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C u s t o m e r
C o n n eCt e d
Annual Financial report 2012
Calendar
2012
28.09.12
10.10.12
29.10.12
01.11.12
Distribution of Final Dividend
Bendigo step up Preference share Dividend
Annual General meeting
Bendigo reset Preference share Dividend
17.12.12
Bendigo Preference share Dividend
Proposed 2013
10.01.13
18.02.13
20.02.13
26.02.13
15.03.13
28.03.13
10.04.13
01.05.13
17.06.13
10.07.13
19.08.13
23.08.13
29.08.13
16.09.13
30.09.13
10.10.13
28.10.13
01.11.13
Bendigo step up Preference share Dividend
Announcement of Interim results and Interim Dividend
Interim ex-Dividend Date
Interim Dividend record Date
Bendigo Preference share Dividend
Distribution of Interim Dividend
Bendigo step up Preference share Dividend
Bendigo reset Preference share Dividend
Bendigo Preference share Dividend
Bendigo step up Preference share Dividend
Announcement of Final results and Final Dividend
Final ex-Dividend Date
Final Dividend record Date
Bendigo Preference share Dividend
Distribution of Final Dividend
Bendigo step up Preference share Dividend
Annual General meeting
Bendigo reset Preference share Dividend
16.12.13
Bendigo Preference share Dividend
the 2013 dates are proposed. Please visit www.bendigoadelaide.com.au
to view the most current calendar.
In this report, the expression “the Bank”, “the Company” or “the Group”
refers to Bendigo and Adelaide Bank Limited and its controlled entities.
C u s t o m e r
C o n n eCt e d
Contact Us
Bendigo and Adelaide Bank Limited
ABN 11 068 049 178
Registered Head office
the Bendigo Centre
22 – 44 Bath Lane
Bendigo VIC
Australia 3550
telephone: 1300 361 911
Facsimile: 03 5485 7000
Customer Help Centre
1300 361 911 (local call)
8.30am – 7.30pm weekdays
Australian eastern standard time/
Australian eastern Daylight time (Aest/AeDt)
Shareholder Inquiries
share registry
1800 646 042
email: share.register@bendigoadelaide.com.au
In an effort to reduce our paper
consumption and impact on the
environment, this Annual report
has been printed on recycled paper
using environmentally friendly inks.
2 | Annual Financial report 2012
Full Financial Report
For the 12 month period ending 30 June 2012
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
TABLE OF CONTENTS
Corporate Governance
Five Year History
Five Year Comparison
Directors’ Report
Summary of Remuneration Outcomes
2012
Remuneration Report (Audited) FY2012
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
Cash earnings
Income tax expense
Capital management
Earnings per ordinary share
Dividends
1
2
3
4
5
6
7
8
9
10 Return on average ordinary equity
11 Net tangible assets per ordinary share
12 Cash flow statement reconciliation
13 Cash and cash equivalents
14 Financial assets held for trading
15 Financial assets available for sale - debt
securities
16 Financial assets available for sale - equity
investments
17 Financial assets held to maturity
Loans and other receivables
18
19
Impairment of loans and advances
20 Particulars in relation to controlled entities
21
Investments in joint ventures using the equity
method
Property, plant and equipment
Assets held for sale
22
23
Page
4
18
19
20
24
26
52
53
54
55
57
58
58
59
78
81
83
84
86
88
89
90
91
91
92
92
92
93
93
94
95
96
97
99
99
24
25
26
Investment property
Intangible assets and goodwill
Impairment testing of goodwill and intangibles
with indefinite lives
27 Other assets
28 Deposits
29 Other payables
30
Provisions
31 Reset preference shares
Subordinated debt
32
33
Issued capital
34 Retained earnings and reserves
35
36
37
38
39 Related party disclosures
40 Risk management
41
42 Derivative financial instruments
43 Commitments and contingencies
44
Employee benefits
Share based payment plans
Auditor’s remuneration
Key management personnel
Financial instruments
45
46
47
Standby arrangements and uncommitted credit
facilities
Fiduciary activities
Events after balance sheet date
Business combinations
Directors’ Declaration
Independent Audit Report
Additional information
Page
100
100
102
104
104
104
105
106
106
107
108
110
111
116
117
124
128
139
148
150
154
155
155
156
157
158
160
BENDIGO AND ADELAIDE BANK LIMITED
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
ABN 11 068 049 178
Annual Financial Report
Annual Financial Report
Period ending 30 June 2012
Period ending 30 June 2012
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
We aim to be Australia’s leading
customer-connected bank
Our strength comes from our focus on the success of our customers, people, partners and communities
Our strength comes from our focus on the success of our customers, people, partners and communities
We take a 100 year view of the business
We take a 100 year view of the business
We listen
We listen
We respect everyone’s choice, needs and objectives
We respect everyone’s choice, needs and objectives
We partner for sustainable long term outcomes
We partner for sustainable long term outcomes
Introduction
Introduction
Bendigo and Adelaide Bank is committed to high standards of corporate governance. This commitment applies to the
Bendigo and Adelaide Bank is committed to high standards of corporate governance. This commitment applies to the
Company’s relationship with its shareholders, customers, employees, suppliers, regulators and the communities in which we
Company’s relationship with its shareholders, customers, employees, suppliers, regulators and the communities in which we
operate.
operate.
The governance processes and practices adopted by the Company take into account APRA’s standards and guidance and the
The governance processes and practices adopted by the Company take into account APRA’s standards and guidance and the
governance recommendations set by the ASX Corporate Governance Council (ASX Recommendations). A summary of the
governance recommendations set by the ASX Corporate Governance Council (ASX Recommendations). A summary of the
ASX Recommendations with reference to the Company’s governance practices is available on the Company’s website –
ASX Recommendations with reference to the Company’s governance practices is available on the Company’s website –
www.bendigoadelaide.com.au. The governance documents referred to below can also be accessed from this website.
www.bendigoadelaide.com.au. The governance documents referred to below can also be accessed from this website.
The following provides an overview of the Company’s corporate governance structure.
The following provides an overview of the Company’s corporate governance structure.
Board Committees
Board
Managing
Director
Board Committees
Audit
Change Framework
& Technology
Governance
Executive
Committee
Credit
Risk
Governance
& HR
Note: ALMAC is the asset liability management committee.
Note: ALMAC is the asset liability management committee.
Management Committees
Credit
Risk
ALMAC
Operational
Risk
- 4 -
- 4 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Board role and skills
The board charter sets out the responsibilities of the board. A copy of the charter is available on the Company’s website.
Except in relation to any matters reserved to the board under the charter, the day-to-day management of the Company and its
operations is delegated to management.
The Company appoints directors with appropriate skills and experience to contribute to the effectiveness of the board, to
provide leadership and contribute to the success of Company.
This involves taking into account the Company’s strategy (set out above), which includes building a long term sustainable
business focusing on the success of our customers, people, partners and communities. This delivers prosperity for
stakeholders, which in turn creates prosperity for the Company and its shareholders.
The board regularly reviews the necessary skills, knowledge and experience represented on the board to deliver the strategy
of the group and to take into account the benefits to the organisation of having board representation relating to strategic points
of difference.
The board uses a skills matrix to assist with the review. The criteria from the matrix are set out below.
Industry
1. Banking industry
Note, this includes the following:
• Retail banking and distribution
• Capital management, including capital and financial markets and treasury
• Regulation, including prudential regulation
2. Wealth management industry
Subject matter specific
3. Governance
4. Accounting and financial reporting
5. Legal
6. Technology and telecommunications
7. Corporate finance/investment banking
8. Risk management
General
9. Business
10. Listed board
11. Retailing Note, this includes sales, branding and marketing
12. Understanding of regional and community issues
A director may obtain independent professional advice at the reasonable cost to the Company with approval of the Chair of the
board (or, if the Chair refuses to give approval, the board).
The directors
Details of the directors of the Company during the reporting period are set out below.
Robert Johanson, Chair, Independent
BA, LLM (Melb), MBA (Harvard), 61 years
Term of office: Robert has been a Company director for 25 years. He was appointed Deputy Chair in 2001 and Chair in
2006.
Skills, experience and expertise: Robert has experience in banking and financial services and expertise in corporate
strategy, capital management, risk management and mergers and acquisitions. He has over 25 years experience in providing
corporate advice on capital market transactions to a wide range of public and private companies.
Board committees: governance & HR, change framework & technology governance
Group and joint venture directorships: Rural Bank Ltd, Homesafe Solutions Pty Ltd (Chair) and Bank of Cyprus Australia
Ltd (from March 2012 to August 2012).
Other director and memberships (current and within last 3 years):
Member, Takeovers Panel
Deputy Chancellor, University of Melbourne and Chairman, Australia India Institute.
Director, Robert Salzer Foundation Ltd and Grant Samuel Group Pty Ltd. Grant Samuel provides professional advisory
services to the Company. Further information is provided under the renewal and re-election section following.
- 5 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Mike Hirst, managing director, not independent
BCom (Melb), 54 years
Term of office: Mike was appointed as managing director and chief executive officer of the Company in 2009.
Skills, experience and expertise: Mike joined the group when he was appointed as a director of Sandhurst Trustees Limited
(a wealth management subsidiary of the Company) in 2001 and he became an employee of the Company later in 2001. Mike
has extensive experience in banking, treasury, funds management and financial markets, including from previous senior
executive and management positions with Colonial Ltd, Chase AMP Bank and Westpac.
Board committees: Mike has a standing invitation to attend meetings of the risk, credit, governance and HR and change
framework and technology governance committees. He is not a member of these committees.
Group and joint venture directorships: Rural Bank Ltd and Bank of Cyprus Australia Ltd (from March 2012 to August 2012)
Other director and memberships (current and within last 3 years):
Director, Treasury Corporation of Victoria
Member, Financial Sector Advisory Council and Business Council of Australia
Councillor, Australian Bankers’ Association
Director, Barwon Health (ended 2009).
Kevin Abrahamson, Independent
BSc (Hons), MA, MBA, FAICD, FFin, FAIM, 67 years
Note: Retired October 2011
Term of office: Kevin joined the Adelaide Bank board in 2000 and the Bendigo and Adelaide Bank board in 2007 and retired
from the board in October 2011.
Skills, experience and expertise: As a specialist in the area of corporate strategy and information technology, Kevin has
worked as a consultant in 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.
Board committees: Audit, Change Framework & Technology Governance
Group and joint venture directorships: n/a
Other director and memberships (current and within last 3 years): n/a
Jenny Dawson, Independent
B Bus (Acc), FCA, MAICD, 47 years
Note: Standing for re-election at the 2012 AGM
Term of office: Ms Dawson joined the board in 1999.
Skills, experience and expertise: Jenny has experience in financial reporting and audit, IT internal control reviews, internal
audit and risk management. Jenny worked with Arthur Andersen for ten years in the audit and IT controls division, and also
worked for the Company (her employment ended in 1999).
Board committees: audit (Chair), credit
Group and joint venture directorships: Sandhurst Trustees Limited (Chair), Community Sector Banking Pty Ltd, Community
Sector Enterprises Pty Ltd
Other director and memberships (current and within last 3 years):
Member, Victorian Regional Policy Advisory committee
Chair, Regional Development Australia Committee for the Loddon Mallee Region
Director, Goulburn-Murray Water
Former director, Coliban Region Water Corporation (ended 2010).
Jim Hazel, Independent
BEc, FFin, 61 years
Term of office: Jim joined the board in 2010.
Skills, experience and expertise: Jim is a professional public company director who has had an extensive career in banking
and finance, including in the regional banking industry. Jim was Chief General Manager of Adelaide Bank (his employment
ended in 1999).
Board committees: risk (Chair), credit, governance & HR
Group and joint venture directorships: Rural Bank Limited
Other director and memberships (current and within last 3 years):
Chairman, Ingenia Communities Group Ltd (listed, period June 2012 to present)
Director, Centrex Metals Ltd (listed, period of directorship: 2010 to present), Impedimed Ltd (listed, period of directorship: 2007
to present), Motor Accident Commission and Coopers Brewery Ltd
Former director, Becton Property Group (2006 – 2010).
- 6 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Jacqueline Hey, Independent
BCom (Melb), Graduate Certificate in Management (Southern Cross University), (GAICD), 46 years
Term of office: Jacquie joined the board in July 2011.
Skills, experience and expertise: Jacquie has experience in the areas of telecommunications, marketing and sales,
including as CEO of Ericsson in the UK and in Australia. Jacquie worked with Ericsson for more than 20 years in finance,
marketing and sales and in leadership roles in Australia, Sweden, the UK and the Middle East.
Board committees: audit, risk, change framework & technology governance (Chair from July 2012)
Group and joint venture directorships: Bank of Cyprus Australia Ltd (from March 2012 to August 2012)
Other director and memberships (current and within last 3 years):
Director, Special Broadcasting Service (SBS) and Honorary Consul of Sweden for Victoria.
Former director of Victorian Branch of Australian Industry Group (AIG) (ended 2010),
Australian Mobile Telecommunications Association (ended 2010) and
Ericsson Group Companies (Australia & New Zealand) (ended 2010).
David Matthews, Independent
Dip BIT, GAICD, 54 years
Term of office: David joined the board in 2010.
Skills, experience and expertise: David has experience in small business and agri-business. David has involvement in a
number of agricultural industry bodies including as a director and vice chairman of Pulse Australia and a director of
Australian Field Crops Association. David has a strong connection to regional communities and is an advocate and
supporter of the Community Bank® model. He chaired the first Community Bank® company in Rupanyup and Minyip
when it was first established in 1998.
Board committees: Credit, Audit
Group and joint venture directorships:
Co-Chair of the Community Bank® Strategic Advisory Board.
Other director and memberships (current and within last 3 years):
Director, Pulse Australia, Australian Field Crops Association, Rupanyup/Minyip Finance Group Ltd.
Terry O’Dwyer, Independent
B Com, Dip Adv Acc, FCA, FAICD, 62 years
Note: Retired August 2012
Term of office: Terry joined the board in 2000 and retired from the board in August 2012. Terry was a director of First
Australian Building Society Limited which was acquired by the Company in 2000.
Skills, experience and expertise: Terry has expertise in accounting and corporate finance. Terry was a partner in BDO
Kendalls (Chartered Accountants) for 28 years and headed its corporate finance division before being appointed Chair.
Board committees: audit, risk, change framework & technology governance
Group and joint venture directorships: n/a
Other director and memberships (current and within last 3 years):
Chair, Metal Storm Ltd (Administrator Appointed) (listed, period of directorship: 2007 to present) and
Director, Queensland Theatre Company Ltd.
Deb Radford, Independent
B.Ec, G. Dip Finance & Investment, 56 years
Note: Standing for re-election at the 2012 AGM
Term of office: Deb joined the board in 2006.
Skills, experience and expertise: Deb has over 20 years experience in the banking industry with both international and local
banks. Deb also worked in the Victorian State Treasury, and ran her own consulting business between 2001 and 2007
advising the government on commercial transactions.
Board committees: credit (Chair), change framework & technology governance, Governance & HR
Group and joint venture directorships: Bank of Cyprus Australia Ltd (from March 2012 to August 2012)
Other director and memberships (current and within last 3 years):
Director, Forestry Tasmania (ceased 30 June 2012) and City West Water (ceased 30 September 2011).
Tony Robinson, Independent
B Com (Melb), ASA, MBA (Melb), 54 years
Note: Standing for re-election at the 2012 AGM
Term of office: Tony joined the board in 2006.
Skills, experience and expertise: Tony is the managing director of Centrepoint Alliance Limited and has many years’
experience in financial services, particularly wealth management and insurance.
Tony’s previous roles include chief executive officer and executive director of IOOF Holdings Ltd, managing director and chief
executive officer of OAMPS Limited, joint managing director of Falkiners Stockbroking, managing director of WealthPoint, and
senior executive positions at Link Telecommunications and Mayne Nickless.
Board committees: risk, governance & HR (Chair)
Group and joint venture directorships: n/a
Other director and memberships (current and within last 3 years):
Director, Centrepoint Alliance Limited (listed, period of directorship: 2009 to present)
Former director, IOOF Holdings Limited (listed, period of directorship: 2007 to 2009).
- 7 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Independence
The board believes that the exercise of independent judgment by directors is an important feature of corporate governance.
The board policy sets out the test for the purpose of assessing the independence of non-executive directors as follows: “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, the quantitative materiality thresholds in Accounting Standard
AASB 1031 are taken into account, as well as qualitative materiality factors.
The board has assessed each non-executive director as independent. Further detail in relation to Robert Johanson and Jenny
Dawson is set out below.
Robert Johanson
The Chairman of the Company, Mr Robert Johanson, is responsible for leading the board and ensuring that it is operating to
the appropriate governance standards. Robert has been Chairman of the Company since 2006 and a non-executive director
since 1988.
Robert is a director of Grant Samuel Group Pty Ltd (and subsidiaries), which has a long standing relationship with the
Company and which is one of a range of firms which may be engaged to provide corporate advisory services to the Company.
In choosing a provider for corporate advisory services, the Company will consider the type of assistance required, the
expertise of the firm and individuals in the firm, their understanding of the Company and its strategy, and the cost of the
services.
During the reporting period Grant Samuel was engaged to provide general commercial property advice and advice on the
group’s distribution arrangements with Australia Post. The Company engaged other firms in relation to the institutional share
placement, share purchase plan and the acquisition of Bank of Cyprus Australia.
The decision whether to appoint Grant Samuel.
The total fees paid by the Company to Grant Samuel for the 2011/12 financial year was approximately $280,000 (excluding
GST and disbursements). Grant Samuel has provided the Bank with written confirmation that, in relation to the engagements
referred to above, the fees paid by the Bank in 2011/12 are not material to Grant Samuel.
The board has an established protocol for the engagement of Grant Samuel. The protocol deals with the following two key
matters.
•
•
Appointment: The appointment may be made 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. In making a decision the board must consider 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
The involvement of Mr Johanson.
believes the engagement would interfere with his exercise of independent judgment as a director.
• Whether the engagement would impact on the independence of Mr Johanson, taking into account the above
confirmations, and materiality from the perspective of the Company.
• Whether Mr Johanson may be present and participate in board discussions and vote on the matter about which Grant
Samuel provides advice.
• Whether the engagement of Grant Samuel is in the best interests of the Company.
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 Company to engage Grant Samuel in the matter under consideration), but then is required
to leave the meeting for the discussion and decision.
Umbrella engagement terms have been agreed with Grant Samuel (without the involvement of Mr Johanson), and specific
engagements are documented.
Involvement: If Grant Samuel is engaged, there are a number of 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 personnel other than Mr Johanson. Contact with the Company is to
be through 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 Company.
•
If the board has decided that Mr Johanson can participate in decision-making on the matter, Mr Johanson is required to
make an independent assessment of advice provided by Grant Samuel and if he has any concerns, to raise those
concerns with the managing director or the board.
The board believes that the engagement of Grant Samuel does not prejudice the independence of Mr Johanson. Furthermore,
the board believes that Mr Johanson has consistently brought independent judgement to bear on board decisions and is
satisfied that Mr Johanson has retained independence of character and judgement and has not formed associations with
management (or others) that might compromise his ability to exercise independent judgement or act in the best interests of the
Company.
- 8 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Jenny Dawson
Ms Jenny Dawson has been a non-executive director of the Company for 13 years.
Jenny is a chartered accountant based in Bendigo. As stated above, she has particular expertise in the areas of financial
reporting and audit, IT internal control reviews, internal audit and risk management.
Prior to her appointment to the board in 1999, Jenny worked with the Company from 1995 up to the date of her appointment,
initially as a contractor (1995 to 1998) and then as an employee (1998 to 1999) managing the internal audit function. At that
time, the Company was predominantly based in regional Victoria and was less than 10% of the size it is now.
In the period leading up to Jenny’s appointment, 2 board members, both experienced accountants, retired. The board
reviewed the skills, experience and attributes represented on the board and identified, in particular, the benefits of gender
diversity and additional local representation (in Bendigo) as well as the need to replace the accounting skills lost through the
retirement of directors. Jenny’s skills, experience and attributes met all of the criteria sought by the board and she was
appointed to the board.
Since Jenny’s appointment, the rules and regulations in relation to corporate governance issued by ASX and APRA changed
so that previous employment relationships between a director and a company became a relevant consideration when
assessing a director’s independence. The Company endorses the policy behind these changes.
By the time these standards came into effect a number of years after her appointment, the board assessed Jenny as
independent on the basis that sufficient time had elapsed and senior management changes had been made that Jenny
displayed independence of character and judgment and did not have associations with management and staff that might
compromise her ability to exercise independent judgement or act in the best interests of the Company. This continues to be
the case today.
Renewal and re-election
The board is committed to a process of orderly renewal, overseen by the governance and HR committee, and taking into
account the planned retirement of directors.
6 non-executive directors have retired;
In November 2007 (the time of the merger between Bendigo Bank and Adelaide Bank), 2 former directors of Bendigo Bank
resigned and 5 former directors of Adelaide Bank were appointed to the board. Since then, the following changes have taken
place:
•
•
•
In addition to this, in 2009 the managing director retired and a new managing director was appointed.
As a result, there are now 4 directors who have served on the board for less than 5 years (including the managing director), 2
directors who have served 5-10 years and 2 who have served more than 10 years.
3 new non-executive directors have been appointed.
an executive director has resigned; and
In considering renewal the board considers term of service, but not as a determinative factor. Moreover, the board considers
that there is a benefit in retaining the services of directors who have experience across economic cycles and changes in the
market environment. Corporate memory is an important attribute of the board.
A director seeking re-election at the end of their term must provide a statement of contribution to the board. In making a
decision whether to recommend re-election, the board takes into account the statement of contribution, the director’s
performance assessment, the skills and experience needed on the board and the skills and experience of the current board.
All new directors are provided with an induction program for the board (and relevant committees) to familiarise directors with
the Company’s business and strategy.
Board performance
The following board performance review process applies.
•
•
•
•
Board as a whole – annual review: An internal review is conducted by the Chair of the board. This involves
questionnaires completed by directors and executives, as well as individual discussions by the Chair.
Individual directors – annual review: This is conducted by the Chair of the board.
Chair of board – annual review: This is conducted by the board as a whole, led by the Chair of the governance & HR
committee.
Committees – bi-annual review: This is bi-annual to enable a greater focus on the board as a whole and individual
director assessment in other years. The review is lead by the chair of each committee and discussed in a board meeting.
Reviews of the board as a whole, committees, individual directors and the Chair of the board took place during the year in
accordance with the process described above.
The review of the board and committees involves consideration of performance against the charters and goals and objectives
set at the start of the financial year. The board review also considers the structure and role of the board (including in strategy
and planning), culture and relationships, meeting processes and organisational performance monitoring.
An external consultant was engaged in the 2011-2012 financial year to provide assistance and advice in relation to the board
performance evaluation process.
- 9 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Board committees
The board is assisted in discharging its responsibilities by the 5 board committees described below. These committees have
been in place for the full financial year.
The membership of the committees has been structured so as to spread responsibility and make best use of the range of skills
across the board.
The board receives the minutes of all committees at the following board meeting.
A committee can seek information from any group employee or any other source and meet with employees and third parties
without the presence of management. A committee may consult with a professional adviser or expert at the cost of the
Company, if the committee considers it necessary to carry out its responsibilities.
A summary of the role of each of the board committees is set out below.
statutory financial and APRA reporting; and
external audit function, including prudential audit requirements;
The audit committee assists the board in relation to the following:
•
• Group Assurance (internal audit & credit risk review) function;
•
•
The governance and HR committee assists the board in relation to the following:
•
•
•
nomination matters, including board composition and succession planning;
internal control framework.
board performance;
remuneration, including executive remuneration policy, approval of remuneration consultants and recommendation of
remuneration arrangements for the managing director and senior executives to the board;
corporate governance matters generally; and
key human resource policies, including diversity and occupational health and safety.
•
•
The risk committee has oversight of risk, including the establishment, implementation, review and monitoring of risk
management systems and policies for balance sheet and off-balance sheet risk (including trading and liquidity) and operational
risk (including regulatory compliance, financial crimes, anti-money laundering and counter terrorism financing and business
continuity).
The credit committee has 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 change framework and technology governance committee has oversight and monitoring of the group’s technology
governance and transformational or change projects within the Company. The change committee monitors the status of the
performance and progress of major change projects and the major activities and priorities for the technology services division.
An example of the projects overseen by the committee is the conversion of the Adelaide Bank customer data to the Bendigo
Bank banking platform.
Board remuneration
The remuneration policy and information about remuneration paid is set out in the remuneration report in the Directors’ Report.
There are no schemes for retirement benefits, other than superannuation, for non-executive directors.
- 10 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Overview of meetings and member attendance
Director
Board
Com m ittees
Audit
Credit
Risk
Governance &
HR
16
7
13
6
6
Change
Fram ew ork &
Technology
5
A
B
A
B
A
B
A
B
A
B
A
B
16
7
16
16
16
16
16
16
16
16
16
7
16
16
16
16
15
15
14
16
3
7
7
6
7
3
7
7
6
7
13
13
5
13
13
13
12
3
12
13
6
6
6
6
6
6
5
5
5
3
5
5
5
5
3
5
5
5
6
6
1
6
6
6
6
1
5
6
Meetings during
reporting period
A = Number eligible
to attend
B = Number attended
Robert Johanson
Kevin Abrahamson 1
Jenny Daw son
Jim Hazel
Jacquie Hey
Mike Hirst 3
David Matthew s 2
Terry O’Dw yer 4
Deb Radford
Tony Robinson
1 Mr K Abrahamson retired from the board on 24 October 2011.
2 Mr D Matthews was appointed to the Audit Committee on 7 July 2011.
3 Mr M Hirst ceased to be a member of the risk and credit committees on 24 October 2011.
4 Mr T O’Dwyer retired from the board on 13 August 2012.
In addition to the meetings described in the table above, a board sub-committee was established during the reporting period in
relation to the acquisition of Bank of Cyprus Australia Limited by the Company and the share capital raisings by the Company.
The members of the board sub-committee were Robert Johanson, Mike Hirst and Jenny Dawson. The committee met twice
during the reporting period and all three members attended both meetings.
Code of conduct and reporting of concerns
The Company’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 executive committee and adopted
by the board.
The code of conduct is a statement of the group’s corporate ethics and philosophy and underpins business decisions, actions
and behaviour. It aims to make sure that high standards of corporate and individual behaviour are observed in conducting the
business, and provides support for those behaviours.
The code 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, use of information and position and confidentiality. More
detailed policies exist that then deal specifically with various aspects of the code, for example the conflicts of interest.
In addition, the 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 sets out the protection provided for employees who raise concerns
in good faith.
Fit and proper
In addition, all directors and senior managers must meet fit and proper standards under the Company’s fit and proper policy,
which addresses the requirements of APRA’s Prudential Standard CPS520 “Fit and Proper”. Under the policy, all directors and
senior managers need to have appropriate skills, experience and knowledge, and act with honesty and integrity. Directors and
senior managers are assessed before appointment and then annually. All directors and senior managers have been assessed
as fit and proper.
- 11 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Continuous disclosure and communications
The continuous disclosure policy assists the Company 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,
Chair and executive officers are responsible for identifying matters or transactions arising between board meetings which
require disclosure under 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 make sure that information is not released to external parties until confirmation of lodgement is received from ASX.
The communications policy provides clear authorities and protocols for all communications with parties external to the
Company, including investors, ASX, regulatory authorities, media and brokers. It has also been designed to complement the
continuous disclosure policy, to make sure that information flows are controlled, and to reduce the likelihood of inadvertent
disclosures outside the continuous disclosure reporting regime. In addition to all direct communications sent to individual
shareholders, the Company will communicate publicly with its shareholders by posting information in the corporate governance
section on the Company’s website.
To provide shareholders with a better opportunity to participate in the Annual General Meeting, in 2012 the Company will again
hold its Annual General Meeting in two locations – Bendigo and Adelaide. Directors and senior management will be in both
locations and the meeting will be transmitted live between the two venues, enabling shareholders to ask questions and vote
across two venues.
Share trading
The trading policy imposes restrictions on trading in the Company’s 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 requires these employees and officers to tell the Company before and after trading and this information is
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 Company securities as part of a margin loan portfolio.
The policy also prohibits a participant in an executive incentive plan from entering into a transaction designed to remove the “at
risk” element of an entitlement under the plan (a) before it vests, and (b) after it vests, until any restriction period imposed by
the board ends or has been lifted.
Overview of diversity
The Company has a diversity policy that is founded on the Company’s code of conduct and corporate values. As stated in the
policy:
“Staff: We advocate an inclusive and welcoming workplace. As an employer, we aim to offer an environment where people
are treated with respect, feel valued, and can achieve success, both for the individual and the organisation. We also
recognise the importance of an appropriate work-life balance.
Customers and communities: Our vision is to be Australia’s leading customer-connected banking group. We engage with
customers and communities, by taking time to connect, listen and understand and build sustainable relationships. It makes
sense to have a diverse team to be able to better understand and meet the needs of our diverse customer base and the
communities in which we operate.
The Bank: Our ability to deliver our “unique style of banking” is dependent on having the best people. We will only find
these people by drawing from the broadest pool of candidates available. Attracting and retaining a diverse team of talented
people positions our organisation for success – it creates both immediate business value and a sustainable organisation. It
also contributes to our good reputation.
So diversity makes good business sense and helps create value for shareholders.”
The governance & HR committee has responsibility for keeping the policy under review. This includes the effectiveness of the
policy. The board is responsible for assessing performance against measurable objectives on an annual basis.
A people development and diversity council has been established, chaired by the executive, corporate resources. The council
comprises representatives from across the Company. Its role is to promote diversity and inclusiveness in the workplace, and
also to provide input from across the organisation to assist formulate policy, strategy and objectives.
The governance & HR committee established the Company’s diversity and inclusiveness strategy and work program in 2012
as a means for measuring the effectiveness of the policy in achieving the Company’s diversity objectives. The diversity and
inclusiveness strategy and work program is described below.
- 12 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Diversity profile
Information about the Company’s gender profile as at 31 March 2012 is set out in the following table.
Senior m anagem ent and
executive positions
Board (1)
All
em ployees
Aw ard
em ployees
Salaried
em ployees
(not senior
m anagem ent
or executive)
5230
2687
2400
Senior
m anagem ent
(2)
134
Executive
com m ittee
(1)
9
3280
63%
2195
82%
1049
44%
34 (2)
25%
2
22%
9
3
33%
Total num ber of
em ployees or directors
Num ber of w om en
Wom en as percentage
of total
1 The CEO is a member of the executive committee and also an executive director and so is included in both sets of numbers.
2 Last year the table showed the Company numbers and percentages and a separate note was included about Rural Bank, which had
become a wholly-owned subsidiary during that financial year. This year, the numbers for Rural Bank are included in the table, along with
those of Bank of Cyprus Australia, which was acquired during this financial year. This has impacted in particular on the percentages shown
for women in senior management (and combined senior management and executive committee), which has reduced from 30% last year (or
29% for senior managers and executive committee combined) to 25% this year as a result of the impact of the numbers in Rural Bank and
Bank of Cyprus Australia.
- 13 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Progress against 2011 diversity objectives
The diversity objectives set last year and progress against those objectives is discussed below.
1. Develop and introduce an inclusiveness and diversity strategy at an organisational level across the following four areas -
gender, age, cultural background (with an initial focus on indigenous background) and disability – by 30 June 2012 –
completed.
The Company has introduced a diversity and inclusiveness strategy and work program that is designed to establish a
strong foundation for ongoing diversity and inclusiveness initiatives. The purpose of the strategy and work program is to
support the Company’s aim to become Australia’s leading customer connected bank by providing an environment with a
diverse workforce where employees work in an inclusive and welcoming workplace.
The priority areas for development are:
• developing and supporting inclusive leaders,
• creating an inclusive culture where all employees can thrive,
• building a more diverse workforce at all levels,
• strengthening diversity foundations and effective governance of diversity and inclusiveness, and
• aligning the diversity program to fit the Company’s customer connected strategy.
Introduce a program for management development for both genders through experience as directors on subsidiary and
joint venture boards; conduct an analysis of current gender composition of these boards and set target for female
representation – by 30 June 2012 - completed.
A program for management development through representation on subsidiary and joint venture boards has been
introduced. An analysis of the current gender composition of these boards has been completed and targets have been
set for the gender composition of management on these boards. The new target is reported as a new diversity objective
(see below).
Increase the representation of females in senior management (including senior managers and executives) from 29% to at
least one third – by 30 June 2015 - ongoing.
3.
2.
Initiatives under the diversity and inclusiveness strategy and work program have been designed to achieve this target.
The reported percentage of women in senior management this year has reduced from 29% to 25% due to the inclusion of
Rural Bank and Bank of Cyprus Australia. Accordingly, this objective now effectively targets an increase from 25% to
one third.
4. Maintain female representation of at least one third of the board – ongoing.
This representation has been maintained, with 3 female directors on the board (out of a total of 8).
Additional diversity objectives
The board has set the following additional objectives, which are priority initiatives identified under the diversity and
inclusiveness strategy and work program.
1.
Female management representation on subsidiary and joint venture boards – target 25% by 30 June 2013.
2.
Female representation is currently 20%. Increasing representation from senior management ranks would increase the
number of female candidates. The management development program introduced for both genders is expected to
increase female representation.
Senior management and the top 200 hiring managers to attend a diversity awareness and unconscious bias workshop
with diversity messages to be built into the management and leader development program by 30 June 2013.
An important foundation of a successful diversity and inclusiveness strategy is the creation of a broad based awareness
of diversity and inclusiveness which reveals and helps to address underlying attitudes and mindsets.
3. Flexible work arrangements to be reviewed - by 30 June 2013.
Flexible work arrangements have been identified as an important enabler for diversity and inclusiveness. While the
Company does have policies and processes in place, the diversity and inclusiveness strategy and work program requires
further work to be done to further embed flexible working as the accepted way of doing things.
4. Additional operational milestones and targets to support each of the elements of the diversity and inclusiveness strategy
to be set by 30 November 2012 and reviewed by 30 June 2013.
The operational milestones and targets are to be based on the Company’s current operational profiles and reflect the
following, which are Company’s priority areas of focus:
• gender
• age
• disability
• cultural background.
- 14 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Overview of 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 Company’s material risks. The board has established an integrated
framework of committees, policies and controls to identify, assess, monitor and manage risk. Executive management is
responsible for implementing the policies and controls.
The first line of defence is the business itself which has accountability for controls. It is the operational and business
management team where the primary responsibility exists for identifying and managing risk, implementing controls and
monitoring their effectiveness through quality processes.
The second line of defence is primarily group risk that provides specialist assistance to the business to monitor and manage
risks.
The third line of defence is group assurance. Through completion of reviews outlined in the group assurance strategic plan,
assessments are made to determine whether the group’s network of risk management, control, and governance processes, as
designed and represented by management, is adequate and functioning effectively.
The Company has established a system of regular reporting from independent risk (credit, operational and market) and audit
functions to the executive committee and board committees on the implementation and effectiveness of the risk management
systems, policies and internal controls designed to manage key business risks.
Key business risks
The following provides an overview of the key risks. Further information about risks and the associated risk management
framework is presented at Note 40 of the Annual Financial Report.
Credit risk
Description: Credit risk is risk of financial loss due to the unwillingness or inability of a counterparty to fully meet their
contractual debts and obligations.
Responsibilities: The board credit committee provides assistance to the board in relation to oversight of the group’s credit risk
profile and credit risk management framework. The committee is responsible for approving changes to the framework including
setting policies in relation to credit standards, practices and procedures within the group and monitoring compliance with the
policies. A management credit committee supports the board credit committee in respect to credit risk management and an
independent credit risk function manages credit support, analysis and reporting. This is complemented by credit risk reviews
performed by the group assurance function.
Market Risk
Description: Market risk is the risk of losses arising from adverse movements in market prices which in turn affect the value of
balance sheet positions. Market risk includes interest rate risk and currency risk which are discussed below.
An independent middle office function oversees, supports and reports on the market risk activities of group treasury and
financial markets to the asset liability management committee (ALMAC) and board risk committees. Middle office provides
treasury and financial markets with policy direction, risk management advice (market, operational and credit risks) and
compliance monitoring in relation to the reporting of market risk and related activities. The risks and activities include liquidity,
traded and non-traded market risk (interest rate and foreign exchange).
Interest rate risk
Description: Interest rate risk is the potential for volatility in earnings due to adverse movements in interest rates.
Responsibilities: Interest rate risk management is primarily monitored through the board risk committee, supported by a
management committee, the ALMAC. Interest rate risk is managed through group treasury.
Currency risk
Description: Currency risk is the risk of loss of earnings due to adverse movements in exchange rates.
Responsibilities: Currency risk is primarily monitored by the board risk committee, supported by a management committee, the
ALMAC. Currency risk is managed through group treasury, in the financial markets unit.
Liquidity risk
Description: Liquidity risk is the inability to access funds, which may lead to an inability to meet obligations in an orderly
manner as they arise or having to forego investment opportunities.
Responsibilities: Liquidity risk is primarily monitored by the board risk committee, supported by a management committee, the
ALMAC. It is managed through group treasury, in the liquidity and balance sheet management units. The independent middle
office function oversees and supports the risk management framework for liquidity risk as discussed above.
Strategic risk
Description: The risk that adverse business decisions, ineffective or inappropriate business plans or failure to respond to
changes in the environment will impact the Company’s ability to meet its objectives.
Responsibilities: Strategic risk is primarily monitored by the executive management committee. The board has ultimate
responsibility for strategic risk.
- 15 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Operational risk
Description: Operational risk is 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.
Responsibilities Operational risk (other than financial reporting risk) is primarily monitored by the board risk committee,
supported by a management committee, the operational risk committee.
It is managed through the group operational risk business unit, which manages regulatory compliance, fraud prevention and
detection, anti-money laundering and business continuity.
Operational risk is governed by the group operational risk framework. The framework complies with Basel II (operational risk
management) and Australian Standard – AS/NZS 4360:2004 (risk management).
The board audit committee has primary responsibility for the oversight of financial reporting risk. In addition to the internal
group assurance function (discussed below), the external auditor 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 annual financial report.
Group assurance
Group assurance is an internal audit and credit risk review function, independent of the business and of the external auditor. It
assesses the adequacy and effectiveness of the Company’s processes for controlling its activities and managing its risks.
The head of group assurance has a direct reporting line to the board audit committee and an administrative reporting line to
the executive, corporate resources, as well as direct access to the managing director, the Chair of the board audit committee
and the Chair of the board. The board committee procedural rules provide for the audit committee to meet at least annually
with the head of group assurance without management present.
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 board audit committee, with those relating to credit risk also provided
to the board credit committee. Reports on specific reviews are also provided to other board committees as appropriate.
The strategic plan for the group assurance function is approved and monitored by the board audit committee which also
assesses and confirms the independence and effectiveness of the function.
Financial reporting
The directors of the Company are responsible for the preparation and fair presentation of the financial statements. The board’s
responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, selecting and applying appropriate accounting policies and
making accounting estimates that are reasonable in the circumstances.
The audit committee assists the board by providing oversight of the group’s financial reporting responsibilities including
external audit independence and performance. The audit committee responsibilities include the following:
•
Assessing whether the financial statements are consistent with committee members’ information and knowledge and, in
their opinion, adequate for shareholder needs.
• Overseeing compliance with the statutory financial reporting obligations of the group.
• Considering and applying any significant changes in accounting policies, principles and practices.
The managing director and chief financial officer provide a written statement to the board in accordance with section 295A of
the Corporations Act that the Annual Financial Report 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.
The statement is made on the basis that it provides a reasonable, but not absolute, level of assurance and does not imply a
guarantee against adverse events or circumstances that may arise in future periods.
External auditor
Independence policy
The board audit committee is responsible for maintaining a policy about auditor independence, rotation and the provision of
non-audit services, and monitoring compliance with that policy. The policy on audit independence sets out the factors that may
compromise auditor independence.
It requires advance approval by the audit committee for engaging the auditor for any non-audit services, to enable the audit
committee to consider whether there may be an impact on auditor independence.
The policy requires the audit committee to receive the annual and half-year independence declarations from the auditor. The
external auditor also meets separately with the audit committee without the presence of management.
- 16 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Non-audit services
The audit committee gives an annual and half-year statement to the board as to whether the audit committee is satisfied that
the independence of the external audit function has been maintained having regard to the provision of non-audit services, and
why it is so satisfied.
As part of this process the audit committee receives a report, confirmed by group assurance, setting out the nature and scope
of all non-audit services provided during the period, including fees and confirmation from relevant senior management that they
are not aware of any matters that might impact the auditor’s independence.
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.
Rotation of audit personnel
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.
Annual General Meeting
Members may give written questions to the Company 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 required to make sure that a suitably qualified representative
attends the Annual General Meeting. The chair of the meeting provides an 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 Company in relation to the preparation of the financial statements and
the independence of the auditor in relation to the conduct of the audit.
The Chair also allows a reasonable opportunity for the representative of the auditor to answer written questions submitted
before the meeting.
- 17 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
Net (profit)/loss attributable to non controlling interes t
Profit after income tax expens e
Adjustments
Cash basis earnings
Financial Position at 30 June
Total assets
Net loans and other receivables
Cash and cash equivalents
Financial as sets and derivatives
Other as sets
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 specific items return on average as sets
Return on average assets
Cash basis return on average ordinary equity
Return on average ordinary equity
2012 (1)
$m
3,434.8
2,490.7
944.1
268.8
32.4
854.4
326.1
(131.1)
-
195.0
128.0
323.0
57,237.8
48,670.0
561.0
5,372.5
2,634.3
4,217.7
2011
$m
3,385.8
2,450.6
935.2
300.8
44.2
767.3
424.5
(77.9)
(4.5)
342.1
(5.9)
336.2
55,004.5
46,409.8
670.6
5,296.8
2,627.3
3,960.1
2010 (2)
$m
2,712.2
1,857.6
854.6
280.4
44.7
739.6
350.7
(90.8)
(17.3)
242.6
48.4
291.0
52,222.5
43,603.2
1,040.2
4,848.6
2,730.5
3,880.4
2009 (3)
$m
3,154.7
2,519.7
635.0
238.7
80.3
674.1
119.3
(35.5)
-
83.8
97.7
181.5
47,114.2
38,740.9
1,148.0
4,360.3
2,780.6
3,118.7
2008 (4)
$m
2,695.6
2,098.1
597.5
272.4
23.1
560.5
286.3
(87.3)
(0.7)
198.3
41.3
239.6
48,049.0
40,105.0
1,608.6
3,647.8
2,113.9
3,297.9
50,983.7
48,975.0
46,217.4
41,854.3
42,697.1
89.5
436.9
1,510.0
89.5
575.7
1,404.2
89.5
532.9
1,502.3
89.5
598.7
1,453.0
89.5
675.8
1,288.7
$6.16
48.6
84.2
30.0
30.0
60.0
0.56%
0.35%
8.36%
4.84%
$5.76
91.5
92.3
30.0
30.0
60.0
0.61%
0.64%
9.07%
8.99%
$5.27
67.4
83.3
28.0
30.0
58.0
0.56%
0.49%
8.18%
6.61%
$4.31
25.4
62.6
28.0
15.0
43.0
0.36%
0.18%
5.79%
2.35%
$5.60
87.7
111.1
28.0
37.0
65.0
0.72%
0.61%
12.29%
9.70%
1
2
3
4
Figures for 2012 include the fully consolidated trading of Bank of Cyprus Australia from 1 March 2012.
Figures for 2010 include the fully consolidated trading of Rural Bank from 1 October 2009, Tasmanian Banking Services from 1 August 2009.
Figures for 2009 include the fully consolidated trading of Macquarie margin lending portfolio from January 2009.
Figures for 2008 include the merger w ith Adelaide Bank effective 30 November 2007.
- 18 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
FIVE YEAR COMPARISON
The Bendigo and Adelaide Bank group
Financial Performance for the year ended 30 June
Key Trading Indicators
Retail deposits - Bendigo Adelaide (4)
Number of depositors' accounts - Bendigo Adelaide (4)
Total loans approved
Number of loans approved
Liquid assets and cash equivalents
Total liabilities
Liquid assets & cash equiv as proportion of total liabilities
Number of branches (5)
Average deposit holdings per branch
Number of staff (excluding Community Banks)
Assets per staff member
Staff per million dollars of assets (6)
Dissection of Loans by Security (7)
Residential loans
($'000)
Commercial loans
Margin lending
Unsecured loans
Other
Gross loans
Dissection of Loans by Security (7)
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
2012 (8)
2011
2010 (1)
2009 (2)
2008 (3)
33,017.1
2,132,090
12,665.6
79,724
5,933.5
53,020.1
11.19
486
67.9
4,189
13.665
0.07
33,768.8
11,622.1
2,333.2
869.2
238.7
29,867.9
1,860,441
13,885.5
83,942
5,967.4
51,044.4
11.69
466
64.1
4,019
13.686
0.07
31,522.3
10,784.2
3,202.2
834.6
220.5
27,542.6
1,812,286
11,916.6
80,881
5,888.8
48,260.7
12.20
448
61.5
3,847
13.554
0.07
28,875.5
10,182.1
3,627.0
823.7
191.0
26,505.0
20,537.7
1,754,849
1,638,443
9,137.4
69,678
5,508.3
8,845.2
81,853
5,256.4
43,995.5
44,751.1
12.52
426
62.2
3,598
13.095
0.08
11.75
404
50.8
3,478
13.815
0.07
28,569.4
29,840.4
5,987.6
3,475.9
707.1
183.1
5,712.3
3,773.8
737.9
193.9
48,832.0
46,563.8
43,699.3
38,923.1
40,258.3
69.15
23.80
4.78
1.78
0.49
67.70
23.16
6.88
1.79
0.47
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
100.00
100.00
100.00
100.00
100.00
358.5
(102.1)
256.4
0.53
102.9
0.21
31.8
128.5
0.53
0.06
358.7
(90.6)
268.1
0.58
91.4
0.20
41.9
110.9
0.54
0.07
282.2
(78.3)
203.9
0.47
79.1
0.18
47.1
104.7
0.54
0.10
223.6
(66.9)
156.7
0.42
67.7
0.18
44.3
86.1
0.54
0.07
59.4
(21.6)
37.8
0.09
22.1
0.06
36.8
76.2
0.51
0.10
($m)
($m)
($m)
($m)
(%)
($m)
(FTE)
($m)
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
(%)
1
2
3
4
5
6
7
8
Figures for 2010 include the fully consolidated trading of Rural Bank from 1 October 2009, Tasmanian Banking Services from 1 August 2009.
Figures for 2009 include the fully consolidated trading of Macquarie margin lending portfolio from January 2009.
Figures for 2008 include the merger w ith Adelaide Bank effective 30 November 2007.
Excludes Rural Bank and treasury retail deposits
Includes Community Bank branches, franchises and joint ventures
These ratios do not take into account off-balance sheet assets under management, w hich totalled $1.9 billion at 30 June 2011 (2010: $1.9 billion).
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.
Figures for 2012 include the fully consolidated trading of Bank of Cyprus Australia from 1 March 2012.
- 19 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
DIRECTORS’ REPORT
Your board of directors has pleasure in presenting the 148th Financial Report of Bendigo and Adelaide Bank Limited and its
controlled entities for the year ended 30 June 2012.
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.
Robert Johanson (chairman)
Mike Hirst (managing director)
Kevin Abrahamson (retired on 24 October 2011)
Jenny Dawson
Jim Hazel
Jacqueline Hey (appointed 5 July 2011)
David Matthews
Terry O’Dwyer (retired on 13 August 2012)
Deb Radford
Tony Robinson
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 the Annual Financial Report at pages 5 to 7.
Share Issues
The following share classes were issued during the financial year:
Ordinary shares
Ordinary shares issued under Employee Share Grant Scheme
Ordinary shares issued under the Dividend Reinvestment Plan
Ordinary shares issued in lieu of dividends under the Bonus Share Scheme
Ordinary shares issued under an Institutional Entitlement
Ordinary shares issued under a Retail Entitlement
Total ordinary shares issued
Share Options and Rights
Unissued Shares:
No.
of shares
-
10,309,077
867,252
17,751,480
6,200,872
35,128,681
As at the date of this report, there were nil unissued ordinary shares under options, nil rights to unissued ordinary shares
and 587,330 performance shares. Refer to notes 36 and 38 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 no performance rights vested (2011: nil) and 210,864 (2011: 409,753) 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.
- 20 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Ordinary Share Dividends Paid or Recommended
Dividends paid:
Final dividend 2011 of 30.0¢ per share, paid September 2011
Interim dividend 2012 of 30.0¢ per share, paid March 2012
Dividend recommended:
Final dividend 2012 of 30.0¢ per share, declared by the directors on 20 August 2012, payable 28
September 2012
All dividends were fully franked
Shareholders electing to receive dividends in the form of shares received the following ordinary shares,
paid in full:
September 2011
March 2012
In addition, shareholders electing to receive bonus shares in lieu of dividends received the following
ordinary shares, paid in full:
September 2011
March 2012
Preference Share Dividends Paid or Recommended
Dividends paid:
115.07 cents per share paid on 15 September 2011 (2010: 113.07 cents)
111.11 cents per share paid on 15 December 2011 (2010: 110.91 cents)
105.50 cents per share paid on 15 March 2012 (2011: 114.0 cents)
104.87 cents per share paid on 15 June 2012 (2011: 112.39 cents)
Dividend announced:
A dividend of 91.81 cents per security for the period 15 June 2012 to 16 September 2012 (inclusive),
announced on 18 June 2012, payable 17 September 2012
All dividends were fully franked
Step-up Preference Share Dividends Paid or Recommended
Dividend paid:
116.00 cents per share paid on 11 July 2011 (2010: 110.00)
118.00 cents per share paid on 10 October 2011 (2010: 116.00)
114.00 cents per share paid on 10 January 2012 (2011: 116.00)
108.00 cents per share paid on 10 April 2012 (2011: 116.00)
Dividend announced:
A dividend of 105.0¢ per security for the period 10 April 2012 to 9 July 2012 (inclusive), announced on
11 April 2012, payable 10 July 2012
All dividends were fully franked
Reset Preference Share Dividends Paid or Recommended
310.53 cents per share paid on 1 November 2011 (2010: 310.53)
307.16 cents per share paid on 1 May 2012 (2011: 305.47)
$107.4 million
$113.2 million
$118.1 million
5,005,825
5,303,252
338,041
529,211
$1.0 million
$1.0 million
$1.0 million
$0.9 million
$.8 million
$1.2 million
$1.2 million
$1.1 million
$1.1 million
$1.1 million
$2.8 million
$2.7 million
- 21 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 group during the year.
Consolidated Result
The consolidated profit after providing for income tax of the group amounted to $195.0 million (2011 - $342.1 million).
Review of Operations and Operating Results
The Company announced an after tax statutory profit of $195.0 million for the financial year ended 30 June 2012. Cash
earnings were $323.0 million, a decrease of 3.9 per cent over the previous financial year. The Company also announced a
final dividend of 30 cents per share (fully franked), which is flat on the previous financial year.
The Company’s performance was impacted by the challenging market environment including high funding costs and a low
demand for credit. Despite this the Company continues to grow and invest in the business and the Company’s core revenue
generating businesses of retail, third party banking, wealth and rural banking continue to perform well. The Company has also
maintained its efforts to improve the funding and capital profile.
The Company has limited net interest margin contraction through prudent and proactive balance sheet management. It has
sought to price both assets and liabilities in the most appropriate manner for all stakeholders. This has been combined with an
active hedging program which, while expensive, has successfully mitigated the risk of significant margin volatility.
The Company also announced the sale of the subordinated notes held in its TORRENS securitisation program. The sale of the
entire portfolio of notes is expected to release approximately $80 million of Core Tier One capital. This, together with the sale
of the Company’s 7.8% interest in IOOF Holdings Limited in August 2012 has resulted in an additional 42 basis points of Core
Tier One capital post balance date. These non-dilutive capital management initiatives demonstrate the Company’s
commitment to managing a profitable, but ultimately low risk and prudent business.
The Company continues to focus on its long-term performance and sustainability which is central to its strategy. The strategy
has been vindicated by recent credit rating upgrades from Fitch and Standard & Poor’s, and contrasts very favourably to the
rating momentum of many banks across the globe.
Funding costs have remained high, with sustained competition for retail term deposits in particular. Despite these pressures
net interest margin only decreased by seven basis points over the year. The Company’s term deposit retention rates have
remained consistently higher than 80%, notwithstanding the Company continuing to adopt a less aggressive pricing structure
than many of its competitors. Deposits grew by $2.2 billion over the six months to June 2012, and by $3.9 billion over the full
year.
The Company’s margin lending portfolio has now fallen more than 70% since its pro-forma peak of more than $8 billion in
2007. While this decline is being replaced by asset growth in other portfolios, notably residential mortgages sourced through
both retail and third-party channels, it has had a significant impact on the weighted average margin achieved on business
assets. The decline in the margin lending portfolio, and an assessment of the value of the wealth division, resulted in
December 2011’s write-off of $95.1 million of goodwill associated with this business, which affected the full year statutory
profit.
Cost containment and efficiency continues to be a major focus of management. Operating expenses, excluding the purchase
of the Bank of Cyprus Australia (BOCA), grew by just 1.1% over the year. Operational expense growth including the BOCA
acquisition was 2.2%. However, due to deteriorating revenues the cost-to-income ratio increased to 59.1% compared to 57.4%
for the 2011 year. The group maintains its long-term 55% cost-to-income target. As part of the group’s continued cost focus the
Board has announced there will be no short term incentive bonus pool for the payment of executive bonuses for the 2012 year.
Despite this cost focus the Company continues to invest in the strategic initiatives and its front-line capacity. The integration of
BOCA continues ahead of plan and in excess of synergy targets. There has been significant investment of staff and resources
into the group’s Basel II Advanced Accreditation project and customer-led connection strategy. This is in addition to the
continued investment in the roll-out of the Company’s newly-developed customer relationship management system. These
investments are being resourced from within the business, with considerable effort being made to maintain front-line capacity
and service levels, while managing back-office functions to fit the needs of the evolving business.
Credit quality is sound across the Company’s businesses. 90 day arrears in our largest portfolio, being residential mortgages,
deteriorated slightly over the period, sitting at 0.82% in June 2012, while business lending arrears (90-day) increased
marginally to 2.8%. The consumer portfolio continued to perform well, with both credit card and personal loan arrears at near
historical lows of 1.56% and 0.99% respectively. Rural Bank arrears and provisions are returning to historical levels after the
trade disruptions and natural disasters of the past 24-months.
The Company’s outlook for the coming year remains difficult to predict given the significant market volatility and revenue
challenges facing all banks. Funding costs, changing asset mix and demand for credit are all volatile reflecting the global
environment. Notwithstanding these pressures, the Company will continue to invest in its business, its people, and the
communities that it operates in, and will work diligently in its efforts to become Australia’s leading customer-connected bank.
- 22 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
The Company has industry-leading customer and business customer satisfaction levels as well as staff engagement levels
which are 2% above the Australian high-performance benchmark. The Company will continue to leverage these strengths, and
the strengths of its funding and capital profiles, to take advantage of the significant opportunities that exist for Bendigo and
Adelaide Bank.
Further information on the operations, performance, strategies and prospects of the economic entity are set out in the Report
by Chairman and Managing Director at pages 8 to 10 of the 2012 Annual Review which is available from the Company’s web
site. Certain information in respect to business strategies and prospects has not been disclosed where the disclosure is likely
to result in unreasonable prejudice to the Company or its controlled entities.
Significant Changes in the State of Affairs
The following significant changes in the state of affairs of the group occurred during the financial year:
In September 2011, 5,005,825 shares were allotted at an issue price of $8.06 to those shareholders participating in the
Dividend Reinvestment Plan, increasing share capital by $40.3 million.
In December 2011, 17,751,480 shares were allotted at an issue price of $8.45 per share, increasing share capital by $148
million, which is net of share issue costs.
In March 2012, 6,200,872 shares were allotted at an issue price of $7.33 per share, increasing share capital by $45 million,
which is net of share issue costs.
In March 2012, 5,303,252 shares were allotted at an issue price of $7.36 to those shareholders participating in the Dividend
Reinvestment Plan, increasing share capital by $39 million.
In the opinion of the directors, there were no other significant changes in the state of affairs of the group that occurred during
the financial year under review not otherwise disclosed in this report or the financial statements.
After Balance Date Events
On 20 August 2012 the Bank declared a final dividend for ordinary shares, on 18 June 2012 announced a dividend for
preference shares and on 11 April 2012 announced a dividend for Step up preference shares, details of which are shown
previously.
On the 9th August 2012 Bendigo and Adelaide Bank Group announced the sale of its 7.8% stake in IOOF. The sale will
improve statutory earnings by approximately $40 million and Tier One capital will increase by approximately 13 basis points.
There will be a reduction of dividend income received for the financial year 2013 of approximately $7.5 million. For further
information please refer to our ASX release on the 9th August 2012.
The Bank recently completed the sale of a portfolio of subordinated notes it held in existing Torrens securitisation trusts. The
Bank had previously deducted capital against these holdings to the value of approximately $90 million. This sale eliminates the
need for this deduction and increases Tier One capital by 29 basis points. There will be a loss on sale of these investments of
$12.4 million recorded for the financial year 2013.
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 group, the results of those operations, or the
state of affairs of the group 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 included in the information provided above under the heading “Review of Operations and Operating Results”, as well
as the Report by the Chairman and Managing Director at pages 8 to 10 of the 2012 Annual Review which is available from the
Company’s web site.
- 23 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF REMUNERATION ARRANGEMENTS AND OUTCOMES FOR SENIOR EXECUTIVES FOR 2012
This summary gives shareholders a concise and easy to understand overview of the group’s remuneration outcomes for the 2012
financial year and includes information on the actual value of remuneration received by senior executives. This summary is
unaudited and has not been prepared to comply with statutory obligations or accounting standards. The detailed statutory
remuneration disclosures prepared to comply with the accounting standards are contained in the Company’s 2012 remuneration
report.
2011 - 2012 Outcomes
Remuneration oversight
& approval
The board, on recommendation of the governance & HR committee, approved the 2012 remuneration
arrangements for senior executives, including the managing director, in August 2011. The managing
director’s long term incentive arrangements were set in 2009. The senior executives’ long term
incentive arrangements were set in 2009 and 2010. No long term incentive grants were made to
senior executives in the 2012 financial year.
Remuneration policy
A number of technical changes were made to the Remuneration Policy to clarify its operation under
APRA’s remuneration prudential standards. The changes did not alter the design or structure of the
group’s remuneration arrangements in FY2012.
Non executive director
fees
The base non-executive director fee was increased from $129,375 to $143,000 ($286,000 for the
Chair – two times the base fee) for the period 1 July 2011 to 31 October 2011 and from $143,000 to
$165,000 ($412,500 for the Chair – two and a half times the base fee) for the period 1 November
2011 to 30 June 2012. There were no additional fee payments for board committee memberships. In
addition, the non-executive directors again contributed $5,000 of their annual fee payment to fund the
board scholarship for students to assist them meet their living expenses. Additional fees were paid to
directors who were on the boards of Rural Bank Limited, Sandhurst Trustees Limited and the
Community Bank® Strategic Advisory Board.
Senior executive
salaries
The board approved changes to senior executive remuneration arrangements in August 2011 in line with
increases awarded to salaried employees generally. The overall increase in fixed remuneration for all
senior executives and other direct reports to the managing director for the 2012 financial year was 3.5%.
Company performance
Short term incentive
(“STI”)
Long term incentive
(“LTI”)
The Company’s overall performance for the year did not achieve the targets set by the board. The
Company announced a statutory after-tax profit of $195 million for the year. The Company’s cash
earnings result was $323 million, a 3.9% decrease on the previous financial year. The cash earnings
result equated to 84.2 cents per share and represents an 8.7% decrease on the previous financial
year. The Company’s share price decreased by 145 cents (16.4%) and the Company’s annual
dividend remained flat at 60 cents.
In August 2012 the board, on recommendation from management and the governance & HR
committee, decided that the criteria for establishment of a group short term incentive (STI)
performance bonus pool were not met and no STI bonus pool was established for the 2012 financial
year. As no STI bonus pool was established, no STI bonuses were paid to senior executives for the
2012 financial year.
No long term incentive grants were made to senior executives in the 2012 financial year. Below is a
summary of the outcomes for past grants.
Shareholders approved an issue of five equal annual parcels of performance shares to the managing
director at the 2009 Annual General Meeting (AGM), with the performance periods measured over one to
five years (with the final performance period ending 30 June 2014). 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 senior executives following the 2009 AGM, with the performance periods measured from
one to three years (with the final performance period ending 30 June 2012). The vested performance
shares for the managing director and the other senior executives are subject to a further trading restriction
which applies for the later of 2 years from the end of each parcel’s performance period and the date
specified in the offer.
In 2010 the board approved a supplementary grant to senior executives to reflect changes in senior
executive roles, market relativities and to re-align the mix of short and long-term incentive
components (with performance periods also ending 30 June 2012).
Half of each annual parcel of performance shares is subject to earnings per share (EPS) and total
shareholder return (TSR) tests. The EPS test for the parcel tested on 30 June 2012 (which included
previous parcels rolled over from 2010 and 2011 for retesting) was not met. For the managing
director, these performance shares have been rolled over for retesting in FY2013. For other senior
executives, the performance share parcels tested on 30 June 2012 have lapsed.
The other half of each annual parcel of performance shares is subject to the executive’s continued
employment with the Company. The relevant employment date under the grant was 30 June 2012,
and accordingly, the 2012 parcel vested for executives who received the grant and were employed by
the Company at that date.
- 24 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
2011-12 Remuneration outcomes for senior executives
Remuneration outcome summary
The table below sets out the actual remuneration received by senior executives in relation to FY2012. The values disclosed in the
table below are different to the tables set out later in the Remuneration Report for the reasons explained in footnote 6.
Executive
(current title)
Base Pay 1
(Fixed annual
remuneration)
Remuneration received 6
Short term
incentive
(Cash/
Shares)2
Long term
incentive
Shares 3
Remuneration forfeited
Total
% of cash
bonus not
awarded 4
Value of LTI
that lapsed 5
Key management personnel – current members of executive committee
Mike Hirst
(Managing Director)
Marnie Baker
(Executive: Banking
and Wealth)
Dennis Bice
(Executive: Retail
Banking)
John Billington
(Executive: Bendigo
Wealth)
Richard Fennell
(Chief Financial
Officer)
Russell Jenkins
(Executive: Customer
and Community)
Tim Piper
(Executive: Risk)
Stella Thredgold
(Executive: Corporate
Resources)
Andrew Watts
(Executive: Change)
$1,258,408
$556,883
$409,666
$414,504
$511,922
$470,938
$409,540
$312,951
$420,696
-
-
-
-
-
-
-
-
-
$556,399
$1,814,807
100%
$178,885
$155,089
$711,972
100%
$282,047
$81,088
$490,754
100%
$120,116
$96,397
$510,901
100%
$132,098
$152,139
$664,061
100%
$272,376
$155,089
$626,027
100%
$289,339
$113,953
$523,493
100%
$216,942
$65,722
$378,673
100%
$90,061
$98,587
$519,283
100%
$189,918
1 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.
2 Short term incentive: In accordance with the Company’s remuneration policy, one third of the short term incentive is subject to deferral into
shares in the Company for a period of two years.
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 2012. The vesting date of the shares is anticipated to be in September 2012.
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 and performance shares 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 2012. 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.
6 Differences to Remuneration Report: The difference to the amount disclosed in the Remuneration Report varies for the following reasons.
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 and long service leave accruals.
The disclosure in the table under the column “Shares” represents the actual value of shares received by senior executives in FY2012 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 above senior executives.
- 25 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
REMUNERATION REPORT
1. Introduction
This remuneration report is for the Company and the consolidated entity (group) for the year ended 30 June 2012. It forms part
of the Directors’ Report. It has been audited. The remuneration report explains the approach the Company takes to
remuneration for non-executive directors and for senior executives, and details the remuneration provided.
In this report the term “senior executive” is used to refer to all executives who fall within the definition of key management
personnel of the group – ie those persons with authority and responsibility for planning, directing and controlling the activities
of the group, directly or indirectly.
2. Non-executive directors
2.1 The non-executive directors
The non-executive directors of the Company are as follows.
Robert Johanson (Chairman)
Kevin Abrahamson (retired 24 October 2011)
Jenny Dawson
Jacqueline Hey (appointed 5 July 2011)
Jim Hazel
David Matthews
Terry O’Dwyer (retired on 13 August 2012)
Deb Radford
Tony Robinson
- 26 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
2.2 Principles
The following principles apply to non-executive director remuneration.
Principle
Comment
1. Structure
Remuneration to
preserve independence /
encourage longer-term
perspective
2. Shareholders approve
an aggregate fee pool
3. Fees are reviewed and
set by reference to key
considerations
4. Base fee
5. Subsidiary, joint
venture and other boards
6. Superannuation
7. Special services
8. Travel,
accommodation
9. No share-based
payments
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. Non-executive directors do not receive bonuses or
incentive payments, nor participate in the Company’s employee equity participation plans.
The shareholders approve an aggregate fee pool. This includes payments by the
Company and its subsidiaries. Shareholders approved the current aggregate fee pool for
non-executive directors of $2,500,000 at the 2011 Annual General Meeting. This fee pool
covers the main board, Company directors on the Rural Bank board and the Chair of
Sandhurst Trustees.
The governance & HR committee recommends to the board the remuneration policy and
remuneration for non-executive directors. The following considerations are taken into
account in setting fees:
(a) The scope of responsibilities of non-executive directors and time commitments. This
includes taking into account any changes in the operations of the Company and
industry developments which impact director responsibilities and risk, at both the
board and committee level.
(b) Fees paid by peer companies and companies of similar market capitalisation,
including survey data and peer analysis to understand the level of director fees paid in
the market by companies of a relatively comparable size and complexity, particularly
in the banking and finance sector.
Non-executive directors receive a fixed annual fee, which is reviewed annually. The Chair
receives a higher base fee in recognition of the additional time commitment and
responsibilities. No additional fees are paid for serving on board committees. The base
fee per annum for the reporting period was as set out below:
From 1 July 2011 to 31 October, 2011:
(a) $143,000 for directors.
(b) $286,000 for the Chair (two times the base fee).
From 1 November 2011 to present:
(a) $165,000 for directors
(b) $412,500 for the Chair (two and half times the base fee).
The directors support a Company scholarship fund. This support is generally provided by
way of the director forfeiting the right to the amount of the contribution ($5,000) so that the
director receives a lower base fee and that amount is instead paid into the scholarship
fund.
The scholarships are awarded to outstanding students who have been offered a full-time
place at an Australian university or college campus, who would not otherwise be able to
undertake tertiary education due to social or financial circumstances. The scholarship for
each student is up to a maximum of $5,000 per annum and intended to provide
assistance by way of support for accommodation costs or other direct study costs.
The board may decide to pay additional fees to directors who are directors of subsidiary,
joint venture or other boards.
The Company pays additional fees for directors of the Company who are also members of
the Sandhurst Trustees Limited board, the wealth management subsidiary of the
Company, and the Community Bank® Strategic Advisory Board. These amounts are
included in the shareholder approved cap and are included in the total fees disclosed paid
to non-executive directors.
Rural Bank Limited, a subsidiary of the Company, pays its own fees to its non-executive
directors, which includes directors of the Company. These amounts are included in the
shareholder approved cap and are included in the total fees disclosed paid to non-
executive directors.
Superannuation contributions are made on behalf of the non-executive directors at a rate
of 9%. This amount is included in the shareholder approved cap. No other post-
employment benefits are paid to non-executive directors.
The board may decide to pay for special services or any journey on the business of the
Company. If fees are paid, they are included in the shareholder approved cap. The board
did not pay any fees of this nature during the year.
Directors are reimbursed for all reasonable travel, accommodation and other expenses
incurred in attending meetings or when engaged on Company business. This is not
included in the shareholder approved cap.
There were no share-based payments to non-executive directors in the reporting period.
- 27 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
2.3 Remuneration paid - FY2012 and FY2011
The following payments were made to non-executive directors in the 2011 and 2012 financial years.
Short-term benefits
Post-employment
benefits
Total
Robert Johanson 5 (Chairman)
2012
2011
Kevin Abrahamson 4
2012
2011
Jenny Dawson 5
2012
2011
Jim Hazel 5
2012
2011
Jacquie Hey 4
2012
2011
David Matthews 5
2012
2011
Terry O’Dwyer
2012
2011
Deb Radford
2012
2011
Tony Robinson
2012
2011
Aggregate totals
2012
2011
Fees 1
443,763
346,584
6,000
96,410
243,231
222,589
238,417
212,264
154,085
-
188,231
165,473
158,231
134,320
158,231
134,320
135,437
107,443
1,725,626
1,419,403
Non-monetary
benefits2
Superannuation
contributions3
-
-
38,000
37,910
-
-
-
-
-
-
-
-
-
-
-
-
22,794
26,877
60,794
64,787
39,939
31,193
3,960
12,089
21,891
20,033
21,458
19,104
13,868
-
16,941
14,893
14,241
12,089
14,241
12,089
14,241
12,089
483,702
377,777
47,960
146,409
265,122
242,622
259,875
231,368
167,953
-
205,172
180,366
172,472
146,409
172,472
146,409
172,472
146,409
160,780
133,579
1,947,200
1,617,769
1 Fee amounts include the $5,000 director contribution to the board scholarship program for FY2011 and FY2012.
2 Represents fee sacrifice component of base director fee amount paid into superannuation.
3 Company superannuation contributions.
4 Appointments/retirements: Ms Hey was appointed as a non-executive director on 5 July 2011. Mr Abrahamson retired on 24
October 2011.
5 Subsidiary fees: Fees were paid by Rural Bank Limited to Mr Johanson of $70,186 for FY2012 (FY2011: $77,945) and Mr
Hazel of $80,186 for FY2012 (FY2011); $77,945) plus company superannuation contributions. The fees paid to Ms Dawson for
FY2012 and FY2011 include an additional fee of $85,000 as chair of Sandhurst Trustees Ltd. The fees paid to Mr Matthews
include $30,000 for FY2011 and FY2012 for his role as Co-Chair of the Community Bank® Strategic Advisory Board.
- 28 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3. Senior executives
3.1 The senior executives
The executive key management personnel, who form the executive committee for the Company, are as follows.
Mike Hirst
Marnie Baker
Dennis Bice
John Billington
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold
Andrew Watts
Managing Director & Chief Executive Officer
Executive: Banking and Wealth
Executive: Retail Banking
Executive: Bendigo Wealth
Executive: Finance & Treasury (Chief Financial Officer)
Executive: Customer and Community
Executive: Risk
Executive: Corporate Resources
Executive: Business Change
3.2 Oversight of senior executive remuneration
The governance & HR committee provides assistance to the board in relation to the Company’s remuneration arrangements.
The board makes all final decisions in relation to those arrangements.
Issue
1. Governance &
HR committee
2. Remuneration
policy
3. Remuneration on
individual basis
4. Remuneration in
relation to
categories of
person
5. Risk adjustment
6. Equity plans
7. Superannuation
8. Independent
advice
Jim Hazel
Commentary
The current members of the committee are all independent non-executive directors:
1. Tony Robinson (Chairman)
2.
3. Robert Johanson
4. 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 the committee charter is 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 remuneration requirements of the Australian Prudential Regulation Authority
(APRA).
The committee makes an annual recommendation to the board on the remuneration of the
managing director, direct reports of the managing director, additional management personnel,
and other persons specified by APRA.
The Committee makes 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 non-executive directors)).
(b) Risk and financial control personnel.
This includes recommendations on the following:
(a) Changes in the structure of remuneration arrangements.
(b) The basis on which performance based remuneration is provided, including the pool of funds
available for distribution as bonuses.
The committee makes 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 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 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 reporting
period no remuneration recommendations were sought from external consultants which would
require approval of directors or the committee under the legislation1 that applies from 1 July 2011
to remuneration consultancy contracts or which could only be provided to directors or the
committee under that legislation (as is required for certain remuneration recommendations).
- 29 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3.3 Remuneration policy
The key features of the Company’s remuneration policy, applicable to remuneration paid in FY2012, are set out in the table
below. In August 2012 the Company amended its remuneration policy. As discussed in section 3.7 below, this did not impact
any remuneration paid in FY2012.
The Company continues to pursue a long term strategy focused 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 in FY2012, based on this strategy, is set out in
section 3.5.1.
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 appropriate for senior executive roles, responsibilities and market relativities.
Issue
Commentary
For more
information
see
1. Philosophy The following philosophy applies to the remuneration framework at both an
n/a
2. Fixed
remuneration
3. Variable:
short term
incentive
(“STI”)
organisational and divisional level:
(a) Remuneration should facilitate the delivery of superior long term results for the
business and shareholders and promote sound risk management principles.
(b) Remuneration should support the corporate values and desired culture.
(c) Remuneration should support the attraction, retention, motivation and alignment
of the talent we need to achieve our business goals.
(d) Remuneration should reinforce leadership, accountability, teamwork and
innovation.
(e) Remuneration should be aligned to the contribution and performance of the
businesses, teams and individuals.
Fixed remuneration in the form of base pay is designed to reflect 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.
Senior executives are given the opportunity to receive their base pay in a variety of
forms including cash and non-cash (salary sacrifice) benefits such as motor vehicles,
superannuation contributions and expense payment arrangements, provided the cost
(including any fringe benefits tax) to the Company remains the same.
In setting the remuneration of senior executives, the board takes into account general
market and peer information, as well as the experience and expertise of the individual,
relative to the role and responsibilities of each senior executive and maintains overall
a conservative median market positioning.
In the case of the managing director, the board also considers the strategic direction
the managing director brings to the role, and any changes in the size, nature and
complexity of the group’s business activities, as well as industry developments which
impact on the managing director’s roles and responsibilities.
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, team
and individual level.
Participation in STI is recommended by the governance & HR committee to the board
for approval and 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 decides 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 is also 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 deciding 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.
3.4
3.4, 3.5.2
- 30 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Issue
Commentary
4. STI
deferral and
forfeiture
STI remuneration is subject to deferral as set out below.
(a) One-third of STI awards which exceed the $30k threshold set by the board are
subject to deferral (refer table at 3.5.2 (8).
(b) Deferral is for two years from the end of the financial year for which the STI is
granted.
5. Variable:
long term
incentive
(“LTI”)
(c) The amount deferred is converted into shares in the Company.
(d) The participant is entitled to vote and receive dividends on the deferred equity.
Forfeiture occurs if an employee’s employment with the group ends; if an employee
acts fraudulently or dishonestly and in other cases decided by the board (for example,
due to an adjustment for risk).
LTI is discretionary equity based remuneration designed to drive and reward long
term growth and sustained Company value, aligning the interests of shareholders and
senior executives. At the board’s discretion, senior executives may be invited to
participate in long term incentive plans.
The grants are subject to long term performance and service conditions. 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 and takes into account the Company’s conservative median
market positioning for base pay.
For more
information
see
3.5.2
3.4, 3.4.2
3.5.3
6. Risk
adjustment:
STI & LTI
The board has discretion, having regard to the recommendation of the governance &
HR committee, to adjust variable remuneration (STI and LTI) to reflect the following.
(a) The outcomes of business activities.
n/a
7. Hedging
(b) The risks related to the business activities taking account, where relevant, of the
cost of the associated capital.
(c) 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. A
member of key management personnel and their closely related parties may not enter
into a transaction designed to remove the at-risk element of the equity before it has
vested. This also applies to the at-risk element of equity after it has vested, if it is
subject to a holding lock.
These restrictions are in the staff trading policy and remuneration policy.
n/a
The Company treats compliance with these policies as important and takes
appropriate measures to ensure compliance. At the end of each financial year, the
Company requires a confirmation from each participant in the plan that they have
complied with these restrictions. If an employee breaches either of these restrictions
the employee forfeits all variable remuneration in the form of equity that is subject to
the prohibition at the time of the breach.
8. 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.
n/a
- 31 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3.4 Remuneration terms and payments – overview
3.4.1 Components of remuneration
The components of executive remuneration and the relative proportion of remuneration for each component for FY2012 are set
out below. The arrangements have been structured to emphasise longer term performance aligned with the Company’s
strategy and shareholder interests and to minimise risks associated with a short term performance focus.
% of total aggregate remuneration*
Fixed remuneration
‘At risk’ – performance-based
Mike Hirst
Marnie Baker
Dennis Bice
John Billington
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold
Andrew Watts
47%
53%
62%
52%
51%
49%
52%
55%
53%
STI**
15%
19%
16%
21%
20%
21%
20%
18%
19%
LTI***
38%
28%
22%
27%
29%
30%
28%
27%
28%
* Aggregate remuneration comprises of fixed annual reward (including base salary, superannuation and allowances), STI at-risk
available for the FY2012 year and the remuneration value of LTI grants for the FY2012 year.
** These amounts are subject to performance levels being achieved based on goals set and minimum values, risk and performance
gateways being met.
*** These amounts are subject to continued service with the Company, and for a portion of the grant, target performance levels being
achieved.
- 32 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3.4.2 Remuneration paid – FY2012 and FY2011
The remuneration paid to senior executives is set out below in the table below.
In setting remuneration levels for FY2012, the market survey and peer information used was based on 2011 Annual Report
disclosures and data contributed directly by listed companies. The survey data includes S&P ASX 200 companies and
companies in the banking and financial services sector. The senior executive remuneration was targeted at market median
levels.
Senior
executive
Short-term Employee Benefits
Cash
salary 1
Cash
bonuses
(STI) 2
Non-
Monetary
benefits 3
Other4
Super-
annuation
benefits 5
Other
long-term
benefits6
Share-based payments 7, 8
Total
Rights &
performance
shares
Options
Deferred
10
shares
Mike Hirst
2012
2011
Marnie Baker
2012
2011
Dennis Bice
2012
2011
John Billington9
2012
2011
Richard Fennell
2012
2011
Russell Jenkins
2012
2011
Tim Piper
2012
2011
Stella Thredgold
Andrew Watts
2012
2011
Aggregate totals
2012
2011
1,184,484
-
26,491
10,920
40,000
23,211
1,068,591
-
-
2,353,697
1,225,413
200,000
47,238
12,636
41,538
90,648
1,202,879
74,837
100,000
2,995,189
477,146
-
42,902
8,584
22,383
14,952
295,514
-
-
861,481
494,491
133,333
19,431
10,318
22,985
57,313
340,003
23,296
66,667
1,167,837
356,697
-
14,664
4,057
33,826
12,300
155,267
326,222
46,667
39,548
4,930
33,316
24,351
164,855
406,196
-
332,957
66,667
5,736
9,639
461,947
-
9,898
461,383
133,333
7,497
-
-
-
-
15,774
12,452
22,339
22,918
-
-
-
-
179,984
200,452
289,265
-
-
-
-
-
-
576,811
23,333
663,222
-
607,690
33,333
655,500
-
783,449
332,963
21,667
66,667
1,046,428
420,317
-
42,562
8,746
22,584
(6,424)
295,514
-
-
783,299
422,785
106,667
38,538
10,811
23,220
16,060
343,053
26,346
53,333
1,040,813
371,818
-
15,431
331,369
83,333
21,467
33,815
11,030
216,629
-
-
648,723
33,578
12,944
254,861
21,667
41,667
800,886
-
-
-
-
2012
2011
270,737
-
6,896
264,848
53,333
10,966
23,239
7,850
122,711
19,822
16,948
136,666
-
-
-
-
431,433
26,667
529,250
-
610,980
359,584
-
32,016
1,972
22,888
10,447
184,073
374,789
66,667
27,457
2,525
23,094
9,725
227,940
22,933
33,333
788,463
4,308,926
-
196,596
34,279
236,848
73,366
2,807,548
-
-
7,657,563
4,234,257
890,000
221,781
41,220
232,923
227,989
3,203,672
190,746
445,000
9,687,588
1 Cash salary amounts include the net movement in the KMP’s annual leave accrual for the year.
2 In the case of FY2012, no STI was awarded given earnings performance did not meet the minimum criteria set by the board.
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 Company’s average cost of funds. Details on loans provided to the senior
executive under the employee share plans are disclosed in the Annual Financial Report at Note 38.
5 Represents superannuation contributions made on behalf of key management personnel.
6 The amounts disclosed relate to movements in long service leave entitlement accruals.
- 33 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
7 In accordance with the requirements of Australian 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
calculated 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 calculated under AASB 124 Related
Party Disclosures applying a Black-Scholes-Merton valuation method incorporating a Monte Carlo simulation option pricing model to
estimate the probability of achieving the Total Shareholder Return hurdle and the number of options and performance shares vesting. The
assumptions underpinning these valuations are set out in Note 36 to the Annual Financial Report.
8 The amortised value of performance rights, options and performance shares as a percentage of total remuneration was: M Hirst 45%
(2011: 43%), M Baker 34% (2011: 31%), D Bice 27% (2011: 25%), J Billington 30% (2011: 31%), R Fennell 37% (2011: 34%), R Jenkins
38% (2011: 35%), T Piper 33% (2011: 35%), S Thredgold 28% (2011:26%), A Watts 30% (2011: 32%).
9 Mr Billington became a member of key management personnel during FY2011 on 31 August 2010. Therefore, Mr Billington’s reported
remuneration for FY2011 only represents the remuneration paid to him for the portion of the 2011 financial year that he was in that a key
management personnel role.
10 One third of STI awards are subject to deferral into equity for two years. The amounts represent the amortised fair value for accounting
purposes of the STI deferred share grants which are still to vest and are subject to forfeiture conditions.
3.5 Performance based remuneration
3.5.1 Company performance
The Company announced on 20 August 2012 a statutory after-tax profit of $195 million. The Company’s cash earnings result
was $323 million, a 3.9% decrease on the previous financial year. The cash earnings result equated to 84.2 cents per share
and represents an 8.7% decrease on the previous financial year. Information on the Company’s share price performance is
presented below.
The performance for the year was impacted by the challenging market environment including high funding costs and a low
demand for credit. The group’s core revenue generating businesses, retail, third party banking, wealth and rural banking
continue to perform well. Deposits grew by more than $4 billion over the year and credit quality is sound across the
Company’s businesses.
The Company recorded a 1% increase in net interest income to $944.1 million and the interest margin before payments to
community banks and alliances decreased from 2.17% to 2.10%. Net of these payments, interest margin decreased 7 basis
points to 1.77% in the 12 months to 30 June 2012. Cost containment and efficiency has again been a major focus over the
year. Expenses before specific items increased by 2.2% to $751.7 million compared to June 2011. The cost to income ratio
was 59.1% compared to 57.4% at June 2011.
Company performance measure
Financial year ending
Basic earnings per share (cents)
Cash earnings per share (cents)
NPAT ($m)
Dividends paid
Share price at start of financial year
Share price at end of financial year
Absolute shareholder return
June 2012
June 2011
June 2010
June 2009
June 2008
48.6
84.2
195.0
60
$8.86
$7.41
(9.6%)
91.5
92.3
342.1
60
$8.18
$8.86
16%
67.4
83.3
242.6
58
$6.95
$8.18
26%
25.4
62.6
83.8
43
$10.93
$6.95
(32%)
87.7
111.1
198.3
65
$15.20
$10.93
(24%)
- 34 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
The following graph shows the cash earnings over the past year and four previous years, with the average STI payment (as a
percentage of the maximum STI) paid to senior executives, which demonstrates the relationship between performance and STI
payments. Based on the Company performance, the quantitative performance conditions as set out in sections 3.5.2 were not
met and no STI bonuses were paid in relation to FY2012.
The following graph compares the Company’s total shareholder return (TSR) against the ASX 100 Accumulation Index for the
past five years (explained in section 3.5.3(b)). The ASX 100 is the comparator group against which the Company’s TSR
performance is measured for the current long term incentive plan. As discussed further below, no instruments have vested for
current senior executives under the discontinued executive incentive plan.
The above table, together with the graphs, 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 second key performance indicator used for the LTI is the Company’s TSR performance. The Company’s market relative
TSR performance underperformed the comparator group and did not achieve the targeted percentile ranking for the 2007,
2008 and 2009 performance periods. The Company’s market relative TSR percentile ranking was partially achieved for both
the 2010, 2011 and 2012 performance periods, however, because the EPS gateway hurdle for FY2012 was not met, no LTIs
subject to performance conditions vested for FY2012. Only LTIs subject to service conditions vested.
- 35 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3.5.2 Short-term incentive
(a) Description
The principles that apply to the short term incentive have been summarised above for executive key management personnel
(3.3). More detail is provided below.
Feature
Description
1. What is the STI?
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.
2. Who participates in
the STI?
All senior executives (who are key management personnel) and other senior management as
decided by the board.
3. Why does the board
consider the STI an
appropriate incentive?
4. Are performance
conditions imposed?
5. What are the
performance
conditions, why were
they chosen and how
are they measured?
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
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.
incentive
is set
The STI is based on target performance conditions designed to drive short and medium term
results and at a level that reduces incentive for 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, first, on the achievement of financial performance measures and,
secondly, on the level of individual executive performance.
5.1 General conditions
Threshold performance – Setting of Group Performance Bonus Pool
The amount of the annual incentive component awarded and paid to executives is
dependent, first, on the Company’s cash earnings performance set by the board and the
establishment of a pool of funds approved by the board for the payment of staff bonuses.
In establishing any bonus pool the board takes into account financial measures including the
achievement of targeted cash earnings and return on equity performance. The bonus pool
also takes into account the type and level of risk associated with achieving the cash earnings
performance using risk measures including capital ratios, liquidity ratios and the Company’s
risk weighted asset base.
The annual bonus pool settings are structured in a manner so that the aggregate amount that
can be allocated to the bonus pool are capped.
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 selected risk measures are fundamental to
the nature of the business activities carried on by the Company.
Additional quantitative and qualitative measures
Payment of the annual incentive component is also dependent on achievement by
executives of quantitative and qualitative measures as explained below. These measures
have been chosen to link the executive’s performance with the Company’s vision to be
Australia’s leading customer-connected bank and its long-term strategic perspective (see
further the governance statement in the annual report), as well as to encourage improved
performance and to ensure the level of risk associated with the level of performance
achieved by the Company is appropriate for the Company’s circumstances. In addition, the
managing director’s objectives are linked to enhancing the reputation of the organisation.
5.2 Specific conditions
Managing director
The managing director’s annual cash incentive component for the FY2012 year was based
upon a mix of quantitative and qualitative performance measures and was set at a maximum
of $400,000. The quantitative element, weighted at 50% for FY2012, focused on the group
achieving its targeted cash EPS performance. This was chosen to link the managing
director’s performance to improved Company performance.
The qualitative element, weighted at 50% for FY2012, was chosen to focus on the continued
progress of the group’s strategic priorities. The objectives and measures are set out below.
- 36 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
5. What are the
performance
conditions, why were
they chosen and how
are they measured?
(cont)
1. Achievement of
Business Goals
2. Risk and Compliance
3. Customer satisfaction
and advocacy
4. Succession Planning
5. Scale and Rating
Advantage
6. Representation of the
Organisation
Prioritising and allocating
the strategic
objectives and operational plans and the delivery of benefits
identified in operational plans.
resources
to
The level of risk associated with the group’s performance
was within the group’s risk appetite.
Maintaining the organisation’s customer satisfaction and
advocacy ratings at existing levels.
A pool of potential successors is available for senior
executive positions with at least one replacement ready for
each position
includes any
appropriate development plans.
three years;
the next
in
Implementation of growth initiatives and opportunities that
deliver scale advantage and support a ratings upgrade.
Represent the organisation at:
•
•
•
Federal and State Political levels
Industry forums; and
Conferences or other public forums.
The board has established an equal weighting between financial and strategic objectives to
give the appropriate focus on longer term performance and the achievement of strategic
objectives.
Other senior executives
The objectives and measures for individual executives include those set out below.
(a) Group financial and strategic performance – net profit after tax, cash earnings per share,
return on equity, liquidity and capital ratios and arrears performance.
(b) Business unit (team) financial and strategic performance – achievement of division or
business unit growth and financial performance targets, implementation of specific
business initiatives and projects in line with project targets and timeframes, independent
industry focused customer satisfaction and advocacy rankings and customer and
community engagement initiatives.
(c)
Individual contribution to team performance – achievement of overall division or
business unit targets and business and risk objectives, assessment of extent to which a
“one-team” culture has been promoted, assessment of continuous improvement in
processes and procedures.
(d)
Individual performance, including alignment with corporate values and meeting
performance objectives – assessment of leadership, management of business unit
resourcing and compliance with corporate values and code of conduct.
Contribution to meeting risk and compliance requirements at the group, team and individual
level. Risk and compliance requirements also represent a gateway to whether a payment is
made and the size of the payment. Notwithstanding financial performance and the individual
contribution and performance, if the individual, team or group does not meet or only partially
meets risk and compliance requirements, no award or a reduced award may be made.
Measures
include compliance with risk management and operational policies and
procedures.
The performance conditions are measured at the same time as board approval of the
Company’s year-end profit result announcement. 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. However, STI is only paid if the board decides there is a bonus
pool available – see the table at paragraph 3.3 above, item 3. This method of assessment
has been chosen because it enables the objective measurement of EPS growth against EPS
targets while enabling the board to exercise its discretion for risk adjustments relating to 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. Further information
regarding the board’s approach to adjusting remuneration for risk is contained in sections 3.2
and 3.3.
6. When are the
performance
conditions measured
and who assesses the
performance?
- 37 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
6. When are the
performance
conditions measured
and who assesses the
performance? (cont)
the assessment of
The non-executive directors conduct
the managing director’s
performance, taking into account the quantitative and qualitative measures set by the board,
at which time the board decides the amount of the incentive payment based upon the
achievement of the agreed performance measures. This allows for independent and
objective assessment of the achievement of performance measures while enabling any
necessary risk adjustments to occur at the board’s discretion.
The managing director assesses the performance of other senior executives and
recommends the annual STI payments for senior executives for consideration by the
governance & HR committee and decision by the board. In making the recommendation, the
managing director takes into account the group bonus pool available for the payment of STI
awards and bonuses to group employees. This method of assessment has been chosen as
the managing director is best placed to make an informed assessment of senior executive
performance and progress towards performance targets, while the board retains ultimate
oversight for the grant of STI awards and any necessary risk adjustments.
7. How well were the
performance
conditions met in the
2012 financial year?
On recommendation of the governance & HR committee, the board determined that the
criteria for establishment of a group performance bonus pool had not been met and no bonus
pool was established for the 2012 financial year. Therefore, even where executives met their
individual performance objectives, no STI awards were made.
8. What deferral
arrangements apply?
One third of STI awards which exceed the $30k threshold set by the board, are subject to
deferral into equity for two years from the end of the financial year if awarded, ie until 30
June 2014.
- 38 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(b) Payments – FY2012
No short term incentives were paid to senior executives for FY2012. The short term incentives forfeited are set out in the table
below.
Senior executive
Maximum Award
available
STI payment
Paid as cash
Deferred into shares
STI payment as
% of maximum
STI
% of maximum
STI payment
forfeited
Mike Hirst
Marnie Baker
Dennis Bice
John Billington
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold
Andrew Watts
$400,000
$225,000
$100,000
$160,000
$225,000
$200,000
$150,000
$100,000
$150,000
3.5.3 Long term incentive
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(a) Overview
Each of the senior executives received their relevant tranches of LTI grants in previous years (as described below). No LTI
grants were made to senior executives in FY2012. The Company intends to make new LTI grants to certain senior executives
in FY2013 (see section 3.7).
The following long term incentive arrangements are in place.
Salary sacrifice, deferred share and
performance share plan
Executive incentive plan
Established
2008
Status
Current -
2006
Discontinued -
First grant made in December 2009.
Participants Senior executives (including the managing
director) and other senior management approved
by the board.
Last grant made in November 2008, final testing
2012.
Senior executives and other senior management
approved by the board.
Nature of
grants
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 periods,
the performance shares lapse and the senior
executives receive 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 receive no value
from the grants.
The Company also has 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 before introducing the executive incentive plan. It did not include performance conditions, as at the time, the
board considered that it was in the best interests of the organisation as a whole to have the managing director and other senior
executives on the same equity participation arrangement as general staff who also participated in the ESOP. Information on
the ESOP, including share grants and loan details are disclosed at Notes 36 and 38 of the Annual Financial Report. This plan
is no longer open to senior executives.
- 39 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(b) Current plan – terms
Key features of the current plan and grants under it are summarised below.
Feature
Description
1. What is the
purpose of 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.
2. Who
participates in the
LTI?
3. What proportion
of total
remuneration
does the LTI
represent?
4. How is reward
delivered under
the LTI?
5. Do participants
pay for the
performance
shares?
6. What rights are
attached to the
performance
shares?
The managing director and other senior executives as decided by the board.
Shareholder approval is required for participation by the managing director.
In the case of the managing director, the grant made under the LTI in 2009, annualised over
each of the five years to which the grant relates, equated to 45% of his total annual
remuneration for the 2012 year. In the case of other senior executives, the grants under the
current LTI equate to between 22% and 29% of their total annual remuneration.
The LTI involves an entitlement to performance shares made in equal tranches. See 3.5.3(c)
for the tranches that have been issued.
Each tranche comprises two components or grants:
(a) Grant A - 50% of each annual tranche is subject to an EPS gateway hurdle, requiring an
increase 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.
(b) 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 is equal to the number of
performance shares issued (subject to the conditions to vesting being met).
Performance shares have been granted at no cost to the recipient and no exercise price
applies.
The vested shares 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 the later of 2 years after
the end of the tranche’s performance period and the date specified in the offer.
In addition, the shares may not be hedged during that period. Senior executives or their closely
related parties may not enter into any transaction designed to remove the “at-risk” element of
an instrument both before and, if there is a holding lock, after it vests (see 3.3 above).
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. Dividends paid on vested performance shares are reinvested into shares
(less an amount distributed to senior executives to meet tax obligations on the dividends) and
are held in trust on the same terms as the performance shares during the dealing restriction
period.
7. What are the
hurdles and
performance
conditions?
The vesting of the performance shares in Grant A is subject to a gateway cash EPS hurdle.
The gateway hurdle will be met if there is an increase in the Company’s cash EPS performance
during the financial year immediately before vesting for each tranche (ie the final year of the
performance period for that tranche).
The second performance condition for the performance shares granted under the plan is based
on the Company’s market relative TSR performance over the performance period.
See below – 3.5.3(c) for the performance period.
In the case of the managing director, five tranches were granted in 2009. The performance for
each tranche is measured over one to five year performance periods (with the final
performance period ending on 30 June 2014). In the case of other executives, grants in
FY2009 are measured over one to three years, and the supplementary grants in FY2010 are
measured over one to two years.
8. Why were the
performance
conditions and
periods chosen?
The EPS based gateway 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.
- 40 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
8. Why were the
performance
conditions and
periods chosen?
(cont)
9. How is EPS
measured?
10. How is TSR
measured?
11. Why does the
Company think
the TSR hurdle is
appropriate?
12. What is 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
(see item 11 below for information on the composition of the comparator group).
The performance periods take into account retention of senior executives and the managing
director, and the period of the managing director’s contract (see further, 3.5.3 (c) below).
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 is the
ASX 100 Accumulation Index (excluding the Company, property trusts and resources). This
group was chosen because the companies are of comparable size, and there are insufficient
companies of comparable size in the banking or financial services sector alone to benchmark
against performance of an industry-specific group.
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
TSR below 50th percentile
TSR between 50th percentile and 75th percentile 65%
TSR above 75th percentile
Nil
100%
Percentage of performance shares
that vest
13. 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.
If there is a takeover or change of control of the Company, the board has the discretion to
decide that unvested performance shares vest, having regard to the Company’s pro rata
performance against the relevant performance conditions.
14. What if a
senior executive
ends
employment?
15. What if a
senior executive
breaches their
duties?
16. What happens
if there is a
change in
control?
- 41 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(c) Current plan – grants
General
The following grants to the managing director and other senior executives were still in place under the current plan in FY2012.
The first grant to the managing director and other senior executives was made on 11 December 2009 (FY 2010 Grant). The
managing director’s grant involved one to five year performance periods. The grants to other senior executives involved one to
three year performance periods.
The board approved supplementary grants of performance shares in FY2011 as follows:
(a) To current senior executives who were not senior executives at the time of the FY2010 grant.
(b) To senior executives who were senior executives at the time of the FY2010 grant as part of the 2011 remuneration review
to reflect changes in role, the contributions made and realignment of the mix of variable pay between short and long term.
The grants were made with the same end date to align with the FY2010 grant made to senior executives, and aside from the
difference in length of performance periods, were on the same terms as the FY2010 grant.
The following table shows the categories of participants that have received grants under the plan and the achievement to date
against the performance measure for each tranche.
Performance
period
Participants
Outcome to date
Start
End
Grant A (EPS and TSR condition)
1.7.09
30.6.10
1.7.09
30.6.11
1.7.10
30.6.11
1.7.09
30.6.12
1.7.10
30.6.12
Senior
executives
Managing
director
Senior
executives
Managing
director
Senior
executives
(supplementary
grant)
Senior
executives
Managing
director
Senior
executives
(supplementary
grant)
This tranche was tested in August 2010. The EPS
gateway hurdle was met. The TSR test was partially
met and 65% of the shares vested. The shares that
did not vest were carried forward and retested in
2011and 2012 and lapsed.
This tranche was tested in August 2011. The EPS
gateway hurdle was met. The TSR test was partially
met and 65% of the shares vested. The shares that
did not vest were carried forward and retested in
2012 and lapsed.
This tranche was tested in August 2011. The EPS
gateway hurdle was met. The TSR test was partially
met and 65% of the shares vested. The shares that
did not vest were carried forward and retested in
2012 and lapsed. 2012 and lapsed.
This tranche was tested in August 2012. The EPS
gateway hurdle was not met. In the case of the
managing director, the shares that did not vest were
carried forward and are available for retesting in 2013
(over a 4 year performance period). For all other
senior executives, their performance shares have
lapsed.
This tranche was tested in August 2012. The EPS
gateway was not met, and all of the performance
shares have lapsed.
Grant B (service
condition)
The performance
shares issued to senior
executives who
remained employed by
the group have vested,
as the service
condition was satisfied.
For each senior
executive whose
employment with the
Company ended during
a year, the
performance shares for
that year lapsed.
1.7.09
30.6.13 Managing
director
1.7.09
30.6.14 Managing
director
This tranche is held by the managing director under
his 5 year grant and will be tested in August 2013.
This tranche is held by the managing director under
his 5 year grant and will be tested in August 2014.
n/a
n/a
An explanation of the pricing model used to calculate these values is set out in Note 36 to the Annual Financial Report.
The number of performance shares granted is included in the table in paragraph 3.5.3(f) below and the maximum value of the
grants is included in the table in paragraph 3.5.3 (g) below. Having regard to the service and performance conditions, the
potential minimum value is nil.
- 42 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Managing director
Further details about the grants made to the managing director are set out in the table below.
In setting the five year performance period (and the additional dealing restriction ie the later of 2 years from the end of each
tranche’s performance period and 30 June 2014), the board took into account the initial five year term of the managing
director’s contract (July 2009 – July 2014) and the importance of rewarding the managing director for taking a longer-term
perspective on the Company’s progress and performance.
In setting the remuneration value of the entitlement, the board included a component that was subject to continued service with
the Company. This took into account the relatively moderate market setting of the managing director’s remuneration. It was
intended to provide the managing director with a further ownership stake in Company aligned with shareholder interests. This
component in substance 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 performance shares were issued at market price to the value of $5 million (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 before 1 July 2009 (being $6.56).
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.
% of
remuneration
value of
performance
rights
Performance
shares
(number)
Potential
remuneration
value
Performance
period
Outcome to date
Tranche 1
Grant A 10%
Grant B 10%
76,219
76,219
$500,000
$500,000
Tranche 2
Grant A 10%
Grant B 10%
76,219
76,219
$500,000
$500,000
Tranche 3
Grant A 10%
Grant B 10%
76,219
76,219
$500,000
$500,000
Tranche 4
Grant A 10%
Grant B 10%
76,219
76,219
Tranche 5
Grant A 10%
Grant B 10%
76,219
76,219
$500,000
$500,000
$500,000
$500,000
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)
No of shares vested: 125,761
Grant A – 49, 542
Grant B – 76, 219
Value at time of vesting: $8.18 per
share
No of shares carried into next
tranche: 26,677 (from Grant A)
No of shares vested: 143,102
Grant A – 66, 883
Grant B – 76, 219
Value at vesting time: $8.86
No of shares carried into next
tranche: 36,013 (from Grant A)
No of shares vested: 76,219
Grant A – Nil
Grant B – 76, 219
Value at vesting time: $7.30
No of shares carried into next
tranche: 112,232
n/a
n/a
(d) Discontinued plan - terms
The terms of the discontinued executive incentive plan and grants under it are similar to those described above for the current
plan, and the rationale for choosing the performance conditions was the same. The instruments issued under the discontinued
plan were options and performance rights, each option or performance right representing one share. The design of the plan,
including the terms and conditions of the options and performance rights issued under the plan, have been disclosed in prior
year Annual Reports. Further information on the discontinued plan is disclosed at Notes 36 and 38 of the Annual Financial
Report.
(e) Discontinued plan - grants
Shareholders at the 2006 Annual General Meeting approved the grant of instruments under the discontinued executive
incentive plan to senior executives. Offers were made as follow:
• November 2006 (2007 grant)
•
July 2007 (2008 grant)
• November 2008 (2009 grant)
The proportion of remuneration represented by the LTI was between 12% and 23% of total remuneration.
- 43 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Outcome
The outcome is that no securities have vested under the terms of the executive incentive plan to current senior executives and
the current senior executives have derived no value from the grants:
•
•
The 2007 grant was tested in August 2009 and was retested in August 2010 (and also in January 2010 for the
options). The unvested rights and options lapsed.
The 2008 grant was tested in August 2010 and retested in August 2011 (and also in January 2011 for the options).
The unvested rights and options lapsed.
The 2009 grant was tested in August 2011 and retested in August 2012 and no performance rights or options vested.
(f) All plans - changes in number of instruments - FY2012
The table below sets out the changes in number of performance rights, options and performance shares held by senior
executives during the year.
Senior executive
Instrument
Movements in number
Balance at
1 July 2011
Granted
Vested
Mike Hirst
Marnie Baker
Dennis Bice
John Billington
Richard Fennell
Russell Jenkins
Tim Piper
Stella Thredgold
Andrew Watts
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Performance shares
Performance shares
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Performance shares
Performance rights
Options
Performance shares
24,141
204,261
493,328
7,515
78,898
51,793
27,318
31,032
6,989
47,445
50,610
8,499
88,462
51,793
6,989
47,445
37,898
21,157
7,398
71,373
31,737
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,219
-
-
21,245
11,108
13,205
-
-
20,841
-
-
21,245
-
-
15,610
9,003
-
-
13,505
Forfeited/
Lapsed
Balance at 30
June 2012
24,141
204,261
-
-
-
417,109
7,515
78,898
30,548
16,210
17,827
6,989
47,445
29,769
8,499
88,462
30,548
6,989
47,445
22,288
12,154
7,398
71,373
18,232
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 44 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(g) All plans - value of instruments - FY2012
The table below sets out the value of performance rights, options and performance shares that were granted, vested,
exercised or forfeited/lapsed during FY2012.
Senior executive
Instrument
Granted(a)
Vested(b)
Exercised
Forfeited/
Lapsed(c)
Value
Mike Hirst
Marnie Baker
Dennis Bice
John Billington
Richard Fennell
Russell Jenkins
Tim Piper
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Performance shares
Performance shares
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Performance rights
Options
Performance shares
Stella Thredgold
Performance shares
Andrew Watts
Performance rights
Options
Performance shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$556,399
-
-
$155,089
$81,088
$96,397
-
-
$152,139
-
-
$155,089
-
-
$113,953
$65,722
-
-
$98,587
-
-
$556,399
-
-
$155,089
$81,088
$96,397
-
-
$152,139
-
-
$155,089
-
-
$115,953
$65,722
-
-
$98,587
$224,511
$329,511
-
$69,890
$142,389
$219,597
$117,138
$125,139
$64,998
$65,000
$213,484
$79,041
$159,039
$219,597
$64,998
$65,000
$159,804
$85,324
$68,801
$123,800
$127,982
(a) The value of performance shares at the grant date is calculated using the fair value of the performance shares. An
explanation of the pricing model used to calculate this value is set out in Note 36 to the Annual Financial Report.
(b) The value of vested performance shares is based on the Company’s volume weighted closing share price on the date
of testing (there is no exercise price), being $7.30. The shares are scheduled to vest in September 2012.
(c) The value of each performance right, performance share and option on the date it lapses or is forfeited is 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 36 to the Annual Financial Report.
(d) The value of options, performance rights and performance shares carried forward to future financial years is calculated
using the fair value of the performance shares. The share based payments may be forfeited after allocation in specific
circumstances as described in section 3.5.3. Therefore the minimum possible value of the awards is nil. The maximum
value cannot be determined because it depends on future share price, but it is estimated according to fair value used
for accounting purposes in this table.
- 45 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
3.6 Senior executive contracts
The remuneration and other terms of employment for senior executives are contained in contracts. The material terms of the
contracts for the senior executives at the date of this report are set out below.
Issue
Description
What is the duration of
the contracts?
Fixed term of 5 years from 2009, subject to the termination
provisions summarised below, and then continuing unless
otherwise agreed by the Company or managing director.
On-going until notice is given by either party.
What notice must be
provided by a senior
executive to end the
contract without cause?
12 months’ notice.
No notice period required if material change in duties or
responsibilities.
Applies to
Managing director
Senior executives (a)
Managing director
6 months’ notice.
No notice period required if material change in duties or
responsibilities.
All senior executives
(a)
12 months’ notice or payment in lieu.
All senior executives
(a)
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
What notice must be
provided by the
Company to end the
contract without cause?
(b)
What payments must be
made by the Company
for ending the contract
without cause?
What are notice and
payment requirements if
the Company ends the
contract for cause?
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
12 month non-solicitation (employees, customers and
suppliers) restriction.
Senior executives
(a) This does not include Mr Dennis Bice. Mr Bice is employed by the Company (over 35 years) and under his employment
contract is currently entitled to 99 weeks notice or payment in lieu.
(b)
In certain circumstances, such as a substantial diminution of responsibility, the Company may be deemed to have ended 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 ending the contract without cause”.
3.7 Changes to remuneration policy and remuneration of senior executives (other than the
Managing Director)
3.7.1.
Remuneration policy
The board approved changes to the remuneration policy in August 2012. These included the changes below, which did not
affect remuneration for FY2012.
• Clarification around the responsibilities for remuneration decisions and processes.
• A reduction in the maximum variable remuneration that can be paid as a percentage of total remuneration for a number of
categories of employee, including the managing director (but no change for senior executives).
3.7.2.
Remuneration components
For FY2013, the board proposes to introduce deferred shares as a retention incentive and a changed structure for LTI. These
changes will not apply to the managing director in FY2013, as his remuneration is governed by his 5 year fixed term contract
(entered into in 2009) and his long term incentive for the 5 year period of his employment was granted in 2009.
- 46 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(a)
Remuneration mix
The senior executives will have their base remuneration supplemented by a grant of deferred shares which, under
accounting treatment, forms part of their variable remuneration. A corresponding decrease will be made to the senior
executives’ LTI opportunity so that the remuneration mix between fixed and at-risk remuneration will remain
unchanged.
The key proposed changes for senior executives in FY2013 are summarised below.
(b)
Deferred shares
Senior executives’ base remuneration will be supplemented by grants of deferred shares as a retention incentive.
The deferred shares will be beneficially owned by the senior executive from the grant date, but will be held on trust
for two years by the plan trustee, subject to vesting conditions. During the period the deferred shares are held on
trust, the senior executive is entitled to vote, receive notices issued to ordinary shareholders and receive dividends.
However, the senior executive is not entitled to “deal” in or enter into any transaction designed to remove the “at risk”
element of the deferred shares until they vest (eg sale, creation of a security interest or hedge). Vesting is subject to
the following:
(i)
Service condition – continued employment for the two years from the beginning of the financial year in respect
of which the grant is made (until 30 June 2014); and
(ii) Risk adjustment – any adjustment the board decides to make to take into account the outcomes of business
activities, the risks related to the business activities and the time necessary for the outcomes of those business
activities to be reliably measured.
When the deferred shares vest and are transferred into the name of the senior executive, the senior executive is then
free to “deal” in the vested shares.
The purpose of the grant is to:
(i) Supplement the conservative median base pay positioning of senior executives;
(ii) Provide an incentive for the retention of senior executives making the benefit of the grant contingent on a
minimum service period; and
(iii) Align the experience of senior executives with shareholders in terms of the value of the grant which will be the
market value at the time they vest and are transferred to the senior executive.
The proportion available under this component will be a third of the amount available for share based payments
(other than deferred shares for STI purposes) rather than half under the previous arrangement.
(c)
FY2013 LTI Grant - performance shares
Starting from FY2013, the Company intends to make annual LTI grants to senior executives, rather then multi-
tranche grants every 3 years.
The first annual LTI grant will be made to senior executives in FY2013. The FY2013 grant of performance shares will
be a single tranche with a four year performance period. The 4 year performance period will consist of a 12 month
initial performance period for EPS testing (1 July 2012 to 30 June 2013) and a 3 year performance period for relative
TSR testing (1 July 2013 to 30 June 2016).
•
EPS hurdle: The grant may be reduced by 50% at the end of the initial performance period if the earnings per
share are not equal to or better than the previous year.
•
TSR hurdle: During the 3 year TSR performance period, vesting of the performance shares (as adjusted for the
EPS performance hurdle) will be conditional on total shareholder return being at least equal to the median
performance of a peer group consisting of the ASX100 Companies (excluding property trusts and resources).
Median performance will result in 65% of the performance shares vesting, with 100% vesting if the Company’s
relative TSR performance is in the 75th percentile or above.
- 47 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Meetings of directors
Information on board and committee meeting attendance for the year is presented in the Corporate Governance Statement.
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. The insurance does not provide cover for the independent auditor of the Company or of a related body corporate
of the Company.
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.
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 2
Performance
Rights and
Options
Sandhurst
Industrial Share
Fund (Units) 3
Sandhurst
Professional IML
Industrial Share
Fund (Units) 3
Robert Johanson
Mike Hirst
Jenny Dawson
Jim Hazel
Jacquie Hey
David Matthews
Terry O’Dwyer
Deb Radford
Tony Robinson
214,784
441,698 1
24,954
12,462
3,114
7,295
74,530
1,900
6,921
500
-
100
-
-
-
-
-
-
417,109
-
-
-
-
-
-
64,672
-
-
-
-
-
-
-
-
-
54,176
-
-
-
-
-
1 Includes 50,000 shares issued under the Bendigo Employee Share Ownership Plan and 367,106 shares issued under the salary
sacrifice, deferred share and performance share plan.
2 There are no relevant interests in relation to the Company’s Step-Up Preference Shares or Reset Preference Shares.
3 Relevant interests in managed investment schemes made available by a subsidiary of the Company.
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
William Conlan, LL.B (Melb)
Mr Conlan was appointed as company secretary of Bendigo and Adelaide Bank Limited on 14 November 2011, having worked
with the Company for almost 10 years in strategy, capital management and compliance. Mr Conlan is a practising lawyer and,
prior to commencing employment with the Bank, was a lawyer in private practice in Melbourne.
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 2012. 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 2012. 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.
- 48 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 2012:
(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
Fees
(excluding GST)
$
175,203
Entity
Bendigo and Adelaide Bank Limited,
Rural Bank Limited.
Australian Financial Services Licence Audits
60,873
(1) Refer below
Comfort Letter – Euro Medium Term Note Program
28,325
Bendigo and Adelaide Bank Limited
Trust Deed Report - Victorian Securities Trust
9,914
Bendigo and Adelaide Bank Limited
Sub total – Audit related fees (Regulatory)
274,315
(1) Amount attributed to Bendigo and Adelaide Bank and subsidiary companies
(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
Prospectus for deposit notes
EMTN audit procedures
Completion accounts
Sub total – Audit related fees (Non-regulatory)
(c)
Non audit related fees
Service
Tax advice
Professional services
Sub total – non audit related fees
Total – non audit services
Fees
(excluding
GST)
$
8,446
3,399
30,900
42,745
Entity
Victorian Securities Corporation
Limited
Bendigo and Adelaide Bank Limited
Bank of Cyprus Australia Limited
Entity
Fees
(excluding
GST)
$
182,334
Bendigo and Adelaide Bank Limited
44,805
Bendigo and Adelaide Bank Limited
227,139
544,199
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.
- 49 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Liability limited by a scheme approved under
Professional Standards Legislation
- 50 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
This Directors Report is signed in accordance with a resolution of the board of directors
Robert Johanson
Chairman
4 September 2012
Mike Hirst
Managing Director
- 51 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
INCOME STATEMENT
for the year ended 30 June 2012
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
Other
Share of joint ventures net profit
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 goodwill
Impairment loss on held for sale assets
Accounting loss on disposal of securitisation notes
Write-down of impaired intangible software
Recovery of GST payments
Integration costs
Employee shares gain/(loss)
Other
Total other expenses
Profit before income tax expense
Income tax expense
Net profit for the period
Net (profit) attributable to non-controlling interest
Net profit attributable to owners of the parent
230
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)
Note
Consolidated
2012
$m
3,434.8
2,490.7
944.1
7.8
177.2
43.6
52.1
280.7
(13.0)
0.4
(12.6)
0.7
2011
$m
3,385.8
2,450.6
935.2
7.2
174.7
38.8
74.3
295.0
2.6
(0.2)
2.4
3.4
Parent
2012
$m
2,611.1
1,858.5
752.6
7.3
160.1
14.4
50.8
232.6
(13.8)
0.3
(13.5)
-
2011
$m
2,485.2
1,752.8
732.4
46.2
158.1
11.4
59.2
274.9
(1.3)
(0.2)
(1.5)
-
1,212.9
1,236.0
971.7
1,005.8
21.8
(4.0)
17.8
339.5
61.3
34.6
10.8
9.4
95.1
-
-
-
-
2.7
1.1
204.3
758.8
195.1
(90.5)
104.6
-
104.6
16.5
(4.2)
12.3
332.6
59.4
33.2
11.0
8.7
-
-
14.7
26.6
(15.3)
4.6
(1.4)
232.2
706.3
287.2
(16.6)
270.6
-
270.6
36.8
(4.4)
32.4
387.8
65.6
44.0
11.4
30.4
95.1
3.8
-
-
-
2.7
1.1
212.5
854.4
326.1
(131.1)
195.0
-
195.0
48.5
(4.3)
44.2
375.0
62.3
41.7
11.5
26.7
-
-
14.7
26.6
(15.3)
7.2
(1.4)
218.3
767.3
424.5
(77.9)
346.6
(4.5)
342.1
48.6
47.7
60.0
91.5
86.4
60.0
4
4
4
4
4
4
4
4
21
4
4
4
4
4
4
4
4
4
4
4
4
4
4
6
8
8
9
- 52 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
BALANCE SHEET
as at 30 June 2012
Assets
Cash and cash equivalents
Due from other financial institutions
Amounts receivable from controlled entities
Financial assets held for trading
Financial assets available for sale - debt securities
Financial assets held to maturity
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
Assets held for sale
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 Equity
Note
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
288.8
272.2
-
4,366.1
444.8
388.4
509.7
124.7
48.5
453.0
48,217.0
12.9
-
69.0
170.2
298.9
25.4
1,548.2
57,237.8
327.2
44,572.7
6,411.0
179.0
731.8
-
86.8
80.7
104.5
89.5
436.9
53,020.1
4,217.7
3,681.8
88.5
100.0
(21.3)
72.2
296.5
4,217.7
469.0
201.6
-
4,331.7
452.1
380.3
417.0
123.4
9.3
471.2
45,938.6
12.5
-
99.9
180.2
263.0
-
1,654.7
55,004.5
215.6
40,521.3
8,453.7
132.0
781.2
-
68.6
84.5
122.3
89.5
575.7
51,044.4
3,960.1
3,408.9
88.5
100.0
(24.6)
37.8
349.5
3,960.1
175.8
266.3
1,090.8
4,367.0
1,594.6
1.8
852.8
4.1
547.3
453.0
41,366.6
-
604.1
60.6
108.5
-
-
1,408.4
52,901.7
315.1
40,179.4
-
111.2
1,168.0
6,294.1
86.8
75.8
209.2
89.5
361.1
48,890.2
4,011.5
3,681.8
88.5
100.0
(21.3)
70.7
91.8
4,011.5
346.7
200.9
1,587.2
4,332.7
2,334.7
69.7
828.3
3.5
42.2
471.2
39,255.4
-
489.3
66.7
134.1
-
-
1,519.1
51,681.7
214.6
37,526.0
576.9
152.4
830.7
7,738.0
68.6
82.5
71.0
89.5
484.9
47,835.1
3,846.6
3,408.9
88.5
100.0
(24.6)
43.6
230.2
3,846.6
13
13
14
15
17
27
16
42
18
18
21
22
6
24
23
25
13
28
28
42
29
6
30
6
31
32
33
33
33
33
34
34
- 53 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2012
Note
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Profit for the year
195.0
346.6
104.6
270.6
Net gain/(loss) on available for sale - equity investments
Transfer to income on sale of available for sale assets
Net gain on cash flow hedges taken to equity
Net gain/(loss) on reclassification from cash flow hedge reserve to income
Net unrealised (loss) on debt securities in available for sale portfolio
Actuarial gain/(loss) on superannuation defined benefits plan
Tax effect on items taken directly to or transferred from equity
34
34
34
34
34
34
34
Net income recognised directly in equity
Total comprehensive income for the period
Total comprehensive income for the period attributable to:
Non-controlling interest
Members of the Parent
(9.6)
-
47.0
(13.0)
(1.8)
(1.8)
(6.9)
13.9
208.9
-
208.9
11.5
(1.0)
95.7
2.6
(0.3)
0.3
(31.1)
77.7
424.3
5.8
418.5
(0.1)
-
34.2
(13.9)
(1.8)
(1.8)
(5.7)
10.9
115.5
-
115.5
0.4
(1.0)
102.0
(1.3)
(0.1)
0.3
(28.8)
71.5
342.1
-
342.1
- 54 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2012
CONSOLIDATED
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
capital
Shares *
Retained
earnings
Reserves **
Total Non-controlling
interest
Total
equity
$m
$m
$m
$m
$m
$m
$m
At 1 July 2011
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 (ESOP) shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Equity dividends
At 30 June 2012
3,408.9
163.9
-
-
-
274.8
(1.9)
-
-
-
-
3,681.8
-
-
-
-
-
3.3
-
-
-
167.2
349.5
195.0
(1.4)
193.6
-
-
-
(17.6)
-
(229.0)
296.5
37.8
-
15.3
15.3
-
-
-
17.6
1.5
-
72.2
3,960.1
195.0
13.9
208.9
274.8
(1.9)
3.3
-
1.5
(229.0)
4,217.7
-
-
-
-
-
-
-
-
-
-
-
3,960.1
195.0
13.9
208.9
274.8
(1.9)
3.3
-
1.5
(229.0)
4,217.7
*refer to note 33 Issued Capital for further details
**refer to note 34 Retained earnings and reserves for further details
for the year ended 30 June 2011
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
capital
Shares *
Retained
earnings
Reserves **
Total Non-controlling
interest
Total
equity
$m
$m
$m
$m
$m
$m
$m
3,361.7
160.8
-
-
-
-
47.2
-
-
-
-
-
-
3,408.9
-
-
-
-
-
3.1
-
-
-
-
-
163.9
234.5
-
342.1
0.3
342.4
-
-
(6.2)
-
-
(221.4)
0.2
349.5
(22.3)
3,734.7
-
-
76.1
76.1
-
-
6.2
(1.6)
(20.4)
-
(0.2)
37.8
-
342.1
76.4
418.5
47.2
3.1
-
(1.6)
(20.4)
(221.4)
-
3,960.1
145.7
(148.3)
3,880.4
(148.3)
4.5
1.3
5.8
-
-
0.1
-
-
(4.3)
1.0
-
346.6
77.7
424.3
47.2
3.1
0.1
(1.6)
(20.4)
(225.7)
1.0
3,960.1
At 1 July 2010
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
Reduction in Employee Share
Ownership Plan (ESOP) shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Acquisition Reserve - Rural Bank
Equity dividends
Other
At 30 June 2011
*refer to note 33 Issued Capital for further details
**refer to note 34 Retained earnings and reserves for further details
- 55 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
STATEMENT OF CHANGES IN EQUITY (continued…)
for the year ended 30 June 2012
PARENT
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
capital
Shares *
Retained
earnings
Reserves **
$m
$m
$m
$m
3,408.9
163.9
-
-
-
274.8
(1.9)
-
-
-
-
3,681.8
-
-
-
-
-
3.3
-
-
-
167.2
230.2
104.6
(1.4)
103.2
-
-
-
(12.6)
-
(229.0)
91.8
43.6
-
12.3
12.3
-
-
-
12.6
2.2
-
70.7
At 1 July 2011
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 (ESOP) shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Equity dividends
At 30 June 2012
*refer to note 33 Issued Capital for further details
**refer to note 34 Retained earnings and reserves for further details
for the year ended 30 June 2011
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued ordinary
capital
Shares *
Retained
earnings
Reserves **
$m
$m
$m
$m
Total
Equity
$m
3,846.6
104.6
10.9
115.5
274.8
(1.9)
3.3
-
2.2
(229.0)
4,011.5
Total
Equity
$m
At 1 July 2010
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
Reduction in Employee Share
Ownership Plan (ESOP) shares
Movement in general reserve for
credit losses (GRCL)
Share based payment
Equity dividends
Other
At 30 June 2011
3,361.7
160.8
-
-
-
47.2
-
-
-
-
-
3,408.9
-
-
-
-
3.1
-
-
-
-
163.9
186.7
270.6
0.3
270.9
-
-
(6.2)
-
(221.4)
0.2
230.2
(34.1)
3,675.1
-
71.2
71.2
-
-
6.2
0.5
-
(0.2)
43.6
270.6
71.5
342.1
47.2
3.1
-
0.5
(221.4)
-
3,846.6
*refer to note 33 Issued Capital for further details
**refer to note 34 Retained earnings and reserves for further details
- 56 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
CASH FLOW STATEMENT
for the year ended 30 June 2012
Note
Consolidated
Parent
2012
$m
3,442.3
(2,545.0)
265.6
(850.5)
8.1
(120.6)
199.9
(12.2)
1.2
(44.4)
11.0
(15.4)
(12.0)
(929.6)
208.1
0.4
(213.1)
(1,006.0)
195.5
-
2,638.3
78.9
-
(138.7)
(149.7)
-
(2,040.8)
3.3
(1.9)
584.9
(221.2)
455.0
233.8
2011
$m
3,338.9
(2,380.3)
271.6
(655.8)
7.5
(93.8)
488.1
(14.3)
1.1
(89.4)
7.2
(4.7)
(3.0)
(2,841.3)
(364.9)
0.7
-
(3,308.6)
-
(166.6)
2,993.6
450.4
259.5
(217.7)
(177.4)
(14.4)
(699.7)
3.1
-
2,430.8
(389.7)
844.7
455.0
2012
$m
2011
$m
2,584.1
(1,868.9)
256.3
(677.7)
7.3
(87.0)
214.1
(11.7)
1.1
-
-
(8.6)
(2.6)
(1,596.6)
773.7
-
(131.4)
(976.1)
195.5
-
2,614.9
38.5
-
(123.8)
(149.7)
-
(2,020.8)
3.3
(1.9)
556.0
(206.0)
333.0
127.0
2,444.9
(1,696.9)
257.2
(625.0)
46.2
(70.5)
355.9
(14.5)
0.8
-
-
(4.2)
(191.0)
(3,408.4)
(670.9)
230.6
-
(4,057.6)
-
-
3,622.9
395.5
250.7
(160.2)
(177.4)
-
(599.6)
3.1
-
3,335.0
(366.7)
699.7
333.0
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
12
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
Net increase in balance of loans and other receivables outstanding
Net (increase)/decrease in balance of investment securities
Proceeds from return of capital
Net cash received on acquisition of a subsidiary
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares
Acquisition of non-controlling interest
Net increase in balance of retail deposits
Net increase in balance of wholesale deposits
Proceeds from issue of subordinated debt
Repayment of subordinated debt
Dividends paid
Dividends paid to non controlling entity
Net decrease in balance of notes payable
Repayment of ESOP shares
Payment of share issue costs
Net cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
13
- 57 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 2012 was authorised for
issue in accordance with a resolution of the directors on 4 September 2012.
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 the Company is Australia.
The registered office of the Company is:
The Bendigo Centre
22 – 44 Bath Lane
Bendigo, Victoria
Australia 3550
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 convention, 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).
- 58 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 ended 30 June 2012:
Application
date of
Standard *
1 July 2012
1 January
2013
Application
date for
group *
1 July 2012
1 July 2013
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.
1 January
2013
1 July 2013
The group has
not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB
2011-9
Amendments to
Australian
Accounting
Standards –
Presentation of
Other
Comprehensive
Income [AASB
1,5,7,101,112,12
0,121,132,133,1
34,1039, 1049]
AASB 119
Employee
Benefits
Annual
Improve-
ments 2009-
2011 Cycle
****
Annual
Improvements to
IFRSs 2009-
2011 Cycle
This Standard requires entities to group items
presented in other comprehensive income on
the basis of whether they might be reclassified
subsequently to profit or loss and those that
will not.
The main change introduced by this standard
is to revise the accounting for defined benefit
plans. The amendment removes the options
for accounting for the liability, and requires that
the liabilities arising from such plans is
recognised in full with actuarial gains and
losses being recognised in other
comprehensive income. It also revised the
method of calculating the return on plan
assets.
The revised standard changes the definition of
short-term employee benefits. The distinction
between short-term and other long-term
employee benefits is now based on whether
the benefits are expected to be settled wholly
within 12 months after the reporting date.
Consequential amendments were also made
to other standards via AASB 2011-10.
This standard sets out amendments to
International Financial Reporting Standards
(IFRSs) and the related bases for conclusions
and guidance made during the International
Accounting Standards Board’s Annual
Improvements process. These amendments
have not yet been adopted by the AASB.
The following items are addressed by this
standard:
IFRS 1 First-time Adoption of International
Financial Reporting Standards
►Repeated application of IFRS 1
►Borrowing costs
IAS 1 Presentation of Financial Statements
►Clarification of the requirements for
comparative information
IAS 16 Property, Plant and Equipment
►Classification of servicing equipment
IAS 32 Financial Instruments: Presentation
►Tax effect of distribution to holders of equity
instruments
IAS 34 Interim Financial Reporting
►Interim financial reporting and segment
information for total assets and liabilities
- 59 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Reference
Title
Summary
AASB 2011-
4
AASB 1053
Amendments to
Australian
Accounting
Standards to
Remove
Individual Key
Management
Personnel
Disclosure
Requirements
[AASB 124]
Application of
Tiers of
Australian
Accounting
Standards
AASB 2012-
2
AASB 2012-
4
Amendments to
Australian
Accounting
Standards –
Disclosures –
Offsetting
Financial Assets
and Financial
Liabilities
Amendments to
Australian
Accounting
Standards –
Government
Loans
This Amendment deletes from AASB 124
individual key management personnel
disclosure requirements for disclosing entities
that are not companies.
This Standard establishes a differential
financial reporting framework consisting of two
Tiers of reporting requirements for preparing
general purpose financial statements:
(a) Tier 1: Australian Accounting Standards
(b) Tier 2: Australian Accounting Standards –
Reduced Disclosure Requirements
Tier 2 comprises the recognition,
measurement and presentation requirements
of Tier 1 and substantially reduced disclosures
corresponding to those requirements.
The following entities apply Tier 1
requirements in preparing general purpose
financial statements:
(a) For-profit entities in the private sector that
have public accountability (as defined in this
Standard); and
(b) The Australian Government and State,
Territory and Local Governments.
The following entities apply either Tier 2 or Tier
1 requirements in preparing general purpose
financial statements:
(a) For-profit private sector entities that do not
have public accountability;
(b) All not-for-profit private sector entities; and
(c) Public sector entities other than the
Australian Government and State, Territory
and Local Governments.
Consequential amendments to other standards
to implement the regime were introduced by
AASB 2010-2, 2011-2, 2011-6, 2011-11 and
2012-1.
AASB 2012-2 principally amends AASB 7
Financial Instruments: Disclosures to require
disclosure of information that will enable users
of an entity’s financial statements to evaluate
the effect or potential effect of netting
arrangements, including rights of set-off
associated with the entity’s recognised
financial assets and recognised financial
liabilities, on the entity’s financial position.
AASB 2012-4 adds an exception to the
retrospective application of Australian
Accounting Standards under AASB 1 First-
time Adoption of Australian Accounting
Standards to require that first-time adopters
apply the requirements in AASB 139 Financial
Instruments: Recognition and Measurement
(or AASB 9 Financial Instruments) and AASB
120 Accounting for Government Grants and
Disclosure of Government Assistance
prospectively to government loans (including
those at a below-market rate of interest)
existing at the date of transition to Australian
Accounting Standards.
- 60 -
Application
date of
Standard *
1 July 2013
1 July 2013
Application
date for
group *
1 July 2013
1 July 2013
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.
1 January
2013
1 January
2013
1 July 2013
1 July 2013
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.
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Application
date of
Standard *
1 January
2013
1 January
2014
1 January
2012
1 January
2013
Application
date for
group *
1 July 2013
1 July 2015
1 July 2012
1 July 2013
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.
1 January
2013
1 July 2013
The group has
not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB 2012-
5
AASB 2012-
3
AASB 2010-
8
AASB 10
Amendments to
Australian
Accounting
Standards
arising from
Annual
Improvements
2009-2011
Cycle;
Amendments to
Australian
Accounting
Standards –
Offsetting
Financial Assets
and Financial
Liabilities;
Amendments to
Australian
Accounting
Standards –
Deferred Tax:
Recovery of
Underlying
Assets [AASB
112]
Consolidated
Financial
Statements
AASB 11
Joint
Arrangements
repeat application of AASB 1 is permitted
AASB 2012-5 makes amendments resulting
from the 2009-2011 Annual Improvements
Cycle. The Standard addresses a range of
improvements, including the following:
•
(AASB 1); and
clarification of the comparative information
requirements when an entity provides a third
balance sheet (AASB 101 Presentation of
Financial Statements).
AASB 2012-3 adds application guidance to
AASB 132 Financial Instruments: Presentation
to address inconsistencies identified in
applying some of the offsetting criteria of
AASB 132, including clarifying the meaning of
“currently has a legally enforceable right of set-
off” and that some gross settlement systems
may be considered equivalent to net
settlement.
These amendments address the determination
of deferred tax on investment property
measured at fair value and introduce a
rebuttable presumption that deferred tax on
investment property measured at fair value
should be determined on the basis that the
carrying amount will be recoverable through
sale. The amendments also incorporate SIC-
21 Income Taxes – Recovery of Revalued
Non-Depreciable Assets into IFRS 112.
IFRS 10 establishes a new control model that
applies to all entities. It replaces parts of IFRS
127 Consolidated and Separate Financial
Statements dealing with the accounting for
consolidated financial statements and UIG-112
Consolidation – Special Purpose Entities.
The new control model broadens the situations
when an entity is considered to be controlled
by another entity and includes new guidance
for applying the model to specific situations,
including when acting as a manager may give
control, the impact of potential voting rights
and when holding less than a majority voting
rights may give control. This is likely to lead to
more entities being consolidated into the
group. Consequential amendments were also
made to other standards via IFRS 2011-7.
IFRS 11 replaces IFRS 131 Interests in Joint
Ventures and UIG-113 Jointly- controlled
Entities – Non-monetary Contributions by
Ventures. IFRS 11 uses the principle of control
in IFRS 10 to define joint control, and therefore
the determination of whether joint control
exists may change. In addition IFRS 11
removes the option to account for jointly
controlled entities (JCEs) using proportionate
consolidation. Instead, accounting for a joint
arrangement is dependent on the nature of the
rights and obligations arising from the
arrangement. Joint operations that give the
venturers a right to the underlying assets and
obligations themselves is accounted for by
recognising the share of those assets and
obligations. Joint ventures that give the
venturers a right to the net assets is accounted
for using the equity method. This may result in
a change in the accounting for the joint
arrangements held by the group.
Consequential amendments were also made
to other standards via IFRS 2011-7 and
amendments to IFRS 128.
- 61 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Application
date of
Standard *
1 January
2013
1 January
2013
Application
date for
group *
1 July 2013
1 July 2013
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.
1 January
2013***
1 January
2013
The group has
not yet
determined
the extent of
the impacts of
the
amendments,
if any.
Reference
Title
Summary
AASB 12
Disclosure of
Interests in
Other Entities
AASB 13
Fair Value
Measurement
AASB 9
Financial
Instruments
IFRS 12 includes all disclosures relating to an
entity’s interests in subsidiaries, joint
arrangements, associates and structured
entities. New disclosures have been
introduced about the judgments made by
management to determine whether control
exists, and to require summarised information
about joint arrangements, associates and
structured entities and subsidiaries with non-
controlling interests.
IFRS 13 establishes a single source of
guidance under IFRS for determining the fair
value of assets and liabilities. IFRS 13 does
not change when an entity is required to use
fair value, but rather, provides guidance on
how to determine fair value under IFRS when
fair value is required or permitted by IFRS.
Application of this definition may result in
different fair values being determined for the
relevant assets.
IFRS 13 also expands the disclosure
requirements for all assets or liabilities carried
at fair value. This includes information about
the assumptions made and the qualitative
impact of those assumptions on the fair value
determined.
Consequential amendments were also made
to other standards via IFRS 2011-8.
AASB 9 includes requirements for the
classification and measurement of financial
assets resulting from the first part of Phase 1
of the IASB’s project to replace IAS 39
Financial Instruments: Recognition and
Measurement (AASB 139 Financial
Instruments: Recognition and Measurement).
It was further amended by AASB 2010-7 to
reflect amendments to the accounting for
financial liabilities.
These requirements improve and simplify the
approach for classification and measurement
of financial assets compared with the
requirements of AASB 139. The main changes
are described below.
(a) Financial assets that are debit instruments
are classified based on (1) the objective of the
entity’s business model for managing the
financial assets; (2) the characteristics of the
contractual cash flows. This replaces the
numerous categories of financial assets in
AASB 139, each of which had its own
classification criteria.
(b) AASB 9 allows an irrevocable election on
initial recognition to present gains and losses
on investments in equity instruments that are
not held for trading in other comprehensive
income. Dividends in respect of these
- 62 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Reference
Title
Summary
Application
date of
Standard *
Impact on
group
financial
report
Application
date for
group *
AASB 9
(contd)
Financial
Instruments
investments that are a return on investment
can be recognised in profit or loss and there is
no impairment or recycling on disposal of the
instrument.
(c) Financial assets can be designated and
measured at fair value through profit or loss at
initial recognition if doing so eliminates or
significantly reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising
the gains and losses on them, on different
bases.
(d) Where the fair value option is used for
financial liabilities the change in fair value is to
be accounted for as follows:
The change attributable to changes in credit
risk are presented in other comprehensive
income (OCI).
The remaining change is presented in profit or
loss.
If this approach creates or enlarges an
accounting mismatch in the profit or loss, the
effect of the changes in credit risk are also
presented in profit or loss.
Consequential amendments were also made
to other standards as a result of AASB 9,
introduced by AASB 2009-11 and superseded
by AASB 2010-7 and 2010-10.
*
Designates the beginning of the applicable annual reporting period unless otherwise stated
*** AASB ED 215 Mandatory effective date of IFRS 9 proposes to defer the mandatory effective date of AASB 9 to annual
periods beginning on or after 1 January 2013, with early application permitted
**** These IFRS amendments have not yet been adopted by the AASB. In order to claim compliance with IFRS, these
amendments should be noted in the financial statements
- 63 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Basis of consolidation
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3
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 group 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
statements 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. 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 net
assets 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
2011
•
•
•
•
•
•
•
•
AASB 2009-12 Further Amendments to Australian Accounting Standards [AASB 5, 8, 108, 110, 112, 119, 133, 137,
139, 1023, 1031 & Interpretations 2, 4, 16, 1039 & 1052]
AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement
AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
AASB 2010-5 Further Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118,119, 121,
132, 133, 134, 137, 139, 140,1023 & 1038 & Interpretations 115,127,132 & 1042]
AASB 124 Related Party Disclosures (amendment)
AASB 1054 Australian Additional Disclosures
AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB
1 and AASB 7]
AASB 2011-1 Amendments to Australian Accounting Standards [AASB 1, 5, 101, 107, 108, 121, 128, 132, 134,
Interpretation 2, 112 and 113]
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BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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:
AASB 124 (Revised) Related Party Disclosures (December 2009)
The amendments to AASB 124 simplify the definition of a related party, clarifying its intended meaning and eliminating
inconsistencies from the definition, including:
(a) The definition now identifies a subsidiary and an associate with the same investor as related parties of each other;
(b) Entities significantly influenced by one person and entities significantly influenced by a close member of the family of that
person are no longer related parties of each other; and
(c) The definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or
significant influence over a third party, the second and third entities are related to each other.
A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by
virtue of being controlled by the same government can provide reduced related party disclosures.
AASB 2009-12 Amendments to Australian Accounting Standards [AASB 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031
and Interpretations 2, 4, 16, 1039 & 1052]
This amendment makes numerous editorial changes to a range of Australian Accounting Standards and Interpretations. In
particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a
government and entities known to be under the control of that government are considered a single customer for the purposes of
certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting
Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB.
AASB 2009-14 Amendments to Australian Accounting Interpretation – Prepayments of a Minimum Funding Requirement
Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement 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.
AASB 1054 Australian Additional Disclosures
This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB.
This standard relocates all Australian specific disclosures from other standards to one place and revises disclosures in the
following areas:
(a) Compliance with Australian Accounting Standards;
(b) The statutory basis or reporting framework for financial statements;
(c) Whether the financial statements are general purpose or special purpose;
(d) Audit fees; and
(e) Imputation credits.
AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
The amendments emphasise the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent
of risks associated with financial instruments. It 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. It provides
guidance to illustrate how to apply disclosure principles in AASB 134 for significant events and transactions. It also clarifies 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.
AASB 2010-5 Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121,132, 133, 134,
137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]
This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations,
including amendments to reflect changes made to the text of IFRS by the IASB. These amendments have no major impact on
the requirements of the amended pronouncements.
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BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
AASB 2010-6 Amendments to Australian Accounting Standards Disclosures on Transfers of Financial Assets [AASB 1 & AASB
7]
This standard makes amendments to increase the disclosure requirements for transactions involving transfers of financial
assets. Disclosures require enhancements to the existing disclosure in IFRS 7 where an asset is transferred but is not
derecognised and introduce new disclosure for assets that are derecognised but the entity continues to have a continuing
exposure to the asset after the sale.
AASB 2011-1 Amendments to Australian Accounting Standards arising form the Trans-Tasman Convergence project
This standard makes amendments to many Australian Accounting Standards, removing the disclosures which have been
relocated to AASB 1054.
- 66 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6
Significant accounting judgments, estimates and assumptions
Significant accounting judgments
(i)
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:
Cash earnings
Cash earnings are considered by management as a key indicator representing the performance of the core business activities
of the group. The basis for determining cash earnings is the statutory profit after tax, adjusted for specific items after tax,
acquired intangibles amortisation after tax and preference share/step up preference share appropriations. Cash earnings have
been used in a number of key indicator calculations such as note 8 – earnings per ordinary share and note 10 – return on
average ordinary equity.
Specific items
Specific items are those items that are deemed to be outside of our core activities and such items are not considered to be
representative of the group’s ongoing financial performance.
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.
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 reassesses the requirement to
consolidate these SPEs in accordance with AASB 127 and judgment is exercised.
(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 26.
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 43.
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.
2.7
Comparatives
Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.
- 67 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Trustee and funds management activities
2.8
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 i.e. 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.
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.
- 68 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets – available for sale share investments
Investment securities available for sale consist of securities that are not actively traded by the group.
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 group 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 i.e. 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.
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.
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BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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
2012
Years
40
3 - 10
2 - 10
2011
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.
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 Assets held for sale
Assets are classified as held for sale, when their carrying amounts are expected to be recovered principally through sale within
twelve months.
They are measured at the lower of carrying amount or fair value less costs to sell, unless the nature of the assets requires they
be measured in line with another accounting standard.
Assets classified as held for sale are neither amortised nor depreciated.
- 70 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
2.17
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, fair value is determined by discounting the expected future cash flows of the portfolio, taking
account of the restrictions on the ability to realise the investment property due to contractual obligations. Assumptions used in
the modelling of future cash flows are sourced from market indexes of property values and long term growth/discount rates
appropriate to residential property. Gains or losses arising from changes in the fair values of investment properties are
recognised in profit and loss in the year in which they arise.
Goodwill
2.18
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.
2.19
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 useful life
intangibles, annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis
and adjustments, where applicable, are made on a prospective basis.
The only intangible asset with an indefinite useful 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.
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BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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
Finite
Usually not in excess of 5 years
– straight line (major software
systems – 7 years)
Finite
Amortised to reflect period
and pattern of economic
benefits
Internally generated/acquired Acquired
Internally generated or acquired
Acquired
Impairment test/recoverable
amount testing
Annually and where an
indicator of impairment
exists
Annually and where an indicator
of impairment exists
Annually and where an
indicator of impairment
exists
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the income statement where the asset is derecognised.
2.20 Trade and other payables
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.
2.21 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
2.22
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.
2.23 Provisions
Provisions are recognised when the group has a legal, equitable or constructive obligation to make a future sacrifice of
economic benefits to other entities as a result of past transactions or other past events, and it is probable that a future sacrifice
of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected cash flows at a pre-
tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the
liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A provision for dividend is not recognised as a liability unless the dividend is declared, determined or publicly recommended on
or before the reporting date.
- 72 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.24 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 group 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.
2.25 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.
- 73 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 (discontinued).
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.
2.26 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 group 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 group.
2.27 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.
- 74 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.28 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 group'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.
2.29 Borrowing costs
Borrowing costs are recognised as an expense when incurred unless they are incurred in relation to qualifying assets.
Borrowing costs for qualifying assets are capitalised as part of the cost of that asset.
2.30 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.
2.31 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.
- 75 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.32 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.
2.33 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.
2.34 Issued ordinary capital
Issued and paid up ordinary capital is recognised at the fair value of the consideration received by the company. Any
transaction costs (net of any tax benefit) arising on the issue of ordinary shares are recognised directly in equity as a reduction
of the share proceeds received.
2.35 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.
- 76 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.36 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.
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);
after tax specific income and expense items; and
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.
- 77 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 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.
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. As of 1 March 2012, Bank of Cyprus Australia has been
included in the retail banking segment.
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, wealth management and margin lending
activities, less interest paid to depositors referred by our wealth partners. Commission received as Responsible Entity for
managed investment schemes and for corporate trusteeships and other trustee and custodial services.
Rural Bank
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. These rates are reset at the beginning of each reporting period and applied throughout that period. It is likely that
rates will be reset for the 2013 financial year; however this is subject to a management review. Management use these
apportionments to assess relative performance between operating segments rather than absolute assessments of year on year
performance.
Major customers
Revenues from no individual customer amount to greater than 10% of the group's revenues.
- 78 -
Total
$m
944.1
281.1
0.7
1,225.9
751.7
32.4
-
24.5
0.7
25.2
14.2
-
11.0
441.8
Total
$m
935.2
294.8
3.4
1,233.4
735.5
44.2
-
42.7
3.4
46.1
15.7
-
30.4
453.7
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SEGMENT RESULTS (continued)
For the year ended 30 June 2012
Operating segments
Retail
Third party
banking
$m
banking
$m
Wealth
$m
Rural Bank
$m
Total operating
segments
$m
Central
functions
$m
Net interest income
Other income
Share of net profit of equity accounted
investments
Total segment income
Operating expenses
Credit expenses
Segment result
534.6
178.2
-
712.8
550.5
13.8
148.5
214.2
25.0
79.9
47.7
-
-
115.4
5.7
-
944.1
256.6
-
239.2
127.6
121.1
1,200.7
64.7
6.2
168.3
71.3
0.4
55.9
51.0
12.0
58.1
737.5
32.4
430.8
For the year ended 30 June 2011
Operating segments
Retail
Third party
banking
$m
banking
$m
Wealth
$m
Rural Bank
$m
Total operating
segments
$m
Central
functions
$m
Net interest income
Other income
Share of net profit of equity accounted
investments
Total segment income
Operating expenses
Credit expenses
Segment result
516.3
172.3
-
688.6
530.4
12.2
146.0
201.0
102.5
115.4
27.5
45.9
-
-
6.4
-
935.2
252.1
-
228.5
148.4
121.8
1,187.3
67.6
1.1
76.4
(0.1)
159.8
72.1
45.4
31.0
45.4
719.8
44.2
423.3
Reportable segment assets
As at 30 June 2012
As at 30 June 2011
Reportable segment liabilities
As at 30 June 2012
As at 30 June 2011
Operating segments
Retail
Third party
banking
$m
26,419.3
23,428.5
banking
$m
16,112.3
15,728.2
Wealth
$m
2,408.0
3,208.1
Rural Bank
$m
3,983.9
4,024.8
Total operating
segments
$m
48,923.5
46,389.6
Central
functions
$m
8,314.3
8,614.9
Total
$m
57,237.8
55,004.5
31,916.1
27,966.5
517.9
489.7
5,025.4
4,880.8
3,472.2
3,595.6
40,931.6
36,932.6
5,677.5
5,658.1
46,609.1
42,590.7
- 79 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
Total group income
Reconciliation of segment expenses to group total expenses
Segment operating expenses
Specific expense items 1
Total group expenses
Reconciliation of segment credit expenses to bad and doubtful debts on loans and receivables
Segment credit expenses
Bad and doubtful debts on loans and receivables
Reconciliation of segment result to group profit before tax
Total segment result
Ineffectiveness in cash flow hedges
Specific expense items 1
Group profit before tax
1 refer note 5 for details of specific items
Reportable segment assets
Total assets for operating segments
Total assets
Reportable segment liabilities
Total liabilities for operating segments
Securitisation funding
Total liabilities
Consolidated
Jun-12
Full year
$m
1,225.9
(13.0)
1,212.9
751.7
102.7
854.4
32.4
32.4
441.8
(13.0)
(102.7)
326.1
Jun-11
Full year
$m
1,233.4
2.6
1,236.0
735.5
31.8
767.3
44.2
44.2
453.7
2.6
(31.8)
424.5
Consolidated
As at
Jun-12
$m
As at
Jun-11
$m
57,237.8
57,237.8
55,004.5
55,004.5
46,609.1
6,411.0
53,020.1
42,590.7
8,453.7
51,044.4
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.
- 80 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 m aturity
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
Other
Commissions
Wealth solutions
Insurance
Other
Other
Income from property
Foreign exchange income
Factoring products income
Trading profit - held for trading securities
Other
Other income
Ineffectiveness in cash flow hedges
Profit/(loss) on disposal of property, plant & equipm ent
Realised accounting gain on the sale of equity investments
Share of associates' and joint ventures net profits/losses
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
-
-
-
4.2
211.3
26.1
29.5
3,163.7
3,434.8
-
-
-
9.7
209.7
20.5
39.1
3,106.8
3,385.8
0.3
409.8
537.6
3.1
211.3
20.1
6.2
1,422.7
2,611.1
0.1
409.1
490.3
8.9
210.3
12.2
15.2
1,339.1
2,485.2
-
-
0.9
5.4
1,828.5
190.3
4.4
421.5
5.5
40.5
2,490.7
944.1
-
-
7.5
0.3
7.8
63.3
84.0
7.4
5.7
16.8
177.2
29.1
15.6
(1.1)
43.6
2.1
15.9
12.2
2.4
19.5
52.1
(13.0)
0.4
(12.6)
0.7
1,691.9
171.2
9.5
533.4
5.5
39.1
2,450.6
935.2
-
-
7.1
0.1
7.2
61.4
80.5
8.6
6.8
17.4
174.7
27.5
12.4
(1.1)
38.8
1.8
15.4
11.6
2.1
43.4
74.3
2.6
(0.2)
2.4
3.4
1,617.2
183.2
4.3
14.0
5.5
33.4
1,858.5
752.6
1,488.3
162.6
9.5
50.7
5.5
30.8
1,752.8
732.4
6.8
0.4
0.1
-
7.3
52.7
83.2
7.4
0.4
16.4
160.1
-
13.4
1.0
14.4
4.9
15.4
12.2
2.6
15.7
50.8
(13.8)
0.3
(13.5)
-
44.7
0.3
1.2
-
46.2
52.1
79.9
8.7
0.4
17.0
158.1
(0.1)
10.9
0.6
11.4
5.1
15.4
11.6
2.1
25.0
59.2
(1.3)
(0.2)
(1.5)
-
1.1
1.2 & 1.3
1
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
5
3.2
3.4
3
6
4.3
8.7
2.9
8
2.3
8.2
8.6
- 81 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
Impairment losses on goodwill
Property, plant & equipment costs
Depreciation of property, plant & equipment
Fees and commissions
Employee shares shortfall/(gain)
Impairment loss on held for sale asset
Accounting loss on disposal of securitisation notes
Write-down of impaired intangible software
Recovery of GST payments
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
33.3
27
11
50.1
8.3
50.3
13
14
14.3
14.5
31
15.1
15.2
15.3
15
50
12
- 82 -
Consolidated
Parent
2012
$m
44.9
(10.2)
2.1
(4.4)
32.4
320.9
28.0
0.1
8.3
0.6
18.2
2.3
2.2
7.2
387.8
37.6
0.3
6.5
3.9
0.4
6.7
3.6
3.8
2.8
65.6
27.8
16.2
95.1
139.1
11.4
30.4
1.1
3.8
-
-
-
2.7
34.2
55.2
30.6
35.8
-
-
7.4
7.3
6.6
32.9
0.5
210.5
2.0
212.5
2011
$m
2012
$m
2011
$m
48.4
(5.2)
5.3
(4.3)
44.2
317.6
26.5
(0.3)
2.0
0.7
18.3
2.7
0.7
6.8
375.0
35.0
0.4
5.7
3.6
0.2
6.9
3.8
3.8
2.9
62.3
28.1
13.6
-
41.7
11.5
26.7
(1.4)
-
14.7
26.6
(15.3)
7.2
32.9
57.5
28.9
36.6
-
-
9.5
8.0
7.9
33.7
1.3
216.3
2.0
218.3
29.3
(8.7)
1.2
(4.0)
17.8
282.6
24.5
(1.0)
6.9
0.6
16.0
1.8
1.9
6.2
339.5
36.8
-
6.2
3.8
0.4
4.6
3.5
3.7
2.3
61.3
19.4
15.2
95.1
129.7
10.8
9.4
1.1
-
-
-
-
2.7
33.8
47.7
27.4
35.4
-
9.5
6.4
6.9
5.7
28.4
1.5
202.7
1.6
18.4
(7.0)
5.1
(4.2)
12.3
281.2
23.3
(0.1)
2.2
0.7
16.2
2.4
0.7
6.0
332.6
34.9
-
5.6
3.6
0.2
5.0
3.8
3.8
2.5
59.4
20.5
12.7
-
33.2
11.0
8.7
(1.4)
-
14.7
26.6
(15.3)
4.6
30.3
51.3
26.8
36.5
1.8
-
9.0
7.3
6.9
57.4
3.7
231.0
1.2
204.3
232.2
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
CASH EARNINGS
5.
Cash earnings is used to represent the performance of the core business activities.
Profit after income tax expense
Adjusted for
Specific items after tax (1)
Amortisation of acquired intangibles after tax
Distributions paid on preference shares
Distributions paid on step-up preference shares
Cash basis earnings after tax
(1) Specific income and expense items after tax comprise:
Income
Ineffectiveness in cash flow hedges (income)/expense
Expense
Shortfall/(Gain) relating to Employee Share Plan
Integration costs
Accounting loss on disposal of securitisation notes
GST refund on change to apportionment methodology
Write down of intangible software assets
Impairment loss on held for sale asset
Impairment loss goodwill
Specific tax b enefits
Acquisition tax benefit - Adelaide
Acquisition tax expense - Rural Bank
Non deductible wealth management rights
Non deductible unrealised hedges at acquisition
Specific items attributable to non-controlling interest
Consolidated
2012
$m
2011
$m
195.0
342.1
117.0
19.5
(3.9)
(4.6)
323.0
9.1
0.8
2.6
-
-
-
2.7
95.1
-
-
4.3
2.4
-
117.0
(16.9)
19.7
(4.1)
(4.6)
336.2
(1.8)
(1.0)
5.7
10.3
(10.7)
17.9
-
-
(40.8)
2.9
-
-
0.6
(16.9)
(1) Specific items are those items that are deemed to be outside of our core activities and such items are not considered
to be representative of the group’s ongoing financial performance.
- 83 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
6.
INCOME TAX EXPENSE
Major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Acquisition income tax benefit
Retrospective change in tax legislation
Imputation credits
Adjustments in respect of current income tax of previous years
Deferred income tax
Acquisition income tax benefit
Retrospective change in tax legislation
Adjustments in respect of deferred income tax of previous years
Relating to origination and reversal of temporary differences
Income tax expense reported in the income statement
Statement of changes in equity
Deferred income tax related to items charged or credited directly in equity
Net gain on cash flow hedge
Net gain/(loss) on available-for-sale investments
Other
Income tax expense reported in equity
A reconciliation between tax expense and the product of accounting profit
before income tax multiplied by the group's applicable income tax rate is as follows:
Income tax expense attributable to:
Accounting profit before income tax
The income tax expense comprises amounts set aside as:
Provision attributable to current year at statutory rate, being
prima facie tax on accounting profit before tax
under/(over) provision in prior years
tax credits and adjustments
Expenditure not allowable for income tax purposes
Impairment Wealth Management goodwill
Other assessable income
Other non assessable income
Tax effect of tax credits and adjustments
Retrospective change in tax legislation
Acquisition income tax benefit
Other
Income tax expense reported in the consolidated income statement
Deferred income tax
Deferred income tax at 30 June relates to the following:
Gross Deferred tax liab ilities
Available-for-sale financial assets
Deferred expenses
Derivatives
Intangible assets on acquisition
Lease receivable
Other
Gross Deferred tax assets
Derivatives
Employee entitlements
Intangible liabilities on acquisition
Losses available for offset against future taxable income
Prepaid income
Provisions
Other
- 84 -
Consolidated
Parent
2012
$m
138.6
-
3.2
(3.4)
2.3
-
3.5
(1.6)
(11.5)
131.1
11.1
(3.8)
(0.4)
6.9
2011
$m
139.4
(27.1)
-
(12.4)
(13.4)
(11.1)
-
(1.3)
3.8
77.9
27.6
3.5
-
31.1
2012
$m
(76.2)
-
1.7
(0.2)
2.2
-
2.6
(2.0)
162.4
90.5
7.0
(0.9)
(0.4)
5.7
2011
$m
139.5
(28.6)
-
(9.4)
(9.6)
(12.2)
-
(4.6)
(58.5)
16.6
28.7
0.1
-
28.8
326.1
424.5
195.1
287.2
97.8
0.7
(3.4)
2.9
28.5
-
-
1.0
6.7
-
(3.1)
131.1
127.4
(14.7)
(12.4)
7.6
-
6.5
(1.7)
3.7
-
(38.2)
(0.3)
77.9
58.6
0.2
(0.2)
5.7
28.5
-
(3.5)
0.1
4.3
-
(3.2)
90.5
Consolidated
Parent
Balance sheet
2012
$m
(26.1)
(1.1)
(17.5)
(36.2)
(8.3)
(15.3)
2011
$m
(29.0)
(1.8)
(2.8)
(44.9)
(7.4)
(36.4)
(104.5)
(122.3)
54.2
20.1
8.1
0.5
11.8
48.3
27.2
39.6
21.8
9.7
0.5
17.5
47.0
44.1
2012
$m
0.7
(1.1)
(164.1)
(23.5)
(8.2)
(13.0)
(209.2)
31.0
18.6
0.3
0.4
0.9
34.7
22.6
86.2
(14.2)
(9.4)
12.9
-
-
(9.1)
2.8
-
(40.8)
(11.8)
16.6
2011
$m
0.9
(2.0)
(12.7)
(30.0)
(7.2)
(20.0)
(71.0)
45.4
21.2
2.0
0.4
1.1
32.0
32.0
170.2
180.2
108.5
134.1
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
INCOME TAX EXPENSE (continued)
Tax payable/(receivable) attributable to members of the tax consolidated group
Balance sheet
Consolidated
2012
$m
86.8
86.8
2011
$m
68.6
68.6
Parent
2012
$m
86.8
86.8
2011
$m
68.6
68.6
At 30 June 2012, there is no unrecognised deferred income tax liability (2011: 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 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
AASB112 Income Taxes.
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 in
the subsidiaries' equity accounts.
Tax consolidation outcomes
During the year, retrospective amendments to tax consolidation legislation came into effect which impact the group. The
outcomes of these changes have resulted in a debit to income tax expense of $6.7m (2011: nil).
Taxation of Financial Arrangements (“TOFA”)
The new taxing regime for financial instruments (TOFA) began to apply to the Tax Consolidated group on 1 July 2010. The
regime aims to align the tax and accounting treatment of financial arrangements.
The Tax Consolidated group made a transitional election to bring pre-existing arrangements into TOFA. The deferred tax in
relation to the transitional adjustment that this created is being amortised equally over the 2011 to 2014 years.
- 85 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
7.
CAPITAL MANAGEMENT
a. Capital management
Bendigo and Adelaide Bank Limited key capital management objectives are to:
•
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;
•
•
•
Optimise the level and use of capital resources to enhance shareholder value through maximising financial performance;
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 Limited 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 group’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 group’s internal capital adequacy
assessment process (or ICAAP).
The group 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 group has satisfied the
minimum capital requirements at Levels 1 and 2 throughout the 2011/12 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 group’s eligible capital must be held in the form of Tier 1 capital.
- 86 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
CAPITAL MANAGEMENT (continued)
b. Capital adequacy
Risk weighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Retained profits & reserves
Innovative tier 1 capital
Less,
Intangible assets, cash flow hedges and capitalised expenses
Net deferred tax assets
50/50 deductions
Other adjustments - APS 120 securitisation
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
Total tier 2 capital
Total qualifying capital
Total risk weighted assets
Consolidated
As at
June 2012
$m
As at
June 2011
$m
8.39%
2.02%
10.41%
7.85%
2.74%
10.59%
3,681.8
101.3
277.9
1,583.9
-
8.5
92.4
2,376.2
144.4
434.6
1.9
580.9
8.5
572.4
3,408.9
159.4
277.9
1,660.5
13.5
16.4
112.5
2,043.3
132.8
576.2
23.0
732.0
16.4
715.6
2,948.6
2,758.9
28,310.1
26,043.3
- 87 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
8.
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 non-controlling 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
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 specific income and expense items (Note 5)
Consolidated
2011
Cents per share Cents per share
2012
48.6
47.7
84.2
$m
195.0
-
(3.9)
(4.6)
186.5
186.5
12.4
198.9
186.5
19.5
117.0
323.0
91.5
86.4
92.3
$m
346.6
(4.5)
(4.1)
(4.6)
333.4
333.4
12.6
346.0
333.4
19.7
(16.9)
336.2
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
No. of shares
No. of shares
383,463,802
1,149,679
32,352,260
364,334,486
1,052,826
35,041,690
per ordinary share
416,965,741
400,429,002
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 as at the reporting date:
Preference shares
Step up preference shares
Reset preference shares
Executive share options
Executive performance rights
Dilutive
2011
Yes
Yes
Yes
No
Yes
2012
Yes
Yes
Yes
No
Yes
- 88 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
9.
DIVIDENDS
Dividends paid or proposed
Ordinary shares
Dividends paid during the year
current year
Interim dividend (30.0 cents per share) (2011 - 30.0 cents per share)
previous year
Final dividend (30.0 cents per share) (2011 - 30.0 cents per share)
Dividends proposed since the reporting date, b ut not recognised as a liab ility
Final dividend (30.0 cents per share) (2011: 30.0 cents per share)
Franked dividends per ordinary shares (cents per share)
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
113.2
107.0
113.2
107.0
107.4
105.7
107.4
105.7
220.6
212.7
220.6
212.7
118.1
60.0
107.7
60.0
118.1
60.0
107.7
60.0
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 2012.
Preference shares
Dividends paid during the year
115.07 cents per share paid on 15 September 2011 (2010: 113.07 cents)
111.11 cents per share paid on 15 December 2011 (2010: 110.91 cents)
105.50 cents per share paid on 15 March 2012 (2011: 114.00 cents)
104.87 cents per share paid on 15 June 2012 (2011: 112.39 cents)
Step up preference shares
Dividends paid during the year
116.00 cents per share paid on 11 July 2011 (2010: 110.00 cents)
118.00 cents per share paid on 10 October 2011 (2010: 116.00 cents)
114.00 cents per share paid on 10 January 2012 (2011: 116.00 cents)
108.00 cents per share paid on 10 April 2012 (2011: 116.00 cents)
Reset preference shares (recorded as debt instruments)
Dividends paid during the year:
310.53 cents per share paid on 7 November 2011 (2010: 310.53)
307.16 cents per share paid on 1 May 2012 (2011: 305.47)
Dividend franking account
Balance of franking account as at end of financial year
Franking credits that will arise from the payment of income tax provided for in the
financial report
Impact of dividends proposed or declared before the financial report was authorised
for issue but not recognised as a distribution of equity holders during the period
The tax rate at which dividends have been franked is 30% (2011: 30%).
Dividends proposed will be franked at the rate of 30% (2011: 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
1.0
1.0
1.0
0.9
3.9
1.2
1.2
1.1
1.1
4.6
2.8
2.7
5.5
1.0
1.0
1.1
1.0
4.1
1.0
1.2
1.2
1.2
4.6
2.8
2.7
5.5
1.0
1.0
1.0
0.9
3.9
1.2
1.2
1.1
1.1
4.6
2.8
2.7
5.5
1.0
1.0
1.1
1.0
4.1
1.0
1.2
1.2
1.2
4.6
2.8
2.7
5.5
189.5
86.8
(51.5)
224.8
166.0
68.6
(46.2)
188.4
149.7
79.3
229.0
191.8
44.0
235.8
149.7
79.3
229.0
177.4
44.0
221.4
- 89 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 fifteen trading days following the Record Date at a discount of
2.5%. 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 fifteen trading days following the
Record Date at a discount of 2.5%. 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 2012 final dividend was 29 August 2012.
10.
RETURN ON AVERAGE ORDINARY EQUITY
Consolidated
Return on average ordinary equity
Pre-specific 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 non-controlling 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 specific income and expense items
Earnings used in calculation of pre-specific items return on average
ordinary equity
After tax intangibles amortisation (excluding amortisation of intangible software)
Earnings used in calculation of cash basis return on average ordinary equity
Reconciliation of ordinary equity used in the calculation of return on average ordinary equity
Total equity
Preference share net capital
Asset revaluation reserve - available for sale investments
Unrealised gains/losses on cash flow hedge reserve
Acquisitions reserve
Ordinary equity
Average ordinary equity
The above calculation uses a twelve month rolling basis of calculation.
2012
%
4.84
7.88
8.36
$m
195.0
-
(3.9)
(4.6)
186.5
117.0
303.5
19.5
323.0
2011
%
8.99
8.54
9.07
$m
346.6
(4.5)
(4.1)
(4.6)
333.4
(16.9)
316.5
19.7
336.2
4,217.7
(188.5)
(26.9)
86.4
20.4
4,109.1
3,852.5
3,960.1
(188.5)
(34.5)
109.3
20.4
3,866.8
3,713.4
- 90 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
11.
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
Net tangible assets
Consolidated
2012
$
6.16
2011
$
5.76
$m
$m
4,217.7
(1,548.2)
(90.0)
(100.0)
2,479.5
3,960.1
(1,654.7)
(90.0)
(100.0)
2,115.4
Number of ordinary shares on issue at reporting date
402,233,266
367,104,585
12.
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
Ineffectiveness in cash flow 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/(decrease) in accrued employees entitlements
Increase/(decrease) in other accruals, receivables and provisions
Net cash flows from operating activities
Consolidated
Parent
2012
$m
195.0
36.8
139.1
18.2
0.9
1.7
(0.7)
13.0
18.2
(7.8)
7.9
(39.3)
(4.4)
(178.7)
199.9
2011
$m
2012
$m
2011
$m
346.6
104.6
270.6
48.5
41.7
17.6
(0.6)
4.5
(3.4)
(2.6)
(4.5)
22.4
(133.5)
24.1
5.1
122.2
488.1
21.8
129.7
17.0
0.6
1.7
-
13.8
18.2
163.8
(546.3)
(21.1)
(7.5)
317.8
214.1
16.5
33.2
16.6
2.0
4.5
-
1.3
8.7
(46.5)
20.7
34.9
7.5
(14.1)
355.9
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 other receivables, investment securities, retail deposits and wholesale deposits.
- 91 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
13.
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
14.
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
Parent
2012
$m
244.2
44.6
288.8
288.8
272.2
(327.2)
233.8
2011
$m
310.6
158.4
469.0
469.0
201.6
(215.6)
455.0
2012
$m
131.2
44.6
175.8
175.8
266.3
(315.1)
127.0
Consolidated
Parent
2012
$m
-
2,656.7
706.6
1,002.8
4,366.1
1,387.6
2,334.6
643.9
-
4,366.1
2011
$m
219.6
2,629.8
834.0
648.3
4,331.7
3,086.5
469.1
776.1
-
4,331.7
2012
$m
-
2,657.6
706.6
1,002.8
4,367.0
1,387.6
2,334.6
643.9
0.9
4,367.0
2011
$m
191.3
155.4
346.7
346.7
200.9
(214.6)
333.0
2011
$m
219.6
2,630.8
834.0
648.3
4,332.7
3,086.5
469.1
776.1
1.0
4,332.7
15.
FINANCIAL ASSETS AVAILABLE FOR SALE – DEBT SECURITIES
Negotiable securities
Negotiable certificates of deposit
Mortgage backed securities
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
Consolidated
Parent
2012
$m
92.7
352.1
-
-
444.8
105.3
41.6
297.9
-
444.8
2011
$m
122.3
311.1
18.7
-
452.1
123.1
79.9
249.1
-
452.1
2012
$m
2011
$m
-
352.1
-
1,242.5
-
311.1
18.9
2,004.7
1,594.6
2,334.7
813.1
65.4
297.9
418.2
1,124.1
79.9
282.7
848.0
1,594.6
2,334.7
Recognised gains / (losses) before tax:
(Loss) recognised directly in equity
(1.8)
(0.3)
(1.8)
(0.1)
- 92 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
16.
FINANCIAL ASSETS AVAILABLE FOR SALE – EQUITY INVESTMENTS
Share investments at fair value
Listed share investments
Unlisted share investments
Consolidated
Parent
2012
$m
122.0
2.7
124.7
2011
$m
121.2
2.2
123.4
2012
$m
1.4
2.7
4.1
2011
$m
1.3
2.2
3.5
Fair value of share investments is determined as follows:
Listed shares - quoted market price at balance date.
Unlisted shares - estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates.
Management believes the estimated fair values resulting from the valuation techniques and recorded in the balance sheet and the related
changes in fair values recorded in equity are reasonable and the most appropriate at the balance sheet date.
Recognised gains / (losses) before tax:
Gain/(loss) recognised directly in equity
Amount removed from equity and recognised in (profit)/loss
(9.6)
-
11.5
(1.0)
(0.1)
-
0.4
(1.0)
17.
FINANCIAL ASSETS HELD TO MATURITY
Consolidated
Parent
Negotiable securities
Bank accepted bills of exchange
Negotiable certificates of deposit
Other
Non negotiable securities
Deposits - other
Other
2012
$m
9.9
328.5
47.1
385.5
1.6
1.3
2.9
2011
$m
6.0
250.5
116.3
372.8
6.2
1.3
7.5
Total financial assets held to maturity
388.4
380.3
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
331.5
38.4
15.0
3.5
388.4
302.0
34.8
35.5
8.0
380.3
2012
$m
2011
$m
-
-
0.5
0.5
-
1.3
1.3
1.8
-
-
-
1.8
1.8
-
-
68.4
68.4
-
1.3
1.3
69.7
52.7
15.2
-
1.8
69.7
- 93 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
18.
LOANS AND OTHER RECEIVABLES
Loans and other receivables - investments
453.0
471.2
453.0
471.2
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Overdrafts
Credit cards
Term loans
Margin lending
Lease receivables
Factoring receivables
Other
Gross loans and other receivables
Specific provision for impairment (Note 19)
Collective provision for impairment (Note 19)
Unearned income
Deferred Costs paid
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
4,342.5
241.2
40,828.7
2,333.2
472.1
78.7
82.6
48,379.0
(102.9)
(31.8)
(105.1)
(239.8)
77.8
4,156.8
230.3
37,875.0
3,202.2
485.0
49.7
93.6
46,092.6
(91.4)
(41.9)
(92.0)
(225.3)
71.3
4,257.5
241.2
36,335.7
-
459.4
78.7
82.6
41,455.1
(60.0)
(27.7)
(64.3)
(152.0)
63.5
4,154.7
230.3
34,359.6
-
481.5
49.7
75.7
39,351.5
(47.3)
(36.1)
(65.0)
(148.4)
52.3
48,217.0
45,938.6
41,366.6
39,255.4
98.7
224.0
35.8
(102.1)
256.4
0.53%
3.7
(0.8)
2.9
88.5
237.9
32.3
(90.6)
268.1
0.58%
4.1
(0.8)
3.3
32.1
94.6
35.7
(59.2)
103.2
46.2
87.1
32.3
(46.4)
119.2
0.25%
0.30%
3.7
(0.8)
2.9
4.1
(0.8)
3.3
811.8
729.2
665.8
631.2
Net fair value of properties acquired through the enforcement of security
Interest income recognised
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.
5.6
26.1
2.1
11.5
108.2
66.2
99.0
2.5
6.3
62.5
1.2
2.8
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
7,971.4
1,311.8
1,727.4
6,660.3
31,161.1
48,832.0
8,578.1
931.2
1,568.3
6,430.0
29,056.2
46,563.8
5,085.1
791.6
1,062.2
4,489.3
30,479.9
41,908.1
4,872.5
602.9
1,182.0
4,442.5
28,722.8
39,822.7
1
Balances exclude specific and general provisions for doubtful debts and unearned revenue, and are categorised by the contracted maturity date of each loan facility.
- 94 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 Trusts 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 Trusts, 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 $11,531.8 million (2011: $13,366.2 million) are reported in loans and receivables of the parent entity.
Investors in the Trusts have no recourse against the Bank if cash flows from the securitised loans are inadequate to service
the obligations of the Trusts.
19.
IMPAIRMENT OF LOANS AND ADVANCES
Consolidated
Specific provision for impairment
Opening balance
Provision acquired in business combination
Transfer of business
Charged to income statement
Impaired debts written-off applied to specific impairment provision
Closing balance
Collective provision for impairment
Opening balance
Provision acquired in business combination
Transfer of business
Charged to income statement
Closing balance
General reserve for credit losses
Opening balance
Provision acquired in business combination
Charged to equity
Closing balance
Bad and doubtful debts expense
Specific provisions for impairment
Collective provision
Bad debts written off
Bad debts recovered
2012
$m
91.4
0.3
-
44.9
(33.7)
102.9
41.9
0.1
-
(10.2)
31.8
110.9
4.8
12.8
128.5
44.9
(10.2)
2.1
(4.4)
32.4
2011
$m
79.1
-
-
48.4
(36.1)
91.4
47.1
-
-
(5.2)
41.9
104.7
-
6.2
110.9
48.4
(5.2)
5.3
(4.3)
44.2
Ratios
Specific provision as % of gross loans less unearned income
Collective provision (adjusted for tax) & General reserve for credit losses
as a % of risk-weighted assets
0.21%
0.20%
0.53%
0.54%
Parent
2012
$m
47.3
-
8.4
29.3
(25.0)
60.0
36.1
-
0.3
(8.7)
27.7
92.4
-
12.6
105.0
29.3
(8.7)
1.2
(4.0)
17.8
2011
$m
51.7
-
-
18.4
(22.8)
47.3
43.1
-
-
(7.0)
36.1
86.2
-
6.2
92.4
18.4
(7.0)
5.1
(4.2)
12.3
- 95 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
20.
PARTICULARS IN RELATION TO CONTROLLED ENTITIES
Prinicpal Activities
Banking
(1)
(2)
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 Managed Funds Ltd
Bank of Cyprus Australia Limited
Hindmarsh Adelaide Property Trust
Hindmarsh Financial Services Ltd
Leveraged Equities Ltd
Adelaide Equity Finance Pty 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
Homesafe Trust
National Mortgage Market Corporation Pty Ltd
Rural Bank Limited
Sandhurst Trustees Ltd
Sandhurst Nominees (Victoria) Pty Ltd
Pirie Street Nominees Pty Ltd
Securitisation
AIL Trust No 1
ABL Portfolio Funding Trust 2007-1
Lighthouse Warehouse Trust No 1
Lighthouse Warehouse Trust No 2
Lighthouse Warehouse Trust No 14
Torrens Series 2004-1 Trust
Torrens Series 2004-2 (W) Trust
Torrens Series 2005-1 Trust
Torrens Series 2005-2(S) Trust
Torrens Series 2005-3 (E) Trust
Torrens Series 2006-1(E) Trust
Torrens Series 2007-1 Trust
Torrens Series 2008-1 Trust
Torrens Series 2008-2(W) Trust
Torrens Series 2008-3 Trust
Torrens Series 2008-4 Trust
Torrens Series 2009-1 Trust
Torrens Series 2009-3 Trust
Torrens Series 2010-1 Trust
Torrens Series 2010-2 Trust
Torrens Series 2010-3 Trust
Torrens Series 2011-1(E)
Torrens Series 2011-2
1 No n-Operating co ntro lled entities are excluded fro m the abo ve list.
2 A ll entities are 100% o wned and inco rpo rated in A ustralia.
Securitisation Manager
Security Trustee
Trust Manager
Trustee company
Responsible Entity for listed trusts
Banking
Property Owner
Investment company
Margin Lending
Margin Lending
Securitisation
Provider of share nominee services for margin lending
Administration company
Leasing finance
Financial advisory services
Community initiatives
Homesafe product financier
Mortgage origination & management
Banking
Trustee company
Nominee 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
- 96 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
21.
INVESTMENTS IN JOINT VENTURES USING THE EQUITY METHOD
N a m e
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
Linear Financial Holdings Pty Ltd
Homebush Financial Services Ltd
(i) Principal activities of joint venture companies
O wne rs hip
B a la nc e da t e
int e re s t he ld by
c o ns o lida t e d e nt it y
2 0 12
%
50.0
50.0
50.0
50.0
47.5
40.0
49.0
2 0 11
%
50.0
50.0
50.0
50.0
47.5
24.3
-
30 June
30 June
30 June
30 June
31 December
30 June
30 June
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
Linear Financial Holdings Pty Ltd - asset management services
Homebush Financial Services Ltd - financial services (acquired January 2012)
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:
- 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
- Linear Financial Holdings Pty Ltd
- Homebush Financial Services Ltd
2012
$m
16.4
15.7
0.7
0.3
0.4
2012
$m
0.2
0.4
0.2
-
0.3
(0.7)
-
0.4
2011
$m
15.0
11.6
3.4
0.2
3.2
2011
$m
0.3
0.9
0.2
-
2.2
(0.4)
-
3.2
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.
- 97 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 for the financial year
Carrying amount of investments in joint ventures at the end of the financial year
Represented by:
Investments at equity accounted amount:
- Homebush Financial Services Ltd
- Community Sector Enterprises Pty Ltd
- Silver Body Corporate Financial Services Pty Ltd
- Community Telco Australia Pty Ltd
- Strategic Payment Services Pty Ltd
- Homesafe Solutions Pty Ltd
- Linear Financial Holdings Pty Ltd
2012
$m
12.5
0.4
(0.4)
0.4
12.9
0.8
0.8
0.4
-
8.8
0.3
1.8
2011
$m
7.2
2.3
(0.2)
3.2
12.5
-
0.8
0.5
-
8.5
0.2
2.5
12.9
12.5
There are no impairment losses relating to investments in joint ventures.
Unrecognised losses relating to joint ventures
1.2
0.8
(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
13.4
9.8
3.6
62.9
11.1
6.8
4.3
62.9
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 46.
The consolidated entity's share of joint ventures' commitments and contingent liabilities (if any) are disclosed in the Commitments and
Contingencies note 43.
- 98 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
22.
PROPERTY, PLANT AND EQUIPMENT
Consolidated
Parent
2012
$m
1.0
1.0
1.1
(0.1)
1.0
80.7
(40.9)
39.8
41.8
179.3
(152.1)
27.2
2011
$m
16.6
16.6
15.4
(0.5)
14.9
70.4
(30.8)
39.6
71.1
170.3
(141.5)
28.8
2012
$m
0.3
0.3
0.2
-
0.2
72.7
(36.7)
36.0
36.5
172.1
(148.0)
24.1
2011
$m
0.3
0.3
0.2
-
0.2
69.0
(30.6)
38.4
38.9
167.3
(139.5)
27.8
69.0
99.9
60.6
66.7
16.6
(15.6)
1.0
14.9
(0.3)
(13.6)
1.0
39.6
3.8
2.9
-
(6.5)
39.8
28.8
8.4
2.2
(0.8)
(11.4)
-
27.2
0.4
0.6
(0.3)
0.7
16.6
-
16.6
15.3
(0.4)
-
14.9
38.5
6.9
-
(0.1)
(5.7)
39.6
33.2
7.4
-
(1.0)
(11.5)
0.7
28.8
17.9
21.8
(2.2)
37.5
0.3
-
0.3
0.2
-
-
0.2
38.4
3.8
-
-
(6.2)
36.0
27.8
7.9
-
(0.8)
(10.8)
-
24.1
0.1
0.1
(0.1)
0.1
6.5
(6.2)
0.3
10.3
-
(10.1)
0.2
37.2
6.9
-
(0.1)
(5.6)
38.4
31.4
7.6
-
(0.9)
(11.0)
0.7
27.8
0.1
0.1
(0.1)
0.1
Consolidated
Parent
2012
$m
-
25.4
25.4
2011
$m
-
-
-
2012
$m
2011
$m
-
-
-
-
-
-
(a) Carrying Value
Property
Freehold land - at fair value
Freehold buildings - at fair value
Accum ulated depreciation
Leasehold improvem ents - at cost
Accum ulated depreciation
Other
Plant, furniture, fittings, office equipment & vehicles - at cost
Accum ulated depreciation
(b) Reconciliations
Freehold land
Carrying amount at beginning of financial year
Transfer to assets held for sale
Freehold buildings
Carrying amount at beginning of financial year
Depreciation expense
Transfer to assets held for sale
Leasehold improvements - at cost
Carrying amount at beginning of financial year
Additions
Additions through acquisition of entities
Disposals
Depreciation expense
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
If land and buildings were measured using the cost model the carrying amounts would be as follows:
Land
Buildings
Accum ulated depreciation and impairment
Net carrying amount
23.
ASSETS HELD FOR SALE
Carrying amount at beginning of financial year
Land and buildings (1)
(1) An impairment loss of $3.8 m was recorded on initial recognition of assets transferred to held for sale.
- 99 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
24. INVESTMENT PROPERTY
Carrying amount at beginning of financial year
Additions
Net gain/(loss) from fair value adjustments
Consolidated
Parent
2012
$m
263.0
36.3
(0.4)
298.9
2011
$m
158.9
83.0
21.1
263.0
2012
$m
2011
$m
-
-
-
-
-
-
-
-
Investment properties are carried at fair value, which has been determined in accordance with directors’ valuations and have
not been independently valued.
The asset represents residential properties acquired under the Homesafe Equity Release product, and is subject to restricted
trading rights over the life of the agreements with individual customers. The realisability of the properties and the remittance of
income and proceeds of disposal can be impacted by the real estate market conditions, particularly Melbourne and Sydney.
The fair value represents the amounts at which the assets could be sold in an arm’s length transaction at the date of valuation
including allowance for the restrictions applicable to these assets, and is determined by reference to adjusted property market
index rates.
25.
INTANGIBLE ASSETS AND GOODWILL
(a) Carrying value
Intangible assets
Customer list - at cost
Accumulated amortisation
Computer software - at cost
Accumulated amortisation and impairment
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
Consolidated
Parent
2012
$m
9.1
(4.2)
4.9
135.3
(67.9)
67.4
8.4
-
8.4
1.3
(1.3)
-
28.4
(20.7)
7.7
72.0
(30.7)
41.3
15.3
(4.7)
10.6
116.3
(68.5)
47.8
2011
$m
3.6
(3.6)
-
114.8
(49.2)
65.6
8.4
-
8.4
1.3
(1.3)
-
28.4
(16.0)
12.4
72.0
(22.1)
49.9
15.3
(3.6)
11.7
116.3
(55.7)
60.6
2012
$m
2011
$m
-
-
-
119.9
(54.6)
65.3
-
-
-
1.3
(1.3)
-
25.5
(19.7)
5.8
29.3
(16.4)
12.9
15.3
(4.7)
10.6
98.7
(62.0)
36.7
-
-
-
103.6
(39.4)
64.2
-
-
-
1.3
(1.3)
-
25.5
(15.4)
10.1
29.3
(12.8)
16.5
15.3
(3.6)
11.7
98.7
(51.6)
47.1
Goodwill
1,360.1
1,446.1
1,277.1
1,369.5
Total intangible assets and goodwill
1,548.2
1,654.7
1,408.4
1,519.1
- 100 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
INTANGIBLE ASSETS AND GOODWILL (continued)
Consolidated
Parent
2011
$m
2012
$m
2011
$m
(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
Transfers
Impairment write down
Amortisation charge
Trustee licence
Carrying amount at beginning of financial year
Computer software (Adelaide)
Carrying amount at beginning of financial year
Amortisation Charge
Trade Name
Carrying amount at beginning of financial year
Additional acquired trade name
Amortisation Charge
Customer Relationship
Carrying amount at beginning of financial year
Amortisation Charge
Management Rights
Carrying amount at beginning of financial year
Amortisation Charge
Core Deposits
Carrying amount at beginning of financial year
Amortisation Charge
2012
$m
-
5.5
(0.6)
4.9
65.6
0.8
17.2
-
-
(16.2)
67.4
8.4
8.4
-
-
-
12.4
-
(4.7)
7.7
49.9
(8.6)
41.3
11.7
(1.1)
10.6
60.6
(12.8)
47.8
-
-
-
25.1
-
81.3
(0.7)
(26.6)
(13.5)
65.6
8.4
8.4
0.1
(0.1)
-
16.3
0.8
(4.7)
12.4
58.5
(8.6)
49.9
12.7
(1.0)
11.7
74.4
(13.8)
60.6
-
-
-
64.2
-
16.3
-
-
(15.2)
65.3
-
-
-
-
-
10.1
-
(4.3)
5.8
16.5
(3.6)
12.9
11.7
(1.1)
10.6
47.1
(10.4)
36.7
-
-
-
23.3
-
80.8
(0.7)
(26.6)
(12.6)
64.2
-
-
0.1
(0.1)
-
13.7
0.8
(4.4)
10.1
20.1
(3.6)
16.5
12.7
(1.0)
11.7
58.6
(11.5)
47.1
1,353.1
-
16.4
-
1,369.5
Goodwill
Carrying amount at beginning of financial year
Addition acquired through business combination/(purchase price adjustment)
Transfer from subsidiary
Impairment of goodwill
1,446.1
9.1
-
(95.1)
1,360.1
1,446.1
-
-
-
1,446.1
1,369.5
-
2.7
(95.1)
1,277.1
Total intangible assets and goodwill
1,548.2
1,654.7
1,408.4
1,519.1
Intangible assets
Finite useful life
The customer list was acquired through a business combination (AIM Investment Management 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).
The carrying value of internally developed software is tested annually for impairment, using estimates of future cash flows over
the assets remaining useful life.
- 101 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
INTANGIBLE ASSETS AND GOODWILL (continued)
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 is 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.
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.
26.
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 the half year ended 31 December 2011 there were a number of indicators that suggested that impairment testing was
required. As such, testing occurred and an impairment loss of $95.1 million was recorded as at 31 December 2011 against the
Wealth cash-generating unit.
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
Useful Life
2 – 10 years
5 – 15 years
7 – 12 years
15 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.
(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 2012/2013 (adjusted for specific items) by 12.
In order to determine the appropriate multiple, consideration is given to recent similar transactions that may have occurred. A
review is performed over earnings multiples across similar sectors over the last five years as well as current market conditions.
Management consider that an earnings multiple of 12 is appropriate for each for the groups identified CGU’s.
- 102 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES (continued)
(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 9.37%. 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. 9.37%
minus long term growth rate i.e. 3%). Long term growth rates of 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 the retail CGU which uses the value in use methodology for
the 2012/13 year and is based on the financial forecast approved by the board:
CGU
Retail
2013/14
4.0%
2014/15
6.8%
2015/16
6.8%
2016/17
6.8%
Profit Growth Rate
Long term
growth
rate
3.0%
The 2012/13 forecasted after tax cash flows are based on the financial forecast approved by the board.
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 or value in use
tests results, no further impairment loss is required to be made for any of the CGU’s as at 30 June 2012.
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 and includes the Bank of Cyprus Australia.
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, margin lending activities and wealth deposits. 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
Goodwill
test applied
Carrying
amount of
goodwill
Carrying
amount of
intangibles
Sensitivity before impairment becomes
evident for the test applied
$m
$m Fair value
Value in use
Retail
Value in use
Third Party Fair value
Wealth
Fair value
Rural Bank Fair value
658.2
455.8
229.3
16.8
Earnings multiple
Profit growth
Discount rate
40.8 Not applicable (1)
65.0 Lower by 2
46.3 Lower by 1
36.0 Lower by 1
Lower by 11.0%
Lower by 15.5%
Lower by 17.0%
Lower by 12.3%
12.3%
14.1%
14.4%
12.8%
Total
1,360.1
188.1
(1)
The value in use test has been applied to the Retail CGU.
- 103 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
27.
OTHER ASSETS
Shares in joint ventures (1)
Accrued income
Prepayments
Sundry debtors
Accrued interest
Consolidated
Parent
2012
$m
-
20.7
22.4
263.3
203.3
509.7
2011
$m
-
15.8
17.1
151.4
232.7
417.0
2012
$m
15.4
18.5
17.4
645.1
156.4
852.8
2011
$m
14.9
12.5
13.7
602.7
184.5
828.3
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 21 for more information regarding joint ventures.
28.
DEPOSITS
DEPOSITS
Retail
Bendigo Adelaide - company owned
Bendigo Adelaide - community bank/alliances
Rural Bank
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
2012
$m
2011
$m
2012
$m
2011
$m
21,399.3
11,617.8
2,143.6
5,502.4
40,663.1
3,832.5
77.1
3,909.6
19,440.0
10,427.9
2,349.0
4,474.0
36,690.9
3,669.2
161.2
3,830.4
20,300.3
11,617.8
-
4,519.4
36,437.5
3,664.8
77.1
3,741.9
19,828.0
10,427.9
-
3,566.8
33,822.7
3,542.1
161.2
3,703.3
44,572.7
40,521.3
40,179.4
37,526.0
21,180.3
8,063.8
773.0
4,959.2
5,268.2
2,918.2
933.6
476.4
44,572.7
17,929.5
9,182.8
603.9
4,387.9
4,582.7
2,453.7
794.3
586.5
40,521.3
18,748.8
7,573.7
836.3
4,537.8
4,716.0
2,457.0
818.8
491.0
40,179.4
17,285.7
8,095.1
527.9
3,895.3
4,408.5
2,017.5
716.4
579.6
37,526.0
NOTES PAYABLE
6,411.0
8,453.7
-
576.9
29.
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
2012
$m
36.2
266.7
387.2
41.7
731.8
2011
$m
21.0
305.9
389.3
65.0
781.2
2012
$m
157.9
668.1
342.0
-
1,168.0
2011
$m
176.6
301.7
352.4
-
830.7
- 104 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
30.
PROVISIONS
(a) Balances
Employee benefits (Note 35)
Employee shares shortfall (1)
Rewards program (2)
Property Rent (3)
Dividends (4)
Uninsured Losses (5)
Consolidated
Parent
2012
$m
66.9
4.2
4.2
1.5
1.0
2.9
80.7
2011
$m
71.3
3.2
3.9
1.8
1.2
3.1
84.5
2012
$m
62.0
4.2
4.2
1.5
1.0
2.9
75.8
2011
$m
69.5
3.2
3.9
1.8
1.2
2.9
82.5
(1) The provision for employee shares shortfall is in relation to possible losses associated with employee loans under 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.
(2) The 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.
(3) The 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.
(4) The 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.
(5) The 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
Release of provision
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
Additional dividends provided
Dividends paid during the year
Closing balance
Uninsured Losses
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
2012
$m
71.3
1.6
34.0
(0.3)
(39.7)
66.9
3.2
1.2
(0.2)
4.2
3.9
1.6
(1.3)
4.2
1.8
(0.3)
1.5
1.2
229.1
(229.3)
1.0
3.1
0.6
(0.8)
2.9
2011
$m
66.2
-
41.9
0.1
(36.9)
71.3
4.8
(1.4)
(0.2)
3.2
3.8
2.3
(2.2)
3.9
2.0
(0.2)
1.8
9.2
227.8
(235.8)
1.2
3.1
0.3
(0.3)
3.1
2012
$m
69.5
-
30.2
(0.3)
(37.4)
62.0
3.2
1.2
(0.2)
4.2
3.9
1.6
(1.3)
4.2
1.8
(0.3)
1.5
1.2
229.1
(229.3)
1.0
2.9
0.4
(0.4)
2.9
2011
$m
62.0
-
40.5
0.1
(33.1)
69.5
4.8
(1.4)
(0.2)
3.2
3.8
2.3
(2.2)
3.9
2.0
(0.2)
1.8
1.2
221.4
(221.4)
1.2
3.1
-
(0.2)
2.9
- 105 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
31.
RESET PREFERENCE SHARES
Reset preference shares - 894,574 fully paid $100 preference shares
Consolidated
Parent
2012
$m
89.5
89.5
2011
$m
89.5
89.5
2012
$m
89.5
89.5
2011
$m
89.5
89.5
Reset preference shares are perpetual, but can be exchanged at the request of the holder or the Company. Dividends are non-cumulative and are payable six-m onthly
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.
32.
SUBORDINATED DEBT
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
Subordinated capital notes
436.9
575.7
361.1
484.9
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
38.5
43.8
72.7
281.9
436.9
-
124.8
155.1
295.8
575.7
38.5
20.2
30.5
271.9
361.1
-
109.8
89.3
285.8
484.9
- 106 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
33.
ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid - 402,233,266 (2011: 367,104,585)
Preference shares of $100 face value fully paid - 900,000 (2011: 900,000 fully paid)
Step-up preference shares of $100 face value fully paid - 1,000,000 (2011: 1,000,000)
Em ployee share ownership plan shares
Consolidated
Parent
2012
$m
3,681.8
88.5
100.0
(21.3)
3,849.0
2011
$m
3,408.9
88.5
100.0
(24.6)
3,572.8
2012
$m
3,681.8
88.5
100.0
(21.3)
2011
$m
3,408.9
88.5
100.0
(24.6)
3,849.0
3,572.8
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-cum ulative 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 m argin m ultiplied by one m inus the com pany tax rate. It is expected
that dividends paid will be fully franked. The BPS are perpetual, but m ay be redeem ed by Bendigo and Adelaide Bank subject to prior
approval of APRA.
Step up Preference share (SPS) dividends are non-cum ulative 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 m ultiplied by one m inus the com pany tax rate. It is
expected that dividends paid will be fully franked. The SPS are perpetual, but m ay be redeem ed by Bendigo and Adelaide Bank subject to
prior approval of APRA.
Em ployee share ownership plan shares is the value of loans outstanding in relation to shares issued to em ployees under this plan and
effectively represents the unpaid portion of the issued shares.
Movement in ordinary shares on issue
Opening balance 1 July - 367,104,585 (2011: 361,366,745)
Shares issued under:
Bonus share schem e - 338,041 @ $8.06; 529,211 @ $7.36
(2011: 301,032 @ $9.19; 266,541 @ $8.95)
Dividend reinvestm ent plan - 5,005,825 @ $8.06; 5,303,252 @ $7.36
(2011: 2,713,513 @ $9.19; 2,129,521 @ $8.95)
Institutional placem ent and entitlem ent offer - 17,751,480 @ $8.45 (2011: Nil)
Retail entitlem ent offer - 6,200,872 @ $7.33 (2011: Nil)
Em ployee share plan - Nil (2011: 327,233 @ $9.78 )
Share issue costs
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
3,408.9
3,361.7
3,408.9
3,361.7
-
79.3
150.0
45.5
-
(1.9)
-
44.0
-
-
3.2
-
-
79.3
150.0
45.5
-
(1.9)
-
44.0
-
-
3.2
-
Closing balance 30 June - 402,233,266 (2011: 367,104,585)
3,681.8
3,408.9
3,681.8
3,408.9
Movements in preference shares on issue
Opening balance 1 July - 900,000 fully paid (2011: 900,000 fully paid)
Closing balance 30 June - 900,000 fully paid to $100 (2011: 900,000 fully paid)
Movements in step up preference shares on issue
Opening balance 1 July - 1,000,000 (2011: 1,000,000)
Closing balance 30 June - 1,000,000 fully paid to $100 (2011: 1,000,000)
Movements in Employee share ownership plan shares
Opening balance 1 July
Reduction in Em ployee share ownership plan shares
Closing balance 30 June
88.5
88.5
100.0
100.0
(24.6)
3.3
(21.3)
88.5
88.5
100.0
100.0
(27.7)
3.1
(24.6)
88.5
88.5
100.0
100.0
(24.6)
3.3
(21.3)
88.5
88.5
100.0
100.0
(27.7)
3.1
(24.6)
Total issued and paid up capital
3,849.0
3,572.8
3,849.0
3,572.8
- 107 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
34.
RETAINED EARNINGS AND RESERVES
Consolidated
Parent
RETAINED EARNINGS
Movements
Opening balance 1 July
Profit for the year
Transfer from asset revaluation reserve
Movements in general reserve for credit losses
Dividends
Defined benefits actuarial adjustment
Tax effect of defined benefits actuarial adjustment
Balance 30 June
OTHER RESERVES
(a) Balances
Employee benefits reserve
Asset revaluation reserve - property
Asset revaluation reserve - available for sale share investments
Asset revaluation reserve - available for sale debt securities
Cash flow hedge reserve
General reserve for credit losses
Acquisitions Reserve
(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 issued 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/(decrease) 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
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)
Net revaluation increments/(decrements)
Tax effect of net revaluation increments
Tax adjustments relating to prior years
Asset revaluation reserve - available for sale debt securities
(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 (losses)
2012
$m
349.5
195.0
-
(17.6)
(229.0)
(1.8)
0.4
296.5
20.2
3.4
28.7
(1.8)
(86.4)
128.5
(20.4)
72.2
18.7
1.5
20.2
3.4
-
3.4
34.5
-
(9.6)
3.0
0.8
28.7
-
(1.8)
(1.8)
2011
$m
234.5
342.1
0.2
(6.2)
(221.4)
0.3
-
349.5
18.7
3.4
34.5
-
(109.3)
110.9
(20.4)
37.8
20.3
(1.6)
18.7
3.6
(0.2)
3.4
27.5
(1.0)
11.5
(3.5)
-
34.5
0.3
(0.3)
-
2012
$m
230.2
104.6
-
(12.6)
(229.0)
(1.8)
0.4
91.8
20.2
0.1
1.8
(1.7)
(54.7)
105.0
-
70.7
18.0
2.2
20.2
0.1
-
0.1
1.0
-
(0.1)
0.1
0.8
1.8
0.1
(1.8)
(1.7)
2011
$m
186.7
270.6
0.2
(6.2)
(221.4)
0.3
-
230.2
18.0
0.1
1.0
0.1
(68.0)
92.4
-
43.6
17.5
0.5
18.0
0.3
(0.2)
0.1
1.7
(1.0)
0.4
(0.1)
-
1.0
0.2
(0.1)
0.1
- 108 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RETAINED EARNINGS AND RESERVES (continued)
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
Transfer of business
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 BOCA GRCL on acquisition
Increase/(decrease) in general reserve for credit losses
Consolidated
Parent
2012
$m
2011
$m
2012
$m
2011
$m
(109.3)
47.0
-
(15.0)
(13.0)
3.9
-
(86.4)
(178.7)
95.7
(1.3)
(26.8)
2.6
(0.8)
-
(109.3)
(68.0)
34.2
-
(11.2)
(13.9)
4.2
-
(54.7)
(140.0)
102.0
-
(29.1)
(1.3)
0.4
-
(68.0)
110.9
4.8
12.8
128.5
104.7
-
6.2
110.9
92.4
-
12.6
105.0
86.2
-
6.2
92.4
Acquisitions Reserve
(a) Nature and purpose
The acquisition reserve is used to record the difference between the carrying value of non-controlling interest
and the consideration paid to acquire the remaining interest of the non-controlling interest.
The reserve is attributable to the equity of the parent.
(b) Movements
Opening balance
Consideration paid in excess of carrying value of non-controlling interest.
(20.4)
-
(20.4)
-
(20.4)
(20.4)
-
-
-
-
-
-
Total reserves
72.2
37.8
70.7
43.6
- 109 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
35.
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
Consolidated
Parent
2012
$m
21.0
0.6
40.1
5.2
66.9
2011
$m
20.8
14.1
31.7
4.7
71.3
2012
$m
18.9
-
37.9
5.2
62.0
2011
$m
19.8
14.1
30.9
4.7
69.5
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 2012.
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.
- 110 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
36.
SHARE BASED PAYMENT PLANS
Salary Sacrifice, Deferred Share and Performance Share Plan (Current)
The Company has established an Employee Salary Sacrifice, Deferred Share and Performance Share Plan (the “Plan”). 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, other senior executives and senior management (the “Participants”) 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, the Participants have been 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 2012 Remuneration Report.
Each performance share represents an entitlement to one fully-paid ordinary share in the company. Accordingly, the
maximum number of shares that may be acquired by the Participants is equal to the number of performance shares granted.
Performance shares are granted at no cost to Participants. 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 Participants 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 37 and prior year
remuneration reports.
The Participants 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. The Participants 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 to Participants in December 2009 with subsequent grants made in October 2010,
December 2010 and September 2011. The grants were made in accordance with the terms disclosed in the Remuneration
Report and 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 in note 36.
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
2012
No.
877,560
110,201
-
(210,864)
(189,567)
587,330
2012
WAEP
$0.00
$0.00
-
$0.00
-
$0.00
2011
No.
913,263
374,050
-
(409,753)
-
877,560
2011
WAEP
$0.00
$0.00
-
$0.00
-
$0.00
The outstanding balance as at 30 June 2012 is represented by 587,330 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 $7.50 (2011: $7.70).
The fair value of the performance shares granted under the Plan takes into account the terms and conditions upon which the
performance shares were granted. The fair value is estimated as at the date of grant using the Black-Scholes-Merton Option
Pricing Model incorporating a Monte Carlo simulation option pricing model to estimate the probability of achieving the TSR
hurdle and the number of shares vesting. The following table lists the inputs to the model used for the years ended 30 June
2011 and 2012.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
2012 Grant
6.0%
27.5%
2011 Grant
5.0% and 5.5%
25%
3.79% to 4.27%
4.82% to 4.95%
Expected life of performance shares (years)
Exercise price ($)
Fair value share price at grant date ($)
3
Nil
$8.82
2 and 3
Nil
$9.16 and $9.95
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.
- 111 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 as described above.
The performance conditions and performance periods for grants under the Plan are set out in the 2012 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
prior year remuneration reports.
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 November 2008. The grant was in accordance
with the terms disclosed in the 2012 Remuneration Report and the grants made under the Plan were valued and expensed in
accordance with applicable accounting requirements.
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
2012
No.
905,561
-
-
-
(905,561)
-
2012
WAEP
$12.60
-
-
-
$12.60
-
2011
No.
1,039,245
-
(133,684)
-
-
905,561
2011
WAEP
$12.54
-
$12.16
-
-
$12.60
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
2012
No.
87,451
-
-
-
(87,451)
-
2012
WAEP
$0.00
-
-
-
$0.00
-
2011
No.
166,191
-
(20,936)
-
(57,804)
87,451
2011
WAEP
-
-
-
-
-
-
The outstanding balance of performance options and performance rights as at 30 June 2012 is nil.
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 (2011: $0.00). 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 (2011: $0.00).
- 112 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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. There have been no grants since 2008.
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)
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 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 and 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
2012
No.
4,187,187
-
-
(503,975)
-
3,683,212
2012
WAEP
$5.87
-
-
$6.53
-
$5.78
2011
No.
4,340,147
-
-
(152,960)
-
4,187,187
2011
WAEP
$6.38
-
-
$7.66
-
$5.87
Exercisable at the end of the year
3,683,212
$5.78
4,187,187
$5.87
The outstanding balance as at 30 June 2012 is represented by 3,683,212 ordinary shares with a market value at 30 June
2012 of $7.41 each (value: $27,292,601), exercisable upon repayment of the employee loans.
The acquisition price of shares granted during the year was nil as no new shares have been issued since December 2007.
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.
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 is
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.
- 113 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SHARE BASED PAYMENT PLANS (continued)
Employee Share Plan (Current) cont’d.
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 2012 -
3,683,212 shares @ $7.41 (2011 - 4,187,187 shares @ $8.86)
Value of outstanding employee loans at beginning of year relating to employee shares
Value of repayments of loans during year
Value of outstanding employee loans at end of year relating to employee shares
Consolidated
2012
$m
2.2
2.2
27.3
24.6
(3.3)
21.3
2011
$m
4.5
4.5
37.1
27.7
(3.1)
24.6
Number of employees with outstanding loan balances
2,217
2,360
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
22.6
25.8
5.06%
5.25%
0.8
48.6
48.8
0.9
91.5
91.8
The cost of employee interest-free loans is calculated by applying the Company’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% (2011: 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.
Share Grant Scheme (Current)
The Company has established a tax-exempt Employee Share Grant Scheme (“ESGS”) as the main equity participation
platform for general employees. Shareholder approval for future grants under the ESGS was obtained at the 2008 Annual
General Meeting. The ESGS 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 ESGS 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. A second grant to
general employees was made in March 2010 with 340,039 fully paid ordinary shares being issued at $10.03 and a third grant
to general employees was made in February 2011 with 327,233 fully paid ordinary shares being issued at $9.78. The issue
price is 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 2012 there were
584,946 fully paid ordinary shares held by the Plan Trustee.
- 114 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
SHARE BASED PAYMENT PLANS (continued)
Bendigo and Adelaide Bank Employee Share Ownership Plan (Discontinued)
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 have 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 above table titled “Recognised share-base payment
expenses”.
- 115 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
37.
AUDITOR’S REMUNERATION
Total fees paid or due and payab le to Ernst & Young (Australia) (1)
Audit and review of financial statements (2)
Audit-related fees
Regulatory (3)
Non-regulatory (4)
Total audit-related fees
All other fees (5)
Taxation services
Other advice
Total other fees
Consolidated
Parent
2012
$
2011
$
2012
$
2011
$
2,027,396
1,921,760
1,198,039
1,256,299
274,315
42,745
317,060
182,334
44,805
227,139
476,851
11,588
488,439
698,387
11,005
709,392
211,665
3,399
436,195
3,348
215,064
439,543
162,084
44,805
580,861
11,005
206,889
591,866
Total remuneration of Ernst & Young Australia
2,571,595
3,119,591
1,619,992
2,287,708
(1) Fees exclude goods and services tax
(2) 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.
(3) 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 group’s compliance with APRA and Australian Financial Services Licensing reporting and
compliance requirements.
(4) 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.
(5) 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.
- 116 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
38.
KEY MANAGEMENT PERSONNEL
(a) Details of key management personnel for the group and the Company for the 2012 financial year are presented in the
2012 Remuneration Report.
(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) for the 2012 financial year:
CONSOLIDATED
Short-term employee benefits
Post employment benefits
Other long-term benefits
Termination benefits
Share-based payment
Total Compensation
2012
$
6,326,223
397,624
73,365
-
2,807,549
9,604,761
2011
$
7,316,447
366,502
227,988
-
3,394,418
11,305,355
(c) Performance shares granted and vested during the year (Consolidated)
During previous financial years 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. There were no grants to key management personnel during the 2012 financial year.
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 is 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 hedging restriction applies to variable remuneration that comprises equity. An employee and their closely related
parties may not enter into a transaction designed to remove the at-risk element of the equity before it has vested. This
also applies to the at-risk element of equity after it has vested, if it is subject to a holding lock. These restrictions are in
the staff trading policy and remuneration policy.
Further details of the Plan are set out in the 2012 Remuneration Report.
- 117 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
KEY MANAGEMENT PERSONNEL (continued)
Performance Shares
There were no grants of performance shares to senior executives during or subsequent to the financial year ended 30 June
2012. The movement in performance shares granted by the Company is presented in the following table.
30 June 2012
Balance
at
1-Jul-11
Granted as
Remun-
eration
Performance
Shares Vested
Net Change
Other
(Expired)
Balance at
30-Jun-12
Total
Exercisable
Not
Exercisable
Current Executives
M Hirst
M Baker
D Bice
J Billington
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
Total
493,328
51,793
27,318
31,032
50,610
51,793
37,898
21,157
31,737
796,666
-
-
-
-
-
-
-
-
-
-
(76,219)
(21,245)
(11,108)
(13,205)
(20,841)
(21,245)
(15,610)
(9,003)
(13,505)
-
(30,548)
(16,210)
(17,827)
(29,769)
(30,548)
(22,288)
(12,154)
(18,232)
417,109
-
-
-
-
-
-
-
-
(201,981)
(177,576)
417,109
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
417,109
-
-
-
-
-
-
-
-
417,109
30 June 2011
Balance
at
1-Jul-10
Granted as
Remun-
eration
Current Executives
Performance
Shares Vested
Net Change
Other
Balance at
30-Jun-11
Total
Exercisable
Not
Exercisable
M Hirst
M Baker
D Bice
J Billington
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
636,430
66,307
43,100
-
58,020
66,307
43,100
-
-
-
24,008
4,800
52,820
30,012
24,008
22,808
36,012
54,020
(143,102)
(38,522)
(20,582)
(21,788)
(37,422)
(38,522)
(28,010)
(14,855)
(22,283)
Total
913,264
248,488
(365,086)
-
-
-
-
-
-
-
-
-
493,328
51,793
27,318
31,032
50,610
51,793
37,898
21,157
31,737
493,328
51,793
27,318
31,032
50,610
51,793
37,898
21,157
31,737
796,666
796,666
-
-
-
-
-
-
-
-
-
493,328
51,793
27,318
31,032
50,610
51,793
37,898
21,157
31,737
796,666
- 118 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
KEY MANAGEMENT PERSONNEL (continued)
Performance Options FY 2012
There were no grants of options during or subsequent to the financial year ended 30 June 2012 and no shares were issued
on the exercise of vested options. The movement in performance options granted by the Company is presented in the
following table.
Balance
1-Jul-11
30 June 2012
Current Executives
M Hirst
M Baker
R Fennell
R Jenkins
T Piper
A Watts
Total
204,261
78,898
47,445
88,462
47,445
71,373
537,884
Granted
as
Remun-
eration
Options
Exercised
Net Change
Other
(Expired)
Balance
30-Jun-12
Total
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(204,261)
(78,898)
(47,445)
(88,462)
(47,445)
(71,373)
(537,884)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Performance Options FY 2011
There were no grants of options during or subsequent to the financial year ended 30 June 2011 and no shares were issued
on the exercise of vested options. The movement in performance options granted by the Company is presented in the
following table.
Balance
1-Jul-10
30 June 2011
Current Executives
Granted
as
Remun-
eration
M Hirst
M Baker
R Fennell
R Jenkins
T Piper
A Watts
Total
204,261
78,898
47,445
88,462
47,445
71,373
537,884
-
-
-
-
-
-
-
Options
Exercised
Net Change
Other
Balance
30-Jun-11
Total
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
204,261
78,898
47,445
88,462
47,445
71,373
204,261
78,898
47,445
88,462
47,445
71,373
537,884
537,884
-
-
-
-
-
-
-
204,261
78,898
47,445
88,462
47,445
71,373
537,884
- 119 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
KEY MANAGEMENT PERSONNEL (continued)
Performance Rights FY 2012
There were no grants of performance rights during or subsequent to the financial year ended 30 June 2012 and no shares
were issued on the exercise of vested performance rights. The movement in performance rights granted by the Company is
presented in the following table.
Balance at
1-Jul-11
30 June 2012
Current Executives
M Hirst
M Baker
R Fennell
R Jenkins
T Piper
A Watts
Total
24,141
7,515
6,989
8,499
6,989
7,398
61,531
Performance Rights FY 2011
Granted
as
Remun-
eration
Rights
Vested /
Exercised
Net Change
Other
(Expired)
Balance at
30-Jun-12
Total
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24,141)
(7,515)
(6,989)
(8,499)
(6,989)
(7,398)
(61,531)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
There were no grants of performance rights during or subsequent to the financial year ended 30 June 2011 and no shares
were issued on the exercise of vested performance rights. The movement in performance rights granted by the Company is
presented in the following table.
Balance
1-Jul-10
30 June 2011
Current Executives
Granted
as
Remun-
eration
Rights
Vested /
exercised
Net Change
Other
Balance
30-Jun-11
Total
Exercisable
Not
Exercisable
M Hirst
M Baker
R Fennell
R Jenkins
T Piper
A Watts
Total
31,625
12,682
6,989
14,201
6,989
11,318
83,804
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,484)
(5,167)
-
(5,702)
-
(3,920)
24,141
7,515
6,989
8,499
6,989
7,398
(22,273)
61,531
24,141
7,515
6,989
8,499
6,989
7,398
61,531
-
-
-
-
-
-
-
24,141
7,515
6,989
8,499
6,989
7,398
61,531
- 120 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
KEY MANAGEMENT PERSONNEL (continued)
(d) Shareholdings of directors and named executives (including their related parties) in the Company:
Name
Balance 1 July 2011
Employee
shares
Ordinary
shares
Pref
Shares
Ordinary
shares
Net Change
Employee
shares
Pref
Shares
Balance 30 June 2012
Employee
shares
Ordinary
shares
Pref
Shares
Non-Executive Directors
R Johanson
J Dawson
J Hazel
J Hey
D Matthews
T O’Dwyer
D Radford
A Robinson
Current Executives
M Hirst
M Baker
D Bice
J Billington
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
333,604
28,199
10,659
-
6,925
73,575
1,900
5,966
9,913
23,205
-
-
-
20,232
-
3,717
3,387
-
-
-
-
-
-
-
-
325,006
120,620
66,795
21,788
61,910
134,780
46,562
15,204
41,852
1,000
100
-
-
-
-
-
-
-
500
-
-
-
-
-
-
-
3,803
5,245
1,803
3,114
370
955
-
955
1,743
6,020
3,980
-
-
9,880
-
250
3,040
-
-
-
-
-
-
-
-
105,036
19,978
8,286
13,795
22,651
13,318
16,959
9,155
11,068
Total
521,282
834,517
1,600
41,158
220,246
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
337,407
33,444
12,462
3,114
7,295
74,530
1,900
6,921
11,656
29,225
3,980
-
-
30,112
-
3,967
6,427
-
-
-
-
-
-
-
-
430,042
140,598
75,081
35,583
84,561
148,098
63,521
24,359
52,920
1,000
100
-
-
-
-
-
-
-
500
-
-
-
-
-
-
-
562,440 1,054,763
1,600
Name
Balance 1 July 2010
Ordinary
shares
Employee
shares
Pref
Shares
Ordinary
shares
Net Change
Employee
shares
Pref
Shares
Balance 30 June 2011
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
J Billington
R Fennell
R Jenkins
T Piper
S Thredgold
A Watts
339,951
19,284
26,422
5,145
1,540
68,575
1,900
5,966
9,288
21,742
3,347
-
-
38,960
-
3,717
3,387
-
-
-
-
-
-
-
-
175,761
80,871
45,165
-
23,414
95,031
17,754
349
19,569
1,000
309
100
-
-
-
-
-
-
500
-
-
-
-
-
-
-
(6,347)
-
1,777
5,514
5,385
5,000
-
-
625
1,463
(3,347)
-
-
(18,728)
-
-
-
-
-
-
-
-
-
-
-
149,245
39,749
21,630
21,788
38,496
39,749
28,808
14,855
22,283
Total
549,224
457,914
1,909
(8,658)
376,603
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,604
19,284
28,199
10,659
6,925
73,575
1,900
5,966
9,913
23,205
-
-
-
20,232
-
3,717
3,387
-
-
-
-
-
-
-
-
325,006
120,620
66,795
21,788
61,910
134,780
46,562
15,204
41,852
1,000
309
100
-
-
-
-
-
-
500
-
-
-
-
-
-
-
540,566
834,517
1,909
All equity transactions with key management personnel have been entered into under terms and conditions no more favorable
than those the entity would have adopted if dealing at arm’s length other than shares issued under the Employee Share
Ownership Plan. Issues of shares under the Employee Share Plan are made under conditions disclosed in Note 37.
- 121 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
(e) 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 2012
$’000
$’000
$’000
$’000
$’000
Directors1
Executives1
2012 2
2011 2
2012 2
2011 2
Total directors and executives
2012 2
2011 2
3,240
2,989
4,451
3,821
7,691
6,810
205
237
268
212
473
449
-
-
35
42
35
42
-
-
-
-
-
-
1,975
3,240
4,405
4,451
6,380
7,691
5
5
7
8
12
13
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 36.
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.
- 122 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
KEY MANAGEMENT PERSONNEL (continued)
(ii) Details of individuals (including their related parties) with loans above $100,000 in the reporting period are as follows:
Balance
at beginning of
period
$’000
Interest
charged
Interest not
charged
Write-off
$’000
$’000
$’000
Balance at
end of
period
$’000
Highest owing
in period
$’000
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
S Thredgold
Loans
A Watts
Staff share loan
Loans
1,576
438
250
500
476
229
44
184
85
87
481
463
190
2,337
274
44
33
98
31
6
32
38
-
9
-
4
-
43
34
-
149
27
-
2
-
-
-
-
-
11
-
9
-
4
-
-
9
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
504
405
54
500
512
206
137
159
43
74
477
464
159
2,066
560
35
25
1673
462
270
503
534
229
163
184
85
87
720
499
190
2,379
833
44
38
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 the Bank’s legacy Employee Share Ownership Plan
(“Plan”). Details of the Plan’s terms and conditions are provided at Note 36 to the financial statements.
(f) 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 2012 financial year related to the Australia Post and Rural Bank distribution arrangement,
the Company’s strategy for the Great Southern managed investment schemes and the Bank’s Adelaide long term
accommodation project. The amount paid or payable for the year was $273,322 (excluding GST) (2011: $1,856,357).
- 123 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
39.
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 20 - Particulars in relation to controlled
entities. Transactions undertaken during the financial year with those entities are eliminated in the consolidated financial
report. The transactions principally arise from the provision of administrative, distribution, corporate and 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 on the next page.
- 124 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RELATED PARTY DISCLOSURES (continued)
All 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
National Mortgage Market Corporation Limited
Fountain Plaza Pty Ltd
Victorian Securities Corporation Limited
Bendigo Financial Planning Limited
Rural Bank Limited
Community Developments Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Sandhurst Trustees Limited
Oxford Funding Pty Ltd
Bank of Cyprus Australia Ltd
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
Homesafe Trust
Pirie St Nominees Pty Ltd
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Net receipts and
Supplies,
Net am ount
fees (paid to)/
fixed assets
ow ing
received from
and services
to/(from )
subsidiaries
charged to
subsidiaries
$m
0.2
(0.1)
-
2.1
0.6
0.5
-
(1.4)
(9.6)
4.0
7.8
11.5
2.0
1.7
1.3
1.8
0.6
0.1
16.7
18.2
(1.9)
-
(8.9)
-
29.3
(342.7)
1,106.5
(626.7)
-
(23.8)
-
-
2.5
2.1
1.8
1.0
0.1
-
-
-
(10.3)
0.1
subsidiaries
at 30 June
$m
$m
-
-
-
-
-
0.1
-
-
3.5
2.8
13.1
10.8
10.0
9.1
0.8
1.7
-
-
10.3
10.4
-
-
-
-
-
3.5
15.9
18.7
-
-
-
-
-
-
0.3
0.8
0.1
-
-
-
-
-
(1.1)
(1.3)
-
-
11.0
10.4
-
-
(4.3)
8.8
(7.0)
(1.7)
(14.9)
(6.9)
(9.5)
(10.0)
-
(0.6)
(60.0)
(66.4)
-
1.9
(8.9)
-
(300.0)
(329.3)
(520.8)
(1,611.4)
(1.2)
(1.2)
(1.4)
(1.4)
14.4
11.9
1.2
(0.3)
(4.9)
(4.9)
(287.4)
(241.6)
(10.2)
0.1
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.
- 125 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Facility
Standby
Guarantee
Guarantee
Overdraft
Overdraft
Guarantee
Limit
$m
20.0
0.2
-
0.4
0.8
-
Drawn/issued at
30 June 2012
$m
-
-
-
-
-
-
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 norm al 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:
AB Investment Services Pty Ltd
ABL Advisory Services Pty Ltd
ABL Securities Pty Ltd
Sandhurst Trustees Limited
Victorian Securities Corporation Limited
Rural Bank Limited
Oxford Funding
Tasmanian Banking Services Limited
Fountain Plaza Pty Ltd
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
$m
-
0.5
-
0.3
-
16.3
-
14.1
4.7
-
-
9.6
2.1
-
-
0.6
-
3.3
During the year there were no other material transactions between subsidiary companies.
- 126 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RELATED PARTY DISCLOSURES (continued)
Other related party transactions
Securitised and sold loans
The bank securitised loans totalling $1,556.9 million (2011: $4,755.7 million) during the financial year. The consolidated group
does invest in some of its own securitisation programs where the Bank holds A & B notes equivalent to $5,719.4 million as at
30 June 2012 (2011: $6,586.3 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 21 - Investments in joint
ventures using the equity method. 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.
During the financial year, transactions took place between the Bendigo and Adelaide Bank group and joint venture entities as
follows:
Homesafe Solutions Pty Ltd
Community Sector Enterprises Pty Ltd
Silver Body Corporate Financial Services Pty Ltd
Strategic Payments Services Pty Ltd
Community Telco Australia Pty Ltd
Comm issions
Supplies and
Am ount ow ing
and fees paid
services
to/(from )
to joint ventures
provided to joint ventures at
joint ventures
$m
$m
30 June
$m
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
4.9
6.3
7.3
6.2
1.0
1.1
11.6
10.3
0.2
0.3
-
-
1.5
3.8
0.6
0.5
-
-
-
-
-
-
0.1
0.2
-
0.1
-
-
0.7
0.2
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.
- 127 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
40.
RISK MANAGEMENT
RISK OVERSIGHT
The management of risk is an essential element of the group’s strategy, profitability management and is central to the way the
group operates.
The board, being ultimately responsible for risk management associated with the group’s activities, has established a risk
appetite statement which is supported by 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
(includes compliance, contagion,
environment/sustainability risks).
liquidity, and operational risk
rate and currency),
(including
interest
The risk management strategy is based upon managing the Bank’s risks within the limits and tolerances detailed in the
Company’s risk appetite statement 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 the group’s culture are the values of all staff doing the right thing, taking
responsibility for managing risks inherent in their role and engaging with the group’s 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.
•
• Maintaining risk competencies especially for key roles.
• Regular discussion on risk at the business unit level.
•
•
The existence of a close working relationship/partnership between the business and risk functions and acceptance
of a “healthy tension” between the functions.
An ability to identify opportunities, strive for quality and efficiency and minimise losses.
Acting promptly to manage risks and events whether internal or external.
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, management credit committee and the operational risk committee.
- 128 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 strategy and, providing the frameworks, policies and procedures to assist
the group in managing credit and operational risk in line with the 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 its 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 and CFO Assurance
As part of the statutory reporting arrangements for the group, the managing director (MD) 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, reputation and emerging
risks.
The framework recognises the governance structure and risk management framework referred to above.
- 129 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 risk appetite 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, who consider changes in market conditions, strategy or risk appetite. The limits are set and reviewed regularly by
the asset liability management committee (“ALMAC”), management credit committee and executive committee. They align
with the financial forecast 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 the approved risk appetite, 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, financial forecasting,
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 and emerging 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, emerging, strategic, contagion and sustainability).
The material risks are described below.
- 130 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 management 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 management credit committee and the board credit committee and
Jointly approving larger transactions that are not required to be submitted to the management 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
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
Consolidated
Parent
2012
$ m
2011
$ m
2012
$ m
2011
$ m
288.8
272.2
4,366.1
444.8
388.4
509.7
124.7
48.5
-
-
453.0
48,379.0
55,275.2
235.9
4,611.8
4,847.7
469.0
201.6
4,331.7
452.1
380.3
417.0
123.4
9.3
-
-
471.2
46,092.6
52,948.2
177.3
4,505.6
4,682.9
175.8
266.3
4,367.0
1,594.6
1.8
852.8
4.1
547.3
604.1
1,090.8
453.0
41,455.1
51,412.7
223.4
4,319.1
4,542.5
346.7
200.9
4,332.7
2,334.7
69.7
828.3
3.5
42.2
489.3
1,587.2
471.2
39,351.5
50,057.9
174.3
4,415.6
4,589.9
Total credit risk exposure
60,122.9
57,631.1
55,955.2
54,647.8
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 within this note.
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 2012 was $652.6 million (2011: $685.6 million) before taking account of
collateral or other credit enhancements and $652.6 million (2011: $685.6 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 Aus tralia
Tasmania
Overseas/other
Total credit risk exposure
Consolidated
Parent
2012
$ m
2011
$ m
2012
$ m
2011
$ m
22,347.6
12,835.2
823.2
9,697.2
6,870.4
6,055.9
1,124.0
369.4
60,122.9
20,326.1
13,026.0
635.5
9,641.2
6,779.0
4,789.8
1,962.4
471.1
57,631.1
23,395.7
10,894.3
784.1
8,278.6
6,390.9
4,838.9
1,019.8
352.9
55,955.2
22,985.2
10,803.5
629.7
8,102.3
6,397.3
4,235.2
1,087.3
407.3
54,647.8
- 131 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
Accommodation 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
Consolidated
Gross
maximum
exposure
2012
$ m
Gross
maximum
exposure
2011
$ m
Parent
Gross
maximum
exposure
2012
$ m
Gross
maximum
exposure
2011
$ m
644.6
310.1
4,913.8
199.8
2,307.2
411.4
208.9
1,430.6
6,288.8
1,083.3
185.1
927.5
2,333.2
240.9
176.7
673.1
833.5
584.2
4,071.8
29,630.3
1,461.9
729.7
476.5
60,122.9
644.6
321.4
4,937.6
195.6
2,262.1
417.1
213.5
1,238.0
6,199.1
1,088.5
190.8
902.7
3,202.2
245.4
160.9
739.6
825.5
655.9
3,316.7
27,286.5
1,380.3
735.6
471.5
57,631.1
642.9
310.1
1,467.2
191.7
2,213.1
411.4
208.9
1,428.2
9,429.2
1,082.4
191.3
897.4
-
240.9
126.6
673.1
833.0
583.6
3,525.9
28,921.2
1,399.1
724.8
453.2
55,955.2
530.3
217.8
1,295.4
150.7
1,622.9
240.7
130.2
1,135.7
10,150.2
814.3
130.5
584.5
-
153.8
102.2
622.3
623.0
443.0
3,163.0
30,667.8
1,053.2
464.5
351.8
54,647.8
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 home loans - charges over borrowers’ residential, other properties or cash. Further, lenders mortgage insurance
(LMI) is taken out for most loans with a loan to valuation ratio (LVR) higher than 80%.
For commercial loans - charges over specified assets such as commercial and residential property, inventory and trade
receivables or cash, and guarantees.
For margin lending - charges over listed securities and managed funds.
For personal loans - approximately 50% are secured by a charge over a specified asset, whilst credit cards are
predominantly unsecured.
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.
- 132 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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
2012
Cash and cash equivalents
Due from other financial ins titutions
Financial assets held for trading
Financial assets available for s ale - debt s ecurities
Financial assets held to maturity
Other ass ets
Financial assets available for s ale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
2011
Cash and cash equivalents
Due from other financial ins titutions
Financial assets held for trading
Financial assets available for s ale - debt s ecurities
Financial assets held to maturity
Other ass ets
Financial assets available for s ale - share investments
Derivatives
Loans and other receivables - investment
Loans and other receivables
PARENT
2012
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
2011
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
High
Grade
$ m
288.8
272.2
4,366.1
444.8
388.4
-
-
48.5
-
3,742.4
9,551.2
469.0
201.6
4,331.7
452.1
380.3
-
-
9.3
-
4,636.4
10,480.4
High
Grade
$ m
175.8
266.3
4,367.0
1,594.6
1.8
-
-
547.3
-
81.8
-
-
7,034.6
346.7
200.9
4,332.7
2,334.7
69.7
-
-
42.2
-
106.0
-
-
7,432.9
Neither past due or impaired
Standard
Grade
$ m
-
-
-
-
-
-
-
-
233.2
7,638.2
Sub-standard
Grade
$ m
-
-
-
-
-
-
-
-
58.4
964.9
Unrated
$ m
-
-
-
-
-
509.7
124.7
-
17.9
654.1
Consumer
Loans *
$ m
-
-
-
-
-
-
-
-
-
32,374.8
Past Due or
Impaired
$ m
-
-
-
-
-
-
-
-
143.5
3,004.6
Total
$ m
288.8
272.2
4,366.1
444.8
388.4
509.7
124.7
48.5
453.0
48,379.0
7,871.4
1,023.3
1,306.4
32,374.8
3,148.1
55,275.2
-
-
-
-
-
-
-
-
357.2
6,627.6
6,984.8
-
-
-
-
-
-
-
-
-
936.1
936.1
Neither past due or impaired
Standard
Grade
$ m
-
-
-
-
-
-
-
-
233.2
5,583.0
-
-
5,816.2
-
-
-
-
-
-
-
-
357.2
4,977.0
-
-
5,334.2
Sub-standard
Grade
$ m
-
-
-
-
-
-
-
-
58.4
614.7
-
-
673.1
-
-
-
-
-
-
-
-
-
611.9
-
-
611.9
-
-
-
-
-
417.0
123.4
-
23.2
715.0
1,278.6
Unrated
$ m
-
-
-
-
-
852.8
4.1
-
17.9
653.3
1,090.8
604.1
3,223.0
-
-
-
-
-
828.3
3.5
-
23.2
761.7
1,587.2
489.3
3,693.2
-
-
-
-
-
-
-
-
-
30,011.6
30,011.6
Consumer
Loans *
$ m
-
-
-
-
-
-
-
-
-
32,121.9
-
-
-
-
-
-
-
-
-
-
90.8
3,165.9
469.0
201.6
4,331.7
452.1
380.3
417.0
123.4
9.3
471.2
46,092.6
3,256.7
52,948.2
Past Due or
Impaired
$ m
-
-
-
-
-
-
-
-
143.5
2,400.4
-
-
Total
$ m
175.8
266.3
4,367.0
1,594.6
1.8
852.8
4.1
547.3
453.0
41,455.1
1,090.8
604.1
32,121.9
2,543.9
51,412.7
-
-
-
-
-
-
-
-
-
30,174.8
-
-
30,174.8
-
-
-
-
-
-
-
-
90.8
2,720.1
-
-
346.7
200.9
4,332.7
2,334.7
69.7
828.3
3.5
42.2
471.2
39,351.5
1,587.2
489.3
2,810.9
50,057.9
* Consumer loans are predominantly mortgage secured residential loans not rated on an individual basis.
- 133 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RISK MANAGEMENT (continued)
Ageing
Ageing analysis of past due but not impaired loans and other receivables
Consolidated
2012
2011
Parent
2012
2011
Le s s tha n
3 0 da ys
$ m
1,548.7
1,642.6
1,367.7
1,578.4
3 1 to
6 0 da ys
$ m
274.1
343.5
214.6
331.5
6 1 t o
9 0 da ys
$ m
157.3
181.1
134.2
160.9
M o re tha n
91 da ys
$ m
T o ta l
$ m
F a ir v a lue o f
c o lla te ra l
$ m
809.5
730.8
658.7
574.5
2,789.6
7,182.7
2,898.0
5,724.1
2,375.2
5,555.1
2,645.3
5,368.3
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 0.53% as at 30 June 2012 (2011:0.54%).
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
stressed 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.
- 134 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RISK MANAGEMENT (continued)
The liquidity ratio during the financial year was as follows:
30 June
Average during the financial year
Highest
Lowest
2012
%
11.09
12.09
13.67
11.04
2011
%
11.59
12.37
14.68
11.03
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the group’s financial liabilities at 30 June 2012 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
2012
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
2011
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
PARENT
2012
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
2011
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
1 t o 5
yea rs
$ m
-
1,083.5
1,063.2
523.6
-
-
-
140.2
2,810.5
-
816.1
5,952.2
459.8
-
-
92.2
223.3
7,543.6
1 t o 5
yea rs
$ m
-
974.7
-
166.2
-
83.1
-
-
117.0
Lo nge r
t ha n
5 ye a rs
$ m
-
2.0
4,276.3
59.7
-
-
-
433.9
T o t a l
$ m
327.2
45,112.7
6,411.4
955.6
530.0
86.8
92.2
662.5
4,771.9
54,178.4
-
1.0
2.2
82.4
-
-
-
514.0
599.6
Lo nge r
t ha n
5 ye a rs
$ m
-
-
-
59.5
-
6,171.6
-
-
346.2
215.6
40,906.9
8,499.4
1,213.7
598.8
68.6
97.6
889.0
52,489.6
T o t a l
$ m
315.1
40,559.4
-
497.4
1,111.0
6,294.3
86.8
92.2
545.7
1,341.0
6,577.3
49,501.9
-
746.1
-
269.9
-
3,364.6
-
92.2
194.1
4,666.9
-
0.3
-
80.8
-
4,221.8
-
-
403.5
214.6
37,872.4
579.0
761.8
631.8
7,738.1
68.6
97.6
742.0
4,706.4
48,705.9
A t c all
N o t lo nge r
t ha n 3 m t hs
$ m
$ m
327.2
11,699.3
-
-
530.0
86.8
-
-
-
22,539.6
581.4
171.9
-
-
-
46.5
3 t o 12
m o nt hs
$ m
-
9,788.3
490.5
200.4
-
-
92.2
41.9
12,643.3
23,339.4
10,613.3
215.6
11,075.6
-
-
598.8
68.6
-
-
-
17,614.8
1,170.1
183.8
-
-
-
11.0
-
11,399.4
1,374.9
487.7
-
-
5.4
140.7
11,958.6
18,979.7
13,408.1
A t c all
N o t lo nge r
t ha n 3 m t hs
$ m
$ m
315.1
11,140.8
-
-
1,111.0
-
86.8
-
-
-
20,675.1
-
141.4
-
15.7
-
-
45.0
12,653.7
20,877.2
214.6
11,188.5
-
-
631.8
-
68.6
-
-
-
16,068.6
453.3
157.8
-
120.7
-
-
9.2
3 t o 12
m o nt hs
$ m
-
7,768.8
-
130.3
-
23.9
-
92.2
37.5
8,052.7
-
9,868.9
125.7
253.3
-
31.0
-
5.4
135.2
12,103.5
16,809.6
10,419.5
- 135 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RISK MANAGEMENT (continued)
The table below shows the contractual expiry by maturity of the group’s contingent liabilities and commitments.
CONSOLIDATED
2012
Contingent liabilities
Commitments
Total
2011
Contingent liabilities
Commitments
Total
PARENT
2012
Contingent liabilities
Commitments
Total
2011
Contingent liabilities
Commitments
Total
A t c a ll
N o t lo nge r
t ha n 12 m t hs
$ m
$ m
235.9
4,611.8
4,847.7
177.3
4,505.6
4,682.9
-
73.9
73.9
-
75.9
75.9
A t c a ll
N o t lo nge r
t ha n 12 m t hs
$ m
$ m
223.4
4,319.1
4,542.5
174.3
4,415.6
4,589.9
-
71.7
71.7
-
75.7
75.7
1 to 5
yea rs
$ m
-
170.6
170.6
-
186.7
186.7
1 to 5
yea rs
$ m
-
165.0
165.0
-
186.0
186.0
Lo nger
t ha n
5 ye a rs
$ m
-
301.9
301.9
-
220.4
220.4
Lo nger
t ha n
5 ye a rs
$ m
-
298.8
298.8
-
220.4
220.4
T o t a l
$ m
235.9
5,158.2
5,394.1
177.3
4,988.6
5,165.9
T o t a l
$ m
223.4
4,854.6
5,078.0
174.3
4,897.7
5,072.0
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 risk volatility of net interest income and market
value of equity exposures. Positions are monitored regularly and approved hedging strategies are executed to ensure
sensitivities and exposures 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 2012, 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 2012 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 ALMAC and the board risk committee.
- 136 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RISK MANAGEMENT (continued)
CONSOLIDATED
Net interest income
Ineffectiveness in cash flow hedge
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
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
+10 0 ba s is
-10 0 ba s is
po int s
2 0 12
$ m
33.7
4.4
(11.4)
26.7
26.7
195.1
(58.5)
163.3
po int s
2 0 12
$ m
(36.1)
(4.4)
12.2
(28.3)
(28.3)
(195.1)
58.5
(164.9)
+10 0 ba s is
-10 0 ba s is
po int s
2 0 12
$ m
24.3
4.4
(8.6)
20.1
20.1
195.1
(58.5)
156.7
po int s
2 0 12
$ m
(29.3)
(4.4)
10.1
(23.6)
(23.6)
(195.1)
58.5
(160.2)
+10 0 ba s is
- 10 0 ba s is
po ints
po int s
2 0 11
$ m
49.3
3.1
(15.7)
36.7
36.7
98.5
(29.6)
105.6
2 0 11
$ m
(43.6)
(3.1)
14.0
(32.7)
(32.7)
(98.5)
29.6
(101.6)
+10 0 ba s is
- 10 0 ba s is
po ints
po int s
2 0 11
$ m
39.7
3.6
(13.0)
30.3
30.3
88.5
(26.6)
92.2
2 0 11
$ m
(36.6)
(3.6)
12.1
(28.1)
(28.1)
(88.5)
26.6
(90.0)
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 company’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 $77.3m (2011: AUD $162.4m) with all borrowings
fully hedged by cross currency swaps, and foreign exchange swaps. Retail and business banking FX transactions are managed
by the group’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 2012 is $124.7m (2011: $123.4m) with $108.2m (2011: $118.4m) 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.
- 137 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
RISK MANAGEMENT (continued)
Operational risk
Operational risk is defined as 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, 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 the group’s industry the following factors can also impact the group’s operations and outcomes:
•
•
•
•
•
•
Globalisation & global impacts e.g. market liquidity, investor sentiment
Economic 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.
- 138 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
41.
FINANCIAL INSTRUMENTS
Fair value
Disclosed below is the estimated fair value of the group'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
“Derivatives”.
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 (i.e 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 for 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, except for other assets in the Company which includes investments in joint ventures. Refer
to Investments in joint ventures methodology above.
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.
- 139 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 - equity 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 held for trading
Financial assets available for sale - debt securities
Financial assets available for sale - equity 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
Notes Payable
Derivatives
Other payables
Loans payable to securitisation trusts
Reset preference shares
Subordinated debt
Carrying value
Net fair value
2012
$m
2011
$m
2012
$m
2011
$m
288.8
272.2
48.5
4,366.1
444.8
124.7
388.4
453.0
48,217.0
12.9
509.7
327.2
44,572.7
6,411.0
179.0
731.8
89.5
436.9
175.8
266.3
547.3
4,367.0
1,594.6
4.1
604.1
1.8
453.0
41,366.6
1,090.8
852.8
315.1
40,179.4
-
111.2
1,168.0
6,294.1
89.5
361.1
469.0
201.6
9.3
4,331.7
452.1
123.4
380.3
471.2
45,938.6
12.5
417.0
215.6
40,521.3
8,453.7
132.0
781.2
89.5
575.7
346.7
200.9
42.2
4,332.7
2,334.7
3.5
489.3
69.7
471.2
39,255.4
1,587.2
828.3
214.6
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576.9
152.4
830.7
7,738.0
89.5
484.9
288.8
272.2
48.5
4,366.1
444.8
124.7
387.6
451.8
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12.9
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327.2
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6,359.0
179.0
731.8
90.8
430.7
175.8
266.3
547.3
4,367.0
1,594.6
4.1
604.1
1.8
451.8
42,027.9
1,090.8
850.3
315.1
39,686.9
-
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1,168.0
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90.8
354.9
469.0
201.6
9.3
4,331.7
452.1
123.4
380.3
474.5
46,150.5
12.5
417.0
215.6
39,954.9
8,479.5
132.0
781.2
91.3
566.1
346.7
200.9
42.2
4,332.7
2,334.7
3.5
489.3
69.7
474.5
39,353.3
1,587.2
825.9
214.6
37,024.8
576.9
152.4
830.7
7,738.0
91.3
475.3
- 140 -
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D
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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.
CONSOLIDATED
As at 30 June 2012
Financial assets
Financial assets - held to maturity
Financial assets - held for trading
Financial assets - available for sale
Derivative instruments
Listed investments
Unlisted equity investments
Financial liabilities
Derivative instruments
As at 30 June 2011
Financial assets - held to maturity
Financial assets - held for trading
Financial assets - available for sale
Derivative instruments
Listed investments
Unlisted equity investments
Financial liabilities
Derivative instruments
Valuation
technique -
m arket
observable
inputs
Valuation
technique - non
m arket
observable
inputs
Quoted
market price
Level 1
Level 2
Level 3
Total
-
-
-
-
108.2
-
108.2
388.4
4,366.1
444.8
48.5
-
-
5,247.8
-
-
179.0
179.0
-
-
-
-
-
16.5
16.5
-
-
388.4
4,366.1
444.8
48.5
108.2
16.5
5,372.5
179.0
179.0
Valuation
technique -
m arket
observable
inputs
Valuation
technique - non
m arket
observable
inputs
Quoted
market price
Level 1
Level 2
Level 3
Total
-
-
-
118.4
-
118.4
380.3
4,331.7
452.1
9.3
-
-
5,173.4
-
-
132.0
132.0
-
-
-
-
5.0
5.0
-
-
380.3
4,331.7
452.1
9.3
118.4
5.0
5,296.8
132.0
132.0
- 145 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
FINANCIAL INSTRUMENTS (continued)
PARENT
As at 30 June 2012
Financial assets
Financial assets - held to maturity
Financial assets - held for trading
Financial assets - available for sale
Derivative instruments
Unlisted equity investments
Financial liabilities
Derivative instruments
As at 30 June 2011
Financial assets
Financial assets - held to maturity
Financial assets - held for trading
Financial assets - available for sale
Derivative instruments
Unlisted equity investments
Financial liabilities
Derivative instruments
Valuation
technique -
m arket
observable
inputs
Valuation
technique - non
m arket
observable
inputs
Quoted
market price
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
1.8
4,367.0
352.1
547.3
-
5,268.2
111.2
111.2
-
-
-
-
4.1
4.1
-
-
1.8
4,367.0
352.1
547.3
4.1
5,272.3
111.2
111.2
Valuation
technique -
m arket
observable
inputs
Valuation
technique - non
m arket
observable
inputs
Quoted
market price
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
47.1
4,332.7
330.0
42.2
-
4,752.0
152.4
152.4
-
-
-
-
3.5
3.5
-
-
47.1
4,332.7
330.0
42.2
3.5
4,755.5
152.4
152.4
The Fair Value of Held for Trading and Available for Sale financial assets process is as follows.
Each month market security investment valuations are determined by the Middle Office department of the Group’s Finance and
Treasury Division. This involves an analysis of market rate sheets provided by institutions independent of Bendigo and
Adelaide Bank. From these independent rate sheets, market average valuations are calculated within the Group’s Treasury
Management System, thereby updating the value of investments. Depending on the valuation movement, the company will
report a profit or loss for the period.
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 $152.0m (2011: $592.5m) and Euro Commercial Paper of $77.3m (2011:
$162.4m).
- 146 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
FINANCIAL INSTRUMENTS (continued)
Reconciliation of Level 3 fair value movements
CONSOLIDATED
As at 30 June 2012
Fair value assets
Listed investments and unlisted equity investments
Total fair value assets
As at 30 June 2011
Fair value assets
Listed investments and unlisted equity investments
Total fair value assets
PARENT
As at 30 June 2012
Fair value assets
Listed investments and unlisted equity investments
Total fair value assets
As at 30 June 2011
Fair value assets
Listed investments and unlisted equity investments
Total fair value assets
There were no transfers between level 1 and level 2 during the year.
As at
30 June 2011
$m
Purchases
$m
5.0
5.0
(0.9)
(0.9)
Sales
$m
-
-
As at
30 June 2012
$m
4.1
4.1
As at
30 June 2010
$m
Purchases
$m
4.4
4.4
0.6
0.6
Sales
$m
-
-
As at
30 June 2011
$m
5.0
5.0
As at
30 June 2011
$m
Purchases
$m
3.5
3.5
0.6
0.6
Sales
$m
-
-
As at
30 June 2012
$m
4.1
4.1
As at
30 June 2010
$m
Purchases
$m
3.0
3.0
0.5
0.5
Sales
$m
-
-
As at
30 June 2011
$m
3.5
3.5
- 147 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
42. DERIVATIVE FINANCIAL INSTRUMENTS
The group 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
2.33 Derivative Financial Instruments.
The group 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 2012 financial year the consolidated entity recognised a loss of $12.6m (2011: a gain of $0.7m) due to hedge
ineffectiveness.
Value of derivatives as at 30 June
Consolidated 2012
Consolidated 2011
Notional
Amount
$m
Asset
Revaluation
Liability
Revaluation
$m
$m
Net Fair
Value
$m
Notional
Amount
$m
Asset
Revaluation
Liability
Revaluation
Net Fair Value
$m
$m
$m
Included in derivatives category
Derivatives held for trading
Forward Rate Agreements
Interest Rate Swaps
Foreign Exchange
Contracts
Derivatives
1,200.0
2,708.8
73.1
3,981.9
Derivatives held as fair value hedges
Interest Rate Swaps
Embedded Derivatives
59.2
1.0
Derivatives
60.2
Derivatives held as cash flow hedges
Cross Currency
Swaps
Interest Rate Swaps
386.9
19,128.9
Derivatives
19,515.8
Total derivatives
23,557.9
-
21.2
0.5
21.7
-
0.2
0.2
11.3
15.3
26.6
48.5
(1.6)
(24.9)
(0.7)
(27.2)
(4.4)
(0.2)
(4.6)
(1.6)
(3.7)
(0.2)
(5.5)
(4.4)
-
(4.4)
-
5,500.8
39.7
5,540.5
64.4
6.5
70.9
(58.4)
(88.8)
(47.1)
(73.5)
(147.2)
(120.6)
353.3
9,496.6
9,849.9
(179.0)
(130.5)
15,461.3
-
5.2
0.4
5.6
0.2
0.4
0.6
-
3.1
3.1
9.3
-
(5.3)
(0.4)
(5.7)
(1.5)
(0.4)
(1.9)
-
(0.1)
-
(0.1)
(1.3)
-
(1.3)
(60.0)
(64.4)
(60.0)
(61.3)
(124.4)
(121.3)
(132.0)
(122.7)
Parent 2012
Parent 2011
Notional
Amount
$m
Asset
Revaluation
$m
Liability
Revaluation
$m
Net Fair
Value
$m
Notional
Amount
$m
Asset
Revaluation
$m
Liability
Revaluation Net Fair Value
$m
$m
Included in derivatives category
Derivatives held for trading
Forward Rate Agreements
Interest Rate Swaps
Foreign Exchange
Contracts
Derivatives
1,200.0
14,508.8
73.1
15,781.9
Derivatives held as fair value hedges
Interest Rate Swaps
59.2
Derivatives
59.2
Derivatives held as cash flow hedges
Interest Rate Swaps
18,520.6
Derivatives
18,520.6
-
537.1
0.5
537.6
-
-
9.7
9.7
(1.6)
(24.9)
(0.7)
(27.2)
(4.4)
(4.4)
(79.6)
(79.6)
(1.6)
512.2
-
19,144.2
(0.2)
39.7
510.4
19,183.9
(4.4)
(4.4)
(69.9)
(69.9)
64.4
64.4
8,846.9
8,846.9
-
40.0
0.4
40.4
0.1
0.1
1.7
1.7
-
(70.7)
(0.4)
(71.1)
(1.5)
(1.5)
(79.8)
(79.8)
-
(30.7)
-
(30.7)
(1.4)
(1.4)
(78.1)
(78.1)
Total derivatives
34,361.7
547.3
(111.2)
436.1
28,095.2
42.2
(152.4)
(110.2)
- 148 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
As at 30 June hedged cash flows are expected to occur and affect the income statement as follows:
CONSOLIDATED
2012
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
2011
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
PARENT
2012
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
2011
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
351.2
(372.4)
(21.2)
(51.1)
581.7
(643.6)
(61.9)
(65.0)
247.7
(337.8)
(90.1)
(47.8)
346.5
(420.4)
(73.9)
(33.4)
187.8
(209.1)
(21.3)
(9.0)
91.4
(101.3)
(9.9)
(9.1)
36.1
(36.4)
(0.3)
(0.1)
48.4
(48.5)
(0.1)
(0.1)
Within 1 year
$ m
1 to 3 years
$ m
3 to 8 years Over 8 years
$ m
$ m
254.4
(271.7)
(17.3)
(38.4)
404.0
(427.7)
(23.7)
(53.5)
56.3
(130.8)
(74.5)
(29.5)
161.1
(192.1)
(31.0)
(28.1)
39.7
(58.5)
(18.8)
(6.5)
85.5
(93.6)
(8.1)
(7.3)
Consolidated
Parent
2012
$ m
8.0
(26.0)
(0.6)
(18.6)
5.6
(13.0)
2011
$ m
13.6
(14.7)
1.8
0.7
(0.2)
0.5
2012
$ m
4.1
(23.3)
(0.6)
(19.8)
5.9
(13.9)
36.1
(36.4)
(0.3)
(0.1)
48.4
(48.5)
(0.1)
(0.1)
2011
$ m
9.1
(13.9)
1.8
(3.0)
0.9
(2.1)
During 2012 the group recognised a $0.1 million gain on fair value hedges (2011: nil), due to hedge ineffectiveness. For hedges
that are marked to market and not in a hedge relationship, a loss of $1.2m (2011: gain of $0.8m) has been recognised.
- 149 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
43. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The following are outstanding expenditure and credit related commitments as at 30 June 2012. 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 17 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
2012
$m
69.8
170.6
301.9
542.3
2011
$m
72.2
186.7
220.4
479.3
2012
$m
2011
$m
67.7
165.0
298.8
531.5
72.0
186.0
220.4
478.4
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
1.6
2.3
3.9
4.1
1.5
2.3
3.8
3.7
1.6
2.3
3.9
1.5
2.3
3.8
4.0
3.7
869.3
991.2
817.2
901.2
10,700.8
3,742.5
9,644.2
3,514.4
9,613.5
3,501.9
9,642.1
3,514.4
- 150 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 $1.1 million as at 30 June 2012.
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
- 151 -
Consolidated
2012
$ m
(0.1)
Consolidated
2011
$ m
0.9
2.6% pa
7.0% pa
3.5% pa
4.6% pa
7.5% pa
4.0% pa
$ m
7.0
0.3
0.3
0.1
0.9
0.6
-
-
-
8.0
9.4
0.7
(0.8)
0.1
0.1
0.6
-
-
-
8.9
$ m
8.0
0.3
0.4
0.1
(0.1)
1.6
0.1
-
-
7.0
9.9
0.7
0.2
0.2
0.1
1.6
0.1
-
-
9.4
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
COMMITMENTS AND CONTINGENCIES (continued)
Reconciliation of the Assets and Liabilities Recognised in the Balance Sheet
Consolidated
2012
$ m
Consolidated
2011
$ m
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 Amount recognised in other comprehensive income
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
8.0
8.9
(0.9)
(0.9)
(2.4)
1.4
0.1
(0.9)
0.3
0.3
(0.7)
(0.1)
1.8
6.6
7.0
9.4
(2.4)
(2.4)
(1.9)
(0.3)
0.2
(2.4)
0.3
0.4
(0.7)
-
(0.3)
4.8
Consolidated
2012
$ m
37%
Consolidated
2011
$ m
38%
24%
15%
14%
4%
6%
28%
12%
9%
6%
7%
- 152 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
COMMITMENTS AND CONTINGENCIES (continued)
Contribution Recommendations
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
Expected salary increase rate
Nature of Asset
7.0% pa
3.5% pa
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 Bendigo and Adelaide Bank Staff Superannuation Plan, a sub-plan of the Spectrum Super, 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
2012
$ m
8.0
8.9
(0.9)
0.8
(0.2)
2011
$ m
7.0
9.4
(2.4)
(0.2)
(0.1)
2013
$m
0.2
- 153 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
COMMITMENTS AND CONTINGENCIES (continued)
(c) Legal claim
From time to time, Bendigo and Adelaide Bank may be subject to material litigation, regulatory actions, legal or arbitration
proceedings and other contingent liabilities which, if they crystallise, may adversely affect the financial position or financial
performance of the Bank.
A specific litigation risk exists in relation to the Bank’s Great Southern loan portfolio. A law firm commenced a number of group
legal proceedings involving the Bank and other parties on behalf of investors in relation to managed investment schemes
managed by Great Southern Managers Australia Ltd (“Group Proceedings”). The Great Southern Group of companies is now
in liquidation.
The Bank either acquired or advanced loans to investors in the managed investment schemes. Not all borrowers are members
of the Group Proceedings as the Group Proceedings relate to specific schemes and categories of borrowers.
While no wrongdoing is alleged against the Bank and the Bank will vigorously defend the Group Proceedings, the law firm is
seeking to have the loan deeds of those borrowers who are members of the Group Proceedings deemed void or
unenforceable and for all money paid under those loans (including principal, any interest and fees) to be repaid to borrowers.
The litigation will continue to be assessed and managed on an ongoing basis.
(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
2012
$m
2011
$m
2012
$m
2011
$m
221.2
162.0
208.8
159.2
14.7
15.3
14.6
15.1
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 2012, the economic entity does not have any contingent assets.
44.
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
2012
$m
7,814.0
5,750.0
77.3
566.9
7,736.7
5,183.1
2011
$m
7,455.7
5,750.0
162.4
1,156.0
7,293.3
4,594.0
2012
$m
2011
$m
7,814.0
5,000.0
7,455.7
5,000.0
77.3
490.5
162.4
1,041.0
7,736.7
4,509.5
7,293.3
3,959.0
The Parent has a $US 5,000m Euro Commercial Paper program of which $US 79.1m (2011: $US 174.3m) was drawn down as at 30 June 2012, and a
$US 3,000m Euro Medium Term Note program of which there were no draw downs (2011: EURO nil). As at 30 June 2012 the Parent has a $5,000m
Domestic Note Program of which $490.5m (2011: $1,041.0m) was issued and the consolidated group has an additional $750.0m Domestic Note Program
through its subsidiary Rural Bank Limited, of which $76.4m (2011: $115.0m) was issued.
- 154 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
45.
FIDUCIARY ACTIVITIES
The group 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 group's statement of financial position is as follows:
Funds under trusteeship
Assets under management
Funds under management
Consolidated
2012
$m
2,733.0
1,789.2
1,300.7
2011
$m
2,780.9
1,859.0
1,365.1
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 group 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.
46.
EVENTS AFTER BALANCE SHEET DATE
On the 9th August 2012 Bendigo and Adelaide Bank group announced the sale of its 7.8% stake in IOOF. The sale has
improved statutory earnings by approximately $40m and Tier One capital will increase by approximately 13 basis points. For
further information please refer to our ASX release on the 9th August 2012.
The Bank recently completed the sale of a portfolio of subordinated notes it held in existing Torrens securitisation trusts. BEN
had previously deducted capital against these holdings to the value of approximately $90m. This sale eliminates the need for
this deduction and increases Tier One capital by 29 basis points. There will be a loss on sale of these investments of $12.4m
recorded for the financial year 2013.
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.
- 155 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
47.
BUSINESS COMBINATIONS
Bank of Cyprus Australia Limited
On the 29th of February 2012, Bendigo and Adelaide Bank acquired the Bank of Cyprus Australia (BOCA), by purchasing
100% of shares on issue. The total consideration paid in cash for the Bank of Cyprus Australia was $131.4 million. The cost of
the acquisition includes directly attributable costs including consultancy, legal, accounting and other professional fees.
The principal activities of Bank of Cyprus Australia are to provide a wide range of banking services with predominate focus on
servicing the Hellenic community.
The acquisition had the following effect on the group's assets and liabilities:
Assets
Cash and cash equivalents
Investment securities
Other financial assets
Loans and other receivables
Plant and equipment
Intangible assets
Other assets
Total Assets
Liabilities
Interest bearing deposits
Trade and other payables
Provisions
Deferred tax liabilities
Total Liabilities
Pre-acquisition
carrying amount
$m
184.5
186.2
8.3
1,330.7
5.1
0.8
2.4
1,718.0
1,564.1
26.3
2.0
-
1,592.4
Recognised
values on
acquisition
$m
184.5
189.6
7.8
1,329.3
5.1
0.8
4.6
1,721.7
1,570.2
26.3
2.0
0.9
1,599.4
Net identifiable assets and liabilities attributable to Bendigo and Adelaide Bank Limited
125.6
122.3
Cost of acquisition
Fair value of net assets acquired
Final goodwill on acquisition
131.4
122.3
9.1
The consolidated statement of comprehensive income includes income of $11.1 million and profit before tax of $3.0 million for
the 4 months to 30 June 2012.
Had the acquisition occurred at the beginning of the reporting period, the consolidated financial statement of comprehensive
income would have included revenue of $34.4 million and a net profit before tax of $7.6 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.
- 156 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 Bank 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 Bank group’s financial
position as at 30 June 2012 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 2012.
On behalf of the board
Robert Johanson
Chairman
4 September 2012
Mike Hirst
Managing Director
- 157 -
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Independent auditor’s report to the members of Bendigo and Adelaide Bank
Limited
Report on the financial report
Directors' responsibility for the financial report
Auditor's responsibility
Independence
158
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
Liability limited by a scheme approved
under Professional Standards Legislation
Opinion
Report on the remuneration report
Opinion
Ernst & Young
T M Dring
Partner
4 September 2012
159
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 20 August 2012.
2.
AUDIT COMMITTEE
As at the date of the Directors' Report the group had an audit committee of the board of directors.
3.
4.
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.
SUBSTANTIAL SHAREHOLDERS
As at 15 August 2012 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 15 August 2012 in the following categories:
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Num ber of Holders
Securities on Issue
Fully Paid
Em ployee
Shares
BPS
Preference
Shares
Reset
Preference
Shares
Step Up
Preference
Shares
Fully Paid
Ordinary
Shares
37,183
36,519
6,932
3,665
104
3,467
783
78
19
2
3,095
53
1
5
1
3,170
74
7
3
-
3,254
3,042
86
5
7
-
3,140
84,403
4,349
3,155
396,677,626
5,555,640
900,000
894,574
1,000,000
6.
MARKETABLE PARCEL
Based on the closing price of $8.50 on 15 August 2012 the number of holders with less than a marketable parcel of the
Company’s main class of securities (Ordinary Shares), as at 15 August 2012 was 7,229.
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.
160
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 capital that number represents as at 15 August 2012 are:
FULLY PAID ORDINARY SHARES
R a nk N a m e
N um be r o f f ully pa id
O rdina ry S ha re s
P e rc e nt a ge he ld o f
Is s ue d O rdina ry C a pit al
1 HSBC Custody Nominees (Australia) Limited
2 J P Morgan Nominees Australia Limited
3 National Nominees Limited
4 Citicorp Nominees Pty Limited
5 BNP Paribas Noms Pty Ltd
6 Milton Corporation Limited
7 BNP Paribas Noms Pty Ltd
8 AMP Life Limited
9 JP Morgan Nominees Australia Limited
10 Queensland Investment Corporation
11 HSBC Custody Nominees (Australia) Limited
12 BNP Paribas Noms Pty Ltd
13 Citicorp Nominees Pty Limited
14 Carlton Hotel Limited
15 Leesville Equity Pty Ltd
16 Navigator Australia Ltd
17 BKI Investment Company Limited
18 HSBC Custody Nominees (Australia) Limited - GSCO ECA
19 RBC Investor Services Australia Nominees Pty Limited
20 Yarabie Estates Pty Ltd
44,294,330
34,492,785
29,978,473
12,625,198
11,859,968
5,709,708
4,232,999
3,708,014
3,207,889
2,280,564
1,604,809
1,366,097
986,252
753,455
678,065
636,612
610,400
599,764
528,247
510,000
160,663,629
11.01%
8.58%
7.45%
3.14%
2.95%
1.42%
1.05%
0.92%
0.80%
0.57%
0.40%
0.34%
0.25%
0.19%
0.17%
0.16%
0.15%
0.15%
0.13%
0.13%
39.96%
BBS Nominees Pty Ltd, trustee for the Bendigo and Adelaide Employee Share Plan and Tasmanian Perpetual Trustees
Limited, trustee for the Employee Share Grant Scheme, held a combined total of 5,555,640 unquoted shares as at the date of
this report. These shares have not been included in the above table, but are included in total of 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 15 August 2012 are:
FULLY PAID PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
P re f e re nc e S ha re s
P e rc e nt age he ld o f iss ue d
P re f e re nce C a pit al
1 J P Morgan Nominees Australia Limited
2 National Nominees Limited
3 Citicorp Nominees Pty Limited
4 RBC Investor Service Australia Nominees Pty Limited
5 UBS Wealth Management Australia Nominees Pty Ltd
6 JP Morgan Nominees Australia Limited
7 BNP Paribas Noms Pty Ltd
8 Dylac Pty Ltd
9 Mr Trevor John Stafford & Mrs Lindley Joy Stafford
10 Carbon Max Pty Ltd
11 Mr Robert Maxwell Hill
12 Royal Queensland Bush Children's Health Scheme
13 The Trustees of the Diocese of Tasmania
14 Mr Jeffrey Frederick Edwards & Mrs June Rose Edwards
15 Ms Jillian Rosemary Broadbent
16 J & S McKinnon Foundation Pty Ltd
17 World Wide Fund For Nature Australia
18 Green Super Pty Ltd
19 James Bostock & Henry Taylor & RSL Custodian Pty Ltd
20 Mr Shaun Eric Sargent & Mr John Richard Green
139,757
29,750
23,475
15,454
13,446
12,886
7,744
4,000
3,788
3,550
3,526
3,000
3,000
2,794
2,750
2,674
2,660
2,531
2,474
2,325
281,584
15.53%
3.31%
2.61%
1.72%
1.49%
1.43%
0.86%
0.44%
0.42%
0.39%
0.39%
0.33%
0.33%
0.31%
0.31%
0.30%
0.30%
0.28%
0.27%
0.26%
31.28%
161
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Annual Financial Report
Period ending 30 June 2012
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 15 August 2012 are:
FULLY PAID RESET PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
R e s e t P re f e re nc e S ha re s
P e rc e nt age he ld o f iss ue d
R e s e t P re f e re nc e S hare s
1 UBS Nominees Pty Ltd
2 Art Gallery of NSW Foundation
3 M F Custodians Ltd
4 BNP Paribas Noms Pty Ltd
5 ST Hedwig Village
6 J P Morgan Nominees Australia Limited
7 CPA Australia Ltd
8 Questor Financial Services Limited
9 Edsgear Pty Limited
10 The Synod of the Diocese of Adelaide of the Anglican Church of Australia Inc
11 UBS Wealth Management Australia Nominees Pty Ltd
12 Ritossa Holdings Pty Ltd
13 Mr Ian William Bailey & Mrs Gloria Jean Bailey
14 Malvern Development Co Pty Ltd
15 National Nominees Limited
16 Dr Spencer David
17 ABN Amro Clearing Sydney Nominees Pty Ltd
18 M F Custodians Ltd
19 Ms Jillian Rosemary Broadbent
20 Baker Custodian Corporation
22,866
17,250
11,024
8,131
7,653
7,442
6,305
6,262
6,000
6,000
4,797
4,472
4,000
4,000
4,000
3,860
3,718
3,495
3,400
3,390
2.56%
1.93%
1.23%
0.91%
0.86%
0.83%
0.70%
0.70%
0.67%
0.67%
0.54%
0.50%
0.45%
0.45%
0.45%
0.43%
0.42%
0.39%
0.38%
0.38%
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 15 August 2012 are:
FULLY PAID STEP UP PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
St e p up P re f e re nc e S ha re s
P e rc e nt age he ld o f iss ue d
St e p up P re f e re nc e S ha re s
138,065
15.45%
1 J P Morgan Nominees Australia Limited
2 National Nominees Limited
3 Navigator Australia Ltd
4 UBS Wealth Management Australia Nominees Pty Ltd
5 Nulis Nominees (Australia) Limited
6 Post Perfect Pty Ltd
7 ABN Amro Clearing Sydney Nominees Pty Ltd
8 Returned Services League of Australia (Queensland Branch)
9 JGW Investments Pty Ltd
10 Elecnet (Aust) Pty Ltd
11 Questor Financial Services Limited
12 CPA Australia Ltd
13 Ballabradach Pty Ltd
14 HSBC Custody Nominees (Australia) Limited
15 Rogand Pty Ltd
16 Carbon Max Pty Ltd
17 Peroda Nominees Pty Limited
18 M F Custodians Ltd
19 Baker Custodian Corporation
20 The Trustees of the Diocese of Tasmania
43,425
41,105
19,757
17,131
14,446
10,800
10,165
10,000
6,640
5,530
5,496
5,235
4,474
4,445
4,220
4,108
4,052
4,000
3,893
3,670
4.34%
4.11%
1.98%
1.71%
1.44%
1.08%
1.02%
1.00%
0.66%
0.55%
0.55%
0.52%
0.45%
0.44%
0.42%
0.41%
0.41%
0.40%
0.39%
0.37%
222,592
22.25%
VOTING RIGHTS
9.
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.
162
Annual Financial report 2012