• Embedding a positive, proactive culture with more collaboration and stronger accountability
• Bringing trust back to banking
• New management team of highly experienced bankers
People and culture
• Building enduring financial relationships
• Refining our product range and rewarding loyalty
• Targeting retail, small business and selected commercial customers
Customers
• Operating model optimisation
• Enhanced risk management capabilities and culture
• Strengthened balance sheet and capital position
• Process improvements as well as structural changes
• Group-wide efficiency and effectiveness program
Stronger foundations
deserves to deal with someone they can trust.
We believe ‘banking’ should be simple and that everyone
how we will get there
What we believe &
Annual Report 2012
Bank of Queensland Limited
Level 17, BOQ Centre
259 Queen Street
Brisbane Qld 4000
Telephone: +61 7 3212 3333
Facsimilie: +61 7 3212 3399
Investor Relations: +61 7 3212 3463
Website: boq.com.au
Customer Service
1300 55 72 72 (within Australia)
+61 7 3336 2420 (overseas)
ABN 32 009 656 740
ACN 009 656 740
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ACN 009 656 740
ABN 32 009 656 740
+61 7 3336 2420 (overseas)
1300 55 72 72 (within Australia)
Customer Service
Website: boq.com.au
Investor Relations: +61 7 3212 3463
Facsimilie: +61 7 3212 3399
Telephone: +61 7 3212 3333
Brisbane Qld 4000
259 Queen Street
Level 17, BOQ Centre
Bank of Queensland Limited
Annual Report 2012
What we believe &
how we will get there
We believe ‘banking’ should be simple and that everyone
deserves to deal with someone they can trust.
Stronger foundations
• Group-wide efficiency and effectiveness program
• Process improvements as well as structural changes
• Strengthened balance sheet and capital position
• Enhanced risk management capabilities and culture
• Operating model optimisation
Customers
• Targeting retail, small business and selected commercial customers
• Refining our product range and rewarding loyalty
• Building enduring financial relationships
People and culture
• New management team of highly experienced bankers
• Embedding a positive, proactive culture with more collaboration and stronger accountability
• Bringing trust back to banking
Results overview
• Statutory net profit after tax for the second half of 2012
was $73.5 million, a significantly improved position on
the first half loss, which reflected a more conservative
approach to provisioning for bad and doubtful debts.
• BOQ confirmed a statutory net loss after tax for the full
year to 31 August 2012 of $17.1 million, due to increased
provisioning and legacy expense items.
• We have achieved a fundamental change in BOQ’s
operations this year, including:
> Significantly strengthened BOQ’s risk management
capability and processes
> Changed BOQ’s culture and refreshed our talent base
in key areas
> Operational redesign to drive efficiency and
operational excellence by continuing to simplify
processes for staff and customers and eliminate
costs from the business
> Strengthened our capital base and collective
provisioning to ‘future proof’ the organisation
> Established a clear strategic direction for growth.
• As a reflection of the confidence in our underlying
business, the Board declared a fully franked final
ordinary dividend of 26 cents per share, matching the
dividend paid in the prior corresponding period. This
takes the full year 2012 dividend to 52 cents per share
fully franked.
• Normalised underlying profit before tax was
$443.5 million and normalised cash net profit after
tax was $30.6 million for the year.
• Normalised cash net interest margin improved despite
competitive pressure in a low growth environment.
• The Bank’s cost-to-income ratio increased slightly,
impacted adversely by non-interest income challenges.
54
10.3%
7.2%
52
9.8%
6.9%
52
7.6%
5.3%
60
50
40
30
20
10
0
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2010
2011
2012
Dividends and yield
Dividends (cents per share) and yield (%)
Dividend (cents per share)
Dividend yield
Gross dividend yield (including franking credits)
In assessing financial performance, Bank of Queensland Limited (“the Bank”) discloses the net profit / (loss) after tax on both a ‘Statutory basis’ and a ‘Normalised Cash basis’.
The Statutory basis is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with International Financial Reporting
Standards (IFRS). The Normalised Cash basis, which is a non-statutory measure, is used by Management to present a clear view of the Bank’s underlying operating results.
This excludes a number of items that introduce volatility and / or significant distortions of the Bank’s current period performance, and allows for a more effective comparison of
the Bank’s performance across reporting periods and against peers. These items, such as amortisation of intangibles from acquisition, and accounting for economic hedges,
are calculated consistently year on year and do not discriminate between positive and negative adjustments. The Bank also uses the non-statutory measure of ‘Normalised
Underlying Profit/(Loss)’, which represents the Normalised Income less Normalised Operating Expenses, to provide users with a view on the underlying growth rate of the
business before bad debt and tax expenses, which often carry volatility between periods.
BOQ ANNUAL REPORT 2012
1
Chairman’s and
Managing Director’s letter
Neil Summerson
Chairman
Overview
The operating environment has continued to be
challenging, with bank margins under continual
pressure, which has been highlighted by unprecedented
competition for deposits in a declining interest rate
environment. On the loan side, there continues to be
competition for customers in both the mortgage and
business space with a tightening in prices also
being witnessed.
The domestic economy has entered a low credit
growth environment that has been driven by a cautious
approach from consumers and business in committing to
further investment utilising debt as a source of funding.
Consumers have understandably been focused on
deleveraging and a recent RBA report highlighted that
around 40% of Australian mortgage holders were at least
one year ahead of schedule in their repayments. While
2
BOQ ANNUAL REPORT 2012
we have recently seen a slight uptick in auction clearance
rates of in capital cities, we are still quite a way from
declaring a return of consumer confidence.
Bad and doubtful debts are showing early signs of
reversing the trends over the past two years, however
the Bank has over 60% of its loan book in Queensland
which is still experiencing economic difficulties. The
high Australian dollar has been problematic for many
industries in Queensland and it is expected that the dollar
will not retreat from these levels for some time.
Result
It is against this backdrop that BOQ recorded a statutory
full year loss after tax of $17.1 million for the year to 31
August 2012. The loss was primarily a result of a large
bad and doubtful debt expense, which created increased
provisions in the balance sheet, as well as a number of
one-off legacy items. Pleasingly, the Bank returned to
profitability in the second half of the year after a thorough
review of the Bank’s loan book, processes and systems.
As a result of the reviews, the Bank implemented
stronger credit and collection processes and a new risk
organisational structure; vastly improving the Bank’s risk
management capability. Mortgage arrears in the months
post BOQ’s full year results have continued to reduce and
the loan book continues to be prudently provisioned with
levels close to market leading.
The Bank’s cost to income ratio has been adversely
impacted by non-interest income challenges as well as
an increase in technology expenses. As a result of this, a
programme focused on efficiency and process redesign
has been undertaken in order to make it easier for staff
and customers to interact with the Bank. The outcome
will be a much fitter and focused organisation that will
position the Bank for sustained long-term profitability.
The housing portfolio continues to grow strongly in this
challenging environment and the funding mix (measured
by the ratio of deposits to loans) has improved through
the course of the year improving from 56% to 59%. The
Bank’s capital ratios at the full year were above internal
benchmarks, assisted by the support of shareholders in
the equity raising earlier this year.
With the economic environment not expected to
recover quickly, the Board has determined there will
be no increase in Directors fees or increases to fixed
remuneration for all employees earning over $100,000.
Shareholders will receive a fully franked dividend of
26 cents per share, taking the full year dividend to
52 cents per share.
Strategy
There are many challenges being a regional bank in what
is an industry dominated by “the big four” banks. The
most important approach the Bank has to this challenge
is to focus on a few things and execute on them
exceptionally well. The Bank does not have the resources
available to it to be all things to all parts of the Australian
economy, however what it can offer is unprecedented
levels of service that is appropriate to the customers
of the Bank.
There are four key areas of focus that will be undertaken:
Multi-channel optimisation
The Bank has relied exclusively on the branch network
to originate loans and service customers. It is apparent
that customer preferences are much wider than this and
many are utilising brokers (40%+ of all home loans are
from this source), mobile, online, call centres and social
media. An early trial of the use of mortgage brokers will
begin in March 2013 with work already underway on the
other channels.
Operational Excellence
The Bank has not exploited the technology that assists
in the efficient processing of loans for both retail and
business customers. These processes will be overhauled
through evaluating better, and more efficient, ways of
doing things coupled with the use of technology. This will
also assist in removing basic administrative tasks from
the branch.
Risk/return balance
The majority (75%) of the Bank’s loans are mortgages
with an average product per customer ratio of 2.0
products. There is an opportunity to enhance the
relationship with customers by improving service that,
with focus, will lead to more of their banking business
being entrusted to the Bank. The Bank will also expand
its focus into other segments where it is felt the BOQ
offering and skill set would be well suited, for example in
Agribusiness and Financial Markets. A continued focus
on BOQ Finance and St Andrew’s Insurance and offering
their services to the Bank’s customers will be integral
to improving the products per customer ratio as well as
attracting clients from new customer segments.
Talent and capability
With a new executive team in place there is a key focus
on revitalising the culture as well as ensuring the talent
within the organisation is at a very high level. It is already
clear that the steps taken over the past financial year
have led to the recruitment of some exceptional leaders
from other institutions and there is continued interest in
the Bank and where it is going from talented financial
services professionals.
Outlook
Over the next twelve months the Bank will be revitalising
the Retail Bank, becoming a trusted multi-channel
challenger brand, optimising all distribution channels with
a focused approach to sales and service, managing risk
for the appropriate return, ensuring asset quality is not
compromised and continuing to drive further efficiencies
throughout the organisation.
The building blocks are in place for growth and the focus
is now on execution and delivery. The Bank is becoming
operationally fit in order to deliver better service for
customers and profitable growth for shareholders.
Stuart Grimshaw
Managing Director and
Chief Executive Officer
BOQ ANNUAL REPORT 2012
3
Strengthening risk management
There has been a significant strengthening of the risk
management frameworks within the Bank in 2012. In
particular, material changes in our approach to risk
management have been implemented to the identification,
reporting and management of credit risks.
A new Risk Appetite Statement has been developed and
a framework established to ensure that the business
strategies developed are consistent with the agreed
risk appetite of the Bank. In addition, there has been
a significant resetting of risk appetite in the retail and
commercial lending segments
Stronger provision coverage
During 2012, the Bank substantially increased the level
of specific and collective provisions held against its loan
portfolios. The Bank now has a conservative level of
provisions in place. These provisions provide a buffer
for any future economic weakness or deterioration in
property markets.
Focus on portfolio quality
A key focus of the Bank is the improvement in the credit
quality in both the retail and commercial portfolios.
During 2012 additional resources were committed to
managing the legacy portfolio of impaired commercial
and property lending exposures.
In July 2012, the Bank successfully sold a portfolio of
four non-performing commercial property loans. The four
loans included the Bank’s three largest impaired assets
at the time, which were secured by shopping centres in
Queensland and Victoria.
Additional measures to improve portfolio quality have
included the implementation of new scorecards and
underwriting standards for retail lending. These initiatives
will improve the quality of new lending and lower bad and
doubtful debt expense in future years.
4
BOQ ANNUAL REPORT 2012
Heading
Funding and capital
10.8%
3.4%
1.0%
6.4%
13.0%
3.4%
1.0%
12.6%
3.1%
1.0%
8.6%
8.5%
1H12
1H12
pro forma
2H12
Capital adequacy
Core Tier 1
Hybrids
Tier 2
$35.3b
$35.3b
$36.3b
$36.3b
$37.9b
$37.9b
• The Bank’s capital levels at 31 August 2012 were above
internal benchmarks with core equity Tier 1 level at
$35.3b
$35.3b
8.5%. This is consistent with the level following BOQ’s
15%
15%
capital raising in April 2012 and demonstrates the
capacity to pay the final dividend at 26 cents per share
17%
17%
from the second half profit.
17%
17%
• BOQ was able to buyback $636 million of its more
51%
51%
expensive Government Guaranteed debt in June 2012
and an additional $364 million matured in October 2012.
• The Bank redeemed $90 million of Lower Tier 2
Convertible Subordinated Notes.
$36.3b
$36.3b
$37.9b
$37.9b
12%
12%
17%
17%
15%
15%
56%
56%
59%
59%
FY10
FY10
FY11
FY11
• The Bank issued $50 million of Lower Tier 2
Subordinated Notes on 20 December 2011
Funding mix
Funding mix
• Strong investor demand for BOQ’s Reds ABS
(%)
(%)
securitisation program in May 2012 resulted in a
transaction being upsized from $500m to $700m,
Retail
Retail
providing valuable funds for the Bank and improving our
funding diversity.
Securitisation
Securitisation
13%
13%
13%
13%
15%
15%
FY12
FY12
• The retail component of our accelerated 8-for-37
pro-rata non-renounceable entitlement offer raised
approximately $162 million. The Bank received very
strong demand from retail shareholders for the offer and
we were able to satisfy 99% of these applications in full.
Long term Wholesale
Long term Wholesale
Short term Wholesale
Short term Wholesale
15%
15%
17%
17%
17%
17%
51%
51%
12%
12%
17%
17%
15%
15%
This followed the completion of the institutional
13%
13%
13%
13%
FY2011 Funding mix
15%
15%
component of the entitlement offer and institutional
placement which raised approximately $135 million and
$153 million respectively.
56%
56%
59%
59%
7%
Capital
11%
FY12
FY12
Short-term
Wholesale
Both institutions and retail shareholders were offered the
same price of $6.05 per share in these offers.
• BOQ is well positioned to meet the new Basel III capital
requirements that will come into effect from
January 2013.
52%
Retail
14%
Securitisation
16%
Long-term
Wholesale
BOQ ANNUAL REPORT 2012
5
FY10
FY10
FY11
FY11
Funding mix
Funding mix
(%)
(%)
Retail
Retail
Securitisation
Securitisation
Long term Wholesale
Long term Wholesale
Short term Wholesale
Short term Wholesale
10.8%
3.4%
1.0%
6.4%
13.0%
3.4%
1.0%
12.6%
3.1%
1.0%
8.6%
8.5%
1H12
1H12
pro forma
2H12
Capital adequacy
Core Tier 1
Hybrids
Tier 2
FY2011 Funding mix
7%
Capital
11%
Short-term
Wholesale
14%
Securitisation
16%
Long-term
Wholesale
52%
Retail
62.6%
56.1%
49.9%
45.8%
44.5%
2007
2008
2009
2010
2011
* (cid:31)Based on normalised cash costs, excludes impacts of normalisation items
and amortisation of customer contracts.
Normalised Cost-to-income ratio*
%
62.6%
56.1%
49.9%
45.8%
44.5%
2007
2008
2009
2010
2011
* (cid:31)Based on normalised cash costs, excludes impacts of normalisation items
and amortisation of customer contracts.
Normalised Cost-to-income ratio*
%
Operational excellence
A process efficiency and cost effectiveness program is underway
to ensure that BOQ is fit enough to meet the challenges it faces,
particularly in the current low credit growth environment.
Review of organisational spans and layers of control
We have optimised our organisational structure to assist BOQ to be as efficient as possible.
This resulted in approximately 100 senior management roles being removed, producing
annual savings of $9 million.
✔
Shared services model
We are bringing together duplicated functions across Banking, BOQ Finance & Insurance,
so that one function services all our business lines, rather than separate teams. This will
provide the Bank with annual savings of approximately $2 million.
Back office operations consolidation
We are ensuring that our non-customer facing support services are efficient, that we have
simplicity in processes with no double handling. Consolidation of back office services is
expected to provide $2.5 million in annual savings.
End to end loan processing (Retail & Commercial)
We have undertaken a detailed analysis of the complete loan process and have found that
a number of improvements are required. Project teams are being formed to drive initiatives
in this area over the next two years.
Expense analysis (Non-Employee costs)
Analysis of the expenses across the BOQ Group not related to employees, involves a review
of all the major categories of vendors and suppliers to identify potential savings through
changes in cost, specifications and usage. Once complete, this project is expected to
provide the Bank with savings of $4 million per annum.
Removing processes from the branch
The administrative tasks that branches are required to conduct are being lessened, freeing
up time for our front line people to focus on the quality of their customer service, while also
improving response times.
Cost savings to fund investments in growth
The cost savings obtained from the above initiatives are intended to be used to fund the
Bank’s growth, while we keep overall cost growth under inflation.
In Progress
In Progress
In Progress
In Progress
Planned
Planned
6
BOQ ANNUAL REPORT 2012
Customers
We are aiming to increase our customer numbers
and profit by providing simple, straight forward
banking with the best possible service.
Online will be a key enabler for growth, so we are
broadening our IT, social media and communication
capabilities. We also have many online and mobile
enhancements on the way that will improve
customer experience.
We are working on a compelling brand proposition,
rewarding loyalty and ensuring our products are
what our customers want. New product suites
planned include an offering for simple family
banking, a small to medium sized enterprise
proposition, as well as a Wealth Management and
Self Managed Super Fund offer.
A new call centre is being established in Brisbane to
complement and share call volumes with our Perth
call centre, which will also ensure the Bank’s phone
service does not experience any down time.
A new customer relationship management system is
being implemented for front line employees, which
will reduce the number of account creation and
servicing procedures by more than 67%, freeing up
our people to concentrate on providing better sales
and service.
We are targeting attractive niche commercial
customer segments that value relationship banking,
while diversifying geographically and across
industries.
BOQ ANNUAL REPORT 2012
7
Environment
• Products used in the latest branch fit-outs are chosen
with sustainability in mind and include items certified
by Good Environmental Choice Australia (GECA), the
Forest Stewardship Council (FSC) and
other authorities.
• Our new signage at branches and office locations
around Australia has been designed to include energy
efficient and long-lasting LED lighting. We are also
investing in LED lighting to be used internally in
branches.
• New switchboards at branches ensure electrical items
not used for security purposes are timed to switch-off
when the branch is closed and staff are not working.
Community
• BOQ provides support to the Australia Red Cross to
help with initiatives such as the innovative new Centre
for Young People opened in Fortitude Valley in Brisbane
in June 2012. The aim of the centre is to address youth
homelessness and to provide intensive, individualised
support to at-risk youth to help them get back onto a
positive life track.
• Our employees are engaged in our Community program
through Dollar-for-Dollar donation matching which has
resulted in approximately $70,000 being donated to
charity in the past year.
• This year’s Banking on our Kids fundraising appeal
raised approximately $150,000 to help sick kids get
better, quicker. This appeal, which involves our people
collecting donations and fundraising, has raised over
$1,150,000 since the appeal started in 2004.
8
BOQ ANNUAL REPORT 2012
• 160 tonnes of paper and cardboard were recycled
by BOQ in the year to 31 August 2012, saving
approximately 2,071 trees.
• BOQ plans to move its Support Centre office 2km out
of Brisbane CBD to a new 5-star certified Green Star
building in 2014 which also boasts a 4.5 star NABERS
energy rating. BOQ will benefit from a lower carbon
footprint from this building and a reduction in the
energy and water used.
• BOQ sponsors the Financial Basics Foundation’s online
simulation game, ESSI Money, which provides high
school students with an opportunity to learn about
Earning, Saving, Spending and Investing. Approximately
5,000 students across the country each year compete
in this financial literacy competition.
• Shareholders donated nearly $40,000 to children’s
hospitals around Australia this year via Investing in
Hope, taking the total contributed since this program’s
inception in 2004 to $240,000.
• BOQ is helping The Smith Family to provide
disadvantaged kids with mentoring support and
financial scholarships, so that they can realise their
potential through education. As part of this partnership
BOQ supports the Learning for Life mentoring program
and funds 120 financial scholarships for school
students.
• At BOQ, we believe every child deserves a merry
Christmas. That’s why throughout November each year
all BOQ branches nationally act as collection points for
new toys and books for the Smith Family’s Toy and
Book Appeal.
BOQ works with Children’s Hospital Foundations Australia
(CHFA) to support its five hospital partners to find cures
and treat sick little kids like Ali.
Within a few months of being born, Ali was suffering up to
50 seizures a day and at only 5 months, she underwent a
functional hemispherectomy to cure her severe epilepsy.
The surgery was a success and because of her young age,
her brain was able to rebuild itself finding new paths for
brainwaves to control her speech and movement. Today, she
is running and jumping around like most other 4 year olds.
Ali
Epilepsy
BOQ ANNUAL REPORT 2012
9
d i f fe r e n t
Stuart Grimshaw
CEO and MD
Anthony Rose
Chief Financial Officer
Matt Baxby
Group Executive Retail
& Online Banking
Jon Sutton
Chief Operating Officer
Brendan White
Group Executive Business
Banking, Agribusiness &
Financial Markets
Peter Deans
Chief Risk Officer
Chris Nilon
Group Executive IT
& Operations
Renato Mazza
Group Executive
Insurance
Hugh Lander
Chief Executive Officer
BOQ Finance
Biographies on each of the Executives are available on the BOQ website or by contacting the Bank.
10
BOQ ANNUAL REPORT 2012
Executive team
• We have appointed the right people to help us maximise
opportunities, manage risks and drive the culture
needed to achieve our goals.
• The Bank needed the best possible Executive team to
review and improve our business and risk management
processes while also driving a new strategic direction.
• After BOQ’s new Managing Director and CEO, Stuart
Grimshaw, had the opportunity to review the business
post his appointment on 1 November 2011, significant
changes to BOQ’s leadership team were put in place.
• The new team of highly experienced bankers are
focused, energised and determined to make this
organisation the best it can be.
OMBs
• BOQ continues to maintain and support the growth of
our unique Owner-Managed Branch network, whereby
the branch manager is an experienced banker who
owns the branch.
• The Bank has been regularly engaging with its Owner-
Managers to discuss performance and risk and as
a result there has been a refinement in the model
structure and incentives provided.
• Owner-Managers are also small business owners, who
benefit from providing exceptional personal service in
their local community for an extended period of time,
so that there is longevity in the manager/customer
relationship.
Culture
• The new leaders of the organisation have launched a
program of cultural change centred on how each and
every employee can contribute to our business being
fit, focused and different.
• We are changing staff behaviours, work practices and
processes so to fulfil our belief that banking should be
simple and everyone deserves to deal with someone
they can trust.
• There is a real focus on accountability, delivery and
performance while working collaboratively, by clearly
defining roles and responsibilities and ensuring that
our people are always acting appropriately and in an
efficient manner.
• Diversity and staff engagement continues to remain a
focus at all levels across the organisation.
• We will be relocating our Brisbane Support Centre in
2014 to a new, innovative environment, which will help
energise our culture by providing our people with an
inspiring and exciting place to work.
BOQ ANNUAL REPORT 2012
11
Board
Neil Summerson
Chairman of the Board
Independent Director
B Com, FCA, FAICD, FAIM – Age: 64
Chair of the Nomination Committee
and a member of both the Budget
and Audit Committees.
Steve Crane
Independent Director
B Com, SF Fin, FAICD - Age: 60
Chair of the Budget Committee and
a member of the Risk Committee.
Richard Haire
Independent Director
FAICD, FAIM - Age: 54
Chair of the Audit Committee and
a member of each of the Information
& Technology, Risk and Investment
Committees.
John Reynolds
Independent Director
B Sc (Hons), Dip Ed FAICD, FAIM
Director - Age: 69
Chair of the Investment Committee
and a member of each of the
Information & Technology,
Nomination and Remuneration
Committees.
Biographies on each of the Board are available on the BOQ
website or by contacting the Bank.
12
BOQ ANNUAL REPORT 2012
Stuart Grimshaw
Managing Director and
Chief Executive Officer
PMD, MBA, BCA - Age: 51
Roger Davis
Independent Director
B.Econ (Hons), Master of
Philosophy - Age: 60
Chair of the Risk Committee and
a member of both the Audit and
Corporate Governance Committees.
Carmel Gray
Independent Director
B Bus - Age: 63
Chair of the Corporate Governance
Committee and a member of each of
the Risk, Nomination and the Audit
Committees
Michelle Tredenick
Independent Director
B Sc Director - Age: 51
Chair of the Information &
Technology Committee and
a member of each of the
Remuneration, Risk and the
Investment Committees.
David Willis
Independent Director
B Com, ACA, ICA Director - Age: 56
Chair of the Remuneration
Committee and a member of both
the Corporate Governance and
Budget Committees.
Remuneration overview
Short-term
$
Post-
employment
$
Other
long-term
$
Termination
benefits
$
Share based
payments
$
Total
$
Executive Director
Stuart Grimshaw1
1,606,399
12,980
1,426
Non-Executive Directors
Neil Summerson
Steve Crane
Roger Davis
Carmel Gray
John Reynolds
Michelle Tredenick
David Willis
Richard Haire2
Former Directors
Bill Kelty3
Executives
Jon Sutton4
Anthony Rose5
Peter Deans6
Brendan White7
Matthew Baxby8
Chris Nilon
Renato Mazza
Former Executives
Ram Kangatharan9
Ewan Cameron10
Darryl Newton11
David Tonuri12
Keith Rodwell13
355,000
165,417
175,458
207,750
218,208
166,651
170,619
55,895
15,939
14,888
15,791
15,939
15,939
14,981
15,300
5,031
137,500
12,375
114,165
74,401
243,026
244,371
149,024
349,526
350,418
549,238
450,716
275,952
246,683
499,912
2,461
1,830
6,695
6,151
4,337
15,821
15,823
9,671
14,685
10,638
11,242
15,579
-
-
-
-
-
-
-
-
-
158
108
356
340
207
11,636
5,112
-
-
-
-
45,789
-
-
-
-
-
-
-
-
-
44,621
-
-
-
-
-
-
-
787,500
489,617
410,345
329.689
393,750
Appointed 1 November 2011
1
2 Appointed 18 April 2012
3 Retired 31 July 2012
4 Appointed 2 July 2012
5 Appointed 1 August 2012
6 Appointed 26 March 2012
7 Appointed 2 April 2012
8 Appointed 17 May 2012
9 Resigned 30 March 2012
10 Resigned 20 July 2012
11 Resigned 26 March 2012
193,237
1,814,042
-
-
-
-
-
-
-
-
-
211,375
143,083
31,104
399,210
126,947
85,342
148,563
370,939
180,305
191,249
223,689
234,147
181,632
185,919
60,926
194,496
333,169
219,422
496,062
829,072
471,058
597,325
639,916
(196,344)
2,619,566
(110,173)
(93,697)
(40,417)
(115,141)
850,576
624,941
558,324
900,515
12 Resigned 11 May 2012
13 Resigned 24 August 2012
BOQ ANNUAL REPORT 2012 13
Balance sheets
As at 31 August 2012
Assets
Cash and liquid assets
Due from other financial institutions
Other financial assets
Derivative financial instruments
Consolidated
Bank
2012
$m
670.5
119.7
5,689.4
276.1
2011
$m
433.2
131.9
5,348.0
148.1
2012
$m
227.7
23.5
5,776.9
276.1
2011
$m
269.6
25.9
5,215.7
126.8
Loans and advances at amortised cost
34,147.2
31,736.5
30,654.6
29,745.7
Current tax assets
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Other assets
Intangible assets
Investments accounted for using the equity method
Total assets
Liabilities
Due to other financial institutions
Deposits
Derivative financial instruments
Accounts payable and other liabilities
Current tax liabilities
Provisions
Insurance policy liabilities
Borrowings including subordinated notes
Amounts due to controlled entities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total Equity
14
BOQ ANNUAL REPORT 2012
0.7
-
31.0
125.7
120.9
554.6
22.2
-
-
31.0
41.7
104.4
580.0
28.7
1.5
933.1
26.1
104.9
277.9
59.3
-
-
933.1
25.3
42.6
251.9
70.6
-
41,758.0
39,900.8
38,361.6
36,707.2
177.8
31,171.9
169.2
29,626.6
177.8
169.2
31,288.7
29,875.2
253.0
450.4
-
44.1
73.5
264.1
429.1
79.4
30.2
77.6
6,688.1
6,651.0
-
-
130.3
404.8
-
33.5
-
895.3
2,553.6
197.5
387.1
79.8
21.5
-
1,123.8
2,340.2
38,858.8
37,327.2
35,484.0
34,194.3
2,899.2
2,573.6
2,877.6
2,512.9
2,660.1
106.2
132.9
2,899.2
2,153.3
115.4
304.9
2,573.6
2,666.0
2,162.8
105.1
106.5
2,877.6
81.8
268.3
2,512.9
5 year summary
$ millions (unless otherwise stated)
Shareholders’ equity:
Issued capital
Reserves and retained profits
Total equity
Financial position:
Total assets under management
Total loans under management 1
Total assets on balance sheet
Retail deposits
Wholesale deposits
Financial performance: 2
Statutory net profit/(loss)
Normalised underlying profit before tax 4
Less: Impairment on loans and advances
Normalised cash profit before tax
Normalised cash profit after tax 3
Shareholder performance:
Market capitalisation at balance date
Share price at balance date
Statutory ratios:
Net interest margin
Capital adequacy ratio
Cost to income ratio
Dividend payout ratio to ordinary shareholders 6
Net tangible assets per share
Fully franked ordinary dividend per share
Diluted earnings/(loss) per share
Return on average ordinary equity
Normalised ratios (cash basis): 4
Net interest margin 7
Cost to income ratio
Dividend payout ratio to ordinary shareholders 6
Diluted earnings per share
Return on average ordinary equity
2012
$m
2,660.1
239.1
2,899.2
41,758.0
34,339.8
41,758.0
22,270.0
8,901.9
(17.1)
443.5
(401.0)
42.5
30.6
$2,331.4
$7.55
1.65%
12.6%
52.5%
n/a
$6.94
$0.52
(10.2c)
(0.7%)
1.67%
45.7%
n/a
7.9c
1.3%
2011
$m
2,153.3
420.3
2,573.6
39,900.8
33,356.2
39,900.8
20,317.9
9,308.7
158.7
447.4
(200.5)
246.9
176.6
1,686.0
$7.48
1.63%
11.4%
47.0%
77%
$7.95
$0.54
60.3c
7.2%
1.65%
44.5%
69%
69.8c
8.0%
2010
$m
2,057.6
347.2
2,404.8
38,811.3
32,003.1
38,597.8
18,083.3
10,005.2
181.9
379.0
(104.2)
274.8
197.0
2,120.3
$9.83
1.60%
11.7%
49.0%
62%
$7.47
$0.52
77.0c
8.9%
1.60%
45.8%
57%
83.4c
9.6%
2009
$m
1,903.1
208.3
2,111.4
34,545.8
28,866.3
34,012.0
16,248.9
7,948.3
141.1
315.0
(66.0)
249.0
187.4
2008
$m
1,439.4
251.5
1,690.9
30,912.5
26,291.8
29,883.2
13,984.5
6,052.0
138.7
250.8
(27.0)
223.8
155.4
2,327.7
$11.65
2,377.4
$15.86
1.56%
11.5%
58.8%
71%
$6.62
$0.52
74.4c
9.0%
1.56%
49.9%
53%
98.4c
11.8%
1.67%
11.0%
59.9%
79%
$6.01
$0.73
89.6c
11.6%
1.67%
56.1%
71%
99.9c
13.0%
1 Before Collective Provision for impairment.
2
Presentation of financial performance has been changed from prior year so as
to provide clear reconciliation between IFRS and non-IFRS measures.
3
Normalised cash profit after tax exclude significant items (tax effected).
4 Normalised underlying profit before tax is profit before impairment on loans
and advances, significant items and tax.
5 Excludes tax impact on significant items.
6 The current year dividend will be paid out of retained profits.
7 Excluding amortisation of fair value adjustments (acquisition).
BOQ ANNUAL REPORT 2012 15
Shareholder information
Share registry
Link Market Services Limited
Level 15
324 Queen Street
Brisbane Qld 4000
Australia: 1800 779 639
International: +61 2 8280 7626
Facsimile: +61 2 9287 0303
Email: boq@linkmarketservices.com.au
Website: linkmarketservices.com.au
Company details
Bank of Queensland Limited
Level 17, BOQ Centre
259 Queen Street
Brisbane Qld 4000
Telephone: +61 7 3212 3333
Investor Relations: +61 7 3212 3463
Facsimile: +61 7 3212 3399
Website: boq.com.au
Twitter: twitter.com/boq
Facebook: facebook.com/BOQOnline
Customer Service
1300 55 72 72 (within Australia)
+61 7 3336 2420 (overseas)
ABN 32 009 656 740
ACN 009 656 740
C E N T R A L T R AI N S T A -
N S T R E E T
N
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N S T R E E T
U E E
Q
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N S T R E E T
N Z A
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S Q
A
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A
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D
A L L
S
T
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W
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A
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R
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D
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E LIZ
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B E T H S T R E E T
T T E S T R E E T
R L O
A
H
C
N S T R E E T M
E E
U
Q
2012 AGM
BOQ’s Annual General Meeting will be held at the Hilton, on
Thursday, 13 December 2012 (registration commences at
9.15am). Enter the Hilton either via the Queen Street Mall or
190 Elizabeth Street, Brisbane.
16 BOQ ANNUAL REPORT 2012
Heading
Financial report
Appendix 4E 18
Financial summary 20
Corporate governance 22
Contents
Statutory financial report:
Directors’ report 27
Lead auditor’s independence declaration 54
Statements of comprehensive income 55
Balance sheets 56
Statements of cash flows 57
Statements of changes in equity 58
Notes to the financial statements 62
Directors’ declaration 122
Independent auditor’s report to the members 123
Supplementary information:
Shareholding details 124
Annexure A 127
BOQ ANNUAL REPORT 2012
17
Appendix 4E
Preliminary final report
For the year ended 31 August 2012
1. Company details and reporting period
Name of entity:
Bank of Queensland Limited
ABN:
Reporting Period
32 009 656 740
31 August 2012
Previous corresponding period 31 August 2011
2. Results for announcement to the market
Revenues from ordinary activities
Loss from ordinary activities after tax attributable to members
Net loss for the period attributable to members
Dividends
Interim ordinary dividend – paid
Final ordinary dividend – payable
Semi-annual dividend – Perpetual Equity Preference Shares (PEPS) – paid
Semi-annual dividend – Perpetual Equity Preference Shares (PEPS) - payable
Previous corresponding period
Interim ordinary dividend
Final ordinary dividend
Semi-annual dividend on – Perpetual Equity Preference Shares (PEPS)
Semi-annual dividend on – Perpetual Equity Preference Shares (PEPS)
Up
Down
Down
1%
111%
111%
to
to
to
$m
804.3
17.1
17.1
Amount per
security
Franked amount
per security
26c
26c
234c
217c
26c
28c
246c
250c
26c
26c
234c
217c
26c
28c
246c
250c
Record date for determining entitlements to the ordinary dividend
21 November 2012
3. Statements of comprehensive income with notes to the statements
Refer to page 53 of the 2012 Profit Announcement and accompanying notes.
4. Balance Sheets with notes to the statements
Refer to page 54 of the 2012 Profit Announcement and accompanying notes.
5. Statements of cash flows with notes to the statements
Refer to page 55 of the 2012 Profit Announcement and accompanying notes.
6. Dividends
Refer to page 77 of the 2012 Profit Announcement and accompanying notes.
7. Dividend reinvestment plan
The Bank of Queensland Dividend Reinvestment Plan provides shareholders with the opportunity to convert all or part of their entitlement to a dividend into new shares. Shares are issued
under the Plan at a discount of 2.5% on the arithmetic average of the daily volume weighted average share prices of the Bank’s shares sold on the Australian Securities Exchange during
the ten trading day period commencing on the second trading day after the Record Date. Shares issued are fully paid and rank equally with existing fully paid ordinary shares.
There is no foreign sourced dividend.
The last date for election to participate in the Dividend Reinvestment Plan is 21 November 2012.
The date of payment for the final ordinary dividend is 8 December 2012.
8. Statements of changes in equity
Refer to page 56 of the 2012 Profit Announcement and accompanying notes.
18
BOQ ANNUAL REPORT 2012
9. Net tangible assets per share
•
31 August 2012 - $6.94
•
31 August 2011 - $7.95
10. Entities over which control has been gained or lost during the period
•
Series 2004-1 REDS Trust was closed on 28 December 2011.
•
•
Series 2012-1E EHP REDS Trust was opened on 24 May 2012.
Series 2008-1E EHP REDS Trust was closed on 13 July 2012.
11. Associates and joint venture entities
Refer to page 130 of the 2012 Profit Announcement and accompanying notes.
12. Other significant information
Not applicable
13. Accounting standards used for foreign entities
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) and
other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
14. Commentary on the results for the year
Refer to page 21 of the 2012 Profit Announcement.
15. Status of audit
The attached Statutory Financial Report has been audited.
16. Dispute or qualifications if not yet audited
Not applicable
17. Dispute or qualifications if audited
Not applicable
Melissa Grundy
Company Secretary
18 October 2012
BOQ ANNUAL REPORT 2012 19
Financial Summary
2012
$m
2,660.1
239.1
2,899.2
41,758.0
34,339.8
41,758.0
22,270.0
8,901.9
(17.1)
47.7
30.6
443.5
(401.0)
42.5
(11.9)
30.6
2011
$m
2,153.3
420.3
2,573.6
39,900.8
33,356.2
39,900.8
20,317.9
9,308.7
158.7
17.9
176.6
447.4
(200.5)
246.9
(70.3)
176.6
2,331.4
7.55
$1,686.0
$7.48
1.65%
12.6%
52.5%
n/a
$6.94
$0.52
(10.2c)
(0.7%)
1.67%
45.7%
n/a
7.9c
1.3%
1.63%
11.4%
47.0%
77%
$7.95
$0.54
60.3c
7.2%
1.65%
44.5%
69%
66.7c
8.0%
Year Ended
2010
$m
2,057.6
347.2
2,404.8
38,811.3
32,003.1
38,597.8
18,083.3
10,005.2
181.9
15.1
197.0
379.0
(104.2)
274.8
(77.8)
197.0
2,120.3
$9.83
1.60%
11.7%
49.0%
62%
$7.47
$0.52
77.0c
8.9%
1.60%
45.8%
57%
83.4c
9.6%
2009
$m
1,903.1
208.3
2,111.4
34,545.8
28,866.3
34,012.0
16,248.9
7,948.3
141.1
46.3
187.4
315.0
(66.0)
249.0
(61.6)
187.4
2008
$m
1,439.4
251.5
1,690.9
30,912.5
26,291.8
29,883.2
13,984.5
6,052.0
138.7
16.7
155.4
250.8
(27.0)
223.8
(68.4)
155.4
2,327.7
$11.65
2,377.4
$15.86
1.56%
11.5%
58.8%
71%
$6.62
$0.52
74.4c
9.0%
1.56%
49.9%
53%
98.4c
11.8%
1.67%
11.0%
59.9%
79%
$6.01
$0.73
89.6c
11.6%
1.67%
56.1%
71%
99.9c
13.0%
Shareholders’ Equity:
Issued capital
Reserves and retained profits
Total Equity
Financial Position:
Total assets under management
Total loans under management(1)
Total assets on balance sheet
Retail deposits
Wholesale deposits
Financial Performance:(2)
Statutory net profit/(loss)
Add: Significant items(3)
Normalised cash profit after tax(3)
Normalised underlying profit before tax(4)
Less: Impairment on loans and advances
Normalised cash profit before tax
Tax expense(5)
Normalised cash profit after tax(3)
Shareholder Performance:
Market capitalisation at balance date
Share price at balance date
Statutory Ratios:
Net interest margin
Capital adequacy ratio
Cost to income ratio
Dividend payout ratio to ordinary shareholders(6)
Net tangible assets per share
Fully franked ordinary dividend per share
Diluted earnings / (loss) per share
Return on average ordinary equity
Normalised Ratios (cash basis):(4)
Net interest margin(7)
Cost to income ratio
Dividend payout ratio to ordinary shareholders(6)
Diluted earnings / (loss) per share
Return on average ordinary equity
20
BOQ ANNUAL REPORT 2012
(1)
Before Collective Provision for impairment.
(2)
Presentation of financial performance has been changed from prior year so as to provide clear reconciliation between IFRS and non-IFRS measures.
(3)
Normalised cash profit after tax exclude significant items (tax effected):
Amortisation of customer contracts
Hedge ineffectiveness
Government guarantee break fee
Integration / Due diligence costs
Amortisation of fair value adjustments
Asset Impairment (software)
Flood impact
Legacy issues
Restructuring costs
Total
(10.5)
(3.3)
(2.2)
(1.0)
(3.9)
(6.6)
-
(14.9)
(5.3)
(47.7)
(6.2)
1.0
(4.3)
(4.1)
(3.5)
-
(0.8)
-
-
(17.9)
(4) Normalised underlying profit before tax is profit before impairment on loans and advances, significant items and tax. These significant items are detailed above.
(5) Excludes tax impact on significant items.
(6) The current year dividend will be paid out of retained profits.
(7) Excluding amortisation of fair value adjustments (acquisition).
Financial Performance
In assessing financial performance, Bank of Queensland Limited (“the Bank”) discloses the net profit/(loss) after tax on both a ‘Statutory basis’ and a ‘Normalised Cash basis’. The
Statutory basis is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS).
The Normalised Cash basis, which is a non-statutory measure, is used by Management to present a clear view of the Bank’s underlying operating results. This excludes a number of items
that introduce volatility and / or significant distortions of the Bank’s current period performance, and allows for a more effective comparison of the Bank’s performance across reporting
periods and against peers. These items, such as amortisation of intangibles from acquisition, and accounting for economic hedges, are calculated consistently year on year and do not
discriminate between positive and negative adjustments. The Bank also uses the non-statutory measure of ‘Normalised Underlying Profit’, which represents the Normalised Income less
Normalised Operating Expenses, to provide users with a view on the underlying growth rate of the business before bad debt and tax expenses, which often carry volatility between periods.
These non-statutory measures have not been subject to review or audit.
BOQ ANNUAL REPORT 2012 21
Corporate Governance
Overview
Directors and Management of the Bank are committed to excellence in corporate
governance. In striving to achieve its objectives, the Bank endeavours to be a bank that
looks after its staff, values and services customers, rewards its shareholders and partners
with the community.
Corporate governance is not just about compliance, but about our values and our
behaviour. We believe in excellence in corporate governance because it is in the best
interests of the Bank and all of its stakeholders.
The Board has over many years developed and implemented policies and practices which
at the time of publishing this statement are consistent with the applicable ASX Corporate
Governance Principles and Recommendations, Second Edition with 2010 Amendments
('Principles') updated by the ASX Corporate Governance Council in 2010, and the
corporate governance standards set out in Australian Prudential Standard (APS) 510
"Corporate Governance".
In addition, the Board has adopted a fit and proper policy as required by APS 520 "Fit
and Proper", which sets out the requirements for regulated authorised deposit-taking
institutions to assess the competencies and fitness for office of persons appointed as
directors, senior managers and auditors. The Bank’s subsidiaries St Andrew's Insurance
(Australia) Pty Ltd and St Andrew's Life Insurance Pty Ltd are subject to APRA's prudential
supervision as insurance companies and subject to similar Corporate Governance and Fit
and Proper standards as those applicable to authorised deposit-taking institutions. The
Bank’s group policies comply with all of these standards.
The Corporate Governance Committee is responsible for reviewing the Bank’s corporate
governance framework and policies. As part of its process of continual improvement, the
Bank has carried out a full review of all of its corporate governance policies during the year,
and where necessary, has refined its code, policies and charters.
•
•
•
•
•
•
ensuring that areas of significant business risk are identified and effectively
managed;
monitoring the effectiveness of risk management practices;
setting targets for and assessing the performance of the Managing Director; and
establishing Board committees.
Certain powers are delegated to the CEO (also Managing Director) and senior
management including:
•
responsibility for day to day management of the Bank within the overall strategies
and frameworks approved by the Board including the following:
x
x
x
x
x
x
x
x
x
developing strategy for approval by the Board;
financial and capital management and reporting;
operations;
information technology;
marketing the current business of the Bank and acquiring new business;
customer relationship service;
developing and maintaining key external relationships, including with
investors, media, analysts and industry participants;
human resources, people development, performance and the creation of a safe
and enjoyable workplace; and
credit;
reporting to the Board on the performance of the Bank and its management; and
performing duties that are delegated by the Board.
The Board undertakes an annual performance review of the Managing Director.
Management has a program for annual performance reviews for all levels of management.
The review program includes the annual setting of key performance indicators at the start of
the financial year and a formal evaluation against those indicators at the conclusion of the
financial year. Reviews have been carried out in accordance with the program for all levels
of management, including the Managing Director.
An induction program exists for all staff.
The powers of the Board are also governed by the Bank’s constitution. The Bank intends to
seek shareholder approval for the adoption of a new constitution at the 2012 annual general
meeting. A copy of the current and proposed new constitution are available on the Bank’s
website at the following address: www.boq.com.au/aboutus_corporate_governance.htm
The Board has established the following Committees:
•
Audit Committee
•
Risk Committee
•
•
Nomination Committee
•
Budget Committee
Corporate Governance
Committee
•
Due Diligence
Committee
•
•
Remuneration
Committee
Information &
Technology Committee
•
Investment Committee
A separate Charter has been prepared for each Committee and is reviewed at least annually.
The composition of the Board Committees is reviewed annually. Details of the current
membership of the Board Committees are contained in the Directors’ Report.
The Bank’s key policies, Board and Committee charters and a checklist detailing its
compliance with the Principles appear on the Company’s website at the following address:
www.boq.com.au/aboutus_corporate_governance.htm
The Bank is required to disclose in this report the extent to which it has followed the best
practice recommendations in the Principles throughout the 2011/2012 financial year.
The Bank has followed those recommendations throughout the year. A summary of the
Bank's corporate governance policies and practices, organised in order of the Principles,
is set out below.
Principle 1: Lay solid foundations for management
and oversight
Board and Management
The Board Charter sets out the key governance principles adopted by the Board in
governing the Bank. There is a functional difference between the Board's role and
responsibilities and that of management which is recognised in the Board Charter.
The responsibilities of the Board include:
•
the overall corporate governance of the Bank including:
x
x
x
overseeing regulatory compliance;
ensuring the Bank observes appropriate ethical standards; and
achievement of the Bank's values.
•
•
the overall strategy and direction of the Bank, including approving, monitoring and
reviewing strategic, financial and operational plans;
the appointment of the Managing Director, including the delegation of powers to the
Managing Director within authorised discretionary levels;
•
succession planning, including Board and Committee composition.
In order to fulfil these responsibilities, the Board reserves to itself certain powers including:
•
•
•
reviewing and approving the Bank's strategic plan at least annually, approving
budgets and reviewing and approving financial results;
determining dividend policy;
dealing with matters outside discretions conferred on the Managing Director;
22
BOQ ANNUAL REPORT 2012
Principle 2: Structure the Board to add value
Board Structure
The Board currently has nine Directors (including the Chairman) eight of whom are
non-executive Directors (Mr William Kelty retired from the Board on 31 July 2012).
The Managing Director, appointed on 1 November 2011, is an executive Director.
Skills & Experience
The Board considers that individually and collectively, the Directors have an appropriate
mix of skills, qualifications and experience to enable them to appropriately discharge their
duties effectively.
The Board proactively plans ahead a number of years to ensure that membership
contains a diverse range of skills and experience that are relevant to the business
undertaken by the Bank, both now and into the future. As part of this process, a board
skills matrix is used which addresses factors such as age, gender, location of residence,
professional network, and professional experience and qualifications, in order to promote a
diverse range of views.
The Board seeks to ensure that its members have a diverse range of skills and experience
that reflect the breadth of operation of the Bank’s business and its future strategy.
Accordingly, the Board has been structured to include suitably qualified men and women
with experience in financial markets, insurance, banking, funds and wealth management,
strategy, superannuation, information technology and agribusiness. Several members also
hold directorships on other ASX-listed entities.
The skills and experience of the Directors and their length of service, membership of Board
committees and record of attendance at meetings, are set out in the Directors’ Report.
Prior to commencement, all new directors sign formal letters of appointment. The Bank
provides an induction program for new Board members.
Every Director and Committee of the Board has the right to seek independent professional
advice in connection with carrying out their duties at the expense of the Bank. Prior written
approval of the Chairman is required.
Nomination
The Board seeks to ensure that it has an appropriate mix of skills and diversity in its
membership. The Nomination Committee monitors the skills and experience of existing
Directors and the balance between experience and new skills, which may lead to
consideration of appointments of new Directors.
The names and qualifications of those appointed to the Nomination Committee, and
number of meetings of the Nomination Committee, during the financial year are set out in
the Directors’ Report.
The Charter of the Nomination Committee, which details its duties, objectives,
responsibilities and membership requirements, appears on the Bank’s website at the
following address:
www.boq.com.au/aboutus_corporate_governance.htm
When appointing a new Director, the Board considers the need to balance the skills,
tenure, experience, diversity and perspectives of its directors as a whole, and endeavours
to achieve an appropriate mix of these factors to enable the Board to facilitate achievement
of the Group's strategic goals. Potential candidates for board positions are sourced
using the Board’s contacts and market intelligence, as well as through the services of
specialist external advisers. When considering whether to support an incumbent Director’s
nomination for election or re-election, the Board considers that Director’s performance to
date, and the skills, experience and diversity that the Director brings to the Board.
Fit & Proper
All new and existing Directors are subject to assessment of their fitness and propriety to
hold office, both at the time of initial appointment and then annually, under the Bank's
fit and proper policy. This policy was established under APS 520 and the equivalent
standards GPS 520 and LPS 520 that apply to the Bank's APRA-regulated insurance
subsidiaries. This involves an assessment of the Director's qualifications and experience
against documented criteria for the competencies required for the office. The assessment
includes checks on the Director's propriety such as police checks and bankruptcy checks.
Independence
The Board assesses Director independence prior to initial appointment and then on at
least an annual basis, or, if it feels it is warranted, depending upon disclosures made by
individual Directors.
It is the responsibility of the Board to determine the independence of Directors in
accordance with the Policy and the Board has assessed that all of the current non-executive
Directors are “independent”.
In reaching its decision regarding individual director independence, the Board reserves
the right (except in the case of the Audit Committee membership) to consider a director to
be independent even through they may not meet one or more of the specific thresholds or
tests set out in the document, having regard to the underlying policy of the independence
requirement and the qualitative nature of the director’s circumstances.
The basis of the Board's assessment is its independence policy which takes into account
whether Directors have relationships with the Bank, its shareholders or advisers which are
likely to materially interfere with the exercise of the Director's unfettered and independent
judgment, having regard to all the circumstances. The Bank has established both
quantitative and qualitative guidelines to determine the materiality, which include the value
of a contractual relationship being the greater of $500,000 or 5% of the other company’s
consolidated gross revenues and the strategic importance of the relationship. A copy of the
policy is available on the ‘Corporate Governance’ page on the Bank’s website.
The Board Charter requires that all Directors bring an independent mind to bear on all
matters coming before the Board for consideration.
The Bank does not consider that the length of service on the Board of any of the
independent Directors is currently a factor affecting the Director's ability to act
independently and in the best interests of the Bank. The Board generally judges
independence against the ability, integrity and willingness of the Director to act, and places
less emphasis on length of service as a matter which impairs independence.
Board and Director Performance
The Bank conducts its business in a complex and constantly changing regulatory and
business environment. It is important that the Board review its own performance and that
of its Committees from time to time, with the objective of achieving and maintaining a high
level of performance in such an environment.
Under the Board Performance Review and Renewal Policy, the performance of the Board as
a whole, each Director and the Chairman is assessed annually. While the Board believes
in the value of a review, it does not consider that a full-scale review is necessarily required
every year, and in the years in which this does not occur, a review is conducted internally
and progress against any recommendations arising from the most recent externally
facilitated review are considered, together with any new issues which may have arisen.
The Chairman meets at least once a year with each individual Director to discuss board
performance and the individual Director’s performance, and at least once a year on a
formal basis with the Managing Director to discuss management’s view of the Board’s
performance, level of interaction with and support of management. Informal meetings
on such matters are held between the Chairman and the Managing Director throughout
the year.
The evaluation of director performance will have regard to factors including the following:
•
The expectation that each Director will actively seek a full appreciation of the
business of the Bank (or subsidiary, as applicable) including key business drivers,
the risks facing the Bank (or subsidiary) and applicable risk management policies,
the regulatory environment in which the company operates and banking, finance and
insurance sector issues (as applicable to the company);
•
Actively participate in open, honest discussion and bring an independent mind to
bear on matters before the Board;
•
The expectation that Directors and the Board as a whole will perform their duties:
x
x
x
in the interests of shareholders and other stakeholders;
in a manner consistent with the Bank’s core values of passion, achievement,
courage, integrity and teamwork; and
in accordance with the duties and obligations imposed by applicable laws.
•
Attendance at briefings, seminars and ongoing training programs.
BOQ ANNUAL REPORT 2012 23
Corporate Governance
(continued)
Principle 2: Structure the Board to add value (continued)
Board and Director Performance (continued)
The Bank recognises that gender diversity is an important component to achieve its goals,
and fully supports the ASX recommendations on diversity. The Bank’s current objectives
and targets for diversity include:
In addition, the Chairman is available to the Board and to senior executives at any time to
discuss Board performance.
During the 2011/12 financial year, the Board engaged an independent external facilitator
to undertake a review of the Chair, the Board as a whole, and all Committees and their
respective Chairs. A review of individual directors was undertaken internally.
The rationale for the review was to allow the Chairman and the Board to obtain an objective
view of the operations of the Board and its Committees. As part of this process, the
facilitator sought and obtained input from each Director and certain members of senior
management through the completion of interviews and an online questionnaire.
Based on the information provided and material reviewed, the external facilitator rated the
Board’s and Committee’s practices across a range of criteria including, the effectiveness
of the Board and Committees, the performance and leadership of the Chair and the
Committee Chairs, and the quality of meetings (including issues such as, the effectiveness
of agendas and papers, the working relationship between the Committee and management
and the performance of Committee members). A comprehensive report, detailing the
findings of the review and recommending areas for discussion and improvement, was
presented to the Board. The Board and management have worked actively to respond to
the issues identified.
The Board considers that the benefits gained from the review include the improvement of
Board processes and effectiveness.
Principle 3: Promote ethical and responsible
decision- making
Code of Conduct
The Bank's Code of Conduct sets out the principles which all Directors, officers,
employees, agents, owner-managers and their staff and contractors are expected to uphold
in order to promote the interests of the Bank and its shareholders and drive its relationships
with employees, customers and the community. The Code details the Bank’s expectations
regarding ethical standards, professionalism, respect for the law, conflicts of interest,
confidentiality, environment and good corporate citizenship. Through annual training and
enforcement of the Code, the Bank actively promotes ethical and responsible decision-
making within the Bank.
Securities Trading Policy
The Bank's Securities Trading Policy provides a framework to assist Directors, employees,
owner-managers, agents and contractors of the Bank to understand their legal obligations
with respect to insider trading. The Bank’s Securities Trading Policy meets the
requirements of the ASX Listing Rules.
Diversity
In order to attract and retain a diverse workforce, the Bank is committed to providing an
environment in which all employees are treated fairly and equitably, and where diversity
(gender, age, ethnicity, cultural background, impairment or disability, sexual preference,
religion) is embraced, and to maintaining a workforce that reflects the diversity of the
Australian population.
The Bank has established a group-wide Diversity Policy to reflect the Bank’s ongoing
commitment to diversity. A copy of the policy is available on the ‘Corporate Governance’
page on the Bank’s website. In line with this commitment, the Bank’s policy is to value the
differences that a diverse workforce brings and to provide a workplace where:
•
•
•
•
•
•
Everyone is valued and respected for their skills, experiences and perspectives;
Structures, policies and procedures are in place to assist employees to balance their
work, family and other responsibilities effectively;
Decision-making processes in recruitment take account of diversity;
Employees have access to opportunities based on merit;
The culture is free from discrimination, harassment and bullying; and
Employment decisions are transparent, equitable and procedurally fair.
•
•
•
•
increasing the representation of women on its Board;
continuing to grow the number of women in senior roles, with a target of 25% of
women in senior management roles by 2015. Senior Management roles are defined
as Levels 1-4 of the Bank’s occupational categories, being Managing Director, Group
Executive, General Manager or Head of Division;
encouraging the participation of women in leadership programs;
encouraging women to participate in the Bank’s Intern Program, to support the
development of women in professional and management roles; and
•
ensuring gender is not a factor in remuneration.
In the current reporting period, the Bank commenced a restructure under which a number
of the Group Executive team changed. The number of women in senior management did
not increase in the 2011/12 financial year, but the Board, Managing Director and Group
Executives, have a continued focus on gender diversity and are aware that further work
must be done to drive the changes necessary to achieve a more diverse workplace and the
Bank’s stated diversity targets.
Women currently constitute 57% of the Bank’s total workforce (57.7% in 2010/11). During the
year, the Bank employed 162 staff on a part-time basis (equating to 9.9% of the total workforce),
92% of which were women, and 50 staff on a casual basis (86% of which were women).
The Bank’s diversity objectives and targets are:
•
•
•
•
there are two women on the Board;
there are 14% of women in senior management roles (17.9% in 2010/11);
62% of participants in the Bank’s management training are women;
30% of participants in the Bank’s leadership development program, which was
established in 2009 and is run over a 12 month period, are women (47% in
2010/11); and
•
The Bank did not conduct an intern program in the 2011/12 year (33% in 2010/11).
As a result of the current performance, diversity is a key focus of Management.
During the 2011/12 financial year, the Bank established many of the necessary platforms
on which it can build a more flexible and diverse workplace. The Board and Executive
team received diversity training and unconscious bias training commenced for senior
management. External consultants have been engaged to work with the Executive team and
develop strategies to move the program forward.
The Bank’s Remuneration Committee annually assess the Bank’s progress against diversity
targets and objectives, including the representation of women at levels within the organisation.
The Bank is committed to facilitating the inclusion of women in all ranks within the
organisation, and removing barriers that may restrict career progression. To support this
position, the Diversity Policy stipulates that selection process for board and senior management
appointments is to involve the creation of a short-list identifying potential candidates for the
appointment which must include at least one female candidate wherever possible.
Furthermore, the Bank has taken the following steps to enhance diversity:
•
•
•
•
•
•
•
commenced a pilot program for the development of women in the organisation;
enhanced its recruitment and remuneration management processes;
improved its policies and processes for dealing with harassment and discrimination
complaints;
enhanced its family friendly terms and conditions of employment;
established a structure for considering flexible work arrangements (including the
ability for employees to purchase up to an additional two weeks annual leave per
year) and refined the processes for dealing with these requests;
taken steps to ensure parental leave arrangements are attractive and supportive of
parents needs; and
reviewed job advertising to ensure that it is aimed at attracting a wide pool
of candidates.
24
BOQ ANNUAL REPORT 2012
Principle 4: Safeguard integrity in financial reporting
Audit Committee
The Audit Committee is comprised in accordance with the recommendations in the
Principles and the requirements of APS 510, GPS 510 and LPS 510.
The Audit Committee assists the Directors in discharging the Board’s responsibilities
of oversight and governance in relation to financial and audit matters. The Committee
operates under a Charter approved by the Board, and is responsible for reviewing and
making recommendations to the Board on the following issues:
•
•
The Board is responsible for appointing the External Auditor, subject to shareholder
approval; and
Upon engagement, the External Auditor will have unfettered access to management,
staff, records and company facilities, and is permitted reasonable, agreed time to
conduct the audit.
The officers who perform a Chief Executive Officer function and a Chief Financial Officer
function state in writing to the Board that the Bank's financial reports present a true and fair
view, in all material respects, of the Bank's financial condition and operational results in
accordance with the relevant accounting standards.
•
•
•
•
•
External financial reporting, APRA and ASIC reporting requirements;
Adequacy of the external audit and the independence of the external auditor;
The internal audit procedures, scope of the internal audit work program, and
management’s responsiveness to findings from the internal audit process;
Actuarial engagements and independence; and
The results of the Credit Risk review process.
The Audit Committee will refer to the Risk Committee any matters that have come to the
Committee’s attention that are relevant for the Risk Committee for noting and consideration,
or which should be dealt with by that Committee.
The Audit Committee comprises non-executive members of the Board with the majority of
members being independent directors. The Audit Committee is chaired by an independent
director, who is not the Chairman of the Board and has at least three members. The
Committee’s charter requires that at least one member must have professional accounting
or financial management expertise. The names and qualifications of those appointed to the
Audit Committee, and number of meetings of the Audit Committee during the financial year
are set out in the Directors’ Report.
The Bank has established an Auditor Independence Policy, which is available on
the website and requires the External Auditor to comply with the requirements of the
Corporations Act 2001, APRA Prudential Standard APS 510 ‘Governance’ and Accounting
and Ethical Standards Board APES 110 – Code of Ethics for Professional Accountants,
section 290 ‘Independence’. The policy requires that the lead partner and review partner
of the External Auditor is rotated so that neither role is performed by the same partner for
more than 5 years, or more than five years out of seven successive years.
The Bank has an External Auditor Evaluation Policy, and under this policy, the Audit
Committee provides feedback to the Board annually in relation to the performance,
capability and service provided by the External Auditor.
The External Auditor contributes to the safeguarding of the integrity of the Bank’s financial
reporting. Accordingly, the Bank considers that the External Auditor must demonstrate the
following attributes:
•
•
•
•
•
Be an internationally recognised and respected accountancy firm which has access
to expert accounting standards research and sufficient resources and technical
expertise to carry out the engagement;
Have partners and staff that possess professional standing and appropriate skills,
knowledge and experience;
An ability to provide high audit quality control processes and efficient audit services;
Independence; and
An ability to satisfy the terms of the Fit & Proper Policy.
The procedure adopted for the selection and appointment of the External Auditor may vary
from time to time. The selection process may involve firms tendering by invitation or by the
Bank holding an open tender.
Key aspects of the External Auditor selection and appointment process are as follows:
•
•
The Audit Committee will annually review the External Auditor's performance and
independence and periodically benchmarks the cost and scope of the external
audit engagement;
The Audit Committee, in consultation with management, will approve the scope of
the audit, the terms of the annual engagement letter and audit fees;
Principle 5: Make timely and balanced disclosure
The Bank’s Market Disclosure Policy provides a framework to assist the Bank in achieving
its aims of keeping the market informed of material information and enhancing its
communication with the market, thereby ensuring its compliance with legal requirements.
The Bank is committed to creating and maintaining an informed market in its securities
and enhancing corporate governance by encouraging a culture of transparency in relation
to its corporate activities. The Bank will also provide relevant information to media
organisations, to ensure the broadest possible communication with investors and the
general market.
The Managing Director and the Company Secretary are responsible for communications
with the ASX. Continuous disclosure is a permanent item on the agenda for Board
meetings. All announcements made by the Bank to the ASX are accessible via the
Bank's website.
Principle 6: Respect rights of shareholders
The Bank's Investor Relations Policy is designed to promote effective communication with
shareholders, provide them with ready access to balanced, understandable information
about the Bank and simplify their participation at general meetings. This policy is in
addition to and designed to enhance the Bank's Market Disclosure Policy.
All information released to the market and the media is available via the Bank's website.
Speeches and presentations for significant conferences and meetings will also be posted
on the website, and webcast or teleconferenced where possible. Shareholders can access
the last three years’ press releases and market announcements, and financial data, on
the website.
Feedback from shareholders is also welcomed through the Bank's branch network or
through the 'contact us' page on the Bank's website.
Principle 7: Recognise and Manage Risk
The Board believes that risk management is a critical part of the Bank's operations and a
comprehensive risk management program has been developed. Management of risk is a
key function of the Risk Committee under its Charter, a copy of which is available on the
‘Corporate Governance’ page of the Bank’s website.
The Risk Committee is a sub-committee of the Board of Directors and assists the Board
to discharge its responsibilities to oversee the risk profile and recommend the risk
management framework of the Bank to the Board. The Risk Committee is responsible for
performing its duties in accordance with its Charter and making recommendations to the
Board on the effective discharge of its responsibilities for the key risk areas below and for
the management of the Bank's compliance obligations.
The Committee recommends to the Board the parameters of the Bank’s risk management
strategy, monitors the Bank’s risk profile with regard to risk appetite, determines the
appropriate level and quality of capital by annual review and approval of the Bank’s ICAAP
Policy to be implemented by management, and oversees risks inherent in the Bank’s
operations. Such oversight will include (but is not limited to) the following categories of
risk and matters as applicable to the business operations and risk management framework:
•
•
Market risk, which includes the risk of loss due to changes in the general level of
market prices, positions in interest rates, equity prices, foreign exchange rates and
commodities, or other factors specific to the Bank;
Liquidity risk, which is the risk that the Bank, although balance sheet solvent, cannot
meet or generate sufficient cash resources to meet its payment obligations in full as
they fall due, or can only do so at materially disadvantageous terms;
BOQ ANNUAL REPORT 2012 25
Corporate Governance
(continued)
Principle 7: Recognise and Manage Risk (continued)
•
Balance Sheet risk, which refers to the variability in value of interest rate products
held by the Bank as a result of changes in interest rates (liquidity, capital positioning,
securitisation, asset and liability composition all influence Balance Sheet risk);
•
•
•
Credit risk, being the risk that borrowers and transactional counterparties will
default on their obligations, and includes the risk of loss of value of assets due to
deterioration in credit quality;
Operational risk, which is the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events;
Compliance risk, being the risk to earnings of capital arising from violations of
or non-conformance with laws, rules, regulations, prescribed practices or ethical
standards. It also includes overseeing the establishment and maintenance of
risk-based controls to mitigate the risks associated with money laundering and
terrorism financing; and
Further information in relation to remuneration is contained in the Remuneration Report.
The Bank’s Securities’ Trading Policy provides that all employees are strictly prohibited
from entering into hedging arrangements (the use of financial products to protect against
or limit the risk associated with equity instruments such as shares, securities or options)
in relation to the unvested employee shares, securities or options received as part of
their performance-based remuneration, whether directly or indirectly. Any employee who
attempts to hedge unvested shares, securities or options renders those instruments liable
to forfeiture. Key management personnel are prohibited from hedging any shares or
securities of Bank of Queensland Limited or its subsidiaries.
Website
The following documents appear in the Corporate Governance section of the Bank’s
website, at the following address:
www.boq.com.au/aboutus_corporate_governance.htm
•
Other responsibilities, including the following:
•
Constitution (existing and proposed))
•
Board Charter
•
Policy on Independence of Directors
•
Board Performance Review and
Renewal Policy
•
Corporate Governance Committee
Charter
•
Audit Committee Charter
•
Risk Committee Charter
•
Remuneration Committee Charter
•
Nomination Committee Charter
•
Information Technology Charter
•
Diversity Policy
•
Market Disclosure Policy
•
Securities Trading Policy
•
Investor Relations Policy
•
BOQ Group Fit and Proper Policy
•
Code of Conduct
•
AML / CTF Statement
•
Award Rights Plan
•
Senior Management Option Plan
– SMOP
x
x
x
x
x
Reviewing and monitoring the performance of other risk categories and types,
such as “insurance risk” (the risk of exposure to financial loss and inability to
meet liabilities due to inadequate or inappropriate insurance product design,
pricing, underwriting, claims management or reinsurance management);
Review of any changes anticipated for the economic and business
environment, including consideration of emerging trends and other factors
relevant to the Bank’s risk profile;
Oversight of APRA statutory reporting requirements pertaining to risk matters,
and deal promptly with APRA reviews;
Oversight of adequacy of internal risk monitoring and reporting requirements;
and
Regular liaison with the Chairperson of the Audit Committee on relevant audit
matters that should come to the attention of the Risk Committee.
The Bank has separate risk management functions in Market Risk, Liquidity Risk, Balance
Sheet Risk, Credit Risk, Operational Risk, and Compliance Risk which are reported to the
Risk Committee through the Managing Director and the Chief Risk Officer. Employees are
trained on important risk management techniques.
The names and qualifications of those appointed to the Risk Committee, and number
of meetings of the Risk Committee during the financial year are set out in the
Directors’ Report.
The Board has received a report from management as to the effectiveness of the Bank's
management of its material business risks, that the declaration provided in accordance with
section 295A of the Corporations Act 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.
Principle 8: Remuneration
The Remuneration Committee is charged with assisting the Board to discharge its
responsibilities regarding the public reporting of remuneration information, remuneration
policies, director fees and entitlements and other matters. A copy of the Remuneration
Charter is available on the ‘Corporate Governance’ page of the Bank’s website.
The Remuneration Committee is comprised solely of non-executive directors and has
been in place for the whole of the financial year. The names and qualifications of those
appointed to the Remuneration Committee, and number of meetings of the Remuneration
Committee during the financial year are set out in the Directors’ Report.
The Board has approved a remuneration policy which is in accordance with the APRA
requirements set out in APS 510 (see the Directors' Report). The remuneration of the
Board, the Managing Director and senior management is overseen by the Remuneration
Committee. Non-executive Directors’ remuneration is distinguished from the remuneration
of the Managing Director and senior managers.
Directors' retirement benefits were frozen in 2003 and the practice discontinued. Directors
are entitled on retirement to their accrued benefit as at 31 August 2003 (increased annually
in line with CPI increases).
26
BOQ ANNUAL REPORT 2012
Directors’ Report
For the year ended 31 August 2012
The directors present their report together with the financial report of Bank of Queensland Limited ("the Bank") and of the Consolidated Entity, being the Bank and its controlled entities for
the year ended 31 August 2012 and the auditor’s report thereon.
Directors
The directors of the Bank at any time during or since the end of the financial year are:
Name, qualifications and independence status
Age
Experience, special responsibilities and other directorships
Neil Summerson
B Com, FCA, FAICD, FAIM
Chairman
Non-Executive Independent Director
Stuart Grimshaw
PMD, MBA, BCA
Managing Director & Chief Executive Officer
Executive Non-Independent Director
(Appointed 1 November 2011)
Steve Crane
B Com, SF Fin, FAICD,
Non-Executive Independent Director
Roger Davis
B.Econ. (Hons), Master of Philosophy
Non-Executive Independent Director
Carmel Gray
B Bus
Non-Executive Independent Director
John Reynolds
B Sc (Hons), Dip Ed, FAICD, FAIM
Non-Executive Independent Director
64
51
60
60
63
69
Neil Summerson is a Chartered Accountant with more than 40 years’ experience and is a past Chairman of
the Queensland branch of the Institute of Chartered Accountants. He was formerly the Queensland Managing
Partner at Ernst & Young. He is a Director of Australian Made Campaign Limited, Australian Property Growth
Limited and Australian Property Growth Fund. He is a former Chairman of the Brisbane Water Board and the
Uniting Healthcare Group. He is currently Chairman of IDEC Pty Ltd, Heuraka Pty Ltd and the Glendower Group
of Companies. Mr Summerson has been a Director of the Bank since December 1996 and was appointed
Chairman on 20 August 2008. Mr Summerson is Chair of the Bank’s Nomination Committee and a member of
the Budget and Audit Committees.
Stuart Grimshaw joined BOQ in November 2011 as Managing Director and Chief Executive Officer. Prior
to joining BOQ Stuart was a Non-Executive Director of Suncorp Group Ltd and Chief Executive Officer of
Caledonia Investments Pty Ltd, an investment house which manages approximately $2 billion of funds
under management. Before joining Caledonia, Stuart spent seven years leading a variety of functions at
Commonwealth Bank of Australia, including Chief Financial Officer and Group Executive, Wealth Management,
and a decade at National Australia Bank Limited in a variety of roles, culminating in the position of Chief
Executive Officer – Great Britain.
Steve Crane was appointed a Director of the Bank at the Annual General Meeting on 11 December 2008. He
has over 40 years’ experience in financial markets in Australia, including experience at both AMP and BZW
Australia, where he was promoted to Managing Director – Financial Markets in 1995 and became Chief
Executive in 1996. In 1998, when ABN AMRO Australia Pty Limited acquired BZW Australia and New Zealand,
Steve became Chief Executive and remained in this role until his retirement in June 2003. Steve is now a
member of the Advisory Council of RBS Group (Australia) and a Director of Transfield Services, APA Pipeline
Limited, Taronga Conservation Society Australia, and Chairman of nib holdings limited and Global Valve
Technology Limited. Mr Crane is Chair of the Budget Committee and a member of the Risk Committee.
Roger Davis was appointed a Director of the Bank on 20 August 2008. He has 32 years’ experience in banking
and investment banking in Australia, the US and Japan. He is currently a consulting Director at Rothschild
Australia Limited. He was previously a Managing Director at Citigroup where he worked for over 20 years and
more recently was a Group Managing Director at ANZ Bank. He is a Director of Chartis Australia Insurance
Ltd, Argo Investments Limited, Ardent Leisure Management Ltd and Ardent Leisure Ltd, Aristocrat Leisure Ltd,
Territory Insurance Office and Trust Ltd. He was formerly Chair of Charter Hall Office REIT and Esanda, and
a Director of ANZ (New Zealand) Limited, CitiTrust in Japan and Citicorp Securities Inc. in the USA. He has
a Bachelor of Economics (Hons) degree from the University of Sydney, a Master of Philosophy degree from
Oxford and is a Rhodes Scholar. Mr Davis is Chair of the Risk Committee and a member of both the Audit and
Corporate Governance Committees.
Carmel Gray was appointed a Director of the Bank on 6 April 2006. Ms Gray has had an extensive career in IT
and Banking. Ms Gray was Group Executive Information Technology at Suncorp from 1999 to 2004. Prior to
her Suncorp appointment she was General Manager of Energy Information Solutions Pty Ltd and Managing
Director of Logica Pty Ltd. She is a Non-Executive Chair of Bridge Point Communications Pty Ltd. Ms Gray
is Chair of the Corporate Governance Committee and Audit Committee (ceasing Audit Committee chair
31 October 2012) and a member of each of the Risk and Nomination Committees.
John Reynolds was appointed a Director of the Bank in April 2003. He has had extensive CEO-level experience
at top 100 media and resource companies in Australia and overseas. He was formerly Chairman of Arrow
Energy Limited and Queensland Cotton Corporation Pty Ltd. He is a Director of Mater Health Services Brisbane
Limited, Chair of Mater Education Limited and an advisor to various private companies and professional
organisations. Mr Reynolds is Chair of the Investment Committee and a member of each of the Information &
Technology, Nomination, Audit and Remuneration Committees.
BOQ ANNUAL REPORT 2012 27
Directors’ Report (continued)
Year ended 31 August 2012
Name, qualifications and independence status
Age
Experience, special responsibilities and other directorships
Michelle Tredenick
B Sc, FAICD
Non-Executive Independent Director
David Willis
B Com, ACA, ICA
Non-Executive Independent Director
Richard Haire
FAICD, FAIM
Non-Executive Independent Director
(Appointed 18 April 2012)
Bill Kelty retired as a director on 31/7/12
51
56
53
Michelle Tredenick was appointed a Director of the Bank in February 2011. She has more than 30 years’
experience in the banking, insurance and wealth management industries across Australia and New Zealand.
Michelle has held senior executive roles and been a member of the Executive Committee for National Australia
Bank, MLC and Suncorp as well as serving as an Executive Director for NAB and MLC companies. During her
career, she has held various roles as chief information officer, head of strategy as well as line responsibility for
corporate superannuation, insurance and wealth management businesses. Michelle is Chair of Comparehealth
Pty Ltd, IAG and NRMA Superannuation Pty Ltd. Ms Tredenick is Chair of the Information & Technology
Committee and a member of each of the Remuneration, Risk and the Investment Committees.
David Willis has over 33 years’ experience in financial services in the Asia Pacific, the UK and the US. He
is a qualified Accountant in Australia and New Zealand and has had some 17 years’ experience working
with Australian and foreign banks. David is a Director of New Zealand Post and Kiwi Bank, CBH (A Grain
Cooperative in Western Australia), Interflour Holdings, (a Singapore based flour Milling company), Converga
(a privately owned IT business) and Couriers Please, both located in Sydney. David chairs a Sydney based
Charity “The Horizons Program”. He was appointed a Director of the Bank in February 2010 and is Chair of the
Remuneration Committee and a member of both the Corporate Governance and Budget Committees.
Richard Haire was appointed a Director of the Bank on 18 April 2012. Mr Haire has more than 28 years’
experience in the international cotton and agribusiness industry, including 26 years in agricultural commodity
trading and banking. He is a Director of the Australian Institute of Company Directors (Qld Div) and Cotton
Research and Development Corporation and formerly a Director of Open Country Dairy (NZ) and New Zealand
Farming Systems Uruguay. Mr Haire is a member of each of the Audit, Information & Technology, Risk and
Investment Committees.
Company Secretary
Melissa Grundy, Company Secretary
BCom, GradDipAppFin (Sec Inst), GradDipACG, CPA, F Fin, FCSA, ASAIM, GAICD
Ms Grundy was appointed Company Secretary on 4 June 2012. Prior to joining the Bank, she held various roles within the Compliance division of ASX Limited, with the most recent
being State Manager (Qld) and Manager, Listings (Brisbane).
Ms Stacey Hester LLB (Hons), LLM, was appointed to the position of Company Secretary on 26 August 2009 and resigned as Company Secretary on 4 June 2012. Ms Hester continues to
hold various roles within the Bank including Head of Group Legal.
28
BOQ ANNUAL REPORT 2012
Directors' meetings
The number of meetings of the Bank's directors (including meetings of Committees of directors) and the number of meetings attended by each director during the financial year were:
Board of
Directors
Risk
Committee
Audit
Committee
Corporate
Governance
Committee
Remuneration
Committee
Nomination
Committee
Budget
Committee
Investment
Committee(1)
Information
Technology
Committee
Due Diligence
Committee
A
11
11
11
11
11
10
11
12
11
4
B
12
11
12
12
12
11
12
12
12
4
A
6(2)
5
6
7
6
-
4
-
-
2
B
A
B
A
B
7
6
7
7
7
-
5
2
-
2
6
5
-
-
6
6
6
-
-
1
7
6
-
-
7
6
7
-
-
1
-
-
1
-
-
1
-
-
-
-
-
1
1
-
-
1
-
-
1
-
A
5(2)
7
-
-
-
-
8
8
8
-
B
8
8
-
-
-
-
8
8
8
-
A
5
-
-
4
1
-
5
-
-
-
B
5
-
-
4
1
-
5
-
-
-
A
1
1
1
-
-
-
-
-
1
-
B
1
1
1
-
-
-
-
-
1
-
A
1(2)
1
-
-
1
-
1
-
-
-
B
1
1
-
-
1
-
1
-
-
-
A
6(2)
4
-
4
-
-
2
6
-
4
B
6
5
-
4
-
-
2
6
-
4
A
4
4
-
4
4
-
2
-
-
1
B
4
4
-
4
4
-
3
-
-
1
12
7
7
1
8
5
1
1
6
4
Neil Summerson
Stuart Grimshaw(3)
Steve Crane
Roger Davis
Carmel Gray
Bill Kelty(4)
John Reynolds
Michelle Tredenick
David Willis
Richard Haire(5)
Total number of
meetings held
A - Number of meetings attended
B - Number of meetings held during the time the director was a member of the Board / Committee during the year
(1)
(2)
The composition of the Investment Committee is not fixed. Composition and meetings held are set by the Board on an as required basis
Neil Summerson attends these Committee meetings but is not a formal Committee member
(3)
Stuart Grimshaw was appointed Chief Executive Officer and Managing Director on 1 November 2011. Stuart Grimshaw attends these Committee meetings but is not a formal Committee member
(4)
Bill Kelty retired as a Non-Executive Director on 31 July 2012
(5)
Richard Haire was appointed as a Non-Executive Director on 18 April 2012
Principal activities
The principal activity of the Consolidated Entity is the provision of financial services and
insurance to the community. The Bank has an authority to carry on banking business
under the Banking Act 1959 (Commonwealth) (as amended). There were no significant
changes during the year in the nature of the activities of the Consolidated Entity.
Operating and finance review
Profitability
A loss after tax was incurred for the year ended 31 August 2012 of $17.1 million compared
with the August 2011 profit after tax of $158.7 million. A decrease of $175.8 million
(111%) from the prior year. The reduction in profit after tax was largely attributable to
significant loan related impairment charges.
Profit before impairment charges and tax decreased 10% to $381.7 million from
$422.3 million in the prior year. Profit for the year was lower than the prior year due to
other operating income being $20.6 million lower than the prior year and a number of
significant operating expense items discussed in detail below.
Income
Total income increased by 1% during the year to $804.3 million from $796.4 million in
the prior year. The major driver of the subdued income growth, was the reduction in other
operating income. This was offset by growth in net interest income of $28.1 million (5%).
Net interest income for the year ended 31 August 2012 increased by 5% to $651.5 million
from the prior year result of $623.4 million. This result was driven by balance sheet growth
and margin improvement over the prior corresponding year.
Other operating income, excluding insurance income, decreased by 16% to $111.5 million
compared to the prior year of $132.1 million. The reduction was primarily due to a
reduction in net income from financial instruments and derivatives at fair value.
Insurance income increased 1% to $41.3 million from the prior comparative year of
$40.9 million.
Expenses
The Bank’s costs increased by 13% for the year ended 31 August 2012 to $422.6 million,
from the prior year result of $374.1 million. This increase is primarily due to an increase in
software amortisation and impairment expense of $10.5 million in the first half results, and
non lending losses and restructuring costs booked in the second half result.
Efficiency
The Bank’s cost to income ratio has increased from the 2011 comparative year of 47.0% to
52.5% in the current year. This is primarily a result of the impact of reduced income and
increased expenses as noted above.
Asset quality and provisioning
Impairment on loans and advances
Loan impairment expenses were $401.0 million for the year ended 31 August 2012.
This expense consisted of $227.8 million of specific provision impairment expense and
$173.2 million of expense relating to the collective provision.
The impairment expense of $401.0 million for the year ended 31 August 2012 has
increased by $200.5 million or 100% on the prior year expense of $200.5 million.
The Bank underwent a review of its commercial loans portfolio and provisioning approach
increasing specific provisions at the half year. The additional specific impairment expense
that has arisen has been primarily due to the continued decline in commercial property
prices in Queensland.
Collective provisions increased significantly providing greater coverage for potential
impairment expenses. The increased provision provides further coverage for the potential
impact that the decline in property prices may have on loss given default ratios in the
collective provisioning model.
BOQ ANNUAL REPORT 2012 29
Directors’ Report (continued)
Year ended 31 August 2012
Operating and finance review (continued)
Capital management
Asset quality and provisioning (continued)
Impaired assets
Impaired assets increased in gross terms to $525.3 million as at 31 August 2012 from
$444.3 million at 31 August 2011. Impaired assets as a percentage of non-securitised
loans have increased to 2.02% at 31 August 2012 from 1.71% at 31 August 2011.
Specific provisions totalling $220.3 million represents 42% of impaired assets.
As noted above, the increase in impaired assets is a result of a thorough independent
review of the Bank’s commercial loan portfolio and the continued decline in commercial
property prices in Queensland in the first half. Retail impaired assets have increased
significantly as a result of a thorough review of significantly past due accounts.
Asset growth
The lending approval growth translated into a loans under management balance (before
collective provision) of $34.3 billion, an increase of $0.9 billion from 31 August 2011
which represents growth of 3% for the year.
Housing loans grew $1.2 billion. This was offset by a reduction in commercial assets as a
result of the realisation of impaired assets.
No loans under management are off balance sheet.
Retail deposit growth
Retail deposits have increased for the year ended 31 August 2012 and have reached $22.3
billion, an increase of $2.0 billion from 31 August 2011, which represents an increase of
10% on the prior year.
The Board has set Tier 1 capital target range to be between 8.5% and 10% of risk weighted
assets and the total capital range to be between 11.5% and 13% of risk weighted assets.
The total capital adequacy ratio at 31 August 2012 was 12.6% and Tier 1 capital was 9.5%.
Perpetual Equity Preference Shares (“PEPS”), issued as hybrid capital instruments,
comprise 7.0% of total Tier 1 capital.
Net Tier 1 capital of 9.5% is represented by 8.5% of Core Tier 1 capital and 1.0% of hybrid
capital instruments, including preference shares.
Capital levels at 31 August 2012 are above the target range set by the Board after the
Bank conducted a fully underwritten entitlements offer and institutional placement of
approximately $450 million completed in 2012.
Branch network expansion
The Bank opened 11 branches and closed 2 branches during the year to bring total
branches to 268 as at 31 August 2012.
Of these 268 branches, 117 are located outside Queensland. No corporate branches were
converted to an owner managed branch during the year.
Shareholder returns
Statutory diluted loss per share for the period was 10.2c for the year 31 August 2012,
compared to the year ended 31 August 2011 result of earnings per share of 60.3c.
The Bank has declared a final dividend of 26 cents per share fully franked which is a
decrease of 7% from the prior year of 28 cents.
Dividends
The Bank has continued to focus on retail deposits growth in an effort to improve the
funding mix of the balance sheet.
Dividends paid or declared by the Bank to members since the end of the previous financial
year were:
Type
Final 2011
Declared after the end of the year
•
•
Final – preference shares (PEPS)
Final – ordinary
Interim 2012
Declared and paid during the year
•
•
Interim – preference shares (PEPS)
Interim – ordinary
Final 2012
Declared after the end of the year
•
•
Final – preference shares (PEPS)
Final – ordinary
Cents
per share
Total Amount
$m
% franked
Date of Payment
250
28
234
26
217
26
5.0
63.1
4.6
79.0
4.3
80.3
100%
100%
100%
100%
100%
100%
17/10/2011
02/12/2011
16/04/2012
25/05/2012
15/10/2012
08/12/2012
All the franked dividends paid or declared by the Bank since the end of the previous financial year were franked at the tax rate of 30%.
The balance of the Bank of Queensland Limited dividend franking account at the date of this report, after adjusting for franking credits and debits that will arise on payment of income tax
and dividends relating to the year ended 31 August 2012, is $124.9 million credit calculated at the 30% tax rate (2011: $127.3 million credit).
It is anticipated, based on these franking account balances that the Bank will continue to pay fully franked dividends in the foreseeable future.
30
BOQ ANNUAL REPORT 2012
Operating and finance review (continued)
Environmental regulation
Remuneration Report – Audited
Introduction
The BOQ Board including the Remuneration sub committee seeks to ensure executive pay
is aligned with the long term creation of value for shareholders.
The year to 31 August 2012 has seen a period of change in both the make up of the
Executive Team and the Remuneration Policies and Practices. Following the appointment
of a new CEO in November 2011, the Board has supported the CEO’s recommendations for
significant change to the executives of the Consolidated Entity. In doing so the Board has
sought to ensure quality executives are attracted through competitive remuneration whilst
also ensuring the creation of value for shareholders over the long term.
During this period the Board has set the frameworks in place to ensure remuneration
practices reflect the current economic and market environment, both appropriately
rewarding staff and ensuring a strong alignment with shareholder value over time. Some of
the initiatives implemented during this period include:
•
•
•
•
•
•
•
implementing a freeze on fixed remuneration in FY 2013 for all employees earning
over $100,000 (this freeze extended to Non-Executive Director fees);
reducing the short-term incentive bonus pool available for distribution to executives
taking into account both the financial performance of the Consolidated Entity and the
return to shareholders over the 2012 Financial Year;
introducing a deferral element to the short-term incentive award such that once any
STI payment exceeds $100,000, 50% of the total amount awarded is deferred for a
period of 2 years (50% vesting at the end of year 1 and 50% at the end of year 2);
providing the discretion for the Board to claw-back bonuses where certain events
occur during the deferral period;
reviewing the remuneration policy to better align and support the governance and
risk framework;
enhancing the link between individual KPI setting and performance measurement for
payment of short-term incentives reducing the impact of STI for the CRO and CFO
and weighting towards personal performance rather than the performance of the
consolidated entities; and
ensuring long-term incentives reward employees consistent with shareholder
rewards through the use of total shareholder return (TSR).
The Board has sought to address suggestions received concerning the readability of the
remuneration report and has taken steps to improve both the structure and communication
of the link between executive pay and performance in this year’s report. A table outlining
the actual take home pay received by current executives during FY 2012 has been included
to enable shareholders to clearly identify each component of remuneration received
by an executive. In addition further details in respect of the STI and LTI, including the
performance hurdles have been included.
We acknowledge that this is a detailed report however we have sought to provide both the
information required by our regulators as well as additional information we believe our
shareholders require.
The Consolidated Entity’s operations are not subject to any significant environmental
regulations under either Commonwealth or State legislation. The Board believes that the
Consolidated Entity is not aware of any breach of environmental requirements as they apply
to the Consolidated Entity.
State of affairs
Significant changes in the state of affairs of the Consolidated Entity during the financial
year were as follows:
Director and Management changes
During the year, there have been significant changes to the Executive Team. The
appointment of Stuart Grimshaw as CEO in November was followed by the appointment of
a number of new Executives to the Bank. Executives appointed within the year were:
•
•
•
•
•
Peter Deans (Chief Risk Officer) – 26 March 2012
Brendan White (Group Executive, Business Banking, Agribusiness & Financial
Markets) – 2 April 2012
Matthew Baxby (Group Executive, Retail and Online Banking) – 17 May 2012
Jon Sutton (Chief Operating Officer) – 2 July 2012
Anthony Rose (Chief Financial Officer) – 1 August 2012
Capital Raising
During the year the Bank completed a capital raising of $450 million of ordinary shares,
comprising of:
•
•
Institutional Placement of $150 million to institutional investors;
Accelerated pro-rata non-renounceable entitlement offer of $300 million comprising:
x
x
an Institutional Entitlement Offer of $138 million; and
a Retail Entitlement Offer of $162 million.
The capital raising resulted in the issue of 74.4 million new ordinary shares at $6.05
per share.
Acquisitions
Series 2012-1E EHP REDS Trust was opened on 24 May 2012.
Refer to Note 33 of the financial report for further information.
Disposals
Series 2004-1 REDS Trust was closed on 28 December 2011.
Series 2008-1 E EHP REDS Trust was closed on 13 July 2012.
Refer to Note 33 of the financial report for further information.
Events subsequent to balance date
Dividends have been declared after 31 August 2012, refer to Note 7.
The financial effect of the above transaction has not been brought to account in the financial
statements for the year ended 31 August 2012.
Likely developments
The Bank will continue to provide a wide range of banking and financial services for the
benefit of its customers, expanding and developing these where appropriate. This will
require further investment, particularly in systems and information technology.
Further information about likely developments in the operations of the Consolidated
Entity and the expected results of those operations in future financial years have not been
included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Consolidated Entity.
BOQ ANNUAL REPORT 2012 31
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
Contents
Executives:
Current
1
2
3
4
5
6
7
8
Key management personnel
Remuneration governance
Remuneration policy
Managing Director remuneration framework
x
x
x
Fixed remuneration
At-risk cash remuneration
At-risk equity remuneration
Executive remuneration framework
Non-executive Director remuneration framework
Link between financial performance and variable remuneration
Remuneration disclosures
x
x
x
Take-home pay summary
Statutory disclosures
Equity held by the MD and KMP
9
Executive contracts
10
Senior Managers’ options and rights
2012 Remuneration Report
This remuneration report is prepared for consideration by shareholders at the 2012 Annual
General Meeting of the Consolidated Entity. It outlines the overall remuneration strategy,
framework and practices adopted by the Consolidated Entity for the period 1 September
2011 to 31 August 2012 and has been prepared in accordance with Section 300A of the
Corporations Act 2001 and its regulations.
1. Key Management Personnel
Key management personnel (“KMP”) include those directors and executives that have
authority and responsibility for planning, directing and controlling the activities of the Bank
and Consolidated Entity.
The KMP for the financial year ended 31 August 2012 are as follows:
Directors:
Neil Summerson
Chairman (Non-executive)
Stuart Grimshaw
Managing Director and Chief Executive Officer
(appointed 1 November 2011)
Steve Crane
Roger Davis
Carmel Gray
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
John Reynolds
Director (Non-executive)
Michelle Tredenick
Director (Non-executive)
David Willis
Richard Haire
Director (Non-executive)
Director (Non-executive) (appointed 18 April 2012)
Bill Kelty retired as Director (Non-executive) on 31 July 2012.
Jon Sutton
Chief Operating Officer (appointed 2 July 2012)
Anthony Rose
Chief Financial Officer (appointed 1 August 2012)
Peter Deans
Chief Risk Officer (appointed 26 March 2012)
Brendan White
Matthew Baxby
Group Executive, Business Banking, Agribusiness &
Financial Markets (appointed 2 April 2012)
Group Executive, Retail and Online Banking
(appointed 17 May 2012)
Chris Nilon
Group Executive, IT and Operations
Renato Mazza
Group Executive, Insurance
Former
Darryl Newton
Chief Risk Officer (until 26 March 2012)
Ram Kangatharan
Chief Operating Officer (until 30 March 2012)
David Tonuri
Group Executive, Strategy and Customers (until 11 May 2012)
Ewan Cameron
Chief Financial Officer (until 20 July 2012)
Keith Rodwell
Group Executive, National Finance (until 24 August 2012)
2. Remuneration Governance
The Remuneration Committee is responsible for making recommendations to the Board
on remuneration policies and directors’ and executives’ remuneration (which includes the
Company Secretary). This Committee considers remuneration issues regularly, usually bi-
monthly, and obtains advice from external independent remuneration specialists to assist in
its deliberations. In the 2012 financial year the Remuneration Committee met 8 times.
Under the Consolidated Entity’s Remuneration Committee Charter, the Committee
undertakes to do the following:
•
•
•
•
•
•
Conduct annual reviews of the Consolidated Entity’s Remuneration Policy to ensure
compliance with the Consolidated Entity’s objectives and relevant standards;
Review and provide recommendations to the Board on remuneration, recruitment,
retention and termination policies and procedures for senior executives;
Review and provide annual recommendations to the Board on the individual
remuneration arrangements of the Managing Director (“MD”), KMP and risk and
governance personnel (“Responsible Persons”);
Review and provide annual recommendations to the Board on the remuneration
principles for employees in Group Risk, Credit, Finance and Legal functions on a
group basis;
Review and provide recommendations to the Board on the remuneration of any
employees specified by APRA as KMP or Responsible Persons; and
Consider and approve Non-Executive Director (“NED”) remuneration, including
ensuring that the structure of NED remuneration is clearly distinguished from
senior executives.
The Remuneration Committee has undertaken significant work to ensure that the
remuneration policy adequately supports the Consolidated Entity’s overall risk management
framework. This has resulted in the inclusion of minimum risk gateways to be satisfied
in order for STI payments to be made, the introduction of STI deferral across all KMP and
Responsible Persons, and the inclusion of Board discretion to enable claw-back of STI
and LTI.
Use of External Advisors and Remuneration Consultants
Where necessary, the Board seeks advice from independent experts and advisors including
remuneration consultants. Remuneration consultants are used to provide expert advice
concerning remuneration packages, structuring and consistency with comparable roles in
the market. Other external advisors assist with administration of the Consolidated Entity’s
performance remuneration plans and ensuring that the appropriate legal parameters are
understood and employment contracts are appropriately executed.
32
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
2. Remuneration Governance (continued)
Use of External Advisors and Remuneration Consultants (continued)
Remuneration consultants are engaged by and report directly to the Remuneration
Committee. When remuneration consultants are engaged, the Committee ensures that the
appropriate level of independence exists from the Consolidated Entity’s management.
The Board is satisfied that remuneration recommendations made during the year are
free from undue influence by members of key management personnel to whom the
recommendations relate. Where the consultant’s engagement requires a recommendation,
the recommendation is provided to, and discussed directly with the Chairman of the
Remuneration Committee to ensure management cannot unduly influence the outcome.
The following table sets out the details of the consultants fees during the 2012
financial year:
•
•
•
Enhancing the setting of key performance indicators (“KPI”) for the short and long-
term incentive plans to create a tighter link between pay and performance. The Board
will continue to link shareholder returns to employee reward through the available
bonus pool for the STI and the use of total shareholder return as a key performance
measure in the LTI;
Implementation of a two year deferral policy for KMP, Responsible Persons and
Senior Management, which sees that once any STI payment exceeds $100,000,
50% of the total amount awarded is deferred for a period of 2 years; and
Taking steps to ensure that the Consolidated Entity’s financial performance has
a reduced impact on the STI for the Chief Financial Officer (“CFO”), Chief Risk
Officer (“CRO”) and other key risk personnel. In particular, the Board determined
that the CRO and key risk personnel should be rewarded based on their individual
performance against specified objectives, rather than the financial performance of
the Consolidated Entity. This will help to establish independence in decision making
and is aligned with good prudential practice. The STI opportunity for the CFO and
CRO is also lower as a proportion of fixed remuneration than the other KMP, as
outlined in Section 5.3.
Fees
$15,981
(exclusive of GST)
4. Managing Director Remuneration Framework
The remuneration structure in place for the Managing Director is consistent with the
Consolidated Entity's remuneration policy and includes the following components:
Remuneration
consultant
Egan Associates
Services provided
Remuneration benchmarking to assist with the
determination of fixed pay for the incoming
MD and KMPs, provision of advice on the
terms and conditions of both cash and equity
based incentive plans and general advice
relating to market trends
Total
Fixed
remuneration
$15,981
(exclusive of GST)
Short-term
incentives
3. Remuneration Policy
The remuneration arrangements for Consolidated Entity employees are designed to be
competitive in each of the markets in which the Consolidated Entity competes for talent and
vary accordingly from business to business, function to function and among individuals.
Fundamental to all arrangements is that they contribute to the achievement of short
and long-term objectives, enhance shareholder value, avoid unnecessary or excessive
risk-taking and discourage behaviours that are contrary to the Consolidated Entity’s
stated values. With advice from Management, the Remuneration Committee monitors
and reshapes remuneration programs to support these underlying objectives, respond to
proposed and enacted legislation and regulatory initiatives and adjust to changes in the
business cycle.
Long-term
incentives
The Board’s objective is to ensure remuneration packages properly reflect employees’
duties, responsibilities and levels of performance, as well as ensuring that remuneration
attracts and motivates people of the highest calibre. The Consolidated Entity’s executive
reward structure is therefore designed to:
Other
•
•
•
•
Incentivise executives to pursue the short and long-term growth and success of the
Consolidated Entity within an appropriate risk control framework;
Demonstrate a clear relationship between executive performance and remuneration;
Provide sufficient rewards to ensure the Consolidated Entity attracts and retains
suitably qualified and experienced executives for key roles; and
Ensure that an element of these rewards is deferred to assist in ensuring appropriate
risk based decision making and behaviour.
Key developments in the remuneration strategy made during the 2012
financial year
During the 2012 financial year, the Board further developed a number of key remuneration
matters including:
•
A review of the interaction of the remuneration policy with the Consolidated Entity’s
governance and risk framework to ensure that remuneration practice is aligned, and
supports, the governance and risk framework;
Base salary and benefits including superannuation
Annual award of short-term performance incentives subject to:
•
•
Achievement against targets established annually;
Achievement of specified, quantifiable results, including the
Consolidated Entity’s performance against budget for net
profit after tax and cost to income ratio; and
•
Individual performance criteria including risk KPIs.
The STI is received in the form of cash and Deferred Award Rights
(“DARs”), with 50% of the award made in DARs that have a 2 year
vesting period (50% vesting year 1 and 50% year 2).
Refer to Table 1 in Section 5 for detail on the 2012 STI Plan.
Annual grant of long-term incentives in the form of Award Rights
made up of Performance Award Rights (“PARs”). The rights vest
according to the vesting schedule for the Award Rights Plan.
Refer to Tables 2 and 3 in Section 5 for detail on the 2012 Award
Rights Plan.
Stuart Grimshaw received an allocation of PARs on commencing
with BOQ. These have a three year vesting period with performance
hurdles which will be tested upon the announcement of BOQ’s
annual result for 2014. Refer to Table 7, Table 8 and Section 9.1 for
further details on the MD’s PARs.
Further detail in respect of the Managing Director’s contractual arrangements can be found
in Section 9.1.
5. Executive Remuneration Framework
Executive staff compensation is based on a total remuneration based approach comprising
an appropriate mix of fixed pay (salary and benefits) and variable pay in the form of
cash and equity-based incentives. This equity portion is delivered over time and subject
to continued tenure of the participant, the performance of the Consolidated Entity and
compliance gateways.
5.1 Current remuneration framework
Total remuneration for the KMP consists of the following three components:
•
•
•
fixed remuneration;
at-risk cash remuneration; and
at-risk equity remuneration.
BOQ ANNUAL REPORT 2012 33
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
5. Executive Remuneration Framework (continued)
5.2 Fixed remuneration
Business objectives and STI Plan design features are reviewed annually by the
Remuneration Committee prior to the commencement of the plan year.
The target award for each participant is stated as a percentage of the executive’s total fixed
remuneration. For the 2012 STI Plan, the STI opportunity ranges are as follows:
Executives are offered a competitive fixed component of pay and rewards that reflect the
core performance requirements and expectations of their roles.
The level of fixed remuneration is approved by the Board and reviewed annually, with
reference to market data provided by remuneration consultants, to ensure that it has regard
to organisations within the financial services sector and those organisations serving
similar customers.
Executives’ fixed remuneration is set out in Table 10 of this report. Management has
recommended and the Board has approved that there will be no increase to fixed
remuneration for all KMP in FY 2013.
5.3 At-risk cash remuneration
KMP, Responsible Persons and Senior Management participate in the 2012 STI Plan under
which the participants receive payments in accordance with specified quantifiable results
and within appropriate risk management parameters. Linking these payments to individual
and corporate performance within the risk management parameters assist to ensure that
participants continue to create a prudent performance focused work culture within the
Consolidated Entity.
MD
CRO & CFO
COO,GE Business Banking, Agribusiness & Financial Markets and
GE Retail and Online Banking
Other KMP
0 – 160%
0 – 100%
0 – 140%
0 – 120%
The Board introduced deferral during the 2012 financial year, for any STI payment
exceeding $100,000, 50% of the total amount awarded is deferred for a period of 2 years
(50% vesting at the end of year 1 and 50% at the end of year 2). The MD already had
deferral in place as outlined in Section 4 of this report. The decision to release deferrals
will be at the complete discretion of the Board, and it may request advice from the CRO.
Table 1 provides an overview of the 2012 STI plan.
Table 1 2012 STI Plan
2012 STI Plan
Participants
Link between performance
and award
The 2012 STI Plan is an incentive plan under which participants receive payments in cash having regard for quantifiable results achieved within
appropriate risk management parameters.
KMP, Responsible Persons and Senior Management, being those individuals who have the ability to influence achievement of the Board’s objectives.
KMP will have a higher STI opportunity and proportion of STI tied to the financial performance of the Consolidated Entity than other participants that are
less senior within the Consolidated Entity.
The performance hurdles for the KMP include:
The Consolidated Entity’s performance against target net profit after tax (“NPAT”);
The Consolidated Entity’s cost to income ratio;
Individual performance criteria; and
Adherence with the Consolidated Entity’s risk framework.
•
•
•
•
NPAT
The Board has set a financial gateway for receiving a STI payment, being the achievement of a minimum of 90% of the target NPAT. Where this gateway
is not met, payment is at the complete discretion of the Board which may have regard for a number of factors including Total Shareholder Return over the
period.
The NPAT hurdle is considered an appropriate hurdle within the STI given it is a direct measurement of financial performance of the group.
Cost to Income Ratio
Participants will receive a percentage of the STI payment if the Consolidated Entity achieves its budgeted cost to income ratio, increasing on a sliding
scale as the ratio improves and decreasing as performance deteriorates.
The cost to income ratio is included as a hurdle within the STI to assist in driving cost management and discipline and align participants with the
financial growth of the Consolidated Entity.
Individual performance criteria
Personal performance measures are agreed annually and will generally be role specific. Individual performance criteria consider multiple factors
including individual behaviours, the business results and/or strategic accomplishments of the business or function, and people management. The Board
selected these measures to reflect the Consolidated Entity’s short-term and long-term strategy.
The key performance indicators (“KPIs”) for each participant are reviewed and moderated by the Remuneration Committee.
Risk framework
The Board has structured the remuneration strategy to support the Consolidated Entity’s overall risk framework. The STI includes specific risk KPI’s that
are designed to ensure specified quantifiable results are achieved within appropriate risk management parameters. The risk framework includes individual
risk KPI’s, group KPI’s and are subject to Board oversight. Failure to meet the risk KPI’s will result in modification, suspension or withdrawal of STI and
will impact the participant’s deferred amount, providing a mechanism for claw-back, where appropriate.
Remuneration Report – Audited (continued)
34
BOQ ANNUAL REPORT 2012
5. Executive Remuneration Framework (continued)
5.3 At-risk cash remuneration (continued)
Table 1 2012 STI Plan
Performance period
Deferral
Performance will be assessed over the financial year. Payments under the STI will generally be made in October, following assessment of performance
over the relevant performance period.
Once any STI payment exceeds $100,000, 50% of the total amount awarded is deferred for a period of 2 years (50% vesting at the end of year 1 and 50%
at the end of year 2). The deferred amount, plus interest at the term deposit rate, will be paid at the end of the deferral period subject to the individual
remaining in employment and the Board determining that no “claw-back” events have occurred. These deferred amounts accumulate over the years and
provide the Board with a pool of unpaid funds to “claw-back”.
The Government’s proposed legislation, requiring disclosure of any arrangements to claw-back remuneration where material misstatement in the financial
statements has occurred, has not yet been passed. However, the Board currently has the discretion to adjust STI through the reduction or forfeiture of
deferred STI and considers that deferral in the form of cash is most appropriate having regard to the proposed claw-back provisions. The mechanisms in
place to claw-back remuneration will be reviewed by the Board once the reforms have been finalised and the current policy tested.
As mentioned above, the MD will receive his deferred STI in the form of DARs with a 2 year vesting period. The Board determined that the MD should
receive a portion of STI in equity to further align the MD with the shareholder.
Forfeiture
The STI award, including any outstanding deferred portion, will be forfeited where the participant (other than the MD) ceases employment with the
Consolidated Entity for reasons other than death, retirement or genuine redundancy.
The deferred portion of an STI award may also be forfeited where the Board determines that the risk conditions have not been met. Advice may be sought
from the CRO in making this determination.
Upon termination other than for serious misconduct, unvested PARs held by the MD will continue to be held and vest according to the vesting schedule.
This is intended to ensure the MD is focussed on the long-term performance of the Consolidated Entity beyond the term of his direct tenure. Upon
cessation of employment unvested DARs held by the MD will lapse except where he is terminated on notice or terminated after fundamental change.
Under these circumstances the DARs will continue to be held and vest according to their vesting schedule.
The MD did receive an allocation of DARs as part of the deferral arrangement in place in
connection with the STI plan (refer Section 4 of this report for further details).
Table 3 provides an overview of the 2012 DARs Plan.
The maximum LTI award for each KMP participant is stated as a percentage of the
executive’s total fixed remuneration. For the 2012 LTI Plan the Board worked to a maximum
face value of 15% of fixed remuneration for DARs and 100% of fixed remuneration
for PARs.
There are no voting rights attached to PARs and DARs awards. Upon exercise of Award
Rights, participants receive BOQ ordinary shares to which voting rights are attached.
Through its security trading policy the Consolidated Entity has guidelines restricting
Directors and Executives dealing in Consolidated Entity securities. This policy includes
margin lending and hedging of risk associated with directors’ and executives’ ownership
of Consolidated Entity securities. All employees are prohibited from entering into hedging
arrangements in relation to their unvested employee shares, securities or options.
Further details of the nature and amount of the major elements of remuneration paid to
each Director and KMP are detailed in Section 8.
5.4 At-risk equity remuneration
The Board reviews and adjusts the structure and quantum of the long-term incentives
on an annual basis to ensure their effectiveness, and recognise the potential impact of
participants on the Consolidated Entity’s future performance. The granting of equity assists
to align the interests of the Executive with those of the shareholder.
Executives, including the Managing Director, participate in the 2012 Awards Rights
Plan under which the participants receive rights to acquire shares at zero cost subject to
achievement of performance and service conditions. No amount is payable by employees
for the grant or exercise of these award rights. The Awards Rights Plan was approved by
shareholders on 11 December 2008 and further ratified at the AGM on 8 December 2011.
There are two types of award rights that can be granted to executives under the plan,
Performance Award Rights ("PARs") and Deferred Award Rights ("DARs"). Eligibility,
quantum and mix of DARs and PARs varies based upon a participant’s accountabilities,
contribution, potential and seniority.
Grants of PARs to executives align their interests with those of the Consolidated Entity and
its shareholders. This includes encouraging behaviour that supports the risk management
framework and the long-term financial soundness of the Consolidated Entity that in turn
supports long-term performance. PARs have performance hurdles which will allow the
Board to ensure that incentives are aligned with the Consolidated Entity’s future strategies
and the interests of shareholders.
Table 2 provides an overview of the 2012 PARs Plan.
DARs are awarded to a broader group of employees and are designed to promote employee
retention and productivity. The number of DARs awarded to an individual employee
depends on their position and relative performance and potential as determined under the
normal performance review and development process undertaken for all employees.
DARs are linked with continued employment and adherence to risk management principles
with the intent of focussing employees on the Consolidated Entity’s performance.
Following the appointment of the CEO and in anticipation of a review of senior executives,
no DARs were issued as part of the 2010 / 2011 remuneration review. In FY 2012, all KMP
participating in the LTI plan received PARs, subject to the Total Shareholder Return hurdle
outlined in Table 2. No DARs were issued to KMPs as part of the LTI in FY 2012.
BOQ ANNUAL REPORT 2012 35
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
5. Executive Remuneration Framework (continued)
5.4 At-risk equity remuneration (continued)
Table 2 Performance Award Rights
2012 PARs Plan
Grants of PARs are made to Group Executives and other identified key senior managers due to the pivotal role they play in achieving the longer-term
business goals of the Consolidated Entity. The Board believes that part of the rewards for their services to the Consolidated Entity should be performance-
based, at risk and should involve equity interests in the Consolidated Entity. This approach reflects national and international best practice in executive
remuneration and corporate governance.
Participants
MD, Group Executives and other identified key senior managers.
Link between performance
and award
Vesting schedule
PARs vest based on the Consolidated Entity’s Total Shareholder Return (TSR) performance measured against a Peer Group over a 3 year period.
The Peer Group consists of the S&P / ASX 200 companies, excluding selected entities in the resources, real estate investment trust, offshore
headquartered telecommunications, energy and utilities sectors, and incorporating such other inclusions and exclusions as the Board considers
appropriate. No changes have been made to this group since implementation of the scheme in 2008 other than to reflect companies moving in or out of
the ASX 200 or being delisted.
TSR is a measure of the entire return a shareholder would derive from holding an entity’s securities over a period, taking into account factors such as
changes in the market value of the securities and dividends paid over the period. The Board has selected performance against TSR because it reflects the
returns made to shareholders relative to other comparable securities and provides a meaningful incentive for executives to outperform peers. The Board
has the discretion to adjust PAR holdings to compensate for the impact of the 2012 capital raising. At this time that discretion has not been exercised and
accordingly individuals who hold PARs had their value diluted. The TSR calculation is undertaken by an independent qualified valuer.
An independent qualified valuer was engaged to measure the TSR performance over the year for shareholders who participated in the entitlement offer.
The TSR achieved for the calendar year was 15.4%, this placed the Bank’s TSR in the 70th percentile of the Peer Group.
One half of an employee’s PARs vest if the Consolidated Entity’s TSR performance over the three year holding period is in the top 50% of the Peer Group.
All of the PARs vest if the Consolidated Entity’s TSR performance is in the top 25%. For TSR performance between those targets, a pro-rata of the PARs
between one half and 100% would vest.
None of the PARs vest if the Consolidated Entity’s TSR performance is in the bottom 50% of the Peer Group.
Vested PARs are generally exercisable within 5 years after they are granted (approximately 2 years after vesting). PARs which lapse, do not vest, or are
not exercised within 5 years after grant, will expire.
Performance period
The performance period is 3 years.
Forfeiture
If an employee ceases employment for serious misconduct involving fraud or dishonesty, their PARs (whether exercisable or not) will lapse. If an
employee resigns or is terminated for other reasons, vested PARs may generally be exercised within 90 days of the employee ceasing employment.
PARs which are not vested may, at the Board’s discretion, vest on a pro rata basis and become exercisable if the employment ceases for reasons including
a transfer of employment to an Owner-Managed Branch, retirement, redundancy, death, total and permanent disablement. Otherwise, unvested PARs will
lapse on cessation of employment for all KMP other than the MD and CRO.
Upon termination, unvested PARs held by the MD and CRO will remain on-foot and vest according to the vesting schedule and subject to the
performance hurdles. This ensures that these key executives remain aligned to and have regard for the financial performance of the Consolidated Entity
post-employment.
Table 3 Deferred Award Rights
DARs Plan
Grants of DARs are generally awarded to a broader group of employees and are designed to promote employee retention and productivity. There were no
DARs granted to KMP as part of the LTI arrangements during FY 2012 (DARs were awarded to the MD as part of the contracted deferral mechanism of STI
award and certain KMPs as part of sign on arrangements).
Participants
Broader employee group which can include the MD and KMP.
Link between performance
and award
DARs are linked with continued employment and adherence to risk management principles with the intent on focussing employees on the Consolidated
Entity’s performance and potential.
There are no market performance hurdles or vesting conditions for DARs other than the holder remaining an employee of the Consolidated Entity and
meeting agreed risk guidelines.
Vesting schedule
DARs currently on issue vest proportionately over 3 years in the ratio of 20% (end Year 1), 30% (end Year 2) and 50% (end Year 3) or proportionately
over 3 years in the ratio of 50% (end Year 1), 30% (end Year 2) and 20% (end Year 3), depending on the year of grant.
The DARs granted to the MD and recently appointed KMPs vest 50% at the end of Year 1 and 50% at the end of Year 2.
Any variation made to vesting is only with the approval of the Board. Vested DARs are generally exercisable within 5 years after they are granted
(approximately 2 to 4 years after vesting). DARs which lapse, do not vest or are not exercised within 5 years after grant will expire.
Forfeiture
If an employee ceases employment for serious misconduct involving fraud or dishonesty, their DARs (whether exercisable or not) will lapse. If an
employee resigns or is terminated for other reasons, vested DARs may generally be exercised within 90 days of the employee ceasing employment.
DARs which are not vested may, at the Board’s discretion, vest on a pro rata basis and become exercisable if the employment ceases for reasons
including a transfer of employment to an Owner-Managed Branch, retirement, redundancy, death, total and permanent disablement. Otherwise, unvested
DARs will lapse on cessation of employment.
36
BOQ ANNUAL REPORT 2012
6. Non-Executive Director Remuneration Framework
Non-executive directors’ fees are set based upon the need to attract and retain individuals
of appropriate calibre. Fees are reviewed annually by the Remuneration Committee
with regard to advice provided by independent remuneration specialists to ensure
market comparability.
The Chairman’s fees are determined independently to the fees of other directors and
are also based upon information provided by independent remuneration specialists.
The Chairman is not present at any discussions relating to the determination of his
own remuneration.
In order to maintain independence and impartiality, non-executive directors do not receive
any performance related remuneration.
Fee Pool
Non-executive directors’ fees are determined within an aggregate fee pool limit, which is
periodically recommended for approval by shareholders. The maximum currently stands
at $2,200,000 (inclusive of superannuation) and was approved by shareholders on 9
December 2010. The current approved aggregate fee pool allows flexibility to deal with
future changes in membership and composition of the Board and for CPI based increases
in future financial years where necessary.
There was no increase for the 2012 financial year and the Board has determined that there
will be no increase in directors’ fees for the 2013 financial year.
Directors’ Annual Fees
Directors’ fees are generally reviewed every three years and may be increased only by CPI
annually during the interim period. The current non-executive directors’ fees comprise:
Directors’ Annual Fees
Fixed component of remuneration for directors(1)
Chairman(1),(2)
Additional remuneration is paid to non-executive
directors for committee work:
Audit Committee
Risk Committee
Corporate Governance Committee
Remuneration Committee
Nomination Committee
Budget Committee
Investment Committee
Due Diligence Committee
Information Technology Committee
Chairman
$
-
355,000
Members /
Directors
$
135,000
-
45,000
45,000
15,000
25,000
-
2,250
2,250
2,250
20,000
17,500
17,500
10,000
10,000
6,000
1,500(3)
1,500(3)
1,500(3)
10,000
(1)
(2)
(3)
Committee members receive one fee for serving on both the Bank and the subsidiary committees.
The Chairman receives no additional remuneration for involvement with committees.
Per deliberative meeting.
Remuneration Report – Audited (continued)
5. Executive Remuneration Framework (continued)
5.4 At-risk equity remuneration (continued)
Restricted Shares
The Consolidated Entity has used shares with restrictions on disposal as a non-cash, share
based component of both short term and long term incentive awards. Such awards are
designed to deliver immediate benefits through dividends but also provide an incentive to
act in the shareholder’s long term interest over the non-disposal period.
Such shares are typically held by a trustee and are subject to disposal restrictions. The
terms that may apply on cessation of employment vary depending on the nature of the
incentive the restricted shares are designed to deliver. For example, if employment
retention is an aim, shares may be forfeited on early cessation of employment. Ram
Kangatharan’s restricted shares were not forfeited on termination in agreement with his
contract terms, they were in place as a retention tool for the period prior to Stuart Grimshaw
joining the Consolidated Entity.
5.5 Historical Equity Plans
The following section provides an overview of the Consolidated Entity’s historical equity
grants. The Consolidated Entity has not made any grants in FY 2012 under the previous
option plan, however a brief explanation has been included in the report due to the small
number of prior year grants that remain on-foot.
Senior Manager Option Plan
The Senior Manager Option Plan (SMOP) has been replaced by the Award Rights Plan, but
options previously granted under the SMOP remain on issue. Each option conveys the
right to acquire one ordinary fully paid share on exercise, after payment to the Consolidated
Entity of an exercise price. The ability to exercise options under this plan is conditional
upon the Consolidated Entity achieving specific performance hurdles detailed later in
Section 10 of this report.
Exercisable options under the SMOP will lapse upon the earliest of:
•
•
•
•
•
their expiry date (5 years from the date of grant);
6 months after the option holder ceases employment for a Qualifying Reason (death,
total and permanent disability, redundancy, retirement or other reason determined by
the Board);
the option holder ceasing employment for any reason other than a Qualifying Reason;
6 months after a Capital Event (50% or more of the Consolidated Entity's ordinary
shares are acquired by way of takeover or scheme of arrangement, the Consolidated
Entity is wound up or liquidated or another event which the Board considers to be a
Capital Event); or
if the option holder has acted fraudulently, dishonestly or in breach of the option
holder's obligations to the Consolidated Entity.
If an option holder ceases employment because of a Qualifying Reason, a proportion of
unvested options will become exercisable, based on the time elapsed in the non-exercise
period. The Board may allow more unvested options to become exercisable than the
formula allows. If a Capital Event occurs, all unvested options become exercisable.
Option holders do not participate in new issues of securities made by the Consolidated
Entity but adjustments are to be made to the number of shares over which the options are
awarded and/or the exercise price to take into account changes to the capital structure of
the Consolidated Entity. This occurs by way of pro rata and bonus issues, according to the
formula set out in the plan and the ASX Listing Rules. In any capital reconstruction, options
will be similarly reconstructed in accordance with the Listing Rules.
There are no voting rights attached to options. Upon exercise of an option and payment
of the exercise price, SMOP participants receive ordinary shares in the Consolidated
Entity to which voting rights are attached. Options may lapse in the event of cessation of
employment depending on the circumstances of such cessation.
BOQ ANNUAL REPORT 2012 37
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
6.
Non-Executive Director Remuneration Framework
(continued)
Equity Participation
Non-executive directors do not receive shares, award rights or share options.
Retirement Benefits
Non-executive directors are no longer provided with retirement benefits apart from statutory
superannuation. The accumulated value of non-executive director retirement benefits was
frozen effective from 31 August 2003. The balance of the accrued benefits is increased
annually by an amount equivalent to the increase in the Consumer Price Index.
7.
Link between financial performance and variable
remuneration
The purpose of this section is to provide detailed information on the remuneration
outcomes for the 2012 year.
7.1 Short-term incentive
The short-term incentive referred to in the remuneration tables in Section 8 represents the
short-term incentive component of “at-risk” remuneration in the year. These bonuses were
determined on the basis of the Consolidated Entity’s performance, the individual’s business
unit performance, the individual executive’s performance and Total Shareholder Return over
the financial year ended 31 August 2012 and are therefore deemed to be attributable to
that financial year, although payment will not occur until October 2012 and beyond for the
deferred portion of STI.
As outlined in Table 1, the STI include the following performance measures:
•
•
•
•
net profit after tax;
cost to income ratio;
specified individual KPIs set by the Board for each role; and
risk KPIs.
In considering the Consolidated Entity’s performance for the FY2012 STI plan, the Board
had regard to the following:
The Board assessed the performance of the MD and each KMP against the individual STI
measures and risk KPI’s that had been agreed for each role.
The Board reviewed the Consolidated Entity’s performance, the individual’s business unit
performance, the individual executive’s performance against KPI’s (particularly the KMP’s
recently employed) and Total Shareholder Return. Based on this the STI awards for the
MD was paid at 55% of opportunity. The KMP were paid at between 27% and 50% of STI
opportunity with the exception of the CRO who was awarded 75% of his STI opportunity
based on his achievements since he arrived at BOQ. All STI awards are pro rata based on
length of service.
7.2 Long-term Incentive
Performance Considerations
The LTI seeks to reward executives for potential and sustained performance over the
period. The award is made in equity to provide additional alignment between participants
and shareholders.
The LTI plan uses a TSR performance measure to determine vesting. TSR and the peer
group used in the TSR calculation are determined by an independent qualified valuer. This
aligns the remuneration received by the MD and KMP under the LTI with the creation of
shareholder value relative to the Peer Group over the performance period. In FY 2012, no
PARs granted in prior financial years vested. This reflected the TSR performance of the
Consolidated Entity during this period relative to the ASX 200 Peer Group.
8. Remuneration disclosures
The MD and KMP receive a mix of remuneration, with a portion paid during the year, and
a portion received over the following three years, depending on service and performance.
This can make it difficult for shareholders to get a clear picture of the actual amount of
remuneration an executive received in the financial year in review.
To assist shareholders, the Board has included in the remuneration disclosures a table that
provides a summary of the remuneration that the current MD and KMP actually received in
relation to the 2012 financial year.
Statutory net profit/(loss) after tax
Normalised cash net profit/(loss) after tax
Normalised cash diluted earnings / (loss) per share
Normalised cash cost to income ratio
Share price
Dividends paid
2012
$(17.1m)
$30.6m
7.9c
45.7%
$7.55
2011
$158.7m
$176.6m
66.7c
44.5%
$7.48
2010
$181.9m
$197.0m
83.4c
45.8%
$9.83
2009
$141.1m
$187.4m
98.4c
49.9%
$11.65
2008
$138.7m
$155.4m
99.9c
56.1%
$15.86
$151.7m
$125.7m
$120.8m
$120.2m
$103.9m
38
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.1 Take-Home Pay Summary
The table below sets out:
•
•
•
•
fixed remuneration (base remuneration, fringe benefits and employer superannuation contributions);
variable cash remuneration (split between the portion of the 2012 STI paid in October 2012 and excluding the portion of the STI deferred until FY 2013 and FY 2014);
Other benefits and termination benefits; and
the value of previous years’ long term incentive awards that vested during the 2012 financial year.
This is a non-statutory disclosure. The statutory disclosures for the year ended 31 August 2012 are disclosed in Tables 5 to 9 and differ to these non-statutory disclosures.
Table 4 Non-statutory disclosures – Remuneration received by the MD, current and former KMP in relation to the FY 2012
Fixed
remuneration(1) STI upfront(2)
Other
Benefits(1)
Termination
benefits(1)
Total cash
payments
STI
deferred(3)
LTI vested(4)
Restricted
Shares(5)
Total
Current
Stuart Grimshaw
1,053,952
484,000(6)
Jon Sutton
Anthony Rose
Peter Deans
114,165
76,231
249,721
81,427
7,471
-
-
-
97,000
20,881
Brendan White
250,522
179,000(7)
Matthew Baxby
Chris Nilon
Renato Mazza
Former
153,361
365,347
366,241
51,500
67,500
60,000
-
-
-
-
-
-
-
-
-
-
-
-
1,619,379
121,636
76,231
367,602
429,522
204,861
432,847
426,241
Ram Kangatharan(8)
558,909
291,667
201,341
787,500
1,839,417
Ewan Cameron
Darryl Newton
David Tonuri
Keith Rodwell
465,401
286,590
257,925
515,491
-
-
-
-
5,731
21,703
11,127
60,626
489,617
410,345
329,689
393,750
960,749
718,638
598,741
969,867
Additional information – Non Statutory Remuneration Methodology
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,885
10,815
-
-
-
-
-
-
-
-
1,619,379
121,636
76,231
367,602
429,522
204,861
469,732
437,056
213,889
792,720
2,846,026
10,815
9,226
-
14,425
-
-
-
-
971,564
727,864
598,741
984,292
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Fixed remuneration, other benefits and termination benefits are determined on the same basis as in Table 5 and Table 6.
Includes the portion of STI Cash award that will be paid in October 2012. For the current executives this figure represents 50% of the 2012 STI upfront and the remaining 50% will be deferred over a
2 year period.
STI Deferred for FY2012 will be reported in the year in which it is paid. As this is the first year in which STI is deferred, no STI deferred amounts were paid.
Includes rights vested in current financial year multiplied by share price at vesting date.
Includes restricted shares vested in current financial year multiplied by share price at vesting date.
This represents 50% of the 2012 STI upfront and the remaining 50% is awarded in DARs that vest equally over a 2 year vesting period - 50% vesting year 1 and 50% year 2 (year ended 31 August 2013 and
31 August 2014).
This represents 100% of the 2012 STI upfront. This is a contractual obligation only for the first year of employment, subsequent amounts will revert to normal deferral arrangements.
STI paid as part of appointment as Acting CEO for period 1 September 2011 to 31 October 2011. This was a contractual commitment.
BOQ ANNUAL REPORT 2012 39
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.2 Statutory disclosures
The following tables include details of the nature and amount of each major element of the remuneration of each Director and KMP of the Consolidated Entity, calculated in accordance
with accounting standards.
The amounts shown in Table 5 to Table 9 below may differ from those shown above in Table 4.
Table 5 Director’s Remuneration Details of the nature and amount of each major element of the remuneration of each Director of the Consolidated Entity are as outlined in the
table below.
2012 Financial Year
Executive Director
Stuart Grimshaw Managing Director
(appointed 1 November 2011)
Non-Executive Directors
Neil Summerson
Steve Crane
Roger Davis
Carmel Gray
John Reynolds
Michelle Tredenick
David Willis
Richard Haire (appointed 18 April 2012)
Former Directors
David Graham
(resigned 8 October 2010)
Bill Kelty
(retired 31 July 2012)
Former Executive Director
David Liddy
Managing Director (retired 31 August 2011)
Short-term
Salary
and fees
$
STI
at risk(1)
$
Non- Monetary
benefits(2)
$
Other cash
benefits(3)
$
Total
$
2012
1,040,972
484,000(1)
80,907
520
1,606,399
12,980
1,426
193,237
-
1,814,042
37%
11%
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2012
2011
2012
2011
2012
2011
355,000
355,000
165,417
164,000
175,458
160,167
207,750
199,000
218,208
214,333
166,651
76,813
170,619
161,916
55,895
-
16,339
137,500
150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
355,000
355,000
165,417
164,000
175,458
160,167
207,750
199,000
218,208
214,333
166,651
76,813
170,619
161,916
55,895
-
16,339
137,500
150,000
-
1,547,414
-
425,000
-
8,279
-
237,695
-
2,218,388
566,667
168,069
2,968,111
20%
6%
(1)
STI at risk reflects 50% of the amount paid or accrued in respect of the year ended 31 August 2012, the remaining 50% is awarded in DARs that vest equally over a 2 year vesting period – 50% vesting year
1 and 50% year 2 (year ended 31 August 2013 and 31 August 2014. Refer to “Executive director remuneration framework” for a discussion of the Bank’s short-term incentive arrangement.
(2) The Bank has also paid insurance premiums in respect of Directors’ and Officers’ Liability Insurance which is not reflected in the above table as there is no appropriate basis for allocation.
(3) This includes accrued annual leave paid out on retirement.
(4)
This includes superannuation benefits, salary sacrificed benefits and interest which is accrued at the CPI rate on director retirement benefits which was frozen effective from 31 August 2003.
(5) Comprises long service leave accrued or utilised during the financial year.
(6)
The fair value of the options and rights is calculated at the date of grant using an industry accepted option pricing model and allocated to each reporting period evenly over the period from grant date to
vesting date. The value disclosed is the portion of the fair value of the options and rights allocated to this reporting period.
40
BOQ ANNUAL REPORT 2012
Post-
Termination
benefits
employment(4)
Other long-term(5)
Share based payments
Total
$
$
$
$
$
%
%
Options and
rights(6)
$
Shares and units
S300A (1)(e)
(i) Proportion
of remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,621
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,939
15,199
14,888
14,760
15,791
14,415
15,939
15,199
15,939
15,199
14,981
6,913
15,300
14,550
5,031
1,471
12,375
13,500
-
-
14,987
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
370,939
370,199
180,305
178,760
191,249
174,582
223,689
214,199
234,147
229,532
181,632
83,726
185,919
176,466
60,926
17,810
194,496
163,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2012 Financial Year
Executive Director
(appointed 1 November 2011)
Non-Executive Directors
Neil Summerson
Steve Crane
Roger Davis
Carmel Gray
John Reynolds
Michelle Tredenick
David Willis
Richard Haire (appointed 18 April 2012)
Former Directors
David Graham
(resigned 8 October 2010)
Bill Kelty
(retired 31 July 2012)
Former Executive Director
David Liddy
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2012
2011
2012
2011
2012
2011
355,000
355,000
165,417
164,000
175,458
160,167
207,750
199,000
218,208
214,333
166,651
76,813
170,619
161,916
55,895
16,339
137,500
150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
355,000
355,000
165,417
164,000
175,458
160,167
207,750
199,000
218,208
214,333
166,651
76,813
170,619
161,916
55,895
16,339
137,500
150,000
-
-
Managing Director (retired 31 August 2011)
1,547,414
425,000
8,279
237,695
2,218,388
Short-term
Post-
employment(4)
Other long-term(5)
Termination
benefits
Share based payments
Total
S300A (1)(e)
(i) Proportion
of remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
Salary
and fees
$
STI
at risk(1)
$
Non- Monetary
benefits(2)
$
Other cash
benefits(3)
$
Total
$
$
$
$
Options and
rights(6)
$
Shares and units
$
$
%
%
Stuart Grimshaw Managing Director
2012
1,040,972
484,000(1)
80,907
520
1,606,399
12,980
1,426
15,939
15,199
14,888
14,760
15,791
14,415
15,939
15,199
15,939
15,199
14,981
6,913
15,300
14,550
5,031
-
1,471
12,375
13,500
-
14,987
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,621
-
-
566,667
193,237
-
1,814,042
37%
11%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
168,069
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
370,939
370,199
180,305
178,760
191,249
174,582
223,689
214,199
234,147
229,532
181,632
83,726
185,919
176,466
60,926
-
17,810
194,496
163,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,968,111
-
20%
-
6%
BOQ ANNUAL REPORT 2012 41
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.2 Statutory disclosures (continued)
Table 6 Key Management Personnel Remuneration
Details of the nature and amount of each major element of the remuneration of each KMP of the Consolidated Entity are as outlined in the table below.
Salary and
fees
$
STI
at risk(1)
$
Short-term
STI at risk
deferred(2)
$
Other cash
benefit(3)
$
Total
$
111,704
74,401
-
-
-
-
7,471
119,175
-
74,401
243,026
97,000
97,000
20,881
457,907
244,371
179,000(7)
-
149,024
51,500
51,500
349,526
288,296
350,418
350,785
256,441
499,912
503,835
549,238
731,898
450,716
482,855
275,952
408,143
246,683
197,457
202,678
67,500
120,000
60,000
200,000
100,000
-
225,000
291,667
375,000
-
185,000
-
120,000
-
100,000
-
67,500
-
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,626
193,500(8)
201,341
-
5,731
-
21,703
-
11,127
-
-
423,371
252,024
484,526
408,296
470,418
550,785
356,441
560,538
922,335
1,042,246
1,106,898
456,447
667,855
297,655
528,143
257,810
297,457
202,678
2012
2012
2012
2012
2012
2012
2011
2012
2011
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2011
Executives
Jon Sutton
(appointed 2 July 2012)
Anthony Rose
(appointed 1 August 2012)
Peter Deans
(appointed 26 March 2012)
Brendan White
(appointed 2 April 2012)
Matthew Baxby
(appointed 17 May 2012)
Chris Nilon
Renato Mazza
Bradley Edwards(9)
Former Executives
Keith Rodwell
(resigned 24 August 2012)
Ram Kangatharan(10)
(resigned 30 March 2012)
Ewan Cameron
(resigned 20 July 2012)
Darryl Newton
(resigned 26 March 2012)
David Tonuri
(resigned 11 May 2012)
Jim Stabback
(resigned on 25 February 2011)
(1)
(2)
STI at risk reflects 50% of the amounts paid or accrued in respect of the year ended 31 August 2012. Refer to “Executive remuneration framework” for a discussion of the Bank’s short-term
incentive arrangement.
STI at risk deferred reflects 50% of the amounts to be paid equally in respect of 31 August 2012 in year ended 31 August 2013 and 31 August 2014 for the compulsory two year deferral. Refer to “Executive
remuneration framework” for a discussion of the Bank’s short-term incentive arrangement.
(3) This includes accrued annual leave paid out on retirement and other cash benefits.
(4) This includes superannuation and salary sacrificed benefits.
(5) Comprises long service leave accrued or utilised during the financial year.
(6)
The fair value of the options and rights is calculated at the date of grant using an industry accepted option pricing model and allocated to each reporting period evenly over the period from grant date to
vesting date. The value disclosed is the portion of the fair value of the options and rights allocated to this reporting period.
(7) This represents 100% of the 2012 STI at risk. This is a contractual obligation only for the first year of employment, subsequent amounts will revert to normal deferral arrangements.
(8) Retention bonuses paid in accordance with the acquisition agreement.
(9) No longer considered a KMP from 1 September 2011.
(10) STI paid as part of appointment as CEO for period 1 September 2011 to 31 October 2011.
42
BOQ ANNUAL REPORT 2012
employment(4)
Other long-term(5)
Share based payments
Termination
benefits
$
$
$
%
%
Options and
rights(6)
$
Shares and units
$
Total
$
S300A (1)(e)
(i) Proportion
of remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
158
108
356
340
207
11,636
36,759
5,112
6,078
8,510
5,234
-
-
-
-
-
-
931
592
274
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
787,500
489,617
410,345
329,689
78,577
132,798
333,169
25,436
117,647
219,422
31,104
496,062
185,530
213,680
829,072
87,543
126,947
471,058
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
976,493
757,382
597,325
546,521
639,916
669,648
402,960
900,515
1,080,462
2,619,566
1,917,631
850,576
810,085
624,941
651,226
558,324
347,204
130,373
85,342
86,237
148,563
97,490
14,570
(115,141)
136,337
(196,344)
32,888
(110,173)
126,070
(93,697)
107,262
(40,417)
40,417
(92,046)
-
-
39%
22%
22%
37%
38%
42%
44%
28%
(13%)
33%
4%
61%
(13%)
38%
(15%)
35%
(7%)
40%
(71%)
45,789
393,750
24%
12%
6%
22%
19%
14%
16%
23%
15%
4%
(13%)
13%
(8%)
2%
(13%)
16%
(15%)
17%
(7%)
12%
(71%)
Post-
2,461
1,830
6,695
6,151
4,337
15,821
15,229
15,823
15,295
23,439
15,579
21,790
9,671
15,229
14,685
15,229
10,638
15,229
11,242
9,056
19,741
Salary and
fees
$
STI
at risk(1)
$
Other cash
benefit(3)
$
Total
$
Short-term
STI at risk
deferred(2)
$
243,026
97,000
97,000
20,881
457,907
244,371
179,000(7)
149,024
51,500
51,500
111,704
74,401
349,526
288,296
350,418
350,785
256,441
499,912
503,835
549,238
731,898
450,716
482,855
275,952
408,143
246,683
197,457
202,678
-
-
-
-
-
-
-
67,500
120,000
60,000
200,000
100,000
225,000
291,667
375,000
185,000
120,000
100,000
67,500
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,471
119,175
-
-
-
-
-
-
-
-
-
-
-
-
-
60,626
193,500(8)
5,731
21,703
11,127
74,401
423,371
252,024
484,526
408,296
470,418
550,785
356,441
560,538
922,335
1,106,898
456,447
667,855
297,655
528,143
257,810
297,457
202,678
201,341
1,042,246
2012
2012
2012
2012
2012
2012
2011
2012
2011
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2011
Executives
Jon Sutton
(appointed 2 July 2012)
Anthony Rose
(appointed 1 August 2012)
Peter Deans
(appointed 26 March 2012)
Brendan White
(appointed 2 April 2012)
Matthew Baxby
(appointed 17 May 2012)
Chris Nilon
Renato Mazza
Bradley Edwards(9)
Former Executives
Keith Rodwell
(resigned 24 August 2012)
Ram Kangatharan(10)
(resigned 30 March 2012)
Ewan Cameron
(resigned 20 July 2012)
Darryl Newton
(resigned 26 March 2012)
David Tonuri
(resigned 11 May 2012)
Jim Stabback
(resigned on 25 February 2011)
Post-
employment(4)
Other long-term(5)
Termination
benefits
Share based payments
S300A (1)(e)
(i) Proportion
of remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
$
$
$
Options and
rights(6)
$
Shares and units
$
Total
$
%
%
2,461
1,830
6,695
6,151
4,337
15,821
15,229
15,823
15,295
23,439
15,579
21,790
9,671
15,229
14,685
15,229
10,638
15,229
11,242
9,056
19,741
158
108
356
340
207
11,636
36,759
5,112
6,078
8,510
45,789
-
-
5,234
-
931
-
592
-
274
-
-
-
-
-
-
-
-
-
-
-
393,750
-
787,500
-
489,617
-
410,345
-
329,689
-
-
78,577
132,798
333,169
25,436
117,647
219,422
31,104
-
496,062
185,530
213,680
829,072
87,543
126,947
471,058
85,342
86,237
148,563
97,490
14,570
(115,141)
136,337
(196,344)
32,888
(110,173)
126,070
(93,697)
107,262
(40,417)
40,417
(92,046)
-
-
-
-
-
-
-
976,493
757,382
-
-
-
-
-
-
-
597,325
546,521
639,916
669,648
402,960
900,515
1,080,462
2,619,566
1,917,631
850,576
810,085
624,941
651,226
558,324
347,204
130,373
-
-
39%
22%
22%
37%
38%
42%
44%
28%
(13%)
33%
4%
61%
(13%)
38%
(15%)
35%
(7%)
40%
(71%)
24%
12%
6%
22%
19%
14%
16%
23%
15%
4%
(13%)
13%
(8%)
2%
(13%)
16%
(15%)
17%
(7%)
12%
(71%)
BOQ ANNUAL REPORT 2012 43
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.3 Equity held by the MD and KMP
The movement during the 2012 financial year in the number of options and rights over ordinary shares held by each Executive Director and KMP, as part of their remuneration, are
as follows:
Table 7 Movement in options and rights held by the MD and KMP during FY 2012
Share
Price at
Grant Date
$
Type
Grant Date
Movements during the 2012 FY
Balance at 1
September
2011
Granted(1) Exercised
Lapsed
Balance at
31 August
2012(1)
Vested and
Exercisable
Non-
Vested
Vested
during the
year (%)(2)
Forfeited
during the
year (%)
KMP
Current
Stuart Grimshaw 2011 PARs
Jon Sutton(3)
2012 DARs
13/10/2011
26/02/2012
2012 PARs
26/02/2012
Restricted
shares
26/02/2012
Anthony Rose(3)
2012 DARs
29/02/2012
2012 PARs
29/02/2012
Restricted
shares
29/02/2012
Peter Deans(3)
Brendan White(3)
2012 PARs
10/05/2012
2012 DARs
10/02/2012
2012 PARs
10/02/2012
Restricted
shares
10/02/2012
Matthew Baxby(3)
2012 DARs
01/02/2012
Chris Nilon
2012 PARs
01/02/2012
Restricted
shares
Options
Options
01/02/2012
20/11/2006
01/11/2007
2008 DARs
29/06/2009
2008 PARs
29/06/2009
2009 DARs
24/12/2009
2009 PARs
24/12/2009
2010 DARs
29/11/2010
2010 May
DARs
28/05/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
Renato Mazza
2010 DARs
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
8.10
7.48
7.48
7.48
7.34
7.34
7.34
6.89
7.33
7.33
7.33
7.44
7.44
7.44
14.90
19.44
8.89
8.89
11.30
11.30
11.45
11.19
11.45
7.71
11.45
11.45
7.71
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
50,000
1,710
5,700
2,905
4,490
3,416
2,126
5,693
-
7,116
33,207
121,619
62,687
74,627
104,478
30,030
75,075
30,030
69,061
75,574
67,476
40,486
36,982
73,964
29,586
-
-
-
-
-
-
-
-
-
21,283
-
-
-
22,195
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
-
-
-
5,700
1,743
-
683
797
-
-
1,423
-
-
-
-
-
-
-
-
-
-
-
121,619
62,687
74,627
104,478
30,030
75,075
30,030
69,061
75,574
67,476
40,486
36,982
73,964
29,586
-
50,000
-
-
1,162
4,490
2,733
1,329
5,693
21,283
5,693
33,207
22,195
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,710
-
1,743
-
683
797
-
-
1,423
-
-
121,619
62,687
74,627
104,478
30,030
75,075
30,030
69,061
75,574
67,476
40,486
36,982
73,964
29,586
-
50,000
-
-
1,162
4,490
2,733
1,329
5,693
21,283
5,693
33,207
22,195
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
-
30
-
20
30
-
-
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
-
-
100
-
-
-
-
-
-
-
-
-
(1)
(2)
(3)
This represents the maximum number of award rights that may vest to each executive.
Percentage of initial rights granted.
The Grant date reflects the date of signing the employment contract not the date the rights / restricted shares were issued. There was no entitlement to these rights and restricted shares until commencement
of employment.
44
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
8.3 Equity held by the MD and KMP (continued)
The movement during the 2012 financial year in the number of options and rights over ordinary shares held by each Executive Director and KMP, as part of their remuneration, are
as follows:
Table 7 Movement in options and rights held by the MD and KMP during FY 2012
Share
Price at
Grant Date
$
Type
Grant
Date
Movements during the 2012 FY
KMP
Balance at 1
September
2011
Granted
Exercised
Lapsed
Balance at
31 August
2012
Vested and
Exercisable
Non-
Vested
Vested
during the
year (%)(1)
Forfeited
during the
year (%)
Former
Ram Kangatharan Options
01/11/2007
19.44
350,000
2008 DARs
29/06/2009
2008 PARs
29/06/2009
2009 DARs
24/12/2009
2009 PARs
24/12/2009
2010 DARs
29/11/2010
2010 PARs
29/11/2010
8.89
8.89
11.30
11.30
11.45
11.45
4,275
45,600
13,740
38,700
10,721
71,157
-
-
-
-
-
-
-
-
350,000
4,275
-
-
45,600
13,740
-
-
38,700
10,721
-
-
71,157
-
-
-
-
-
-
-
-
4,275
-
13,740
-
10,721
-
-
-
-
-
-
-
-
-
50
-
50
-
100
-
100
-
100
-
100
-
100
15/06/2010
11.30
108,000
-
108,000
Restricted
shares
Restricted
shares
23/08/2011
Ewan Cameron
2010 DARs
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
Darryl Newton
2010 DARs
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
David Tonuri
2010 PARs
25/01/2011
2011 PARs
16/12/2011
Keith Rodwell
2010 DARs
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
(1)
Percentage of initial rights granted.
7.21
11.45
11.45
7.71
11.45
11.45
7.71
10.12
7.71
11.45
11.45
7.71
100,000
7,116
47,438
-
-
-
-
30,405
6,072
40,323
-
-
-
25,844
18,975
-
-
21,283
9,488
47,438
-
-
-
31,925
-
1,423
-
-
1,214
-
-
-
-
1,898
-
-
-
-
5,693
47,438
30,405
4,858
40,323
25,844
18,975
21,283
7,590
47,438
31,925
-
108,000
-
100
-
100,000
-
100,000
-
-
-
-
-
-
-
-
-
-
-
1,423
-
-
1,214
-
-
-
-
1,898
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
-
-
20
-
-
-
-
20
-
-
-
80
100
100
80
100
100
100
100
80
100
100
BOQ ANNUAL REPORT 2012 45
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.3 Equity held by the MD and KMP (continued)
The table below shows the total value of any options and rights that were granted, exercised or lapsed to the MD and KMP.
Table 8 Value of rights and options held by the MD and KMP during FY 2012
KMP
Grant
Grant Date
Fair value
per option
or right at
grant date
$
Value at
grant date
$(1)
Exercise
Date
Exercise
price
$
Value at
Exercise
Date(2)
$
Expiry /
Lapsing Date
Value at
Expiry /
Lapsing
Date(2)
$
Current
Stuart Grimshaw
Jon Sutton(3)
Anthony Rose(3)
Peter Deans(3)
Brendan White(3)
Matthew Baxby(3)
Chris Nilon
Renato Mazza
2011 PARs
2012 DARs
13/10/2011
26/02/2012
2012 PARs
26/02/2012
Restricted
shares
2012 DARs
26/02/2012
29/02/2012
2012 PARs
29/02/2012
Restricted
shares
2012 PARs
2012 DARs
29/02/2012
10/05/2012
10/02/2012
2012 PARs
10/02/2012
Restricted
shares
2012 DARs
10/02/2012
01/02/2012
2012 PARs
01/02/2012
Restricted
shares
Options
Options
01/02/2012
20/11/2006
01/11/2007
2008 DARs
29/06/2009
2008 PARs
29/06/2009
2009 DARs
24/12/2009
2009 PARs
24/12/2009
2010 DARs
29/11/2010
2010 May DARs
28/05/2010
2010 PARs
29/11/2010
2011 PARs
2010 DARs
16/12/2011
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
5.36
6.60
5.18
6.70
6.60
5.18
6.66
3.70
6.60
5.18
7.41
6.60
5.18
6.76
2.13
2.57
7.59
4.59
10.40
6.93
11.17
10.11
7.81
5.18
11.17
7.81
5.18
651,878
413,734
386,568
700,000
198,198
388,888
200,000
255,526
498,788
349,526
300,000
244,081
383,134
200,000
42,600
128,500
12,979
26,163
30,212
31,116
38,157
21,494
44,462
110,246
79,486
259,347
114,970
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28/03/2012
-
28/03/2012
-
28/03/2012
25/02/2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16.26
19.11
7.65
-
7.65
-
7.65
7.34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13/10/2016
05/05/2017
16/12/2017
09/01/2014
05/05/2017
16/12/2017
21/09/2012
16/12/2017
05/05/2017
16/12/2017
31/10/2012
05/05/2017
16/12/2017
31/10/2012
20/11/2011
01/11/2012
13,082
29/06/2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13/10/2011
46,170
13,334
23/12/2014
-
23/12/2014
5,225
5,850
-
-
29/11/2015
28/05/2015
29/11/2015
16/12/2016
29/11/2015
29/11/2015
16/12/2016
-
-
-
-
-
-
-
-
-
18/01/2012
7.32
10,416
-
-
-
-
-
-
(1)
(2)
(3)
Represents options and rights held at 1 September 2012 and granted during the 2012 financial year.
Closing share price on exercise, expiry date and balance date multiplied by the number of rights exercised or lapsed during the year.
The Grant date reflects the date of signing the employment contract not the date the rights / restricted shares were issued. There was no entitlement to these rights and restricted shares until commencement
of employment.
46
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
8. Remuneration disclosures (continued)
8.3 Equity held by the MD and KMP(continued)
The table below shows the total value of any options and rights that were granted, exercised or lapsed to the MD and KMP during the 2012 financial year.
Table 8 Value of rights and options held by the MD and KMP during FY 2012
KMP
Grant
Grant Date
Fair value
per option
or right at
grant date
$
Value at
grant date
$(1)
Exercise
Date
Exercise
price
$
Value at
Exercise
Date(2)
$
Expiry /
Lapsing
Date
Value at
Expiry /
Lapsing
Date(2)
$
Former
Ram Kangatharan
Ewan Cameron
Darryl Newton
David Tonuri
Keith Rodwell
Options
01/11/2007
2008 DARs
29/06/2009
2008 PARs
29/06/2009
2.57
7.59
4.59
899,500
-
32,447
17/01/2012
209,304
-
2009 DARs
24/12/2009
10.40
142,896
17/01/2012
2009 DARs
24/12/2009
2009 PARs
24/12/2009
2010 DARs
29/11/2010
2010 DARs
29/11/2010
02/04/2012
6.93
11.17
268,191
-
119,754
17/01/2012
30/03/2012
2010 PARs
29/11/2010
7.81
555,736
-
19.11
7.44
-
7.44
7.16
-
7.44
7.28
-
-
30/03/2012
31,806
29/06/2014
-
-
-
13/10/2011
369,390
61,335
39,351
24/12/2014
24/12/2014
-
-
-
30/03/2012
281,736
15,951
62,441
-
-
-
-
-
30/03/2012
518,023
15/06/2010
10.31
1,113,480
02/03/2012
7.34
792,720
02/03/2012
Restricted
shares
Restricted
shares
2010 DARs
23/08/2011
29/11/2010
2010 PARs
29/11/2010
2011 PARs
2010 DARs
16/12/2011
29/11/2010
2010 PARs
29/11/2010
2011 PARs
2010 DARs
2011 PARs
2010 DARs
16/12/2011
25/01/2011
16/12/2011
29/11/2010
2010 PARs
29/11/2010
2011 PARs
16/12/2011
7.21
11.17
7.81
5.18
11.17
7.81
5.18
7.81
5.18
11.17
7.81
5.18
721,000
79,486
370,491
157,498
67,824
314,923
133,872
148,195
110,246
105,981
370,491
165,372
-
22/12/2011
-
-
-
7.55
-
-
-
10,744
01/11/2012
20/07/2012
-
-
28/03/2012
7.65
9,287
-
-
-
-
-
-
-
-
-
-
-
-
28/03/2012
7.65
14,520
-
-
40,534
20/07/2012
337,759
20/07/2012
19/04/2012
216,484
34,880
19/04/2012
289,519
19/04/2012
19/04/2012
19/04/2012
24/08/2012
185,560
136,240
152,812
57,304
-
-
-
-
-
-
24/08/2012
358,157
24/08/2012
241,034
(1)
(2)
Represents options and rights held at 1 September 2012 and granted during the 2012 financial year.
Closing share price on exercise, expiry date and balance date, respectively, multiplied by the number of rights exercised, lapsed during the year or value at balance date.
BOQ ANNUAL REPORT 2012 47
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
8.3 Equity held by the MD and KMP (continued)
The table below shows the allocation of the FY 2012 LTI Grant, estimating the remuneration amounts which the MD and KMP may receive under the grant in future years.
Table 9 Allocation of the FY 2012 LTI Grant
KMP
Current
Stuart Grimshaw
Jon Sutton(1)
Anthony Rose(1)
Peter Deans(1)
Brendan White(1)
Matthew Baxby(1)
Chris Nilon
Renato Mazza
Maximum remuneration amounts received under the 2012 grant of
rights and restricted shares
2012
(‘$000’)
2013
(‘$000’)
2014
(‘$000’)
2015
(‘$000’)
2016
(‘$000’)
Total
(‘$000’)
193.2
211.3
143.1
31.1
399.2
214.4
27.7
28.9
217.7
916.7
348.6
71.9
459.2
332.8
38.9
40.5
217.7
240.2
159.1
71.8
178.9
153.9
38.9
40.5
23.3
117.6
121.3
71.8
98.8
112.2
4.8
5.0
-
14.5
15.0
8.9
12.2
13.8
-
-
651.9
1,500.3
787.1
255.5
1,148.3
827.1
110.3
114.9
(1)
There was no entitlement to these rights and restricted shares until commencement of employment.
9. Executive Contracts
Long Term Incentive
Members of the Executive team are employed on permanent employment contracts.
Executive contracts specify payment of termination benefits on early termination by the
Consolidated Entity, other than for gross misconduct. The termination provisions in
the new Executive contracts do not provide for termination payments that exceed twelve
months fixed remuneration (including superannuation).
9.1 Managing Director
As previously disclosed to the market, Mr Grimshaw joined the Consolidated Entity on 1
November 2011, succeeding David Liddy, who had been the Consolidated Entity’s MD &
CEO since April 2001. The appointment to the position of Managing Director and Chief
Executive Officer is ongoing with reviews of performance and remuneration annually.
The key terms and conditions of the Employment Agreement are summarised below
as previously disclosed to the market. They have been formulated in line with the ASX
Corporate Governance Guidelines and with regard to external advice on Australian and
international benchmarks.
The package has been designed to promote alignment of reward with shareholders'
interests and provide an appropriate focus on both the short term and long term
performance of the Consolidated Entity.
Fixed Remuneration
The position has a base annual remuneration of $1.25 million, including the minimum
statutory contribution to superannuation (Total Remuneration – TR). This remuneration
will be reviewed by the Board annually.
Short Term Incentive (STI)
The STI provides a reward for annual performance. This scheme has a range of 0 - 160%
of TR and is based on the executive's achievement of performance objectives set annually
by the Board. Pro rata principles apply to all STI payments.
To ensure appropriate focus on shareholders' interests and appropriate risk management,
consideration of an STI award is subject to performance gateways. These thresholds are
currently a NPAT target and risk objectives set by the Board.
To further reinforce the importance of an appropriate focus on the long term performance of
the Consolidated Entity, a long term incentive is provided.
This involves the granting of Performance Award Rights (PARs) which vest after three
years. These award rights are subject to a vesting condition based on a comparison of
the Consolidated Entity’s TSR over three years against a Peer Group. If the Consolidated
Entity's TSR is better than 50% of the Peer Group then half of the allocated PARs vest.
This vesting percentage increases on a straight line basis until the performance of the
Consolidated Entity’s TSR is above the 75th percentile. At this point 100% of the PARs vest.
To ensure that a long term focus remains beyond the employment of the MD, if the
MD leaves for a reason other than summary dismissal, the vesting of PARs will not be
accelerated and they will vest in accordance with their terms if the vesting condition is
satisfied over the three year period.
The MD received an initial allocation of PARs based on an allocation of $1 million at
the volume weighted average price of shares after announcement of the FY11 financial
results. These PARs vest over three years and are designed to encourage a long term
strategic focus.
Termination
Termination may be instigated by either party on 6 months notice.
On a fundamental change, the MD can terminate and receive payment of 12 months TR
plus partial STI if awarded by the Board.
There is no accelerated vesting of DARs and PARs. For termination by the Consolidated
Entity (by payment of notice) or for a fundamental change, the DARs continue after
termination and vesting is subject to their terms. For PARs if employment ceases for any
reason other than summary dismissal PARs will continue after termination and vesting is
subject to their terms.
Fundamental Change is the removal of the executive as a director by shareholders, the
executive being required to report to someone other than the Board, the executive not
being the most senior executive in the Consolidated Entity or in a new holding entity or the
executive's positions are redundant.
48
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
9. Executive Contracts (continued)
9.2 Other Executives
All other KMP are employed under rolling contracts with the key terms as outlined in Table 10.
Table 10 KMP Notice Periods
KMP
Term of agreement
Stuart Grimshaw
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Chris Nilon
Renato Mazza
Open
Open
Open
Open
Open
Open
Open
Open
Fixed Annual
Remuneration
$
1,250,000
700,000
625,000
600,000
600,000
525,000
365,000
365,000
Notice period by
executive
Notice period by the
Consolidated Entity
6 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Termination payment
12 months base pay
(including notice period)
9 months base pay
(including notice period)
9 months base pay
(including notice period)
6 months base pay
(including notice period)
9 months base pay
(including notice period)
9 months base pay
(including notice period)
12 months base pay
(including notice period)
9 months base pay
(including notice period)
The Executive contracts for the new KMP allow for a notice period of no longer than
6 months. No termination payments made under the arrangements with existing KMP
(including the MD) will exceed 12 months base salary.
Changes have been made to the Awards Rights Plan such that unvested rights held by
the MD and CRO will not accelerate upon termination. Instead, the rights will remain
on-foot and will vest over the performance period according to the vesting schedule.
Rather than the rights being subject to accelerated vesting or forfeiting on termination,
the Board considered it important to ensure continued alignment of these key executives
with the Consolidated Entity’s financial performance after their departure from the
Consolidated Entity.
Unvested rights held by all other KMP may, at Board discretion, vest on a pro rata basis at
termination where the individual is a good leaver (i.e. has departed for reasons including
a transfer of employment to an Owner Managed Branch, retirement, redundancy, death
or total and permanent disablement). Otherwise the awards will lapse upon termination
of employment.
Payments made to former executives
The following executives departed the Consolidated Entity and received termination
payments in the 2012 financial year.
•
•
•
•
•
Ram Kangatharan
Ewan Cameron
Darryl Newton
David Tonuri
Keith Rodwell
All former executives received contractually obligated payments only.
The termination payments received consisted of payments in lieu of notice, annual and
long service leave accruals and termination payments of either 6 or 9 months base salary,
depending on the individual’s Executive contract.
Ram Kangatharan agreed to stay with the organisation in the role of Acting CEO after the
retirement of David Liddy, prior to Stuart Grimshaw starting with the Consolidated Entity.
The Board made Mr Kangatharan an employment offer to ensure there was continuity of
leadership and steerage of the organisation in this period. Mr Kangatharan was a CEO
candidate and had other employment options, accordingly it was seen as important to
ensure he remained with BOQ.
In addition to the termination payment, Mr Kangatharan received the following additional
amounts as part of historical contractual agreements:
•
•
•
•
All unvested DARs held by Mr Kangatharan vested upon cessation of his
employment. This is in line with Mr Kangatharan’s Executive contract which
provided for full vesting of the unvested DARs should his employment be terminated
prior to 1 November 2012.
Mr Kangatharan retained the restricted shares allocated to him under the Executive
contract dated 8 November 2011. The restriction on these restricted shares remains
unchanged (i.e. there is no accelerated removal of the restriction) with the shares not
released until 1 November 2012.
Mr Kangatharan was paid an STI as part of appointment as Acting CEO for period 1
September 2011 to 31 October 2011.
Based on the Consolidated Entity and executive’s performance over the 2012
financial year, no STI payment will be paid to Mr Kangatharan for the period
November 2011 to August 2012.
Further details of the payments made to former executives are included in Table 6.
BOQ ANNUAL REPORT 2012 49
Directors’ Report (continued)
Year ended 31 August 2012
The ability to exercise the options is conditional on the Consolidated Entity achieving
certain performance hurdles. The performance hurdles are based on diluted cash EPS
growth and require the Bank’s diluted cash EPS to outperform the average diluted cash
EPS growth of the Comparison Banks over the financial years 2008, 2009 and 2010
(“performance period”), as described above.
To reach the EPS performance hurdle the Consolidated Entity must achieve the following
for the performance period:
Percentage range by which cash EPS growth exceeds
Comparison banks
Percentage of
options to vest
5% and up to but not exceeding 10%
10% and up to but not exceeding 15%
15% and up to but not exceeding 20%
20% or more
25%
50%
75%
100%
Should any SMOP 7 options remain unvested as at November 2012, the EPS test will be
applied across financial years 2008, 2009, 2010, 2011 and 2012.
Using the trinomial pricing methodology, each option had a value of $2.57 as at date of
granting. The market value of shares at 31 August 2012 was $7.55 (2011: $7.48).
Remuneration Report – Audited (continued)
10. Senior Managers’ options and rights
1. Options issued on 20 November 2006 (SMOP 6):
Options originally issued:
Options lapsed during the year:
3,370,000;
1,351,934;
Options exercised during the year:
Options on issue at balance date:
Nil;
Nil;
Exercise date:
Expiry date:
20 November 2009;
20 November 2011;
Options exercisable at balance date:
Nil;
Issue price:
Exercise price:
$Nil; and
$16.26.
2. Options issued on 1 November 2007 (SMOP 7):
Options originally issued:
Options lapsed during the year:
3,999,000;
650,000;
Options exercised during the year
Nil;
Options on issue at balance date:
1,391,000;
Exercise date:(1)
Expiry date:
1 November 2011;
1 November 2012;
Options exercisable at balance date:
1,391,000;
Issue Price:
Exercise Price:
$Nil; and
$19.11.
(1) The exercise date was amended during the year from 1 November 2010 to 1 November 2011.
50
BOQ ANNUAL REPORT 2012
Remuneration Report – Audited (continued)
10. Senior Managers’ options and rights (continued)
Type
Grant Date
Expiry Date
Granted
Lapsed
during the
year
Exercised
during the
year
Balance at
31 August
2012
Vested(1)
Vesting Date
Vesting
Percentage(2)
DARs
2008 DARs
29 June 2009
29 June 2014
269,072
1,502
101,025
14,876
2,518
17 December 2009
2009 DARs
24 December 2009
23 December 2014
403,294
8,832
113,412
68,526
11,608
16 December 2010
16 December 2010
15 December 2011
2010 DARs
28 May 2010
28 May 2015
41,809
2,425
8,797
20,346
2,181
2 May 2011
15 December 2011
20 December 2012
2010 DARs
29 November 2010
29 November 2015
400,892
59,472
87,175
240,013
18,043
15 December 2011
2011 DARs
16 December 2011
16 December 2016
466,128
29,940
1,631
434,557
1,498
20 December 2012
20 December 2012
19 December 2013
7 May 2012
6 May 2013
2012 DARs
February 2012
5 May 2017
233,723
-
PARs(4)
2008 PARs
2009 PARs
2010 PARs
29 June 2009
29 June 2014
24 December 2009
23 December 2014
29 November 2010
29 November 2015
429,292
192,810
561,909
149,910
61,180
258,633
2010 PARs
2011 PARs
25 January 2011
25 January 2016
13 October 2011
13 October 2016
18,975
121,619
18,975
-
2011 PARs
16 December 2011
16 December 2016
359,632
123,018
2012 PARs
February 2012
16 December 2017
311,057
2012 PARs
10 May 2012
16 December 2017
69,061
-
-
-
-
-
-
-
-
-
-
-
233,723
-
89,060
271,303
-
121,619
236,614
311,057
69,061
19 December 2013
19 December 2014
3 May 2013
2 May 2014
n/a
18 October 2012
Date of release of
financial results in
October 2013
n/a
Date of release of
financial results in
October 2014
Date of release of
financial results in
October 2014
Date of release of
financial results in
October 2015
Date of release of
financial results in
October 2015
-
-
-
-
-
-
-
-
-
(1)
(2)
(3)
(4)
The number of rights vested during the year under the Award Rights Plan at the discretion of the directors, as permitted under the terms of the plan.
PARs vest based on the Consolidated Entity’s TSR performance measured against a Peer Group over a 3 year period.
Valued using the Monte Carlo simulation approach
The ability to exercise the PARs is conditional on the Bank achieving certain market performance hurdles. Refer to “Executives Remuneration Framework” for further details.
Fair value
per right
at grant
date(3)
$
7.59
10.40
10.11
11.17
6.60
6.60
4.59
6.93
7.81
7.81
5.36
20%
30%
50%
50%
30%
20%
20%
30%
50%
20%
30%
50%
20%
30%
50%
50%
50%
100%
100%
100%
100%
100%
100%
5.18
100%
5.18
100%
3.70
BOQ ANNUAL REPORT 2012 51
Directors’ Report (continued)
Year ended 31 August 2012
Remuneration Report – Audited (continued)
Indemnification of officers
The Bank's Constitution provides that all officers of the Bank are indemnified by the Bank
against liabilities incurred by them in the capacity of officer to the full extent permitted by
the Corporations Act 2001.
Insurance of officers
Audit and Non–audit services
During the year KPMG, the Bank’s auditor, has performed certain other services in addition
to their statutory duties. The Board has considered the non-audit services provided during
the year by the auditor are in accordance with written advice provided by resolution of the
Audit Committee, and is satisfied that the provision of those non-audit services during the
year by the auditor is compatible with, and did not compromise, the auditor’s independence
requirements of the Corporations Act 2001 for the following reasons:
Since the end of the previous financial year the Bank has paid insurance premiums in
respect of a Directors' and Officers' liability insurance contract. The contract insures each
person who is or has been a director or executive officer (as defined in the Corporations
Act 2001) of the Bank against certain liabilities arising in the course of their duties to the
Bank and its controlled entities. The directors have not included details of the nature of the
liabilities covered or the amount of the premium paid in respect of the insurance contract
as such disclosure is prohibited under the terms of the contract.
•
•
all non-audit services were subject to the corporate governance procedures adopted
by the Bank and have been reviewed by the Audit Committee to ensure they do not
impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating
to auditor’s independence as set out in APES 110 Code of Ethics for Professional
Accountants, as they did not involve reviewing or auditing the auditor’s own work,
acting in a management or decision making capacity for the Bank, acting as an
advocate for the Bank or jointly sharing risks and rewards.
Directors’ interests
Directors’ interests as at the date of this report were as follows:
Director
Neil Summerson
Stuart Grimshaw(1)
Steve Crane
Roger Davis
Carmel Gray
John Reynolds
Michelle Tredenick
David Willis
Richard Haire(2)
Ordinary Shares
45,599
10,825
25,678
4,896
10,946
5,217
2,433
1,414
4,000
(1)
Stuart Grimshaw was appointed as Chief Executive Officer and Managing Director on
1 November 2011.
(2)
Richard Haire was appointed as a Non-Executive Director on 18 April 2012.
Audit services – KPMG Australia
•
•
Audit and review of the financial reports
Other regulatory and audit services
Audit related services – KPMG Australia
•
Other assurance services(1)
Other services – KPMG Australia
•
•
•
Tax advisory services
Other
Due diligence services
Details of the amounts paid to the auditor of the Bank, KPMG and its related practices for
audit and non-audit services provided during the year are set out below:
Consolidated
Bank
2012
$000
1,127.1
532.6
1,659.7
123.9
123.9
222.5
75.6
103.2
401.3
2011
$000
923.4
464.1
1,387.5
84.2
84.2
347.4
5.4
-
352.8
2012
$000
818.3
346.1
1,164.4
-
-
218.2
75.6
103.2
397.0
2011
$000
547.1
304.1
851.2
-
-
341.4
5.4
-
346.8
(1)
Other assurance services comprise accounting opinions, and audit related services provided in relation to mortgage securitisation trusts which are consolidated under Australian Accounting Standards.
Fees for audit and non-audit services paid to KPMG which were provided in relation to leasing securitisation trusts which are not consolidated by the Bank were nil for 2012
(2011: $32,448).
52
BOQ ANNUAL REPORT 2012
Lead Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 54 and forms part of the
directors’ report for the year ended 31 August 2012.
Rounding of amounts
The Bank is a company of a kind referred to in ASIC Class Order 98/100 dated 10 July
1998 (as amended by Class Order 04/667 dated 15 July 2004) and in accordance with that
Class Order, amounts in this financial report and directors' report have been rounded off to
the nearest million dollars, unless otherwise stated.
Dated at Brisbane this eighteenth day of October 2012.
Signed in accordance with a resolution of the directors:
Neil Summerson
Chairman
Stuart Grimshaw
Managing Director
BOQ ANNUAL REPORT 2012 53
Directors’ Report (continued)
Year ended 31 August 2012
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To the directors of Bank of Queensland Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 August 2012 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Martin McGrath
Partner
Brisbane, 18 October 2012.
KPMG, an Australian partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative.
54
BOQ ANNUAL REPORT 2012
Statements of
Comprehensive Income
For the year ended 31 August 2012
Interest income
Less: Interest expense
Net interest income
Other operating income
Net banking operating income
Premiums from insurance contracts
Investment revenue
Claims and policyholder liability expense from insurance contracts
Net insurance operating income
Total operating income
Less: Expenses
Profit before impairment on loans and advances and tax
Less: Impairment on loans and advances
Profit/(Loss) before income tax
Less: Income tax expense/(benefit)
Profit/(Loss) for the year
Other comprehensive income, net of income tax
Cash flow hedges:
Net gains / (losses) taken to equity
Net losses transferred to profit and loss
Foreign currency translation differences on foreign operations
Net gain / (losses) on hedge of net investment in foreign operation
Change in fair value of assets available for sale
Other comprehensive income / (expense) for the year, net of income tax
Total comprehensive income / (expense) for the year
Profit/(Loss) attributable to:
Equity holders of the parent
Total comprehensive income / (expense) attributable to:
Equity holders of the parent
Consolidated
Bank
Note
4
4
4
4
4
5
13
6
2012
$m
2,596.2
1,944.7
651.5
111.5
763.0
76.0
7.4
(42.1)
41.3
804.3
422.6
381.7
401.0
(19.3)
(2.2)
(17.1)
(18.8)
0.2
(0.6)
0.8
6.2
(12.2)
(29.3)
2011
$m
2,676.6
2,053.2
623.4
132.1
755.5
68.6
8.5
(36.2)
40.9
796.4
374.1
422.3
200.5
221.8
63.1
158.7
29.7
6.0
0.6
(0.2)
2.1
38.2
196.9
2012
$m
2,549.2
2,086.7
462.5
235.7
698.2
-
-
-
-
698.2
369.7
328.5
359.9
(31.4)
(27.6)
(3.8)
8.1
0.2
-
-
8.9
17.2
13.4
2011
$m
2,638.6
2,184.2
454.4
232.5
686.9
-
-
-
-
686.9
322.5
364.4
166.7
197.7
55.3
142.4
24.8
6.0
-
-
(0.7)
30.1
172.5
(17.1)
158.7
(3.8)
142.4
(29.3)
196.9
13.4
172.5
Basic earnings per share
Ordinary shares
Diluted earnings per share
Ordinary shares
8
8
(10.2c)
(10.2c)
63.6c
60.3c
The above statements of comprehensive income should be read in conjunction with the accompanying notes.
BOQ ANNUAL REPORT 2012 55
Balance Sheets
As at 31 August 2012
Assets
Cash and liquid assets
Due from other financial institutions
Other financial assets
Derivative financial instruments
Loans and advances at amortised cost
Current tax assets
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Other assets
Intangible assets
Investments accounted for using the equity method
Total assets
Liabilities
Due to other financial institutions
Deposits
Derivative financial instruments
Accounts payable and other liabilities
Current tax liabilities
Provisions
Insurance policy liabilities
Borrowings including subordinated notes
Amounts due to controlled entities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total Equity
The above balance sheets should be read in conjunction with the accompanying notes.
Consolidated
Bank
Note
2012
$m
2011
$m
2012
$m
2011
$m
9
10
11
26
12
33
14
15
16
17
39
18
19
26
20
37
21
670.5
119.7
5,689.4
276.1
34,147.2
0.7
-
31.0
125.7
120.9
554.6
22.2
433.2
131.9
5,147.0
126.8
33,276.1
-
-
31.0
41.7
104.4
580.0
28.7
227.7
23.5
5,776.9
276.1
30,654.6
1.5
933.1
26.1
104.9
277.9
59.3
-
269.6
25.9
5,215.7
126.8
29,745.7
-
933.1
25.3
42.6
251.9
70.6
-
41,758.0
39,900.8
38,361.6
36,707.2
177.8
31,171.9
253.0
450.4
-
44.1
73.5
6,688.1
-
38,858.8
2,899.2
2,660.1
106.2
132.9
2,899.2
169.2
29,626.6
264.1
429.1
79.4
30.2
77.6
6,651.0
-
37,327.2
2,573.6
2,153.3
115.4
304.9
2,573.6
177.8
31,288.7
130.3
404.8
-
33.5
-
895.3
2,553.6
35,484.0
2,877.6
2,666.0
105.1
106.5
2,877.6
169.2
29,875.2
197.5
387.1
79.8
21.5
-
1,123.8
2,340.2
34,194.3
2,512.9
2,162.8
81.8
268.3
2,512.9
56
BOQ ANNUAL REPORT 2012
Statements of Cash Flows
For the year ended 31 August 2012
Cash flows from operating activities
Interest received
Fees and other income received
Dividends received
Interest paid
Cash paid to suppliers and employees
Operating income tax paid
(Increase)/decrease in operating assets:
Loans and advances at amortised cost
Other financial assets
Increase/(decrease) in operating liabilities:
Deposits
Securitisation liabilitiess
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets – software
Cash distribution received from equity accounted investments
Proceeds from sale of property, plant and equipment
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Cost of capital issues
Proceeds from borrowings and foreign exchange instruments
Proceeds from other financing activities
Repayment of other financing activities
Repayments of borrowings
Payments for treasury shares
Dividends paid
Dividends received
Net cash from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and liquid assets at beginning of year
Cash and liquid assets at end of year
Consolidated
Bank
Note
2012
$m
2011
$m
2012
$m
2011
$m
2,567.0
181.6
0.8
2,694.2
168.8
1.6
2,317.7
130.1
0.8
(2,085.5)
(1,908.4)
(2,231.4)
(382.9)
(153.4)
127.6
(312.9)
(110.1)
533.2
(338.4)
(151.7)
(272.9)
(1,279.2)
(517.2)
(1,745.5)
197.5
(1,115.7)
(551.8)
1,541.5
283.3
156.0
(10.4)
(21.7)
6.7
3.9
(21.5)
450.3
(10.4)
984.4
-
-
1,550.7
(274.4)
261.5
(13.4)
(19.4)
1.8
5.7
(25.3)
-
-
2,377.5
-
-
(1,228.9)
(2,572.1)
(3.8)
(88.8)
-
102.8
237.3
433.2
670.5
(6.2)
(73.3)
-
(274.1)
(37.9)
471.1
433.2
1,462.9
-
(477.5)
(9.7)
(18.2)
-
0.9
(27.0)
450.3
(10.4)
983.5
612.5
(278.3)
(1,226.6)
(3.8)
(88.8)
24.2
462.6
(41.9)
269.6
227.7
2,445.5
156.2
1.6
(2,041.7)
(290.9)
(109.3)
161.4
(1,710.0)
290.8
1,527.5
-
269.7
(12.4)
(11.9)
-
-
(24.3)
-
-
2,355.4
-
-
(2,569.8)
(6.2)
(73.3)
42.0
(251.9)
(6.5)
276.1
269.6
21
27
21
21
9
The above statements of cash flows should be read in conjunction with the accompanying notes.
BOQ ANNUAL REPORT 2012 57
Statements of
Changes in Equity
For the year ended 31 August 2012
Perpetual
Equity
Preference
shares
$m
Employee
benefits
reserve
$m
General
reserve
for credit
losses
$m
Ordinary
shares
$m
Cashflow
hedge
reserve
$m
Translation
reserve
$m
Available
for sale
reserve
$m
Retained
profits
$m
Total equity
$m
1,957.6
195.7
33.5
67.0
Consolidated
Year ended 31 August 2012
Balance at beginning of the year
Total comprehensive income for the year
Loss
Other comprehensive income, net of
income tax
Cash flow hedges:
Net losses taken to equity
Net losses transferred to profit
and loss
Net gain on hedge of net investment in
foreign operation
Foreign currency translation differences on
foreign operations
Change in fair value of assets available
for sale
Transfers
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Institutional placement and
entitlement offer(1)
Retail entitlement offer(1)
Costs of capital issue
Dividend reinvestment plan
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Treasury Shares(2)
Total contributions by and distributions
to owners
-
-
-
-
-
-
-
-
-
288.5
161.8
(7.4)
63.0
-
-
-
0.9
506.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.2)
-
(0.2)
33.3
8.0
-
(18.8)
0.2
-
-
-
-
(18.6)
(18.6)
-
-
-
-
-
-
-
-
-
0.4
6.5
304.9
2,573.6
-
-
-
0.8
(0.6)
-
-
0.2
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6.2
-
6.2
6.2
-
-
-
-
-
-
-
-
-
(17.1)
(17.1)
-
-
-
-
-
(3.2)
(3.2)
(20.3)
-
-
-
-
(142.1)
(9.6)
-
-
(18.8)
0.2
0.8
(0.6)
6.2
-
(12.2)
(29.3)
288.5
161.8
(7.4)
63.0
(142.1)
(9.6)
(0.2)
0.9
(151.7)
354.9
-
-
-
-
-
-
3.2
3.2
3.2
-
-
-
-
-
-
-
-
-
Balance at the end of the year
2,464.4
195.7
70.2
(10.6)
0.6
12.7
132.9
2,899.2
(1)
(2)
In April / May, the Bank completed a capital raising by way of Institutional Placement, Institutional Entitlement and Retail Entitlement offers of fully paid ordinary shares at an issue price of $6.05 per share.
Treasury shares represent the value of shares held by a subsidiary that the Bank is required to include in the Consolidated Entity’s financial statements. No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Bank’s own equity instruments.
The statements of changes in equity should be read in conjunction with the accompanying notes.
58
BOQ ANNUAL REPORT 2012
Perpetual
Equity
Preference
shares
$m
Employee
benefits
reserve
$m
General
reserve
for credit
losses
$m
Ordinary
shares
$m
Cashflow
hedge
reserve
$m
Translation
reserve
$m
Available
for sale
reserve
$m
Retained
profits
$m
Total equity
$m
1,861.9
195.7
32.9
77.0
(27.7)
Consolidated
Year ended 31 August 2011
Balance at beginning of the year
Total comprehensive income for the year
Profit
Other comprehensive income, net of
income tax
Cash flow hedges:
Net gains taken to equity
Net losses transferred to profit
and loss
Net gains on hedge of net investment in
foreign operation
Foreign currency translation differences on
foreign operations
Change in fair value of assets available
for sale
Transfers
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Dividend reinvestment plan
Conversion of RePS to ordinary shares
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Treasury Shares(1)
Total contributions by and distributions
to owners
-
-
-
-
-
-
-
-
-
51.3
47.2
-
-
-
(2.8)
95.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10.0)
(10.0)
(10.0)
-
-
-
-
-
-
-
-
29.7
6.0
-
-
-
-
35.7
35.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.6
-
0.6
33.5
-
-
-
-
(0.2)
0.6
-
-
0.4
0.4
-
-
-
-
-
-
-
4.4
260.6
2,404.8
-
-
-
-
-
2.1
-
2.1
2.1
-
-
-
-
-
-
-
158.7
158.7
-
-
-
-
-
10.0
10.0
168.7
-
-
(114.8)
(9.6)
-
-
29.7
6.0
(0.2)
0.6
2.1
-
38.2
196.9
51.3
47.2
(114.8)
(9.6)
0.6
(2.8)
(124.4)
(28.1)
Balance at the end of the year
1,957.6
195.7
67.0
8.0
0.4
6.5
304.9
2,573.6
(1)
Treasury shares represent the value of shares held by a subsidiary that the Bank is required to include in the Consolidated Entity’s financial statements. No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Bank’s own equity instruments.
The statements of changes in equity should be read in conjunction with the accompanying notes.
BOQ ANNUAL REPORT 2012 59
Statements of
Changes in Equity (continued)
For the year ended 31 August 2012
Bank
Year ended 31 August 2012
Balance at beginning of the year
Total comprehensive income for the year
Loss
Other comprehensive income, net of income tax
Cash flow hedges:
Net gains taken to equity
Net losses transferred to profit and loss
Change in fair value of assets available for sale
Transfers
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Institutional placement and entitlement offer(1)
Retail entitlement offer(1)
Costs of capital issue
Dividend reinvestment plan
Treasury Shares
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Total contributions by and distributions to owners
Balance at the end of the year
Perpetual
Equity
Preference
shares
$m
Employee
benefits
reserve
$m
General
reserve
for credit
losses
$m
Ordinary
shares
$m
Cashflow
hedge
reserve
$m
Available
for sale
reserve
$m
Retained
profits
$m
Total
equity
$m
1,967.1
195.7
33.5
51.0
(6.5)
3.8
268.3
2,512.9
-
-
-
-
-
-
-
288.5
161.8
(7.4)
63.0
(2.7)
-
-
-
503.2
2,470.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
195.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.2)
(0.2)
33.3
-
-
-
-
6.3
6.3
6.3
-
-
-
-
-
-
-
-
-
-
8.1
0.2
-
-
8.3
8.3
-
-
-
-
-
-
-
-
-
-
-
-
8.9
-
8.9
8.9
-
-
-
-
-
-
-
-
-
57.3
1.8
12.7
(3.8)
(3.8)
-
-
-
(6.3)
(6.3)
(10.1)
-
-
-
-
-
8.1
0.2
8.9
-
17.2
13.4
288.5
161.8
(7.4)
63.0
(2.7)
(142.1)
(142.1)
(9.6)
-
(151.7)
106.5
(9.6)
(0.2)
351.3
2,877.6
(1)
In April / May, the Bank completed a capital raising by way of Institutional Placement, Institutional Entitlement and Retail Entitlement offers of fully paid ordinary shares at an issue price of $6.05 per share.
The statements of changes in equity should be read in conjunction with the accompanying notes.
60
BOQ ANNUAL REPORT 2012
Bank
Year ended 31 August 2011
Balance at beginning of the year
Total comprehensive income for the year
Profit
Other comprehensive income, net of income tax
Cash flow hedges:
Net gains taken to equity
Net losses transferred to profit and loss
Change in fair value of assets available for sale
Transfers
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Dividend reinvestment plan
Conversion of RePS to ordinary shares
Treasury Shares
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Total contributions by and distributions to owners
Balance at the end of the year
Perpetual
Equity
Preference
shares
$m
Employee
benefits
reserve
$m
General
reserve
for credit
losses
$m
Ordinary
shares
$m
Cashflow
hedge
reserve
$m
Available
for sale
reserve
$m
Retained
profits
Total equity
$m
1,867.7
195.7
32.9
61.6
(37.3)
4.5
239.8
2,364.9
-
-
-
-
-
-
-
51.3
47.2
0.9
-
-
-
99.4
1,967.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
195.7
-
-
-
-
-
-
-
-
-
-
-
-
0.6
0.6
33.5
-
-
-
-
(10.6)
(10.6)
(10.6)
-
-
-
-
-
-
-
-
24.8
6.0
-
-
30.8
30.8
-
-
-
-
-
-
-
-
-
-
(0.7)
-
(0.7)
(0.7)
-
-
-
-
-
-
-
51.0
(6.5)
3.8
142.4
142.4
-
-
-
10.6
10.6
153.0
-
-
-
24.8
6.0
(0.7)
-
30.1
172.5
51.3
47.2
0.9
(114.8)
(114.8)
(9.7)
-
(124.5)
268.3
(9.7)
0.6
(24.5)
2,512.9
The statements of changes in equity should be read in conjunction with the accompanying notes.
BOQ ANNUAL REPORT 2012 61
Notes to the Financial
Statements
Year ended 31 August 2012
Note
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
Reporting entity
Basis of preparation
Significant accounting policies
Operating income
Expenses
Income tax expense
Dividends
Earnings per share
Cash and liquid assets
Due from other financial institutions
Other financial assets
Loans and advances at amortised cost
Provisions for impairment
Property, plant and equipment
Deferred tax assets and liabilities
Other assets
Intangible assets
Due to other financial institutions
Deposits
Provisions
Borrowings including subordinated notes
Capital and Reserves
Segment reporting
Risk management
Capital management
Financial instruments
Notes to the statements of cash flows
Auditors’ remuneration
Contingent liabilities
Commitments
Employee benefits
Key management personnel disclosures
Controlled entities
Related parties information
Average balances and margin analysis
Deed of cross guarantee
Insurance business
Events subsequent to balance date
Investments accounted for using the equity method
62
BOQ ANNUAL REPORT 2012
Page
63
63
63
70
71
72
73
74
74
75
75
76
77
78
80
80
81
83
83
84
84
86
87
88
96
98
102
103
103
104
104
107
114
115
115
116
118
121
121
1. Reporting entity
Bank of Queensland Limited (the “Bank”) is a company domiciled in Australia.
The address of the Bank’s registered office is Level 17, 259 Queen Street, Brisbane,
QLD, 4000. The consolidated financial report of the Bank for the financial year ended
31 August 2012 comprises the Bank and its subsidiaries (together referred to as the
“Consolidated Entity”) and the Consolidated Entity’s interest in equity accounted
investments. The Bank primarily is involved in retail banking, leasing finance and
insurance products.
2. Basis of preparation
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in
accordance with Australian Accounting Standards (“AASBs” – including Australian
Interpretations) adopted by the Australian Accounting Standards Board (“AASB”) and
the Corporations Act 2001. The financial statements and notes of the Consolidated
Entity and Bank also comply with International Financial Reporting Standards
(“IFRSs”) and interpretations adopted by the International Accounting Standards
Board. The Bank is a for-profit entity.
The consolidated financial report was authorised for issue by the directors on
18 October 2012.
(b) Basis of measurement
The financial report is prepared on the historical cost basis with the exception of the
following assets and liabilities which are stated at their fair value:
•
•
•
•
derivative financial instruments;
financial instruments designated at fair value;
financial instruments classified as available-for-sale; and
insurance policy liabilities.
(c) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which
is the Bank’s functional currency and the functional currency of the majority of the
Consolidated Entity.
(d) Rounding
The Consolidated Entity is of a kind referred to in ASIC Class Order 98/100 dated
10 July 1998 and in accordance with that Class Order, amounts in this financial
report and directors’ report have been rounded off to the nearest million dollars,
unless otherwise stated.
(e) Use of estimates and judgements
The preparation of a financial report in conformity with Australian Accounting
Standards requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets, liabilities,
income and expenses. These estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
These accounting policies have been consistently applied by each entity in the
Consolidated Entity.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised if the revision only affects that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Information about significant areas of estimation uncertainty and critical judgements
in applying accounting policies that have the most significant effect on the amounts
recognised in the financial statements are described in the following notes:
•
•
Provisions for impairment – Note 13 (refer Note 3 (j));
Intangible assets – Note 17;
•
•
•
•
Provisions – Note 20 (refer Note 3 (m));
Financial instruments – Note 26;
Contingent liabilities – Note 29; and
Insurance policy liabilities – Note 37.
3. Significant accounting policies
The following standards and amendments have been identified as those which may
impact the Bank and were available for early adoption at 31 August 2012 but have
not been applied in these financial statements.
•
•
•
•
AASB 9 Financial Instruments was issued and introduces changes in
the classification and measurement of financial assets and financial
liabilities. This standard becomes mandatory for the Consolidated Entity’s
31 August 2016 financial statements. The potential effects on adoption of the
amendments are yet to be determined.
AASB 10 Consolidated Financial Statements, when it becomes mandatory for
the Consolidated Entity’s 31 August 2014 financial statements, will supersede
AASB 127 Consolidated and Separate Financial Statements and Interpretation
112 Consolidation – Special Purposes Entities. It introduces a new single
control model to assess whether to consolidate an investee. The Consolidated
Entity has not determined the potential effect of the standard.
AASB 119 Employee Benefits is amended for changes in accounting and
disclosures of defined benefit superannuation plans; definitions of short-
term and other long-term employee benefits affecting the measurement
of the obligations; and the timing for recognition of termination benefits.
The amendments become mandatory for the Consolidated Entity’s 31 August
2014 financial statements with specific transitional requirements. The potential
effects on adoption of the amendments are yet to be determined.
AASB 11 Joint Arrangements, when it becomes mandatory for the
Consolidated Entity’s 31 August 2014 financial statements, introduces a
principles based approach to accounting for joint arrangements. If the parties
have rights to and obligations for underlying assets and liabilities, the joint
arrangement is considered a joint operation and the parties will account
for their share of revenue, expenses, assets and liabilities. Otherwise the
joint arrangement is considered a joint venture and the parties must use the
equity method to account for their interest. The Consolidated Entity has not
determined the potential effect of the standard.
The accounting policies set out below have been applied consistently to all periods
presented in the consolidated financial report, and have been applied consistently
across the Consolidated Entity.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Bank. Control exists when the Bank has
the power, directly or indirectly, to govern the financial and operating policies of an
entity so as to benefit from its activities. In assessing control, potential voting rights
that presently are exercisable or convertible are taken into account. The financial
statements of subsidiaries are included in the consolidated financial report from the
date that control commences until the date that control ceases. In the Bank’s financial
statements, investments in subsidiaries are carried at cost.
(ii) Securitisation
The Bank conducts a loan securitisation program whereby mortgage loans
are packaged and sold to the REDS Securitisation and Warehouse Trusts
(“RMBS Trusts”).
The Bank also securitises Hire Purchase, Chattel Mortgages and Finance
Leases which are packaged and sold to REDS EHP Securitisation Trusts (“REDS
EHP Trusts”).
BOQ ANNUAL REPORT 2012 63
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
Where a foreign currency transaction is part of a hedge relationship it is accounted
for as above, subject to the Hedge Accounting rules set out in Note 3 (c) Derivatives,
financial instruments and hedging.
(ii) Securitisation (continued)
Consolidated Entity
The Consolidated Entity receives the residual income distributed by the RMBS
and REDS EHP Trusts after all payments due to investors and associated costs of
the program have been met and as a result the Consolidated Entity is considered
to retain the risks and rewards of the RMBS Trusts and as a result do not meet
the de-recognition criteria of AASB 139 Financial Instruments: Recognition and
Measurement.
The RMBS Trusts fund their purchase of the loans by issuing floating-rate debt
securities. The securities are issued by the RMBS Trusts. These are represented as
borrowings of the Consolidated Entity however the Consolidated Entity does not
stand behind the capital value or the performance of the securities or the assets
of the RMBS Trusts. The Consolidated Entity does not guarantee the payment of
interest or the repayment of principal due on the securities. The loans subject to the
securitisation program have been pledged as security for the securities issued by the
RMBS Trusts. The Consolidated Entity is not obliged to support any losses that may
be suffered by investors and does not intend to provide such support.
To the extent that the Consolidated Entity does not substantially transfer all the risk
and rewards associated with these assets, the level of the Consolidated Entity’s
continuing involvement in these assets continues to be recognised.
Bank
Interest rate risk from the RMBS and REDS EHP Trusts is transferred back to the
Bank by way of interest rate and basis swaps. Accordingly, under AASB 139 the
original sale of the mortgages from the Bank to the RMBS Trusts does not meet
the de-recognition criteria set out in AASB 139. The Bank continues to reflect the
securitised loans in their entirety and also recognises a financial liability to the
RMBS Trusts. The interest payable on the intercompany financial asset / liability
represents the return on an imputed loan between the Bank and the Trusts and is
based on the interest income under the mortgages, the fees payable by the Trusts and
the interest income or expense not separately recognised under the interest rate and
basis swaps transactions between the Bank and the Trusts.
All transactions between the Bank and the Trusts are eliminated on consolidation.
(iii) Transactions eliminated on consolidation
Intra-group balances, and any unrealised gains and losses or income and expenses
arising from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
(iv) Derecognition of financial assets and liabilities
Financial assets are derecognised when the contractual rights to receive cash flows
from the assets have expired, or where the Bank has transferred its contractual
rights to receive the cash flows of the financial assets and substantially all the risks
and rewards of ownership. Financial liabilities are derecognised when they are
extinguished, i.e. when the obligation is discharged, cancelled or expired.
(b) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated into Australian dollars at the
foreign exchange rate ruling at that date. Non-monetary items in a foreign currency
that are measured at historical cost are translated using the exchange rate at the date
of the transaction. Foreign exchange differences arising on translation are recognised
in the profit and loss.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to Australian dollars at exchange
rates at the reporting date. The income and expenses of foreign operations are
translated to Australian dollars at exchange rates at the date of the transaction.
Foreign currency differences are recognised in other comprehensive income, and
presented in the foreign currency translation reserve in equity. When the settlement of
a monetary item receivable from or payable to a foreign operation is neither planned
nor likely in the foreseeable future, foreign exchange gains and losses arising from
such a monetary item are considered to form part of a net investment in a foreign
operation and are recognised in other comprehensive income, and are presented
within equity in the foreign currency translation reserve. When a foreign operation is
disposed of such that control is lost, the cumulative amount in the translation reserve
related to that foreign operation is reclassified to profit or loss as part of the gain or
loss on disposal. When the Bank disposes of only part of its interest in a subsidiary
that includes a foreign operation while retaining control, the relevant proportion of
the cumulative amount is reattributed to non-controlling interests.
(c) Derivatives, financial instruments and hedging
Derivatives
The Consolidated Entity uses derivative financial instruments to hedge its exposure
to foreign exchange and interest rate risks arising from operating, financing and
investing activities. In accordance with its treasury policy, the Consolidated Entity
can hold derivative financial instruments for trading purposes. Derivatives that do not
qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at trade date fair value and
are subsequently remeasured at fair value at the reporting date. The gain or loss
on re-measurement is recognised immediately in profit or loss in the Statement of
Comprehensive Income. However, when derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the hedge
relationship discussed below.
The fair value of interest rate swaps is the estimated amount that the Consolidated
Entity would receive or pay to terminate the swap at the balance sheet date, taking
into account current interest rates and the current creditworthiness of the swap
counterparties. The fair value of forward exchange contracts is their quoted market
price at the balance sheet date, being the present value of the quoted forward price.
The fair value of futures contracts is their quoted market price.
(i) Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability
of the cash flows of a recognised asset or liability, or a highly probable forecasted
transaction, the effective part of any gain or loss on the derivative financial
instrument is recognised directly in other comprehensive income. The ineffective
portion of any gain or loss is recognised immediately in profit or loss in the
Statement of Comprehensive Income. If a hedge of a forecast transaction
subsequently results in the recognition of a financial asset or a financial liability, then
the associated gains and losses that were recognised directly in other comprehensive
income are reclassified into profit or loss in the Statement of Comprehensive Income
in the same period or periods in which the asset acquired or liability assumed affects
the Statement of Comprehensive Income (i.e. when interest income or expense
is recognised).
When a hedging instrument expires or is sold, terminated or exercised, or the
Consolidated Entity revokes designation of the hedge relationship but if the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point
remains in other comprehensive income and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer
expected to take place, then the cumulative unrealised gain or loss is recognised
immediately in profit or loss in the Statement of Comprehensive Income.
64
BOQ ANNUAL REPORT 2012
3. Significant accounting policies (continued)
(c) Derivatives, financial instruments and hedging
(g) Leases
Finance Leases
(continued)
Derivatives (continued)
(ii) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash
flow hedges. Any foreign currency gain or loss on the hedging instrument relating to
the effective portion of the hedge is recognised in other comprehensive income and
accumulated in reserves in equity. To the extent the hedge is ineffective, a portion
is recognised immediately in the Statement of Comprehensive Income within other
income or other expenses.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the
fair value of any derivative instrument that does not qualify for hedge accounting are
recognised immediately in the Statement of Comprehensive Income and are included
in other income.
The Bank has not designated any hedges as fair value hedges.
Financial instruments
The Bank classifies its financial instruments into one of the following two categories
upon initial recognition:
(i)
Financial assets at fair value through the profit and loss
Financial assets that are held as part of the Bank’s Trading Book (refer Note 11)
are designated at fair value through the profit and loss. The Bank manages such
financial assets and makes purchase and sale decisions based on their fair value in
accordance with the Bank’s documented risk management or investment strategy.
Upon initial recognition attributable transaction costs are recognised in profit or loss
in the Statement of Comprehensive Income when incurred. Financial instruments at
fair value through the profit and loss are measured at fair value, and changes therein
are recognised in profit or loss in the Statement of Comprehensive Income.
(ii) Available-for-sale
Assets that are intended to be held for an indefinite period of time but which may
be sold in response to changes in interest rates, exchange rates and liquidity needs
are classified as available for sale. These assets are initially measured at fair value
plus any directly attributable transaction costs, with any changes in fair value other
than impairment losses (refer Note 3 (j)), being recognised in other comprehensive
income until the asset is sold. Interest income received on these assets is recorded
as net interest income and any realised gains or losses recorded in other income.
(d) Cash and Liquid assets
Cash and liquid assets comprise cash at branches, cash on deposit and balances
with the Reserve Bank of Australia.
(e) Receivables due from other financial institutions
Receivables due from other financial institutions are recognised and measured at
amortised cost and include nostro balances (an account held with a foreign bank
usually in a foreign currency) and settlement account balances.
(f) Loans and advances at amortised cost
Loans and advances are originated by the Bank and are recognised upon cash
being advanced to the borrower. Loans and advances are initially recognised at fair
value plus incremental direct transaction costs and subsequently measured at each
reporting date at amortised cost using the effective interest method. Refer Note 3 (j)
for impairment of loans and advances.
Finance leases in which the Bank is the lessor, are recorded in the Balance Sheet as
loans and advances at amortised cost. They are recorded on the commencement of
the lease as the net investment in the lease, being the present value of the minimum
lease payments.
The Consolidated Entity does not have finance leases as lessee.
Operating Leases
Operating leases in which the Bank is the lessee, are expensed on a straight-
line basis over the term of the lease, except where an alternative basis is more
representative of the pattern of benefits to be derived from the leased property.
When an operating lease terminates before the lease period expires, any payment
required to be made to the lessor by way of penalty, is recognised as an expense in
the period in which termination takes place.
(h) Property, plant and equipment
Recognition and initial measurement
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation and accumulated impairment losses. The cost of self-
constructed assets includes the cost of materials, direct labour and an appropriate
proportion of production overheads.
Subsequent Costs
Subsequent additional costs are only capitalised when it is probable that future
economic benefits in excess of the originally assessed performance of the assets will
flow to the Bank in future years. Where these costs represent separate components,
they are accounted for as separate assets and are separately depreciated over their
useful lives. Costs that do not meet the criteria for subsequent capitalisation are
expensed as incurred.
Subsequent Measurement
The Bank has elected to use the cost model to measure property, plant and
equipment after recognition. The carrying value is the initial cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation
Depreciation is charged to the profit or loss in the Statement of Comprehensive
Income on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Land is not depreciated.
The estimated useful lives in the current and comparative periods are as follows:
IT equipment
Plant, furniture and equipment
Years
3–10
3–25
Leasehold improvements
10 (or term of lease if less)
•
•
•
The residual value, if not insignificant, is reassessed annually.
(i) Intangible Assets
Initial recognition and measurement
Intangible assets are stated at cost less any accumulated amortisation and any
impairment losses. Expenditure on internally generated goodwill, research costs
and brands is recognised in the Statement of Comprehensive Income as an expense
as incurred.
Subsequent expenditure
Subsequent expenditure on intangible assets is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it relates. All other
expenditure is expensed as incurred.
BOQ ANNUAL REPORT 2012 65
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
3. Significant accounting policies (continued)
(i) Intangible Assets (continued)
Goodwill
Goodwill is the excess of the cost of acquisition over the fair value of the Bank’s
share of the identifiable net assets of the acquired subsidiary. Any goodwill is tested
annually for impairment, with any impairment taken directly to the profit or loss in
the Statement of Comprehensive Income. Refer Note 3 (j).
Consideration transferred included the fair values of the assets transferred, liabilities
incurred by the Consolidated Entity to the previous owners of the acquired entity, and
equity interests issued by the Consolidated Entity.
Amortisation
Except for goodwill, amortisation is charged to profit or loss in the Statement of
Comprehensive Income on a straight-line basis over the estimated useful life of the
intangible asset unless the life of the intangible asset is indefinite. Where applicable,
intangible assets are amortised from the date they are available for use. The
amortisation period and method are reviewed on an annual basis.
The amortisation rates used in the current and comparative periods are as follows:
•
•
Computer software
Customer related intangibles
and brands
(j) Impairment
Financial assets
Years
5–12
3–10
Financial assets other than loans and advances at amortised cost
The Consolidated Entity assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of financial assets,
not carried at fair value through profit and loss, is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has occurred after the
initial recognition of the asset, and that the loss event had a negative effect on the
estimated future cash flow of that asset that can be estimated reliably. In the case
of equity securities classified as available-for-sale, a significant or prolonged
decline in the fair value of a security below its cost is considered as an indicator
that the securities are impaired. If any such evidence exists for available-for-sale
financial assets, the cumulative loss - measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss in the Statement of Comprehensive
Income - is reclassified from equity and recognised in profit or loss in the Statement
of Comprehensive Income as a reclassification adjustment. Impairment losses
recognised in profit or loss in the Statement of Comprehensive Income on equity
instruments classified as available-for-sale are not reversed through the profit or loss
in the Statement of Comprehensive Income.
For available for sale debt securities, if any increase in the fair value can be related
objectively to an event occurring after the impairment loss was recognised, then the
impairment loss is reversed through profit or loss.
Loans and advances and other assets at amortised cost
If there is evidence of impairment for any of the Consolidated Entity’s financial assets
carried at amortised cost, the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows, excluding future
credit losses that have not been incurred. The cash flows are discounted at the financial
asset’s original effective interest rate. The loss is recognised in profit or loss.
The Bank uses two methods for calculating impairment of loans and advances:
(i) Specific impairment provisions
Impairment losses on individually assessed loans and advances are determined on a
case-by-case basis. If there is objective evidence that an individual loan or advance
is impaired, then a specific provision for impairment is raised. The amount of the
specific provision is based on the carrying amount of the loan or advance, including
the security held against the loan or advance and the present value of expected
future cash flows. Any subsequent write-offs for bad debts are then made against the
specific provision for impairment.
(ii) Collective impairment provisions
Where no evidence of impairment has been identified for loans and advances, these
loans and advances are grouped together on the basis of similar credit characteristics
for the purpose of calculating a collective impairment loss. Collective impairment
provisions are based on historical loss experience adjusted for current observable
data. The amount required to bring the collective provision for impairment to its
required level is charged to profit or loss in the Statement of Comprehensive Income.
Non-financial assets
Non-financial assets other than deferred tax assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. For goodwill, and intangible assets with an indefinite life, the
recoverable amount is estimated each year at the same time.
The Bank conducts an annual internal review of non-financial asset values to assess
for any indicators of impairment. If any indication of impairment exists, an estimate
of the asset's recoverable amount is calculated.
For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows that are largely independent
of the cash inflows from other assets or groups of assets Cash Generating Units
(“CGU”). An impairment loss is recognised in profit or loss in the Statement
of Comprehensive Income for the amount by which the asset’s carrying amount
exceeds its recoverable amount. Impairment losses recognised in respect of CGUs
are allocated first to reduce the carrying amount of goodwill allocated to the units,
and then to reduce the carrying amounts of the other assets in the unit on a pro rata
basis. This grouping is subject to an operating segment ceiling test. Non-financial
assets, other than goodwill, that suffered impairment are tested for possible reversal
of the impairment whenever events or changes in circumstances indicate that
the impairment may have reversed. An impairment loss in respect of goodwill is
not reversed.
Calculation of recoverable amount
The recoverable amount of a non-financial asset or CGU is the greater of their 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.
(k) Financial Liabilities
Financial liabilities including current accounts, deposits, subordinated and
convertible notes and term deposits are initially recognised at fair value plus
transaction costs that are directly attributable to the issue of the financial liability and
are subsequently measured at amortised cost using the effective interest method.
Securitisation set-up costs relating to on-balance sheet assets are included with
securitisation borrowings and amortisation is recorded as interest expense.
The Bank classifies capital instruments as financial liabilities or equity instruments in
accordance with the substance of the contractual terms of the instrument.
(l) Employee benefits
(i) Wages, Salaries and Annual Leave
Liabilities for employee benefits for wages, salaries and annual leave represents
present obligations resulting from employees’ services provided up to the reporting
date, calculated at undiscounted amounts based on remuneration wage and salary
rates that the Bank expects to pay as at reporting date including related on-costs.
66
BOQ ANNUAL REPORT 2012
3. Significant accounting policies (continued)
(l) Employee benefits (continued)
(ii) Long Service Leave
The provision for employee benefits to long service leave represents the present
value of the estimated future cash outflows to be made resulting from employee’s
services provided to reporting date. The provision is calculated using expected
future increases in wage and salary rates including related on-costs, and expected
settlement dates based on turnover history and is discounted using the rates attached
to national government bonds at reporting date which most closely match the terms
of maturity of the related liabilities.
(iii) Superannuation plan
The Bank contributes to a number of defined contribution superannuation plans
which comply with the Superannuation Contributions Act Legislation. Contributions
are charged to profit or loss in the Statement of Comprehensive Income as they
are made.
(iv) Share based payments
The Bank operates the following equity-settled compensation plans:
•
•
Senior Management Option Plan (“SMOP”); and
Award Rights Plan.
The above plans allow Consolidated Entity employees to acquire shares in the Bank.
The fair value of options and rights granted is recognised as an employee expense
with a corresponding increase to the Employee Benefits Reserve. The fair value is
measured at grant date and spread over the period during which the employees
become unconditionally entitled to the options and rights. The fair value of the
options and rights granted is measured using industry accepted option pricing
methodologies, taking into account the terms and conditions upon which the options
and rights are granted. The fair value of the options and rights is expensed over the
vesting period. Where options and rights do not vest due to failure to meet a non
market condition (e.g. employee service period) the expense is reversed. Where
options and rights do not vest due to failure to meet a market condition (e.g. Total
Shareholder Return test) the expense is not reversed.
(m) Provisions
A provision is recognised in the Balance Sheet when the Consolidated Entity has a
present legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of
money and, when appropriate, the risks specific to the liability.
(n) Shares
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to
the issue of ordinary shares and share options are recognised as a deduction from
equity, net of any tax effects.
Preference Shares
Preference share capital is classified as equity if it is non-redeemable or redeemable
only at the Bank’s option, and any dividends are discretionary. Dividends thereon are
recognised as distributions within equity upon declaration by the directors.
Preference share capital is classified as a financial liability if it is redeemable on a
specific date or at the option of the shareholders, or if dividend payments are not
discretionary. Dividends thereon are recognised as interest expense in the Statement
of Comprehensive Income as accrued.
Treasury shares
Ordinary shares of the Bank may be purchased from time to time by a subsidiary
of the Bank authorised to do so under the Bank's Award Rights Plan. Where these
shares remain unvested to employees they are treated as treasury shares and
deducted from capital as required by AASB 132 Financial Instruments: Presentation
and Disclosure. No profit or loss is recorded on purchase, sale, issue or cancellation
of these shares.
(o) Revenue
Interest income and expense
Interest income and expense for all interest-bearing financial instruments are
recognised in the profit and loss using the effective interest rates of the financial
assets or financial liabilities to which they relate.
The effective interest rate is the rate that exactly discounts the estimated future cash
payments or receipts through the expected life of the financial asset or financial
liability (or, where appropriate, a shorter period, to the net carrying amount of the
financial asset or financial liability). When calculating the effective interest rate,
the Bank estimates cash flows considering all contractual terms of the financial
instrument but not future credit losses. The calculation includes all amounts paid or
received by the Bank that are an integral part of the effective interest rate, including
transaction costs and all other premiums or discounts. Transaction costs include
loan acquisition costs such as commissions paid to Owner Managed Branches and
other intermediaries.
Non-interest income
Non-yield related lending application fees received are recognised as income when
the loan is disbursed or the commitment to lend expires.
Service fees that represent the recoupment of the costs of providing the service are
recognised on an accruals basis when the service is provided.
Lending fees that are considered an integral part of the effective interest rate are
recognised within interest revenue on an effective interest rate basis.
Fair value gains and losses from financial assets held at fair value are recognised in
the Statement of Comprehensive Income immediately.
Dividend income
Dividends are recognised when control of a right to receive consideration is
established.
(p) Income tax
Income tax comprises current and deferred tax. Income tax is recognised in profit
or loss in the Statement of Comprehensive Income except to the extent that it
relates to business combination, or items recognised directly in equity, or other
comprehensive income.
Current tax is the expected tax payable / receivable on the taxable income for the
year, using tax rates enacted or substantially enacted at the Balance Sheet date, and
any adjustment to tax payable / receivable in respect of previous years. Current tax
payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is provided using the Balance Sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates enacted or substantially
enacted at the Balance Sheet date. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will
be realised.
Tax Consolidation
The Bank is the head entity in the tax consolidated group comprising all the
Australian wholly-owned subsidiaries. The implementation date for the tax-
consolidated group was 1 September 2003.
BOQ ANNUAL REPORT 2012 67
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
3. Significant accounting policies (continued)
(p) Income tax (continued)
Tax Consolidation (continued)
Current tax expense/income, deferred tax liabilities and deferred tax assets arising
from temporary differences of the members of the tax-consolidated group are
recognised in the separate financial statements of the members of the tax-
consolidated group using a ‘group allocation’ approach by reference to the carrying
amounts in the separate financial statements of each entity and the tax values
applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused
tax losses of the subsidiaries is assumed by the head entity in the tax consolidated
group and are recognised as amounts payable (receivable) to (from) other entities
in the tax-consolidated group in conjunction with any tax funding arrangement
amounts (refer below). Any difference between these amounts is recognised by the
Bank as an equity contribution, or distribution from the subsidiary.
The Bank recognises deferred tax assets arising from unused tax losses of the tax-
consolidated group to the extent that it is probable that future taxable profits of the
tax-consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused
tax losses as a result of revised assessments of the probability of recoverability is
recognised by the head entity only.
(r) Earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit/(loss)
attributable to members of the Consolidated Entity for the reporting period, after
excluding any costs of servicing equity (other than ordinary shares), by the weighted
average number of ordinary shares of the Bank, adjusted for any bonus issues.
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after
tax effect of financing costs associated with dilutive potential ordinary shares and
the effect on revenues and expenses of conversion to ordinary shares associated
with dilutive potential ordinary shares, by the weighted average number of ordinary
shares and dilutive potential ordinary shares adjusted for any bonus issue.
(s) Business Combinations
Acquisitions on or after 1 July 2009
The Consolidated Entity has adopted revised AASB 3 Business Combinations (2008)
and amended AASB 127 Consolidated and Separate Financial Statements (2008)
for business combinations occurring in the financial year starting 1 July 2009.
All business combinations occurring on or after 1 July 2009 are accounted for by
applying the acquisition method.
For every business combination, the Group identifies the acquirer, which is the
combining entity that obtains control of the other combining entities or businesses.
Control is the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities.
Nature of tax funding and tax sharing arrangements
Contingent Liabilities
The Bank, in conjunction with other members of the tax-consolidated group, has
entered into a tax funding agreement which sets out the funding obligations of
members of the tax-consolidated group in respect of tax amounts. The tax funding
agreement requires payments to/from the head entity equal to the current tax liability
(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by
the head entity, resulting in the Bank recognising an inter-entity payable (receivable)
equal in amount to the tax liability (asset) assumed.
Contributions to fund the current tax liabilities are payable as per the Tax Funding
Arrangement and reflect the timing of the head entity's obligation to make payments
for tax liabilities to the relevant tax authorities.
The Bank, in conjunction with other members of the tax-consolidated group, has
also entered into a Tax Sharing Agreement (“TSA”). The TSA provides for the
determination of the allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations. No amounts have been
recognised in the financial statements in respect of this agreement as payment of any
amounts under the TSA is considered remote.
Taxation of Financial Arrangements ("TOFA")
TOFA began to apply to the BOQ 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 four years from
1 September 2010.
(q) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and
services tax (“GST”), except where the amount of GST incurred is not recoverable
from the Australian Tax Office (“ATO”). In these circumstances the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a
current asset or liability in the Balance Sheet.
Cash flows are included in the statements of cash flows on a gross basis. The GST
components of cash flows arising from investing and financing activities which are
recoverable from, or payable to, the ATO are classified as operating cash flows.
A contingent liability of the acquiree is assumed in a business combination only if
such a liability represents a present obligation and arises from a past event, and its
fair value can be measured reliably.
Transactions Costs
Transaction costs that the Group incurs in connection with a business combination,
such as a finders fee, legal fees, due diligence fees and other professional and
consulting fees are expensed as incurred.
(t) General reserve for credit losses
The Bank is required by the Australian Prudential Regulation Authority (“APRA”)
to maintain a general provision for credit losses. As the Bank is unable to hold
a general provision under current accounting standards, the Bank has created a
general reserve for credit losses. The general reserve for credit losses and collective
provision for impairment are aggregated for the purpose of satisfying the APRA
requirement for a general reserve for credit losses.
(u) Investment in jointly controlled operations
The Bank’s investments in jointly controlled joint venture entities are accounted for
under the equity method of accounting in the consolidated financial statements.
These are entities in which the Bank has joint control over all operational decisions
and activities.
Under the equity method, the investments in joint ventures are recognised at the cost
of acquisition and the carrying value is subsequently adjusted by the Bank’s share
of the joint venture entity’s profit or loss and movement in post-acquisition reserves,
after adjusting to align the accounting policies with that of the Bank.
The Bank’s share of the joint venture entity’s net profit or loss is calculated based on
the sale of land, together with any tax expense, and is brought to account based on
the proportion of settled land sales contracts.
(v) Life Insurance Business
Principles for life insurance
The life insurance operations of the Bank are conducted within separate funds
as required by the Life Insurance Act 1995 and is reported in aggregate with
the Shareholders’ Fund in the Statement of Comprehensive Income, Statement
of Financial Position and Statement of Cash Flows of the Bank. The life
insurance operations of the Bank comprise the selling and administration of life
insurance contracts.
68
BOQ ANNUAL REPORT 2012
3. Significant accounting policies (continued)
(v) Life Insurance Business (continued)
Principles for life insurance (continued)
Life insurance contracts involve the acceptance of significant insurance risk.
Insurance risk is defined as significant if, and only if, an insured event could cause
an insurer to pay significant additional benefits in any scenario, excluding scenarios
that lack commercial substance (i.e. have no discernible effect on the economics of
the transaction). Any products sold that do not meet the definition of a life insurance
contract are classified as life investment contracts. Insurance contracts include those
where the insured benefit is payable on the occurrence of a specified event such as
death, injury or disability caused by accident or illness. The insured benefit is either
not linked or only partly linked to the market value of the investments held by the
Bank, and the financial risks are substantially borne by the Bank.
Monies held in the statutory fund are subject to distribution and transfer restrictions
and other requirements of the Life Insurance Act 1995.
Under AASB 1038 the financial statements must include all assets, liabilities,
revenues, expenses and equity, irrespective of whether they are designated as
relating to shareholders or policyowners. Therefore, the Bank’s financial statements
comprise the total of all statutory funds and the Shareholders' Fund.
Insurance contract liability accounting policy
Profits of the insurance contract business are brought to account on a Margin
on Services ("MoS") basis in accordance with guidance provided by LPS 1.04:
Valuation of Policy Liabilities as determined by Australian Prudential Regulation
Authority ("APRA"). Under MoS, profit is recognised as fees are received and
services are provided to policyholders. When fees are received but the service has
not been provided, the profit is deferred. Losses are expensed when identified.
Consistent with the principle of deferring unearned profit is the requirement to defer
expenditure associated with the deferred profit. MoS permits costs associated
with the acquisition of policies to be charged to profit or loss in the Statement of
Comprehensive Income over the period that the policy will generate profits. Costs
may only be deferred to the extent that a policy is expected to be profitable.
Profit arising from life insurance is based on actuarial assumptions, and calculated
as the excess of premiums and investment earnings less claims, operating expenses
and the amortisation of acquisition costs that will be incurred over the estimated
life of the policies. The profit is systematically recognised over the estimated time
period the policy will remain in force.
Under MoS, insurance contract liabilities may be valued using an accumulation
approach where this does not result in a material difference to the projection
approach. The accumulation approach is deemed appropriate by the directors and
the appointed actuary. Under this approach, premiums received are deferred and
earned in accordance with the underlying incidence of risk. Costs of acquiring
insurance contracts, both direct and indirect, are deferred to the extent that related
product groups are expected to be profitable. Where a related product group is not
expected to be profitable, the insurance contract liability is increased by the excess of
the present value of future expenses over future revenues.
Claims expense – insurance contracts
Claims incurred all relate to the provision of services, including the bearing of risks,
and are treated as expenses.
Claims are recognised when the liability to the policyholder under the policy contract
has been established. Claims recognition is based upon:
•
•
cost estimates for losses reported to the close of the financial year; and
estimated incurred, but not reported losses, based upon past experience.
Deferred acquisition costs
Life insurance contracts
The fixed and variable costs of acquiring new life insurance business are deferred to
the extent that such costs are deemed recoverable from future premiums or policy
charges. These costs include commission, policy issue and underwriting costs,
certain advertising costs and other sales costs. Acquisition costs deferred are
limited to the lesser of the actual costs incurred and the allowance for the recovery of
such costs in the premium or policy charges. The actual acquisition costs incurred
are recorded in profit or loss in the Statement of Comprehensive Income. The value
and future recovery of these costs are assessed in determining policy liabilities.
This has the effect that acquisition costs are deferred within the policy liability
balance and amortised over the period that they will be recovered from premiums or
policy charges.
Critical Accounting Judgements and Estimates:
The Bank’s insurance subsidiary makes estimates and assumptions that affect the
reported amounts of assets and liabilities within the next financial year. Estimates
and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. The areas where critical accounting
judgements and estimates are applied are noted below.
Policy liabilities
Policy liabilities for life insurance contracts are computed using statistical or
mathematical methods, which are expected to give approximately the same results
as if an individual liability was calculated for each contract. The computations are
made by suitably qualified personnel on the basis of recognised actuarial methods,
with due regard to relevant actuarial principles. The methodology takes into account
the risks and uncertainties of the particular classes of life insurance business written.
The key factors that affect the estimation of these liabilities and related assets are:
•
•
•
The cost of providing benefits and administering these insurance contracts;
Mortality and morbidity experience on life insurance products, including
enhancements to policyholder benefits; and
Discontinuance experience, which affects the Bank’s ability to recover the cost
of acquiring new business over the lives of the contracts.
In addition, factors such as regulation, competition, interest rates, taxes, securities
market conditions and general economic conditions affect the level of these
liabilities. Details of specific actuarial policies and methods are set out in Note 37.
Revenue Recognition
(w) Segment reporting
Premiums in respect of life insurance contracts are recognised as revenue in the
Statement of Comprehensive Income from the date of attachment of risk. Premiums
with no due date are recognised as revenue on a received basis. Premiums with a
regular due date are recognised as revenue on an accruals basis. Unpaid premiums
are only recognised as revenue during the days of grace or where secured by the
surrender value of the policy and are included in the intergroup balance in the
Statement of Financial Position.
Investment income is recognised on an accruals basis. Realised and unrealised
gains and losses are included in the Statement of Comprehensive Income as
investment income.
The Bank determines and presents operating segments based on the information that
is provided internally to the Managing Director, who is the Bank’s chief operating
decision maker.
An operating segment is a component of the Bank that engages in business activities
from which it may earn revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Bank’s other components. All
operating segments’ operating results are regularly reviewed by the Bank’s Managing
Director to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Managing Director include items
directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
BOQ ANNUAL REPORT 2012 69
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
4. Operating income
Interest income
Loans and advances
Securities at fair value
Total interest income
Interest expense
Retail deposits
Wholesale deposits and borrowings
Total interest expense
Net interest income
Income from operating activities
Other customer fees and charges
Share of fee revenue paid to Owner Managed Branches
Securitisation income
Net income from financial instruments and derivatives at fair value
Commission – insurance and financial planning
Management fee – controlled entities
Foreign exchange income – customer based
Net profit/(loss) on sale of property, plant and equipment
Other income
Other operating income
Net Insurance operating income
Total operating income
Consolidated
Bank
2012
$m
2,345.1
251.1
2,596.2
1,025.8
918.9
1,944.7
651.5
106.1
(14.8)
-
0.3
6.2
-
7.4
1.8
4.5
111.5
111.5
41.3
804.3
2011
$m
2,383.1
293.5
2,676.6
977.7
1,075.5
2,053.2
623.4
108.5
(15.2)
0.6
13.6
5.0
-
7.0
5.5
7.1
132.1
132.1
40.9
796.4
2012
$m
1,998.4
550.8
2,549.2
1,025.8
1,060.9
2,086.7
462.5
105.6
(14.8)
53.8
1.0
10.0
25.4
7.3
(0.5)
47.9
235.7
235.7
-
698.2
2011
$m
2,034.0
604.6
2,638.6
977.2
1,207.0
2,184.2
454.4
108.1
(15.2)
48.0
13.7
8.0
26.1
7.0
0.1
36.7
232.5
232.5
-
686.9
70
BOQ ANNUAL REPORT 2012
5. Expenses
Operating expenses
Advertising
Commissions to Owner Managed Branches
Communications and postage
Printing and stationery
Non-lending losses
Processing costs
Impairment(1)
Other operating expenses
Administrative expenses
Professional fees
Directors’ fees
Other
Computer costs
Data processing
Amortisation and impairment – computer software (intangible)
Depreciation – IT equipment
Occupancy expenses
Lease rental
Depreciation of plant, furniture, equipment and leasehold improvements
Other
Employee expenses
Salaries and wages
Superannuation contributions
Amounts set aside to provision for employee entitlements
Payroll tax
Equity settled transactions
Other
Other
Amortisation – acquired intangibles
Integration costs(2)
Expenses
(1)
(2)
The prior year relates to property related equity investments.
The prior year includes integration costs associated with the acquisition of St Andrews and BOQ Finance.
Consolidated
Bank
2012
$m
2011
$m
2012
$m
2011
$m
14.0
5.6
18.7
5.7
14.7
24.2
-
19.9
102.8
18.7
1.7
7.4
27.8
53.1
31.9
1.3
86.3
20.4
8.2
2.5
31.1
134.0
12.5
1.4
7.9
4.7
5.4
14.7
5.1
17.1
4.9
2.1
22.9
4.9
18.6
90.3
12.5
1.5
6.7
20.7
47.2
18.4
1.4
67.0
18.9
6.3
1.9
27.1
122.5
12.1
3.8
7.1
3.9
5.5
13.3
6.7
17.7
5.3
12.9
24.2
-
16.2
96.3
15.9
1.2
8.7
25.8
50.2
29.6
0.7
80.5
18.8
7.0
2.4
28.2
111.1
10.7
1.0
6.6
3.8
4.4
14.1
6.1
16.1
4.4
2.1
22.9
3.5
14.9
84.1
10.4
1.0
8.2
19.6
44.5
17.1
1.0
62.6
16.6
5.2
1.8
23.6
101.0
10.5
2.7
6.0
3.9
4.4
165.9
154.9
137.6
128.5
8.7
-
422.6
8.4
5.7
374.1
1.3
-
369.7
0.6
3.5
322.5
BOQ ANNUAL REPORT 2012 71
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
6. Income tax expense
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense / (benefit)
Attributable to:
Continuing Operations
Deferred tax recognised in equity
Equity raising costs
Cash flow hedge reserve
Other
Numerical reconciliations between tax expense and pre-tax profit/(loss)
Profit/(loss) before tax – continuing operations
Profit/(loss) before tax
Income tax using the domestic corporate tax rate of 30% (2011: 30%)
Increase in income tax expense due to:
Non-deductible expenses
Decrease in income tax expense due to:
Research and development expenses
Other(1)
Under / (Over) provided in prior years
Income tax expense on pre-tax net profit/(loss)
Consolidated
Bank
2012
$m
67.2
3.3
70.5
(72.7)
(72.7)
(2.2)
2011
$m
115.1
(0.1)
115.0
(51.9)
(51.9)
63.1
2012
$m
39.4
(3.6)
35.8
(63.4)
(63.4)
(27.6)
2011
$m
107.7
(4.3)
103.4
(48.1)
(48.1)
55.3
(2.2)
63.1
(27.6)
55.3
(3.2)
3.5
(8.9)
(8.6)
(19.3)
(19.3)
(5.8)
4.3
-
(4.3)
(5.8)
3.6
(2.2)
-
12.7
1.0
13.7
221.8
221.8
66.5
0.8
(0.6)
(1.8)
64.9
(1.8)
63.1
(3.2)
3.5
3.9
4.2
(31.4)
(31.4)
(9.4)
0.3
-
(18.7)
(27.8)
0.2
(27.6)
-
10.7
(0.2)
10.5
197.7
197.7
59.3
0.3
(0.6)
(1.7)
57.3
(2.0)
55.3
(1)
In the Bank, this includes the impact of dividends received from subsidiary Group members which are eliminated at a Group level and other non-assessable income.
72
BOQ ANNUAL REPORT 2012
7. Dividends
Bank
2012
2011
Cents per share
$m
Ordinary shares
Final 2011 dividend paid 2 December 2011
(2011: 2 December 2010)
Interim 2012 dividend paid 25 May 2012
(2011: 25 May 2011)
Preference shares recognised as liabilities
RePS half-yearly dividend paid
(2011: 15 October 2010)
Preference shares not recognised as liabilities
Half-yearly PEPS dividend paid on 17 October 2011
(2011: 15 October 2010)
Half-yearly PEPS dividend paid on 16 April 2012
(2011: 15 April 2011)
28
26
-
250
234
63.1
79.0
142.1
-
-
5.0
4.6
9.6
Since the end of the financial year, the directors have declared the
following dividends:
Cents per share
•
•
PEPs half-yearly dividend (BOQPC)
Final – ordinary shares (BOQ)
217
26
Dividend franking account
30% franking credits available to shareholders of the Bank for subsequent financial years
Percentage
franked
%
100%
100%
100%
100%
$m
4.3
80.3
Cents per share
$m
Percentage
franked
%
26
26
257
239
246
Percentage
franked
%
100%
100%
57.1
57.7
114.8
1.2
1.2
4.8
4.9
9.7
100%
100%
100%
100%
100%
Date of payment
15 October 2012
8 December 2012
Bank
2012
$m
124.9
2011
$m
127.3
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a)
franking debits that will arise from the refund of the amount of the current tax assets and franking credits arising from the payment of current tax liabilities;
(b)
franking debits that will arise from the payment of dividends subsequent to year-end;
(c)
franking credits that will arise from the receipt of dividends recognised as receivables at the year end; and
(d)
franking credits that the entity may be prevented from distributing in subsequent years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
All the franked dividends paid or declared by the Bank since the end of the previous financial year were franked at the tax rate of 30%.
The balance of the Bank of Queensland Limited dividend franking account at the date of this report, after adjusting for franking credits and debits that will arise on payment of income tax
and dividends relating to the year ended 31 August 2012, is $124.9 million credit calculated at the 30% tax rate (2011: $127.3 million credit).
It is anticipated, based on these franking account balances that the Bank will continue to pay fully franked dividends in the foreseeable future.
BOQ ANNUAL REPORT 2012 73
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
8. Earnings per share
Basic earnings per share
Diluted earnings per share
Earnings reconciliation
Net profit/(loss)
Less other equity instrument dividends
Basic earnings
Effect of distributions on convertible preference shares
Diluted earnings
Weighted average number of shares used as the denominator
Number for basic earnings per share
Ordinary shares
Number for diluted earnings per share
Ordinary shares
Effect of award rights
Effects of converting preference shares
Effects of convertible notes(2)
Consolidated
2012
cents
(10.2c)
(10.2c)
2012
$m
(17.1)
(9.6)
(26.7)
-
(26.7)
2011
cents(1)
63.6c
60.3c
2011
$m
158.7
(9.7)
149.0
19.2
168.2
Consolidated
2012
Number
2011
Number(1)
263,815,724
234,035,934
263,815,724
234,035,934
1,343,916
770,019
-
-
22,836,809
21,206,409
265,159,640
278,849,171
(1)
(2)
Comparatives for basic and diluted earnings per share have been adjusted for the effect of the rights issue that occurred during the current financial year.
Refer to note 21 for Convertible Notes terms and conditions.
9. Cash and liquid assets
Consolidated
Bank
2012
$m
522.5
148.0
670.5
2011
$m
240.1
193.1
433.2
2012
$m
79.7
148.0
227.7
2011
$m
76.5
193.1
269.6
Notes, coin and cash at bank
Remittances in transit
74
BOQ ANNUAL REPORT 2012
10. Due from other financial institutions
Term deposits
11. Other financial assets
At fair value through profit and loss
Floating rates notes and bonds
Negotiable certificates of deposit
Deposits at call
Bank accepted bills
Promissory notes
Investment securities available for sale
Debt instruments
Unlisted equity instruments
Consolidated
Bank
2012
$m
119.7
119.7
894.3
2,650.6
289.1
445.2
345.3
4,624.5
1,055.0
9.9
1,064.9
2011
$m
131.9
131.9
1,119.9
1,361.2
110.3
88.9
1,507.2
4,187.5
949.0
10.5
959.5
2012
$m
23.5
23.5
894.3
2,650.6
289.1
445.2
345.3
4,624.5
1,142.5
9.9
1,152.4
2011
$m
25.9
25.9
1,119.9
1,361.2
110.3
88.9
1,507.2
4,187.5
1,015.3
12.9
1,028.2
Total other financial assets
5,689.4
5,147.0
5,776.9
5,215.7
BOQ ANNUAL REPORT 2012 75
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
12. Loans and advances at amortised cost
Residential property loans – secured by mortgages
Securitised residential property loans – secured by mortgages
Personal loans
Overdrafts
Commercial loans
Leasing finance
Consolidated
Bank
2012
$m
17,324.9
8,115.2
224.3
473.9
4,935.9
3,930.0
2011
$m
16,818.3
7,358.7
272.9
521.0
4,986.0
4,108.0
2012
$m
17,324.9
8,115.2
224.3
473.9
4,886.4
-
2011
$m
16,818.3
7,358.7
272.9
521.0
4,986.0
-
Gross loans and advances at amortised cost
35,004.2
34,064.9
31,024.7
29,956.9
Less:
Unearned lease finance income
Collective provision for impairment
Specific provisions for impairment
Total loans and advances at amortised cost
(444.1)
(192.6)
(220.3)
(535.0)
(80.1)
(173.7)
-
(165.8)
(204.3)
34,147.2
33,276.1
30,654.6
-
(56.8)
(154.4)
29,745.7
Loans and advances at amortised cost include the following finance lease receivables for leases of certain property and equipment where the Bank is the lessor:
Gross investment in finance lease receivables:
Less than one year
Between one and five years
More than five years
Unearned finance income
Net investment in finance leases
The net investment in finance leases comprise:
Less than one year
Between one and five years
More than five years
Transfer of financial assets
Consolidated
Bank
2012
$m
609.6
3,245.7
74.7
3,930.0
(444.1)
3,485.9
575.1
2,853.7
57.1
3,485.9
2011
$m
610.5
3,403.5
94.0
4,108.0
(535.0)
3,573.0
558.6
2,944.1
70.3
3,573.0
2012
$m
2011
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Bank conducts a loan securitisation program whereby mortgage loans are packaged and sold to the REDS Securitisation and Warehouse Trusts (“RMBS Trusts”).
A subsidiary of the Bank also securitises Hire Purchase, Chattel Mortgages and Finance Leases which are packaged and sold to REDS EHP Securitisation Trusts (“REDS EHP Trusts”).
The Trusts fund their purchase of the assets by issuing floating-rate debt securities. The securities are issued by the Trusts. Neither Bank of Queensland Limited nor any other member of
the Bank of Queensland group in any way stands behind the capital value or performance of the securitisation programs. The Bank does however provide the securitisation programs with
arm’s length services and facilities including the management and servicing of the leases securitised.
The Bank has no right to repurchase any of the securitised assets and no obligation to do so, other than in certain circumstances where there is a breach of warranty within 120 days of the
sale or when certain criteria are met under the Clean up Provision per the Trust Deed Supplement.
The Bank receives the residual income distributed by the Trusts after all payments due to investors and associated costs of the program have been met and as a result the Bank is
considered to retain the risks and rewards of the Trusts.
76
BOQ ANNUAL REPORT 2012
12. Loans and advances at amortised cost (continued)
The following table sets out the transferred financial assets and associated liabilities from conducting the securitisation program.
Transferred financial assets
Loans and advances at amortised cost
Associated financial liabilities
Amounts due to controlled entities
For those liabilities that have recourse only to transferred assets:
Fair value of transferred assets
Fair value of associated liabilities
13. Provisions for impairment
Specific provision:
Balance at the beginning of the year
Add: Expensed during the year
Less: Amounts written off against specific provision
Transfers from collective provision
Unwind of discount
Balance at the end of the year
Collective provision:
Balance at the beginning of the year
Add: Expensed during the year
Impairment losses written off
Transfers to specific provision
Balance at the end of the year
Total provisions for impairment
Consolidated
Bank
2012
$m
2011
$m
2012
$m
2011
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,100.8
5,100.8
(5,259.6)
(5,259.6)
5,100.8
(5,259.6)
(158.8)
Consolidated
Bank
2012
$m
173.7
227.8
(193.2)
34.8
(22.8)
220.3
80.1
173.2
(25.9)
(34.8)
192.6
2011
$m
60.5
173.5
(60.3)
-
-
173.7
53.1
27.0
-
-
80.1
2012
$m
154.4
190.2
(152.9)
34.8
(22.2)
204.3
56.8
169.7
(25.9)
(34.8)
165.8
5,379.9
5,379.9
(5,476.8)
(5,476.8)
5,379.9
(5,476.8)
(96.9)
2011
$m
51.0
131.4
(28.0)
-
-
154.4
21.5
35.3
-
-
56.8
412.9
253.8
370.1
211.2
BOQ ANNUAL REPORT 2012 77
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
Leasehold
improvements
Plant, furniture
and equipment
IT equipment
Capital works in
progress
$m
$m
$m
$m
30.7
5.5
(0.9)
0.2
35.5
15.3
5.7
(0.4)
20.6
15.4
14.9
26.6
5.6
(1.0)
0.2
31.4
14.3
4.6
(0.4)
18.5
12.3
12.9
28.9
3.5
(0.7)
0.4
32.1
17.6
2.5
(0.3)
19.8
11.3
12.3
27.9
3.4
(0.7)
0.5
31.1
17.5
2.4
(0.2)
19.7
10.4
11.4
31.9
1.1
(0.1)
0.1
33.0
28.3
1.3
(0.1)
29.5
3.6
3.5
29.7
0.4
(0.1)
-
30.0
27.8
0.7
-
28.5
1.9
1.5
0.7
0.3
-
(0.7)
0.3
-
-
-
-
0.7
0.3
0.7
0.3
-
(0.7)
0.3
-
-
-
-
0.7
0.3
Total
$m
92.2
10.4
(1.7)
-
100.9
61.2
9.5
(0.8)
69.9
31.0
31.0
84.9
9.7
(1.8)
-
92.8
59.6
7.7
(0.6)
66.7
25.3
26.1
14. Property, plant and equipment
2012
Consolidated
Cost
Balance at the beginning of the financial year
Additions
Disposals
Transfers between categories
Balance at the end of the financial year
Depreciation
Balance at the beginning of the financial year
Depreciation charge for the year
Disposals
Balance at the end of the financial year
Carrying amounts
Carrying amount at the beginning of the financial year
Carrying amount at the end of the financial year
Bank
Cost
Balance at the beginning of the financial year
Additions
Disposals
Transfers between categories
Balance at the end of the financial year
Depreciation
Balance at the beginning of the financial year
Depreciation charge for the year
Disposals
Balance at the end of the financial year
Carrying amounts
Carrying amount at the beginning of the financial year
Carrying amount at the end of the financial year
78
BOQ ANNUAL REPORT 2012
14. Property, plant and equipment (continued)
2011
Consolidated
Cost
Balance at the beginning of the financial year
Additions
Disposals
Transfers between categories
Balance at the end of the financial year
Depreciation
Balance at the beginning of the financial year
Depreciation charge for the year
Disposals
Balance at the end of the financial year
Carrying amounts
Carrying amount at the beginning of the financial year
Carrying amount at the end of the financial year
Bank
Cost
Balance at the beginning of the financial year
Additions
Disposals
Transfers between categories
Balance at the end of the financial year
Depreciation
Balance at the beginning of the financial year
Depreciation charge for the year
Disposals
Balance at the end of the financial year
Carrying amounts
Carrying amount at the beginning of the financial year
Carrying amount at the end of the financial year
Leasehold
improvements
Plant, furniture
and equipment
IT equipment
Capital works in
progress
$m
$m
$m
$m
24.0
6.4
(0.4)
0.7
30.7
11.1
4.5
(0.3)
15.3
12.9
15.4
21.0
5.3
(0.4)
0.7
26.6
11.1
3.5
(0.3)
14.3
9.9
12.3
25.7
4.1
(1.0)
0.1
28.9
16.7
1.8
(0.9)
17.6
9.0
11.3
25.0
3.8
(1.0)
0.1
27.9
16.7
1.7
(0.9)
17.5
8.3
10.4
29.7
2.4
(0.2)
-
31.9
27.1
1.4
(0.2)
28.3
2.6
3.6
29.4
0.5
(0.2)
-
29.7
27.0
1.0
(0.2)
27.8
2.4
1.9
1.0
0.5
-
(0.8)
0.7
-
-
-
-
1.0
0.7
1.0
0.5
-
(0.8)
0.7
-
-
-
-
1.0
0.7
Total
$m
80.4
13.4
(1.6)
-
92.2
54.9
7.7
(1.4)
61.2
25.5
31.0
76.4
10.1
(1.6)
-
84.9
54.8
6.2
(1.4)
59.6
21.6
25.3
BOQ ANNUAL REPORT 2012 79
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
15. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2012
$m
6.4
-
-
-
-
125.2
13.7
-
8.1
0.6
154.0
3.0
-
-
111.0
12.2
-
7.8
-
134.0
2011
$m
4.7
-
-
-
-
75.9
10.2
-
7.6
-
98.4
0.8
-
-
63.4
9.0
-
6.6
1.5
81.3
2012
$m
-
(17.6)
(1.7)
(1.2)
(4.9)
-
-
(0.2)
(2.7)
-
(28.3)
-
(19.1)
(5.0)
-
-
(0.2)
-
(4.8)
(29.1)
2011
$m
-
(30.0)
(2.8)
(2.5)
(8.8)
-
-
(0.6)
(6.4)
(5.6)
(56.7)
-
(26.8)
(8.9)
-
-
(0.6)
(2.4)
-
(38.7)
2012
$m
6.4
(17.6)
(1.7)
(1.2)
(4.9)
125.2
13.7
(0.2)
5.4
0.6
125.7
3.0
(19.1)
(5.0)
111.0
12.2
(0.2)
7.8
(4.8)
104.9
Consolidated
Bank
2012
$m
67.8
45.6
7.5
120.9
2011
$m
39.9
58.8
5.7
104.4
2012
$m
66.2
211.7
-
277.9
2011
$m
4.7
(30.0)
(2.8)
(2.5)
(8.8)
75.9
10.2
(0.6)
1.2
(5.6)
41.7
0.8
(26.8)
(8.9)
63.4
9.0
(0.6)
4.2
1.5
42.6
2011
$m
38.4
213.5
-
251.9
Consolidated
Accruals
Capitalised expenditure
Intangibles
Leasing
Property, plant, equipment and software
Provision for impairment
Provisions other
Receivables
Other
Equity reserves
Tax assets / (liabilities)
Bank
Accruals
Capitalised expenditure
Property, plant, equipment and software
Provision for impairment
Provisions other
Receivables
Other
Equity reserves
Tax assets / (liabilities)
16. Other assets
Accrued interest
Other debtors and prepayments
Operating lease assets
80
BOQ ANNUAL REPORT 2012
17. Intangible assets
Consolidated
Customer
related
intangibles
and brands
$m
Computer
software
$m
2012
Goodwill
$m
Cost
Balance at the beginning of
the financial year
Other additions
Impairment
Balance at the end of the
financial year
Amortisation and
impairment losses
Balance at the beginning of
the financial year
Amortisation for the year
Impairment
Balance at the end of the
financial year
Carrying amounts
Carrying amount at the
beginning of the financial
year
Carrying amount at the end
of the financial year
444.4
107.4
-
-
-
-
190.3
21.6
(8.1)
444.4
107.4
203.8
-
-
-
-
46.3
14.4
-
121.6
24.6
(2.0)
60.7
144.2
444.4
444.4
61.1
46.7
68.7
59.6
Bank
Other
$m
Total
$m
Goodwill
$m
Customer
contracts
$m
Computer
software
$m
Other
$m
Total
$m
7.3
0.1
-
7.4
1.5
2.0
-
3.5
5.8
3.9
749.4
21.7
(8.1)
763.0
169.4
41.0
(2.0)
208.4
580.0
554.6
8.1
-
-
8.1
-
-
-
-
8.1
8.1
5.0
-
-
5.0
5.0
-
-
5.0
-
-
181.0
18.1
(8.1)
191.0
120.2
22.3
(2.0)
140.5
60.8
50.5
2.0
0.1
-
2.1
0.3
1.1
-
1.4
1.7
0.7
196.1
18.2
(8.1)
206.2
125.5
23.4
(2.0)
146.9
70.6
59.3
BOQ ANNUAL REPORT 2012 81
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
17. Intangible assets (continued)
Consolidated
Customer
related
intangibles
and brands
$m
Computer
software
$m
2011
Goodwill
$m
Cost
Balance at the beginning of
the financial year
Other additions
Disposals
Balance at the end of the
financial year
Amortisation and
impairment losses
Balance at the beginning of
the financial year
Amortisation for the year
Disposals
Balance at the end of the
financial year
Carrying amounts
Carrying amount at the
beginning of the financial
year
Carrying amount at the end
of the financial year
444.4
107.4
-
-
-
-
170.9
19.4
-
444.4
107.4
190.3
-
-
-
-
444.4
444.4
31.3
15.0
-
46.3
76.1
61.1
103.2
18.4
-
121.6
67.7
68.7
Bank
Other
$m
Total
$m
Goodwill
$m
Customer
contracts
$m
Computer
software
$m
Other
$m
Total
$m
5.3
2.0
-
7.3
0.2
1.3
-
1.5
5.1
5.8
728.0
21.4
-
749.4
134.7
34.7
-
169.4
593.3
580.0
8.1
-
-
8.1
-
-
-
-
8.1
8.1
5.0
-
-
5.0
4.7
0.3
-
5.0
0.3
-
169.3
11.7
-
181.0
103.1
17.1
-
120.2
66.2
60.8
-
2.0
-
2.0
-
0.3
-
0.3
-
1.7
182.4
13.7
-
196.1
107.8
17.7
-
125.5
74.6
70.6
Impairment testing of the cash generating units containing goodwill
The aggregate carrying amounts of goodwill are:
Consolidated
Bank
2012
$m
12.9
8.1
24.0
399.4
444.4
2011
$m
12.9
8.1
24.0
399.4
444.4
2012
$m
-
8.1
-
-
8.1
2011
$m
-
8.1
-
-
8.1
BOQ Equipment Finance Limited
Orix debtor finance division
Pioneer Permanent Building Society Limited
Home Building Society Ltd
82
BOQ ANNUAL REPORT 2012
17. Intangible assets (continued)
Goodwill on acquisition of Home Building Society Ltd and Pioneer Permanent Building Society Limited has been allocated to the Banking cash generating unit (“CGU”) and all other
goodwill allocated to the BOQ Finance CGU.
The impairment test for goodwill is performed by comparing the CGUs carrying amount with its recoverable amount. The recoverable amount is based on the CGU’s value in use for
both CGUs.
Value in use was determined by discounting the future cash flows generated from the continued use of the CGU and was based on the following assumptions:
•
•
•
•
cash flows based on the retail banking segments 3 year projections (2011: 3 years);
a medium term growth rate of 9% (2011: 10%) for the 7 years subsequent to these projections;
a terminal value at year 10 based on a long term growth rate of 3.0% (2011: 2.5%) and a terminal price earnings multiple of 22.9 (2011: 10.7) times earnings; and
a pre tax discount rate of 13.8 % (2011: 16.9%).
The values assigned to the key assumptions represent management’s assessments of future trends in retail banking and are based on both external sources and internal sources.
Management has identified two key assumptions for which there could be a reasonably possible change that could cause the carrying amount to exceed the recoverable amount for
the Banking CGU. The table below shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the
carrying amount.
Pre tax discount rate
Forecast profit growth rate
18. Due to other financial institutions
Amounts payable – at call
19. Deposits
Deposits at call
Term deposits
Certificates of deposit
Total
Concentration of deposits:
Retail deposits
Wholesale deposits
Total
Deposits are well-diversified across industries and regions. All deposits are sourced in Australia.
2012
%
8
8
2011
%
12
17
Consolidated
Bank
2012
$m
2011
$m
2012
$m
2011
$m
177.8
169.2
177.8
169.2
8,134.9
16,753.6
6,283.4
31,171.9
22,270.0
8,901.9
31,171.9
8,615.2
13,269.5
7,741.9
29,626.6
20,317.9
9,308.7
29,626.6
8,216.6
16,788.7
6,283.4
31,288.7
22,351.6
8,937.1
31,288.7
8,863.8
13,269.5
7,741.9
29,875.2
20,566.5
9,308.7
29,875.2
BOQ ANNUAL REPORT 2012 83
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
20. Provisions
Employee benefits(1)
Directors' retiring allowance(2)
Leases
Restructuring
Other(3)
Total
Consolidated
Bank
2012
$m
16.1
0.2
0.8
-
27.0
44.1
2011
$m
15.8
0.2
0.4
0.8
13.0
30.2
2012
$m
13.3
0.2
0.4
-
19.6
33.5
(1)
(2)
(3)
Employee benefits provisions consist of annual leave and long service leave entitlements for employees.
The directors’ retiring allowance has been frozen as at 31 August 2003 and will only be increased in line with CPI movements.
Other provisions include provision for non-lending losses and, in the Consolidated Entity, insurance claims reserves.
Movements in provisions
Movements in each class of provision during the year, other than employee benefits, are as follows:
2012
Carrying amount at beginning of year
Additional provision recognised
Payments made
Carrying amount at end of year
2011
Carrying amount at beginning of year
Additional provision recognised
Payments made
Carrying amount at end of year
Consolidated
Bank
Leases
$m
Restructuring
$m
0.4
0.5
(0.1)
0.8
0.4
0.3
(0.3)
0.4
0.8
0.3
(1.1)
-
Consolidated
4.5
-
(3.7)
0.8
Other
$m
13.0
15.8
(1.8)
27.0
12.1
1.9
(1.0)
13.0
Leases
$m
Restructuring
$m
0.1
0.4
(0.1)
0.4
0.4
-
(0.3)
0.1
0.8
0.3
(1.1)
-
Bank
4.5
-
(3.7)
0.8
21. Borrowings including subordinated notes
The Consolidated Entity recorded the following movements on borrowings including subordinated notes:
Securitisation
liabilities(1)
$m
EMTN
Program
$m
ECP
Program
$m
Borrowings
including
subordinated
notes(2)
$m
Syndicated
Loan
$m
5,525.6
1,950.4
(1,667.1)
(4.0)
5.1
(17.4)
5,792.6
20.6
22.0
(10.0)
-
-
0.4
33.0
378.4
911.6
(1,127.0)
-
-
6.6
169.6
541.2
50.8
(91.9)
-
-
-
500.1
185.2
-
-
-
-
7.6
192.8
Year ended 31 August 2012
Balance at beginning of year
Proceeds from issues
Repayments
Deferred establishment costs
Amortisation of deferred costs
Foreign exchange translation
Balance at end of the year
84
BOQ ANNUAL REPORT 2012
2011
$m
13.2
0.2
0.1
0.8
7.2
21.5
Other
$m
7.2
14.2
(1.8)
19.6
7.1
1.1
(1.0)
7.2
Total
$m
6,651.0
2,934.8
(2,896.0)
(4.0)
5.1
(2.8)
6,688.1
21. Borrowings including subordinated notes (continued)
Securitisation
liabilities(1)
$m
EMTN
Program
$m
ECP
Program
$m
Borrowings
including
subordinated
notes(2)
$m
Preference
shares(3)
$m
Syndicated
Loan
$m
Year ended 31 August 2011
Balance at beginning of year
Proceeds from issues
Repayments
Deferred establishment costs
Amortisation of deferred costs
Foreign exchange translation
Balance at end of the year
5,776.1
972.8
(1,247.3)
(2.4)
5.7
20.7
5,525.6
81.7
10.9
(62.9)
-
-
(9.1)
20.6
472.6
1,885.9
(1,964.5)
-
-
(15.6)
378.4
494.4
279.9
(233.1)
-
-
-
541.2
47.2
-
(47.2)
-
-
-
-
300.3
198.2
(264.4)
-
-
(48.9)
185.2
The Bank recorded the following movements on borrowings including subordinated notes:
Year ended 31 August 2012
Balance at beginning of year
Proceeds from issues
Repayments
Foreign exchange translation
Balance at end of the year
EMTN
Program
$m
ECP
Program
$m
Borrowings
including
subordinated
notes
$m
Syndicated
Loan
$m
20.6
22.0
(10.0)
0.4
33.0
378.4
911.6
(1,127.0)
6.6
169.6
539.6
49.9
(89.6)
-
499.9
185.2
-
-
7.6
192.8
Total
$m
7,172.3
3,347.7
(3,819.4)
(2.4)
5.7
(52.9)
6,651.0
Total
$m
1,123.8
983.5
(1,226.6)
14.6
895.3
(1)
(2)
Securitisation liabilities are secured by a floating charge over securitised assets for amounts owing to noteholders and any other secured creditors of the securitisation vehicles.
The Convertible Notes issued were in three tranches of $60 million (“Tranche 1”), $45 million (“Tranche 2”) and $45 million (“Tranche 3”), and are cumulative, convertible, subordinated notes due June
2020, and pay, subject to a solvency condition, a monthly coupon equal to the 30 day bank bill rate plus 400 basis points. The Convertible Notes are unlisted. Tranche 2 and Tranche 3 were redeemed during
the current financial year. The Convertible Notes for Tranche 1 (after extension) convert into a variable number of BOQ ordinary shares on 10 November 2012, or each monthly interest payment date thereafter,
at the holders’ option, or earlier following the occurrence of certain events. The Convertible Notes will be redeemable for Tranche 1 at the option of the holder and also BOQ.
(3)
The bank converted the RePs into fully paid ordinary shares on 15 October 2010.
The Bank recorded the following movements on borrowings including subordinated notes:
Year ended 31 August 2011
Balance at beginning of year
Proceeds from issues
Repayments
Foreign exchange translation
Balance at end of the year
EMTN
Program
$m
ECP
Program
$m
Borrowings
including
subordinated
notes
$m
Preference
shares(1)
$m
Syndicated
Loan
$m
81.7
10.9
(62.9)
(9.1)
20.6
472.6
1,885.9
(1,964.5)
(15.6)
378.4
490.5
279.9
(230.8)
-
539.6
47.2
-
(47.2)
-
-
300.3
198.2
(264.4)
(48.9)
185.2
Total
$m
1,392.3
2,374.9
(2,569.8)
(73.6)
1,123.8
(1)
The bank converted the RePs into fully paid ordinary shares on 15 October 2010.
BOQ ANNUAL REPORT 2012 85
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
22. Capital and Reserves
(a) Ordinary shares
Movements during the year
Balance at the beginning of the year – fully paid
Dividend reinvestment plan
Conversion of REPs to ordinary shares
Institutional placement and entitlement offer(1)
Retail entitlement offer(1)
Balance at the end of the year – fully paid
Treasury shares (included in ordinary shares above)
Balance at the beginning of the year
Net acquisitions and disposals during the year
Balance at the end of the year
Consolidated
Bank
2012
Number
2011
Number
2012
Number
2011
Number
225,369,848
215,685,428
225,369,848
215,685,428
8,991,342
5,324,724
8,991,342
-
4,359,696
-
47,690,067
26,746,268
-
-
47,690,067
26,746,268
5,324,724
4,359,696
-
-
308,797,525
225,369,848
308,797,525
225,369,848
906,311
(39,018)
867,293
583,080
323,231
906,311
108,000
196,580
304,580
108,000
-
108,000
(1)
In April / May, the Bank completed a capital raising by way of Institutional Placement, Institutional Entitlement and Retail Entitlement offers of full paid ordinary shares at an issue price of $6.05 per share.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.
In the event of winding up of the Bank, ordinary shareholders rank after PEPS shareholders and creditors and are fully entitled to any proceeds of liquidation.
(b) Perpetual Equity Preference Shares (“PEPS”)
Balance at beginning of the year – fully paid
Balance at end of the year – fully paid
Terms and conditions
Consolidated
Bank
2012
Number
2011
Number
2012
Number
2011
Number
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
The PEPS are fully paid, redeemable, perpetual, non-cumulative preference shares. Dividends are non-cumulative and payable semi-annually at the discretion of directors and subject
to certain conditions being met, such as sufficient distributable profit. The Consolidated Entity is entitled to redeem, buy-back or cancel the preference shares on a call date (5 years
from issue date 17 December 2007) and each subsequent dividend payment date, subject to the prior written approval from APRA. The Consolidated Entity is also entitled to redeem
the preference shares on the occurrence of a regulatory event, tax event or a control event. The preference shareholders have no right to demand redemption of the preference shares but
they are entitled to receive a liquidation amount being equal to the issue price plus all dividends due but unpaid. PEPS are subordinate to all creditors and depositors and rank ahead of
ordinary shareholders for return of capital on liquidation.
86
BOQ ANNUAL REPORT 2012
22. Capital and Reserves (continued)
(c) Nature and purpose of reserves
Employee benefits reserve
The employee equity benefits reserve is used to record the value of share based payments provided to employees, including key management personnel, as part of their remuneration.
Refer to Note 31 for further details of these plans.
General reserve for credit losses
Refer to significant accounting policies Note 3 (t).
Available-for-sale reserve
Changes in the fair value of investments, such as bonds and floating rate notes classified as available-for-sale financial assets, are recognised in other comprehensive income as described
in Note 3(c) and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.
Cash flow hedge reserve
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income, as described in Note 3(c).
Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss.
Translation reserve
As described in Note 3(b) and (c), the translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as
from the movement in fair value of derivatives that hedge the Bank’s net investment in a foreign subsidiary.
23. Segment reporting
Segment information
For management purposes, the bank is organised into three operating segments based on products and services:
Banking
Retail banking, commercial, personal, small business loans, savings and transaction accounts and treasury.
Insurance
Life insurance and income protection insurance.
BOQ Finance
Equipment finance, vendor finance and debtor finance.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated financial statements. Income
taxes are managed within the individual operating segments and thus disclosed this way.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank’s total revenue in 2012 or 2011.
(a) Information about reportable segments
The following table presents income and profit/(loss) and certain asset and liability information regarding the bank’s operating segments.
Income
External
Inter-segment
Total operating income
Segment profit/(loss) before income tax
Income tax expense
Segment profit/(loss) after income tax
Results
Interest income
Interest expense
Depreciation and amortisation
Impairment losses
Assets
Liabilities
Banking
Insurance
BOQ Finance
Segment Total
2012
$m
2011
$m
2012
$m
2011
$m
2012
$m
2011
$m
2012
$m
2011
$m
609.0
6.6
615.6
(111.0)
(28.1)
(82.9)
604.9
5.9
610.8
129.0
34.9
94.1
2,258.8
1,750.1
37.5
365.6
38,015.3
35,452.0
2,336.5
1,850.0
22.9
165.3
36,122.6
33,878.7
40.9
-
40.9
26.4
6.3
20.1
1.4
2.4
0.7
-
210.7
166.0
40.3
-
40.3
26.1
8.2
17.9
-
2.6
0.5
-
198.7
161.8
156.2
-
156.2
67.4
20.2
47.2
338.4
194.6
3.2
35.4
3,571.8
3,280.2
153.2
-
153.2
69.1
20.7
48.4
342.7
203.2
2.6
35.2
3,590.9
3,307.0
806.1
6.6
812.7
(17.2)
(1.6)
(15.6)
798.4
5.9
804.3
224.2
63.8
160.4
2,598.6
1,947.1
41.4
401.0
41,797.8
38,898.2
2,679.2
2,055.8
26.0
200.5
39,912.2
37,347.5
BOQ ANNUAL REPORT 2012 87
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
23. Segment reporting (continued)
(b) Reconciliations
Segment total
Elimination of inter-segment revenue
Less other consolidation eliminations
Consolidated total
Segment total
Less elimination of inter-company bank accounts
Less other inter-company eliminations
Consolidated total
(c) Geographical segments
Revenue
Profit/(loss) before tax
2012
$m
812.7
(6.6)
(1.8)
804.3
2011
$m
804.3
(5.9)
(2.0)
796.4
2012
$m
(17.2)
-
(2.1)
(19.3)
2011
$m
224.2
-
(2.4)
221.8
Assets
Liabilities
41,797.8
39,912.2
38,898.2
37,347.5
(43.3)
3.5
(20.1)
8.7
(43.3)
3.9
(20.1)
(0.2)
41,758.0
39,900.8
38,858.8
37,327.2
The Consolidated Entity’s business segments operate principally in Australia, with the majority of customers being in Queensland, with the exception of leasing assets which are spread
throughout Australia and New Zealand.
24. Risk management
The Consolidated Entity adopts a “managed risk” approach to its banking and insurance activities. As such, the articulation of a risk aware culture is prevalent throughout the Consolidated
Entity’s credit, liquidity, market, operational, insurance risk and compliance policies and procedures. The Board has adopted policies in relation to the assessment, management and
monitoring of these risks and ownership of the frameworks within which these risks are managed, reside with the Chief Risk Officer.
The Chief Risk Officer contributes towards the achievement of the Consolidated Entity’s corporate objectives through the operationalisation and progressive development of the Bank’s risk
management function. In particular, improvement of the risk management function is focussed in a number of areas:
1.
2.
3.
4.
5.
the efficiency and effectiveness of the Consolidated Entity’s credit, liquidity, market, operational risk and compliance management process controls and policies to support improved
competitive advantage, support growth and enable improved cost controls;
to provide management and the Board with risk reporting that contributes to the further development of sound corporate governance standards;
to maintain regulatory compliance in line with regulators’ expectations;
to provide a sound basis from which the Bank can progress to the required compliance level under the Basel II accord; and
to contribute to the Consolidated Entity achieving risk based performance management.
Group Risk is an independent function and is responsible for providing the framework, policies and procedures for managing credit, liquidity, market, operational risk and compliance
throughout the Group. Policies are set in line with the governing strategy and risk guidelines set by the Board.
Monitoring
The Consolidated Entity’s enterprise risk management framework incorporates active management and monitoring of a range of risks including (but not limited to):
1. Market
2.
3.
4.
5.
Credit
Operational
Liquidity
Insurance
(a) Market risk
Market risk is the risk that movements in market rates and prices will result in profits or losses to the Bank. The objective of market risk management is to manage and control market risk.
(i)
Interest rate risk management
The management of interest rate market risk is separated into balance sheet (non-traded) and traded market risk.
Balance sheet (non-traded) market risk
The operations of the Bank are subject to the risk of interest rate fluctuations as a result of mismatches in the timing of the repricing of interest rates on the Bank’s assets and liabilities.
It is the principal objective of the Bank’s asset/liability management process to maximise levels of net interest income whilst limiting the effects of volatile and unpredictable movements in
interest rates. To achieve these objectives, the Bank uses derivative financial instruments, principally interest rate swaps, forward rate agreements and futures.
88
BOQ ANNUAL REPORT 2012
24. Risk management (continued)
(a) Market risk (continued)
(i)
Interest rate risk management (continued)
The current policy of the Bank is to eliminate market risk in the balance sheet where practical and to consciously establish specific positions within conservative limits for changes in value
of the residual risk.
A 1% parallel shock in the yield curve is used to determine the potential adverse change in net interest income in the ensuing 12 month period. This is a standard risk quantification
measure used by the Bank. A number of supplementary scenarios comprising variations in size and duration of interest rate moves together with changes in the balance sheet size and mix
are also used to provide a range of net interest income outcomes.
The figures in the table below indicate the potential increase in net interest income for an ensuing 12 month period. The change is expressed as a percentage and dollar impact of expected
net interest earnings based on a 1% parallel positive shock.
Consolidated and Bank
Exposure at the end of the year
Average monthly exposure during the year
High month exposure during the year
Low month exposure during the year
Traded market risk
2012
%
0.61
0.91
1.88
0.06
2011
%
0.67
2.26
3.47
0.17
2012
$m
4.9
7.3
15.3
0.5
2011
$m
5.3
17.9
27.5
1.3
Market risks attributable to trading activities are primarily measured using Value-at-risk (“VaR) based on historical simulation methodology. BOQ estimates VaR as the potential loss in
earnings from adverse market movements and is calculated over a 1-day time horizon to a 99% confidence level using 1 year of historical data. VaR takes account of all material market
variables that may cause a change in the value of the trading portfolio. Although an important tool for the measurement of market risk, the assumptions underlying the model have
some limitations:
•
•
•
VaR typically understates the losses that may occur beyond the 99% confidence level;
The reliance of historical data may prove insufficient to predict the severity of possible outcomes;
A 1-day holding period assumes that it is possible to hedge or dispose of positions within that period. For certain illiquid assets or in certain market situations this might not
be possible.
As VaR is a statistical measure and only attempts to cover losses to a 99% confidence level, the Bank supplements this analysis with stress testing. Stress testing attempts to adequately
assess the risks inherent in its trading activities by applying appropriate scenario analyses, whilst not addressing the likelihood of those outcomes.
As an overlay, the individual market risks of interest rate and credit sensitivities are monitored and measured against limits delegated by ALCO.
The interest rate VaR for the Bank’s trading portfolio for the year was as follows:
Trading VaR
Average
Maximum
Minimum
(ii) Foreign exchange risk
2012
$m
0.61
1.56
0.08
2011
$m
0.33
0.98
0.05
It is the Bank’s policy not to carry material foreign exchange rate exposures. At balance date there are no material foreign exchange rate exposures.
The Bank uses cross currency swaps and foreign exchange forwards to hedge its exchange rate exposures arising from borrowing off-shore in foreign currencies. The Bank uses forward
foreign exchange contracts to hedge potential exchange rate exposures created by customer-originated foreign currency transactions.
The Bank’s investment in its New Zealand subsidiary is hedged by forward foreign exchange contracts which mitigate the currency risk arising from the subsidiary’s net assets.
(b) Credit risk
Credit risk arises in the business from lending activities, the provision of guarantees including letters of credit and commitments to lend, investment in bonds and notes, financial market
transactions and other associated activities. Credit risk is the potential loss arising from the possibility that customers or counterparties fail to meet contractual payment obligations to the
Bank as they fall due.
The Board of Directors have implemented a structured framework of systems and controls to monitor and manage credit risk comprising:
•
•
•
documented credit risk management principles which are disseminated to all staff involved with the lending process;
documented policies;
a process for approving risk, based on tiered delegated approval authorities, whereby the largest exposures are assessed by a committee consisting of Group Executives and senior
risk managers chaired by the Chief Risk Officer;
BOQ ANNUAL REPORT 2012 89
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
24. Risk management (continued)
(b) Credit risk (continued)
•
•
risk grading the Bank’s commercial exposures for facilities greater than $100,000 based on items inclusive of financial performance and stability, organisational structure, industry
segment and security support. Exposures within this segment of the portfolio are generally subject to annual review including reassessment of the assigned risk grade;
an automated scorecard approval model for the Bank’s retail portfolio inclusive of home loans, personal loans, and lines of credit. This model is supported by experienced Risk
Assessment Managers; and
•
a series of management reports detailing industry concentrations, counterparty concentrations, loan grades and security strength ratings.
The Consolidated Entity uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investing activities.
In accordance with its treasury policy, the Consolidated Entity can hold derivative financial instruments for trading purposes. Credit risk on derivative contracts is minimised as
counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency.
Maximum exposure to credit risk
The amounts disclosed are the maximum exposure to credit risk, before taking account of any collateral held or other credit enhancements. For financial assets recognised on the balance
sheet, the exposure to credit risk equals their carrying amount. For customer commitments, the maximum exposure to credit risk is the full amount of the committed facilities as at
reporting date.
The carrying amount of the Consolidated Entity’s and Bank’s financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Cash and liquid assets
Due from other financial institutions
Other financial assets (including accrued interest)
Derivative financial instruments
Financial assets other than loans and advances
Gross loans and advances at amortised cost
Total financial assets
Customer commitments(1)
Total potential exposure to credit risk
(1)
Refer to Note 30(b) for full details of customer commitments.
Distribution of financial assets by credit quality
Neither past due or impaired
Gross loans and advances at amortised cost
Financial assets other than loans and advances
Past due but not impaired
Gross loans and advances at amortised cost
Impaired
Gross loans and advances at amortised cost
Consolidated
Bank
2012
$m
670.5
119.7
5,757.2
276.1
6,823.5
35,004.2
41,827.7
1,349.8
43,177.5
2011
$m
433.2
131.9
5,186.9
126.8
5,878.8
34,064.9
39,943.7
1,166.2
41,109.9
2012
$m
227.7
23.5
5,843.1
276.1
6,370.4
31,024.7
37,395.1
839.6
38,234.7
2011
$m
269.6
25.9
5,254.1
126.8
5,676.4
29,956.9
35,633.3
757.4
36,390.7
Consolidated
Bank
2012
$m
2011
$m
2012
$m
2011
$m
32,993.3
6,823.5
31,892.0
5,878.8
29,143.3
6,370.4
27,952.2
5,676.4
1,485.6
1,728.6
1,380.9
1,588.8
525.3
41,827.7
444.3
39,943.7
500.5
37,395.1
415.9
35,633.3
There is no item included in impaired assets which exceeds 5.0% of shareholders’ equity (2011: nil).
The Bank holds collateral against loans and advances to customers in the form of mortgage interest over property, other registered securities over assets and guarantees and mortgage
insurance. To mitigate credit risk, the Bank can take possession of the security held against the loans and advances as a result of customer default. To ensure reduced exposure to losses,
the collateral held by the Bank as mortgagee in possession is realised promptly.
90
BOQ ANNUAL REPORT 2012
24. Risk management (continued)
(b) Credit risk (continued)
Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as impaired.
An estimate of the collateral held against past due but not impaired and impaired loans and advances at amortised cost is below. It is not practicable to determine the fair value on
performing loans.
Held against past due but not impaired assets
Held against impaired assets
Credit quality
Consolidated
Bank
2012
$m
1,874.4
349.3
2011
$m
2,118.4
336.1
2012
$m
1,710.6
337.4
2011
$m
1,918.7
321.7
The credit quality of financial assets has been determined based on Standard and Poors credit ratings, APRA risk weightings and the Bank's standard risk grading.
The table below presents an analysis of the credit quality of financial assets:
Consolidated
2012
$m
2011
$m
Gross loans and advances
Gross loans and advances
Retail
Commercial
Total
loans and
advances
Financial
assets other
than loans
and advances
21,384.4
1,896.8
23,281.2
6,813.6
3,616.1
590.1
547.7
5,469.0
1,500.1
-
9,085.1
2,090.2
547.7
-
9.9
-
Retail
Commercial
20,210.5
3,548.5
603.7
608.2
2,008.3
5,753.3
1,332.4
-
Total
loans and
advances
Financial
assets other
than loans and
advances
22,218.8
5,868.3
9,301.8
1,936.1
608.2
-
10.5
-
26,138.3
8,865.9
35,004.2
6,823.5
24,970.9
9,094.0
34,064.9
5,878.8
Bank
2012
$m
2011
$m
Gross loans and advances
Gross loans and advances
Retail
Commercial
Total
loans and
advances
Financial
assets other
than loans
and advances
21,384.4
1,651.6
23,036.0
6,273.1
3,616.1
2,481.7
590.1
547.7
753.1
-
6,097.8
1,343.2
547.7
59.5
37.8
-
Retail
Commercial
20,210.5
3,548.5
603.7
608.1
1,773.9
2,662.2
550.0
-
Total
loans and
advances
Financial
assets other
than loans and
advances
21,984.4
5,603.4
6,210.7
1,153.7
608.1
-
73.0
-
26,138.3
4,886.4
31,024.7
6,370.4
24,970.8
4,986.1
29,956.9
5,676.4
High Grade
Satisfactory
Weak
Unrated(1)
High Grade
Satisfactory
Weak
Unrated(1)
(1)
Those items that remain unrated for retail gross loans and advances represent mainly personal loans and advances, which although not secured, are not determined to be weak. Any loans which have been
rated, have been included in the appropriate category.
BOQ ANNUAL REPORT 2012 91
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
24. Risk management (continued)
(b) Credit risk (continued)
Restructured / Renegotiated Loans
Generally, the terms of consumer loans are primarily renegotiated on a temporary basis in the event of customer hardship. Should temporary hardship conditions need to be extended,
some examples of assistance offered include:
•
•
•
concessional interest rates;
restructured loans to extend the period of repayment; and
repayment holidays.
The carrying value of loans that would otherwise be past due or impaired whose terms have been re-negotiated is considered immaterial.
Loans and advances which were past due but not impaired
Loans which are 90 or more days past due are not classified as impaired assets where the estimated net realisable value of the security is sufficient to cover the repayment of all principal
and interest amounts due.
Less than 30 days
31 to 90 days
More than 90 days
– Retail
– Commercial
– Retail
– Commercial
– Retail
– Commercial
Consolidated
Bank
2012
$m
651.7
231.2
162.8
93.3
231.8
114.8
2011
$m
676.5
207.3
253.9
108.0
318.3
164.6
2012
$m
651.7
157.9
162.8
68.1
231.8
108.6
2011
$m
676.5
124.1
253.9
68.6
318.3
147.4
1,485.6
1,728.6
1,380.9
1,588.8
Concentration of exposure for gross loans and advances at amortised cost;
Concentration of credit risk exists when a number of counterparties are engaged in similar activities, or operate in the same geographical areas or industry sectors and have similar
economic characteristics so that their ability to meet contractual obligations is similarly affected by changes in economic, political or other conditions.
The Bank monitors concentrations of credit risk by geographical location for loans and advances. An analysis of these concentrations of credit risk at balance sheet date is shown below:
Geographical concentration of credit risk for loans and advances at amortised cost
(before provisions and unearned income):
Queensland
New South Wales
Victoria
Northern Territory
Australian Capital Territory
Western Australia
South Australia
Tasmania
International (New Zealand)
(c) Liquidity risk
Consolidated
Bank
2012
$m
20,893.2
4,631.1
5,477.1
182.9
413.5
2,807.4
205.4
223.8
169.8
2011
$m
20,631.4
4,415.8
5,191.5
120.2
423.6
2,760.1
208.9
193.7
119.7
2012
$m
19,348.4
3,864.0
4,653.9
176.1
222.0
2,437.2
102.5
220.6
-
2011
$m
19,096.2
3,614.4
4,247.3
113.9
211.5
2,393.1
90.1
190.4
-
35,004.2
34,064.9
31,024.7
29,956.9
Liquidity risk arises from the possibility that the Bank is unable to meet its financial obligations as they fall due. Liquidity risk is managed through a series of detailed policies, including
the management of cash flow mismatches, the maintenance of a stable, core retail deposits base, the diversification of the funding base and the retention of adequate levels of high quality
liquid assets.
The Consolidated Entity manages liquidity risk by maintaining adequate reserves and facilities by continuously monitoring forecast and actual cash flows and matching maturity profiles of
financial assets and liabilities and liquidity scenario analysis.
92
BOQ ANNUAL REPORT 2012
Total
38,562.9
11,057.0
19,301.7
6,413.6
5,038.6
746.8
24. Risk management (continued)
(c) Liquidity risk (continued)
Consolidated
2012
Financial liabilities
Due to other financial institutions
Deposits
Derivative financial instruments(1)
Accounts payable and other
liabilities
Securitisation liabilities(2)
Borrowings including
subordinated notes
Insurance policy liabilities
Carrying
amount
$m
177.8
31,171.9
1.2
450.4
5,792.6
895.5
73.5
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and
letters of credit
Customer funding commitments
Consolidated
2011
Financial liabilities
Due to other financial institutions
Deposits
Derivative financial instruments(1)
Accounts payable and other
liabilities
Securitisation liabilities(2)
Borrowings including
subordinated notes
Insurance policy liabilities
-
-
(19.9)
-
-
-
Carrying
amount
$m
169.2
29,626.6
41.2
429.1
5,525.6
1,125.4
77.6
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
Policy Holder
$m
177.8
10,879.2
-
-
16,682.0
4,586.2
-
-
-
-
-
2.0
450.4
1,939.4
227.9
-
-
2,197.8
(0.7)
-
-
-
-
-
0.3
-
1,601.2
2,293.8
746.8
225.9
-
547.7
-
-
-
-
-
-
408.3
(506.8)
(98.5)
415.1
(409.0)
6.1
1,063.7
(990.4)
73.3
130.8
1,341.8
1,472.6
-
-
-
-
-
-
-
-
-
27.4
(19.9)
7.5
-
-
-
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
Policy Holder
$m
169.2
10,302.5
-
-
-
11,578.6
6,476.1
3,665.0
-
-
-
-
-
41.6
429.1
826.7
296.8
-
0.6
-
-
-
2,018.5
2,781.1
715.6
233.3
-
745.3
-
-
-
-
-
-
-
Total
contractual
cash flows
$m
177.8
34,345.2
1.6
450.4
6,581.2
1,001.5
73.5
42,631.2
1,914.5
(1,926.1)
(11.6)
130.8
1,341.8
1,472.6
Total
contractual
cash flows
$m
169.2
32,022.2
42.2
429.1
6,341.9
1,275.4
77.6
40,357.6
-
-
-
-
-
-
73.5
73.5
-
-
-
-
-
-
-
-
-
-
-
-
77.6
77.6
Total
36,994.7
10,471.7
13,172.8
8,728.5
7,191.4
715.6
(1) Derivative financial instruments other than those designated in a cashflow hedge relationship.
(2)
Repayment of securitisation bonds is forecast based on the expected repayment profile of the underlying assets of the trusts.
BOQ ANNUAL REPORT 2012 93
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
24. Risk management (continued)
(c) Liquidity risk (continued)
Consolidated
2011
Carrying
amount
$m
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
Policy
Holder
$m
Total
contractual
cash flows
$m
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and
letters of credit
Customer funding commitments
-
-
112.0
-
-
-
Bank
2012
Financial liabilities
Due to other financial institutions
Deposits
Derivative financial instruments(1)
Accounts payable and other liabilities
Borrowings including subordinated notes
Amounts due to controlled entities
Total
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and letters of credit
Customer funding commitments
133.2
1,166.2
1,299.4
Carrying
amount
$m
177.8
31,288.7
1.3
404.8
895.3
2,553.6
35,321.5
-
-
(142.7)
-
-
-
-
-
-
519.6
(475.6)
44.0
550.3
(506.6)
43.7
947.8
(889.4)
58.4
-
-
-
-
-
-
-
-
-
34.8
(30.6)
4.2
-
-
-
-
-
-
-
-
-
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
177.8
10,996.0
-
-
-
16,682.0
4,586.2
2,197.8
-
-
-
2,553.6
13,727.4
-
-
-
130.8
839.6
970.4
2.1
404.8
227.9
-
17,316.8
373.0
(482.3)
(109.3)
-
-
-
0.3
-
225.8
-
4,812.3
282.2
(303.6)
(21.4)
-
-
-
(0.7)
-
547.7
-
2,744.8
693.2
(707.6)
(14.4)
-
-
-
-
-
-
-
-
-
-
27.4
(19.9)
7.5
-
-
-
2,052.5
(1,902.2)
150.3
133.2
1,166.2
1,299.4
Total
contractual
cash flows
$m
177.8
34,462.0
1.7
404.8
1,001.4
2,553.6
38,601.3
1,375.8
(1,513.4)
(137.6)
130.8
839.6
970.4
(1)
Derivative financial instruments other than those designated in a cashflow hedge relationship.
94
BOQ ANNUAL REPORT 2012
24. Risk management (continued)
(c) Liquidity risk (continued)
Bank
2011
Financial liabilities
Due to other financial institutions
Deposits
Derivative financial instruments(1)
Accounts payable and other liabilities
Borrowings including subordinated notes
Amounts due to controlled entities
Total
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and letters of credit
Customer funding commitments
Carrying
amount
$m
169.2
29,875.2
41.2
387.1
1,123.8
2,340.2
33,936.7
-
-
45.5
-
-
-
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
169.2
10,551.1
-
-
-
11,578.6
6,476.1
3,665.0
-
-
-
2,340.2
13,060.5
-
-
-
133.2
757.4
890.6
41.6
387.1
296.3
-
12,303.6
487.9
(451.8)
36.1
-
-
-
0.6
-
231.8
-
6,708.5
472.3
(445.7)
26.6
-
-
-
-
-
743.5
-
4,408.5
695.9
(679.7)
16.2
-
-
-
-
-
-
-
-
-
-
34.8
(30.6)
4.2
-
-
-
Total
contractual
cash flows
$m
169.2
32,270.8
42.2
387.1
1,271.6
2,340.2
36,481.1
1,690.9
(1,607.8)
83.1
133.2
757.4
890.6
(1) Derivative financial instruments other than those designated in a cashflow hedge relationship.
(d) Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk failures could lead to reputational
damage, financial loss, legal disputes and/or regulatory consequences.
Group Risk are responsible for ensuring an appropriate framework exists to define, assess and manage operational risk and that resources are available to support it.
The Bank has developed an Operational Risk Management Framework (“ORMF”) which is designed to articulate, assess and manage operational risks throughout the Bank and its
subsidiaries. The key objectives of the framework are as follows:
•
•
•
risk identification, analysis and acceptance;
execution and monitoring of risk management practices; and
reporting and escalation of risk information on a regular and/or exception basis.
The ORMF consists of the following mandatory elements:
•
•
•
Bank-wide policies which require a consistent approach and minimum standards on specific operational risk matters;
Enterprise and Business Unit specific Risk profiling; and
Risk Self Assessments through the completion of controls attestation questionnaires.
These provide the basis for the business unit and Bank-wide risk profiles. The Bank wide risk profile is reported to the Board and Risk Committee on a regular basis.
(e) Insurance risk
(I) Risk management objectives and policies for risk mitigation
Insurance risks are controlled through the use of underwriting procedures, adequate premium rates and policy charges and sufficient reinsurance arrangements, all of which are approved
through a Board approved governance structure. Controls are also maintained over claims management practices to assure the correct and timely payment of insurance claims.
(II) Strategy for managing insurance risk
Portfolio of risks
The Bank’s insurance subsidiary issues term life insurance contracts and disability insurance contracts. The performance of the Bank’s insurance subsidiary and its continuing ability
to write business depends on its ability to pre-empt and control risks. The Bank’s insurance subsidiary has a risk strategy which has been approved by the Board. It summarises the
approach to risk and risk management.
BOQ ANNUAL REPORT 2012 95
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
24. Risk management (continued)
(e) Insurance risk (continued)
(II) Strategy for managing insurance risk (continued)
Risk strategy
In compliance with contractual and regulatory requirements, a strategy is in place to ensure that the risks underwritten satisfy objectives whilst not adversely affecting the Consolidated
Entity’s ability to pay benefits and claims when due. The strategy involves the identification of risks by type, impact and likelihood, the implementation of processes and controls to
mitigate the risks, and continuous monitoring and improvement of the procedures in place to minimise the chance of an adverse compliance or operational risk event occurring. Included
in this strategy is the process for underwriting and product pricing to ensure products are appropriately priced. Capital management is also a key aspect of the Consolidated Entity’s risk
management strategy. Capital requirements take account of all of the various regulatory reporting requirements to which the Consolidated Entity is subject.
Solvency margin requirements established by the Australian Prudential Regulation Authority (APRA) are in place to reinforce safeguards for policyholders’ interests, which are primarily
the ability to meet future claims payments to policyholders. The solvency margins measure the excess of the value of the insurers’ assets over the value of its liabilities, each element
being determined in accordance with the applicable valuation rules. This margin must be maintained throughout the year, not just at year end. These solvency requirements also take into
account specific risks faced by the Bank’s insurance subsidiary.
(iii) Methods to monitor and assess insurance risk exposures
Statutory capital adequacy requirements
Insurance operations are subject to regulatory capital requirements which prescribe the amount of capital to be held depending on the type, quality and concentration of investments held.
(iv) Methods to limit or transfer insurance risk exposures
Reinsurance
All insurance treaties are examined by the Appointed Actuary to assess their impact on the Bank’s insurance subsidiary’s exposure to risk and to ensure the achievement of the optimal
choice of type of reinsurance and retention levels. The methodology used produces financial projections based on a number of possible scenarios providing a detailed analysis of the
potential exposures.
Underwriting procedures
Strategic underwriting decisions are put into effect using the underwriting procedures detailed in the Bank’s insurance subsidiary’s Underwriting Policy. Such procedures include limits to
delegated authorities and signing powers.
Claims management
Strict claims management procedures ensure timely and correct payment of claims in accordance with policy conditions.
Asset and liability management techniques
Assets are allocated to different classes of business using a risk based approach. The Bank’s insurance subsidiary has a mix of short and long term business and invests accordingly.
Market risk is managed through investing in cash and deposits, bank issued commercial bills, cash management trusts and managed income funds. No more than 35% of shareholder
funds and funds backing insurance policy liabilities can be invested with any one counterparty subject to counterparty credit ratings.
(v) Concentration of insurance risk
Insurance risks associated with human life events
The Bank’s insurance subsidiary aims to maintain a stable age profile and mix of the sexes within its portfolio of policyholders. This policy maintains a balance between the current and
future profitability of the life business, and exposure to the significant external events. Despite the inevitable growth in policyholders at the age of retirement, the age profile and mix of
sexes within the population of policyholders is sufficiently spread so that the risk concentration in relation to any particular age group is minimal.
25. Capital management
The Bank and Group’s capital management strategy aims to ensure that the Consolidated Entity maintains adequate capital to act as a buffer against risks associated with activities whilst
maximising returns to shareholders. The Bank’s capital is measured and managed in line with Prudential Standards issued by APRA. This regulatory capital differs from statutory capital in
that certain liabilities such as preference shares are considered capital from a regulatory perspective and certain assets including goodwill and other intangibles are considered a deduction
from regulatory capital.
The Bank and Group have a capital management plan, consistent with their overall business plans, for managing capital levels on an ongoing basis. This plan sets out:
(i)
(ii)
the strategy for maintaining adequate capital over time including the capital target, how the target level is to be met and the means available for sourcing additional capital when
required; and
the actions and procedures for monitoring compliance with minimum regulatory capital adequacy requirements, including trigger ratios to alert management to, and avert, potential
breaches of these requirements.
The capital management plan is updated at least annually and submitted to the Board for approval. Current and projected capital positions are reported to the Board and APRA on a
monthly basis.
The Board has set Tier 1 capital target range to be between 8.5% and 10% of risk weighted assets and the total capital range to be between 11.5% and 13% of risk weighted assets.
The total capital adequacy ratio at 31 August 2012 was 12.6% and Tier 1 capital was 9.5%. Perpetual Equity Preference Shares (“PEPS”), issued as hybrid capital instruments, comprise
7.0% of total Tier 1 capital.
Net Tier 1 capital of 9.5% is represented by 8.5% of Core Tier 1 capital and 1.0% of hybrid capital instruments, including preference shares.
96
BOQ ANNUAL REPORT 2012
25. Capital management (continued)
A summary of the consolidated capital position is shown in the table below:
Qualifying capital
Tier 1
Fundamental Tier 1
Ordinary Share Capital
Reserves
Retained profits(1)
Residual Tier 1
Non Innovative (PEPS)
Tier 1 Deductions
Deferred Expenditure
Goodwill and other identifiable intangibles
Other deductions
Net Tier 1 Capital
Tier 2
Upper Tier 2
General Reserve for Credit Losses
Other
Lower Tier 2
Term subordinated debt
Tier 2 Deductions
Net Tier 2 Capital
Capital Base
Risk Weighted Assets
Capital Adequacy Ratio
(1)
For calculation of capital adequacy retained profits includes current year’s profit/(loss) less accrual of expected dividends net of expected dividend reinvestment.
Consolidated
2012
$m
2011
$m
2,464.6
33.3
116.8
2,614.7
195.7
195.7
(106.8)
(541.1)
(164.4)
(812.3)
1,957.9
33.5
288.4
2,279.8
195.7
195.7
(105.1)
(557.9)
(94.3)
(757.3)
1,998.1
1,718.2
184.2
8.5
192.7
499.9
499.9
(31.5)
(31.5)
661.1
123.1
4.2
127.3
539.6
539.6
(40.8)
(40.8)
626.1
2,659.2
21,098.1
12.6%
2,344.3
20,524.6
11.4%
BOQ ANNUAL REPORT 2012 97
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
26. Financial instruments
(a) Derivative financial Instruments
The Consolidated Entity and Bank used derivative financial instruments for both hedging and trading purposes in the current year. Refer to Note 24 for an explanation of the Consolidated
Entity’s and Bank’s risk management framework.
The following table summarises the notional and fair value of the Consolidated Entity’s and Bank's commitments to derivative financial instruments at 31 August 2012. Fair value in
relation to derivative financial instruments is calculated using the quoted market price less transaction costs. Where the instrument does not have a quoted market price, fair value is
estimated using net present value techniques.
Consolidated
2012
2011
Notional
Amount
Fair Value
Asset / (Liability)
Notional
Amount
Fair Value
Asset / (Liability)
$m
Asset
$m
Liability
$m
$m
Asset
$m
Liability
$m
Derivatives at fair value through income statement
Interest Rate Swaps
Foreign Exchange Forwards
Futures
Derivatives held as cash flow hedges
Interest Rate Swaps
Cross Currency Swaps
Foreign Exchange Forwards
Derivatives designated as net investment hedges
Foreign Exchange Forwards
18,100.0
68.9
6,085.7
24,254.6
29,014.0
832.1
129.8
29,975.9
12.9
54,243.4
0.1
0.7
3.6
4.4
268.3
0.9
2.5
271.7
-
276.1
2012
(0.9)
(0.3)
-
(1.2)
(118.3)
(133.3)
(0.2)
(251.8)
-
(253.0)
11,000.0
51.9
12,624.8
23,676.7
28,249.0
677.3
241.8
29,168.1
23.7
52,868.5
Bank
9.0
0.4
6.5
15.9
108.8
0.1
1.9
110.8
0.1
126.8
2011
(40.9)
(0.3)
-
(41.2)
(132.3)
(88.0)
(2.6)
(222.9)
-
(264.1)
Notional
Amount
Fair Value
Asset / (Liability)
Notional
Amount
Fair Value
Asset / (Liability)
$m
Asset
$m
Liability
$m
$m
Asset
$m
Liability
$m
18,100.0
81.8
6,085.7
24,267.5
29,014.0
307.0
129.8
29,450.8
53,718.3
0.1
0.7
3.6
4.4
268.3
0.9
2.5
271.7
276.1
(0.9)
(0.4)
-
(1.3)
(118.3)
(10.5)
(0.2)
(129.0)
(130.3)
11,000.0
75.5
12,624.8
23,700.3
28,249.0
289.5
241.8
28,780.3
52,480.6
9.0
0.5
6.5
16.0
108.8
0.1
1.9
110.8
126.8
(40.9)
(0.3)
-
(41.2)
(132.3)
(21.4)
(2.6)
(156.3)
(197.5)
Derivatives at fair value through income statement
Interest Rate Swaps
Foreign Exchange Forwards
Futures
Derivatives held as cash flow hedges
Interest Rate Swaps
Cross Currency Swaps
Foreign Exchange Forwards
98
BOQ ANNUAL REPORT 2012
26. Financial Instruments (continued)
(b) Other financial instruments
The fair value estimates for specific instruments are based on the following methodologies and assumptions:
Cash and liquid assets, due from and to other financial institutions, accounts payable and other liabilities
The fair value approximates their carrying value as they are short term in nature or are receivable or payable on demand.
Loans and advances
Loans and advances are net of specific and collective provisions for doubtful debts and unearned income. The fair values of loans and advances that reprice within six months of year
end are assumed to equate to the carrying value. The fair values of all other loans and advances are calculated using discounted cash flow models based on the maturity of the loans and
advances. The discount rates applied are based on the current interest rates at 31 August of similar types of loans and advances, if the loans and advances were performing at balance
date. The differences between estimated fair values of loans and advances and carrying value reflect changes in interest rates and creditworthiness of borrowers since loan or advance
origination.
Deposits
The fair value of non-interest-bearing, call and variable rate deposits and fixed rate deposits repricing within six months is the carrying value. The fair value of other term deposits is
calculated using discounted cash flow models based on the deposit type and its related maturity.
Borrowings including subordinated notes
The fair values are calculated based on a discounted cash flow model using a yield curve appropriate to the remaining maturity of the instruments. Fair values of financial instruments at
balance date are as follows:
Assets carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Assets carried at amortised cost
Cash and liquid assets
Due from other financial institutions
Loans and advances at amortised cost
Liabilities carried at fair value
Derivative liabilities
Insurance policy liabilities
Liabilities carried at amortised cost
Balances due to other financial institutions
Deposits
Borrowings including subordinated notes
Accounts payable and other liabilities
Consolidated Entity
Carrying value
Fair value
Note
2012
$m
2011
$m
2012
$m
2011
$m
11
11
26
9
10
12
26
37
18
19
21
1,064.9
4,624.5
276.1
5,965.5
670.5
119.7
34,147.2
34,937.4
(253.0)
(73.5)
(326.5)
(177.8)
(31,171.9)
(6,688.1)
(450.4)
(38,488.2)
959.5
4,187.5
126.8
5,273.8
433.2
131.9
33,726.1
34,291.2
(264.1)
(77.6)
(341.7)
(169.2)
(29,626.6)
(6,651.0)
(429.1)
(36,875.9)
1,064.9
4,624.5
276.1
5,965.5
670.5
119.7
34,290.6
35,080.8
(253.0)
(73.5)
(326.5)
(177.8)
(31,240.9)
(6,738.6)
(450.4)
(38,607.7)
959.5
4,187.5
126.8
5,273.8
433.2
131.9
33,772.8
34,337.9
(264.1)
(77.6)
(341.7)
(169.2)
(29,698.3)
(6,713.6)
(429.1)
(37,010.2)
BOQ ANNUAL REPORT 2012 99
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
26. Financial Instruments (continued)
(b) Other financial instruments (continued)
Assets carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Assets carried at amortised cost
Cash and liquid assets
Due from other financial institutions
Loans and advances at amortised cost
Liabilities carried at fair value
Derivative liabilities
Liabilities carried at amortised cost
Balances due to other financial institutions
Deposits
Borrowings including subordinated notes
Accounts payable and other liabilities
Amounts due to controlled entities
Bank
Carrying value
Fair value
Note
2012
$m
2011
$m
2012
$m
2011
$m
11
11
26
9
10
12
26
18
19
21
1,152.4
4,624.5
276.1
6,053.0
227.7
23.5
30,654.6
30,905.8
1,028.2
4,187.5
126.8
5,342.5
269.6
25.9
29,745.7
30,041.2
1,152.4
4,624.5
276.1
6,053.0
227.7
23.5
30,710.8
30,962.0
1,028.2
4,187.5
126.8
5,342.5
269.6
25.9
29,771.0
30,066.5
(130.3)
(197.5)
(130.3)
(197.5)
(177.8)
(31,288.7)
(895.3)
(404.8)
(2,553.6)
(35,320.2)
(169.2)
(29,875.2)
(1,123.8)
(387.1)
(2,340.2)
(33,895.5)
(177.8)
(31,357.7)
(945.8)
(404.8)
(2,553.6)
(35,439.7)
(169.2)
(29,946.9)
(1,186.4)
(387.1)
(2,340.2)
(34,029.8)
The estimated fair values disclosed do not include the assets and liabilities that are not financial instruments.
Interest rates used for determining fair values
The interest rates used to discount estimated cash flows, when applicable, are based on the Bank’s yield curve at the reporting date plus an adequate credit spread, and were as follows;
Derivatives, deposits and borrowings including subordinated notes
Leases
Loans and advances at amortised cost
Fair value hierarchy
2012
2011
3.56% – 3.95% 4.86% – 5.24%
6.79% – 20.3% 8.24% – 14.52%
5.55% – 7.3%
6.5% – 8.7%
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
There were no material movements in Level 3 during the year.
100
BOQ ANNUAL REPORT 2012
26. Financial Instruments (continued)
(b) Other financial instruments (continued)
Consolidated Entity
Instruments carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Derivative liabilities
Consolidated Entity
Instruments carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Derivative liabilities
Bank
Instruments carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Derivative liabilities
Bank
Instruments carried at fair value
Available for Sale financial assets
Financial assets designated at fair value through profit and loss
Derivative assets
Derivative liabilities
2012
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
454.1
-
-
454.1
-
454.1
600.9
4,624.5
276.1
5,501.5
(253.0)
5,248.5
9.9
-
-
9.9
-
9.9
2011
Level 1
$m
Level 2
$m
Level 3
$m
312.1
62.0
-
374.1
-
374.1
636.9
4,125.5
126.8
4,889.2
(264.1)
4,625.1
10.5
-
-
10.5
-
10.5
2012
1,064.9
4,624.5
276.1
5,965.5
(253.0)
5,712.5
Total
$m
959.5
4,187.5
126.8
5,273.8
(264.1)
5,009.7
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
454.1
-
-
454.1
-
454.1
688.4
4,624.5
276.1
5,589.0
(130.3)
5,458.7
9.9
-
-
9.9
-
9.9
2011
Level 1
$m
Level 2
$m
Level 3
$m
312.1
62.0
-
374.1
-
374.1
703.2
4,125.5
126.8
4,955.5
(197.5)
4,758.0
12.9
-
-
12.9
-
12.9
1,152.4
4,624.5
276.1
6,053.0
(130.3)
5,922.7
Total
$m
1,028.2
4,187.5
126.8
5,342.5
(197.5)
5,145.0
BOQ ANNUAL REPORT 2012 101
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
27. Notes to the statements of cash flows
Reconciliation of profit/(loss) for the year to net cash provided by operating activities.
Consolidated
Bank
2012
$m
(17.1)
14.8
4.0
-
24.6
7.3
4.4
(1.8)
12.2
(529.4)
2011
$m
158.7
11.5
6.7
-
18.4
0.2
4.0
(5.5)
(16.1)
208.6
2012
$m
(3.8)
7.7
1.3
(44.2)
22.3
7.2
4.4
0.5
2.4
(544.2)
2011
$m
142.4
6.1
0.6
(32.0)
17.1
0.2
4.0
(0.1)
(1.2)
227.3
(1,030.2)
(1,679.7)
(1,067.6)
(1,689.3)
(155.4)
159.1
(67.1)
(7.9)
-
8.6
125.0
139.2
(38.9)
(2.3)
-
31.0
1,530.1
1,541.0
19.2
(80.5)
14.1
(13.2)
(5.7)
265.9
156.0
19.7
2.6
1.1
(10.6)
18.0
(271.1)
261.5
(185.1)
158.7
(55.3)
(54.6)
(121.3)
8.6
1,398.4
42.8
(81.7)
12.1
13.9
-
-
129.3
138.8
(39.0)
22.1
(188.5)
31.0
1,515.0
3.1
(15.0)
(2.2)
-
-
-
(477.5)
269.7
Profit/(loss) from ordinary activities after income tax
Add/(less) items classified as investing / financing activities or non-cash items
Depreciation
Amortisation
Dividends received from subsidiaries
Software amortisation
Asset writedowns
Share based payments
Profit/(loss) on sale of property, plant and equipment
Increase/(decrease) in due from other financial institutions
(Increase)/decrease in other financial assets
Increase in loans and advances at amortised cost
(Increase)/decrease in derivatives
Increase in provision for impairment
Increase in deferred tax asset
(Increase)/decrease in other assets
Decrease in amounts due from controlled entities
Increase in due to other financial institutions
Increase in deposits
Increase in accounts payable and other liabilities
Increase/(decrease) in current tax liabilities
Increase/(decrease) in provisions
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in insurance policy liabilities
Increase/(decrease) in borrowings including subordinated notes
Net cash from operating activities
Cash flows from the following activities are presented on a net basis in the statements of cash flows:
•
•
•
Sales and purchases of investment securities;
Customer deposits in and withdrawals from deposit accounts; and
Loan drawdowns and repayments.
102
BOQ ANNUAL REPORT 2012
28. Auditors’ remuneration
Audit services – KPMG Australia
•
•
Audit and review of the financial reports
Other regulatory and audit services
Audit related services – KPMG Australia
•
Other assurance services(1)
Other services – KPMG Australia
•
•
•
Tax advisory services
Other
Due diligence services
Consolidated
Bank
2012
$000
1,127.1
532.6
1,659.7
123.9
123.9
222.5
75.6
103.2
401.3
2011
$000
923.4
464.1
1,387.5
84.2
84.2
347.4
5.4
-
352.8
2012
$000
818.3
346.1
1,164.4
-
-
218.2
75.6
103.2
397.0
2011
$000
547.1
304.1
851.2
-
-
341.4
5.4
-
346.8
(1) Other assurance services comprise accounting opinions, and audit related services provided in relation to mortgage securitisation trusts which are consolidated under Australian Accounting Standards.
Fees for audit and non-audit related services paid to KPMG which were provided in relation to leasing securitisation trusts which are not consolidated were nil (2011: $32,448).
29. Contingent liabilities
Guarantees
Letters of credit
Guarantees, indemnities and letters of credit
Consolidated
Bank
2012
$m
123.4
7.4
2011
$m
127.7
5.5
2012
$m
123.4
7.4
2011
$m
127.7
5.5
There are contingent liabilities arising in the normal course of business for which there are equal and opposite contingent assets and against which no loss is anticipated. Guarantees are
provided to third parties on behalf of customers. The credit risks of such facilities are similar to the credit risks of loans and advances.
Legal proceedings
On 22 December 2010, the Australian Securities and Investment Commission (ASIC) lodged legal proceedings against parties including the Bank, arising out of the collapse of Storm
Financial. Trial of this matter commenced on 24 September 2012 and the Bank intends to defend the action vigorously. The proceedings are regulatory in nature and no estimate of
damages can be made at this point given the current status of proceedings.
The trials of proceedings involving the Bank by a number of former Owner Managers in NSW commenced in the Supreme Court of New South Wales on 17 September 2012. The Bank
intends to vigorously defend these proceedings.
BOQ ANNUAL REPORT 2012 103
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
30. Commitments
(a) Lease commitments
Future rentals in respect of operating leases (principally in respect of premises) not provided for in
these financial statements comprise amounts payable:
Within 1 year
Between 1 year and 5 years
Later than 5 years
(b) Customer funding commitments
Loans to customers approved but not drawn at year end
Amounts undrawn against lines of credit
Consolidated
Bank
2012
$m
2011
$m
2012
$m
2011
$m
41.6
70.6
2.5
114.7
1,008.7
333.1
1,341.8
36.7
82.0
5.4
124.1
857.4
308.8
1,166.2
40.0
65.2
2.5
107.7
588.2
251.4
839.6
35.1
74.9
5.4
115.4
492.8
264.6
757.4
In the normal course of business the Bank makes commitments to extend credit to its customers. Most commitments either expire if not taken up within a specified time or can be
cancelled by the Bank within one year. Credit risk is significantly less than the notional amount and does not crystallise until a commitment is funded.
31. Employee benefits
(a) Superannuation commitments
The Consolidated Entity contributes to defined contribution superannuation plans which comply with the Superannuation Contributions Act legislation.
Basis of contributions
Employee superannuation contributions are based on various percentages of employees' gross salaries. The Consolidated Entity’s contributions are also based on various percentages of
employees' gross salaries.
The Consolidated Entity is under no legal obligation to make superannuation contributions except for the minimum contributions required under the Superannuation Guarantee
Legislation.
During the year employer contributions were made, refer Note 5.
(b) Share based payments
The Consolidated Entity has one remaining option plan. The Senior Management Option Plan (“SMOP”), which was established in 2001.
The ability to exercise the options under the plan is conditional on the Consolidated Entity achieving certain performance hurdles. The performance hurdles are based on diluted cash EPS
growth and require the Bank’s diluted cash EPS to outperform the average diluted cash EPS growth of the Comparison Banks over the relevant performance period. Performance periods
are noted in the relevant vesting conditions description.
To reach the EPS performance hurdle the Consolidated Entity must achieve the following for the performance period:
Percentage range by which cash EPS growth exceeds Comparison banks
Percentage of options to vest
5% and up to but not exceeding 10%
10% and up to but not exceeding 15%
15% and up to but not exceeding 20%
20% or more
25%
50%
75%
100%
104
BOQ ANNUAL REPORT 2012
31. Employee benefits (continued)
(b) Share based payments (continued)
Other terms and conditions of options granted under the above plans are as follows, with all options settled by physical delivery of shares:
Grant date / employee entitled
Number of
instruments
Vesting conditions
Options granted to key management at 20 November 2006 - SMOP 6
3,370,000(1)
Performance period – 2007, 2008 and 2009.
These options vested in the 2010 financial year.
Options granted to key management at 1 November 2007 - SMOP 7
3,999,000
Performance period – 2008, 2009 and 2010.
Contractual life
of options
5 years
5 years
SMOP 7 remain unvested as at November 2012, and as such the EPS
test will be applied across financial years 2008, 2009, 2010, 2011 and
2012 in accordance with the plan rules.
(1)
SMOP 6 options lapsed in this financial year
Long-Term Incentives – Award Rights
The Award Rights Plan was approved by shareholders on 11 December 2008. It is an equity based program under which Award Rights are granted as long-term incentives. The two types
of award rights currently granted to executives under the plan are PARs and DARs. No amount is payable by employees for the grant or exercise of these award rights.
PARs
PARs have a vesting framework based on Total Shareholder Return (TSR) of the Bank as measured against a Peer Group over a 2 to 3 year period. That Peer Group consists of the S&P
/ ASX 200 from time to time excluding selected entities in resources, real estate investment trusts, telecommunications (offshore headquartered), energy and utilities and such other
inclusions and exclusions as the Board considers appropriate. TSR is a measure of the entire return a shareholder would obtain from holding an entity’s securities over a period, taking into
account factors such as changes in the market value of the securities and dividends paid over the period.
One half of an employee’s PARs will vest if the Bank’s TSR performance over the three year period is in the top 50% of the Peer Group. All of the PARs vest if the Bank’s TSR performance is
in the top 25%. For TSR performance between those targets, a relative proportion of the PARs between 50% and 100% would vest.
Vested PARs are generally exercisable within 5 years after they are granted (approximately 2 years after vesting).
DARs
There are no market performance hurdles or vesting conditions for DARs but the holder must remain an employee of the Bank.
Vested DARs are generally exercisable within 5 years after they are granted (approximately 2 to 4 years after vesting).
Restricted Shares
The Consolidated Entity has used shares with restrictions on disposal as a non-cash, share based component of both short term and long term incentive awards.
BOQ ANNUAL REPORT 2012 105
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
31. Employee benefits (continued)
(b) Share based payments (continued)
The following factors and assumptions were used in determining the fair value of options or rights on grant date:
Option or right Type
Grant date
Expiry date
Fair value
per option or
right
Exercise
price(1)
Price of
shares on
grant date
Expected
volatility
Risk free
interest rate
Dividend
yield
Executives – Options
SMOP 6(2)
SMOP 7(2)
Restricted Shares(3)
Restricted Shares(3)
Restricted Shares(3)
Restricted Shares(3)
Restricted Shares(3)
Restricted Shares(3)
Executive
Director – Rights
PARs
Executives – Rights
PARs(4)
DARs(4)
PARs(4)
DARs(4)
DARs(4)
DARs(4)
PARs(4)
PARs(4)
PARs(4)
DARs(4)
PARs(4)
DARs(4)
PARs(4)
DARs(4)
PARs(4)
DARs(4)
PARs(4)
DARs(4)
PARs(4)
20 November 2006
20 November 2011
1 November 2007
1 November 2012
15 June 2010
1 March 2012
23 August 2011
1 November 2012
1 February 2012
31 October 2012
10 February 2012
31 October 2012
26 February 2012
9 January 2014
29 February 2012
21 September 2012
$2.13
$2.57
$10.31
$7.21
$6.76
$7.41
$6.70
$6.66
13 October 2011
13 October 2016
$5.36
29 June 2009
29 June 2009
23 December 2009
23 December 2009(5)
28 May 2010(6)
29 November 2010(7)
29 June 2014
29 June 2014
23 December 2014
23 December 2014
28 May 2015
29 November 2015
29 November 2010
29 November 2015
25 January 2011
25 January 2016
16 December 2011
16 December 2011(8)
1 February 2012
1 February 2012(9)
10 February 2012
10 February 2012(9)
26 February 2012
26 February 2012(9)
29 February 2012
29 February 2012(9)
10 May 2012(9)
16 December 2016
16 December 2016
16 December 2017
5 May 2017
16 December 2017
5 May 2017
16 December 2017
5 May 2017
16 December 2017
5 May 2017
16 December 2017
$4.59
$7.59
$6.93
$10.40
$10.11
$11.17
$7.81
$7.81
$5.18
$6.60
$5.18
$6.60
$5.18
$6.60
$5.18
$6.60
$5.18
$6.60
$3.70
$16.26
$19.11
-
-
-
-
-
-
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
$14.90
$19.44
$10.31
$7.21
$6.76
$7.41
$6.70
$6.66
15.0%
14.0%
6.00%
6.50%
4.5%
4.3%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$8.10
36.6%
3.9%
6.1%
$8.89
$8.89
$11.22
$11.22
$11.19
$11.45
$11.45
$10.12
$7.71
$7.71
$7.44
$7.44
$7.33
$7.33
$7.48
$7.48
$7.34
$7.34
$6.89
35.1%
35.1%
36.3%
36.3%
36.9%
37.1%
37.1%
37.1%
36.7%
36.7%
37.1%
37.1%
37.1%
37.1%
37.1%
37.1%
37.1%
37.1%
37.1%
4.2%
4.2%
4.8%
4.8%
4.6%
5.1%
5.1%
5.1%
3.1%
3.1%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
7.2%
7.2%
4.6%
4.6%
4.6%
4.2%
4.2%
4.2%
7.0%
7.0%
8.5%
8.5%
8.5%
8.5%
8.5%
8.5%
8.5%
8.5%
8.5%
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
The exercise price is calculated as the volume weighted average price of shares traded over the ten business days immediately after the date of the announcement of the Bank’s most recent annual results and
requires Board approval. The exercise price was adjusted due to the entitlements offer as required under the plan rules.
Valued using the Monto Carlo simulation approach.
The restricted shares were valued based on the volume weighted average price of ordinary shares in BOQ sold on ASX during a 10 trading day period. The shares will vest on the expiry date respectively
based on meeting certain service conditions.
Value using the trinomial pricing metholodgy.
Remaining DARs will vest 20% in financial year 2013.
Remaining DARs will vest 50% in financial year 2013.
Remaining DARs will vest 30% in financial year 2013 and 50% in financial year 2014.
The DARs will vest 20% in financial year 2013, 30% in financial year 2014 and 50% in financial year 2015.
The DARs will vest 50% in financial year 2013 and 50% in financial year 2014.
106
BOQ ANNUAL REPORT 2012
31. Employee benefits (continued)
(b) Share based payments (continued)
The number and weighted average exercise price of share options is as follows:
Outstanding at the beginning of the year
Forfeited / expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average exercise
price
Number of
options
Weighted
average exercise
price
Number of
options
2012
$
17.75
17.00
19.11
2012
’000
3,892
2,501
1,391
1,391
2011
$
16.16
13.72
17.75
2011
’000
6,447
(2,555)
3,892
1,852
The options outstanding at 31 August 2012 have an exercise price of $19.11 and a weighted average contractual life of 0.2 years (2011: 0.8 years).
During the year no options were exercised (2011: nil).
The number of award rights and restricted shares is as follows:
Balance at beginning of the year
Granted during the year(1)
Forfeited / expired during the year
Exercised during the year
Outstanding at the end of the year
Number of
rights
Number of
rights
2012
‘000
1,683
1,866
(714)
(420)
2,415
2011
’000
1,239
982
(201)
(337)
1,683
The weighted average share price at the date of exercise was $7.46 (2011: $9.89).
(1) Included restricted shares in the 2011 and 2012 financial year. These remain in the closing balance as at 31 August 2012.
32. Key management personnel disclosures
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Bank and the Consolidated Entity, including directors and
other executives.
(a) Key management personnel compensation
Key management personnel compensation included in ‘administrative expenses’ and ‘employee expenses’ (refer Note 5) is as follows:
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Termination benefits
Share based employment benefits
Consolidated and Bank
2012
$
2011
$
8,155,415
8,756,844
254,096
65,132
2,455,522
1,847,125
12,777,290
276,430
58,378
566,667
1,474,676
11,132,995
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted by Corporations Regulation 2M.3.03 is provided in the
remuneration report section of the directors’ report.
Apart from the details disclosed in the note, no director has entered into a material contract with the Bank since the end of the previous financial year and there were no material contracts
involving directors’ interest existing at year end.
BOQ ANNUAL REPORT 2012 107
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
32. Key management personnel disclosures (continued)
(b) Equity Instruments – holdings and movements
The movement during the reporting period in the number of options and rights over ordinary shares in Bank of Queensland Limited held, directly, indirectly or beneficially, by key
management personnel, including their personally related entities, is as follows:
Managing Director, Senior Management Option Plans (“SMOP”) and Award rights
All options issued under the SMOP and Award rights refer to options and rights over ordinary shares of Bank of Queensland Limited, which are exercisable on a one-for-one basis.
During the reporting period, the following options and rights over ordinary shares were granted to executives under the SMOP and Award Rights:
Managing Director
Stuart Grimshaw(1)
- Rights
Executives
Anthony Rose(2)
Peter Deans(3)
Brendan White(4)
Matthew Baxby(5)
Jon Sutton(6)
Renato Mazza
Chris Nilon
Former Executives
Keith Rodwell
Ram Kangatharan
Ewan Cameron
Darryl Newton
David Tonuri
- Rights
- Restricted shares
- Rights
- Rights
- Restricted shares
- Rights
- Restricted shares
- Rights
- Restricted shares
- Rights
- Options
- Rights(7)
- Rights
- Options
- Restricted shares
- Rights
- Rights
- Rights
- Rights
Held at
1 September
2011
Granted as
remuneration
Exercised /
vested
Forfeited
Held at
31 August
2012
Vested
during the
year
Vested and
exercisable
at
31 August
2012
-
-
-
-
-
-
-
-
-
-
40,323
70,000
31,186
56,926
350,000
208,000
184,193
54,554
46,395
18,975
121,619
105,105
30,030
69,061
143,050
40,486
110,946
29,586
137,314
104,478
22,195
-
21,283
31,925
-
-
-
30,405
25,844
21,283
-
-
-
-
-
-
-
-
-
-
1,423
-
10,079
1,898
-
108,000
28,736
1,423
1,214
-
-
-
-
-
-
-
-
-
-
-
-
20,000
5,700
86,953
350,000
121,619
105,105
30,030
69,061
143,050
40,486
110,946
29,586
137,314
104,478
61,095
50,000
36,690
-
-
-
100,000
155,457
83,536
71,025
40,258
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,423
-
4,933
1,898
-
108,000
28,736
1,423
1,214
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No option or right held by key management personnel are vested but not exercisable at 31 August 2012.
(1)
(2)
(3)
(4)
Stuart Grimshaw was appointed Chief Executive Officer and Managing Director on 1 November 2011.
Anthony Rose became a member of the key management personnel on 1 August 2012.
Peter Deans became a member of the key management personnel on 26 March 2012.
Brendan White became a member of the key management personnel on 2 April 2012.
(5) Matthew Baxby became a member of the key management personnel on 17 May 2012.
(6)
(7)
Jon Sutton became a member of the key management personnel on 2 July 2012.
This includes rights which have been exercised but held in trust.
108
BOQ ANNUAL REPORT 2012
32. Key management personnel disclosures (continued)
(b) Equity Instruments – holdings and movements (continued)
Held at
1 September
2010
Granted as
remuneration
Exercised /
vested
Forfeited
Held at
31 August
2011
Vested
during the
year
Executives
Ram Kangatharan(1)
- Options
- Restricted shares
- Rights
- Rights
- Rights
- Rights
- Rights
- Rights
- Options
- Rights(3)
- Options
- Rights
Ewan Cameron
Darryl Newton
David Tonuri
Renato Mazza
Keith Rodwell
Chris Nilon(2)
Bradley Edwards(4)
Former Executives
Jim Stabback
350,000
108,000
120,330
-
100,000
81,878
-
-
18,015
-
-
-
-
-
85,000
31,186
260,000
24,696
54,554
46,395
18,975
40,323
56,926
-
-
-
-
-
-
-
-
-
-
-
16,604
5,286
-
-
-
-
-
-
-
-
15,000
-
350,000
208,000
184,193
-
-
16,305
54,554
46,395
18,975
40,323
56,926
70,000
31,186
-
-
-
-
-
-
531
110,000
-
150,000
36,014
52,868
-
75,000
Vested and
exercisable
at
31 August
2011
-
-
-
-
-
-
-
-
20,000
5,146
-
-
- Rights
59,630
25,142
10,675
74,097
-
9,193
Former Managing Director
David Liddy
(retired 31 August 2011)
- Options
- Rights
1,000,000
175,072
-
-
-
87,536
500,000
87,536
500,000
-
500,000
-
87,536
-
No option or right held by key management personnel are vested but not exercisable at 31 August 2012.
(1)
Ram Kangatharan was appointed Acting Chief Executive Officer for the period 1 September 2011 to 31 October 2011
(2) Chris Nilon became a member of the key management personnel on 31 January 2011.
(3)
This includes rights which have been exercised but held in trust.
(4) No longer considered a KMP from 1 September 2011.
BOQ ANNUAL REPORT 2012 109
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
32. Key management personnel disclosures (continued)
(b) Equity Instruments – holdings and movements (continued)
Movement in shares
The number of shares held directly, indirectly or beneficially by each key management person is as follows:
Ordinary shares
Directors of Bank of Queensland Limited
Neil Summerson
Stuart Grimshaw(1)
Steve Crane
Roger Davis
Carmel Gray
John Reynolds
Michelle Tredenick
David Willis
Richard Haire(2)
Former Director
Bill Kelty(3)
Executives
Chris Nilon
Renato Mazza
Former Executives
Ram Kangatharan
Ewan Cameron
Darryl Newton
Keith Rodwell
(1)
Stuart Grimshaw appointed as Chief Executive Officer and Managing Director on 1 November 2011.
(2)
Richard Haire was appointed as a Non-Executive Director on 18 April 2012.
(3)
Bill Kelty retired as Director on 31 July 2012.
Held at
1 September
2011
Purchases /
(Sales)
Received on
exercise of
award rights
/ restricted
shares
Held at
31 August 2012
27,655
-
12,224
3,732
5,899
1,000
1,000
1,077
-
17,944
10,825
13,454
1,164
5,047
4,217
1,433
337
4,000
1,286
401
-
-
-
-
-
-
-
-
-
-
11,053
-
18,015
-
-
-
9,544
(1,423)
-
(1,423)
-
411
4,933
1,423
136,736
1,423
1,214
1,898
45,599
10,825
25,678
4,896
10,946
5,217
2,433
1,414
4,000
-
25,530
-
-
-
-
-
110
BOQ ANNUAL REPORT 2012
32. Key management personnel disclosures (continued)
(b) Equity Instruments – holdings and movements (continued)
Ordinary shares
Directors of Bank of Queensland Limited
Neil Summerson
Steve Crane
Roger Davis
Carmel Gray
Bill Kelty
John Reynolds
Michelle Tredenick(1)
David Willis
Former Director
David Graham(2)
David Liddy(3)
Executive
Ram Kangatharan
Bradley Edwards(4)
Chris Nilon
(1) Michelle Tredenick appointed as a Director on 22 February 2011.
(2) David Graham resigned as a Director on 8 October 2010.
(3) David Liddy retired as Managing Director on 31 August 2011.
(4) No longer considered a KMP from 1 September 2011.
Held at
1 September
2010
Purchases /
(Sales)
Received on
exercise of
award rights
Held at
31 August 2011
26,241
12,224
3,541
5,899
1,220
1,000
-
1,022
1,414
-
191
-
66
-
1,000
55
9,576
1,058,325
-
33,192
-
-
-
-
-
-
-
-
-
27,655
12,224
3,732
5,899
1,286
1,000
1,000
1,077
-
87,536
1,179,053
1,710
1,370
11,053
-
196
-
16,305
5,286
-
18,015
6,852
11,053
BOQ ANNUAL REPORT 2012 111
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
32. Key management personnel disclosures (continued)
(c) Loans to key management personnel disclosures
Details of loans outstanding at the reporting date to key management personnel, where the individuals aggregate loan balance exceeded $100,000 at any time in the reporting period, are
as follows:
2012
Balance at
1 September
2011
$
Interest paid
and payable
during the
year
$
Balance at
31 August
2012
$
Highest
balance
during
the year
$
Balance at
1 September
2010
$
2011
Interest paid
and
payable
during
the year
$
Balance at
31 August
2011
$
Highest
balance
during the
year
$
864,785
52,191
801,767
864,820
439,608
29,758
864,785
892,410
-
-
325,782
18,863
-
-
-
344,645
4,242,163
325,782
28,429
23,161
-
325,782
4,467,277
325,782
300,250
18,394
315,837
346,428
2,210,556
3,204,675
1,967,705
1,819,938
1,335,957
128,940
139,332
122,999
71,667
21,209
-
-
-
-
-
2,229,559
4,302,916
1,979,599
1,824,810
2,074,436
-
-
2,285,412
-
-
-
17,439
300,250
356,172
80,749
187,031
126,595
75,191
45,068
2,210,556
3,204,675
1,967,705
1,819,938
1,335,957
4,072,765
4,676,438
2,000,000
1,856,030
1,699,039
Directors:
Neil Summerson
Former Director:
David Graham
Bill Kelty(1)
Executives:
Renato Mazza
Former Executives:
Keith Rodwell
Ram Kangatharan
Ewan Cameron
Darryl Newton
David Tonuri
(1)
Bill Kelty retired on 31 July 2012.
All loans with key management personnel are conducted on an arm’s length basis in the normal course of business and on terms and conditions as available to all employees of the Bank.
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the economic entity to all key management personnel and their related parties, and the number of
individuals in each group are as follows:
Balance at
1 September
2011(1)
$
Balance at
31 August
2012
$
Interest paid
and payable
$
Number in
group at
31 August
2012
#
Directors:
Executives:
1,190,567
10,839,080
801,767
315,837
71,054
502,541
1
1
Balance at
1 September
2010(2)
$
Balance at
31 August
2011
$
Interest paid
and payable
$
Number in
group at 31
August 2011
#
Directors:
Executives:
5,007,553
2,290,875
1,190,567
11,384,087
81,348
535,664
2
7
(1)
(2)
Balance as at 1 September 2011 will not equal 31 August 2011 closing balance due to changes in key management personnel during the year.
Balance as at 1 September 2010 will not equal 31 August 2010 closing balance due to changes in key management personnel during the year.
112
BOQ ANNUAL REPORT 2012
32. Key management personnel disclosures (continued)
(d) Other financial instrument transactions with key management personnel and personally-related entities
A number of key management personnel or their related parties hold positions in other entities that result in them having control or significant influence over the financial or operating
policies of those entities. Financial instrument transactions with key management personnel and personally-related entities during the financial year arise out of the provision of banking
services, the acceptance of funds on deposit, the granting of loans and other associated financial activities. The terms and conditions of the transactions with management personnel and
their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an
arm’s length basis.
Other non financial instrument transactions with key management personnel
The Bank of Queensland has entered into a rolling contract with a 2 year termination clause with DDH Graham Limited, of which David Graham is the Chairman. Under this contract, DDH
Graham Limited provides funding to the Bank through introduced customer money market deposit accounts, and in turn the Bank pays DDH Graham Limited a commission based on
the value of deposited funds held with the bank. Commission was paid on a monthly basis for the duration of the contract. Commission amounts for these services were billed based on
normal market rates and were due and payable under normal payment terms. David Graham resigned 8 October 2010, however, commission payments paid to the firm by the Bank up to
his resignation date amounted to $509,470 in the prior year.
Other transactions with directors, executives and their personally-related entities are conducted on an arm’s length basis and are deemed trivial or domestic in nature.
The following are transactions undertaken between the Consolidated Entity and key management personnel as at 31 August 2012:
Balance as at
For the period(1)
01/09/11(2)
$
31/08/12
$
Total Loan
Repayments
$
Total Loan
Redraws /
Further
Advances
$
Total Loan /
Overdraft
interest
$
Total Fees
on Loans /
Overdraft
$
Term Products (Loans / Advances)
(12,029,647)
(1,117,604)
6,299,765
(6,221,511)
(573,594)
(2,757)
Balance as at
For the period(1)
01/09/10(3)
$
31/08/11
$
Total Loan
Repayments
$
Total Loan
Redraws /
Further
Advances
$
Total Loan /
Overdraft
interest
$
Total Fees
on Loans /
Overdraft
$
Term Products (Loans / Advances)
(7,298,428)
(12,574,655)
8,282,805
(16,869,606)
(617,012)
(16,799)
Balance as at
For the period(1)
01/09/11(2)
$
31/08/12
$
Total Deposits
$
Total
Withdrawals
$
Total Account
Fees
$
Total Deposit
Interest
$
Transaction Products (Deposits)
2,025,212
669,014
3,881,150
(3,777,483)
(456)
37,752
Balance as at
For the period(1)
01/09/10(3)
$
31/08/11
$
Total Deposits
$
Total
Withdrawals
$
Total Account
Fees
$
Total Deposit
Interest
$
Transaction Products (Deposits)
3,839,121
2,259,376
13,220,360
(14,900,560)
(1,769)
176,096
(1)
(2)
(3)
Amounts are included only for the period that the director / executive are classified as a member of the key management personnel.
Balance as at 1 September 2011 will not equal 31 August 2011 closing balance due to changes in key management personnel during the year.
Balance as at 1 September 2010 will not equal 31 August 2010 closing balance due to changes in key management personnel during the year.
BOQ ANNUAL REPORT 2012 113
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
33. Controlled entities
(a) Particulars in relation to controlled entities
Parent entity’s interest
Amount of Investment (at cost)
Controlled entities:
B.Q.L. Management Pty Ltd
B.Q.L. Nominees Pty Ltd
B.Q.L. Properties Limited
Queensland Electronic Switching Pty Ltd
BOQ Equipment Finance Limited
St Andrew’s Australia Services Pty Ltd (formerly Electronic Financial Solutions Pty Ltd)
Series 2004-1 REDS Trust
Series 2005-1 REDS Trust
Series 2005-2 REDS Trust
REDS Warehouse Trust No.1
REDS Warehouse Trust No.2
Series 2006-1E REDS Trust
Series 2007-1E REDS Trust
Series 2007-2 REDS Trust
Series 2008-1 REDS Trust
Series 2008-2 REDS Trust
Series 2009-1 REDS Trust
REDS Warehouse Trust No.3
Series 2010-1 REDS Trust
Series 2010-2 REDS Trust
Series 2008-1E EHP REDS Trust
Series 2012-1E EHP REDS Trust
Pioneer Permanent Building Society Limited
Home Building Society Ltd
Home Financial Planning Pty Ltd
Home Credit Management Ltd
Statewest Financial Services Ltd
Statewest Financial Planning Pty Ltd
BOQ Share Plans Nominee Pty Ltd
Bank of Queensland Limited Employee Share Plans Trust
St Andrew’s Life Insurance Pty Ltd
St Andrew’s Insurance (Australia) Pty Ltd
BOQ Finance (Aust) Limited (formerly CIT Group (Australia) Ltd)
BOQ Credit Pty Limited (formerly CIT Credit Pty Limited)
BOQ Funding Pty Limited (formerly CIT Funding Pty Limited)
BOQ Finance (NZ) Limited (formerly CIT Group (New Zealand) Limited)
Equipment Rental Billing Services Pty Ltd
Hunter Leasing Ltd
Newcourt Financial (Australia) Pty Limited
114
BOQ ANNUAL REPORT 2012
2012
2011
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2012
$m
-
5.0
-
0.1
15.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2011
$m
-
5.0
-
0.1
15.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60.1
600.2
60.1
600.2
-
-
-
-
-
-
-
-
230.2
-
-
22.1
-
-
-
-
-
-
-
-
-
-
-
230.2
-
-
22.1
-
-
-
933.1
933.1
33. Controlled entities (continued)
(b) Acquisition / disposal of controlled entities
Control
Series 2012-1E EHP REDS Trust opened on 24 May 2012.
Disposal of entities
Series 2004-1 REDS Trust was closed on 28 December 2011.
Series 2008-1E EHP REDS Trust was closed on 13 July 2012.
34. Related parties information
Controlled entities
Details of interests in controlled entities are set out in Note 33.
During the year there have been transactions between the Bank and all of its controlled entities. The Bank conducted normal banking business with its operating controlled entities.
Amounts owing to or from controlled entities do not attract interest, except in respect of BOQ Equipment Finance Limited, St Andrew’s Australia Services Pty Ltd, BOQ Finance (Aust) Ltd
and BOQ Finance (NZ) Ltd where interest is charged on normal terms and conditions.
The Bank receives management fees from B.Q.L. Management Pty Ltd and BOQ Equipment Finance Limited.
The Bank has a related party relationship with equity accounted investees, refer to Note 39.
35. Average balances and margin analysis
Consolidated
2012
Consolidated
2011
Interest
$m
Average Rate
%
Interest
$m
Average Rate
%
2,345.1
251.1
2,596.2
6.89
4.69
6.59
Interest earning assets
Gross loans and advances at amortised cost*
Investments and other securities*
Total interest earning assets
Non-interest earning assets
Property, plant and equipment
Other assets
Provision for impairment
Total non-interest earning assets
Total assets
Interest bearing liabilities
Retail deposits*
Wholesale deposits and borrowings*
Total interest bearing liabilities
Non-interest bearing liabilities
Total liabilities
Shareholders' funds
Total liabilities and shareholders' funds
Average
Balance
$m
34,060.9
5,348.9
39,409.8
31.8
1,125.4
(367.8)
789.4
40,199.2
20,923.5
15,850.0
36,773.5
741.6
37,515.1
2,684.1
40,199.2
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest spread(1)
Net interest margin – on average interest earning assets
39,409.8
36,773.5
2,596.2
1,944.7
39,409.8
651.5
*
Calculated on average monthly balances
(1)
Interest spread is calculated after taking into account third party and OMB commissions.
1,025.8
918.9
1,944.7
4.90
5.80
5.29
6.59
5.29
1.30
1.65
Average
Balance
$m
32,677.5
5,496.8
38,174.3
27.5
961.2
(187.8)
800.9
38,975.2
18,891.2
16,849.2
35,740.4
742.9
36,483.3
2,491.9
38,975.2
38,174.3
35,740.4
2,383.1
293.5
2,676.6
977.7
1,075.5
2,053.2
2,676.6
2,053.2
7.29
5.34
7.01
5.18
6.38
5.74
7.01
5.74
1.27
1.63
38,174.3
623.4
BOQ ANNUAL REPORT 2012 115
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
36. Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, certain wholly-owned subsidiaries are relieved from the Corporations Act 2001 requirements for preparation,
audit and lodgement of financial reports, and directors’ reports.
It is a condition of the Class Order that the Bank and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Bank guarantees to each creditor
payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of
the Act, the Bank will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Bank is
wound up.
The subsidiaries to the Deed are:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
B.Q.L. Properties Limited;
BOQ Equipment Finance Limited;
B.Q.L. Management Pty Ltd;
St Andrew’s Australia Services Pty Ltd;
B.Q.L. Nominees Pty Ltd;
Queensland Electronic Switching Pty Ltd;
BOQ Share Plans Nominee Pty Ltd;
Pioneer Permanent Building Society Limited;
Home Building Society Ltd;
Home Credit Management Ltd;
StateWest Financial Services Limited;
BOQ Finance (Aust) Limited;
BOQ Credit Pty Limited;
BOQ Funding Pty Limited;
Equipment Rental Billing Services Pty Ltd;
Hunter Leasing Ltd; and
Newcourt Financial (Australia) Pty Limited.
A consolidated Statement of Comprehensive Income and consolidated Balance Sheet, comprising the Bank and its controlled entities which are a party to the Deed, after eliminating all
transactions between parties to the Deed of Cross Guarantee, at 31 August 2012 is set out as follows:
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME AND RETAINED PROFITS
Consolidated
2012
$m
(33.0)
4.7
(28.3)
321.1
(151.7)
-
(2.9)
138.2
(28.3)
(28.3)
2011
$m
227.4
(54.9)
172.5
248.1
(124.5)
7.2
17.8
321.1
172.5
172.5
Profit/(loss) before tax
Less: Income tax (expense) / benefit
Profit/(loss) for the year
Retained profits at beginning of year
Dividends to shareholders
Addition to Deed of Cross Guarantee
Equity settled transactions and transfers
Retained profits at end of year
Attributable to:
Equity holders of the parent
Profit/(loss) for the year
116
BOQ ANNUAL REPORT 2012
36. Deed of cross guarantee (continued)
BALANCE SHEET
As at 31 August
Assets
Cash and liquid assets
Due from other financial institutions
Other financial assets
Derivative financial instruments
Loans and advances at amortised cost
Shares in controlled entities
Property, plant and equipment
Current tax asset
Deferred tax assets
Other assets
Intangible assets
Investments accounted for using the equity method
Total assets
Liabilities
Due to other financial institutions
Deposits
Derivative financial instruments
Accounts payable and other liabilities
Current tax liabilities
Provisions
Borrowings including subordinated notes
Amounts due to controlled entities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
Consolidated
2012
$m
2011
$m
258.8
4.4
5,777.0
276.1
34,147.2
49.8
31.0
0.7
118.1
258.7
541.3
22.2
294.2
25.9
5,217.3
126.8
33,276.1
49.8
31.0
-
51.0
253.1
558.2
28.7
41,485.3
39,912.1
177.8
31,188.0
130.3
434.3
-
40.9
886.8
5,710.3
38,568.4
169.2
29,830.5
197.5
415.0
79.4
25.9
1,115.6
5,503.7
37,336.8
2,916.9
2,575.3
2,660.1
118.6
138.2
2,916.9
2,153.3
100.9
321.1
2,575.3
BOQ ANNUAL REPORT 2012 117
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
37. Insurance business
The effective date of the actuarial report on life insurance policy liabilities and solvency requirements, is 31 August 2012. The actuarial report was prepared by Mr Wayne Kenafacke,
Fellow of the Institute of Actuaries of Australia. This report indicates that Mr Kenafacke is satisfied as to the accuracy of the data upon which policy liabilities have been determined.
The amount of policy liabilities have been determined in accordance with methods and assumptions disclosed in this financial report and the requirements of applicable accounting
standards. Specifically, policy liabilities for life insurance contracts are determined in accordance with AASB 1038 Life Insurance Contracts.
In addition, life insurance contract liabilities have been calculated in accordance with relevant actuarial guidance being Prudential Standard LPS: 1.04 Valuation of Policy Liabilities
determined by APRA. The Prudential Standard requires policy liabilities to be calculated in a way which allows for the systematic release of planned margins as services are provided to
policyholders and premiums are received.
The methods used for the major product groups in order to achieve the systematic release of planned margins were as follows:
Product group
Consumer credit insurance
Direct marketed risk
3rd Party Risk
Method (Projection or other)
Profit Carriers
Accumulation (2011: Accumulation)
Accumulation (2011: Accumulation)
Accumulation (2011: Accumulation)
N/A
N/A
N/A
Policy liabilities have been calculated as the provision for unearned premium reserve and a deferred acquisition cost component. Outstanding claims liabilities and Incurred But Not
Reported liabilities (IBNR) are included in claims liabilities.
Premium earning pattern
For Consumer Credit Insurance products, the Unearned Premium Reserve (UPR) is based on a premium earning pattern that is similar to the pattern of expected future claim payments.
The future claim payments are based on an assessment of the future sum insured (e.g. outstanding loan balances for mortgage and loan protection) and future mortality costs. Past
experience is used to set these assumptions. This earning is also used to set commission earning patterns.
Mortality and morbidity
Mortality and morbidity assumptions used in determining IBNR, pending and continuing claims provisions have been based on the experience of similar products issued in the Company
and recent experience. The disputed claims provision is based on individual claim estimates.
Processes used to determine actuarial assumptions
Sensitivity analysis
As a result of using an accumulation approach in the determination of policy liabilities, changes of assumptions will not affect the policy liabilities in the current period, unless a product
enters loss recognition. As at 31 August 2012, no Related Product Groups were in loss recognition.
Changes in the underlying variables and assumptions will give rise to a difference in the emergence of profit margins in the future.
Variable
Impact of movement in underlying variable
Mortality rates
Morbidity rates
For insurance contracts, providing death benefits, greater mortality rates would lead to higher levels of claims occurring sooner than anticipated,
increasing associated claims cost and therefore reducing profit and shareholder equity.
The cost of disability related claims depends on both the incidence of policyholders becoming disabled and the duration which they remain so.
Higher than expected incidence and duration would be likely to increase claim costs, reducing profit and shareholders equity.
118
BOQ ANNUAL REPORT 2012
37. Insurance business (continued)
Reconciliation of movements in insurance policy liabilities
Life Insurance contract policy liabilities
Gross life insurance contract liabilities at the beginning of the financial year
Decrease in life insurance contract policy liabilities(i)
Gross life insurance contract liabilities at the end of the financial year
Liabilities ceded under reinsurance
Opening balance at the beginning of the financial year
Decrease in life reinsurance assets(ii)
Closing balance at the end of the financial year
Net life policy liabilities at the end of the financial year
(i) plus (ii) = decrease in net life insurance contract liabilities reflected in the statement of comprehensive income
Components of net life insurance contract liabilities
Future policy benefits
Future charges for acquisition costs
Total net life insurance contract policy liabilities
Components of general insurance liabilities
Unearned Premium Liability
Outstanding Claims Liability
Total Insurance Policy Liabilities
2012
$m
2011
$m
65.5
(2.9)
62.6
(2.4)
(0.4)
(2.8)
59.8
(3.3)
77.8
(18.0)
59.8
13.1
0.6
13.7
73.5
70.4
(4.9)
65.5
(2.1)
(0.3)
(2.4)
63.1
(5.2)
69.1
(6.0)
63.1
13.9
0.6
14.5
77.6
Note: Future policy benefits include the unearned premium components of the liability. The accumulation method has been used to calculate policy liabilities and components relating to
expenses and profits are not separately calculated.
BOQ ANNUAL REPORT 2012 119
Notes to the Financial
Statements (continued)
Year ended 31 August 2012
37. Insurance business (continued)
Life Insurance Solvency requirements
The solvency requirement of each statutory fund is the amount required to be held in accordance with LPS 2.04: Solvency Standard. These are amounts required to meet the prudential
standards prescribed by the Life Insurance Act 1995 to provide protection against the impact of fluctuations and unexpected adverse circumstances on the life company.
The methodology and bases for determining solvency requirements are in accordance with the requirements of LPS 2.04: Solvency Standard.
2012
$m
77.5
89.2
11.7
63.2
5.6
68.8
36.3
7.2
43.5
25.3
(7.6)
17.7
16.2
(0.5)
98.4
1.8
100.2
46.2
14.5
60.7
39.5
39.5
2011
$m
74.1
84.0
9.9
62.5
5.2
67.7
37.5
5.9
43.4
24.3
(7.3)
17.0
15.8
(0.6)
89.8
4.5
94.3
45.5
15.4
60.9
33.4
33.4
Life Insurance solvency requirement*
Total assets less assets arising from reinsurance contracts
Assets in excess of solvency requirement
* The minimum level of assets required to be held by the life insurance business as prescribed in LPS 2.04: Solvency Standard
Disaggregated information life insurance (before consolidation adjustments)
Summarised statement of comprehensive income
Revenue
Life insurance premium revenue
Investment income
Net life insurance premium revenue
Expenses
Net claims and other liability expense from insurance contracts
Other expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after income tax
Statement of Sources of Profit/(Loss) for Statutory Funds
Operating profit/(loss) after income tax arose from:
Components of profit/(loss) related to movement in life insurance liabilities:
Planned margins of revenues over expenses released
Difference between actual and assumed experience
Summarised balance sheet
Assets
Investment assets
Other assets
Liabilities
Life insurance liabilities
Liabilities other than life insurance liabilities
Retained earnings
Directly attributable to shareholders
The life insurance business has no life investment contracts
120
BOQ ANNUAL REPORT 2012
38. Events subsequent to balance date
Dividends have been declared after 31 August 2012, refer to Note 7.
The financial effect of the above transactions have not been brought to account in the financial statements for the year ended 31 August 2012.
39. Investments accounted for using the equity method
The Consolidated Entity’s share of profit in its equity accounted investees for the year was nil (2011: $2.3m).
The principal activity of the joint venture entities is land subdivision, development and sale. Details of material interest in joint ventures are as follows:
Ocean Springs Pty Ltd (Brighton)
Dalyellup Beach Pty Ltd (Dalyellup)
Wanneroo North Pty Ltd (The Grove)
East Busselton Estate Pty Ltd (Provence)
Coastview Nominees Pty Ltd (Margaret River)
Satterley Austin Cove Pty Ltd (Austin Cove)
Provence 2 Pty Ltd (Provence 2)
Crestview Asset Pty Ltd (Beacham Road)
Percentage Ownership Interest
2012
(%)
9.31
17.08
21.42
25.00
5.81
-
25.00
-
2011
(%)
9.31
17.08
21.42
25.00
5.81
4.18
25.00
7.36
The above companies are proprietary companies incorporated in Australia. There are no material capital commitments or contingent liabilities relating to the joint ventures. During the
year the Bank’s investments in Austin Cove Pty Ltd and Crestview Asset Pty Ltd was sold on 23 December 2011 which produced a profit of $109k for the Bank.
Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the consolidated entity and fair value adjustments on acquisition, is
contained in the table below:
Balance Sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Profit and Loss
Revenues
Expenses
Profit
2012
$m
106.5
113.4
219.9
44.0
18.9
62.9
157.0
65.4
(23.7)
41.7
2011
$m
105.7
178.9
284.6
85.9
17.3
103.2
181.4
53.0
(45.7)
7.3
BOQ ANNUAL REPORT 2012 121
Directors’ Declaration
1
In the opinion of the directors of Bank of Queensland Limited (“the Bank”):
(a)
the consolidated financial statements and notes and the remuneration report included within the directors’ report set out on pages 27 to 53, are in accordance with the
Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position of the Bank and Consolidated Entity as at 31 August 2012 and of their performance, for the year ended on that date;
and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Bank will be able to pay its debts as and when they become due and payable.
2
3
4
There are reasonable grounds to believe that the Bank and the Controlled Entities identified in Note 33 will be able to meet any obligations or liabilities to which they are or may
become subject to by virtue of the Deed of Cross Guarantee between the Bank and those Controlled Entities pursuant to ASIC Class Order 98/1418.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief executive officer and chief financial officer for the financial year
ended 31 August 2012.
The Directors draw attention to note 2(a) to the financial statements, which includes a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Neil Summerson
Chairman
Stuart Grimshaw
Managing Director
Dated at Brisbane this eighteenth day of October 2012
122
BOQ ANNUAL REPORT 2012
Independent Auditor’s Report
to the members of Bank of Queensland Limited
Report on the financial report
We have audited the accompanying financial report of Bank of Queensland Limited (the “Bank”), which comprises the balance sheets as at 31 August 2012, and statements of
comprehensive income, statements of changes in equity and statements of changes in cash flows for the year ended on that date, notes 1 to 39 comprising a summary of significant
accounting policies and other explanatory information and the directors’ declaration of the Bank and the Consolidated Entity comprising the Bank and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Bank are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud
or error. In note 2 (a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the Bank and
its controlled entities comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards
require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Bank’s and the Consolidated Entity’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Bank of Queensland Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Bank’s and the Consolidated Entity’s financial position as at 31 August 2012 and of their performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b)
the financial report of the Bank and the Consolidated Entity also complies with International Financial Reporting Standards as disclosed in note 2 (a).
Report on the remuneration report
We have audited the Remuneration Report included on pages 31 to 52 of the directors’ report for the year ended 31 August 2012. The directors of the Bank are responsible for the
preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration
report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Bank of Queensland Limited for the year ended 31 August 2012, complies with Section 300A of the Corporations Act 2001.
Auditor’s opinion on the additional remuneration disclosures in the directors’ remuneration report
In our opinion, the additional remuneration disclosures set out in Table 4 of the Remuneration Report of Bank of Queensland Limited for the year ended 31 August 2012 are presented, in
all material respects, in accordance with the basis of preparation set out in the footnotes to Table 4.
KPMG
Brisbane, 18 October 2012
Martin McGrath
Partner
KPMG, an Australian partnership and a member firm of the KPMG network, of independent member firms affiliated with KPMG International, a Swiss cooperative.
BOQ ANNUAL REPORT 2012 123
Shareholding Details
As at 28 September 2012, the following shareholding details applied:
1. Twenty largest ordinary shareholders
Shareholder
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
MILTON CORPORATION LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AMP LIFE LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
QIC LIMITED
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
INVIA CUSTODIAN PTY LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
BOQ SHARE PLANS NOMINEE PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
AVANTEOS INVESTMENTS LIMITED
Total
Voting rights
No. of ordinary
shares
43,211,676
31,459,553
29,070,268
24,253,681
9,517,227
7,139,578
6,550,276
4,080,727
2,981,442
2,397,722
2,061,500
2,038,108
2,025,484
1,816,381
1,344,347
1,005,036
769,490
735,327
726,961
671,556
%
13.99%
10.19%
9.41%
7.85%
3.08%
2.31%
2.12%
1.32%
0.97%
0.78%
0.67%
0.66%
0.66%
0.59%
0.44%
0.33%
0.25%
0.24%
0.24%
0.22%
173,856,340
56.32%
On a show of hands every person present who is a holder of ordinary shares or a duly appointed representative of a holder of ordinary shares has one vote, and on a poll each member
present in person or by proxy or attorney has one vote for each share that person holds.
124
BOQ ANNUAL REPORT 2012
2. Twenty largest PEPS shareholders
Shareholder
J P MORGAN NOMINEES AUSTRALIA LIMITED
MILTON CORPORATION LIMITED
DOMER MINING CO PTY LTD
NATIONAL NOMINEES LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
NAVIGATOR AUSTRALIA LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
M F CUSTODIANS LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
NULIS NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BCITF (QLD)
CORLETTE HOLDINGS PTY LTD
F & B INVESTMENTS PTY LIMITED
EASTCOTE PTY LTD
PRESBYTERIAN CHURCH OF VICTORIA TRUSTS
P ILHAN INVESTMENTS PTY LTD
BAPTIST INVESTMENT AND FINANCE LTD
MR DAVID FELDMAN & MRS LAIMA FELDMAN
Voting rights
The PEPS do not give the holders any voting rights at any general shareholders meetings, except in certain circumstances.
No. of PEPS
shares
162,185
50,000
32,200
31,291
26,682
25,288
18,194
15,819
15,641
15,201
13,824
12,493
10,000
10,000
10,000
10,000
10,000
9,866
8,546
8,500
%
8.11%
2.50%
1.61%
1.56%
1.33%
1.26%
0.91%
0.79%
0.78%
0.76%
0.69%
0.62%
0.50%
0.50%
0.50%
0.50%
0.50%
0.49%
0.43%
0.43%
495,730
24.77%
BOQ ANNUAL REPORT 2012 125
Shareholding Details
(continued)
As at 28 September 2012, the following shareholding details applied:
3. Distribution of equity security holders
Category
1 - 1,000
1,001 - 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Ordinary shares
PEPS
2012
55,474
21,665
3,408
1,696
66
82,309
2011
58,886
20,299
2,622
1,200
57
83,064
2012
4,065
208
17
11
1
2011
4,052
186
16
14
1
4,302
4,269
The number of ordinary shareholders holding less than a marketable parcel is 3,517
The number of perpetual equity preference shareholders holding less than a marketable parcel is 1
4. Partly Paid Shares
There are no partly paid shares.
5.
The names of substantial shareholders in the Bank and the number of shares in which each has an interest as
disclosed in substantial shareholder notices given to the Bank are:
Substantial shareholders
BRED Banque Populaire
No. of ordinary shares in which interest is held
(at date of notification)
27,315,821
Date of notification
18 December 2009
6. Stock exchange listing
The shares of Bank of Queensland Limited (“BoQ”) and PEPS (“BOQPC”) are quoted on the AustralianSecurities Exchange.
7. Options
At 31 August 2012 there were options over 1,391,000 (2011: 3,892,934) unissued ordinary shares. There are no voting rights attached to the unissued ordinary shares. Voting rights will
be attached to the unissued ordinary shares when the options have been exercised.
8. On market buy-back
There is no current on market buy-back.
9. Other information
Bank of Queensland Limited is a publicly listed company limited by shares and is incorporated and domiciled in Australia.
126
BOQ ANNUAL REPORT 2012
Annexure A
Assets
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Half Year Performance
Financial Year Performance
Assets under management
Loans – net of specific and collective provision for doubtful debts
Liquid assets
Other assets
Total balance sheet assets
Securitised assets (off balance sheet)
Total assets under management
Loans under management (before collective provisions)
Housing
Commercial
BOQ Finance
Consumer
Total loans under management (before collective provisions)
Housing
Commercial
BOQ Finance
Consumer
Balance sheet loans (before collective provisions)
Housing
Commercial
BOQ Finance
Consumer
Total balance sheet loans (before collective provisions)
Housing
Commercial
BOQ Finance
Consumer
Lending approvals
Housing
Commercial
BOQ Finance
Consumer
Total lending approvals
Funding
Shareholders’ equity
Perpetual Equity Preference Shares (PEPS)
Retail deposits
Wholesale deposits
Borrowings (including subordinated notes, securitisation
liabilities and hybrid debt)
Other liabilities
Total funding
Retail deposit funding %
Wholesale deposit funding %
Retail funding as a % of total deposits and borrowings
32,386.0
5,920.6
888.3
39,194.9
137.2
39,332.1
23,390.4
5,173.7
3,736.4
303.5
32,604.0
72%
16%
11%
1%
23,390.4
5,173.7
3,599.2
303.5
32,466.8
72%
16%
11%
1%
3,763.0
889.0
837.0
140.0
5,629.0
2,280.0
195.7
19,201.6
9,812.2
6,736.6
968.8
39,194.9
66%
34%
54%
33,276.1
5,712.1
912.6
39,900.8
-
33,514.7
5,615.5
954.3
40,084.5
-
34,147.2
6,479.6
1,131.2
41,758.0
-
33,276.1
5,712.1
912.6
39,900.8
-
34,147.2
6,479.6
1,131.2
41,758.0
-
39,900.8
40,084.5
41,758.0
39,900.8
41,758.0
24,149.4
5,252.4
3,683.5
270.9
33,356.2
72%
16%
11%
1%
24,149.4
5,252.4
3,683.5
270.9
33,356.2
72%
16%
11%
1%
3,641.0
1,076.0
1,349.0
91.0
6,157.0
2,377.9
195.7
20,317.9
9,308.7
6,651.0
1,049.6
39,900.8
69%
31%
56%
24,625.6
5,209.3
3,683.3
238.6
33,756.8
73%
15%
11%
1%
24,625.6
5,209.3
3,683.3
238.6
33,756.8
73%
15%
11%
1%
3,794.0
761.0
1,184.0
69.0
5,808.0
2,245.2
195.7
21,099.0
8,777.0
6,845.4
922.2
40,084.5
71%
29%
57%
25,366.1
5,095.1
3,655.2
223.4
34,339.8
74%
14%
11%
1%
25,366.1
5,095.1
3,655.2
223.4
34,339.8
74%
14%
11%
1%
3,881.0
606.0
1,282.0
72.0
5,841.0
2,703.5
195.7
22,270.0
8,901.9
6,688.1
998.8
41,758.0
71%
29%
59%
24,149.4
5,252.4
3,683.5
270.9
33,356.2
72%
16%
11%
1%
24,149.4
5,252.4
3,683.5
270.9
33,356.2
72%
16%
11%
1%
7,404.0
1,965.0
2,186.0
231.0
11,786.0
2,377.9
195.7
20,317.9
9,308.7
6,651.0
1,049.6
39,900.8
69%
31%
56%
25,366.1
5,095.1
3,655.2
223.4
34,339.8
74%
14%
11%
1%
25,366.1
5,095.1
3,655.2
223.4
34,339.8
74%
14%
11%
1%
7,675.0
1,367.0
2,466.0
141.0
11,649.0
2,703.5
195.7
22,270.0
8,901.9
6,688.1
998.8
41,758.0
71%
29%
59%
BOQ ANNUAL REPORT 2012 127
Annexure A (continued)
Growth Measures
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Half Year Performance
Financial Year Performance
Increase / (decrease) in loans under management
(before collective provisions)
Housing
Commercial
BOQ Finance
Consumer
Total increase in loans under management
Loans under management growth / (decline)(1)
Housing
Commercial
BOQ Finance
Consumer
Total growth in loans under management
Increase in total assets (under management)
Asset growth (under management)(1)
Increase in total assets (on balance sheet)
Asset growth (on balance sheet)(1)
Increase in retail deposits
Retail deposit growth(1)
(1) Growth measures are calculated from the prior comparable period.
Financial Performance
Net Interest Income
Banking Income
Other Income
Insurance Income
Total Non-Interest Income
Total Income
Operating Costs
IT Costs
Occupancy Costs
Employee Costs
Administrative Expenses
Total Expenditure
Normalised underlying Profit before Tax
Collective Provisions
Specific Provisions & Write-Offs
Loan Impairment Expense
Normalised operating Profit/(Loss) before Income Tax
Tax Expense / (Benefit)
Normalised cash profit / (loss) after tax
128
BOQ ANNUAL REPORT 2012
727.2
63.7
(174.8)
(15.2)
600.9
8.1%
(3.3%)
62.0%
(7.5%)
7.5%
520.8
8.9%
597.1
9.7%
1,118.3
13.4%
1H/11
310.1
50.4
13.1
19.4
82.9
393.0
44.2
35.5
13.5
75.3
9.0
177.5
215.5
27.7
106.7
134.4
81.1
23.7
57.4
759.0
78.7
(52.9)
(32.6)
752.2
6.6%
2.8%
(5.8%)
(15.0%)
4.2%
568.7
2.8%
705.9
3.4%
1,116.3
12.4%
476.2
(43.1)
(0.2)
(32.3)
400.6
5.3%
0.7%
(1.4%)
(21.4%)
3.5%
183.7
1.9%
183.7
2.3%
781.1
9.9%
Half Year Performance
2H/11
318.3
50.5
22.8
21.5
94.8
413.1
45.4
31.4
13.6
79.5
11.3
181.2
231.9
(0.7)
66.8
66.1
165.8
46.6
119.2
1H/12
326.0
48.7
8.4
20.2
77.3
403.3
42.9
35.0
15.4
78.2
9.9
181.4
221.9
162.0
165.7
327.7
(105.8)
(33.4)
(72.4)
740.5
(114.2)
(28.1)
(15.2)
583.0
5.0%
(3.0%)
(0.8%)
(17.5%)
2.9%
1,673.5
4.7%
1,673.5
4.7%
1,171.0
9.6%
2H/12
330.4
49.9
12.2
21.1
83.2
413.6
45.4
41.2
15.5
81.8
8.1
192.0
221.6
11.2
62.1
73.3
148.3
45.3
103.0
1,486.2
142.4
(227.7)
(47.8)
1,353.1
6.6%
2.8%
(5.8%)
(15.0%)
4.2%
1,089.5
2.8%
1,303.0
3.4%
2,234.6
12.4%
1,216.7
(157.3)
(28.3)
(47.5)
983.6
5.0%
(3.0%)
(0.8%)
(17.5%)
2.9%
1,857.2
4.7%
1,857.2
4.7%
1,952.1
9.6%
Financial Year Performance
FY2011
FY2012
628.4
100.9
35.9
40.9
177.7
806.1
89.6
66.9
27.1
154.8
20.3
358.7
447.4
27.0
173.5
200.5
246.9
70.3
176.6
656.4
98.6
20.6
41.3
160.5
816.9
88.3
76.2
30.9
160.0
18.0
373.4
443.5
173.2
227.8
401.0
42.5
11.9
30.6
Financial Performance
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Half Year Performance
Financial Year Performance
Add / (subtract): significant items after tax:
Amortisation of customer contracts (acquisition)
Amortisation of fair value adjustments (acquisition)
Hedge ineffectiveness
Integration / due diligence costs
Asset impairment
Government guarantee break fee
Flood Impact
Legacy items
Restructuring costs
Statutory Net Profit / (Loss) after Tax
Profitability Measures
Increase / (decrease) in normalised cash underlying profit
/ (loss) (before tax and impairment)(1)(2)(3)
Normalised underlying profit / (loss) growth / (decline)(1)(2)
Increase / (decrease) in statutory net profit / (loss) after tax(2)
Statutory net profit / (loss) growth / (decline) after tax(2)
Increase / (decrease) in normalised cash profit / (loss)
after tax(1)(2)
Normalised cash profit / (loss) growth / (decline) after tax(1)(2)
Statutory profit / (loss) after tax / average total assets(4)
Total operating expenses / average total assets(4)
Statutory cost to income ratio
Normalised cash cost to income ratio(1)
Normalised non-interest income / normalised total income(1)
Statutory effective tax rate (%)
Margin Analysis
Interest rate margin
Impact of payments to 3rd parties
Statutory net interest margin
Add back : Amortisation of fair value adjustment
(acquisition)
Normalised cash net interest margin
(3.1)
(1.8)
(1.6)
(2.2)
-
-
(0.7)
-
-
48.0
25.8
13.6%
(42.9)
(47.2%)
(39.8)
(40.9%)
0.3%
1.0%
47.8%
45.2%
21.1%
29.2%
1.98%
(0.34%)
1.64%
0.01%
1.65%
(3.1)
(1.7)
2.6
(1.9)
-
(4.3)
(0.1)
-
-
(5.6)
(1.9)
(3.0)
(1.1)
(6.6)
-
-
-
-
110.7
(90.6)
42.6
22.5%
19.7
21.6%
19.4
19.4%
0.6%
1.0%
46.2%
43.9%
22.9%
28.1%
1.98%
(0.35%)
1.63%
0.01%
1.64%
6.4
3.0%
(138.6)
(288.8%)
(129.8)
(226.1%)
(0.5%)
1.0%
49.7%
45.0%
19.2%
29.3%
2.01%
(0.34%)
1.67%
0.01%
1.68%
(4.9)
(2.0)
(0.3)
0.1
-
(2.2)
-
(14.9)
(5.3)
73.5
(10.3)
(4.4%)
(37.2)
(33.6%)
(16.2)
(13.6%)
0.4%
1.1%
55.3%
46.4%
20.1%
32.4%
1.97%
(0.34%)
1.63%
0.01%
1.64%
(6.2)
(3.5)
1.0
(4.1)
-
(4.3)
(0.8)
-
-
158.7
68.4
18.0%
(23.2)
(12.8%)
(20.4)
(10.4%)
0.4%
1.0%
47.0%
44.5%
22.0%
28.4%
1.97%
(0.34%)
1.63%
0.02%
1.65%
(10.5)
(3.9)
(3.3)
(1.0)
(6.6)
(2.2)
-
(14.9)
(5.3)
(17.1)
(3.9)
(0.9%)
(175.8)
(110.8%)
(146.0)
(82.7%)
0.0%
1.0%
52.5%
45.7%
19.6%
11.4%
1.99%
(0.34%)
1.65%
0.02%
1.67%
(1)
(2)
(3)
Normalised measures exclude significant, non-recurring and non-cash items detailed on page 2 of this annexure.
Growth / (decline) measures are calculated from the prior comparable period.
The increase / (decrease) in underlying profit / (loss) excludes significant items.
(4) Measures have been annualised where appropriate.
BOQ ANNUAL REPORT 2012 129
Annexure A (continued)
Return Analysis(1)
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Half Year Performance
Financial Year Performance
ROE – weighted average
ROE – normalised cash(1)
ROA – average
ROA – average – normalised cash(1)
RORWA
RORWA – normalised cash(1)
Per Share Data
EPS Calculation
Reconciliation of earnings / (loss) for normalised
cash EPS
Normalised cash profit / (loss) after tax
Less: PEPS dividends
Normalised basic earnings / (loss) available for
ordinary shareholders
Add back :
–
–
–
RePS dividends(2)
Convertible note dividends(2)
PEPS dividends(2)
Normalised diluted earnings / (loss) available to
ordinary shareholders
Reconciliation of earnings / (loss) for statutory EPS
Net Profit / (loss) after tax (statutory)
Less: PEPS dividends
Statutory basic earnings / (loss) available for
ordinary shareholders
Add back :
–
–
–
RePS dividends(2)
Convertible note dividends(2)
PEPS dividends(2)
Statutory diluted earnings / (loss) available to
ordinary shareholders
Weighted average number of shares (WANOS):
–
Basic WANOS(3)
Add: Effect of SMOP and award rights
Add: Effect of converting preference shares
Add: Effect of convertible notes(2)
– Diluted WANOS for normalised cash EPS
–
Basic WANOS(3)
Add: Effect of SMOP and award rights
Add: Effect of converting preference shares
Add: Effect of convertible notes(1)
–
Diluted WANOS for statutory EPS
Statutory basic earnings / (loss) per share (c)(6)
Statutory diluted earnings / (loss) per share (c)(6)
EPS growth / (decline) (basic)(4)
EPS growth / (decline) (diluted)(4)
130
BOQ ANNUAL REPORT 2012
4.5%
5.3%
0.2%
0.3%
0.5%
0.6%
57.4
(4.8)
52.6
-
-
4.8
57.4
48.0
(4.8)
43.2
-
-
-
9.9%
10.6%
0.6%
0.6%
1.1%
1.2%
119.2
(4.9)
114.3
0.3
4.6
4.9
(8.0%)
(6.4%)
(0.5%)
(0.4%)
(0.9%)
(0.7%)
(72.4)
(5.0)
(77.4)
-
-
-
124.1
(77.4)
110.7
(4.9)
105.8
0.3
4.6
4.9
(90.6)
(5.0)
(95.6)
-
-
-
5.9%
8.2%
0.4%
0.5%
0.7%
1.0%
103.0
(4.6)
98.4
-
-
-
98.4
73.5
(4.6)
68.9
-
-
-
7.2%
8.0%
0.4%
0.4%
0.8%
0.9%
176.6
(9.7)
166.9
0.3
9.2
9.7
(0.7%)
1.3%
0.0%
0.1%
(0.1%)
0.1%
30.6
(9.6)
21.0
-
-
-
186.1
21.0
158.7
(9.7)
149.0
0.3
9.2
9.7
(17.1)
(9.6)
(26.7)
-
-
-
43.2
115.6
(95.6)
68.9
168.2
(26.7)
231.8
0.8
-
-
232.6
231.8
0.8
-
-
232.6
18.6
18.6
(55.0%)
(52.3%)
234.0
0.8
22.8
21.2
278.8
234.0
0.8
22.8
21.2
278.8
45.2
41.5
11.9%
9.2%
239.9
-
-
-
239.9
239.9
-
-
-
239.9
(39.8)
(39.8)
263.8
1.3
-
-
265.1
263.8
1.3
-
-
265.1
26.1
26.0
234.0
0.8
22.8
21.2
278.8
234.0
0.8
22.8
21.2
278.8
63.6
60.3
263.8
1.3
-
-
265.1
263.8
1.3
-
-
265.1
(10.2)
(10.2)
(314.0%)
(314.0%)
(42.3%)
(37.3%)
(22.2%)
(21.7%)
(116.0%)
(116.9%)
Half Year Performance
Financial Year Performance
Per Share Data
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Normalised basic cash earnings / (loss) per share (c)(1)(6)
Normalised diluted cash earnings / (loss) per share (c)(1)(6)
Ordinary dividend per share (c)
Franking percentage – all dividends
Franking credits (consolidated)
NTA per share ($)
Dividend yield(5)
Statutory payout ratio – ordinary shares
Normalised cash payout ratio – ordinary shares(1)
DRP takeup % (before underwriting)
Total ordinary shares on issue – period end
Ordinary shares (at record date)
Share price – period end ($)
22.7
24.7
26.0
100%
96.5
7.60
5.32%
120%
100%
50%
222.1
222.1
9.85
48.8
44.5
28.0
100%
127.3
7.95
7.43%
57%
53%
52%
225.4
225.4
7.48
(32.3)
(32.3)
26.0
100%
129.3
7.30
7.12%
n/a
n/a
38%
229.6
304.0
7.34
37.3
37.1
26.0
100%
124.9
6.94
6.83%
109%
78%
n/a
308.8
308.8
7.55
71.3
66.7
54.0
100%
127.3
7.95
7.22%
77%
69%
51%
225.4
225.4
7.48
7.9
7.9
52.0
100%
124.9
6.94
6.89%
n/a
n/a
n/a
308.8
308.8
7.55
(1)
(2)
Normalised measures exclude significant, non-recurring and non-cash items detailed on page 2 of this annexure.
The Bank is required to perform a trigger test at each balance date to determine whether the RePS, PEPS or convertible notes are dilutive. The PEPS and convertible notes are all non dilutive at
31 August 2012.
(3)
FY2011 basic and diluted earnings per share have been adjusted for the effect of the rights issue that occurred during the current financial year.
(4)
Growth / (decline) measures are calculated from the prior comparable period.
(5) Measures have been annualised where appropriate.
(6)
Amalgamation of first half and second half FY12 EPS is not reflective of FY2012 EPS due to the impact of the significantly increased share count in the second half.
Asset Quality
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
Half Year Performance
Financial Year Performance
Specific bad and doubtful debt provision
Collective bad and doubtful debt provision
General reserve for credit losses
Total bad and doubtful debt provision and general
reserve for credit losses
Collective provision plus general reserve as a % of risk
weighted assets
Total specific provision/total impaired assets
Total provision coverage of impaired assets (times)
Total impaired assets/average shareholders’ equity
Total impaired assets/non-securitised lending (at risk)
Total impaired assets
Loans 90 days past due (non-securitised)
Loans 90 days past due (securitised)
Total loans 90 days past due
Total loans 90 days past due as a % of risk weighted assets
Bad debts written off to specific provisions
Unwind Interest
Transfers from collective provision
Movement in specific provision
Underlying specific bad and doubtful debts
139.7
80.8
57.2
277.7
0.60%
33.0%
0.50
17.3%
1.71%
423.2
326.5
45.5
372.0
2.0%
27.5
-
-
79.2
106.7
173.7
80.1
67.0
320.8
0.60%
39.1%
0.55
17.6%
1.71%
444.3
426.0
56.9
482.9
2.4%
32.8
-
-
34.0
66.8
249.3
242.1
70.1
561.5
0.96%
43.1%
0.72
23.1%
2.21%
578.7
331.3
59.9
391.2
1.9%
78.3
11.8
-
75.6
165.7
220.3
192.6
70.2
483.1
0.97%
41.9%
0.68
19.7%
1.99%
525.3
297.4
49.2
346.6
1.6%
114.9
11.0
(34.8)
(29.0)
62.1
173.7
80.1
67.0
320.8
0.60%
39.1%
0.55
17.8%
1.71%
444.3
426.0
56.9
482.9
2.4%
60.3
-
-
113.2
173.5
220.3
192.6
70.2
483.1
0.97%
41.9%
0.68
19.2%
1.99%
525.3
297.4
49.2
346.6
1.6%
193.2
22.8
(34.8)
46.6
227.8
BOQ ANNUAL REPORT 2012 131
Annexure A (continued)
Asset Quality
Impairment losses written off
Transfers to specific provision
Movement in collective provision
Underlying collective bad and doubtful debts
Impairment on loans and advances
(Refer to P&L detail)
Half Year Performance
Financial Year Performance
1H/11
2H/11
1H/12
2H/12
FY2011
FY2012
-
-
27.7
27.7
134.4
-
-
(0.7)
(0.7)
66.1
-
-
162.0
162.0
327.7
25.9
34.8
(49.5)
11.2
73.3
-
-
27.0
27.0
200.5
25.9
34.8
112.5
173.2
401.0
Capital Ratio Data
Risk weighted assets
Fundamental tier 1 capital
Residual tier 1 capital(1)
Tier 1 capital deductions
Net tier 1 capital
Upper tier 2 capital
Lower tier 2 capital
Tier 2 capital deductions
Net tier 2 capital
18,946.3
20,524.6
20,671.4
21,098.1
20,524.6
21,098.1
2,211.1
195.7
(747.6)
1,659.2
114.1
491.5
(41.8)
563.8
2,279.8
195.7
(757.3)
1,718.2
127.3
539.6
(40.8)
626.1
2,143.9
195.7
(820.1)
1,519.5
200.8
544.9
(39.7)
706.0
2,614.7
195.7
(812.3)
1,998.1
192.7
499.9
(31.5)
661.1
2,279.8
195.7
(757.3)
1,718.2
127.3
539.6
(40.8)
626.1
2,614.7
195.7
(812.3)
1,998.1
192.7
499.9
(31.5)
661.1
Total regulatory capital base
2,223.0
2,344.3
2,225.5
2,659.2
2,344.3
2,659.2
APRA capital adequacy calculations
Fundamental tier 1 capital
Residual tier 1 capital
Tier 1 capital deductions
Net tier 1 capital
Upper tier 2 capital
Lower tier 2 capital
Tier 2 capital deductions
Net tier 2 capital
Total capital adequacy ratio
Other Information (Actual numbers)
Number of corporate branches
Number of Owner Managed Branches – QLD
Number of Owner Managed Branches – NSW/ACT
Number of Owner Managed Branches – VIC
Number of Owner Managed Branches – WA
Number of Owner Managed Branches – NT
Number of Owner Managed Branches – TAS
Number of Owner Managed Branches – SA
Number of transaction centres – QLD
Total number of branches and transaction centres
Number of BOQ owned ATMs
Number of BOQ branded ATMs(2)
Total BOQ branded ATMs
Number of redi ATMS (fee free for BOQ customers)
Number of BOQ branded EFTPOS machines
Number of employees (FTE)
11.7%
1.0%
(4.0%)
8.7%
0.6%
2.6%
(0.2%)
3.0%
11.7%
52
117
42
29
14
1
2
1
11
269
259
2,453
2,712
3,409
8,704
1,353
11.1%
1.0%
(3.7%)
8.4%
0.6%
2.6%
(0.2%)
3.0%
11.4%
51
118
42
30
14
1
2
1
11
270
262
260
522
3,376
8,412
1,420
10.4%
1.0%
(4.0%)
7.4%
1.0%
2.6%
(0.2%)
3.4%
10.8%
52
118
42
31
14
2
2
1
10
272
267
335
602
3,467
8,500
1,458
12.4%
1.0%
(3.9%)
9.5%
0.9%
2.4%
(0.2%)
3.1%
12.6%
53
119
42
36
13
2
2
1
9
277
267
412
679
3,037
8,947
1,448
11.1%
1.0%
(3.7%)
8.4%
0.6%
2.6%
(0.2%)
3.0%
11.4%
51
118
42
30
14
1
2
1
11
270
262
260
522
3,376
8,412
1,420
12.4%
1.0%
(3.9%)
9.5%
0.9%
2.4%
(0.2%)
3.1%
12.6%
53
119
42
36
13
2
2
1
9
277
267
412
679
3,037
8,947
1,448
(1)
(2)
Residual Tier 1 capital includes the PEPS.
BOQ terminated its agreement with Customers Limited and entered into an agreement to join the Redi ATM Scheme in September 2010.
132
BOQ ANNUAL REPORT 2012
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different
focused
fit
ACN 009 656 740
ABN 32 009 656 740
+61 7 3336 2420 (overseas)
1300 55 72 72 (within Australia)
Customer Service
Website: boq.com.au
Investor Relations: +61 7 3212 3463
Facsimilie: +61 7 3212 3399
Telephone: +61 7 3212 3333
Brisbane Qld 4000
259 Queen Street
Level 17, BOQ Centre
Bank of Queensland Limited
Annual Report 2012
What we believe &
how we will get there
We believe ‘banking’ should be simple and that everyone
deserves to deal with someone they can trust.
Stronger foundations
• Group-wide efficiency and effectiveness program
• Process improvements as well as structural changes
• Strengthened balance sheet and capital position
• Enhanced risk management capabilities and culture
• Operating model optimisation
Customers
• Targeting retail, small business and selected commercial customers
• Refining our product range and rewarding loyalty
• Building enduring financial relationships
People and culture
• New management team of highly experienced bankers
• Embedding a positive, proactive culture with more collaboration and stronger accountability
• Bringing trust back to banking