strategic objectives; and
Achieve progressive improvement to short and long term credit ratings.
The Group manages capital adequacy according to the framework provided by the APRA Prudential Standards. Capital
adequacy is measured at two levels:
Level 1 includes Bendigo and Adelaide Bank Limited and certain controlled entities that meet the APRA definition of
extended licensed entities; and
Level 2 consists of the consolidated group, excluding non-controlled subsidiaries and subsidiaries involved in insurance,
funds management, non-financial operations and securitisation special purpose vehicles.
APRA determines minimum prudential capital ratios (eligible capital as a percentage of total risk-weighted assets) that must be
held by all authorised deposit-taking institutions. Accordingly, Bendigo and Adelaide Bank is required to maintain a minimum
prudential capital ratio (eligible capital as a percentage of total risk-weighted assets) at both Level 1 and Level 2 as determined
by APRA. As part of the Bank’s capital management process, the Board considers the Group’s strategy, financial performance
objectives, credit ratings and other factors relating to the efficient management of capital in setting target ratios of capital above
the regulatory required levels. These processes are formalised within the Bank’s internal capital adequacy assessment process
(or ICAAP).
The Bank has adopted the Prudential Capital Adequacy Standardised Approach to credit risk, operational risk and market risk,
which requires the Group to determine capital requirements based on standards set by APRA. The Bank has satisfied the
minimum capital requirements at Levels 1 and 2 throughout the 2009/10 financial year.
APRA has defined two broad categories of capital, and the form and substance of their components must meet APRA’s specific
requirements in order to be eligible for inclusion in the Group’s capital base. Tier 1 capital comprises the highest quality
components of capital, and Tier 2 includes other components of lesser quality, but which still contribute to the overall strength of
the group as a going concern. At least half of the Bank’s eligible capital must be held in the form of Tier 1 capital.
114
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
CAPITAL MANAGEMENT (continued)
b. Capital adequacy
Consolidated
Risk weighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Retained profits & reserves
Minority interests
Innovative tier 1 capital
Less,
Intangible assets, cash flow hedges and capitalised expenses
Net deferred tax assets
50/50 deductions
Other adjustments as per APRA advice
Total tier 1 capital
Tier 2
General reserve for credit losses/collective provision (net of tax effect)
Subordinated debt
Asset revaluation reserves
Less,
50/50 deductions
Other adjustments as per APRA advice
Subsidiary investment residual
Total tier 2 capital
Less,
Investments in non-consolidated subsidiaries or joint ventures and other
bank's capital instruments
Total qualifying capital
As at
June 2010
$m
8.55%
2.60%
11.15%
3,361.7
22.3
145.7
277.9
1,619.5
-
18.2
1.3
2,168.6
128.5
534.4
13.2
676.1
18.1
-
-
658.0
As at
June 2009
$m
7.43%
3.48%
10.91%
3,003.9
(260.4)
126.6
277.9
1,321.4
11.5
19.6
1.8
1,793.7
129.5
722.1
8.7
860.3
19.6
-
-
840.7
-
2,826.6
-
2,634.4
Total risk weighted assets
25,347.3
24,155.0
115
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
CAPITAL MANAGEMENT (continued)
c.
Adjusted common equity (“ACE”) and Adjusted total equity (“ATE”)
Adjusted common equity and adjusted total equity are measures considered by Standard & Poor’s in evaluating the Bank’s
credit rating. The ACE and ATE ratios have been calculated in accordance with the Standard & Poor’s methodology.
Shareholders' equity
Minority interest equity
Retained earnings
Expected dividends
Goodwill and intangible assets
Other deductions
Adjusted Common Equity ratio to risk weighted assets
Consolidated
As at
June 2010
$m
3,459.0
145.7
234.5
(106.1)
(1,641.6)
(1.3)
2,090.2
8.25%
As at
June 2009
$m
3,091.5
126.6
123.8
(45.1)
(1,598.9)
(1.8)
1,696.1
7.02%
Investments in joint ventures equity accounted for
(7.2)
(3.2)
Hybrid capital
Subsidiary investment residual
Adjusted total equity
Adjusted Total Equity ratio to risk weighted assets
277.9
(8.9)
2,352.0
9.28%
278.0
(9.0)
1,961.9
8.12%
9.
EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share
Diluted earnings per ordinary share
Cash basis earnings per ordinary share
Reconciliation of earnings used in the calculation of basic earnings per ordinary share
Profit after tax
(Profit)/loss attributable to minority interests
Dividends paid on preference shares
Dividends paid/accrued on step up preference shares
Reconciliation of earnings used in the calculation of diluted earnings per ordinary share
Earnings used in calculating basic earnings per ordinary share
Add back dividends on dilutive preference shares
Consolidated
2010
2009
Cents per share Cents per share
67.4
62.9
83.3
$m
259.9
(17.3)
(3.4)
(3.9)
235.3
235.3
11.1
246.4
25.4
25.4
62.6
$m
83.8
-
(4.5)
(5.7)
73.6
73.6
-
73.6
116
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
EARNINGS PER ORDINARY SHARE (continued)
Reconciliation of earnings used in the calculation of cash basis earnings per ordinary share
Earnings used in calculating basic earnings per ordinary share
After tax intangibles amortisation (excluding software amortisation)
After tax significant income and expense items ( 1 )
Weighted average number of ordinary shares used in basic and cash
basis earnings per ordinary share
Effect of dilution - executive performance rights
Effect of dilution - preference shares
Weighted average number of ordinary shares used in diluted earnings
per ordinary share
(1) Significant income and expense items after tax comprise:
Income
Ineffectiveness in cash flow hedges
Realised accounting gain on equity investments
Expense
Expenses relating to withdrawn capital raising
Shortfall/(Gain) relating to Employee Share Plan
Impairment loss - equity investments
Integration costs
Fair value adjustment - head office development
Property revaluation decrement
Consolidated
2010
2009
235.3
20.9
34.8
291.0
73.6
18.5
89.4
181.5
No. of shares
No. of shares
349,242,552
1,538,688
41,243,313
289,778,761
430,151
-
392,024,553
290,208,912
$m
$m
24.7
(19.8)
-
(1.8)
-
24.5
-
7.2
34.8
65.5
(18.2)
1.1
3.7
7.0
29.0
1.3
-
89.4
Significant items are items of income or expense that are, by management judgement, of significant value and/or
are unusual or non-recurring by nature. These items are excluded from cash basis earnings.
Information on the classification of securities - Executive performance rights
Executive performance rights are treated as dilutive from the date of issue and remain dilutive so long as the
performance conditions are satisfied. In the event of a performance condition not being satisfied, the number of
dilutive rights would be reduced to the number that would have been issued if the end of the period was the end
of the contingency period.
Potentially dilutive instruments
The following instruments are potentially dilutive in the future, but are assessed as not being dilutive as at the
reporting date:
Preference shares
Step up preference shares
Reset preference shares
Executive share options
Executive performance rights
Dilutive
2009
No
No
No
No
Yes
2010
Yes
Yes
Yes
No
Yes
117
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
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 2010.
10.
DIVIDENDS
Dividends paid or proposed
Ordinary shares
Dividends paid during the year
current year
Interim dividend (28.0 cents per share) (2009 - 28.0 cents per share)
previous year
Final dividend (15.0 cents per share) (2009 - 37.0 cents per share)
Dividends proposed since the reporting date, but not recognised as a liability
Final dividend (30.0 cents per share) (2009: 15.0 cents per share)
Franked dividends per ordinary shares (cents per share)
Preference shares
Dividends paid during the year
84.60 cents per share paid on 15 September 2009 (2008: 161.60 cents)
86.47 cents per share paid on 15 December 2009 (2008: 152.98 cents)
99.25 cents per share paid on 15 March 2010 (2009: 104.89 cents)
104.63 cents per share paid on 15 June 2010 (2009: 79.12 cents)
Step up preference shares
Dividends paid during the year
86.00 cents per share paid on 10 July 2009 (2008: 168.00 cents)
86.00 cents per share paid on 12 October 2009 (2008: 167.00 cents)
98.00 cents per share paid on 12 January 2010 (2009: 138.00 cents)
102.00 cents per share paid on 12 April 2010 (2009: 98.00 cents)
Reset preference shares (recorded as debt instruments)
Dividends paid during the year:
310.53 cents per share paid on 2 November 2009 (2008: 309.68)
305.47 cents per share paid on 3 May 2010 (2009: 305.47)
Convertible preference shares
Dividends paid during the year
Nil (2009: 0.0448 cents)
Nil (2009: 0.0867 cents)
Nil (2009: 0.1345 cents)
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
Franking credits that will arise from the receipt of dividends recognised as
receivables as at end financial year
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% (2009: 30%).
Dividends proposed will be franked at the rate of 30% (2009: 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
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
97.5
81.8
97.5
81.8
44.0
141.5
106.1
58.0
98.8
180.6
45.1
43.0
0.7
0.8
0.9
1.0
3.4
0.9
0.9
1.0
1.1
3.9
2.8
2.7
5.5
-
-
-
-
1.5
1.4
0.9
0.7
4.5
1.7
1.6
1.4
1.0
5.7
2.8
2.7
5.5
0.1
0.2
0.1
0.4
44.0
141.5
106.1
58.0
0.7
0.8
0.9
1.0
3.4
0.9
0.9
1.0
1.1
3.9
2.8
2.7
5.5
-
-
-
-
151.4
59.9
5.1
(46.5)
169.9
98.8
180.6
45.1
43.0
1.5
1.4
0.9
0.7
4.5
1.7
1.6
1.4
1.0
5.7
2.8
2.7
5.5
0.1
0.2
0.1
0.4
249.4
(84.4)
3.6
(19.3)
149.3
119.6
49.4
169.0
142.3
48.9
191.2
99.5
49.4
148.9
142.3
48.9
191.2
118
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
DIVIDENDS (continued)
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 and Adelaide Bank
shares traded on the Australian Securities 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 and Adelaide Bank shares traded on the Australian Securities 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 2010 final dividend was 2 September 2010.
11.
RETURN ON AVERAGE ORDINARY EQUITY
Consolidated
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
Dividends paid on preference shares
Dividends paid/accrued on step up preference shares
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
2010
%
6.79
7.80
8.40
$m
259.9
(17.3)
(3.4)
(3.9)
235.3
34.8
270.1
20.9
291.0
2009
%
2.37
5.22
5.82
$m
83.8
-
(4.5)
(5.0)
74.3
89.4
163.7
18.5
182.2
Total equity
Preference share net capital
Asset revaluation reserve - shares
Unrealised gains/losses on cash flow hedge reserve
Non-controlling interest
Ordinary equity
Average ordinary equity
3,880.4
(188.5)
(27.5)
178.6
(145.7)
3,697.3
3,118.7
(188.5)
(5.5)
303.7
-
3,228.4
3,462.9
3,133.6
The above calculation uses a basic average balance calculation, consistent with previous years.
119
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
12.
NET TANGIBLE ASSETS PER ORDINARY SHARE
Net tangible assets per ordinary share
Reconciliation of net tangible assets used in calculation of net tangible assets
per ordinary share
Net assets
Intangibles
Preference shares - face value
Step up preference shares - face value
Non-controlling interest
Net tangible assets
Consolidated
2010
$
5.27
2009
$
4.31
$m
3,880.4
(1,641.6)
(90.0)
(100.0)
(145.7)
1,903.1
$m
3,118.7
(1,598.9)
(90.0)
(100.0)
-
1,329.8
Number of ordinary shares on issue at reporting date
361,366,745
308,243,636
13.
CASH FLOW STATEMENT RECONCILIATION
Profit after tax
Non-cash items
Doubtful debts expense
Amortisation
Depreciation
Revaluation (increments)/decrements
Equity settled transactions
Share of joint ventures' net profits
Dividends received/(accrued) from joint ventures
Profits on sale of investment securities
Ineffectiveness in cashflow hedges
Changes in assets and liabilities
Increase/(decrease) in tax provision
Increase/(decrease) in deferred tax assets & liabilities
(Increase)/decrease in derivatives
(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
Cash flows presented on a net basis
Cash flows arising from the following activities are presented on a net basis in the cash flow statement:
Loans and receivables, Investment securities, Retail deposits, Wholesale deposits and Subordinated debt.
Consolidated
Parent
2010
$m
259.9
50.9
38.2
18.4
(0.2)
7.8
(12.7)
11.0
(19.9)
33.9
157.5
40.0
(131.2)
(79.4)
17.9
(44.1)
348.0
2009
$m
83.8
86.2
32.7
18.4
(9.0)
11.9
(30.9)
32.8
(26.0)
93.6
(95.5)
(142.7)
626.8
5.6
(3.2)
(557.2)
127.3
2010
$m
2009
$m
244.1
113.6
40.0
31.4
17.3
3.3
7.8
-
-
(0.3)
37.4
144.3
74.7
(272.0)
(8.1)
13.7
(85.2)
248.4
63.7
20.8
15.7
(0.7)
11.9
-
-
(25.9)
36.4
(95.5)
(45.8)
316.4
32.1
(2.8)
(577.1)
(137.2)
120
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
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 cash flow statement, cash and cash equivalents includes:
Cash and cash equivalents
Due from other financial institutions
Due to other financial institutions
15.
FINANCIAL ASSETS HELD FOR TRADING
Bank discount securities
Other discount securities
Floating rate notes
Government securities
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
2009
$m
2010
$m
371.4
389.1
760.5
760.5
279.7
(195.5)
844.7
351.0
561.6
912.6
912.6
235.4
(196.3)
951.7
Parent
2010
$m
225.9
389.1
615.0
615.0
279.0
(194.3)
699.7
2009
$m
150.2
377.3
527.5
527.5
235.4
(196.3)
566.6
Consolidated
2009
$m
2010
$m
Parent
2010
$m
2009
$m
174.8
2,369.3
841.6
599.5
3,985.2
2,105.1
1,274.2
605.9
-
3,985.2
26.0
3,020.1
599.5
236.7
3,882.3
2,796.4
798.1
287.8
-
3,882.3
174.8
2,370.4
841.6
599.5
3,986.3
2,105.1
1,274.2
605.9
1.1
3,986.3
26.0
4,751.1
599.5
236.7
5,613.3
4,153.3
798.1
340.4
321.5
5,613.3
16.
FINANCIAL ASSETS AVAILABLE FOR SALE – DEBT SECURITIES
Consolidated
Parent
Negotiable securities
Negotiable certificates of deposit
Government securities
Bank accepted bills of exchange
Floating rate notes
Notes to securitisations
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
Recognised gains / (losses) before tax:
Gain/(loss) recognised directly in equity
Amount removed from equity and recognised in profit/(loss)
2010
$m
130.2
97.8
4.9
28.6
-
261.5
135.2
16.8
109.5
-
261.5
0.3
-
2009
$m
2010
$m
2009
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
97.8
-
28.6
1,912.9
2,039.3
-
16.8
109.5
1,913.0
2,039.3
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
17.
FINANCIAL ASSETS AVAILABLE FOR SALE – EQUITY INVESTMENTS
Share investments at fair value
Listed share investments
Unlisted share investments
Consolidated
Parent
2010
$m
109.5
2.2
111.7
2009
$m
81.2
2.9
84.1
2010
$m
0.8
2.2
3.0
2009
$m
3.0
2.9
5.9
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.
Recognised gains / (losses) before tax:
Gain/(loss) recognised directly in equity
Amount removed from equity and recognised in (profit)/loss
31.6
-
(34.3)
20.0
(1.1)
0.2
(36.8)
19.9
18.
FINANCIAL ASSETS HELD TO MATURITY
Negotiable securities
Bank accepted bills of exchange
Negotiable certificates of deposit
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
Parent
2010
$m
2009
$m
-
249.1
198.7
447.8
20.4
13.3
1.3
35.0
482.8
316.8
65.8
98.4
1.8
482.8
1.8
28.4
301.7
331.9
-
13.0
-
13.0
344.9
135.6
100.9
108.4
-
344.9
2010
$m
-
-
96.1
96.1
-
-
1.3
1.3
97.4
10.0
40.3
45.3
1.8
97.4
2009
$m
-
-
266.4
266.4
-
-
-
-
266.4
85.5
85.5
95.4
-
266.4
122
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
19.
LOANS AND OTHER RECEIVABLES
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
Loans and other receivables - investments
541.0
505.7
541.0
505.7
Overdrafts
Credit cards
Term loans
Margin lending
Lease receivables
Factoring receivables
Other
Gross loans and other receivables
Specific provision for impairment (Note 20)
Collective provision for impairment (Note 20)
Unearned income
Deferred Costs
Net loans and other receivables
Impaired loans
Loans
- without provisions
- with provisions
Restructured Loans
less specific impairment provisions
Net impaired loans
Net impaired loans % of loans and other receivables
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 $7.6 million (2008: $18.2 million)
of loans due to their review date expiring more than 90 days ago, but
which are not in payment default.
3,498.5
213.2
35,068.3
3,627.0
575.5
48.5
127.3
43,158.3
(79.1)
(47.1)
(95.5)
(221.7)
44.2
3,283.7
184.1
30,655.3
3,329.9
582.3
38.5
343.4
38,417.2
(67.7)
(44.3)
(89.6)
(201.6)
19.6
3,497.0
213.2
31,360.0
-
572.1
48.5
100.8
35,791.6
(51.7)
(43.1)
(79.5)
(174.3)
19.3
3,282.8
184.1
30,383.4
-
578.5
38.5
334.1
34,801.4
(58.6)
(44.0)
(87.2)
(189.8)
(13.2)
42,980.8
38,235.2
35,636.6
(0.0)
34,598.4
83.5
174.0
24.7
(78.3)
203.9
0.47%
15.3
(0.8)
14.5
546.8
103.3
79.4
144.2
7.4
(66.9)
164.1
0.42%
4.1
(0.8)
3.3
340.7
61.0
64.3
99.8
24.7
(50.9)
137.9
0.39%
4.3
(0.9)
3.4
477.7
18.9
79.3
128.3
7.4
(57.8)
157.2
0.45%
4.1
(0.8)
3.3
339.3
61.0
52.8
0.2
1.3
Net fair value of properties acquired through the enforcement of security
Interest income recognised
89.3
52.8
89.0
Interest income recognised in respect of impaired loans
Interest income forgone in respect of impaired loans
Interest income recognised is the interest income actually received subsequent to these balances becoming impaired 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.
1.3
16.4
0.7
2.0
0.2
5.4
Maturity analysis (1)
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
1
Balances exclude specific and general provisions for doubtful debts and unearned revenue.
8,374.3
1,380.2
2,885.4
15,488.2
15,571.2
43,699.3
6,613.7
4,274.5
1,810.4
6,000.3
20,224.0
38,922.9
3,990.2
1,376.4
2,288.6
13,219.5
15,457.9
36,332.6
3,282.8
3,360.4
1,811.3
6,096.0
20,756.6
35,307.1
123
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
LOANS AND OTHER RECEIVABLES (continued)
Derecognition of securitised loan portfolios
The parent entity (“the Bank”) through its loan securitisation program, securitises mortgage loans to the Torrens Trust and
Lighthouse Trusts (“the Trusts”) which in turn issue rated securities to investors.
The Bank holds income and capital units in the Trusts at nominal values, which entitles the Bank to receive excess income, if
any, generated by the securitised assets, while the capital units receive upon termination of the Trust any residual capital
value.
Fees are received for various services provided to the Trusts on an arms length basis, including the servicing fee and
management fees and are reported in the Income Statement. As the value of fees and excess income is influenced by the
financial performance of the Trust, the Bank has determined that substantially all of the risks and rewards of these securitised
loan portfolios have been retained and consequently, the loans have not been derecognised. Securitised mortgage loans
totalling $11,918.7 million (2009: $10,956.8 million) are reported in loans and receivables of the parent entity.
Investors in the Trust have no recourse against the Bank if cash flows from the securitised loans are inadequate to service the
obligations of the Trusts.
20.
IMPAIRMENT OF LOANS AND ADVANCES
Consolidated
Parent
Specific provision for impairment
Opening balance
Provision acquired in business combination
Charged to income statement
Transfer of Adelaide business
Impaired debts written-off applied to specific impairment provision
Closing balance
Collective provision for impairment
Opening balance
Provision acquired in business combination
Charged to income statement
Transfer of Adelaide business
Closing balance
General reserve for credit losses
Opening balance
Provision acquired in business combination
Transfer of Adelaide business
Charged to equity
Closing balance
Bad and doubtful debts expense
Specific provisions for impairment
Collective provision
Bad debts written off
Bad debts recovered
2010
$m
67.7
10.3
46.3
-
(45.2)
79.1
44.3
2.9
(0.1)
-
47.1
86.1
-
-
18.6
104.7
46.3
(0.1)
4.7
(6.2)
44.7
2009
$m
22.1
-
57.5
-
(11.9)
67.7
36.8
-
7.5
-
44.3
76.2
-
-
9.9
86.1
57.5
7.5
21.2
(5.9)
80.3
2010
$m
58.6
-
36.2
-
(43.1)
51.7
44.0
-
(0.9)
-
43.1
86.1
-
-
0.1
86.2
36.2
(0.9)
4.7
(6.0)
34.0
2009
$m
9.5
-
42.0
15.5
(8.4)
58.6
10.0
-
7.6
26.4
44.0
46.2
-
30.0
9.9
86.1
42.0
7.6
14.1
(4.0)
59.7
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
0.18%
0.18%
0.54%
0.54%
124
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
21.
PARTICULARS IN RELATION TO CONTROLLED ENTITIES
Principal
Activities
Banking
Securitisation Manager
Security Trustee
Trust Manager
Trustee company
Margin Lending
Responsible Entity for listed trust
Trustee for executive & staff equity plans
Property Owner
Investment company
Margin Lending
Margin Lending
Provider of share nominee services for
margin lending
Administration company
Leasing finance
Financial advisory services
Community initiatives
Community initiatives
Community initiatives
Trust manager
Mortgage origination & management
Banking
Trustee company
Financial services
Financial services
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Chief entity
Bendigo and Adelaide Bank Limited
Directly Controlled Operating Entities
AB Management Pty Ltd
ABL Custodian Services Pty Ltd
ABL NIM Pty Ltd
ABL Nominees Pty Ltd
Adelaide Equity Finance Pty Ltd
Adelaide Managed Funds Ltd
Co-operative Member Services Pty Ltd
Hindmarsh Adelaide Property Trust
Hindmarsh Financial Services Ltd
Leveraged Equities Ltd
Leveraged Equities 2009 Trust
Pirie Street Custodian Ltd
BBS Nominees Pty Ltd
Bendigo Finance Pty Ltd
Bendigo Financial Planning Ltd
Community Developments Australia Pty Ltd
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Homesafe Trust
National Mortgage Market Corporation Pty Ltd
Rural Bank Limited
Sandhurst Trustees Ltd
Tasmanian Banking Services Pty Ltd
Victorian Securities Corporation Ltd
Securitisation
AIL Trust No 1
Series 2007-1 Torrens Trust
Portfolio Funding Trust 2007-1
Series 2006-1(E) Torrens Trust
Series 2005-1 Torrens Trust
Series 2008-1 Torrens Trust
Lighthouse Warehouse Trust No 4
Series 2004-1 Torrens Trust
Series 2005-3 (E) Torrens Trust
NIM Trust
Series 2005-1AAA Torrens Trust
Lighthouse Warehouse Trust No 2
Lighthouse Warehouse Trust No 1
Lighthouse Warehouse Trust No 8
Lighthouse Warehouse Trust No 11
Lighthouse Warehouse Trust No 12
Lighthouse Warehouse Trust No 14
Series 2004-2 (W) Torrens Trust
Series 2005-2(S) Torrens Trust
Q9 Trust
Lighthouse Warehouse Trust No. 5
Q10 Trust
Torrens Series 2008-2(W) Trust
Torrens Series 2008-3 Trust
Torrens Series 2008-4 Trust
Torrens Series 2009-1 Trust
Torrens Series 2009-2(W) Trust
Torrens Series 2009-3 Trust
Torrens Series 2010-1 Trust
1 Non-Operating controlled entities are excluded from the above list.
2 All entities are 100% owned and incorporated in Australia. Exception: Rural bank 60% ownership.
125
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
22.
INVESTMENTS IN JOINT VENTURES USING THE EQUITY METHOD
Name
Ownership
Balance date
Rural Bank Ltd (1)
Tasmanian Banking Services Ltd (2)
Community Sector Enterprises Pty Ltd
Homesafe Solutions Pty Ltd
Silver Body Corporate Financial Services Pty Ltd
Community Telco Australia Pty Ltd
Strategic Payments Services Pty Ltd
(i) Principal activities of joint venture companies
interest held by
consolidated entity
2010
%
60.0
100.0
50.0
50.0
50.0
50.0
47.5
2009
%
60.0
50.0
50.0
50.0
50.0
50.0
33.3
30 June
30 June
30 June
30 June
30 June
30 June
31 December
(1) Rural Bank Ltd - financial services (consolidated, effective October 2009)
(2)Tasmanian Banking Services Ltd - financial services (wholly-owned subsidiary, effective August 2009)
Community Sector Enterprises Pty Ltd - financial services
Homesafe Solutions Pty Ltd - trust manager
Silver Body Corporate Financial Services Pty Ltd - financial services
Community Telco Australia Pty Ltd - telecommunication services
Strategic Payments Services Pty Ltd - payment processing services
All joint venture companies are incorporated in Australia, and have a balance date of 30 June except Strategic
Payments Services Pty Ltd which has a balance date of 31 December.
(ii) Share of joint ventures' revenue and profits
Share of joint ventures':
- revenue
- expense
- profit before income tax
- income tax expense
- profit after income tax
Share of joint ventures' operating profits after income tax:
- Rural Bank Ltd (1)
- Tasmanian Banking Services Ltd (2)
- Community Sector Enterprises Pty Ltd
- Homesafe Solutions Pty Ltd
- Silver Body Corporate Financial Services Pty Ltd
- Community Telco Australia Pty Ltd
- Strategic Payments Services Pty Ltd
(1) Rural Bank Ltd - equity accounted to 30 September 2009.
(2) Tasmanian Banking Services Ltd - equity accounted to 31 July 2009.
2010
$m
29.2
16.5
12.7
3.8
8.9
2010
$m
8.1
0.1
0.3
(0.1)
0.2
(0.5)
0.8
8.9
2009
$m
99.6
68.7
30.9
10.3
20.6
2009
$m
22.8
0.9
(0.3)
(0.5)
0.2
(1.2)
(1.3)
20.6
The consolidated entity's share in the retained profits and reserves of joint venture companies is not available for payment
of dividends to shareholders of Bendigo and Adelaide Bank Limited until such time as those profits and reserves are
distributed by the joint venture companies.
126
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INVESTMENTS IN JOINT VENTURES USING THE EQUITY METHOD (continued)
(iii) Carrying amount of investments in joint ventures
Balance at the beginning of financial year
- carrying amount of investment in joint ventures acquired during the year
- dividends received from joint ventures
- share of joint ventures' net profits (losses) for the financial year
- share of joint ventures' movements in retained earnings for the financial year
- share of joint ventures' movements in reserves for the financial year
- derecognition of joint ventures upon acquisition
Carrying amount of investments in joint ventures at the end of the financial year
Represented by:
Investments at equity accounted amount:
- Rural Bank Ltd
- Tasmanian Banking Services Ltd
- Community Sector Enterprises Pty Ltd
- Silver Body Corporate Financial Services Pty Ltd
- Strategic Payment Services Pty Ltd
There are no impairment losses relating to investments in joint ventures.
Unrecognised losses relating to joint ventures
(iv) The consolidated entity's share of the assets and liabilities of joint venture
in aggregate
Assets
Liabilities
Net Assets
(v) Amount of retained profits of the consolidated entity attributable to
joint ventures
2010
$m
225.9
5.7
(8.1)
8.9
-
5.1
(230.3)
7.2
-
-
0.5
0.6
6.1
7.2
0.5
2009
$m
185.2
66.5
(34.3)
20.6
0.1
(12.2)
-
225.9
222.7
2.2
0.2
0.5
0.3
225.9
0.2
Total
2010
2009
Rural
2010
7.8
6.1
1.7
59.9
2,147.0
1,977.0
170.0
59.1
0.0
0.0
0.0
Subsequent events affecting a joint ventures' profits/losses for the ensuing year (if any) are disclosed in the Events after Balance Sheet
Date note 48.
The consolidated entity's share of joint ventures' commitments and contingent liabilities (if any) are disclosed in the Commitments and
Contingencies note 45.
127
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
23.
PROPERTY, PLANT AND EQUIPMENT
Consolidated
Parent
(a) Carrying Value
Property
Freehold land - at fair value (1)
Freehold buildings - at fair value (1)
Accumulated depreciation
Leasehold improvements - at cost
Accumulated depreciation
Other
Plant, furniture, fittings, office equipment & vehicles - at cost
Accumulated depreciation
(b) Reconciliations
Freehold land (1)
Carrying amount at beginning of financial year
Additions
Revaluations
Transfer to assets
Freehold buildings (1)
Carrying amount at beginning of financial year
Revaluations
Depreciation expense
Transfer to assets
Leasehold improvements - at cost
Carrying amount at beginning of financial year
Additions
Additions through acquisition of entities
Disposals
Depreciation expense
Transfer to assets
Plant, furniture, fittings, office equipment & vehicles
Carrying amount at beginning of financial year
Additions
Additions through acquisition of entities
Disposals
Depreciation expense
Transfer to assets
2010
$m
16.6
16.6
15.4
(0.1)
15.3
65.7
(27.2)
38.5
70.4
174.2
(141.0)
33.2
2009
$m
16.8
16.8
22.2
(1.0)
21.2
60.7
(20.9)
39.8
77.8
170.2
(132.1)
38.1
2010
$m
6.5
6.5
10.7
(0.4)
10.3
63.3
(26.1)
37.2
54.0
169.6
(138.2)
31.4
2009
$m
6.5
6.5
10.7
(0.1)
10.6
60.7
(20.9)
39.8
56.9
167.4
(130.5)
36.9
103.6
115.9
85.4
93.8
16.8
1.8
(2.0)
-
16.6
21.2
(5.1)
(0.8)
-
15.3
39.8
3.6
0.5
-
(5.4)
-
38.5
38.1
8.0
0.6
(1.2)
(12.3)
-
33.2
9.3
7.5
-
-
16.8
22.0
-
(0.8)
-
21.2
30.1
14.3
-
(0.3)
(4.3)
-
39.8
52.1
3.4
-
(4.1)
(13.3)
-
38.1
6.5
-
-
-
6.5
10.6
-
(0.3)
-
10.3
39.8
2.7
-
-
(5.3)
-
37.2
36.9
7.3
-
(1.1)
(11.7)
-
31.4
0.3
-
-
6.2
6.5
0.2
-
(0.1)
10.5
10.6
28.3
14.2
-
(0.3)
(4.1)
1.7
39.8
37.9
2.7
-
(0.7)
(11.6)
8.6
36.9
(1) Freehold land and buildings are carried at fair value based on independent valuations performed in 2010 using a capitalisation rate of 9.0%. Refer note 2.15.
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
17.9
21.8
(1.7)
38.0
16.1
21.8
(1.1)
36.8
0.1
0.1
-
0.2
0.1
0.1
-
0.2
128
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
24. ASSETS HELD FOR SALE
Carrying amount at beginning of financial year
Additions
Fair value adjustment
Disposals
Consolidated
2010
$m
-
-
-
-
-
2009
$m
105.5
6.9
(5.3)
(107.1)
-
Parent
2010
$m
-
-
-
-
-
2009
$m
3.2
-
(3.2)
-
-
In accordance with Accounting Standard AASB 5: “Non-current Assets Held for Sale and Discontinued Operations”, the
carrying value of the Head Office development in Bendigo, Victoria has been disclosed as Assets held for sale.
The development is the subject of a Sale and Leaseback contract which took effect 29 August 2008.
25. INVESTMENT PROPERTY
Carrying amount at beginning of financial year
Additions
Net gain from fair value adjustments
Consolidated
Parent
2010
$m
115.6
33.0
10.3
158.9
2009
$m
80.4
26.3
8.9
115.6
2010
2009
$m
-
-
-
-
$m
-
-
-
-
Investment properties are carried at fair value, which has been determined in accordance with directors’ valuations and have
not been independently valued.
Investment properties are carried at fair value, which has been determined in accordance with directors’ valuations and have
not been independently valued.
The fair value represents the amounts at which the assets could be sold in an arm’s length transaction at the date of valuation.
As the asset represents residential properties the realisability of the properties and the remittance of income and proceeds of
disposal can be impacted by the real estate market conditions in relation to residential properties, particularly Melbourne and
Sydney.
129
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
26.
INTANGIBLE ASSETS AND GOODWILL
Consolidated
Parent
(a) Carrying value
Intangible assets
Customer list - at cost
Accumulated amortisation
Computer software - at cost
Accumulated amortisation
Trustee licence - at cost
Accumulated impairment
Computer Software (Adelaide) - at fair value
Accumulated amortisation
Trade Name - at fair value
Accumulated amortisation
Customer Relationship - at fair value
Accumulated amortisation
Management rights - at fair value
Accumulated amortisation
Core Deposits - at fair value
Accumulated amortisation
Goodwill
Purchased goodwill
Accumulated impairment
Total intangible assets and goodwill
2010
$m
4.7
(4.7)
-
61.1
(36.0)
25.1
8.4
-
8.4
1.3
(1.2)
0.1
27.6
(11.3)
16.3
72.0
(13.5)
58.5
15.3
(2.6)
12.7
116.3
(41.9)
74.4
2009
$m
4.7
(4.5)
0.2
69.3
(40.6)
28.7
8.4
-
8.4
1.3
(0.8)
0.5
24.7
(6.7)
18.0
29.3
(5.7)
23.6
15.3
(1.6)
13.7
98.7
(25.9)
72.8
2010
$m
0.1
(0.1)
-
50.4
(27.1)
23.3
-
-
-
1.3
(1.2)
0.1
24.7
(11.0)
13.7
29.3
(9.2)
20.1
15.3
(2.6)
12.7
98.7
(40.1)
58.6
2009
$m
0.1
-
0.1
68.8
(40.1)
28.7
-
-
-
0.7
(0.2)
0.5
20.5
(2.5)
18.0
25.7
(2.1)
23.6
14.3
(0.6)
13.7
82.3
(9.5)
72.8
1,448.6
(2.5)
1,446.1
1,437.0
(4.0)
1,433.0
1,641.6
1,598.9
1,353.1
-
1,353.1
1,481.6
1,319.3
-
1,319.3
1,476.7
130
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INTANGIBLE ASSETS AND GOODWILL (continued)
Consolidated
Parent
(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
Addition acquired through business combination
Additions
Disposals
Amortisation charge
Trustee licence
Carrying amount at beginning of financial year
Computer software (Adelaide)
Carrying amount at beginning of financial year
Addition acquired through business combination
Amortisation Charge
Trade Name
Carrying amount at beginning of financial year
Addition acquired through business combination
Amortisation Charge
Customer Relationship
Carrying amount at beginning of financial year
Addition acquired through business combination
Amortisation Charge
Management Rights
Carrying amount at beginning of financial year
Addition acquired through business combination
Amortisation Charge
Core Deposits
Carrying amount at beginning of financial year
Addition acquired through business combination
Amortisation Charge
Goodwill
Purchased goodwill
Carrying amount at beginning of financial year
Additions/transfer from goodwill on consolidation
Addition acquired through business combination/(purchase price adjustment)
Transfer to purchased goodwill
Writeback of goodwill on business deregistration
2010
$m
0.2
-
(0.2)
-
28.7
1.9
3.1
(0.4)
(8.2)
25.1
8.4
8.4
0.5
-
(0.4)
0.1
18.0
2.9
(4.6)
16.3
23.6
42.7
(7.8)
58.5
13.7
-
(1.0)
12.7
72.8
17.6
(16.0)
74.4
1,433.0
18.1
16.8
(8.1)
(13.7)
1,446.1
2009
$m
0.7
-
(0.5)
0.2
21.8
1.6
10.7
-
(5.4)
28.7
8.4
8.4
0.9
-
(0.4)
0.5
22.2
-
(4.2)
18.0
27.2
-
(3.6)
23.6
14.7
-
(1.0)
13.7
89.2
-
(16.4)
72.8
1,385.3
1,373.1
1.4
(1,326.8)
-
1,433.0
Total intangible assets and goodwill
1,641.6
1,598.9
2010
$m
0.1
-
(0.1)
-
28.7
-
2.9
(0.4)
(7.9)
23.3
-
-
0.5
-
(0.4)
0.1
18.0
-
(4.3)
13.7
23.6
-
(3.5)
20.1
13.7
-
(1.0)
12.7
72.8
-
(14.2)
58.6
2009
$m
-
0.1
-
0.1
18.8
1.6
13.9
-
(5.6)
28.7
-
-
-
0.7
(0.2)
0.5
-
20.5
(2.5)
18.0
-
25.7
(2.1)
23.6
-
14.3
(0.6)
13.7
-
82.3
(9.5)
72.8
1,319.3
33.8
-
-
-
1,353.1
1,481.6
34.6
1,284.7
-
-
-
1,319.3
1,476.7
131
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
INTANGIBLE ASSETS AND GOODWILL (continued)
Intangible assets
Finite useful life
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).
Other intangible assets acquired through the business combinations with Adelaide Bank Limited and Rural Bank Limited,
include trade name, customer relationship, management rights and core deposits. These assets have been capitalised at fair
value and are amortised to reflect the period and pattern of economic benefit. Impairment testing is completed annually on
these assets, and if impairment indicators are met, the assets are written down to recoverable amounts.
Indefinite useful life
The trustee licence represents an intangible asset purchased through the effect of a business combination (Sandhurst
Trustees Limited). The useful life of this asset 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 items represent intangible assets purchased through the effect of business combinations.
27.
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES
Goodwill acquired through business combinations is initially measured at its cost, being the excess of the cost of the business
combination over Bendigo and Adelaide Bank Limited interest in the net fair value of all subsidiaries’ identifiable assets,
liabilities and contingent liabilities. Goodwill is not amortised, but is tested for impairment annually or more frequently if
impairment indicators exist.
For intangible assets that have definite life, impairment testing is only required at each reporting date where there is an
indication of an impairment. For intangible assets that have indefinite life, impairment testing is required at least annually.
Allocation of Goodwill and Intangible Assets
Goodwill and intangible assets do not generate cash flows independently of other assets or groups of assets, and often
contributes to the cash flows of multiple cash-generating units. Therefore the accounting standard allows companies to
aggregate cash-generating units (“CGU”) and test goodwill for impairment at relatively higher levels than is the case of other
assets.
Amortisation and Impairment Charge – Intangible Assets with Finite Lives
All the intangible assets other than goodwill and trustee licence have been assessed as having finite lives in the ranges as
follows:
Category
Core Deposit
Trade name
Customer Relationship
Management Rights
Software
Useful Life
2 – 10 years
5 – 15 years
7 – 12 years
15 years
1-7 years
Impairment Review Methodologies – Goodwill and Intangible Assets with Indefinite Lives
Impairment testing for goodwill and intangible assets is performed by comparing the carrying amount of the CGU grouping to
which the goodwill and intangible assets have been allocated with its recoverable amount. The recoverable amount is
measured as the higher of value in use and fair value less costs to sell.
132
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES (continued)
(i) Fair Value Method
In the goodwill impairment review model, fair value less costs to sell is calculated by multiplying the CGU’s projected after tax
cash flows for 2010/2011 (adjusted for non-recurring items) by 12. The multiple of 12 is considered appropriate for each of the
Group’s identified CGU’s.
(ii) Value in Use Method
Value in use recoverable amount calculation is based on 5 years’ forecasted after tax cash flows for the CGU, discounted back
to the present value using an appropriate discount rate, plus a terminal value.
The discount rate applied to the cash flows projection is 11.46%. Management believe this discount rate is appropriate based
on current market risk free rate, company specific beta and market risk premium.
Terminal value for value in use method is calculated by discounting the fifth year’s earning by the discount factor (i.e. 11.46%
minus long term growth rate i.e. 2%). Long term growth rates of 2-3% have been used.
The 5 years’ forecasted after tax cash flows of each CGU is based on management’s expectation of group strategy and future
trends in the industry.
The below table represents the growth assumptions adopted for CGU's using the value in use methodology for the 2010/11
year and is based on the budget approved by the Board:
CGU
Retail
2011/12
12.5%
2012/13
12.5%
2013/14
10.0%
2014/15
10.0%
For the 2010/11 year is based on the budget approved by the Board.
Long term
growth
rate
3.0%
For impairment review purposes, no impairment loss is required to be made if the CGU’s recoverable amount is above the
CGU’s net asset carrying amount under either of the fair value and value in use tests. Based on the fair value and value in use
tests results, no impairment loss is required to be made for any of the CGU’s as at 30 June 2010.
For the purpose of impairment testing, goodwill and intangible assets acquired in a business combination shall, from the
acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are
expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units or groups of units.
For goodwill allocation, the cash generating units identified represent the core business operations of the group as follows:
Retail
The provision of retail banking products and services delivered through the company-owned branch network and the Group’s
share of net interest and fee income from the Community Bank® branch network.
Third Party
The provision of residential home loans, distributed through mortgage brokers, mortgage managers, mortgage originators and
alliance partners.
Wealth
The provision of financial planning services and margin lending activities. Commissions are received as the responsible entity
for managed investment schemes and for corporate trusteeships and other trustee and custodial services.
Rural Bank
The provision of banking services to agribusiness, rural and regional Australian communities.
The carrying amount of goodwill and intangibles allocated to each cash-generating unit is as follows:
CGU
Retail
Third Party
Wealth
Rural Bank
Goodwill test
applied
Value in use
Fair value
Fair value
Fair value
Total
Carrying
amount of
goodwill
$m
Carrying
amount of
intangibles
$m
Sensitivity before impairment
becomes evident for the test
applied
656.4
461.5
311.4
16.8
1,446.1
18.9 Profit growth lower by 1.5%
76.1 Earnings multiple lower by 3
49.3 Earnings multiple lower by 3
51.2 Earnings multiple lower by 4
195.5
133
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
28.
OTHER ASSETS
Shares in joint ventures (1)
Accrued income
Prepayments
Sundry debtors
Accrued interest
Consolidated
Parent
2010
$m
-
14.1
21.7
391.5
190.9
618.2
2009
$m
-
22.6
38.8
334.2
116.7
512.3
2010
$m
15.6
22.6
15.3
266.7
140.6
460.8
2009
$m
229.2
28.6
15.8
273.6
113.2
660.4
Other assets are generally non-interest bearing and are short-term by nature.
Sundry debtors are normally settled within 30 days.
Accrued interest is interest accrued on loans and receivables and is generally charged to the loan or receivable on the first day of the next month.
(1) Shares in joint ventures are carried at cost. Refer to note 22 for more information regarding joint ventures.
29.
DEPOSITS
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
Overseas
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
29,957.8
3,740.4
33,698.2
3,139.7
238.3
3,378.0
37,076.2
14,093.5
6,324.1
509.3
4,153.8
8,783.7
2,113.2
652.7
445.9
37,076.2
26,505.0
2,031.4
28,536.4
2,652.6
690.8
3,343.4
27,494.9
2,704.9
30,199.8
3,066.1
238.3
3,304.4
31,879.8
33,504.2
13,298.7
4,422.8
229.1
3,738.5
7,172.9
1,552.8
565.9
899.1
31,879.8
13,364.4
5,297.8
406.0
3,658.2
8,107.6
1,650.7
579.2
440.3
33,504.2
26,447.4
2,103.3
28,550.7
2,652.6
690.8
3,343.4
31,894.1
13,289.9
4,422.5
229.5
3,733.6
7,196.0
1,555.6
566.9
900.1
31,894.1
NOTES PAYABLE
9,042.8
9,974.5
1,156.4
2,102.4
30.
OTHER PAYABLES
Sundry creditors
Accrued expenses and outstanding claims
Accrued interest
Prepaid interest
Payables are non-interest bearing and are generally settled within 30 days.
Accrued interest is credited to customer accounts in accordance with the terms of
the investment products held by the customer, but generally within a twelve month period.
Consolidated
Parent
2010
$m
6.4
341.4
356.9
72.6
777.3
2009
$m
12.9
299.0
290.4
63.6
665.9
2010
$m
145.9
369.0
305.9
-
820.8
2009
$m
78.8
549.6
274.9
-
903.3
134
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
31.
PROVISIONS
(a) Balances
Employee benefits (Note 37)
Employee shares shortfall
Rewards program
Property Rent
Dividends
Uninsured Losses
Consolidated
Parent
2010
$m
66.2
4.8
3.8
2.0
9.2
3.1
89.1
2009
$m
48.3
8.1
3.3
2.1
0.9
-
62.7
2010
$m
62.0
4.8
3.8
2.0
1.2
3.1
76.9
2009
$m
48.3
8.1
3.3
2.1
0.9
-
62.7
Provision employee shares shortfall is in relation to possible losses associated with employee loans relating to the Employee share plan. This
provision will only be utilised if:
(a) employees instruct the administrator of the plan to sell their shares in settlement of the employee loan relating to those shares: and,
(b) at the time of the sale the market price of Bendigo and Adelaide Bank Limited shares is below the outstanding value of those shares in
the loan account.
Provision for rewards program is to recognise the liability to customers in relation to points earned by them under the Bendigo and Adelaide 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 Accounting Standard 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 dividends represents the residual carried forward balance in relation to ordinary 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. The provision also includes accrued
dividends relating to preference shares.
Provision for uninsured losses represents the expected loss in relation to fraud, not covered under insurance contracts.
Consolidated
Parent
(b) Movements
Employee benefits
Opening balance
Provision acquired in business combination
Additional provisions recognised
Decrease due to change in discount rate
Amounts utilised during the year
Closing balance
Employee shares shortfall
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
Amounts utilised during the year
Closing balance
Dividends
Opening balance
Provision acquired in business combination
Additional dividends provided
Dividends paid during the year
Closing balance
Uninsured Losses
Opening balance
Additional provisions recognised
Closing balance
2010
$m
48.3
4.6
41.6
(0.2)
(28.1)
66.2
8.1
(2.6)
(0.7)
4.8
3.3
2.2
(1.7)
3.8
2.1
(0.1)
2.0
0.9
10.2
167.1
(169.0)
9.2
-
3.1
3.1
2009
$m
56.6
-
21.1
(0.8)
(28.6)
48.3
3.0
5.1
-
8.1
3.5
1.4
(1.6)
3.3
2.1
-
2.1
2.5
-
190.4
(192.0)
0.9
-
-
-
2010
$m
48.3
-
38.8
(0.2)
(24.9)
62.0
8.1
(2.6)
(0.7)
4.8
3.3
2.2
(1.7)
3.8
2.1
(0.1)
2.0
0.9
-
149.2
(148.9)
1.2
-
3.1
3.1
2009
$m
42.6
-
(4.9)
(0.8)
11.4
48.3
3.0
5.1
-
8.1
3.5
1.4
(1.6)
3.3
2.1
-
2.1
1.5
-
190.5
(191.1)
0.9
-
-
-
135
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
32.
RESET PREFERENCE SHARES
Reset preference shares - 894,574 fully paid $100 preference shares
Consolidated
Parent
2010
$m
89.5
89.5
2009
$m
89.5
89.5
2010
$m
89.5
89.5
2009
$m
89.5
89.5
Reset preference shares are perpetual, but can be exchanged at the request of the holder or Bendigo and Adelaide Bank. Dividends are
non-cumulative and are payable six-monthly in arrears at the discretion of the directors, based on a dividend rate of the five year mid swap
reference rate plus the initial margin multiplied by one less the corporate tax rate.
33.
SUBORDINATED DEBT
Subordinated capital notes
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
Parent
2010
$m
532.9
96.1
81.9
269.9
85.0
532.9
2009
$m
598.7
94.7
141.0
288.0
75.0
598.7
2010
$m
393.7
65.3
54.7
198.7
75.0
393.7
2009
$m
598.7
94.7
141.0
288.0
75.0
598.7
136
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
34.
ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid - 361,366,745 (2009: 308,243,636)
Preference shares of $100 face value fully paid - 900,000 (2009: 900,000 fully paid)
Step-up preference shares of $100 face value fully paid - 1,000,000 (2009: 1,000,000)
Employee share ownership plan shares
Consolidated
Parent
2010
$m
3,361.7
88.5
100.0
(27.7)
3,522.5
2009
$m
3,003.9
88.5
100.0
(32.7)
3,159.7
2010
$m
3,361.7
88.5
100.0
(27.7)
3,522.5
2009
$m
3,003.9
88.5
100.0
(32.7)
3,159.7
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 the 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 and Adelaide Bank subject to prior
approval of APRA.
Step up Preference share (SPS) dividends are non-cumulative and are payable quarterly in arrears, at the discretion of the 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 SPS are perpetual, but may be redeemed by Bendigo and Adelaide Bank subject to
prior approval of APRA.
Employee share ownership plan shares is the value of loans outstanding in relation to shares issued to employees under this plan and
effectively represents the unpaid portion of the issued shares.
Movement in ordinary shares on issue
Opening balance 1 July - 308,243,636 (2009: 274,678,383)
Shares issued under:
Bonus share scheme - 304,421 @ $7.95; 256,532 @ $9.59
(2009: 262,362 @ $11.01; 329,948 @ $6.13)
Dividend reinvestment plan - 1,607,958 @ $7.95; 3,818,849 @ $9.59
(2009: 2,472,153 @ $11.01; 3,538,902 @ $6.13)
Issue to Tasmanian Banking Services Limited shareholders - 781,910 @ $6.39 (2009: Nil)
Institutional placement and entitlement offer - 26,618,172 @ $6.75 (2009: Nil)
Retail entitlement offer - 17,854,868 @ $6.75 (2009: Nil)
Employee share plan - 340,039 @$10.03 (2009: 762,104 @ $10.78 )
Preference share conversions - Nil ( 2009: 2,130,339 @ 9.39;
3,343,355 @ $5.98; 1,656,461 @ $7.24) (1)
Share Placement and Share purchase plan - Nil (2009: 19,067,229 @ $10)
Executive performance share plan - 1,540,360 @ $6.56 (2009: Nil)
Share issue costs
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
3,003.9
2,706.3
3,003.9
2,706.3
-
49.4
5.0
179.7
120.5
3.4
-
-
10.1
(10.3)
-
48.9
-
-
-
8.2
52.0
190.7
-
(2.2)
-
49.4
5.0
179.7
120.5
3.4
-
-
10.1
(10.3)
-
48.9
-
-
-
8.2
52.0
190.7
-
(2.2)
Closing balance 30 June - 361,366,745 (2009: 308,243,636)
3,361.7
3,003.9
3,361.7
3,003.9
(1) 2009: As part of the acquisition of the Macquarie Group Margin Lending portfolio the bank issued 4,766,270 Tranched Convertible Preference Shares (TCS)
during the financial year at an issue price of $10.91. The TCS were mandatorily converted to 7,130,155 ordinary shares within the financial year.
Movements in preference shares on issue
Opening balance 1 July - 900,000 fully paid (2009: 900,000 fully paid)
Closing balance 30 June - 900,000 fully paid to $100 (2009: 900,000 fully paid)
Movements in step up preference shares on issue
Opening balance 1 July - 1,000,000 (2009: 1,000,000)
Closing balance 30 June - 1,000,000 fully paid to $100 (2009: 1,000,000)
Movements in convertible preference shares
Opening balance 1 July
Issue of convertible preference shares - Nil (2009: 4,766,270 )
Conversion of convertible preference shares to ordinary shares
Closing balance 30 June
Movements in Employee share ownership plan shares
Opening balance 1 July
Reduction in Employee share ownership plan shares
Closing balance 30 June
88.5
88.5
100.0
100.0
-
-
-
-
(32.7)
5.0
(27.7)
88.5
88.5
100.0
100.0
-
52.0
(52.0)
-
(37.4)
4.7
(32.7)
88.5
88.5
100.0
100.0
-
-
-
-
(32.7)
5.0
(27.7)
88.5
88.5
100.0
100.0
-
52.0
(52.0)
-
(37.4)
4.7
(32.7)
Total issued and paid up capital
3,522.5
3,159.7
3,522.5
3,159.7
137
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
35.
RETAINED EARNINGS AND RESERVES
Consolidated
Parent
2010
$m
144.3
242.6
1.5
(18.6)
(148.9)
11.1
2.8
(0.3)
-
234.5
20.3
3.6
27.5
0.3
(178.7)
-
104.7
-
(22.3)
13.6
6.7
20.3
2.1
(0.9)
4.1
(1.7)
3.6
5.5
-
-
31.6
(9.6)
27.5
-
0.3
0.3
2009
$m
269.9
83.8
-
(11.7)
(190.4)
-
(6.6)
(0.3)
(0.4)
144.3
13.6
2.1
5.5
-
(295.4)
(8.3)
86.1
11.1
(185.3)
12.4
1.2
13.6
2.1
-
-
-
2.1
14.8
19.1
0.9
(34.3)
5.0
5.5
-
-
-
2010
$m
143.4
244.1
-
(0.1)
(148.8)
-
2.8
(0.3)
5.5
246.6
17.5
0.3
1.7
0.2
(76.4)
-
86.2
-
29.5
13.6
3.9
17.5
0.3
-
-
-
0.3
2.3
0.2
-
(1.1)
0.3
1.7
-
0.2
0.2
2009
$m
246.1
113.6
-
(39.9)
(190.9)
-
(2.4)
(0.3)
17.2
143.4
13.6
0.3
2.3
-
(261.8)
-
86.1
-
(159.5)
12.6
1.0
13.6
0.3
-
-
-
0.3
13.6
19.8
0.1
(36.8)
5.6
2.3
-
-
-
RETAINED EARNINGS
Movements
Opening balance 1 July
Profit for the year
Transfer from asset revaluation reserve
Movements in general reserve for credit losses
Dividends
Establishment of Rural Bank GRCL on acquisition
Defined benefits actuarial adjustment
Tax effect of defined benefits actuarial adjustment
Transfer of business - Adelaide Bank
Balance 30 June
OTHER RESERVES
(a) Balances
Employee benefits reserve
Asset revaluation reserve - property
Asset revaluation reserve - available for sale share investments
Net unrealised gains reserve
Cash flow hedge reserve
Cash flow hedge reserve - joint ventures
General reserve for credit losses
General reserve for credit losses - joint ventures
(b) Nature, purpose and movements
Employee benefits reserve
(a) Nature and purpose
The employee benefits reserve is used to record the assessed cost of shares issue to
non-executive employees under the Employee Share Plan and the assessed cost of
options granted to executive employees under the Executive Incentive Plan.
(b) Movements
Opening balance
Net increase in reserve
Asset revaluation reserve - property
(a) Nature and purpose
The asset revaluation reserve is used to record increments and decrements in
the value of non-current assets.
(b) Movements
Opening balance
Transfer asset revaluation reserve to retained earnings
Net revaluation increments/(decrements)
Tax effect of net revaluation increments
Asset revaluation reserve - available for sale share investments
(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
Transfer asset revaluation reserve to retained earnings (sold assets)
Transfer impairment loss to income
Net revaluation increments/(decrements)
Tax effect of net revaluation increments
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)
138
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RETAINED EARNINGS AND RESERVES (continued)
OTHER RESERVES (continued)
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
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
Changes due to mark to market
Changes due to mark to market attributable to non controlling interests
Tax effect of changes due to mark to market
Changes due to transfer to the income statement
Tax effect of changes due to transfer to the income statement
Cash flow hedge reserve - joint ventures
(a) Nature and purpose
Joint ventures 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
Tax effect of gain 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
Establishment of Rural Bank GRCL on acquisition
Increase/(decrease) in general reserve for credit losses
General reserve for credit losses - joint ventures
(a) Nature and purpose
The general reserve for credit losses - joint ventures records the group's share of
a joint venture company's GRCL in accordance with equity accounting.
(b) Movements
Opening balance
Increase in general reserve for credit losses
Total reserves
(295.4)
132.8
(0.5)
(39.2)
33.7
(10.1)
(178.7)
(8.3)
11.9
(3.6)
-
86.1
18.9
(0.3)
104.7
11.1
(11.1)
-
(22.3)
51.9
(526.2)
-
118.2
86.7
(26.0)
(295.4)
3.9
(12.2)
-
(8.3)
76.2
-
9.9
86.1
9.3
1.8
11.1
(261.8)
228.5
-
(68.2)
35.8
(10.7)
(76.4)
56.4
(436.3)
-
97.4
29.5
(8.8)
(261.8)
-
-
-
-
86.1
-
0.1
86.2
-
-
-
-
-
-
-
46.2
-
39.9
86.1
-
-
-
(185.3)
29.5
(159.5)
139
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
36.
NON-CONTROLLING INTEREST
Interest in:
Ordinary shares
Reserves
Retained earnings
37.
EMPLOYEE BENEFITS
Employee benefits liability
Provision for annual leave
Provision for other employee payments
Provision for long service leave
Provision for sick leave bonus
Aggregate employee benefits liability
C o ns o lida t e d
P a re nt
2 0 10
$ m
122.7
3.3
19.7
145.7
2 0 0 9
$ m
2 0 10
$ m
2 0 0 9
$ m
-
-
-
-
-
-
-
-
-
-
-
-
C o ns o lida t e d
P a re nt
2 0 10
$ m
21.2
11.2
29.8
4.0
66.2
2 0 0 9
$ m
17.5
0.1
26.8
3.9
48.3
2 0 10
$ m
20.0
9.2
28.8
4.0
62.0
2 0 0 9
$ m
17.5
0.1
26.8
3.9
48.3
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 2010.
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.
140
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
38.
SHARE BASED PAYMENT PLANS
Salary Sacrifice, Deferred Share and Performance Share Plan (Current)
The Company has established an Employee Salary Sacrifice and Deferred Share Plan (“DSP”). In 2009 the Board
approved changes to the Plan rules to enable the Plan to be used as the vehicle for senior executive (including the
Managing Director) long term incentive arrangements. The changes provide for grants of Performance Shares to the
managing director and other senior executives and to include rules to allow the board to set performance conditions
and to determine when those performance conditions have been met and the Performance Shares Vest.
Under the Plan, senior executives were granted performance shares subject to performance conditions set by the
Board. If the performance conditions are satisfied during the relevant performance period, the performance shares
will vest. The performance conditions and performance periods for grants under the Plan are set out in the 2010
Remuneration Report. Each performance share represents an entitlement to one ordinary share in the company.
Accordingly, the maximum number of shares that may be acquired by senior executives is equal to the number of
performance shares granted.
Performance shares are granted at no cost to the senior executives. The Plan rules provide that the Board may
determine that a price is payable upon exercise of an exercisable performance share. The board has determined that
no exercise price will apply to exercisable performance shares.
The number of performance shares granted to the senior executives is based on the value of each performance
share. The assessed fair value of each performance share granted under the Plan are set out in the tables presented
at note 40.
Senior 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 shares. The grants are
subject to a dealing restriction. Senior executives are not entitled to sell, transfer or otherwise deal with any shares
allocated to them until 2 years after the end of the initial performance period.
The first grant was made under the Plan during the year to senior executives on 11 December 2009. The grant was in
accordance with the terms disclosed in the 2010 Remuneration Report and was valued and expensed in accordance
with applicable accounting requirements. The expense recognised in the income statement in relation to share-based
payments is disclosed in note 40.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in
performance shares issued during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Vested / Exercised during the year
Expired during the year
Outstanding at the end of the year
2010
No.
-
1,540,360
(371,179)
(255,918)
-
913,263
2010
WAEP
-
-
-
-
-
-
The outstanding balance as at 30 June 2010 is represented by 913,263 performance shares over ordinary shares
with an exercise price of nil, each exercisable upon meeting the above conditions, and until 2014. The weighted
average fair value of performance shares granted during the year was $7.17 (2009: $nil).
The fair value of the performance shares granted under the Plan takes into account the terms and conditions upon
which the performance shares were granted. The fair value is estimated as at the date of grant using the Black-
Scholes – Merton Option Pricing Model incorporating a Monte Carlo simulation option pricing model to estimate the
probability of achieving the TSR hurdle and the number of options vesting. The following table lists the inputs to the
model used for the year ended 30 June 2010.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of performance shares (years)
Exercise price ($) (1)
Fair value share price at grant date ($)
2010 Grant
4.5%
30%
4.25% to 5.15%
5
Nil
$8.77
The expected life of the performance shares is based on historical data and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of
future trends, which may also not necessarily be the actual outcome. No other features of shares granted were
incorporated into the measurement of fair value.
141
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SHARE BASED PAYMENT PLANS (continued)
Executive Incentive Plan (discontinued)
The Executive Incentive Plan (“Plan”) was established in 2006. The Plan provides for grants of options and
performance rights (“Instruments”) to the Managing Director and other senior executives. Under the Plan, senior
executives were 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 Plan has been discontinued and replaced by the new arrangement involving grants of performance shares
under the Employee Salary Sacrifice, Deferred Share and Performance Share Plan for the 2010 financial year as
described above.
The performance conditions and performance periods for grants under the Plan are set out in the 2010 Remuneration
Report. Each option and performance right represents an entitlement to one ordinary share in the company.
Accordingly, the maximum number of shares that may be acquired by key executives is equal to the number of
options and performance rights issued.
Options and performance rights are granted at no cost to the senior executives. 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.
The number of options and performance rights granted to the senior executives is based on the value of each option
and performance right. The assessed fair value of each option and each performance right granted under the Plan
are set out in the tables presented at note 40.
Senior 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 grants are subject to a dealing restriction. Senior 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.
The last grant made under the Plan to senior executives of the group was in July 2008. The grant was in accordance
with the terms disclosed in the 2009 Remuneration Report. The grant made in 2009 was valued and expensed in
accordance with applicable accounting requirements. The expense recognised in the income statement in relation to
share-based payments is disclosed in note 40.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in
performance options issued during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Vested / Exercised during the year
Expired during the year
Outstanding at the end of the year
2010
No.
2,052,199
-
(475,566)
-
(537,388)
1,039,245
2010
WAEP
$12.99
-
$12.08
-
$14.66
$12.54
2009
No.
1,034,849
1,050,601
(33,251)
-
-
2,052,199
2009
WAEP
$14.98
$11.09
$14.96
-
-
$12.99
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in
performance rights issued during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Vested / Exercised during the year
Expired during the year
Outstanding at the end of the year
2010
No.
430,151
-
(98,742)
(46,076)
(119,142)
166,191
2010
WAEP
$0.00
-
$0.00
$0.00
$0.00
$0.00
2009
No.
294,427
154,767
-
(19,043)
-
430,151
2009
WAEP
$0.00
$0.00
-
$0.00
-
$0.00
The outstanding balance as at 30 June 2010 is represented by:
344,614 performance options over ordinary shares with an exercise price of $15.47 each, 694,631 performance
options over ordinary shares with an exercise price of $11.09 each, exercisable upon meeting the above
conditions, and until 31 July 2013.
166,191 performance rights over ordinary shares with an exercise price of $0.00 each, exercisable upon meeting
the above conditions, and until 30 June 2012.
The weighted average fair value of rights granted during the year was nil as the Plan was discontinued and no grants
were made under the Plan (2009: $9.30). The weighted average fair value of options granted during the year was nil
as the Plan was discontinued and no grants were made under the Plan (2009: $1.37).
142
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SHARE BASED PAYMENT PLANS (continued)
The fair value of the performance options and performance rights granted under the Plan takes into account the terms
and conditions upon which the options were granted. The fair value is estimated as at the date of grant using the
Black-Scholes – Merton Option Pricing Model incorporating a Monte Carlo simulation option pricing model to estimate
the probability of achieving the TSR hurdle and the number of options vesting.
The following table lists the inputs to the model used for the year ended 30 June 2009. There was no grant during
2010.
2010 Grant
2009 Grant
(Rights & Options)
(Rights & Options)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Expected life of rights (years)
Option exercise price ($) (1)
Closing share price at grant date ($)
-
-
-
-
-
-
-
(1) For performance rights the exercise price is nil.
4.0
25 and 30
3.51
4.1
3.5
11.09
10.51
The expected life of the share rights and options is based on historical data and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual outcome. No other features of shares
granted were incorporated into the measurement of fair value.
Employee Share Plan
Current Plans
The Bank established a new loan-based limited recourse Employee Share Plan (“Plan”) in 2006. The Plan is
substantially the same as the legacy plan (employee share ownership plan) that was in place from 1995 to 2006.
However, the new Plan is only available to general staff. Executives (including the Managing Director) may not
participate in it.
Under the terms of the new Plan, shares are 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. Net cash dividends after personal income tax obligations are applied to reduce the loan balance. Staff cannot
deal in the shares until the loan has been repaid. The primary benefit under the terms of the Plan is the financial
benefit of the limited recourse interest-free loan.
The first issue to general staff under this plan was completed in September 2006. A grant to Community Bank®
employees was made in December 2007. There have been no further issues under this Plan.
Share issues under the Plan are valued and expensed in accordance with applicable accounting requirements. The
expense recognised in the income statement in relation to share-based payments is disclosed on the following page.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in
Plan shares (including the employee share ownership plan) during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
2010
No.
4,879,777
-
-
(539,630)
-
4,340,147
2010
WAEP
$6.70
-
-
$9.12
-
$6.38
2009
No.
5,553,369
-
-
(673,592)
-
4,879,777
2009
WAEP
$6.73
-
-
$6.99
-
$6.70
Exercisable at the end of the year
4,340,147
$6.38
4,879,777
$6.70
The outstanding balance as at 30 June 2010 is represented by 4,340,147 ordinary shares with a market value at 30
June 2010 of $8.18 each (value: $35,502,402), exercisable upon repayment of the employee loans.
The acquisition price of shares granted during the year was nil as no new shares were issued. There were also no
shares issued under the Plan in 2009. The acquisition price for shares issued under the Plan is calculated using the
volume weighted average share price of the company’s shares traded on the ASX in the 7 days trading ending one
calendar week before the invitation date.
143
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SHARE BASED PAYMENT PLANS (continued)
Current Plans cont’d…
The fair value of the shares granted under the Plan is estimated as at the date of each grant using the Black-Scholes-
Merton Option Pricing Model taking into account the terms and conditions upon which the shares were granted. The
fair value determined by independent valuation. The expected life of the share options is based on historical data and
is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that
the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other
features of shares granted were incorporated into the measurement of fair value. The exercise price of the shares
issued will reduce over time as dividends are applied to repay the staff loans. There have been no grants under the
Plan since 2008.
Consolidated
Recognised share-based payment expenses
Expense arising from equity settled share-based payment transactions
Total expense arising from share-based payment transactions
Employee share and loan values and EPS impact (1)
Employee Share and Loan Values
Value of unlisted employee shares on issue at 30 June 2010 -
4,340,147 shares @ $8.18 (2009 - 4,879,777 shares @ $6.93)
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
2010
$m
7.8
7.8
35.5
32.7
-
(5.0)
27.7
2009
$m
11.9
11.9
33.8
37.4
-
(4.7)
32.7
Number of employees with outstanding loan balances
2,525
2,894
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
29.6
4.27%
0.9
67.4
67.6
34.4
5.89%
1.4
25.4
25.9
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% (2009: 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.
(1) The EPS analysis relates to shares issued under the Company’s current and legacy employee share plans. The
analysis does not take into account the plans operated by Adelaide Bank as summarised on the next page.
144
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SHARE BASED PAYMENT PLANS (continued)
Current Plans cont’d…
Share Grant Plan
The Company has established a tax-exempt Employee Share Grant Plan (“ESGP”) as the main equity participation
platform for general employees. Shareholder approval for future grants under the ESGP was obtained at the 2008
Annual General Meeting. The ESGP is open to all full-time and permanent part-time staff in the Group (excluding
Directors and Senior Executives) who can elect to acquire fully paid ordinary shares. It is was intended that grants
under the ESGP would be made annually subject to Board discretion and having regard to company performance.
Employees will generally be entitled to participate in rights attached to the shares including to receive dividends and
to vote at general meetings. The shares are restricted for 3 years unless the employee leaves the Company. The first
grant to general employees was made in January 2009 with 764,504 fully paid ordinary shares being issued at
$10.78, being the volume weighted average price of the Company’s shares traded over the 5 days prior to the issue.
A second grant to general employees was made in March 2010 with 340,039 fully paid ordinary shares being issued
at $10.03, being the volume weighted average price of the Company’s shares traded over the 5 days prior to the
issue. The share issues were valued and expensed in accordance with applicable accounting requirements. The
expense recognised in the income statement in relation to share-based payments is disclosed on the previous page.
As at 30 June 2010 there were 1,010,721 fully paid ordinary shares held by the Plan Trustee.
Salary Sacrifice, Deferred Share and Performance Share Plan
The Company has established an Employee Salary Sacrifice, Deferred Share and Performance Share Plan (“DSP”).
The DSP provides a vehicle that will facilitate the purchase of shares on a salary-sacrifice basis and the making of
additional discretionary grants as may be required from time to time in line with the Company’s employee attraction
and retention objective.
The DSP is open to permanent full-time and part-time employees of the group and the number of shares to be
granted to employees will be determined by the Board. Employees will generally be entitled to participate in rights
attached to the shares including to receive dividends and to vote at general meetings. No shares have been issued
under the DSP to date apart from the senior executive performance share grant discussed earlier.
Discontinued Plans
The Group has the following legacy employee share plans which are now closed.
Bendigo and Adelaide Bank Employee Share Ownership Plan
The Company discontinued in 2006 the existing loan-based Employee Share Ownership Plan (“Plan”) that was open
to all employees in the Group, including the Managing Director and senior 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. Shares were issued under the Plan at market
value. The terms of the Plan are consistent with the Share Ownership Plan described earlier. The Plan provides staff
members with an interest-free loan for the sole purpose of acquiring Plan shares. Staff cannot deal in the shares until
the loan has been repaid. The primary benefit under the terms of the Plan is the financial benefit of the limited
recourse interest-free loan.
The loan will be repayable progressively out of after tax dividends (if any) paid on the shares and the sale of
unexercised renounceable rights (if any). A participant is not otherwise obliged to repay all or part of the outstanding
loan while he or she is an employee of the Bendigo and Adelaide Bank Group. The loan must be fully repaid when a
participant ends employment and before the participant can sell, transfer, mortgage or otherwise deal with the shares.
Where a participant’s employment ends as result of fraud, dishonesty or other serious issues, that participant will not
be given the opportunity to repay their loan and retain their shares. They will also lose entitlement to any proceeds
from the sale of their shares. If a participant’s employment ends and the participant has not repaid the loan within the
time period specified by the Board, the Company may sell, transfer or realise the participant’s shares and apply those
funds to cover the costs of the sale and to repay the loan. If there is a shortfall in repaying the loan once the
participant’s shares are sold, the Company will not have any further recourse against the participant.
The notional value of the limited recourse interest-free loan provided to the managing director and relevant senior
executives under this legacy Plan is disclosed in the remuneration tables that accompany this report. Information on
shares issued and loans provided under this Plan have been aggregated into the tables provided above under
“Employee Share Plan”.
Adelaide Bank Deferred Employee Share Plan
Adelaide Bank operated a deferred employee share plan (“Plan”) for senior and executive staff whereby that part of
total remuneration allocated to short-term incentive and long-term incentive were received by way of shares held in
the Plan. Participation in the Plan was at the Board’s discretion and the shares were purchased on-market.
The shares are held by the Plan Trustee for the benefit of plan participants. A participant’s right to receive shares
allocated under the Plan may be subject to performance and/or vesting criteria (“requirements”). When the
requirements have been met the participant may request the Trustee to transfer the vested shares from the Plan or
direct the Trustee to sell the shares on market.
As at 30 June 2010 there were 33,213 shares held by the Plan Trustee with 33,213 shares having vested.
145
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
SHARE BASED PAYMENT PLANS (continued)
Discontinued Plans cont’d…
Adelaide Bank Share Allocation Scheme
The Adelaide Bank Share Allocation Scheme (“Scheme”) allowed the Board to allocate a percentage of Adelaide
Bank’s pre-tax operating profit each year towards the acquisition of fully paid shares for eligible non-executive
employees (free of charge). The Scheme was open to all part time, full time and casual employees who had
completed at least one year of continuous service with Adelaide Bank.
The percentage of profit at the discretion of the Board that could be allocated under the scheme ranged between 2%
and 5%. Invitations were issued to eligible employees and, in relation to accepted invitations, the Scheme Trustee
would acquire and hold the shares on trust for the participants. Three years after the shares had been acquired, the
Trustee must transfer the shares to the participant provided the participant had not previously ceased their
employment.
As at 30 June 2010 - 8,390 shares were held by the Scheme Trustee with 8,390 shares having vested.
Adelaide Bank Loan Plan
Adelaide Bank operated an employee share plan (“Plan”) whereby shares were allotted from time to time to eligible
staff that elected to take up their entitlement. The Plan was open to all part time, full time and casual employees who
had completed at least one year of continuous service and participation in the Plan was at the Board’s discretion.
The price was generally set at market price and funded by an interest free loan from a subsidiary of Adelaide Bank.
The Plan provided participants with a right to take up a limited recourse loan from an Adelaide Bank subsidiary to
fund the purchase of the shares. Until the loan is repaid the shares are held in trust by the Trustee of the Plan.
Dividends paid on the shares were applied to repay the outstanding loan balance. The last allocation of shares made
under the Plan was in 2001.
As at 30 June 2010, the Plan Trustee held 64,500 shares under the plan with a market value of $527,610. The
aggregate amount of loans outstanding at year end was $18,060.
The above discontinued plans will continue until all shares have been withdrawn and / or outstanding loans repaid as
appropriate.
146
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
39.
AUDITOR’S REMUNERATION
Total fees paid or due and payable to Ernst & Young (Australia) (1)
Audit and review of financial statements
Audit-related fees
Regulatory
Non-regulatory
Total audit-related fees
All other fees
Taxation services
Other advice
Total other fees
Total remuneration of Ernst & Young Australia
(1) Fees exclude goods and services tax.
Consolidated
Parent
2010
$
2009
$
2010
$
2009
$
1,817,172
2,021,222
1,304,389
1,727,477
214,371
7,983
222,354
986,004
243,595
1,229,599
3,269,125
153,900
379,796
533,696
574,414
191,600
766,014
171,083
-
171,083
834,653
88,580
923,233
153,900
379,796
533,696
538,685
191,600
730,285
3,320,932
2,398,705
2,991,458
Audit and review of financial statements includes payments for the audit of the financial statements of the Group and
Parent, including controlled entities that are required to prepare financial statements.
Audit-related fees (Regulatory) consist of fees for services required by statute or regulation that are reasonably
related to the performance of the audit of the Group's financial statements and are traditionally performed by the
external auditor. These services include assurance of the Groups compliance with APRA and Australian Financial
Services Licensing reporting and compliance requirements.
Audit-related (Non-regulatory) consist of fees for assurance and related services not required by statute or regulation
but are reasonably related to the performance of the audit or review of the Group's financial statements which are
traditionally performed by the external auditor. These services include assurance of the Group's credit assessments
and reviews of the Group's acquisition accounting and tax consolidation processes.
All other fees, including taxation services and other advice are incurred under the Audit Committee's pre-approval
policies and procedures, having regard to the auditor’s independence requirements of applicable laws, rules and
regulations, and assessment that each of the non-audit services provided would not impair the independence of Ernst
& Young.
147
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
40.
KEY MANAGEMENT PERSONNEL
(a) Details of key management personnel for the Group and the Company for the 2010 financial year are presented
in the 2010 Remuneration Report at pages 50 and 72.
(b) Compensation for 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 for the 2010 financial year:
CONSOLIDATED
2010
$
2009
$
Short-term employee benefits
5,649,202
8,238,004
Post employment benefits
Other long-term benefits
286,079
218,352
900,185
146,629
Termination benefits
1,062,000
-
Share-based payment
3,343,894
2,521,041
Total Compensation
10,585,089
11,805,859
(c) Performance shares granted and vested during the year (Consolidated)
During the financial year performance shares were granted as equity compensation under the Employee Salary
Sacrifice, Deferred Share and Performance Share Plan (“Plan”) to certain key management personnel as the
long term incentive component.
The Plan provides for grants of performance shares to key executives, including the Managing Director. Under
the Plan, eligible executives are granted performance shares subject to performance conditions set by the
Board. If the performance conditions are satisfied during the relevant performance period, the performance
shares will vest.
Each performance share represents an entitlement to one ordinary share in the company. Accordingly, the
maximum number of shares that may be acquired by the key executives is equal to the number of performance
shares granted.
Performance shares are granted at no cost to the key executives. The exercise price that applies to exercisable
performance rights is nil.
The number of performance shares granted to the Managing Director and key executives have been based on
the value of each option and performance right, calculated using the recognised Black – Scholes-Merton
valuation methodology. The assessed fair value of each performance share granted under the Plan are set out
in the tables below.
The 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.
A Plan participant may not enter into a transaction designed to remove the “at-risk” element of an entitlement
under the Plan before it vests. Plan participants may only enter into a transaction designed to remove the “at
risk” element of an entitlement under the Plan after it vests and if the Board has not decided to restrict or
prohibit the participant from doing this. If a Plan participant enters into such a transaction, they must tell the
Company Secretary and provide any details requested. Details of the 2010 grant to senior executives are set
out in the following three tables.
Further details of the Plan are set out in the 2010 Remuneration Report.
148
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
Performance Shares (Grant A: TSR Performance Condition)
Vested Granted
Terms & Conditions for each Grant
30 June 2010
No.
No.
Grant Date
Fair Value
at grant
date
Exercise
price
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Current Executives
M Hirst
- Tranche 1
- Tranche 2
- Tranche 3
- Tranche 4
- Tranche 5
M Baker
- Tranche 1
- Tranche 2
- Tranche 3
D Bice
- Tranche 1
- Tranche 2
- Tranche 3
R Fennell
- Tranche 1
- Tranche 2
- Tranche 3
R Jenkins
- Tranche 1
- Tranche 2
- Tranche 3
T Piper
- Tranche 1
- Tranche 2
- Tranche 3
Former Executives
A Baum
- Tranche 1
- Tranche 2
- Tranche 3
J McPhee
- Tranche 1
- Tranche 2
- Tranche 3
- Tranche 4
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,219
76,219
76,219
76,219
76,219
11.12.09
11.12.09
11.12.09
11.12.09
11.12.09
15,243
15,243
15,243
11.12.09
11.12.09
11.12.09
9,908
9,908
9,908
11.12.09
11.12.09
11.12.09
13,338
13,338
13,338
11.12.09
11.12.09
11.12.09
15,243
15,243
15,243
11.12.09
11.12.09
11.12.09
9,908
9,908
9,908
11.12.09
11.12.09
11.12.09
15,243
15,243
15,243
11.12.09
11.12.09
11.12.09
11.12.09
11.12.09
11.12.09
11.12.09
38,109
38,109
38,109
38,109
770,180
$0.00
$0.00
$0.00
$0.00
$0.00
30.06.14
30.06.14
30.06.14
30.06.14
30.06.14
30.06.10
30.06.11
30.06.12
30.06.13
30.06.14
30.06.14
30.06.14
30.06.14
30.06.14
30.06.14
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.10
30.06.11
30.06.12
30.09.12
30.09.12
30.09.12
$0.00
$0.00
$0.00
$0.00
30.06.12
30.06.12
30.06.12
30.06.14
30.06.10
30.06.11
30.06.12
30.06.13
30.09.13
30.09.13
30.09.13
30.06.13
$7.19
$6.61
$6.19
$5.70
$5.02
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$7.19
$6.61
$6.19
$5.70
149
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
Performance Shares (Grant B: Continued Service)
30 June 2010
Vested Granted
No.
No.
Grant
Date
Fair
Value at
grant
date
Current Executives
M Hirst
- Tranche 1
- Tranche 2
- Tranche 3
- Tranche 4
- Tranche 5
M Baker
- Tranche 1
- Tranche 2
- Tranche 3
D Bice
- Tranche 1
- Tranche 2
- Tranche 3
R Fennell
- Tranche 1
- Tranche 2
- Tranche 3
R Jenkins
- Tranche 1
- Tranche 2
- Tranche 3
T Piper
- Tranche 1
- Tranche 2
- Tranche 3
Former Executives
A Baum
- Tranche 1
- Tranche 2
- Tranche 3
J McPhee
- Tranche 1
- Tranche 2
- Tranche 3
- Tranche 4
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,219 11.12.09
76,219 11.12.09
76,219 11.12.09
76,219 11.12.09
76,219 11.12.09
15,243 11.12.09
15,243 11.12.09
15,243 11.12.09
9,908 11.12.09
9,908 11.12.09
9,908 11.12.09
13,338 11.12.09
13,338 11.12.09
13,338 11.12.09
15,243 11.12.09
15,243 11.12.09
15,243 11.12.09
9,908 11.12.09
9,908 11.12.09
9,908 11.12.09
15,243 11.12.09
15,243 11.12.09
15,243 11.12.09
38,109 11.12.09
38,109 11.12.09
38,109 11.12.09
38,109 11.12.09
770,180
$8.56
$8.19
$7.83
$7.50
$7.17
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$8.56
$8.19
$7.83
$7.50
Terms & Conditions for each Grant
Exercise
price
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
$0.00 30.06.14 30.06.10 30.06.14
$0.00 30.06.14 30.06.11 30.06.14
$0.00 30.06.14 30.06.12 30.06.14
$0.00 30.06.14 30.06.13 30.06.14
$0.00 30.06.14 30.06.14 30.06.14
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.12
$0.00 30.06.12 30.06.11 30.06.12
$0.00 30.06.12 30.06.12 30.06.12
$0.00 30.06.12 30.06.10 30.06.13
$0.00 30.06.12 30.06.11 30.06.13
$0.00 30.06.12 30.06.12 30.06.13
$0.00 30.06.14 30.06.13 30.06.13
Performance Shares (Grant A and Grant B)
The movement in performance shares granted by the Company is presented in the following table.
30 June 2010
Balance
at
01.7.09
Granted as
Remun-
eration
Performance
Shares Vested
Net Change
Other
Balance at
30.6.10
Total
Exercisable
Not
Exercisable
Current Executives
M Hirst
M Baker
D Bice
R Fennell
R Jenkins
T Piper
Former Executives
A Baum
J McPhee
Total
-
-
-
-
-
-
-
-
-
762,190
91,458
59,448
80,028
91,458
59,448
91,458
304,872
(125,761)
(25,151)
(16,348)
(22,008)
(25,151)
(16,348)
-
-
-
-
-
-
636,429
66,307
43,100
58,020
66,307
43,100
636,429
66,307
43,100
58,020
66,307
43,100
(25,151)
-
(66,307)
(304,872)
-
-
-
-
1,540,360
(255,918)
(371,179)
913,263
913,263
-
-
-
-
-
-
-
-
-
636,429
66,307
43,100
58,020
66,307
43,100
-
-
913,263
150
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
Performance Options FY 2010
There were no grants of options during or subsequent to the financial year ended 30 June 2010 and no shares were
issued on the exercise of vested options.
Balance
01.7.09
30 June 2010
Current Executives
M Hirst
M Baker
D Bice
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
248,862
109,414
-
47,445
122,500
47,445
-
97,195
Former Executives
A Baum
G Gillett
D Hughes
R Hunt
C Langford
J McPhee
P Riquier
50,365
134,017
45,985
402,352
145,534
189,781
40,146
Total
1,681,041
Options
Exercised
Net Change
Other
Balance
30.6.10
Total
Exercisable
Not
Exercisable
Granted
as
Remun-
eration
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(44,601)
(30,516)
-
-
(34,038)
-
-
(25,822)
(50,365)
(37,559)
(45,985)
(160,465)
(145,534)
(189,781)
-
204,261
78,898
-
47,445
88,462
47,445
-
71,373
-
96,458
-
241,887
-
-
40,146
204,261
78,898
-
47,445
88,462
47,445
-
71,373
-
96,458
-
241,887
-
-
40,146
764,666
916,375
916,375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
204,261
78,898
-
47,445
88,462
47,445
-
71,373
-
96,458
-
241,887
-
-
40,146
916,375
Performance Options FY 2009
Balance
01.7.08
30 June 2009
Current Executives
R Hunt
J McPhee
M Baker
A Baum
R Fennell
G Gillett
M Hirst
D Hughes
R Jenkins
C Langford
T Piper
P Riquier
A Watts
402,352
-
58,401
-
-
70,251
84,986
-
64,807
75,695
-
-
46,976
Granted
as
Remun-
eration
-
189,781
51,013
50,365
47,445
63,766
163,876
45,985
57,693
69,839
47,445
40,146
50,219
Total
803,468
877,573
Options
Exercised
Net Change
Other
Balance
30.7.09
Total
Exercisable Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
402,352
189,781
109,414
50,365
47,445
134,017
248,862
45,985
122,500
145,534
47,445
40,146
97,195
402,352
189,781
109,414
50,365
47,445
134,017
248,862
45,985
122,500
145,534
47,445
40,146
97,195
120,349
-
-
-
-
-
-
-
-
-
-
-
-
282,003
189,781
109,414
50,365
47,445
134,017
248,862
45,985
122,500
145,534
47,445
40,146
97,195
1,681,041
1,681,041
120,349
1,560,692
-
-
-
-
-
-
-
-
-
-
-
-
-
-
151
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
Performance Rights FY 2010
There were no grants of performance rights during or subsequent to the financial year ended 30 June 2010. During
the year 46,076 shares (2009: 19,043 shares) were issued on the exercise of performance rights. This includes
36,238 shares issued to senior executives listed below on the exercise of performance rights. A further 9,838 shares
were issued to other senior management who participated in previous grants under the executive incentive Plan.
Granted
as
Remun-
eration
Rights
Vested /
Exercised
Net
Change
Other
Balance
at
30.6.10
Total
Exercisable
Not
Exercisable
Balance at
01.7.09
30 June 2010
Current Executives
M Hirst
M Baker
D Bice
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
Former Executives
A Baum
G Gillett
D Hughes
R Hunt
C Langford
J McPhee
P Riquier
38,683
17,511
-
18,238
19,587
18,238
-
15,404
19,360
21,396
17,677
47,914
23,204
69,490
15,432
Total
342,134
Performance Rights FY 2009
Balance
01.7.08
30 June 2009
Current Executives
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,406)
-
(1,406)
-
-
(7,058)
(4,829)
-
(9,843)
(5,386)
(9,843)
-
(4,086)
(1,493)
-
(11,344)
-
(14,207)
(5,192)
(1,190)
(17,867)
(5,944)
(6,333)
(25,391)
(8,997)
(64,298)
(8,328)
31,625
12,682
-
6,989
14,201
6,989
-
11,318
-
15,452
-
22,523
-
-
5,914
31,625
12,682
-
6,989
14,201
6,989
-
11,318
-
15,452
-
22,523
-
-
5,914
36,238
178,203
127,693
127,693
Granted
as
Remun-
eration
Rights
Vested /
exercised
Net
Change
Other
Balance
30.6.09
Total
Exercisable
R Hunt
J McPhee
M Baker
A Baum
R Fennell
G Gillett
M Hirst
D Hughes
R Jenkins
C Langford
T Piper
P Riquier
A Watts
66,957
41,533
9,996
11,941
11,249
12,002
14,542
10,903
11,088
12,916
11,249
9,518
8,006
-
27,957
7,515
7,419
6,989
9,394
24,141
6,774
8,499
10,288
6,989
5,914
7,398
(19,043)
-
-
-
-
-
-
-
-
-
-
-
-
Total
231,900
129,277
(19,043)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,914
69,490
17,511
19,360
18,238
21,396
38,683
17,677
19,587
23,204
18,238
15,432
15,404
47,914
69,490
17,511
19,360
18,238
21,396
38,683
17,677
19,587
23,204
18,238
15,432
15,404
342,134
342,134
152
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,625
12,682
-
6,989
14,201
6,989
-
11,318
-
15,452
-
22,523
-
-
5,914
127,693
Not
Exercisable
47,914
69,490
17,511
19,360
18,238
21,396
38,683
17,677
19,587
23,204
18,238
15,432
15,404
342,134
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
(d) Shareholdings of directors and named executives (including their related parties) in the Company:
Name
Balance 1 July 2009
Ordinary
shares
Employee
shares
Pref
Shares
Ordinary
shares
Net Change
Employee
shares
Pref
Shares
Balance 30 June 2010
Employee
shares
Ordinary
shares
Pref
Shares
Non-Executive Directors
R Johanson
K Abrahamson
J Dawson
J Hazel
D Matthews
T O’Dwyer
D Radford
A Robinson
Current Executives
M Hirst
M Baker
D Bice
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
Former Executives 1
A Baum
G Gillett
D Hughes
R Hunt
C Langford
J McPhee
P Riquier
306,113
17,801
21,705
-
540
63,300
1,700
3,200
1,202
8,957
3,442
-
27,087
16,878
3,717
1,630
538
10,617
708
388,193
1,450
337,826
-
-
-
-
-
-
-
-
-
50,000
55,720
28,817
-
69,880
-
250
19,470
30,746
132,590
-
600,000
123,367
204,250
2,467
1,000
309
150
-
-
-
-
-
-
500
-
-
-
-
-
-
33,838
1,483
4,717
5,145
1,000
5,275
200
2,766
8,086
12,785
155
1,406
-
1,406
-
1,757
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99
99
-
-
-
-
-
-
-
(538)
(10,617)
(708)
(388,193)
(1,450)
(337,826)
-
(30,746)
(132,590)
-
(600,000)
(123,367)
(204,250)
(2,467)
-
-
(50)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
339,951
19,284
26,422
5,145
1,540
68,575
1,900
5,966
9,288
21,742
3,597
1,406
27,087
18,284
3717
3,387
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
55,720
28,817
-
69,880
-
349
19,569
-
-
-
-
-
-
-
1,000
309
100
-
-
-
-
-
-
500
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,216,604
1,317,557
1,959
(659,313)
(1,093,222)
(50)
557,291
224,335
1,909
1 During the year the former executives were issued ordinary shares in relation to vested and exercised performance rights (refer
“Performance Rights” table above): A Baum - 1,493 shares, R Fennell - 1,406 shares, D Hughes - 11,344 shares, C Langford -
14,207 shares, J McPhee - 5,192 shares, T Piper - 1,406 shares and P Riquier – 1,190 shares.
All equity transactions with key management personnel 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 and the Adelaide Bank Loan Plan. Issue of shares under the Employee Share Plans
are made under conditions disclosed in Note 38.
(f) 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
Interest
charged
Interest not
charged
Write-off
Balance at
end of
period
Number at
30 June 2009
$’000
$’000
$’000
$’000
$’000
Directors1
Executives1
2010 2
2009 2
2010 2
2009 2
Total directors and executives
2010 2
2009 2
3,667
14,146
13,571
8,562
17,238
22,708
-
-
-
-
-
-
2,981
11,824
3,810
6,555
6,791
18,379
5
7
8
10
13
17
-
235
216
102
216
337
273
645
468
355
741
1,000
153
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
(ii) Details of individuals (including their related parties) with loans above $100,000 in the reporting period are as
follows:
Directors
R Johanson
J Dawson
D Radford
T Robinson
D Matthews
Current Executives
M Hirst
Staff share loan
Loans
M Baker
Staff share loan
Loans
D Bice
Staff share loan
Loans
R Fennell
Loans
R Jenkins
Staff share loan
Loans
T Piper
Loans
S Thredgold
Loans
A Watts
Staff share loan
Loans
Former Executives
A Baum
Loans
G Gillett
Staff share loan
Loans
R Hunt
Staff share loan
Loans
C Langford
Staff share loan
Loans
J McPhee
Staff share loan
Loans
P Riquier
Loans
Balance
at beginning of
period
$’000
Interest
charged
Interest not
charged
Write-off
$’000
$’000
$’000
Balance at
end of
period
$’000
Highest owing
in period
$’000
1,030
449
995
800
393
269
3
228
97
110
29
407
245
1,035
2
-
59
423
452
428
701
2,101
3,636
401
1,593
129
1,006
218
100
30
39
69
35
-
2
-
5
-
21
36
-
65
1
23
-
21
15
-
38
-
90
-
67
-
74
10
-
-
-
-
-
11
-
9
-
4
-
-
10
-
-
-
2
-
-
17
-
151
-
9
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,273
449
389
500
370
252
40
209
57
100
424
508
222
1,243
31
325
53
346
-
-
-
-
-
-
-
-
-
-
1,463
484
1,000
808
437
269
79
228
97
110
449
908
245
1,391
36
357
59
577
451
428
701
2,101
3,636
401
1,593
129
1,006
218
1 Balances include interest-free loans provided to the Managing Director and Senior Executives in connection with share
issues under employee share plans as described at Note 38.
2 Opening balances have been adjusted to include loans to directors and senior executives appointed during the year and to
exclude directors and senior executives who ceased during the year. The closing balances excludes directors and
executives who ceased during the year.
154
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
KEY MANAGEMENT PERSONNEL (continued)
Terms and conditions of director and senior executive loans
The loans to directors and senior executives are made in the ordinary course of the company’s business and on an
arms length basis. The loans are processed and approved in accordance with the Bank’s standing lending processes
and prevailing terms and conditions.
Terms and conditions of the loans under Employee Share Ownership Plan
Loans have been provided to senior executives under the terms of Bank’s legacy Employee Share Ownership Plan
and Adelaide Bank Loan Plan. Details of the Plan’s terms and conditions are provided at Note 38 to the financial
statements.
(g)
Other transactions of directors and director related entities
Mr R Johanson is a director of the Grant Samuel Group, which provided professional advisory services to Bendigo
and Adelaide 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 services provided during the 2010 financial year included services in relation to the purchase of Tasmanian
Banking Services, the Company’s strategy for the Great Southern managed investment schemes and the Bank’s
Adelaide and Sydney long term accommodation projects. The amount paid or payable for the year was $1,063,660
(2009: $1,216,187).
41.
RELATED PARTY DISCLOSURES
Ultimate Parent Entity
Bendigo and Adelaide Bank Limited is the ultimate parent entity.
Wholly owned group transactions
Bendigo and Adelaide Bank Limited is the parent entity of all entities listed in Note 21 - 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 and Adelaide 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 net 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 and is included in the table below.
155
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RELATED PARTY DISCLOSURES (continued)
Material transactions excluding dividends, between Bendigo and Adelaide Bank and its subsidiaries during the period
were as follows:
Bendigo Finance Pty Ltd
Tasmanian Banking Services Limited (1)
National Mortgage Market Corporation Limited
National Assets Securitisation Corporation Pty Ltd
Fountain Plaza Pty Ltd
Victorian Securities Corporation Limited
Bendigo Financial Planning Limited
Benhold Pty Ltd
IOOF Building Society Pty Ltd
Rural Bank Limited (1)
Community Developments Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Sandhurst Trustees Limited
Oxford Funding Pty Ltd
Sunstate Lenders Mortgage Insurance Limited
Pirie Street Holdings Limited
(previously Adelaide Bank Limited)
Adelaide Equity Finance Pty Ltd
Leveraged Equities
Co-op Member Services Pty Ltd
Hindmarsh Financial Service Pty Ltd
AB Management Pty Ltd
Adelaide Managed Funds Limited
Hindmarsh Adelaide Property Trust
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
Net receipts and
Supplies,
Net amount
fees (paid to)/
fixed assets
received from
and services
owing
to/(from)
subsidiaries
charged to
subsidiaries
subsidiaries
at 30 June
$m
0.4
0.4
2.3
-
2.9
(1.0)
(0.9)
-
(0.2)
91.2
1.5
15.1
13.0
9.8
-
5.1
-
(20.4)
1.2
-
0.4
0.9
(0.5)
1.2
8.6
(60.4)
0.5
45.2
-
-
77.9
32.1
416.9
(388.1)
(730.9)
(191.6)
0.4
22.2
(0.3)
(1.8)
2.9
6.9
7.0
2.6
(1.0)
(4.4)
$m
-
-
4.4
-
0.4
0.5
-
-
-
1.8
2.4
2.7
11.2
11.9
-
-
-
-
7.5
-
1.4
1.8
-
-
12.1
10.0
-
6.9
-
1.4
-
52.7
3.3
8.6
24.9
18.6
-
-
-
(0.7)
-
-
1.5
8.6
-
(0.5)
$m
(1.2)
(1.6)
(2.1)
-
10.0
7.5
-
0.9
1.4
1.6
7.6
8.5
(2.4)
(4.2)
-
-
-
-
0.5
-
(10.1)
(9.1)
(0.7)
(0.2)
(74.2)
(70.7)
1.9
1.4
-
(10.0)
-
(77.9)
16.9
(396.7)
(966.0)
(210.2)
22.6
22.2
(1.4)
(1.1)
9.8
6.9
(0.5)
(6.0)
(4.9)
(3.9)
(1) Fully consolidated contributions of Tasmanian Banking Services Limited from August 2009 and Rural Bank Limited from October 2009
Dividends paid by subsidiaries are disclosed in the table below.
Bendigo and Adelaide 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 net amount owing to/(from)
subsidiaries in the above table.
All funding and guarantee facilities are provided to subsidiary companies on normal commercial terms and conditions.
156
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RELATED PARTY DISCLOSURES (continued)
Several subsidiary companies have bank accounts and investment funds held with Bendigo and Adelaide Bank
Limited under normal terms and conditions. These balances are included in the amount owing to/(from) subsidiaries
in the above table.
Subsidiary
Sandhurst Trustees Limited
Bendigo Financial Planning Limited
Victorian Securities Corporation Limited
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Facility
Standby
Guarantee
Standby
Guarantee
Overdraft
Overdraft
Guarantee
Limit
20.0
-
10.0
-
0.4
0.8
-
Drawn/issued at
30 June 2010
-
-
-
-
-
0.6
-
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 and Adelaide 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 and Adelaide Bank Limited from subsidiary companies are included in the above table:
Adelaide Bank Limited
(now Pirie Street Holdings Limited)
Sandhurst Trustees Limited
Sunstate Lenders Mortgage Insurance Pty Ltd
Leveraged Equities
Rural Bank Limited
Caroline Springs Financial Services Limited
Funds Transfer Services Limited
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
$m
-
86.8
15.0
14.4
1.3
10.0
60.0
-
14.7
-
0.1
-
0.5
-
During the year transactions between subsidiaries occurred between Sandhurst Trustees Limited and Victorian Securities Corporation Limited,
totalling $19.9 million. There were no other material transactions between subsidiary companies.
Other related party transactions
Securitised and sold loans
The bank securitised loans totalling $2,550.7 million (2009: $5,857.6 million) during the financial year. No loans were
sold to the Common Funds managed by Sandhurst Trustees Limited during the year (2009: $248.9 million). The
consolidated Group does invest in some of its own securitisation programs where the Bank holds A & B notes
equivalent to $6,049.8m as at 30 June 2010 (2009: $4,565.9 million). The Bank does invest in other securitisation
programs unrelated to the Bank as part of normal Investment activities.
Joint venture entities
Bendigo and Adelaide Bank Limited has investments in joint venture entities as disclosed in Note 22 - Investments in
joint ventures. The group has transactions with the joint venture entities, principally relating to commissions received
and paid, services and supplies procured from joint ventures 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. 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 joint venture entities at arm's length in
the same circumstances.
157
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RELATED PARTY DISCLOSURES (continued)
During the financial year, transactions took place between the Bendigo and Adelaide Bank group and joint venture
entities as follows:
Rural Bank Limited
Tasmanian Banking Services Ltd
Community Sector Enterprises Pty Ltd
Silver Body Corporate Financial Services Pty Ltd
Strategic Payments Services Pty Ltd
Homesafe Trust
Community Telco Australia Pty Ltd
Commissions
Supplies and
Amount owing
and fees paid
services
to/(from)
to joint ventures
provided to
joint ventures at
joint ventures
30 June
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
$m
0.4
1.4
1.0
10.5
5.3
3.8
1.2
1.1
10.9
6.6
-
-
-
-
$m
2.9
8.2
0.2
3.3
2.8
2.9
0.4
0.4
-
-
-
-
-
-
$m
-
(0.3)
-
0.5
0.3
0.1
-
0.1
-
-
(144.0)
(98.5)
(1.0)
(0.7)
Dividends received and receivable from joint venture entities are disclosed in Note 4 – Profit.
Bendigo and Adelaide Bank Limited provides loans, guarantees and/or overdraft facilities to joint venture companies
in connection with cash flow management, and the payment of administration costs on behalf of the joint venture
companies. The loans have agreed repayment terms which vary according to the nature of the facility. These loans
are included in the net amount owing to/(from) joint ventures in the above table.
158
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
42.
RISK MANAGEMENT
RISK OVERSIGHT
The management of risk is an essential element of the Group’s strategy and profitability and the way the Group
operates.
The Board, being ultimately responsible for risk management associated with the Group’s activities, has established
an integrated governance and accountability framework, policies and controls to identify, assess, monitor and
manage risk.
In addition to strategic and reputation risk the material business risks relating to the Group can be categorised as:
credit, market (including interest rate and currency), liquidity, and operational risk (includes compliance, contagion,
environment/sustainability risks).
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 (“MD”), management
committees to the various risk, support and business units of the Group.
An essential element of the risk framework is the risk culture of the Group. Management of risk is the responsibility of
the business units of the Group. Embedded in our culture is the value in all staff to doing the right thing, taking
responsibility for managing risks inherent in their role and engaging with our stakeholders including the broader
community to deliver a sustainable business proposition for all. The Group’s risk management culture is also
demonstrated by many aspects of management of the Group, including:
Risk is managed both top down and bottom up.
Risk management is embedded in strategy, planning, policy (including remuneration) and procedures.
An ability to identify opportunities, strive for quality and efficiency and minimise losses.
Maintaining risk competencies especially for key roles.
Regular discussion on risk at the business unit level.
Acting promptly to manage risks and events whether internal or external.
The existence of a close working relationship/partnership between the business and risk functions and
acceptance of a “healthy tension” between the functions.
Board Responsibilities
In accordance with the Board Charter, the Board principally through the Audit, Credit, Risk, Change Framework and
Technology Governance and Governance & HR Committees oversees the establishment, implementation, review and
monitoring of risk management systems and policies, taking into account the risk appetite of the Group, the overall
business strategy, management expertise and the external environment. This includes approving risk limits and risk
policies.
Board Committee Responsibilities
The Board has approved policies that support the implementation of a risk oversight and management framework for
the Group. These policies are overseen by the Board Committees with each Committee operating under a Board
approved charter that is reviewed annually.
Each Committee has established Terms of Reference that describes the relevant responsibilities in respect to
oversight and monitoring of Board-approved risk management policies.
The Committees evaluate developments in respect to the Group’s structure and operations, as well as economic,
industry and market developments that may impact the Group’s management of risk.
Executive Responsibilities
On a day to day basis each Executive, management and staff are responsible for carrying out their roles in a way that
manages risk in line with policies and procedures.
Whilst the Board has responsibility for approving the Group’s appetite for risk, the MD and other Executive Committee
members are responsible for developing strategies and business plans commensurate with that risk appetite.
The Executive Committee has responsibility for ensuring that the Board approved strategies and decisions are
appropriately implemented as well as managing and monitoring the day to day activities of the Group including the
management of risk and consideration of emerging risks and opportunities.
The Executive has a number of committees that assists the Executive consider risk management matters including
the Asset Liability Management Committee, Credit Committee and the Operational Risk Committee.
159
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Independent Review
Group Assurance (Internal Audit)
The Group Assurance function operates under a charter and annual audit plan approved by the Board Audit
Committee. The Board, on recommendation of the Board Audit Committee, approves the appointment of the head of
Group Assurance. The Committee receives reports at each meeting in respect to the outcomes and status of the
internal bank assurance plan. The independent Group Assurance function audits all functions across the Group
including the effectiveness of the Group’s risk management and internal compliance and control systems, in line with
the bank assurance plan and has direct access to the Board through the Board Audit Committee.
Group Risk
Group Risk is an independent function of the Group, providing the frameworks, policies and procedures to assist the
Group in managing credit and operational risk in line with the strategy and risk appetite set by the Board.
The Group Credit Risk function is responsible for reviewing portfolio credit quality, policy development and
promulgation, credit policy compliance, the assessment of large/maximum credit and manages the performance of
the credit management system at the Group level.
The Group Operational Risk function is responsible for providing the frameworks, tools and support to assist the
business in the management of its operational risk (including regulatory compliance, business continuity, financial
crimes and dealings through Partners).
The Group Insurance function develops an insurance strategy and program for “insurable risk” which is approved by
the Board Risk Committee
The Group Risk function has direct access to the Board through the Board Credit and Risk Committees.
Middle Office
A Middle Office function has been established within Finance and Treasury that is responsible for monitoring market
risk and Treasury policy compliance (including adherence to tolerance limits). Middle Office reports to the Chief
Financial Officer and has direct access to the Asset Liability Management Committee and in turn the Board Risk
Committee.
MD/CEO and CFO Assurance
As part of the statutory reporting arrangements for the Group, the Managing Director (MD/CEO) and Chief Financial
Officer (CFO), provide a written declaration to the Board that:
The Group’s financial statements present a true and fair view, in all material respects, of the Group’s financial
position and performance, are in accordance with the Corporations Act and comply with the Corporations
Regulations 2001 and comply with accounting standards.
The financial records of the Group for the financial year have been properly maintained in accordance with
Section 286 of the Corporations Act 2001.
The above statements regarding the integrity of the financial reports are founded on a sound system of risk
management and internal control and that the systems, including those relating to business continuity, are
operating effectively in all material respects in relation to financial reporting risks.
Any other matters that are prescribed by the Corporations Act regulations as they relate to the financial
statements and notes to the financial statements are met.
To provide this assurance a formal due diligence and verification process, including attestations from management, is
conducted. This assurance is provided each six months in conjunction with the half year and full year financial
reporting obligations. The statements are made on the basis that they provide a reasonable but not absolute level of
assurance and do not imply a guarantee against adverse circumstances that may arise in future periods.
In addition a description of the systems and policies employed to manage the key risks to which the Bank and Group
is exposed is provided to APRA. The MD confirms annually the integrity of these descriptions to APRA with the
endorsement of the Board.
RISK PRINCIPLES
Overview
The Group’s Risk Management Principles and Systems Description document summarises the risk management
control framework of the Group. These principles are approved by the Board and may be amended with
endorsement of the Board. Specific details and responsibilities for managing each category of risk are contained in
the relevant policy statements, frameworks and procedural manuals.
The risk principles are summarised below.
Risk Management Strategy
A structured framework has been established to ensure that the risk management objectives are linked to the Group’s
business strategy and operations. The risk management strategy is underpinned by an integrated framework of
responsibilities and functions driven from Board level down to operational levels, covering all aspects of risk, most
notably market, credit, liquidity, operational (includes compliance, contagion and environmental), strategic and
reputation risks.
The framework recognises the governance structure and risk management framework referred to above.
160
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Risk Limits
Risk limits for market risk, credit risk and capital at risk are set and monitored by the appropriate management
committees within the parameters approved by the Board.
The management of operational risk is performed using qualitative self assessment and the Group has defined
general parameters to manage the Group-wide operational risk profile to comply with the approved risk appetite and
tolerances.
Limits (which may be in the form of net interest income, net profit before or after tax, retained earnings, market value
of equity or other key performance indicators) are based upon the level of capital the Board is willing to place at risk.
Limits are calculated by aggregating quantifiable measures of market, credit and operational risk.
Prior to approval by the Board, limits are formally reviewed on a regular basis by the appropriate management and
Board committees, and consider changes in market conditions, strategy or risk appetite. The limits are set and
reviewed regularly by the Asset Liability Management Committee (“ALMAC”), Credit Committee and Executive
Committee. They align with the budgeting and planning cycle take into account historic and projected risk-adjusted
performance and are independently monitored.
Risk Management Measurement Reporting and Control
Effective measurement, reporting and control of risk is vital to manage the Group’s business activities in accordance
with overall strategic and risk management objectives. The risk management, reporting and control framework
requires the quantification of market, credit and liquidity risk, the capability to aggregate and monitor exposures, a
comprehensive set of limits to ensure that exposures remain within agreed boundaries, and a mechanism for
evaluating performance on a risk-adjusted basis. The management of operational risk is based on a documented
policy and framework. The Board has defined general parameters to manage the Group-wide operational risk profile
to comply with the approved risk appetite and tolerances which considers both downside risk and opportunities.
Internal controls
The risk management framework requires robust internal controls across all aspects of the business as well as strong
support functions covering legal, regulatory, governance, reputation, finance, information technology, human
resources and strategy. Consequently the effectiveness and efficiency of controls is evaluated in all new and
amended products, processes and systems or where external and internal factors impact the operating environment
(e.g. changes in organisation structure, growth, new regulation).
Risk Management Systems
Accurate, reliable and timely information is vital to support decisions regarding risk management at all levels. The
requirements span a diverse range of risk functionality including market and credit risk analysis systems, budgeting,
strategic planning, asset and liability management, performance measurement, operational risk and regulatory
reporting, as well as trading and trade processing systems and those systems supporting our staff.
Data reconciliation is established to provide for the integrity of the information used and appropriate security controls
around all systems. Back-up and recovery procedures are defined and business continuity plans approved and
communicated to promote resilience and minimise the impact of an incident.
The Group maintains and implements specific policies and procedures to measure, monitor, manage and report on
the material risks to which the Group is exposed. Each policy contains requirements to be met for review and
approval.
MATERIAL RISKS
Overview
The risk management framework of the Group is structured upon:
Core Risk Principles – overriding principles governing all activities and risk monitoring procedures; and
Specific Risk Policies – appropriate policies, framework documents, procedures and processes implemented to
manage specific risks to which the Group is exposed.
The Board, and industry regulators, have identified the material risks to which the Group is exposed as being credit,
market (including interest rate and currency), liquidity and operational risk. Specific risk management structures have
been established by the Group to manage these and other risks (e.g. reputation, strategic, contagion and
sustainability).
The material risks are described below.
161
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Credit Risk
Credit risk is the potential that the Group will suffer a financial loss due to the unwillingness or inability of
counterparties to fully meet their contractual debts and obligations.
The Board 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 (including the Credit Committee), partners and the Board Credit Committee can approve transactions.
Group Credit Risk has responsibility for:
Managing, maintaining and enhancing the currency and relevance of the Group’s Credit Policies;
Providing support and analysis of credit portfolio information for credit management purposes;
Reporting to the Credit Committee and the Board Credit Committee and
Jointly approving larger transactions that are not required to be submitted to the Credit Committee for
approval.
The table below shows the maximum exposure to credit risk for the components of the balance sheet, including
derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting
and collateral agreements.
Gross maximum exposure
Consolidated
Parent
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Other assets
Financial assets available for sale - share investments
Derivatives
Shares in controlled entities
Amounts receivable from controlled entities
Loans and other receivables - investment
Gross loans and other receivables
Contingent liabilities
Commitments
Total credit risk exposure
2010
$ m
760.5
279.7
3,985.2
261.5
482.8
618.2
111.7
7.4
-
-
541.0
43,158.3
50,206.3
179.5
4,529.1
4,708.6
2009
$ m
912.6
235.4
3,882.3
-
344.9
512.3
84.1
49.0
-
-
505.7
38,417.2
44,943.5
171.6
4,632.4
4,804.0
2010
$ m
615.0
279.0
3,986.3
2,039.3
97.4
460.8
3.0
130.8
653.6
694.9
541.0
35,791.6
45,292.7
176.5
4,456.3
4,632.8
2009
$ m
527.5
235.4
5,613.3
-
266.4
660.4
5.9
124.7
460.6
765.7
505.7
34,801.4
43,967.0
171.6
4,616.2
4,787.8
54,914.9
49,747.5
49,925.5
48,754.8
Where financial instruments are recorded at fair value the amounts shown above represent the current credit risk
exposure but not the maximum risk exposure that could arise in the future as a result of changes in values.
The effect of collateral and other risk mitigation techniques is shown in the Ageing table, page 165 below.
Concentrations of the maximum exposure to credit risk
Concentration of risk is managed by client/counterparty, by geographical region and by industry sector. The
maximum credit exposure to any client or counterparty as at 30 June 2010 was $561.5 million (2009: $519.8 million)
before taking account of collateral or other credit enhancements and $561.5 million (2009: $519.8 million) net of such
protection.
Geographic
The group’s financial assets, before taking into account any collateral held or other credit enhancements can be
analysed by the following geographic regions:
Gross maximum exposure
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia/Northern Territory
Western Australia
Tasmania
Overseas/other
Total credit risk exposure
Consolidated
Parent
2010
$ m
2009
$ m
2010
$ m
2009
$ m
18,414.4
12,628.6
401.1
9,944.2
5,593.4
6,522.0
972.3
438.9
54,914.9
15,574.0
12,984.5
468.3
8,757.8
6,936.6
3,590.5
816.2
619.6
49,747.5
19,859.2
10,401.1
395.8
8,293.8
4,686.8
5,034.2
867.2
387.4
49,925.5
16,170.7
12,701.2
422.1
8,059.6
7,680.3
2,387.8
722.1
611.0
48,754.8
162
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Industry sector
An industry sector analysis of the group’s financial assets, before taking into account collateral held or other credit
enhancements, is as follows:
Industry Concentration
Consolidated
Accomodation and food services
Administrative and support services
Agriculture, forestry and fishing
Arts and recreation services
Construction
Education and training
Electricity, gas, water and waste services
Financial and insurance services
Financial services
Health care and social assistance
Information media and telecommunications
Manufacturing
Margin Lending
Mining
Other
Other Services
Professional, scientific and technical services
Public administration and safety
Rental, hiring and real estate services
Residential/consumer
Retail trade
Transport, postal and warehousing
Wholesale trade
Gross
maximum
exposure
2010
$ m
571.6
328.9
5,048.9
202.0
2,127.2
412.7
200.0
1,102.0
6,322.1
1,023.2
193.8
906.2
3,627.0
252.6
308.7
578.4
769.3
634.4
3,175.6
24,568.6
1,334.5
765.3
461.9
Gross
maximum
exposure
2009
$ m
482.6
305.4
1,592.9
216.7
1,974.9
422.1
172.0
1,124.0
5,893.6
933.6
199.2
905.8
3,315.8
256.5
278.4
537.0
714.2
461.2
2,923.5
24,144.7
1,613.4
793.7
486.3
Parent
Gross
maximum
exposure
2010
$ m
481.1
238.3
1,264.0
162.3
1,605.9
247.0
132.7
1,021.0
9,025.2
764.3
135.3
618.4
-
173.0
153.6
438.1
604.9
437.6
3,067.9
27,407.7
1,057.9
528.3
361.0
Gross
maximum
exposure
2009
$ m
441.1
240.2
1,505.4
189.8
1,618.6
312.1
140.5
1,078.5
8,677.9
792.6
164.5
736.8
-
216.8
263.1
441.6
609.7
361.1
3,037.4
25,396.0
1,426.7
666.9
437.5
54,914.9
49,747.5
49,925.5
48,754.8
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are
implemented regarding the acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:
For commercial lending, charges over real estate properties (including residential properties), inventory and trade
receivables
For retail lending, mortgages over residential properties
Management monitors the market value of collateral, requests additional collateral in accordance with the underlying
agreement, and monitors the market value of collateral obtained during the review of the adequacy of the allowance for
impairment losses.
It is the group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay
the outstanding claim.
163
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Credit quality
The credit quality of financial assets is managed by the group using internal credit ratings. The table below shows the credit
quality by class of asset for financial asset balance sheet lines, based on the group’s credit rating system.
Consolidated
2010
High
Grade
Neither past due or impaired
Sub-standard
Grade
Standard
Grade
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Other assets
Financial assets available for sale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
2009
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Other assets
Financial assets available for sale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
$ m
760.5
279.7
3,985.2
261.5
482.8
-
-
7.4
-
4,802.5
10,579.6
912.6
235.4
3,882.3
-
344.9
-
-
49.0
-
2,327.6
$ m
-
-
-
-
-
-
-
-
392.7
8,326.7
8,719.4
-
-
-
-
-
-
-
-
318.2
6,875.9
$ m
-
-
-
-
-
-
-
-
-
983.5
983.5
-
-
-
-
-
-
-
-
-
652.6
Unrated
$ m
-
-
-
-
-
618.2
111.7
-
34.5
1,216.5
1,980.9
-
-
-
-
-
512.3
84.1
-
68.3
985.9
* Consumer loans are predominantly mortgage secured residential loans not rated on an individual basis.
7,751.8
7,194.1
652.6
1,650.6
Parent
2010
High
Grade
Neither past due or impaired
Sub-standard
Grade
Standard
Grade
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Other assets
Financial assets available for sale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
Amounts receivable from controlled entities
Shares in controlled entities
2009
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
Other assets
Financial assets available for sale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
Amounts receivable from controlled entities
Shares in controlled entities
$ m
615.0
279.0
3,986.3
2,039.3
97.4
-
-
130.8
-
126.8
-
-
7,274.6
527.5
235.4
5,613.3
-
266.4
-
-
124.7
-
150.4
-
-
$ m
-
-
-
-
-
-
-
-
392.7
6,313.3
-
-
6,706.0
-
-
-
-
-
-
-
-
318.2
5,671.8
-
-
$ m
-
-
-
-
-
-
-
-
-
656.7
-
-
656.7
-
-
-
-
-
-
-
-
-
623.2
-
-
Unrated
$ m
-
-
-
-
-
460.8
3.0
-
34.5
1,204.1
694.9
653.6
3,050.9
-
-
-
-
-
660.4
5.9
-
68.3
973.8
765.7
460.6
Consumer
Loans *
$ m
-
-
-
-
-
-
-
-
-
25,083.4
Past Due or
Impaired
$ m
-
-
-
-
-
-
-
-
113.8
2,745.7
Total
$ m
760.5
279.7
3,985.2
261.5
482.8
618.2
111.7
7.4
541.0
43,158.3
25,083.4
2,859.5
50,206.3
-
-
-
-
-
-
-
-
-
25,646.2
25,646.2
Consumer
Loans *
$ m
-
-
-
-
-
-
-
-
-
25,012.2
-
-
-
-
-
-
-
-
-
-
119.2
1,929.0
912.6
235.4
3,882.3
-
344.9
512.3
84.1
49.0
505.7
38,417.2
2,048.2 44,943.5
Past Due or
Impaired
$ m
-
-
-
-
-
-
-
-
113.8
2,478.5
-
-
Total
$ m
615.0
279.0
3,986.3
2,039.3
97.4
460.8
3.0
130.8
541.0
35,791.6
694.9
653.6
25,012.2
2,592.3
45,292.7
-
-
-
-
-
-
-
-
-
25,470.3
-
-
-
-
-
-
-
-
-
-
119.2
1,911.9
-
-
527.5
235.4
5,613.3
-
266.4
660.4
5.9
124.7
505.7
34,801.4
765.7
460.6
* Consumer loans are predominantly mortgage secured residential loans not rated on an individual basis.
6,917.7
5,990.0
623.2
2,934.7
25,470.3
2,031.1
43,967.0
164
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Ageing
Ageing analysis of past due but not impaired loans and other receivables
Consolidated
2010
2009
Parent
2010
2009
Less than
30 days
$ m
1,544.7
1,127.4
1,511.1
1,126.9
31 to
60 days
$ m
347.9
262.4
300.3
262.4
61 to
90 days
$ m
147.3
152.6
132.8
152.6
More than
91 days
$ m
Total
$ m
Fair value of
collateral
$m
539.1
274.8
459.3
274.2
2,579.0
6,568.0
1,817.2
3,868.5
2,403.5
5,092.1
1,816.1
3,857.7
Renegotiated terms
Generally, the terms of loans are only renegotiated on a temporary basis in the event of customer hardship. In these
cases the term of the loan is extended, but no longer than the maximum term entitlement for the product. Original
terms are typically re-instated within a 3 to 6 month period. The majority of retail customers proactively contact the
bank prior to the loan becoming past due or impaired. Therefore, the carrying value of financial assets that would
otherwise be past due or impaired whose terms have been renegotiated is considered immaterial.
Impairment assessment
The main considerations for the loan impairment assessment include whether any payments of principal or interest
are overdue by more than 90 days or there are any known difficulties in the cash flows of counterparties, credit rating
downgrades, or infringement of the original terms of the contract. The group addresses impairment assessment in
three areas: individually assessed allowances (specific provisions), collectively assessed allowances (collective
provisions) and a prudential reserve (general reserve for credit losses).
Individually assessed provisions (specific provisions)
The group determines the impairment provision appropriate for each individually significant loan or advance on an
individual basis. Items considered when determining provision amounts include the sustainability of the counterparty’s
business plan, its ability to improve performance once a financial difficulty has arisen, projected receipts and the
expected dividend payout should bankruptcy ensue, the availability of other financial support and the realisable value
of collateral, and the timing of expected cash flows. The impairment losses are evaluated on a continuous basis.
Allowances are assessed on a portfolio basis for losses on loans and receivables that are not individually significant
(including unsecured credit cards, personal loans, overdrafts, unsecured mortgage loans) and where specific
identification is impractical. Provisions are calculated for these portfolios based on historical loss experience.
Collectively assessed provisions (collective provisions)
Where individual loans are found not to be specifically 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. The collective provisions are
re-assessed at each balance date.
Prudential reserve (general reserve for credit losses)
A general reserve for credit losses is maintained to cover risks inherent in the loan portfolios.
Australian Prudential Regulation Authority (“APRA”) requires that banks maintain a general reserve for credit losses
to cover risks inherent in loan portfolios. In certain circumstances the collective provision can be included in this
assessment. Movements in the general reserve for credit losses are recognised as an appropriation of retained
earnings. The bank maintained a GRCL at 0.54% as at 30 June 2010 (2009:0.54%).
Liquidity Risk
Liquidity risk is the risk that the group will be unable to meet its payment obligations when they fall due under normal
and stress circumstances.
Group Treasury 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.
The group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of
an unforeseen interruption of cash flow. The group also has committed lines of credit that it can access to meet
liquidity needs. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration
to stress factors relating to both the market in general and specifically to the group. The most important of these is to
maintain limits on the ratio of net liquid assets to customer liabilities, set to reflect market conditions. Net liquid assets
consist of cash, short term bank deposits and liquid debt securities available for immediate sale, less deposits for
banks and other issued securities and borrowings due to mature within the next month.
165
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
The liquidity ratio during the financial year was as follows:
30 June
Average during the financial year
Highest
Lowest
2010
%
11.19
12.08
14.15
10.85
2009
%
11.95
14.45
16.97
11.19
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the group’s financial liabilities at 30 June 2010 based on contractual
undiscounted cash flows. Cash flows which are subject to notice are treated as if notice were to be given immediately.
However, the group expects that many customers will not request repayment on the earliest date the group could be
required to pay and the table does not reflect the expected cash flows indicated by the group’s deposit retention history.
Consolidated
2010
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
2009
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Reset preference shares
Subordinated debt - at amortised cost
Parent
2010
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Loans payable to securitisation trusts
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
2009
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Loans payable to securitisation trusts
Reset preference shares
Subordinated debt - at amortised cost
At call
$ m
Not longer
than 3 mths
$ m
195.5
11,104.2
-
-
630.2
73.1
-
-
-
16,849.3
309.5
166.6
-
-
-
72.4
12,003.0
17,397.8
196.3
10,879.5
-
-
625.7
-
-
-
15,185.9
2,806.5
275.2
-
-
100.9
11,701.5
18,368.5
194.3
10,710.3
-
-
721.7
-
59.9
-
-
-
15,164.6
309.5
135.9
-
-
-
-
70.0
11,686.2
15,680.0
196.3
10,974.6
-
-
882.5
30.8
-
-
-
15,164.3
414.6
260.2
-
895.7
-
100.9
12,084.2
16,835.7
3 to 12
months
$ m
-
8,370.5
868.9
313.8
-
-
5.4
185.3
9,743.9
-
4,299.9
2,439.6
656.0
-
5.4
155.6
7,556.5
-
6,916.0
868.9
275.8
-
120.4
-
5.4
178.0
8,364.5
-
4,243.7
1,727.5
583.9
-
142.5
5.4
155.6
6,858.6
1 to 5
years
$ m
-
1,121.0
6,487.1
871.5
-
-
97.6
159.6
8,736.8
-
1,915.4
3,476.5
1,116.2
-
103.0
311.2
6,922.3
-
1,017.6
-
347.5
-
4,496.3
-
97.6
120.5
6,079.5
-
1,909.4
-
930.2
-
473.8
103.0
311.2
3,727.6
Longer
than
5 years
$ m
-
1.4
1,432.0
92.7
-
-
-
254.3
1,780.4
-
1.0
1,305.6
88.6
-
-
95.2
1,490.4
-
0.7
-
90.2
-
1,790.0
-
-
94.1
1,975.0
-
1.0
-
88.6
-
4,490.6
-
95.2
4,675.4
Total
$ m
195.5
37,446.4
9,097.5
1,444.6
630.2
73.1
103.0
671.6
49,661.9
196.3
32,281.7
10,028.2
2,136.0
625.7
108.4
662.9
46,039.2
194.3
33,809.2
1,178.4
849.4
721.7
6,406.7
59.9
103.0
462.6
43,785.2
196.3
32,293.0
2,142.1
1,862.9
882.5
6,033.4
108.4
662.9
44,181.5
166
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
The table below shows the contractual expiry by maturity of the group’s contingent liabilities and commitments.
Consolidated
2010
Contingent liabilities
Commitments
Total
2009
Contingent liabilities
Commitments
Total
Parent
2010
Contingent liabilities
Commitments
Total
2009
Contingent liabilities
Commitments
Total
At call
$ m
179.5
4,138.1
4,317.6
171.6
4,295.6
4,467.2
176.5
4,066.9
4,243.4
171.6
4,279.4
4,451.0
Not longer
3 to 12
than 3 mths months
$ m
$ m
-
-
-
-
-
-
-
-
-
-
-
-
-
95.1
95.1
-
64.2
64.2
-
94.5
94.5
-
64.2
64.2
1 to 5
years
$ m
-
171.2
171.2
-
137.4
137.4
-
170.3
170.3
-
137.4
137.4
Longer
than
5 years
$ m
-
124.7
124.7
-
135.2
135.2
-
124.6
124.6
-
135.2
135.2
Total
$ m
179.5
4,529.1
4,708.6
171.6
4,632.4
4,804.0
176.5
4,456.3
4,632.8
171.6
4,616.2
4,787.8
Market Risk (including interest rate and currency risk)
Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in
market variables such as interest rates, foreign exchange rates, and equity prices.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values
of financial instruments. The Board has established limits on the interest rate gaps for stipulated periods. Positions
are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within the
established limits.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other
variables held constant, on the group’s income statement and equity.
The sensitivity of the income statement is the effect of assumed changes in interest rates on the net interest for one
year, based on the floating rate financial assets and financial liabilities held at 30 June 2010, including the effect of
hedging instruments. The sensitivity of equity is calculated by revaluing fixed rate available for sale financial assets
(including the effect of any associated hedges), and swaps designated as cash flow hedges, at 30 June 2010 for the
effects of the assumed changes in interest rates. The sensitivity of equity is analysed by maturity of the asset or
swap. With sensitivity based on the assumption that there are parallel shifts in the yield curve.
Monitoring of adherence to policies, limits and procedures is controlled through the Asset Liability Management
Committee and the Board Risk Committee.
167
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Reasonably possible movements in interest rates
Consolidated
Net interest income
Ineffectiveness in cash flow hedge
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Available for sale reserve
Ineffectiveness in cash flow hedge
Income tax effect on reserves at 30%
Effect on equity
Parent
Net interest income
Ineffectiveness in cash flow hedge - controlled entity
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Cash flow hedge reserve
Income tax effect on reserves at 30%
Effect on equity
+100 basis
points
2010
$ m
-100 basis
points
2010
$ m
+100 basis
points
2009
$ m
-100 basis
points
2009
$ m
37.2
5.1
(12.7)
29.6
29.6
-
100.9
(30.3)
100.2
30.5
5.0
(10.7)
24.8
24.8
94.1
(28.2)
90.7
(37.7)
(5.1)
12.8
(30.0)
(30.0)
-
(100.9)
30.3
(100.6)
(31.0)
(5.0)
10.8
(25.2)
(25.2)
(94.1)
28.2
(91.1)
46.0
0.2
(13.9)
32.3
32.3
-
95.4
(28.6)
99.1
45.5
-
(13.7)
31.8
31.8
95.4
(28.6)
98.6
(46.0)
(0.2)
13.9
(32.3)
(32.3)
-
(95.4)
28.6
(99.1)
(45.5)
-
13.7
(31.8)
(31.8)
(95.4)
28.6
(98.6)
The movements in profit are due to higher/lower interest costs from variable rate debt and cash balances. The movement in
equity is also affected by the increase/decrease in the fair value of derivative instruments designated as cash flow hedges,
where these derivatives are deemed effective. Controlled entity hedges are no longer held following the transfer of all of the
assets and liabilities of Adelaide Bank Limited to the parent entity. This analysis reflects a scenario where no management
actions are taken to counter movements in rates.
Foreign currency risk
The Group does not have any significant exposure to foreign currency risk, as all borrowings through the Bank’s Euro
medium term note program (EMTN) and Euro commercial paper program (ECP) are fully hedged. At balance date the
principal of foreign currency denominated borrowings under these programs was AUD $239.8 million (2009: AUD $707.4
million) with all borrowings fully hedged by cross currency swaps, and foreign exchange swaps. Retail and business banking
FX transactions are managed by the Bank’s Financial Markets unit, with resulting risk constrained by Board approved spot
and forward limits. Adherence to limits is independently monitored by the Treasury Operations unit.
It is the current policy of the Group that it does not trade in derivatives or foreign currencies (i.e. the risk is managed rather
than actively sought).
Equity price risk
The Group’s exposure to equity securities at 30 June 2010 is $111.7m (2009:$84.1m) with $109.5m (2009:$81.2m) of these
listed on a recognised stock exchange. The fair value of listed investments is affected by movements in market prices, whilst
unlisted investment fair values are determined using other valuation methods.
Equity securities price risk arises from investments in equity securities and is the risk that the fair values of equities decrease
as the result of changes in the levels of equity indices and the value of individual stocks. The majority of the value of equity
investments held are of a high quality and are publicly traded on either the ASX or BSX.
The Groups’ equity investments represent approximately 0.2% of total Group assets and are predominantly long term
strategic holdings, therefore short term volatility in fair values is not considered significant and a sensitivity analysis has not
been completed.
168
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
RISK MANAGEMENT (continued)
Operational Risk
Operational risk is defined as the risk impact of objectives resulting from inadequate or failed internal processes,
people and systems or from external events, including legal and reputation risk but excluding strategic risk, that are
not already covered by other regulatory capital charges (i.e. credit and market risks).
The Board Risk Committee is responsible for the oversight of the operational risk management policies and
effectiveness of implementation across the Group.
The Executive Committee and each individual Executive member has day to day responsibility and accountability for
the management of operational risk in their business/support line including, but not limited to ensuring operational risk
management strategies are in place and operating effectively.
Management and staff in each business are responsible for identifying operational risks and determining,
implementing, monitoring and reporting on policies and practices to manage operational risks to which their business
is exposed.
In managing operational risks, the Group is cognisant of its correlation with strategic, reputation and contagion risk.
The Group considers both the internal and external environment as well emerging risks when monitoring and
assessing operational risk.
Inherent in our industry the following factors can also impact the Group’s operations and outcomes:
Globalisation & global impacts e.g. market liquidity, investor sentiment
Economy e.g. changes in economic growth, interest rates
Changes in Government policy and regulation
Demographic trends
Technological dependency, advancements and speed to market
Financial convergence and competitive landscape
Group Operational Risk, has a role to assist and support the Executive Committee and Business Units to develop,
implement, monitor and report on the effectiveness of implementation of the Group’s Operational Risk Management
framework. It reports to the Board Risk Committee on the status of the implementation of the framework and
implications of significant risks and risk events at the Group level.
Sustainability and climate change
Sustainability and climate change risk is defined as the risk to the business and our stakeholders of meeting
objectives due to changes in climate and environment.
In recognition of the importance of managing this risk (both downside and opportunity) the Group’s risk and business
functions consider the broader environment, social responsibility and resilience in its decision making.
169
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
43.
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 Accounting Standard AASB 7 "Financial Instruments - Disclosure”.
A financial instrument is defined by AASB 132 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 is
disclosed under “Derivative financial instruments”.
Financial assets – held for trading (Securities)
These financial assets include floating rate notes and discounted short term securities. The carrying value of
these assets is based on a mark to market value. Therefore the carrying value represents fair value.
Financial assets - available for sale
Available for sale financial assets (securities) are predominantly short-term bank accepted bills of exchange and
negotiable certificates of deposit and are carried at fair value.
Financial assets - held to maturity (Securities)
The fair value of financial assets 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. Carrying value of these assets approximates fair 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. As the listed share investments are carried at market value, carrying value
represents fair value.
Loans and other receivables
The carrying value of loans and other receivables is net of specific and collective provisions for doubtful debts.
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 utilising 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
represent the rate the market is willing to offer these loans at arms-length.
The net fair value of impaired loans is calculated by discounting expected cash flows using these rates.
Investments in joint ventures
These investments are carried at the proportional share of equity invested in the joint venture, including
accumulated profit or losses of the joint venture. The fair value has been determined using a multiple of the latest
annual profit after tax. Where the joint venture is not yet profitable the fair value has been assumed to be equal to
the carrying value.
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 and notes payable
The carrying value of call, variable rate and fixed rate deposits repricing within six months approximates the fair
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. The discount rates applied represent the rate the market is
willing to offer these loans at arms-length.
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.
Reset preference shares
The closing share price of the reset preference shares on 30 June is used to calculate the fair value of these
financial liabilities.
170
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FINANCIAL INSTRUMENTS (continued)
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.
Summary
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 held for trading
Financial assets available for sale - debt securities
Financial assets available for sale - share investments
Financial assets held to maturity
Loans and other receivables - investment
Net loans and other receivables
Investments in joint ventures accounted for using the equity method
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Notes Payable
Derivatives
Other payables
Reset preference shares
Subordinated debt
PARENT
Financial Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - debt securities
Financial assets available for sale - share investments
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables - investment
Net loans and other receivables
Amounts receivable from controlled entities
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Other payables
Loans payable to securitisation trusts
Reset preference shares
Subordinated debt
Carrying value
Net fair value
2010
$m
2009
$m
2010
$m
2009
$m
760.5
279.7
7.4
3,985.2
261.5
111.7
482.8
541.0
42,980.8
7.2
618.2
195.5
37,076.2
9,042.8
263.6
777.3
89.5
532.9
615.0
279.0
130.8
2,039.3
3.0
653.6
97.4
541.0
35,636.6
694.9
460.8
194.3
33,504.2
220.3
820.8
6,406.7
89.5
393.7
912.6
235.4
49.0
3,882.3
-
84.1
344.9
505.7
38,235.2
225.9
512.3
196.3
31,879.8
9,974.5
436.4
665.9
89.5
598.7
527.5
235.4
124.7
-
5.9
460.6
266.4
505.7
34,598.4
765.7
660.4
196.3
31,894.1
486.2
903.3
6,033.4
89.5
598.7
760.5
279.7
7.4
3,985.2
261.5
111.7
482.8
540.4
46,206.5
7.2
618.2
195.5
36,566.0
9,018.2
263.6
777.3
90.1
497.8
615.0
279.0
130.8
2,039.3
3.0
653.6
97.4
540.4
37,955.4
694.9
452.4
194.3
32,998.3
220.3
820.8
6,406.7
90.1
368.4
912.6
235.4
49.0
3,882.3
-
84.1
344.9
507.6
41,053.9
281.6
512.3
196.3
31,555.7
9,807.5
436.4
665.9
87.2
527.1
527.5
235.4
124.7
-
5.9
460.6
266.4
507.6
38,988.5
765.7
657.1
196.3
31,560.2
486.2
903.3
6,033.4
87.2
527.1
171
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The economic entity's exposure to interest rate risks of financial assets and liabilities 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 2010
Floating
interest
Fixed interest rate repricing :
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
& 6 months & 12 months
& 5 years
Total
Weighted
Other
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 institutions
Financial assets held for trading
Financial assets available for sale
Financial assets held to maturity
469.6
-
82.0
-
-
-
-
2,926.3
261.5
419.4
-
-
906.9
-
5.0
-
-
70.0
-
18.6
Loans and other receivables
27,486.7
5,498.5
1,336.6
3,455.7
-
-
-
-
39.8
5,664.9
-
Derivatives
Total financial assets
Liabilities
Due to other financial instituions
Deposits
Notes payable
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
AS AT 30 JUNE 2009
-
-
-
-
28,038.3
9,105.7
2,248.5
3,544.3
5,704.7
-
10,774.1
60.0
-
-
-
-
17,371.2
8,132.7
-
-
393.5
-
5,646.4
449.8
-
2,409.9
400.3
-
-
-
-
-
-
10,834.1
25,897.4
6,096.2
2,810.2
-
868.7
-
-
89.5
-
958.2
-
-
-
-
-
198.0
-
198.0
-
5.8
-
-
-
-
5.8
290.9
279.7
-
-
-
(118.6)
7.4
459.4
195.5
0.1
-
263.6
-
139.4
598.6
760.5
279.7
3,985.2
261.5
482.8
43,521.8
7.4
49,298.9
195.5
37,076.2
9,042.8
263.6
89.5
532.9
47,200.5
2.92
-
5.03
5.51
5.10
7.67
-
-
-
4.72
5.67
-
6.16
6.03
-
Floating
interest
Fixed interest rate repricing :
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
& 6 months & 12 months
& 5 years
Total
Weighted
Other
carrying value
average
per
effective
Balance sheet
interest rate
Consolidated
$m
$m
$m
$m
$m
$m
$m
$m
%
-
-
-
-
-
50.7
-
50.7
-
-
-
-
-
-
-
368.2
235.4
-
-
-
(126.1)
49.0
526.5
196.3
-
-
436.4
-
-
912.6
235.4
3,882.3
-
344.9
38,740.9
49.0
44,165.1
196.3
31,879.8
9,974.5
436.4
89.5
598.7
632.7
43,175.2
1.94
-
3.53
-
3.45
6.72
-
-
-
3.58
4.11
-
6.16
3.96
-
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale
Financial assets held to maturity
Loans and other receivables
Derivatives
Total financial assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
544.4
-
-
-
2.3
21,644.8
-
-
-
-
-
-
-
3,374.7
438.9
68.7
-
9.6
-
-
-
333.0
5,435.6
-
1,424.3
3,076.8
7,234.8
-
-
-
-
-
-
-
-
22,191.5
9,143.3
1,872.8
3,145.5
7,234.8
-
8,578.5
-
-
-
-
-
16,214.4
8,250.3
-
-
598.7
-
2,441.3
615.5
-
3,428.6
1,108.7
-
-
-
-
-
-
-
1,217.0
-
-
89.5
-
8,578.5
25,063.4
3,056.8
4,537.3
1,306.5
172
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FINANCIAL INSTRUMENTS (continued)
Interest rate risk (continued)
AS AT 30 JUNE 2010
Floating
interest
rate
Less than
3 months
Parent
$m
$m
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale
Financial assets held to maturity
Loans and other receivables
Derivatives
Total financial assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Loans payable to securitisation trusts
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
AS AT 30 JUNE 2009
413.0
-
82.0
-
14,516.8
-
15,011.8
-
10,144.0
-
-
-
-
10,144.0
-
-
2,948.0
2,039.3
97.4
4,994.1
-
10,078.8
-
15,821.1
306.3
47.4
-
-
393.7
16,568.5
Floating
interest
rate
Less than
3 months
Parent
$m
$m
Fixed interest rate repricing :
Between
6 months
& 12 months
$m
Between
3 months
& 6 months
$m
Between
1 year
& 5 years
$m
After
5 years
Other
$m
$m
Total
carrying value
per
Balance sheet
$m
Weighted
average
effective
interest rate
%
-
-
888.3
-
2,362.2
-
3,250.5
-
4,955.2
449.8
884.1
-
-
-
6,289.1
-
-
68.0
-
2,099.9
-
2,167.9
-
1,807.3
400.3
397.9
-
-
-
2,605.5
-
-
-
-
-
7,294.3
-
7,294.3
-
775.6
-
2,389.7
-
89.5
-
3,254.8
-
-
-
-
-
5,038.3
-
5,038.3
-
1.0
-
2,687.6
-
-
-
2,688.6
202.0
279.0
-
-
-
(128.0)
130.8
483.8
194.3
-
-
220.3
-
-
414.6
615.0
279.0
3,986.3
2,039.3
97.4
36,177.6
130.8
43,325.4
194.3
33,504.2
1,156.4
6,406.7
220.3
89.5
393.7
41,965.1
3.22
-
5.03
5.89
5.00
7.45
-
-
-
4.58
4.99
-
-
6.16
5.66
-
Fixed interest rate repricing :
Between
6 months
& 12 months
$m
Between
3 months
& 6 months
$m
Between
1 year
& 5 years
$m
After
5 years
Other
$m
$m
Total
carrying value
per
Balance sheet
$m
Weighted
average
effective
interest rate
%
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Derivatives
Total financial assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Loans payable to securitisation trusts
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
370.9
-
-
-
2.0
13,200.8
-
13,573.7
-
8,672.1
-
30.8
-
-
-
8,702.9
-
-
5,105.3
-
264.4
6,079.6
-
11,449.3
-
16,247.9
406.9
895.7
-
-
598.7
18,149.2
-
-
439.3
-
-
880.1
-
1,319.4
-
2,359.2
605.3
71.0
-
-
-
3,035.5
-
-
68.7
-
-
1,556.3
-
1,625.0
-
3,403.9
1,090.2
71.5
-
-
-
4,565.6
-
-
-
-
-
5,304.4
-
5,304.4
-
1,210.0
-
473.8
-
89.5
-
1,773.3
-
-
-
-
-
8,198.8
-
8,198.8
-
1.0
-
4,490.6
-
-
-
4,491.6
156.6
235.4
-
-
-
(115.9)
124.7
400.8
196.3
-
-
-
486.2
-
-
682.5
527.5
235.4
5,613.3
-
266.4
35,104.1
124.7
41,871.4
196.3
31,894.1
2,102.4
6,033.4
486.2
89.5
598.7
41,400.6
2.26
-
4.09
-
3.40
6.59
-
-
-
3.57
4.10
-
-
6.16
3.96
-
173
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FINANCIAL INSTRUMENTS (continued)
Fair Value Financial Instruments
The Group uses various methods in estimating the fair value of financial instrument. The methods comprise of
Level 1 - The fair value is calculated using quoted prices in active markets.
Level 2 - The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly (derived from prices).
Level 3 - The fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table
below.
As at 30 June 2010
Consolidated
Financial assets
Trading book investments
Available for sale investments
Derivative instruments
Listed investments and unlisted equity investments
Financial liabilities
Derivative instruments
Parent
Financial assets
Trading book investments
Available for sale investments
Derivative instruments
Listed investments and unlisted equity investments
Financial liabilities
Derivative instruments
Quoted market price
Valuation technique -
market observable
inputs
Valuation technique -
non market
observable inputs
Level 1
-
-
-
107.3
107.3
-
-
Level 2
4,448.9
261.5
7.4
-
4,717.9
263.2
263.2
Level 3
-
-
-
4.4
4.4
-
-
Quoted market price
Level 1
-
-
-
-
-
-
-
Valuation technique -
market observable
inputs
Valuation technique -
non market
observable inputs
Level 2
4,083.7
126.4
130.8
-
4,340.9
220.3
220.3
Level 3
-
-
-
3.0
3.0
-
-
Total
4,448.9
261.5
7.4
111.7
4,829.6
263.2
263.2
Total
4,083.7
126.4
130.8
3.0
4,343.9
220.3
220.3
The Fair Value of Held for Trading and Available for Sale financial assets process is as follows.
Each month valuations are determined by undertaking a review of market rate sheets provided by institutions. From these rate
sheets, an aggregate trading margin is determined and agreed upon. These margins are then loaded into the groups Treasury
Management System, and the investment's market value is updated. Depending on the margin movement, the bank will report
a profit or loss for the period.
Almost all of the Banks securities have margins attached. A1 Bills & Certificate of Deposits (CD's) are marked flat to the base
rate, Treasury Notes are marked at a negative margin to the base rate and A3 CD’s are positive (note these types of securities
are regarded as homogeneous and are marked on the same margins irrespective of issuer (i.e. the same credit rating). Asset
Backed Commercial Paper, Floating Rate Notes and Residential Mortgage Backed Securities all have individual margins
determined by the stocks individual characteristics.
Financial Assets and Liabilities are listed as tier 3 as the fair values are determined on the basis of management assumptions
in respect of remaining average life of the portfolio of loans and deposits acquired through acquisitions.
Listed Investments relates to equity held in IOOF Holdings Ltd. Unlisted Equity Investments relates to equity holdings in
entities that are traded in an illiquid market or are thinly traded.
Issued Debt includes issued Floating Rate Notes of $650 million and Euro Commercial Paper of $240 million.
174
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
FINANCIAL INSTRUMENTS (continued)
Reconciliation of Level 3 fair value movements
Consolidated
Fair value assets
As at 30 June
2009
$m
Purchases
$m
Sales
$m
As at June 30
2010
$m
Listed investments and unlisted equity investments
Total fair value assets
9.1
9.1
0.4
0.4
(5.1)
(5.1)
4.4
4.4
Parent
Fair value asset
As at 30 June
2009
$m
Purchases
$m
Sales
$m
As at 30 June
2010
$m
Listed investments and unlisted equity investments
Total fair value assets
5.5
5.5
(2.5)
(2.5)
-
-
3.0
3.0
There were no transfers between level 1 and level 2 during the year.
175
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
44. DERIVATIVE FINANCIAL INSTRUMENTS
The economic entity uses derivatives primarily to hedge banking operations and for asset and liability management. Some
derivatives transactions may qualify as either cash flow or fair value hedges. The accounting treatment of these hedges is
outlined in Note 2.32 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.
During the 2010 financial year the consolidated entity recognised a loss of $33.9 million (2009: loss $93.6) due to hedge
ineffectiveness.
Value of derivatives as at 30 June
Consolidated 2010
Consolidated 2009
Notional
Amount
$m
Asset Revaluation
Liability Revaluation
Net Fair Value
Notional Amount
Asset Revaluation
Liability Revaluation
Net Fair Value
$m
$m
$m
$m
$m
$m
$m
Included in derivatives category
Derivatives held for trading
Cross Currency Swap
Interest Rate Swaps
Foreign Exchange
Contracts
Derivatives
27.7
531.1
54.2
613.0
Derivatives held as fair value hedges
Interest Rate Swaps
Embedded Derivatives
48.2
4.9
Derivatives
53.1
Derivatives held as cash flow hedges
Cross Currency
Swaps
Interest Rate Swaps
Foreign Exchange
Contracts
9,913.2
485.4
-
Derivatives
Derivatives
10,398.6
11,064.7
Included in deposits category
Cross Currency
Swaps
Total derivatives
-
11,064.7
-
1.6
0.4
2.0
0.3
0.7
1.0
-
4.4
-
4.4
7.4
-
7.4
(0.3)
(4.1)
(0.4)
(4.8)
(0.8)
-
(0.8)
(0.3)
(2.5)
-
(2.8)
(0.5)
0.7
0.2
505.1
163.8
52.9
721.8
150.8
1.4
152.2
-
3.4
1.4
4.8
0.4
-
0.4
(54.6)
(54.6)
689.1
43.8
(203.4)
(199.0)
14,025.1
-
-
-
(258.0)
(253.6)
14,714.2
(263.6)
(256.2)
15,588.2
-
-
-
(263.6)
(256.2)
15,588.2
-
-
43.8
49.0
16.3
65.3
(1.3)
(2.9)
(1.1)
(5.3)
(4.3)
-
(4.3)
-
(426.8)
-
(426.8)
(1.3)
0.5
0.3
(0.5)
(3.9)
-
(3.9)
43.8
(426.8)
-
(383.0)
(436.4)
(387.4)
-
(436.4)
16.3
(371.1)
Parent 2010
Parent 2009
Notional
Amount Asset Revaluation
$m
$m
Liability Revaluation
$m
Net Fair Value
$m
Notional Amount
$m
Asset Revaluation
$m
Liability Revaluation
$m
Net Fair Value
$m
Included in derivatives category
Derivatives held for trading
Cross Currency Swap
Interest Rate Swaps
Foreign Exchange
Contracts
Derivatives
27.7
12,910.4
54.2
12,992.3
Derivatives held as fair value hedges
Interest Rate Swaps
48.2
Derivatives
48.2
Derivatives held as cash flow hedges
Interest Rate Swaps
9,215.0
Derivatives
9,215.0
-
126.3
0.4
126.7
0.2
0.2
3.9
3.9
(0.3)
(28.2)
(0.4)
(28.9)
(0.7)
(0.7)
(0.3)
98.1
-
97.8
(0.5)
(0.5)
505.1
11,209.6
52.9
11,767.6
159.3
159.3
(190.7)
(190.7)
(186.8)
(186.8)
13,475.1
13,475.1
-
122.6
1.4
124.0
0.7
0.7
-
-
(1.3)
(58.1)
(1.0)
(60.4)
-
-
(1.3)
64.5
0.4
63.6
0.7
0.7
(425.8)
(425.8)
(425.8)
(425.8)
Derivatives
22,255.5
130.8
(220.3)
(89.5)
25,402.0
124.7
(486.2)
(361.5)
Included in deposits category
Cross Currency
Swaps
Total derivatives
-
22,255.5
-
130.8
-
(220.3)
-
(89.5)
-
25,402.0
16.3
141.0
-
(486.2)
16.3
(345.3)
176
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
As at June 2010, hedged cash flows are expected to occur and they are expected to affect the income statement as follows:
Consolidated
2010
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
2009
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
Parent
2010
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
2009
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
Net gain on cash flow hedges reclassified to the income statement:
Interest income
Interest expense
Other operating expenses
Taxation
Net gain on cash flow hedges reclassified to the income statement
Within 1 year
$ m
1 to 3 years
$ m
3 to 8 years
$ m
Over 8 years
$ m
417.3
(558.7)
(141.4)
(134.5)
636.1
(931.2)
(295.1)
(282.9)
265.1
(378.2)
(113.1)
(105.9)
653.2
(933.8)
(280.6)
(272.4)
83.2
(100.9)
(17.7)
(15.2)
147.8
(215.6)
(67.8)
(65.8)
54.3
(54.7)
(0.4)
(0.2)
54.1
(55.5)
(1.4)
(1.0)
Within 1 year
$ m
1 to 3 years
$ m
3 to 8 years
$ m
Over 8 years
$ m
376.2
(491.4)
(115.2)
(108.1)
234.3
(321.9)
(87.6)
(81.2)
849.5
(1,258.6)
(409.1)
713.5
(1,132.4)
(418.9)
(392.2)
(406.7)
73.0
(88.0)
(15.0)
(13.0)
197.6
(296.3)
(98.7)
(95.7)
Consolidated
Parent
2010
$ m
12.1
(44.5)
(1.7)
(34.1)
10.2
(23.9)
2009
$ m
5.3
(92.0)
(6.9)
(93.6)
28.1
(65.5)
2010
$ m
7.8
(43.6)
(1.7)
(37.5)
11.3
(26.2)
54.3
(54.7)
(0.4)
(0.2)
55.3
(56.7)
(1.4)
(1.0)
2009
$ m
4.3
(33.7)
(7.0)
(36.4)
10.9
(25.5)
During 2010 the consolidated entity recognised a loss on fair value hedges of $0.3m, due to hedge ineffectiveness. For
hedges that are marked to market and not in a hedge relationship, a loss of $0.1m has been recognised.
177
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
45. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The following are outstanding expenditure and credit related commitments as at 30 June 2010. 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. The head office development has a lease term
of 18 years remaining.
Future minimum rentals payable under non-cancellable
operating leases as at 30 June:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
90.1
171.2
124.7
386.0
62.1
137.4
135.2
334.7
89.9
170.3
124.6
384.8
62.1
137.4
135.2
334.7
Operating lease commitments - group as lessor
The group has entered into commercial property leases on the group's surplus office space. These non-cancellable leases have
remaining terms of between 2 and 5 years. All leases have a clause to enable upward revision of the rental charge on a regular basis
according to prevailing market conditions.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 June
Not later than 1 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
Credit related commitments
Gross loans approved, but not advanced to borrowers
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
1.5
2.8
4.3
4.8
1.1
2.2
3.3
2.1
1.5
2.8
4.3
4.6
1.1
2.2
3.3
2.1
993.5
606.2
921.8
589.7
8,744.9
3,144.8
9,351.7
3,689.4
9,151.8
3,145.1
9,351.1
3,689.7
178
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
COMMITMENTS AND CONTINGENCIES (continued)
(b) Superannuation Commitments
The Bendigo and Adelaide Bank Group has a legally enforceable obligation to contribute to a superannuation plan for
employees either on an accumulation basis (including the Superannuation Guarantee Charge) or on a defined benefits basis
(Adelaide Bank staff superannuation plan) which provides benefits on retirement, disability or death based on years of service
and final average salary. Employees contribute to the plan at a fixed percentage of remuneration.
The Group’s contribution to the defined benefit plan is determined by the Trustee after consideration of actuarial advice. At
balance date, the Directors believe that funds available were adequate to satisfy all vested benefits under the plan.
Accounting Policy
Actuarial gains and losses are recognised in retained earnings.
Plan Information
Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit
section of the Plan is closed to new members. All new members are entitled to become members of the accumulation
categories of the fund.
Fair Value of Plan Assets
The fair value of Plan assets includes Bendigo and Adelaide Bank shares to the value of $1.5 million as at 30 June 2010.
Actual Return
Actual return on Plan assets
Principal Actuarial Assumptions
Discount rate
Expected rate of return on Plan assets
Expected salary increase rate
Reconciliation of the Present Value of the Defined Benefit Obligation
Present value of defined benefit obligations at beginning of period
Add Current service cost
Add Interest cost
Add contributions by plan participants
Add Actuarial gains/(losses)
Less Benefits paid
Less Taxes, premiums and expenses paid
Add Transfers in
Less Contributions to accumulation section
Present value of defined benefit obligations at end of the year
Reconciliation of the Fair Value of Plan Assets
Fair value of Plan assets at beginning of period
Add Expected return on plan assets
Add Actuarial gains/(losses)
Add Employer contributions
Add Contributions by plan participants
Less Benefits paid
Less Taxes, premiums and expenses paid
Add Transfers in
Less Contributions to accumulation section
Fair value of Plan assets at end of the year
179
Consolidated
2010
$ m
1.4
4.5% pa
7.5% pa
4.0% pa Certified
staff 4.5% increase
at 1 December
2010)
Consolidated
2009
$ m
(4.0)
5.2% pa
7.5% pa
0.0% pa first year
4.0% pa thereafter
$ m
11.0
0.6
0.6
0.2
1.5
4.6
0.3
(0.9)
0.1
8.0
13.2
1.0
0.5
0.9
0.2
4.6
0.3
(0.9)
0.1
9.9
$ m
12.2
0.7
0.8
0.3
(0.9)
1.9
0.1
0.1
0.2
11.0
18.7
1.4
(5.3)
0.3
0.3
1.9
0.1
0.1
0.2
13.3
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
COMMITMENTS AND CONTINGENCIES (continued)
Reconciliation of the Assets and Liabilities Recognised in the Balance Sheet
Consolidated
2010
$ m
8.0
9.9
(1.9)
(1.9)
(2.3)
1.3
0.9
(1.9)
0.6
0.6
(1.0)
0.2
1.1
5.1
Consolidated
2009
$ m
11.0
13.3
(2.3)
(2.3)
(6.5)
4.5
0.3
(2.3)
0.7
0.8
(1.3)
0.2
4.3
3.9
Consolidated
2010
$ m
41%
25%
11%
8%
9%
6%
Consolidated
2009
$ m
39%
25%
9%
10%
7%
10%
Defined Benefit Obligation ^
Less Fair value of Plan assets
(Surplus)
Net superannuation (asset) / liability
^ includes contributions tax provision
Movements in Liability / (Asset) Recognised in the Balance Sheet
Net superannuation (asset) at beginning of period
Add Expense recognised in income statement
Less Employer contributions
Net superannuation (asset) at 30 June
Expense Recognised in Income Statement
Service cost
Interest cost
Expected return on assets
Superannuation expense
Amount recognised directly in Other Comprehensive Income
Actuarial (gain) / loss
Cumulative amount recognised directly in Other Comprehensive Income
Actuarial (gain) / loss
Plan Assets
The percentage invested in each asset class at the balance sheet date:
Australian Equity
International Equity
Fixed Income
Property
Alternatives
Cash
180
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
COMMITMENTS AND CONTINGENCIES (continued)
Contribution Recommendations
The Bank has recently recommenced employer funding of the defined benefit section of the Plan after an extended period of
contribution holiday. This decision was made in accordance with recommendations from the Actuary. The financial position of
the defined benefits is reviewed regularly by the Bank, at least annually, to ensure that the contribution amount remains
appropriate.
Funding Method
The method used to determine the employer contribution recommendations is the Attained Age Normal method. The method
adopted affects the timing of the cost to the Bank.
Under the Attained Age Normal method, a “normal cost” is calculated which is the estimated employer contribution rate
required to provide benefits in respect of future service after the review date. The “normal” cost is then adjusted to take into
account any surplus (or deficiency) of assets over the value of liabilities in respect of service prior to the review date. Any
surplus or deficiency can be used to reduce or increase the “normal” employer contribution rate over a suitable period of time.
Economic Assumptions
The long-term economic assumptions adopted are:
Expected rate of return on assets (discount rate)
Expected salary increase rate
7.50% pa
4.00% pa (Certified
staff: 4.5% increase at
1 December 2010)
Nature of Asset
Bendigo and Adelaide Bank has recognised an asset in the Balance Sheet (under Other assets) in respect of its defined
benefit superannuation arrangements. If a surplus exists in the Plan, Bendigo and Adelaide Bank may be able to take
advantage of it in the form of a reduction in the required contribution rate, depending on the advice of the Plan’s actuary.
The Adelaide Bank Staff Superannuation Plan, a sub-plan of the Mercer Super Trust, does not impose a legal liability on
Bendigo and Adelaide Bank to cover any deficit that exists in the Plan. If the Plan were wound up, there would be no legal
obligation on the Bank to make good any shortfall. The rules of the Plan state that if the Plan winds up, the remaining assets
are to be distributed amongst the Members as determined by the Trustee of the Plan.
The Bank may at any time terminate its contributions by giving one month’s notice in writing to the Trustee.
Historical Information
Present value of defined benefit obligation
Fair value of Plan assets
(Surplus) / deficit in Plan
Experience adjustments (gain)/loss - Plan assets
Experience adjustments (gain)/loss - Plan liabilities
Expected Contributions
Financial year ending
Expected employer contributions
2010
$ m
8.0
9.9
(1.9)
(0.4)
1.0
2009
$ m
11.0
13.3
(2.3)
5.3
0.1
2011
$m
0.2
181
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
COMMITMENTS AND CONTINGENCIES (continued)
(c) Legal claim
In the course of its operations Bendigo and Adelaide Bank may be subject to material litigation, which, if it should crystallise,
may adversely affect the financial position or financial performance of the Bank.
Bendigo and Adelaide Bank extended loans to a large number of investors to facilitate their investments in 24 managed
investment schemes of which Great Southern Managers Australia Limited was the responsible entity. Administrators and
receivers and managers and, subsequently, liquidators were appointed to Great Southern. The bank has been notified that a
number of investors in the Great Southern schemes may involve the Bank in legal proceedings in relation to the Bank
enforcing loans made to investors in the schemes. To date one group proceeding has commenced, in respect of investors in 2
schemes against a number of parties including the Bank. It does not allege wrongdoing by the Bank. The risk of litigation will
continue to be assessed on an ongoing basis.
Proceedings were commenced in August 2009 concerning the role of Sandhurst Trustees Limited, as debenture trustee, for
failed property developer Fincorp Pty Ltd. The position of Sandhurst has been reviewed by the Bendigo and Adelaide Bank,
and the Bank does not believe that Sandhurst has been negligent, fraudulent or in breach of its duty. The bank does not
consider the legal claim to be materially adverse and will continue to monitor its proceedings.
(d) Contingent liabilities and contingent assets
Contingent liabilities
Guarantees
The economic entity has issued guarantees on behalf of clients
Other
Documentary letters of credit & performance related obligations
Consolidated
Parent
2010
$m
2009
$m
2010
$m
2009
$m
159.2
144.4
156.4
144.4
20.3
27.2
20.1
27.2
As 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.
Contingent assets
As at 30 June 2010, the economic entity does not have any contingent assets.
46.
STANDBY ARRANGEMENTS AND UNCOMMITTED CREDIT FACILITIES
Amount available:
Offshore borrowing facility
Domestic note program
Amount utilised:
Offshore borrowing facility
Domestic note program
Amount not utilised:
Offshore borrowing facility
Domestic note program
Consolidated
Parent
2010
$m
9,365.5
5,500.0
239.8
1,052.0
9,125.7
4,448.0
2009
$m
9,855.3
5,000.0
2010
$m
9,365.5
5,000.0
2009
$m
9,855.3
5,000.0
707.4
724.0
239.8
914.0
707.4
724.0
9,147.8
4,276.0
9,125.7
4,086.0
9,147.8
4,276.0
The Parent has a $US 5,000 million Euro Commercial Paper program of which $US 204.9m (2009: $US 150m) was drawn down as at 30 June 2010, and a
$US 3,000 million Euro Medium Term Note program of which there were no draw downs (2009: EURO $300m) . As at 30 June 2010 the Parent has a $5,000 million
Domestic Note Program of which $914.0 million (2009: $724m) was issued and the consolidated group has an additional $500 million Domestic Note Program
through its subsidiary Rural Bank Limited of which $138.0m (2009:nil) was issued.
182
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
47.
FIDUCIARY ACTIVITIES
The economic entity conducts investment management and other fiduciary activities as trustee, custodian or manager for a
number of funds and trusts, including superannuation, 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
C o ns o lida t e d
2 0 10
$ m
2,713.9
1,932.9
1,771.1
2 0 0 9
$ m
2,649.7
2,408.8
2,082.5
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, custodian or manager incur liabilities in the normal
course of their duties, 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 and Adelaide Bank does not guarantee the performance or obligations of its
subsidiaries.
48.
EVENTS AFTER BALANCE SHEET DATE
On 9 August 2010 the Bank declared a final dividend, details of which are disclosed in the directors' report and in Note 10.
On the 9 August 2010 the Bank announced its intention, through the signing of a heads of agreement, to purchase 24 per cent
of Linear Asset Management. This business will provide significant scope for growth in the banks wealth deposit and financing
businesses.
On the 1 September 2010 the Bank announced that the discount for the dividend reinvestment plan will be reduced from 2.5
percent to zero for the final dividend payable on 30 September 2010. The Bank also intends to separately buy-back on-market
a number of shares equal to the number of shares issued under the Dividend Reinvestment Plan. The number of shares to be
bought back is expected to be 3.4 million with a maximum of 7.4 million.
No other 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.
183
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
49.
BUSINESS COMBINATIONS
(a) Macquarie margin lending portfolio
On 8 January 2009, Bendigo and Adelaide Bank Limited purchased a $1.5 billion margin lending portfolio from Macquarie
Group Limited. The total consideration paid for the portfolio was $1,563,992,000 including the issue of $52 million of short
dated convertible preference shares to Macquarie. The convertible shares were converted to ordinary shares in Bendigo and
Adelaide Bank during 2009. The cost of the acquisition includes directly attributable costs including consultancy, legal,
accounting and other professional fees.
The acquisition had the following effect on the Group's assets and liabilities:
Assets
Cash and cash equivalents
Loans and other receivables
Deferred tax assets
Other assets
Total Assets
Liabilities
Deferred tax liabilities
Pre-acquisition
Recognised
carrying amount
values on
$m
30.0
acquisition
$m
30.0
1,467.2
1,471.6
-
0.6
19.6
-
1,497.8
1,521.2
3.6
Net identifiable assets and liabilities attributable to Bendigo and Adelaide Bank Limited
1,497.8
1,517.6
Total consideration
Fair value of identifiable assets and liabilities
Goodwill on acquisition
Intangible assets on acquisition
Final goodwill on acquisition
Goodwill
1,564.6
(1,517.6)
47.0
(7.7)
39.3
Goodwill arose in the business combination as the consideration paid for the combination effectively included amounts in
relation to the skills and talent of the acquired business workforce, the benefit of expected head office and operational
synergies, revenue growth and future market development.
These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be
measured reliably or they are not capable of being separated from the Group and sold, transferred, licensed, rented or
exchanged either individually or together with any related contracts.
(b) Rural Bank
On 7 May 2009 Bendigo and Adelaide Bank acquired an additional 10% of shares in Rural Bank, increasing the Banks holding
to 60%. From 1 October 2009 the shareholders agreement between Bendigo and Adelaide Bank Limited and Elders Limited
resulted in the Bank gaining effective control, and significant judgement were made to determine the requirement to
consolidate the joint venture. Total number of shares held in Rural Bank is 184,140,000 for the consideration amount of $252
million.
The principal activities of Rural Bank are to provide a wide range of banking services to agribusiness, rural and regional
Australian communities.
184
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
BUSINESS COMBINATIONS (continued)
The acquisition had the following effect on the Group's assets and liabilities:
Assets
Term Loans
Fixed Loans
Variable Loans
Seasonal Loans & AgriManager
Specific Provisions
Unearned Income
Collective Provisioning
Securitisation
Cash
Financial Assets AFS
Financial Assets HTM
Derivatives
Other Debtors
Deferred Tax Assets
Intangible Assets
Fixed Assets
Total Assets
Liabilities
Retail Deposit
At Call
Term
Wholesale Deposit
Treasury Deposit
Subordinated Debt
Creditors
Other Payables
Derivatives
Provision for employee entitlements
Provision for income tax
Provision for dividends
Deferred Tax Liabilities
Total Liabilities
Pre-acquisition
Recognised
carrying amount
values on
acquisition
$m
$m
988.7
1,870.8
998.8
1,870.8
790.6
(10.3)
(8.1)
(3.0)
(95.4)
33.2
175.7
491.3
0.5
6.5
12.4
2.0
0.1
790.6
(10.3)
(8.1)
(3.0)
(95.4)
33.2
175.7
491.9
0.5
6.5
16.1
57.4
0.1
4,255.0
4,324.9
491.5
1,996.2
77.9
1,158.3
117.4
3.0
12.6
14.0
4.1
9.0
25.6
1.6
491.5
2,002.1
78.0
1,161.2
120.9
3.0
12.6
14.0
4.1
9.0
25.6
21.5
3,911.2
3,943.4
Net identifiable assets and liabilities attributable to Bendigo and Adelaide Bank Limited
343.9
381.5
Non-controlling interest in identifiable acquired net assets
Fair value of identifiable net assets attributable to parent
Cost of acquisition
Fair value adjustment
Cost of acquisition including fair value adjustment
Final goodwill on acquisition
(131.6)
(146.7)
212.2
234.8
252.3
(0.7)
251.6
16.8
The consolidated statement of comprehensive income includes income of $104.3 million and profit before tax $59.9 million for
the year ending 30 June 2010.
Had the acquisition occurred at the beginning of the reporting period, the consolidated financial statement of comprehensive
income would have included revenue of $139.0 million and a net profit before tax of $79.2 million.
185
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
BUSINESS COMBINATIONS (continued)
Goodwill
Goodwill arose in the business combination as the consideration paid for the combination effectively included amounts in
relation to the skills and talent of the acquired business workforce, the benefit of expected head office and operational
synergies, revenue growth and future market development.
These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be
measured reliably or they are not capable of being separated from the Group and sold, transferred, licensed, rented or
exchanged either individually or together with any related contracts.
(c) Tasmanian Banking Services Limited
On 10 August 2009, Bendigo and Adelaide Bank Limited acquired the additional 50% shareholding in Tasmanian Banking
Services Limited. The total consideration paid was $6.5 million, which included the issue of 781,910 ordinary shares in
Bendigo and Adelaide Bank at a fair value of $6.39 per share.
The cost of the acquisition includes directly attributable costs including consultancy, legal, accounting and other professional
fees.
The principal activities of Tasmanian Banking Services are a wide range of banking products and services to its clients.
The current fair values of assets and liabilities are provisional and are subject to final review. This will alter the assets and
liabilities as currently disclosed for 30 June 2010.
The following table shows the effect on the Group's assets and liabilities:
P re - a c quis it io n
F a ir v a lue a t
c a rrying a m o unt
a c quis it io n da t e
Assets
Cash and cash equivalents
Current tax assets
Other assets
Property, plant & equipment
Deferred tax assets
Total Assets
Liabilities
Provisions
Other payables
Total Liabilities
Net identifiable assets and liabilities attributable to Bendigo and Adelaide Bank Limited
Consideration paid in cash
Cash acquired
Net cash outflow
Consideration
Consideration paid in cash
Shares issued, at fair value
Total consideration
Fair value of identifiable assets and liabilities
Provisional Goodwill on acquisition
$ m
0.9
0.1
0.9
0.9
0.5
3.3
0.5
0.2
0.7
$ m
0.9
0.1
0.9
0.9
0.5
3.3
0.5
0.2
0.7
2.6
1.5
(0.9)
0.6
1.5
5.0
6.5
2.6
3.9
The consolidated statement of comprehensive income includes income of $18.0 million and profit before tax of $10.5 million for
the year ending 30 June 2010.
Had the acquisition occurred at the beginning of the reporting period, the consolidated financial statement of comprehensive
income would have included revenue of $18.9 million and a net profit before tax of $10.7 million
Goodwill
Goodwill arose in the business combination as the consideration paid for the combination effectively included amounts in
relation to the skills and talent of the acquired business workforce, the benefit of expected head office and operational
synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill as the
future economic benefits arising from them cannot be measured reliably or they are not capable of being separated from the
Group and sold, transferred, licensed, rented or exchanged either individually or together with any related contracts.
186
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Bendigo and Adelaide Bank Limited, we state that:
In the opinion of the Directors:
(a)
the financial statements and notes of the Company and the Bendigo and Adelaide Group are in accordance
with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and the Bendigo and Adelaide Group’s financial position as
at 30 June 2010 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and Corporations Regulations 2001; and
(b)
(c)
(d)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 2.2 and
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 year ending 30 June 2010.
On behalf of the Board
Robert Johanson
Chairman
8 September 2010
Mike Hirst
Managing Director
187
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Independent auditor’s report to the members of Bendigo and Adelaide Bank
Limited
Report on the Financial Report
We have audited the accompanying financial report of Bendigo and Adelaide Bank Limited, which comprises the
balance sheet as at 30 June 2010, and the income statement, statement of comprehensive income, statement of
changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting
policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and
the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the
preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in
the circumstances. In Note 2.2, the directors also state that the financial report, comprising the financial statements and
notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on our judgment, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider
internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit we have met the independence requirements of 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, 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.
Liability limited by a scheme approved
under Professional Standards Legislation
188
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
Auditor’s Opinion
In our opinion:
1.
the financial report of Bendigo and Adelaide Bank Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the financial position of Bendigo and Adelaide Bank Limited and the
consolidated entity at 30 June 2010 and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
2.
the financial report also complies with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 50 to 72 of the directors’ report for the year ended 30
June 2010. The directors of the company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Bendigo and Adelaide Bank Limited for the year ended 30 June 2010,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
T M Dring
Partner
Melbourne
8 September 2010
189
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
ADDITIONAL INFORMATION
1. MATERIAL DIFFERENCES
There are no material differences between the information supplied in this report and the information in the preliminary
final report supplied by Bendigo and Adelaide Bank Limited to the Australian Securities Exchange on 9 August 2010.
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 and Adelaide Bank Limited are as detailed in the Corporate
Governance section of this report.
4.
SUBSTANTIAL SHAREHOLDERS
As at 20 August 2010 there were no substantial shareholders in Bendigo and Adelaide Bank Limited as detailed in
substantial holdings notices given to the company.
5.
DISTRIBUTION OF SHAREHOLDERS
Range of Securities as at 20 August 2010 in the following categories:
Category
Fully Paid
Fully Paid
BPS
Reset
Step Up
Ordinary Em ployee Preference Preference Preference
Shares
Shares
Shares
Shares
Shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
36,473
36,682
6,030
3,202
96
3,453
951
103
26
3
3,236
52
2
2
1
3,389
3,127
73
8
2
81
4
5
Number of Holders
82,483
4,536
3,293
3,472
3,217
Securities on Issue
354,513,322
6,853,423
900,000
894,574
1,000,000
6.
MARKETABLE PARCEL
Based on the closing price of $8.73 on 20 August 2010 the number of holders with less than a marketable parcel of the
Company’s main class of securities (Ordinary Shares), as at 20 August 2010 was 5,763.
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.
190
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
8. MAJOR SHAREHOLDERS
Names of the 20 largest holders of Fully Paid Ordinary Shares, including the number of shares each holds and the
percentage of issued ordinary share capital that number represents as at 20 August 2010 are:
FULLY PAID ORDINARY SHARES
Rank Nam e
HSBC Custody Nominees (Australia) Limited
1
JP Morgan Nominees Australia Limited
2
National Nominees Limited
3
Citicorp Nominees Pty Limited
4
AMP Life Limited
5
Milton Corporation Limited
6
Cogent Nominees Pty Limited
7
ANZ Nominees Limited
8
Cogent Nominees Pty Limited
9
RBC Dexia Investor Services Aust Nominees Pty Limited
10
Queensland Investment Corporation
11
RBC Dexia Investor Services Aust Nominees Pty Limited
12
13
Choiseul Investments Limited
14 Woodross Nominees Pty Ltd
15
16
17
18
19
20
Invia Custodian Pty Limited
Carlton Hotel Limited
Australian Rew ard Investment Alliance
Leesville Equity Pty Ltd
RBC Dexia Investor Services Aust Nominees Pty Limited
CS Fourth Nominees Pty Ltd
Num ber of fully paid
Ordinary Shares
43,677,888
28,634,993
22,959,825
7,680,691
6,526,702
4,626,636
3,846,216
3,317,189
3,278,812
2,075,886
1,771,091
1,359,816
1,083,073
990,579
839,620
752,500
701,840
677,740
583,528
578,739
Percentage held of
Issued Ordinary Capital
12.09%
7.92%
6.35%
2.13%
1.81%
1.28%
1.06%
0.92%
0.91%
0.57%
0.49%
0.38%
0.30%
0.27%
0.23%
0.21%
0.19%
0.19%
0.16%
0.16%
135,963,364
37.62%
BBS Nominees Pty Ltd, trustee for the Bendigo and Adelaide Employee Share Ownership Plan and Tasmanian
Perpetual Trustees Limited, trustee for the Employee Share Grant Scheme, held a combined total of 6,853,423 unquoted
shares as at the date of this report. These shares have not been included in the above table, but are included in total
issued ordinary share capital.
Names of the 20 largest holders of Bendigo and Adelaide Preference Shares, including the number of shares each holds
and the percentage of preference share capital that number represents as at 20 August 2010 are:
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Cogent Nominees Pty Limited
Dylac Pty Ltd
Bruttow n Pty Limited
The Trustees of the Diocese of Tasmania
Mr Jeffrey Frederick Edw ards & Mrs June Rose Edw ards
FULLY PAID PREFERENCE SHARES
Rank Nam e
1
2
3
4
5
6
7
8
9
10 World Wide Fund for Nature Australia
11
12
13
14
15
16
17
18
19
20
Green Super Pty Ltd
Cambooya Pty Ltd
Uniting Church in Australia Property Trust (WA)
James Bostock & Henry Taylor & RSL Custodian Pty Ltd
Rome Pty Ltd
Dylac Pty Ltd
Fedton Pty Ltd
Sandhurst Trustees Ltd
Mr Shaun Eric Sargent & Mr John Richard Green
Mr Graeme Edw ard Buckingham & Mrs Else Margrethe Buckingham
Num ber of fully paid
Preference Shares
178,336
23,425
15,856
7,836
7,744
4,000
4,000
3,000
2,794
2,660
2,531
2,500
2,500
2,474
2,428
2,400
2,200
2,200
2,058
2,046
Percentage held of
Issued Preference Capital
19.82%
2.60%
1.76%
0.87%
0.86%
0.44%
0.44%
0.33%
0.31%
0.30%
0.28%
0.28%
0.28%
0.27%
0.27%
0.27%
0.24%
0.24%
0.23%
0.23%
272,988
30.32%
191
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2010
MAJOR SHAREHOLDERS (continued)
Names of the 20 largest holders of Bendigo and Adelaide Reset Preference shares, including the number of shares each
holds and the percentage of reset preference share capital that number represents as at 20 August 2010 are:
FULLY PAID RESET PREFERENCE SHARES
Rank Nam e
Num ber of fully paid
Reset Preference Shares
Percentage held of issued
Reset Preference Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
RBC Dexia Investor Services Australia Nominees Pty Limited
MF Custodians Ltd
Art Gallery Of NSW Foundation
Questor Financial Services Limited
Cogent Nominees Pty Limited
ANZ Nominees Limited
Edsgear Pty Limited
The Synod of the Diocese of Adelaide of the Anglican Church of Australia Inc
UBS Wealth Management Australia Nominees Pty Ltd
National Nominees Limited
Ritossa Holdings Pty Ltd
Mr Ian William Bailey & Mrs Gloria Jean Bailey
Five Ways Pastoral Co Pty Ltd
Malvern Development Co Pty Ltd
Dr Spencer David
Baker Custodian Corporation
The Invergow rie Foundation
Austymca Nominees Pty Ltd
Mr Wayne Thomson & Mrs Gabrielle Thomson
Australian Executor Trustees Limited
27,492
18,894
10,000
8,561
8,131
6,072
6,000
6,000
5,051
4,565
4,472
4,000
4,000
4,000
3,860
3,390
3,350
3,200
3,023
2,913
3.07%
2.11%
1.12%
0.96%
0.91%
0.68%
0.67%
0.67%
0.56%
0.51%
0.50%
0.45%
0.45%
0.45%
0.43%
0.38%
0.37%
0.36%
0.34%
0.33%
Names of the 20 largest holders of Bendigo and Adelaide Step Up Preference Shares, including the number of shares
each holds and the percentage of step up preference share capital that number represents as at 20 August 2010 are:
FULLY PAID STEP UP PREFERENCE SHARES
Rank Nam e
Num ber of fully paid
Step Up Preference Shares
Percentage held of issued
Step Up Preference Capital
136,974
15.32%
National Nominees Limited
JP Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
ANZ Nominees Limited
ABN Amro Clearing Sydney Nominees Pty Ltd
Returned Services League of Australia (Queensland Branch)
Questor Financial Services Limited
JGW Investments Pty Ltd
Elecnet (Aust) Pty Ltd
1
2
3
4
5
6
7
8
9
10 Wal Investments Pty Ltd
11
12
13
14
15
16
17
18
19
20
Peroda Nominees Pty Limited
Rogand Pty Ltd
Aileendonan Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
Baker Custodian Corporation
The Trustees of the Diocese of Tasmania
Moladi Pty Ltd
Mr Brett Mcpherson Tulloch
Motel Management Services Pty Limited
Shore Nominees Limited
42,110
41,021
39,248
11,314
10,657
10,000
6,178
5,598
5,530
4,605
4,504
4,220
4,000
3,972
3,893
3,670
3,526
3,000
3,000
3,000
4.21%
4.10%
3.92%
1.13%
1.07%
1.00%
0.62%
0.56%
0.55%
0.46%
0.45%
0.42%
0.40%
0.40%
0.39%
0.37%
0.35%
0.30%
0.30%
0.30%
213,046
21.30%
9.
VOTING RIGHTS
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.
192