#LOVEBOQ
ANNUAL REPORT
2 014
CONTENTS
DIRECTORS’ REPORT
DIRECTORS’ DETAILS
OPERATING AND FINANCIAL REVIEW
REMUNERATION REPORT
INTRODUCTORY MESSAGE
REMUNERATION REPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE
FINANCIAL REPORT
INCOME STATEMENTS
STATEMENTS OF COMPREHENSIVE INCOME
BALANCE SHEETS
STATEMENTS OF CHANGES IN EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
OTHER INFORMATION
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
SHAREHOLDING DETAILS
SHAREHOLDER INFORMATION
2
2
5
12
12
12
36
37
47
47
48
49
50
54
55
113
113
114
116
119
PERFORMANCE
SNAPSHOT
PERFORMANCE
SNAPSHOT
STATUTORY NET PROFIT
after tax
up
to
$ 2 60.5m
CASH EARNINGS
after tax
up
EARNINGS PER SHARE
cash basic
up
to
89.5c
D I V I D E N D P E R S H A R E
l y e a r o rd i n a r y
f u l
u p
to
$301.2m
t o
6 6
c
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
1
DIRECTORS’ REPORT
Year Ended 31 August 2014
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 2014 and the independent auditor’s report thereon.
DIRECTORS’ DETAILS
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
Roger Davis
B.Econ. (Hons),
Master of Philosophy
Chairman
Non-Executive Independent Director
Stuart Grimshaw
PMD, MBA, BCA
Managing Director and
Chief Executive Officer
Executive Non-Independent Director
(Resigned - 31 August 2014)
Steve Crane
B Com, SF Fin, FAICD
Non-Executive Independent Director
Carmel Gray
B Bus
Non-Executive Independent Director
Michelle Tredenick
B Sc, FAICD, F Fin
Non-Executive Independent Director
2
ANNUAL REPORT 2014
62
53
62
65
53
Mr Davis was appointed Chairman on 28 May 2013 and has been a Director since 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 AIG Australia Ltd, Argo Investments
Limited, Ardent Leisure Management Ltd and Ardent Leisure Ltd and Aristocrat Leisure 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 and a Master of Philosophy degree from Oxford.
Mr Davis is Chair of the Nomination & Governance Committee, a member of the Audit and Risk
Committees, and an attendee at all other Board Committees.
Mr Grimshaw joined BOQ in November 2011 as Managing Director and Chief Executive Officer.
Prior to joining BOQ, Mr Grimshaw was a Non-Executive Director of Suncorp Group Ltd and
Chief Executive Officer of Caledonia Investments Pty Ltd (an investment house). Before joining
Caledonia, Mr Grimshaw 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.
Mr 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, Mr Crane became Chief Executive and remained in
this role until his retirement in June 2003. Mr Crane is Chairman of nib Holdings Limited and
Global Valve Technology Limited, Director of Transfield Services, APA Pipeline Limited, Taronga
Conservation Society Australia and a member of the CIMB Advisory Council. Mr Crane is Chair
of the Risk Committee and a member of the Nomination & Governance Committee.
Ms Gray was appointed a Director of BOQ in April 2006. Ms Gray has had an extensive
executive career in IT and Banking. She was Group Executive Information Technology at Suncorp
from 1999 until 2004 and a member of Suncorp’s Group Executive committee during that
period. Previously, she held a number of senior roles in the IT Services industry, including
General Manager, Energy Information Solutions and Chief Executive, Logica Australia. She is
Non-Executive Chair of Bridge Point Communications, and provides IT and business consultancy
services to the SME sector. Ms Gray is a member of each of the Information Technology, Audit
and Nomination & Governance Committees.
Ms Tredenick has served on the Board of BOQ since February 2011. Ms Tredenick has more
than 30 years’ experience in the banking, insurance and wealth management industries across
Australia and New Zealand. Ms Tredenick has held senior executive roles and been a member
of the Executive Committee at National Australia Bank, MLC and Suncorp-Metway Limited, 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. In addition to
her role at BOQ Ms Tredenick currently serves as a Non-Executive Director of Vocation Ltd and
Canstar Pty Ltd. She is Chair of IAG and NRMA Superannuation Pty Ltd and is a member of the
Senate of the University of Queensland and the Board of St James Ethics Centre. Ms Tredenick is
Chair of the Information Technology Committee and a member of each of the Human Resources
& Remuneration and Risk Committees.
Name, qualifications and independence status
Age
Experience, special responsibilities and other Directorships
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
Richard Haire
B.Ec, FAICD
Non-Executive Independent Director
David Willis
B Com, ACA, ICA
Non-Executive Independent Director
Neil Berkett
B Com and Admin
Non-Executive Independent Director
Bruce Carter
B Econ, MBA, FAICD, FICA
Non-Executive Independent Director
(Appointed 27 February 2014)
Margaret Seale
BA, FAICD
Non-Executive Independent Director
(Appointed 21 January 2014)
55
58
58
56
54
Mr 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 Cotton Research and
Development Corporation and formerly a Director of Open Country Dairy (NZ) and New Zealand
Farming Systems Uruguay. Mr Haire is Chair of the Audit Committee and a member of the Risk
and Information Technology Committees.
Mr 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 17 years’ experience
working with Australian and foreign banks. Mr Willis is a Director of New Zealand Post and Kiwi
Bank, a Director of CBH (A Grain Cooperative in Western Australia) and Interflour Holdings, a
Singapore based flour milling company. He is also a Director of Parcel Direct Group based
in Sydney and a Director of Converga Pty Ltd. Mr Willis chairs a Sydney based Charity “The
Horizons Program”. He was appointed a Director of the Bank in February 2010 and is Chair of
the Human Resources & Remuneration Committee and is a member of the Risk Committee. He
is a Non-Executive Director of the Bank’s insurance subsidiary, St Andrew’s.
Mr Berkett was appointed a Director of the Bank on 30 July 2013. His career spans a range
of sectors and geographies in both the consumer and enterprise space with an emphasis on
managing significant change. For six years finishing in mid-2013 he was the Chief Executive
Officer of Virgin Media, a NASDAC listed company where he oversaw the successful turnaround,
differentiation and growth of the UK cable company. Mr Berkett then led the sale of the company
to Liberty Global in June 2013. His previous career included senior roles at Lloyds TSB,
Prudential, St George Bank in Australia, Citibank and Eastwest Airlines. He is the Non-Executive
Chairman of the Guardian Media Group, is a Non-Executive Director with the Sage Group plc
and a Trustee for the NSPCC. Mr Berkett is a member of each of the Human Resources &
Remuneration and Information Technology Committees.
Mr Carter was a founding Managing Partner of Ferrier Hodgson South Australia, a corporate
advisory and restructuring business, and has worked across a number of industries and sectors
in the public and private sectors. He has been involved with a number of state government-
appointed restructures and reviews including chairing a task force to oversee the government’s
involvement in major resource and mining infrastructure projects. Mr Carter had a central
role in a number of key government economic papers including the Economic Statement on
South Australian Prospects for Growth, the Sustainable Budget Commission, and the Prime
Minister’s 2012 GST Distribution Review. Mr Carter has worked with all the major financial
institutions in Australia. Before Ferrier Hodgson, Mr Carter was at Ernst & Young for 14 years
including four years as Partner in Adelaide. During his time at Ernst & Young he worked across
the London, Hong Kong, Toronto and New York offices. Mr Carter is the chair of Australian
Submarine Corporation and Territory Insurance Office and a Non-Executive Director of SkyCity
Entertainment Group Limited and Genesee & Wyoming Australia Pty Ltd. Mr Carter is a member
of each of the Audit and Risk Committees.
Margaret (Margie) Seale has more than 25 years’ experience in senior executive roles in
Australia and overseas in the global publishing, health and consumer goods industries, and in
the transition of traditional business models to adapt and thrive in a digital environment. Most
recently she was Managing Director of Random House Australia (with managerial responsibility
for Random House New Zealand) and President, Asia Development for Random House Inc.,
the global company. Amongst other roles prior to that she held national sales and national
marketing roles for Oroton and Pan Macmillan respectively. She is a Non-Executive Director
of Telstra and member of the Audit & Risk Committee. She has also served on the boards of
the Australian Publishers’ Association and the Powerhouse Museum, and on the Council of
Chief Executive Women, chairing its Scholarship Committee from 2011 to 2012. She remains a
Non-Executive Director of Random House Australia and New Zealand. She is a member of the
Information Technology and Human Resources & Remuneration Committees.
COMPANY SECRETARY
Melissa Grundy, Company Secretary
BCom, GradDipAppFin (Sec Inst), GradDipACG, CPA, F Fin, FGIA, 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).
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
3
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
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
Board of
Directors -
St Andrews
Risk
Committee
Audit
Committee
Nomination &
Governance
Committee
Human
Resources &
Remuneration
Committee
- BOQ & St
Andrews
Investment
Committee (1)
Information
Technology
Committee
Due
Diligence
Committee
Audit & Risk
Committee -
St Andrews
A
10
10
10
10
10
9
10
9
7
6
B
10
10
10
10
10
10
10
10
7
6
A
4
-
-
-
-
5
-
-
-
-
B
5
-
-
-
-
5
-
-
-
-
A
10
8
10
-
10
7
10
-
-
6
B
10
10
10
-
10
10
10
-
-
6
A
7
-
7
7
-
-
7
4
-
3
B
7
-
7
7
-
-
7
6
-
3
A
5
5
5
5
-
-
-
-
-
-
B
5
5
5
5
-
-
-
-
-
-
A
7
3
6
-
7
7
-
3
3
-
B
7
3
7
-
7
7
-
4
3
-
A
2
2
2
2
-
-
2
2
-
1
B
2
2
2
2
-
-
2
2
-
1
A
8
-
8
8
8
-
8
5
6
-
B
8
-
8
8
8
-
8
8
6
-
A
3
2
3
3
-
-
3
1
-
2
B
3
3
3
3
-
-
3
3
-
3
A
3
-
-
-
-
-
-
-
-
-
B
6
-
-
-
-
1
-
-
-
-
10
5
10
7
5
7
2
8
3
6
Stuart Grimshaw(2)
Steve Crane
Roger Davis(3)
Carmel Gray
Michelle Tredenick
David Willis
Richard Haire
Neil Berkett
Margaret Seale(4)
Bruce Carter(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) The composition of the Investment Committee is not fixed. Composition and meetings held are set by the Board on an as required basis.
(2) Stuart Grimshaw attended these Committee meetings but was not a formal committee member.
(3) Roger Davis attends these Committee meetings but is not a formal Committee member.
(4) Margaret Seale was appointed as a Director on 21 January 2014.
(5) Bruce Carter was appointed as a Director on 27 February 2014.
4
ANNUAL REPORT 2014
OPERATING AND FINANCIAL REVIEW
Statutory Profit after Tax ($m)
260.5
40%
185.8
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
Cash Earnings Net Profit after Tax ($m)
301.2
250.9
20%
100.5
85.3
73.5
134.7
125.8
119.9
131.0
103.0
161.0
140.2
2HY12
1HY13
2HY13
1HY14
2HY14
2HY12
1HY13
2HY13
1HY14
2HY14
Statutory Basic Earnings per Share (EPS) (cents)
Dividends (cents)
77.4
34%
57.6
66
14%
58
25.7
31.2
26.4
41.5
36.2
26
28
30
32
34
2HY12
1HY13
2HY13
1HY14
2HY14
2HY12
1HY13
2HY13
1HY14
2HY14
Statutory Net Interest Margin (NIM) (%)
Cash Cost-to-Income (%)
1.82
44.3
13bps
1.69
40bps
43.9
1.63
1.65
1.72
1.87
1.77
46.4
44.7
43.9
43.8
43.9
2HY12
1HY13
2HY13
1HY14
2HY14
2HY12
1HY13
2HY13
1HY14
2HY14
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
5
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
OPERATING AND FINANCIAL REVIEW (CONTINUED)
About BOQ
BOQ is one of Australia’s leading regional banks and one of the few
significant bank brands not owned by one of the big banks. This means
we are completely independent while still offering a genuine alternative to
customers looking for a full range of banking services. We have grown from
being the first Permanent Building Society in Queensland in 1874 to the
current day with a network of around 250 branches spanning every state
and territory in Australia.
Over the last two years we have built the foundations for sustainable growth
and are successfully delivering a strategy which involves four pillars: putting the
customer in charge, growing the right way, finding a better way and being loved
like no other. One of our key differentiators is a reputation for superior customer
service. As a regional bank, flexibility and responsiveness to customer needs
are paramount and the focus on this area will complement the progress being
made under the four strategic pillars and contribute to future growth.
BOQ’s principal activity is the provision of financial services to individuals
and businesses. We have an authority to carry on banking business under
the Banking Act 1959 (Commonwealth) (as amended). During the year we
acquired the Professional Finance and Asset Finance & Leasing businesses
of Investec Bank (Australia) Limited and have since rebranded the acquired
business BOQ Specialist Bank Limited (“BOQ Specialist”). Outside of this
acquisition there were no significant changes during the year in the nature
of the activities of the Group.
Group strategy
Our clear and simple strategy continues to be well executed by an
experienced management team who are delivering initiatives against four
pillars: putting the customer in charge, growing the right way, finding a better
way and being loved like no other.
“Customer in Charge” is about making it easier for our customers to
engage with us on their terms. We are doing this through a range of initiatives
including enhancing our Owner Manager and corporate branch capabilities,
opening new distribution channels such as broker and digital, and investing
in our frontline employee capability. BOQ Finance continues to provide asset
and equipment finance solutions in specifically targeted sectors, recent
investments in Business Banking and Agribusiness capabilities are driving
above system growth, BOQ Specialist and Virgin Money (Australia) (“VMA”)
offer specialised banking services to targeted customer niches and St
Andrew’s is building its consumer credit and life insurance offerings through
its distribution partnerships.
“Grow the Right Way” is about profitable and sustainable growth and
meeting customers’ needs by putting their interests first. We will continue
to further enhance our risk management strategies, building frameworks in
line with new prudential requirements. The balance sheet is being further
diversified by geography and industry segments. Business Banking has
widened its origination capability across all states, supporting targeted
customer acquisition, while looking to further engage with the Small and
Medium Enterprise (“SME”) market. Our Agribusiness team is deepening
customer relationships with particular focus in the cotton, cropping and
domestic livestock sectors. The recent acquisition of BOQ Specialist will
deliver distinctive banking solutions to niche professional market sectors.
“There’s Always a Better Way” is about enhancing operational excellence
and efficiency through initiatives such as back-office automation, improved
risk management and channel expansion, with governance of contract
delivery and service management becoming a core competency.
6
ANNUAL REPORT 2014
Our IT strategy, which is about getting the basic rights while building solid
foundations to be able to operate effectively in a digitised world, is also
integral to this strategic pillar. Recent cost opportunities realised (eg: shared
services and back office consolidation) have allowed reinvestment in frontline
capabilities in Business Banking, mobile banking and broker support teams.
We delivered a record number of projects across the Group in 2014 with
further initiatives in the pipeline for coming years.
“Loved Like No Other” is about building a culture that makes BOQ a great
place to work and that supports an outcome where our customers love
dealing with us. In recent years we have built a pool of talent, and embedded
desired corporate behaviours and sales and service disciplines across the
Group. Staff engagement increased in 2014, led by positive leadership
and development of career pathways across all business areas. This pillar
focuses on key fundamentals of diversity, workforce planning, performance,
rewards, culture and leadership to support the target of top quartile staff
engagement and top customer Net Promoter Score.
Through continued focus on our four strategic pillars, we aim to continue
to deliver robust and sustainable financial performance, consistent growth
in returns to shareholders and superior service to our customers and the
wider community.
Risks and Challenges
BOQ has a defined risk appetite, approved by the Board, which clarifies our
risk tolerance and the risk management policies implemented to ensure we
operate within these tolerance levels. Corporate Governance Principle 7:
Recognise and Manage Risk (refer page 46) identifies the material business
risks of BOQ under the risk management framework. We also recognise
the following external risks and challenges which, though beyond our direct
control, we closely monitor.
Domestic Economy
Our earnings are linked to economic activity in the Australian economy and
the demand for credit and employment levels in the economy, particularly
as the economy rebalances from the peak in resources construction activity.
Ongoing global uncertainty continues to impact economic growth locally and
any future downturns will potentially impact reported results.
Australian Property Markets
We have substantial exposure to the Australian property market through our
secured lending portfolio and recent years have demonstrated the fluctuating
nature of property prices. Large decreases in property valuations may
increase losses on the loan portfolio and also decrease asset growth from
new lending. This could adversely impact earnings.
Competition
We operate in a market where there is strong competition for the services
we provide. Existing participants or potential new entrants to the market
could heighten competition and reduce margins or increase costs of
participation. As banking is a licensed and regulated industry, the prudential
framework across industry participants creates its own challenges. Changes
in the regulatory environment will potentially influence the industry’s
competitive dynamic.
Credit Ratings
Credit ratings impact our cost and access to funding which influences the
deposit and wholesale liabilities mix. Potential downgrades to credit ratings
may limit access to funding markets, increase funding costs and limit the
ability to fund potential lending growth.
Reputational
This is the potential loss of earnings or adverse impact on market
capitalisation resulting from stakeholders taking a negative view of the Bank
or our actions.
Regulatory Environment
BOQ is a prudentially regulated and we seek to comply with all applicable
laws and regulations. Any changes to the regulatory environment will
potentially influence use of capital and resources and / or create an increase
in operational costs.
Financial Performance
Highlights
2014
2013
Net Profit After Tax - Statutory $’m
260.5
185.8
Net Profit After Tax - Cash $’m
301.2
250.9
Aug 14
vs
Aug 13
40%
20%
Return on Equity - Statutory %
Return on Equity - Cash %
Dividend (cents)
Basic Earnings per Share - Statutory
(cents)
9.0
10.4
66.0
7.0
200bps
9.4
100bps
58.0
14%
77.4
57.6
34%
Basic Earnings per Share - Cash (cents)
89.5
78.1
Market Capitalisation $’m
4,560.3
3,070.2
Common Equity Tier 1 %
8.63
8.63
15%
49%
-
Statutory Profit is prepared in accordance with the Corporations Act 2001
and the Australian Accounting Standards, which comply with International
Financial Reporting Standards (“IFRS”). Cash Earnings is a non-Accounting
Standards measure commonly used in the banking industry to assist in
presenting a clear view of the Bank’s underlying earnings.
The table below provides a reconciliation of Statutory Profit to Cash Earnings.
$ million
Aug-14
Aug-13
Aug 14
vs
Aug 13
Cash Earnings after Tax
301.2
250.9
20%
Amortisation of customer contracts
(acquisition)
Amortisation of fair value adjustments
(acquisition)
Hedge ineffectiveness
Government guarantee break fee
Integration / due diligence costs
Legacy items
Restructuring costs
(6.8)
(9.1)
(25%)
-
(1.0)
(100%)
(1.7)
(1.4)
(7.6)
2.4
(171%)
(5.2)
(3.7)
(73%)
105%
(23.2)
(37.5)
(38%)
-
(11.0)
(100%)
Statutory Net Profit after Tax
260.5
185.8
40%
Integration/due diligence costs – increase reflects costs relating to the
acquisition of BOQ Specialist Bank. 2013 included the acquisition of Virgin
Money (Australia).
Government guaranteed break fee – includes costs relating to repurchase of
Government guaranteed debt.
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
Legacy items – principally a provision for settlement of the outstanding
Storm Financial proceedings. Also includes legal costs relating to court
proceedings by former NSW Owner Managers which found in favour of BOQ
in February 2014. 2013 included the Product Remediation Review.
Restructuring costs – 2013 included a number of costs relating to significant
restructuring activities undertaken in 2012 and 2013 as we implemented
the four pillar strategy.
BOQ has posted record statutory and cash results for the 2014 financial
year, as we continue to make progress in executing our strategy and
building an organisation that is lower risk, lower volatility and set up for a
sustainable future.
Statutory profit after tax was up 40% on the prior year to $260.5 million. Cash
Earnings after Tax increased 20% on FY13 to $301.2 million, predominantly
driven by net interest margin expansion and further improvement in
impairment expense. Statutory basic earnings per share increased 34% to
77.4 cents per share for 2014, compared to the prior year earnings per
share of 57.6 cents. Basic cash earnings per share was up 15% on the prior
year to 89.5 cents.
The Board has determined to pay a final dividend of 34 cents per share fully
franked, taking the full year dividend to 66 cents per share, an increase of
14% on 2013.
2014 Statutory Earnings movement ($m)
15.0
3.8
28.3
32.5
67.7
185.8
260.5
Aug 13
Net Interest
Other
Expenses
Loan
Tax
Aug 14
Income
Income
Impairment
Expense
Net Interest Income increased largely due to an expansion in the net interest
margin of 13 basis points. We received credit rating upgrades from Standard
& Poor’s and Moody’s during the year to A- and A3 respectively, the highest
level ever achieved by the bank, which enhanced our ability to improve our
funding mix. The acquisition of the higher margin BOQ Specialist business
will provide opportunities to grow assets in more profitable segments.
Lending assets grew at 9% over the year to $38.4 billion. This included
the $2.6 billion in assets acquired as part of the BOQ Specialist Bank
acquisition. Ignoring the impact of the acquisition, organic lending growth
of $0.6 billion (2%) was achieved, which was below system growth of 6%.
The Bank’s portfolio is heavily weighted to Queensland, where credit growth
has been significantly lower than other regions across the country. Growth
rates have also been impacted by a reduction in credit risk appetite from
pre 2013 levels.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
7
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Further success was achieved in our Business Banking strategy which
delivered above average growth in the Property, SME and Agribusiness areas.
Funding costs and mix – driven by selective retail re-pricing initiatives,
rollover of wholesale funding at lower credit spreads supported by improved
market conditions, recent rating upgrades and ongoing benefits from
repurchases of higher cost Government Guaranteed debt in recent periods.
Improvement in all key credit metrics reflects macro-economic benefits from
the low interest rate environment. In addition, revised risk appetite and focus
on embedding heightened risk management processes continues to improve
the credit quality of the portfolio. Loan impairment expense, impaired asset
and arrears balances have all reduced from the prior year and demonstrate
the Bank’s enhanced credit management practices. The changes will deliver
improved sustainability of returns for shareholders over the long term.
Operating expenses have increased marginally over the year. Expenses
include the one-off $31.5 million (pre-tax) settlement relating to Storm
Financial, whilst the 2013 result included $46 million costs relating to the
Product Remediation Review. Excluding these significant one off items,
expenses reflect the significant investment in frontline capability as we
expand our Business Banking team and establish a broker support network
and mobile banking unit. These initiatives are now generating new business
and putting the ‘Customer in Charge’ of choosing the channel through
which they deal with us. We are in the process of undertaking substantial
re-investment in our systems to move from a paper based to a digitised
business, and this will provide the platform to harvest future productivity and
efficiency benefits.
The balance sheet continues to be conservatively managed with capital
ratios remaining stable. Recent credit rating upgrades have enabled us to
improve the resilience and diversification of the Bank’s liability mix with the
deposits to lending ratio increasing to 69%.
Income
Total operating income increased by 10% to $938.6 million compared with
$855.9 million in the prior year. The main driver of this increase was net
interest income growth of $67.7 million.
As seen from the graph below, Statutory net interest income increased by
13bps over the year to 1.82%. This movement was attributable to a number
of factors including:
Net Interest Margin
2.02%
0.33%
1.69%
0.23%
(0.03%)
0.01%
(0.08%)
2.14%
0.32%
1.82%
FY13
Asset Pricing
& Mix
Funding & Mix Capital & Low
Cost Deposits
BOQ Specialist
FY14
Net Interest Margin
Third Party Costs
Asset pricing and mix – reductions over the year reflect run off of lower
quality, higher margin business (eg Line of Credit product run off of $700
million) which has been replaced by lower margin lending such as the new
award winning ‘Clear Path’ mortgage offering.
8
ANNUAL REPORT 2014
Capital & low cost deposits – the investment return on the capital and
low-cost deposit replicating portfolio has reduced in line with the lower
interest rate environment. This has been partly offset by interest earned on
the capital raised during the year in advance of settlement of the BOQ
Specialist acquisition.
income,
insurance
Income, excluding
increased by 11%
Other
to
$136.2 million. Trading Income benefitted from favourable positioning and
recent reductions in credit spreads on the liquid asset portfolio. Commission
income increased due to a full year of VMA commission streams compared
to four months post acquisition in 2013. Insurance income increased 3% to
$41.6 million from the prior year of $40.3 million with a solid underwriting
result and lower acquisition costs.
Fee income earned on banking products has remained challenging as new
product offerings have lower fee structures and customers have continued
to migrate to these products.
Expenses
Operating expenses on a statutory basis increased by 1% to $469.4 million
(2013: $465.5 million) and cost to income ratio for the current financial
year is 50.0%, down from 54.4% in 2013. Total operating expenses
(excluding the impact of BOQ Specialist) on a cash basis increased by 6% to
$403 million for the full year. On the same basis, the cash cost to income
ratio improved from 44.3% to 43.8%.
While we continue to actively manage the expense base, we have reinvested
in the business by bolstering our frontline capability to support the ‘Customer
in Charge’ strategy.
There were a number of one-off costs for premises consolidation incurred
during the year, including bridging tenancies, onerous lease provisions and
lease surrender costs relating to branch closures. Excluding these impacts
the annual expense growth would have been approximately 4.5%.
The Group is undertaking a strategic transformation in its operational
infrastructure to digitise the organisation, requiring significant reinvestment
to deliver its objectives. Whilst the expense growth profile is above inflation
it reflects the current stage of this evolution. We would expect costs to
return to an inflationary profile upon delivery of key pipeline projects which
are underway.
The strategic project pipeline is designed to improve the customer
experience while generating front and back office efficiency and includes a
new retail lending platform, business processing systems and moving from
legacy manual paper based processes to electronic data with full workflow
management capability. We have also announced a significant restructure
of our IT service delivery model and entered into a new IT outsourcing
agreement with Hewlett-Packard after a competitive tender process. The
new agreement brings a substantial lift in capability and an improved cost
profile compared to the previous ten year old agreement. The new agreement
is for five years with an option to extend for a further two years. We will
experience an upward trend in technology amortisation in coming years as
the investment pipeline is completed. This uplift should be sheltered by the
significant operational efficiencies expected from the new IT outsourcing
model and the benefits from these investment programs.
The acquisition of BOQ Specialist, which is a higher margin and higher
cost to income ratio business, will reset the Group’s cost to income ratio
approximately 1% higher than the current level. The BOQ Group’s cost to
income ratio, excluding BOQ Specialist, is expected to be stable in financial
year 2015. Completion of the current project portfolio is expected to deliver
improved cost to income outcomes from financial year 2016.
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
Asset quality and provisioning
IMPAIRED ASSETS ($m)
The improved credit quality of the portfolio is evidenced by favourable trends
across key metrics. The following table summarises the Bank’s key credit
indicators with comparisons against August 2013.
Year End Performance
Aug-14
Aug-13
Aug 14 vs
Aug 13
86.2
114.6
(25%)
22
32
(10bps)
292.9
381.6
455.7
523.0
(23%)
(13%)
525.3
478.5
381.6
298.4
292.9
Aug 12
Feb 13
Aug 13
Feb 14
Aug 14
221.2
270.8
(18%)
Balance Sheet Overview
Loan impairment expense
Bad and Doubtful Debts /
Gross Loans & Advances
Impaired Assets
30+ Arrears
90+ Arrears
Collective Provision & General
Reserve Credit Loss / RWA (1)
($m)
bps
($m)
($m)
($m)
bps
95
110
(15bps)
(1) The General Reserve for Credit Loss is grossed up for tax effect.
Loan Impairment expense continued to reduce, reflecting the improved credit
management practises accompanied by a tighter risk appetite framework, as
well as macro-economic benefits from the low interest rate environment.
The full year impairment expense of $86.2 million, or 22bps/GLA, was a
$28.4 million (10bps) improvement from August 2013. Excluding BOQ
Specialist,
impairment expense was $85.7 million, or 24bps/GLA,
representing an 8bps improvement on the prior year.
IMPAIRMENT CHARGE TO GROSS LOANS (BPS) (1)
Loans under management of $38.3bn (net of specific provisions) increased
9% over the year primarily due to the $2.6 billion in loans acquired as
part of the BOQ Specialist Bank acquisition. Excluding the impact of the
acquisition, we achieved 2% growth over the year, which is 0.3x system. The
retail lending market has become increasingly competitive as Banks pursue
growth and a concentrated market. We continue to look to ‘Grow the Right
Way’ to ensure portfolio quality is not compromised.
LOANS UNDER MANAGEMENT ($bn)
3.7
5.1
3.6
5.2
3.7
5.3
2.6
3.7
5.6
24.4
25.5
26.3
26.5
3.9
5.1
23.0
43
34
31
26
24
2010
2011
2012
2013
2014
BOQ Finance
Commercial
Retail
BOQ SPECIALIST
2H12
1H13
2H13
1H14
2H14 (2)
Housing Lending
(1) Annualised
(2) This excludes BOQ Specialist, including BOQ Specialist this is 22bps.
Impaired assets reduced to $292.9 million (including BOQ Specialist of
$5.3 million) through improved performance in the retail portfolio and the
commercial book benefitting from the realisation of the two largest impaired
exposures held at August 2013. Excluding BOQ Specialist, the current
impaired asset levels are now less than half the level of February 2012
($579 million), which reinforces the improvement in the credit quality of the
portfolio over the last two years.
Past due performance within the commercial portfolio has trended favourably
over the year due to continued early workout/exit strategies, troublesome
accounts transitioning to impaired status and improvement in collections.
Retail and BOQF arrears have remained relatively stable over the year.
Housing lending grew by $360 million or 1% over the year. The Bank has
gained further traction in broker penetration, digital and mobile banking. We
continue to reduce concentration in the Line of Credit portfolio, which has
declined to 13% of the portfolio from 21% in February 2012. We remain
significantly weighted to Queensland where mortgage growth remains less
than half the national average (Source: Canstar) which has been driven by
increases in Sydney and Melbourne.
Significant inroads have been achieved in diversifying origination channels
through the year. The broker channel provided 14% of our housing applications
in August 2014 and with expansion just commenced in Queensland, further
growth in this channel is expected. We have now extended the broker network
to 1,186 active brokers at the end of financial year 2014, predominantly in
Western Australia, New South Wales, and Victoria which will further drive
geographic diversification of the lending portfolio.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
9
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Credit rating
Commercial Lending
Commercial lending grew 41% to $7.2 billion bolstered by the acquisition
of BOQ Specialist. Excluding the impact of the acquisition, growth was
up 6% over the year to $5.6 billion. This was delivered by continuing to
build closer customer relationships and supported by the appointment of
SME specialists.
In our Business Bank, we continue to outperform our peers in customer
satisfaction surveys, leading the pack in the East & Partners Business
Banking Index for six years running and recently achieving a record high.
Our current long-term debt ratings are shown below. Two rating agencies
revised their long term debt ratings for the Bank during the year. Standard &
Poor’s upgraded their rating to A- and Moody’s upgraded to A3. Both noted
the improved balance sheet and capital strength of BOQ.
Rating Agency
Short Term Long Term
Outlook
Standard & Poor’s
Fitch
Moody’s
A2
F2
P2
A-
BBB+
A3
Stable
Positive
Stable
BOQ Finance
Tax Expense
The portfolio has been further complemented by the recent acquisition
of BOQ Specialist Bank which has an asset and finance leasing portfolio
providing commercial rental, lease and loan solutions for a broad range of
equipment types. Our BOQ Finance leasing portfolio saw organic growth
despite contraction in the industry, offsetting a targeted reduction in selected
debtor finance exposures which provided further portfolio credit quality
improvement. The business maintains leading capability in equipment,
debtor, vendor and dealer finance.
Funding & Liquidity
As evidenced by recent credit upgrades from both Standard & Poor’s
(‘A-’) and Moody’s (‘A3’), there has been progress in strengthening the
balance sheet, creating a sustainable funding profile and improving internal
capital generation.
The recent upgrades, supported by improvement in term funding markets,
have provided opportunities to further diversify funding sources and manage
all liabilities to maximise interest margins, which has been a key driver of
income growth. Significant value was achieved over the year as we reduced
reliance on high cost, price sensitive segments of the retail deposit market.
We have also deepened our penetration of middle market customers as the
recent upgrades widen our liability eligibility across investment portfolios.
We maintain a high quality, diversified liquid asset portfolio to support
regulatory and internal requirements. The transition of the liquid asset
portfolio to meet the new Basel III Prudential Standard APS 210 Liquidity rules
has been completed well in advance of the 1 January 2015 implementation
date. Further, eligibility for the Reserve Bank of Australia (‘RBA’) Committed
Liquidity Facility has been finalised and will begin on 1 January 2015.
Our total liquidity holdings of $6.4 billion represents a substantial excess
over short term funding levels and provides a material buffer in the event of a
market dislocation. In addition, $2.4 billion of internal securitisation capacity
is held which is eligible for repurchase arrangements with the Reserve Bank
of Australia as a source of contingent liquidity in the event of a crisis scenario.
Significant further liquidity is also available with the majority of the Bank’s
retail lending assets eligible to be placed as collateral into the structure.
The effective tax rate for the year is 32%. The increment over the 30%
company tax rate reflects non-deductibility of interest payable on Convertible
Preference Shares, intangibles amortisation expenses and BOQ Specialist
acquisition costs.
Capital
We maintained a strong capital position over the course of the year
with Common Equity Tier 1 steady at 8.63%. During the year, we raised
$400 million in capital to fund the acquisition of BOQ Specialist. The improved
cash earnings, coupled with lower lending growth, enabled underlying
capital generation of approximately 38 basis points of Common Equity
Tier 1. This was used to part fund the capital requirements of the BOQ
Specialist acquisition.
COMMON EQUITY TIER 1 RATIO
0.60%
1.40%
0.28%
0.14%
0.34%
0.09%
0.13%
8.63%
Underlying capital
generation
8.63%
Aug 13
Cash Earnings Net Dividends
net of DRP (1)
RWA
Movement
Capitalised
Software
BOQ Specialist
Acquisition (2)
Storm
Settlement
Other
Aug 14
(1) DRP participation level in the 2014 half year dividend was 31%.
(2) The loan book acquired on completion was $215m higher than the book reflected at announcement.
This growth, coupled with a small increase in goodwill due to fair value adjustments, has resulted in
consumption of excess capital of 34 basis points rather than the 25 basis points ($54m) presented in
the February 2014 proforma announcement. Post completion, organic capital generation of the acquired
business is available to fund RWA growth.
10
ANNUAL REPORT 2014
Dividends
Disposals
DIRECTORS’ REPORT
(Continued) Year Ended 31 August 2014
Series 2005-2 REDS Trust was closed on 12 June 2014.
Events subsequent to balance date
Dividends have been determined after 31 August 2014, refer to Section 2.5.
The financial effect of the above transaction has not been brought to account
in the financial statements for the year ended 31 August 2014.
On 22 September 2014, we announced an agreement to settle the
outstanding Storm Financial proceedings for $31.5 million, which had been
brought against the Group by the Australian Securities and Investment
Commission and a class action on behalf of borrowers advised by Storm
Financial. The timing of payment is to be confirmed as we await court
ratification of the settlement.
The Board announced an increase in the final dividend to 34 cents per
share. This takes full year dividends to 66 cents per share and represents an
increase of 14% on the prior year. All the dividends paid or determined were
fully franked at the tax rate of 30%.
Environmental regulation
The Group’s operations are not subject to any significant environmental
regulations under either Commonwealth or State legislation. The Board confirms
that the Group is not aware of any breach of environmental requirements.
Director and Management changes
Bruce Carter and Margaret Seale joined the Board as Non-Executive
Independent Directors during the financial year. Bruce was appointed on
27 February 2014 and is also a member of the Audit and Risk Committees.
Margaret, appointed 21 January 2014, is a member of the Human Resources
& Remuneration and Information Technology Committees. On 31 August
2014 Stuart Grimshaw resigned from his positions as Managing Director
and Chief Executive Officer with plans well advanced for his replacement.
Acquisition
On 31 July 2014, we finalised the acquisition of Investec Bank (Australia)
Limited, which has now been renamed as BOQ Specialist Bank Limited.
BOQ Specialist has a substantial market share of Medical and Accounting
professionals and combining this with access to BOQ products and funding
will create significant growth opportunities. In addition it increases BOQ’s
footprint geographically while at the same time adding $2.6 billion to our
loan portfolio.
BOQ Specialist contributed one month of earnings to the Group Net Profit
after tax of $3.1 million, in line with expectations.
Below are details of the entities established or acquired during the
financial year:
• BOQ Specialist Bank Limited formerly known as Investec Bank (Australia)
Limited was acquired on 31 July 2014.
• BOQ Specialist Pty Ltd formerly known as Investec Professional Finance
Pty Ltd was acquired on 31 July 2014.
• BOQ Asset Finance and Leasing Pty Ltd formerly known as Investec Asset
Finance & Leasing Pty Ltd was acquired on 31 July 2014.
Refer to Section 6.5 of the financial report for further information.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
11
REMUNERATION REPORT
Year Ended 31 August 2014
INTRODUCTORY MESSAGE
Dear Shareholder
Please find attached the 2014 Remuneration Report. In response to feedback
from shareholders, proxy advisors, remuneration advisors and regulators we
have, as we did last year, further refined the 2014 remuneration report in
an effort to make it more readable and meaningful. This feedback has also
resulted in changes to our policy and practice.
The BOQ Human Resources & Remuneration Committee has, on behalf of the
BOQ Board, sought to provide governance over the Bank’s remuneration and
human resources, and in doing so to align the interests of employees and
shareholders. Our principles have not changed:
•
•
Deferral and claw back of unvested short term incentives (STI) and
long term incentives (LTI);
No upfront cash payments for executives joining BOQ;
Allocation of LTIs on the basis of face value and not fair value;
•
• Matching the fixed and total remuneration to market;
•
Structuring total remuneration at approximately one third fixed, one
third short term incentive and one third long term incentive;
•
•
Providing Board overlay discretion on all remuneration outcomes; and
Ensuring key performance indicators for all executives, covering both
financial and non-financial measures.
During the year we made several changes to the remuneration
arrangements for our Senior Executives as follows:
•
Ceased awarding non-hurdled deferred award rights (DARs) to
Senior Executives. These have previously been used as a retention
mechanism, but are seen as inappropriate as an element of their
remuneration at the current time;
•
•
Awarded restricted shares instead of cash for the deferred
component of STI. This change will better align management and
shareholder interests;
For the 2015 STI scheme, we will be using an EPS measure as a
gateway to STI instead of Net Profit After Tax (“NPAT”) currently in use;
• We will make LTI offers in FY15 on the basis that some or all of
any unvested performance award rights may remain on foot at the
Board’s discretion for a Senior Executive deemed to be a “good
leaver”, with the vesting of any such award rights remaining subject
to satisfaction of the vesting conditions. The Board intends to apply
this principle to unvested LTI performance award rights granted in
years prior to FY15, subject to any necessary approvals (refer Table
3 or Page 20). This change will further encourage Management to
ensure their actions are focused on long term shareholder value
whilst they are employed at BOQ;
• We plan to add a second vesting measure to our 2015 – Long
Term Incentive Plan to complement the current comparative Total
Shareholder Return (“TSR”) hurdles. We continue to work on what
measure best suits the objectives of the LTI; and
• We considered the dilution impact on unvested award rights from the
2014 capital raising and the Board decided consistent with the 2011
capital raising that there would be no adjustment.
2014 has been a very strong year for the BOQ shareholders in both absolute
and comparative terms. The total shareholder return for the 12 months to
August 2014 was 39.2%. This provided the best overall return amongst
BOQ’s industry competitors and, subject to individual performances, has
meant that the Board of BOQ has awarded short term incentives which are
higher than last year. Each executive’s remuneration has been evaluated
in accordance with their Key Performance Indicators (“KPIs”), scored and
moderated by the Acting CEO and by the Board.
12
ANNUAL REPORT 2014
The Human Resources (“HR”) & Remuneration Committee has taken external
advice concerning comparative and absolute payments for all Senior
Executives. In August 2014, the BOQ Managing Director & CEO, Stuart
Grimshaw, resigned. His entitlements on departure have been released
publicly and are consistent with his employment contract. He received no
STI for the 2014 year however his LTI remains on foot and is subject to the
comparative TSR vesting hurdles. We have also publicised the remuneration
for the Acting CEO, Jon Sutton. When the Board determines who will be the
permanent CEO, we will agree a new contract and conditions.
Finally, the year has been satisfying for the Bank in many respects. In
addition to a strong financial and share price performance, a number of
improvements to the internal systems and processes are being successfully
implemented and should provide a basis for shareholder value in future years
and this has impacted our view on remuneration. In many ways, this year
has provided confidence to the Board that the additional costs associated
with the renewal of the senior executive at BOQ have been more than offset
by the value this team is creating for shareholders.
DAVID WILLIS
CHAIRMAN OF THE HUMAN RESOURCES & REMUNERATION COMMITTEE
2014 REMUNERATION REPORT – AUDITED
This Remuneration Report is prepared for consideration by shareholders
at the 2014 Annual General Meeting of the Bank. It outlines the overall
remuneration strategy, framework and practices adopted by the Consolidated
Entity for the period 1 September 2013 to 31 August 2014 and has been
prepared in accordance with Section 300A of the Corporations Act 2001 and
its regulations.
Contents
1. Key management personnel
2. Remuneration governance
3. Remuneration policy
4. Executive remuneration framework
5. Non-executive Director remuneration
6. Remuneration disclosures
7. Transactions with Directors and Senior Executives
8. Executive contracts
Page
12
13
13
13
19
20
32
33
1. Key Management Personnel (KMP)
KMP include those Directors and executives who have authority and
responsibility for planning, directing and controlling the activities of the
Bank and the Consolidated Entity.
The KMP for the financial year ended 31 August 2014 were as follows:
(i) Directors
Current
Roger Davis
Stuart Grimshaw
Neil Berkett
Bruce Carter
Steve Crane
Carmel Gray
Chairman (Non-executive)
Managing Director and Chief Executive Officer
(Resigned - 31 August 2014)
Director (Non-executive)
Director (Non-executive)
(appointed - 27 February 2014)
Director (Non-executive)
Director (Non-executive)
Richard Haire
Director (Non-executive)
(i) Directors (continued)
Margaret Seale
Michelle Tredenick
Director (Non-executive)
(appointed 21 January 2014)
Director (Non-executive)
David Willis
Director (Non-executive)
(ii) Senior Executives
Current
Jon Sutton
Chief Operating Officer (currently Acting CEO)
Julie Bale
Chief Information Officer
Matthew Baxby
Group Executive, Retail and Online Banking
Brian Bissaker
Chief Executive Officer, Virgin Money Australia
Peter Deans
Chief Risk Officer
Karyn Munsie
Group Executive, Corporate Affairs,
Investor Relations & Government Relations
Anthony Rose
Chief Financial Officer
Brendan White
Group Executive, Business Banking, Agribusiness
& Financial Markets
2. Remuneration Governance
The HR & Remuneration Committee makes recommendations to the Board
on remuneration policies, Directors’ and executives’ remuneration (which
includes the Company Secretary) and HR matters. This Committee considers
remuneration and HR issues regularly and obtains advice from external
independent remuneration specialists to assist in its deliberations.
Under the Consolidated Entity’s HR & 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 risk management framework;
•
•
•
•
•
•
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 for the Managing Director,
Senior Executives 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 the Australian Prudential
Regulation Authority (“APRA”) as KMP or Responsible Persons;
Review and provide recommendations to the Board on the
remuneration for all remaining groups of employees not otherwise
specified; and
Consider and approve Non-Executive Director (“NED”) remuneration,
including ensuring that the structure of NED remuneration is clearly
distinguished from that of Senior Executives.
The HR & Remuneration Committee regularly reviews Remuneration Policy
to ensure it adequately supports the Consolidated Entity’s overall risk
management framework. As noted last year we have implemented the
change to the nature of STI deferral from cash to restricted shares for all
Senior Executives (including the Managing Director) from the FY 2013 award.
The HR & Remuneration Committee meets at least six times per year and in
the 2014 financial year, seven meetings were held.
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
2.1 Use of External Advisors and Remuneration Consultants
Where necessary, the Board seeks advice from independent experts and
advisors, including remuneration consultants. Remuneration consultants are
engaged by, and report directly to, the HR & Remuneration Committee which
ensures, upon engagement, that the appropriate level of independence
exists from the Consolidated Entity’s Management. Where the consultant’s
engagement requires a recommendation, the recommendation is provided
to, and discussed directly with the Chairman of the HR & Remuneration
Committee.
During the year, the Board paid an amount of $63,275 to Egan & Associates
in respect of remuneration advice covering a number of remuneration-related
issues, including benchmarking and determination of pay for the Senior
Executives. Egan & Associates provided no advice directly to Management
in the 2014 year. The Board is satisfied that remuneration advice provided by
external advisers during the year was free from undue influence by members
of the Senior Executive to whom the advice related.
3. Remuneration Policy
The Consolidated Entity’s executive reward policy is designed to balance
five objectives:
•
Incentivise executives to pursue the short and long-term goals of the
Consolidated Entity within an appropriate risk control framework;
•
•
•
•
Demonstrate a clear relationship between executive performance and
remuneration;
Align the interest of management with those of the shareholders;
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
appropriate risk-based decision-making and behaviour.
The HR & Remuneration Committee monitors and reshapes remuneration
programs to support these underlying objectives, responds to proposed and
enacted legislation and regulatory initiatives, and adjusts to changes in the
business cycle.
4. Executive Remuneration Framework
The remuneration structure in place for the Senior Executives (including the
Managing Director) is consistent with the Consolidated Entity’s Remuneration
Policy, and is based on a total remuneration approach comprising an
appropriate mix of fixed (salary and benefits) and variable pay in the form of
cash and equity-based incentives.
4.1 Current remuneration framework
Total remuneration for the Senior Executives consists of the following three
components:
• Fixed remuneration;
• Short term incentives - at-risk remuneration consisting of cash and
equity; and
• Long term incentives - at-risk equity remuneration.
4.2 Fixed remuneration
The Senior Executives (including the Managing Director) 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
at least annually. It is referenced to market data provided by remuneration
consultants,
to remuneration within
the financial services sector. The fixed remuneration for the Managing
Director and Senior Executives is set out in Table 10 of this report.
it has regard
to ensure
that
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
13
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
4.3 Short term incentive - At-risk remuneration
The short term incentive links individual performance with that of the Con-
solidated Entity. It is designed to ensure that the participants have a per-
formance-focussed work environment, whilst exercising an appropriate level
of risk.
Responsible Persons (as defined by CPS 520) and Senior Executives partic-
ipated in the 2014 STI Plan, under which the participants receive payments
dependent upon the achievement of specified, quantifiable results and within
appropriate risk management parameters.
Business objectives and the STI Plan design features are reviewed annually
by the HR & Remuneration Committee prior to the commencement of the
plan year. The Board has determined that deferral for the Senior Executives
(including the Managing Director) will be into shares subject to restrictions
on disposal from the FY 2013 STI award. The restricted shares provide an
additional incentive to act in the shareholders’ longer-term interests over the
two year deferral period. The decision to release deferred STI will be at the
discretion of the Board, which consults with the Chief Risk Officer (“CRO”) in
making such a decision.
Table 1
Overview
Participants
2014 STI Plan
The 2014 STI Plan is an incentive plan under which participants have the opportunity to receive amounts in cash and equity,
having regard for quantifiable results achieved within appropriate risk management parameters.
Senior Executives (including the Managing Director (“MD”)), being those individuals who have the ability to influence achievement
of the Board’s objectives.
STI Opportunity
The STI opportunity for each participant is stated as a percentage of total fixed remuneration (“TFR”). For the 2014 STI Plan, the
STI opportunity ranges are as follows:
MD
COO,GE Business Banking, Agribusiness & Financial Markets,
GE Retail and Online Banking, GE Virgin Money
CRO & CFO
CIO & GE Corporate Affairs, Investor Relations and Govern-
ment Relations
0 - 150% of TFR
0 - 140% of TFR
0 - 100% of TFR
0 - 100% of TFR
Link between
performance
and award
The performance measures are:
• The Consolidated Entity’s performance against target NPAT;
• The Consolidated Entity’s Cost to Income ratio;
• Individual performance criteria; and
• Adherence with the Consolidated Entity’s risk framework and expected behaviours.
Additionally, NPAT acts as a gateway for the other performance measures in the STI. Achievement of a threshold of 90% of target
NPAT is required for payments under the STI Plan to occur. If performance does not meet the NPAT threshold, payment of STI is at
the discretion of the Board. In exercising this discretion the Board will have regard for a range of factors which are outlined in Section
4.5. From 2015, this hurdle will change from NPAT to Earnings Per Share (“EPS”) reflecting feedback from investors.
Measure
Weighting
Net Profit After Tax
50%
Rationale for use of this
measure
How does this measure
operate?
The NPAT measure is
included as it is a direct and
transparent measure of the
financial performance of the
Consolidated Entity.
As the level of NPAT
increases, the quantum of
STI payable in respect of the
NPAT component increases,
up to the maximum potential
payout indicated above.
14
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Link between
performance
and award
(continued)
Measure
Weighting
Rationale for use of this
measure
How does this measure
operate?
Cost to Income Ratio
10%
40%
Individual performance criteria,
including:
• Strategic Initiatives
• Customer in Charge
• Grow the Right Way
• There’s Always a Better Way
• Loved Like No Other
• Demonstration of appro-
priate leadership behaviours
The Cost to Income ratio
is included as a measure
within the STI Plan to assist
in driving a cost manage-
ment discipline and align
participants with the financial
growth of the Consolidated
Entity. This measure directly
aligns with the operational
excellence component of the
Consolidated Entity’s strategy.
These measures are selected
to reflect the Consolidated
Entity’s short-term and long-
term objectives.
Participants receive a per-
centage 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.
Personal performance meas-
ures are agreed annually and
are 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, together
with adherence to risk criteria.
Performance period
Change of control
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.
In the event of a change of control, all STIs will either remain on foot or be paid out on a pro rata basis or in full (depending on
the circumstances). The restriction on deferred STI (Restricted shares) will either remain on foot or be lifted depending on the
circumstances of the change in control.
Dividends
Deferral
Forfeiture
Senior Executives who hold restricted shares as part of deferred STI receive dividends.
When any STI payment exceeds $100,000, 50% of the total amount awarded is deferred. For Senior Executives (including the
MD), the deferral is into restricted shares for a period of 2 years (50% vesting at the end of year 1 and 50% at the end of year 2).
Restricted shares are ordinary BOQ shares held by a trustee on behalf of participants and subject to disposal restrictions.
The restricted shares will be released to the individual at the end of the deferral period subject to continued employment and the
Board determining that no “forfeiture” events have occurred. The Board retains discretion to determine what constitutes a “claw-
back” event but such events can include breaches of risk KPI’s, departure to a direct competitor and instances where there has been
a material misstatement in the financial statements.
The STI award and / or any deferred component will only be awarded to KMP’s who are employed by the BOQ Group as at the
relevant STI Bonus payment date and who have not given notice of resignation prior to this date. Once awarded, restricted shares
remain subject to disposal restrictions and will be forfeited where the participant:
1. Resigns in order to take up employment with a defined competitor; or
2. Takes up employment with a direct competitor within 3 months of ceasing employment; or
3. Ceases employment by reason of summary dismissal or for reasons associated with a breach of their Agreement or other
employment terms or any policy of the Company or a related Company; or
4. Is deemed by the Board to have committed an act of fraud, material misstatement, financial mismanagement, gross misconduct
or a serious breach of their duties obligations in relation to the Company’s affairs.
The deferred portion of an MD / Senior Executive’s STI award may also be forfeited where the Board determines that risk conditions
have not been met during the deferral period. Advice may be sought from the CRO in making this determination.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
15
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Forfeiture (continued)
For clarity, following the resignation of Mr Stuart Grimshaw as MD, he forfeited his 2014 STI entitlement and his 2012 unvested
DARs. Mr Grimshaw retained his 2013 restricted shares, as none of the forfeiture conditions were deemed to exist. The 2013
restricted shares will vest in line with their vesting conditions, however the Board retains the right to claw back these shares should
it be decided that risk conditions have not been met.
4.3.1 Performance against STI awarded
The Board reviewed the Consolidated Entity’s performance (Table 2) , and the performance of each Senior Executive against the measures outlined in the 2014
STI Plan, as agreed for each role (Table 2a), in order to determine the appropriate payment under the 2014 STI Plan.
The key financial and non-financial objectives for the MD and Senior Executives in the 2014 financial year, with commentary on key highlights, are provided
below in Table 2a.
Table 2 - Consolidated Entity performance (last 5 years)
Statutory net profit/(loss) after tax
Cash net profit after tax
Cash diluted earnings per share
Cash cost to income ratio
Share price
Dividends paid
2014
$260.5m
$301.2m
87.0c
43.9%
$12.58
2013
$185.8m
$250.9m
75.1c
44.3%
$9.60
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
$215.8m
$179.9m
$151.7m
$125.7m
$120.8m
Table 2a - STI Performance Commentary - MD & Key Management Personnel 2014 STI Plan
Measure
Net Profit After Tax
Cost to Income Ratio
Individual Performance Objectives
Weighting
Commentary/Results
50%
10%
40%
For the period ending August 31, 2014, NPAT increased
40.2% to $260.5 million which was determined to be just
short of the ‘Superior’ performance range.
For the period ending August 31, 2014, cost to income
ratio reduced by 0.4% to 43.9% which was determined
to be in the ‘Target ‘ (stretch) performance range.
Progress was also made in a number of key areas,
including:
• Strategic Initiatives
• Customer in Charge
• Grow the Right Way
• There’s Always a Better Way
• Loved Like No Other
• Demonstration of appropriate leadership behaviours
Overall, dependent on the individual performance of the
MD and the Senior Executives, these results were judged
to be in a range of ‘meets expectations’ to ‘superior’.
Based on this level of organisational and individual performance reported for the 2014 financial year, the Senior Executives were paid at between 47% and 82%
of their STI opportunity.
16
ANNUAL REPORT 2014
4.4 Long-term incentive remuneration
The Board considers the granting of equity remuneration to Senior Executives
and the MD to be an important component in aligning their interests to those
of shareholders. This includes encouraging behaviour that supports the
risk management framework and the long-term financial soundness of the
Consolidated Entity.
The Board reviews 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.
Senior Executives participated in the 2014 Award Rights Plan under which
the participants receive rights to acquire shares at no 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 Award
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 Senior Executives
under the plan - Performance Award Rights (“PARs”) and Deferred Award
Rights (“DARs”). Eligibility, quantum and mix of PARs and DARs varies based
upon a participant’s accountabilities, contribution, potential and seniority.
From the 2014 year the Board has made a decision not to award DARs to
Senior Executives.
Grants of PARs are made to Senior Executives (including the MD) and
other identified key senior managers due to the important role they play
in achieving the longer-term business goals of the Consolidated Entity.
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.
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
DARs are awarded to a broader group of employees below Senior Executive 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. The maximum number
of DARs allocated per employee is capped by the Board.
Table 3 provides an overview of the 2014 PARs and DARs Plans.
The maximum LTI award for each Senior Executive is stated as a percentage
of the Senior Executive’s total fixed remuneration. For the 2014 LTI allocation
for Senior Executives, the Board based allocations on a maximum face value of
100% of fixed remuneration for PARs, with no DARs being issued to this group.
There are no voting or dividend rights attached to unvested PAR and DAR
awards. Upon exercise of Award Rights, participants receive BOQ ordinary
shares to which voting and dividend rights are attached. In the event of a
change of control, all LTI awards will either remain on foot or vest on a pro
rata basis or in full (depending on the circumstances).
Through its Securities Trading Policy, the Consolidated Entity has guidelines
restricting Directors and Executives dealing in the Consolidated Entity’s
securities. This policy addresses margin lending and hedging of risk associated
with Directors’ and Executives’ ownership of the Consolidated Entity’s securities.
All employees are prohibited from entering into hedging arrangements in relation
to their unvested employee shares, securities or options.
The 2008 PARs tested in October 2011 did not vest at all, the 2009 PARs
which were tested in October 2012 vested at 54%, and the 2010 PARs
which were tested in October 2013 vested at 52%.
4.4.1 Vesting of LTI in FY2014
PARs and DARs that were granted under the LTI in prior years vested during
the current financial year, in line with the relevant award rights plans. Details
are shown below in section 6.
Table 3
Participants
Link between
performance
and award
Performance Award Rights (PARs)
Deferred Award Rights (DARs)
Up to 2014, eligibility has included a broader employee group
than PARs, which could include the MD and Senior Executives.
From 2014 onwards, the MD and Senior Executives are no
longer eligible to receive DARs.
DARs are linked with continued employment and adherence to
risk management principles with the intent on focussing em-
ployees on the Consolidated Entity’s performance and potential.
The vesting conditions for DARs include continued employment
with the Consolidated Entity and meeting risk parameters.
MD, Senior Executives and other identified key senior manag-
ers.
PARs vest based on the Consolidated Entity’s TSR performance
measured against a Peer Group over a 3 year period.
TSR is a measure of the entire return a shareholder would derive
from holding an entity’s securities over a period, taking into ac-
count factors such as changes in the market value of the secu-
rities and dividends paid over the period. The Board has relative
TSR performance as a measure because it reflects the returns
made to shareholders relative to other comparable securities and
provides a meaningful reward for executives where the Company
outperforms peers.
The Peer Group consists of the S&P / ASX 200 companies, ex-
cluding:
• all entities in the resources sector
• all real estate investment trusts
• all entities in the energy and utilities sectors
• telecommunications companies whose headquarters
are offshore
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
17
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
4.4.1 Vesting of LTI in FY2014 (continued)
Table 3
Performance Award Rights (PARs)
Deferred Award Rights (DARs)
Link between
performance and
award (continued)
Vesting schedule
Additionally, the Board may add or exclude such other companies
as it considers appropriate. No such exclusions or inclusions have
been made to this group since implementation of the scheme in
2008, other than to reflect companies moving in to, or out of, the
ASX 200 or being delisted.
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
performance is in the bottom 50% of the Peer Group.
the Consolidated Entity’s TSR
the PARs vest
if
DARs granted during FY 2014 vest proportionately over 3 years in
the ratio of 20% (at the end of Year 1), 30% (at the end of Year 2)
and 50% (at the end of Year 3).
Performance period
The performance period is three years.
If an employee ceases employment for serious misconduct involv-
ing fraud or dishonesty, their PARs (whether exercisable or not) will
lapse. If an employee resigns or is terminated for other reasons,
vested PARs may, at the Board’s discretion, be exercised within 90
days of the employee ceasing employment.
PARs which have 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 Own-
er-Managed Branch (“OMB”), retirement, redundancy, death, total
and permanent disablement.
If an employee ceases employment for serious misconduct involv-
ing 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 have 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 OMB,
retirement, redundancy, death, total and permanent disablement.
Otherwise, unvested DARs will lapse on cessation of employment.
Upon termination, the unvested PARs held by the MD and CRO
(CRO initial 2012 grant only) currently remain on-foot and vest ac-
cording to the vesting schedule and subject to the performance
hurdles. This ensures that these key executives remain aligned
to, and have regard for, the long term financial performance of the
Consolidated Entity post-employment.
The rationale for allowing the MD and CRO to retain unvested PARs
is that it promotes the long-term creation of shareholder value
post-employment as all unvested PARs remain at risk and subject
to previously agreed hurdle measures. Mr Grimshaw was not allo-
cated any LTI in the 2014 offer.
A similar arrangement in relation to the treatment of these hurdled
equity rights is intended to be extended to all Senior Executives. It
is the Board’s intention for this change to apply to both future PAR
offers and, subject to any necessary approvals, existing unvested
PARs. The Board has previously had discretion over the accelerated
vesting of these equities, but instead of accelerated vesting on de-
parture, some or all unvested PARs may remain on foot at the Boards
discretion for their full vesting period and only vest in accordance
with the plan rules and performance hurdles.
Forfeiture - all
participants
excluding Senior
Executive and
the MD
Forfeiture - Senior
Executive and the
MD
18
ANNUAL REPORT 2014
4.5 Application of discretion in the management of MD and
Senior Executive Remuneration
Whilst the performance of the MD and Senior Executives is assessed against
a range of performance measures, the Board and the HR & Remuneration
Committee recognise that there are still a range of factors which must
be taken into account when considering overall remuneration outcomes.
The HR & Remuneration Committee may make discretionary adjustments
to the outcomes for the MD and Senior Executives that may impact their
remuneration negatively or positively. Through this process, remuneration
outcomes have been adjusted both positively and negatively in the last
three years.
Criteria used by the HR & Remuneration Committee to apply discretionary
adjustments include:
•
factors either not known or relevant at the beginning of a financial
year, which can impact performance positively or negatively during
the course of the financial year;
•
•
•
•
•
•
•
the degree of stretch implicit in the measures and targets and the
context in which the targets were set;
whether the operating environment during the financial year was
materially different than forecast;
comparison with the performance of the Group relative to its
competitors;
the emergence of any major positive or negative risk or reputational
issues;
the quality of the financial result as shown by its composition and
consistency;
whether leadership behaviours and BOQ’s CANDO values have been
consistently demonstrated throughout the year; and
any other matters that the Board and the HR & Remuneration
Committee deemed to be relevant and which are not outlined above.
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
At the end of the year the HR & Remuneration Committee reviews performance
against objectives and applies any adjustments it considers appropriate. The
HR & Remuneration Committee then recommends STI outcomes for the MD
and each Senior Executive to the Board for approval, thereby ensuring the
Board retains oversight of final awards.
5. Non-Executive Director remuneration
Remuneration Framework
Non-Executive Directors’ (“NEDs”) fees are set based upon the need to at-
tract and retain individuals of appropriate calibre. Fees are reviewed annual-
ly by the HR & Remuneration Committee having regard to advice provided by
independent remuneration specialists to ensure market comparability.
The Chairman’s fees are determined independently to the fees of other di-
rectors and are also based upon information provided by independent remu-
neration specialists. The Chairman is not present at any discussions relating
to the determination of his own remuneration.
In order to maintain independence and impartiality, NEDs do not receive any
performance-related remuneration.
Fee Pool
NED fees are determined within an aggregate fee pool limit, which is
periodically recommended for approval by shareholders. The maximum
currently stands at $2,600,000 (inclusive of superannuation) and was
approved by shareholders on 27 November 2013. The increase in the
fee pool was made principally to allow the Board flexibility in dealing with
changes to the size and composition of the Board as a means of ensuring
that an appropriate mix of skills and experience is maintained. During the
course of the 2014 year two new Directors were appointed to the Board,
increasing the Board from eight members to ten.
The NED fees were increased during the 2014 financial year, in line with
recommendations made by the independent remuneration specialist. The
increase in NED fees in 2014 was the first fee increase since 2010. The fees
for the 2014 financial year are set out in the table below.
Directors’ Annual Fees
The current NEDs’ fees comprise:
Directors’ Annual Fees
01/09/13 -
30/06/14
Chairman /
Committee Chair
$
01/09/13 -
30/06/14
Directors /
Committee
Members
$
01/07/14 -
31/08/14
Chairman /
Committee Chairs
$
01/07/14 -
31/08/14
Directors /
Committee
Members
$
Fixed component of remuneration for Directors (1)
-
135,000
-
150,000
Chairman (1) (2)
355,000
400,000
Additional remuneration is paid to Non-Executive
Directors for committee work:
Audit Committee
Risk Committee
Nomination & Governance Committee
Human Resources and Remuneration Committee
Investment Committee (3)
Due Diligence Committee (3)
Information Technology Committee
45,000
45,000
15,000
25,000
2,250
2,250
20,000
17,500
17,500
10,000
10,000
1,500
1,500
10,000
45,000
45,000
15,000
35,000
2,250
2,250
35,000
22,500
22,500
10,000
17,500
2,250
2,250
17,500
(1) Committee members received one fee for serving on both the Bank and the subsidiary committees. Separate fees were received for serving on the Bank and St Andrew’s committees.
(2) The Chairman receives no additional remuneration for involvement with Committees.
(3) Per deliberative meeting.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
19
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
5. Non-Executive Director remuneration (continued)
Remuneration Framework
Equity Participation
NEDs do not receive shares, award rights or share options.
Retirement Benefits
NEDs are no longer provided with retirement benefits apart from statutory superannuation. The accumulated value of NED retirement benefits was frozen
effective from 31 August 2003. The balance of the accrued benefits was increased annually by an amount equivalent to the increase in CPI. The balance of the
accrued benefits is nil at 31 August 2014 (2013: Nil).
6. Remuneration disclosures
The MD and KMP receive a mix of cash, deferred equity and long term incentives which is tested over the following three years, depending on service and
performance. To assist shareholders in understanding the actual amount of remuneration an executive received in the financial year in review, the Board has
again included in the remuneration disclosures a table that provides a summary of the remuneration that the MD and KMP actually received in relation to the
2014 financial year.
6.1 Non-Statutory remuneration disclosure
Tables 4 and 5 on the following page set out:
•
•
•
•
fixed remuneration (base remuneration, fringe benefits and employer superannuation contributions);
variable cash remuneration (split between the portion of the 2014 STI paid in October 2014 and excluding the portion of the STI deferred until FY 2015
and FY 2016);
Other benefits and termination benefits; and
the value of previous years’ long term incentive awards that vested during the 2014 financial year.
These are non-statutory disclosures. The statutory disclosures for the year ended 31 August 2014 are provided in Tables 6 to 9 and differ to these non-statutory
disclosures.
20
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Table 4 Non-statutory disclosures - STI disclosure for the MD, current and former KMP in relation to the FY 2014
STI at Target
Maximum STI Potential (1)
STI Paid (2)
STI Deferred Portion (3)
$
%
Current
Stuart Grimshaw
1,215,000
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Karyn Munsie
Julie Bale
Brian Bissaker
525,000
331,250
344,500
450,000
393,750
233,200
212,000
412,500
150%
140%
100%
100%
140%
140%
100%
100%
140%
%
-
50%
50%
50%
50%
50%
50%
50%
50%
$
-
400,000
257,500
250,000
340,000
275,000
165,000
100,000
180,000
%
-
50%
50%
50%
50%
50%
50%
50%
50%
$
-
400,000
257,500
250,000
340,000
275,000
165,000
100,000
180,000
Additional information – Non Statutory Remuneration Methodology
(1) The maximum STI is represented as a percentage of fixed remuneration. The minimum STI potential is zero.
(2) This is 50% of the 2014 STI for performance during the 12 months to 31 August 2014 (payable October 2014). The remaining 50% is deferred into restricted shares, 50% of which is released
at 12 months and 50% released at 24 months subject to approval of the Board.
(3) This represents 50% of the STI award that is deferred until 1 October 2015 (50%) and 1 October 2016 (50%). The deferred awards are subject to Board review at the time of payment and
are deferred into restricted shares subject to vesting conditions.
Table 5 Non-statutory disclosures - Cash Remuneration received by the MD, current and former KMP in relation to the FY 2014
Base plus superannuation
$ (1)
2014 STI Performance
$ (2)
Total Cash Payments in
relation to the 2014 year
$
Deferred Equity Awards
$
LTI Awards
$
Previous Years’ Awards
that Vested during 2014
(3)
Awards rights Forfeited /
Lapsed during 2014 (4)
Current
Stuart Grimshaw
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Karyn Munsie
Julie Bale
Brian Bissaker
1,378,645
709,417
598,151
638,661
596,979
526,130
442,821
394,347
583,871
-
400,000
257,500
250,000
340,000
275,000
165,000
100,000
180,000
1,378,645
1,109,417
855,651
888,661
936,979
801,130
607,821
494,347
763,871
379,643
774,596
197,132
14,500
473,811
237,015
-
18,824
-
-
-
-
-
-
-
-
-
-
(1) Base Remuneration and Superannuation make up an Executive’s fixed remuneration.
(2) This is 50% of the 2014 STI for performance during the 12 months to 31 August 2014 (payable October 2014). The remaining 50% is deferred into restricted shares, 50% released at
12 months and 50% released at 24 months subject to approval of the Board.
(3) The value of all deferred cash (to be paid in October 2014) and / or equity awards (closing share price on vesting date) that vested during 2014 financial year. This includes the value of the
award that vested, plus any interest and / or dividends accrued during the vesting period. This excludes deferred equity awards granted in previous years which have not vested in FY14.
(4) The value of any deferred cash and / or equity awards (closing share price on forfeited / lapsed date) that were forfeited / lapsed during the 2014 financial year.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
21
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.2 Statutory disclosures
The following tables include details of the nature and amount of each major element of the remuneration of each Director and Senior Executive of the Consolidated
Entity, calculated in accordance with accounting standards. The amounts shown in Table 6 to Table 9 below may differ from those shown above in Table 4 and
Table 5.
Table 6 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.
Salary and fees
$
STI at risk
$
Short-term
Non-Monetary
benefits (1)
$
Other cash benefits (2)
$
Total
$
1,360,784
1,276,857
-
703,125
64,557
79,807
209,750
161,379
362,500
250,429
192,500
194,410
189,583
187,000
213,333
172,717
219,583
214,875
177,875
14,719
99.353
95,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,425,341
2,059,789
209,750
161,379
362,500
250,429
192,500
194,410
189,583
187,000
213,333
172,717
219,583
214,875
177,875
14,719
99,353
95,083
Executive Director
Stuart Grimshaw
Managing Director
Non-Executive Directors
Steve Crane
Roger Davis
Carmel Gray
Michelle Tredenick
David Willis
Richard Haire
Neil Berkett
Margaret Seale
Bruce Carter
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
(1) 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.
(2) This includes accrued annual leave paid out on retirement.
(3) This includes superannuation benefits and interest which is accrued at the CPI rate on Director retirement benefits which was frozen effective from 31 August 2003.
(4) Comprises long service leave accrued or utilised during the financial year.
(5) The fair value of the 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 rights allocated to this period.
(6) Representing the unamortised balance that Mr Grimshaw retains under his employment contract.
22
ANNUAL REPORT 2014
Post-employment
Other
long-term
Termination benefits
Share based payments
Rights(5)
$
Shares and units
$
7,511
3,389
1,431,196 (6)
292,969
3,174,878
526,996
292,969
2,899,750
(3)
$
17,861
16,607
17,943
14,447
17,717
19,198
17,943
16,698
17,630
16,539
17,943
15,542
17,943
16,806
12,781
1,131
9,267
8,876
(4)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
S300A (1)(e)(i)
Proportion of
remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
Total
$
227,693
175,826
380,217
269,627
210,443
211,108
207,213
203,539
231,276
188,259
237,526
231,681
190,656
15,850
108,620
103,959
%
54%
53%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
45%
18%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Salary and fees
STI at risk
Other cash benefits (2)
Executive Director
Stuart Grimshaw
Managing Director
Non-Executive Directors
Steve Crane
Roger Davis
Carmel Gray
Michelle Tredenick
David Willis
Richard Haire
Neil Berkett
Margaret Seale
Bruce Carter
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
$
1,360,784
1,276,857
209,750
161,379
362,500
250,429
192,500
194,410
189,583
187,000
213,333
172,717
219,583
214,875
177,875
14,719
99.353
95,083
703,125
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term
Non-Monetary
benefits (1)
$
64,557
79,807
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
1,425,341
2,059,789
209,750
161,379
362,500
250,429
192,500
194,410
189,583
187,000
213,333
172,717
219,583
214,875
177,875
14,719
99,353
95,083
(1) 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.
(2) This includes accrued annual leave paid out on retirement.
(3) This includes superannuation benefits and interest which is accrued at the CPI rate on Director retirement benefits which was frozen effective from 31 August 2003.
(4) Comprises long service leave accrued or utilised during the financial year.
(5) The fair value of the 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 rights allocated to this period.
(6) Representing the unamortised balance that Mr Grimshaw retains under his employment contract.
Post-employment
(3)
Other
long-term
(4)
$
$
17,861
16,607
17,943
14,447
17,717
19,198
17,943
16,698
17,630
16,539
17,943
15,542
17,943
16,806
12,781
1,131
9,267
8,876
7,511
3,389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Termination benefits
Share based payments
Rights(5)
$
Shares and units
$
Total
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,431,196 (6)
292,969
3,174,878
526,996
292,969
2,899,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
227,693
175,826
380,217
269,627
210,443
211,108
207,213
203,539
231,276
188,259
237,526
231,681
190,656
15,850
108,620
103,959
S300A (1)(e)(i)
Proportion of
remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
%
54%
53%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
45%
18%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
23
Other
long-term
(4)
$
3,126
1,536
2,755
1,350
3,241
1,423
2,831
1,415
2,393
1,186
1,266
509
1,176
361
1,404
277
$
17,861
16,607
17,861
16,607
17,861
16,607
17,861
16,607
17,861
16,607
17,861
12,758
17,861
10,991
17,861
5,438
S300A (1)(e)(i)
Proportion of
remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
Rights(5)
Shares and units
$
$
Total
$
393,782
366,915
1,923,048
435,793
673,207
2,235,861
330,779
301,402
237,092
106,442
345,428
407,970
298,028
289,289
94,421
-
91,891
14,496
121,662
5,155
196,354
171,416
192,063
87,896
261,396
206,050
217,896
176,367
129,015
45,199
80,277
25,740
110,917
11,972
1,385,539
1,304,129
1,370,865
1,065,547
1,546,634
1,502,883
1,319,447
1,244,025
832,523
536,388
667,691
369,184
997,854
268,652
%
48%
25%
45%
26%
44%
31%
50%
29%
48%
31%
47%
32%
38%
28%
41%
27%
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
20%
19%
24%
23%
17%
10%
22%
27%
23%
23%
11%
-
14%
4%
12%
2%
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Table 7 Senior Executive Remuneration
Details of the nature and amount of each major element of the remuneration of each Senior Executive of the Consolidated Entity are as outlined in the table below.
Short-term
Post-employment (3)
Termination benefits
Share based payments
Executives
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Karyn Munsie
Julie Bale
Brian Bissaker
Salary and fees
$
STI at risk (1)
$
Other cash benefits (2)
$
Total
$
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
691,556
691,410
580,290
599,604
620,800
592,421
579,118
583,491
508,269
512,627
424,960
349,022
376,486
238,396
566,010
184,860
400,000
367,500
257,500
213,750
250,000
210,950
340,000
287,350
275,000
247,950
165,000
128,900
100,000
79,200
180,000
60,950
49,808
49,808
-
-
49,808
49,808
-
-
-
-
-
-
-
-
-
-
1,141,364
1,108,718
837,790
813,354
920,608
853,179
919,118
870,841
783,269
760,577
589,960
477,922
476,486
317,596
746,010
245,810
(1) STI at risk reflects 50% of the amounts paid or accrued in respect of the year ended 31 August 2014. Refer to Section 4.3 “Executive remuneration framework” for a discussion of the Bank’s
short-term incentive arrangements.
(2) This includes accrued annual leave paid out on retirement and other cash benefits.
(3) This includes superannuation and salary sacrificed benefits.
(4) Comprises long service leave accrued or utilised during the financial year.
(5) The fair value of the 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.
24
ANNUAL REPORT 2014
Executives
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Karyn Munsie
Julie Bale
Brian Bissaker
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Short-term
691,556
691,410
580,290
599,604
620,800
592,421
579,118
583,491
508,269
512,627
424,960
349,022
376,486
238,396
566,010
184,860
Salary and fees
STI at risk (1)
$
$
Other cash benefits (2)
Total
$
49,808
49,808
1,141,364
1,108,718
49,808
49,808
$
-
-
-
-
-
-
-
-
-
-
-
-
400,000
367,500
257,500
213,750
250,000
210,950
340,000
287,350
275,000
247,950
165,000
128,900
100,000
79,200
180,000
60,950
837,790
813,354
920,608
853,179
919,118
870,841
783,269
760,577
589,960
477,922
476,486
317,596
746,010
245,810
(1) STI at risk reflects 50% of the amounts paid or accrued in respect of the year ended 31 August 2014. Refer to Section 4.3 “Executive remuneration framework” for a discussion of the Bank’s
short-term incentive arrangements.
(2) This includes accrued annual leave paid out on retirement and other cash benefits.
(3) This includes superannuation and salary sacrificed benefits.
(4) Comprises long service leave accrued or utilised during the financial year.
(5) The fair value of the 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.
Post-employment (3)
Other
long-term
(4)
$
$
17,861
16,607
17,861
16,607
17,861
16,607
17,861
16,607
17,861
16,607
17,861
12,758
17,861
10,991
17,861
5,438
3,126
1,536
2,755
1,350
3,241
1,423
2,831
1,415
2,393
1,186
1,266
509
1,176
361
1,404
277
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Termination benefits
Share based payments
Rights(5)
Shares and units
$
$
Total
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
393,782
366,915
1,923,048
435,793
673,207
2,235,861
330,779
301,402
237,092
106,442
345,428
407,970
298,028
289,289
94,421
-
91,891
14,496
121,662
5,155
196,354
171,416
192,063
87,896
261,396
206,050
217,896
176,367
129,015
45,199
80,277
25,740
110,917
11,972
1,385,539
1,304,129
1,370,865
1,065,547
1,546,634
1,502,883
1,319,447
1,244,025
832,523
536,388
667,691
369,184
997,854
268,652
S300A (1)(e)(i)
Proportion of
remuneration
performance
related
S300A (1)(e)(vi)
Value of options
and rights as
proportion of
remuneration
%
48%
25%
45%
26%
44%
31%
50%
29%
48%
31%
47%
32%
38%
28%
41%
27%
%
20%
19%
24%
23%
17%
10%
22%
27%
23%
23%
11%
-
14%
4%
12%
2%
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
25
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.3 Equity held by the MD and Senior Executives
The movement during the 2014 financial year in the number of rights over ordinary shares held by each Senior Executive including the MD, as part of their
remuneration, are as follows:
Table 8 Movement in rights held by the MD and Senior Executives during FY 2014
Senior Executive Type
Grant Date
Current
Stuart Grimshaw
2011 PARs
2012 DARs
2012 PARs
2013 PARs
13/10/2011
18/12/2012
01/03/2013
27/11/2013
Jon Sutton
Restricted shares
16/12/2013
2012 DARs
2012 PARs
26/02/2012
26/02/2012
Restricted shares
26/02/2012
2012 DARs
2012 PARs
2013 PARs
2013 DARs
18/12/2012
18/12/2012
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Anthony Rose
2012 DARs
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
29/02/2012
29/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
Peter Deans
Restricted shares
16/12/2013
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
10/05/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Brendan White
2012 DARs
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
10/02/2012
10/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Matthew Baxby
2012 DARs
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
01/02/2012
01/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Share
Price at
Grant
Date $
8.10
7.26
9.13
12.30
11.43
7.48
7.48
7.48
7.26
7.26
11.43
11.43
11.43
7.34
7.34
7.26
7.26
11.43
11.43
11.43
6.89
7.26
7.26
11.43
11.43
11.43
7.33
7.33
7.26
7.26
11.43
11.43
11.43
7.44
7.44
7.26
7.26
11.43
11.43
11.43
Movements during the 2014 Financial Year
Balance at
1 September
2013
Granted (1) Exercised Lapsed
Balance at
31 August
2014 (1)
Vested and
Exercisable
Non-
Vested
Vested
during the
year (%) (2)
Forfeited
during the
year (%)
121,619
64,620
166,933
-
-
-
-
-
107,481
60,458
31,343
74,627
29,851
7,009
56,075
-
-
-
-
-
-
-
-
60,189
9,028
31,599
30,030
75,075
6,258
50,067
-
-
-
-
-
-
-
53,740
6,046
18,379
69,061
6,173
48,064
-
-
-
-
-
-
51,591
5,804
18,138
37,787
67,476
6,258
50,067
-
-
-
-
-
-
-
51,591
5,804
24,708
36,982
73,964
5,257
42,056
-
-
-
-
-
-
-
45,142
5,079
21,320
-
32,310
-
-
-
31,343
-
29,851
1,401
-
-
-
-
30,030
-
1,251
-
-
-
-
-
-
-
-
-
-
37,787
-
-
-
-
-
-
36,982
-
1,051
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121,619
32,310
166,933
107,481
60,458
-
74,627
-
5,608
56,075
60,189
9,028
31,599
-
75,075
5,007
50,067
53,740
6,046
18,379
69,061
6,173
48,064
51,591
5,804
18,138
-
67,476
6,258
50,067
51,591
5,804
24,708
-
73,964
4,206
42,056
45,142
5,079
21,320
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,234
-
-
-
-
-
-
1,251
-
-
-
-
-
-
-
-
-
-
-
121,619
32,310 (3)
166,933
107,481
60,458
-
74,627
-
5,608
56,075
60,189
9,028
31,599
-
75,075
5,007
50,067
53,740
6,046
18,379
69,061
4,939
48,064
51,591
5,804
18,138
-
67,476
5,007
50,067
51,591
5,804
24,708
-
73,964
4,206
42,056
45,142
5,079
21,320
-
50%
-
-
-
50%
-
29%
20%
-
-
-
-
50%
-
20%
-
-
-
-
-
20%
-
-
-
-
50%
-
20%
-
-
-
-
50%
-
20%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) This represents the maximum number of award rights that may vest to each executive.
(2) Percentage of initial rights granted.
(3) Deferred award rights were subsequently forfeited after 31 August 2014 due to resignation as Managing Director and CEO.
26
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.3 Equity held by the MD and Senior Executives (continued)
Table 8 Movement in rights held by the MD and Senior Executives during FY 2014 (continued)
Senior Executive Type
Grant Date
Current
Julie Bale
2013 May DARs
18/12/2012
Karyn Munsie
2013 PARs
2013 DARs
16/12/2013
16/12/2013
Restricted shares
16/12/2013
2013 PARs
2013 DARs
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Brian Bissaker
2013 May PARs
14/05/2013
2013 PARs
2013 DARs
16/12/2013
16/12/2013
Restricted shares
16/12/2013
Movements during the 2014 Financial Year
Share
Price at
Grant
Date $
Balance at
1 September
2013
Granted (1) Exercised Lapsed
Balance at
31 August
2014
Vested and
Exercisable
Non-
Vested
Vested
during the
year (%) (2)
Forfeited
during the
year (%)
7.26
11.43
11.43
11.43
11.43
11.43
11.43
9.68
11.43
11.43
11.43
8,010
-
1,602
-
-
-
30,095
3,386
6,810
37,833
5,675
11,083
31,748
-
-
-
-
47,291
3,547
5,241
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,408
30,095
3,386
6,810
37,833
5,675
11,083
31,748
47,291
3,547
5,241
-
-
-
-
-
-
-
-
-
-
-
6,408
30,095
3,386
6,810
37,833
5,675
11,083
31,748
47,291
3,547
5,241
20%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) This represents the maximum number of award rights that may vest to each executive.
(2) Percentage of initial rights granted.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
27
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.3 Equity held by the MD and Senior Executives (continued)
The table below shows the total value of any rights that were granted, exercised or lapsed to the MD and Senior Executives.
Table 9 Value of rights held by the MD and Senior Executives during FY 2014
Senior Executive
Grant
Grant Date
Fair value
per right
at grant
date
$
Value at
grant date
$ (1)
Exercise Date
Exercise
price
$ (2)
Value at
Exercise
Date
$ (3)
Expiry /
Lapsing
Date
Value at
Expiry /
Lapsing
Date
$
Current
Stuart Grimshaw
2011 PARs
2012 DARs (4)
13/10/2011
18/12/2012
2012 PARs
2013 PARs
Restricted shares
01/03/2013
27/11/2013
16/12/2013
5.36
6.55
2.73
6.07
11.43
651,878
423,261
455,727
652,410
691,035
Jon Sutton
2012 DARs
26/02/2012
6.60
413,734
2012 PARs
Restricted shares
26/02/2012
26/02/2012
5.18
6.70
386,568
700,000
2012 DARs
2012 PARs
2013 PARs
2013 DARs
Restricted shares
18/12/2012
18/12/2012
16/12/2013
16/12/2013
16/12/2013
6.20
1.74 (4)
7.63
10.38
11.43
43,456
97,571
459,242
93,711
361,177
Anthony Rose
2012 DARs
29/02/2012
6.60
198,198
Peter Deans
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
Restricted shares
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
Restricted shares
29/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
16/12/2013
10/05/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
16/12/2013
5.18
6.20
1.74 (5)
7.63
10.38
11.43
3.70
6.20
1.74 (5)
7.63
10.38
11.43
388,888
38,800
87,117
410,036
62,757
210,072
255,526
38,273
83,631
393,639
60,246
207,317
-
24/12/2013
30/12/2013
-
-
-
01/05/2013
07/05/2014
-
05/01/2013
07/07/2013
05/01/2014
05/02/2014
-
-
-
-
30/10/2013
25/07/2014
-
15/01/2014
-
-
-
-
-
-
-
-
-
-
-
12.10
12.18
-
-
-
9.93
11.95
-
7.61
8.88
12.23
10.84
-
-
-
-
11.96
12.57
-
11.89
-
-
-
-
-
-
-
-
-
-
-
388,652
2,314
-
-
-
311,246
374,549
-
227,166
397,611
365,078
15,187
-
-
-
-
179,579
188,739
-
14,874
-
-
-
-
-
-
-
-
-
-
13/10/2016
18/12/2017
18/12/2017
18/12/2017
27/11/2018
16/12/2015
05/05/2017
05/05/2017
16/12/2017
09/01/2014
09/01/2014
09/01/2014
18/12/2017
18/12/2017
16/12/2018
16/12/2018
16/12/2015
05/05/2017
05/05/2017
16/12/2017
18/12/2017
18/12/2017
16/12/2018
16/12/2018
16/12/2015
16/12/2017
18/12/2017
18/12/2017
16/12/2018
16/12/2018
16/12/2015
Brendan White
2012 DARs
10/02/2012
6.60
498,788
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
Restricted shares
10/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
16/12/2013
5.18
6.20
1.74 (5)
7.63
10.38
11.43
349,526
38,800
87,117
393,639
60,246
282,412
01/05/2013
03/06/2014
-
-
-
-
-
-
9.93
12.00
-
-
-
-
-
-
375,225
453,444
-
-
-
-
-
-
05/05/2017
05/05/2017
16/12/2017
18/12/2017
18/12/2017
16/12/2018
16/12/2018
16/12/2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Represents rights held at 1 September 2013 or granted during the 2014 financial year.
(2) Closing share price on exercise of rights have a nil exercise price.
(3) Closing share price on exercise date multiplied by the number of rights exercised during the year.
(4) Deferred award rights were subsequently forfeited after 31 August 2014 due to resignation as Managing Director and CEO.
(5) The fair value as based on a valuation period from 18 October 2012 to grant date. The Bank’s total shareholder return over this period was below the peer group, decreasing the vesting probability and reducing the fair
value calculation.
28
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.3 Equity held by the MD and Senior Executives (continued)
Table 9 Value of rights held by the MD and Senior Executives during FY 2014 (continued)
Senior Executive
Grant
Grant Date
Current
Fair value
per right
at grant
date
$
Value at
grant date
$ (1)
Exercise Date
Exercise
price
$ (2)
Value at
Exercise
Date
$ (3)
Expiry /
Lapsing
Date
Value at
Expiry /
Lapsing
Date
$
Matthew Baxby
2012 DARs
01/02/2012
6.60
244,081
2012 PARs
2012 DARs
2012 PARs
2013 PARs
2013 DARs
Restricted shares
01/02/2012
18/12/2012
18/12/2012
16/12/2013
16/12/2013
16/12/2013
2012 DARs
2013 PARs
2013 DARs
Restricted shares
18/12/2012
16/12/2013
16/12/2013
16/12/2013
2013 PARs
2013 DARs
Restricted shares
16/12/2013
16/12/2103
16/12/2013
2013 May PARs
2013 PARs
2013 DARs
Restricted shares
14/05/2013
16/12/2013
16/12/2013
16/12/2013
5.18
6.20
1.74 (4)
7.63
10.38
11.43
6.20
7.63
10.38
11.43
7.63
10.38
11.43
2.39
7.63
10.38
11.43
383,134
32,593
73,177
344,433
52,720
243,688
49,662
229,625
35,147
77,838
288,666
58,907
126,679
75,878
360,830
36,818
59,905
Julie Bale
Karyn Munsie
Brian Bissaker
30/10/2013
09/07/2013
-
09/07/2014
-
-
-
-
17/01/2014
-
-
-
-
-
-
-
-
-
-
11.96
12.15
-
12.15
-
-
-
-
12.28
-
-
-
221,152
224,666
-
12,770
-
-
-
-
19,673
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
05/05/2017
05/05/2017
16/12/2017
18/12/2017
18/12/2017
16/12/2018
16/12/2018
16/12/2015
18/12/2017
16/12/2018
16/12/2018
16/12/2015
16/12/2018
16/12/2018
16/12/2015
18/12/2018
16/12/2018
16/12/2018
16/12/2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Represents rights held at 1 September 2013 or granted during the 2014 financial year.
(2) Closing share price on exercise of rights have a nil exercise price.
(3) Closing share price on exercise date multiplied by the number of rights exercised during the year.
(4) The fair value as based on a valuation period from 18 October 2012 to grant date. The Bank’s total shareholder return over this period was below the peer group, decreasing the vesting probability and reducing the fair
value calculation.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
29
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.4 Equity Instruments - holdings and movements
The movement during the reporting period in the number of rights over ordinary shares in Bank of Queensland Limited held directly, indirectly or beneficially, by
Senior Executives, including their personally related entities, is as follows:
Managing Director and Award rights
All Award rights refer to rights over ordinary shares of Bank of Queensland Limited, which are exercisable on a one-for-one basis. During the reporting period, the
following rights over ordinary shares were granted to executives under Award Rights:
Held at
1 September
2013
Granted as
remuneration
Exercised (1)
Forfeited
Held at
31 August
2014
Vested
during the
year
Vested and
exercisable at
31 August
2014
Executive Director
Stuart Grimshaw
- DARs
- PARs
Executives
Anthony Rose
- DARs
- PARs
64,620
-
32,310
288,552
107,481
- Restricted shares
-
60,458
36,288
6,046
31,281
125,142
53,740
- Restricted shares
-
18,379
Peter Deans
- DARs
- PARs
6,173
5,804
117,125
51,591
- Restricted shares
-
18,138
Brendan White
- DARs
- PARs
44,045
5,804
37,787
117,543
51,591
- Restricted shares
-
24,708
Matthew Baxby
- DARs
- PARs
42,239
116,020
5,079
45,142
- Restricted shares
-
21,320
Jon Sutton
Julie Bale
Karyn Munsie
Brian Bissaker
- DARs
- PARs
- Restricted shares
- DARs
- PARs
- Restricted shares
- DARs
- PARs
- Restricted shares
- DARs
- PARs
38,352
130,702
29,851
8,010
-
-
-
-
-
-
31,748
9,028
60,189
3,386
30,095
6,810
5,675
37,833
11,083
3,547
47,291
- Restricted shares
-
5,241
31,599
29,851
-
-
-
-
-
-
-
-
-
38,033
-
-
32,744
-
1,602
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32,310 (2)
396,033
60,458
32,310
-
-
11,053
16,266
178,882
18,379
11,977
168,716
18,138
12,062
169,134
24,708
1,234
1,234
-
-
-
-
39,038
1,251
-
-
-
-
9,285
19,542
124,180
21,230
14,636
190,891
31,599
9,794
30,095
6,810
5,675
37,833
11,083
3,547
79,039
5,241
-
-
32,744
-
29,851
1,602
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Includes award rights vested during the prior financial year.
(2) Deferred award rights were subsequently forfeited after 31 August 2014 due to resignation as Managing Director and CEO.
The vesting of PARs is conditional on the Consolidated Entity’s TSR performance measured against a Peer Group over a 2 to 3 year period.
No rights held by Senior Executives are vested but not exercisable at 31 August 2014.
30
ANNUAL REPORT 2014 REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
6.4. Equity Instruments - holdings and movements (continued)
Movement in shares
The number of shares held directly, indirectly or beneficially by each Director or Senior Executive is as follows:
Ordinary shares
Executive Director
Stuart Grimshaw
Directors
Steve Crane
Roger Davis
Carmel Gray
Michelle Tredenick
David Willis
Richard Haire
Neil Berkett
Margaret Seale
Bruce Carter
Executive
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matt Baxby
Karyn Munsie
Julie Bale
Held at
1 September
2013
Purchases /
(Sales)
Received on
exercise of award
rights / restricted
shares
Held at
31 August
2014
3,506
(32,405)
32,310
3,411
25,678
15,235
10,946
2,433
1,512
4,000
10,600
-
-
76,120
30,030
-
3,273
29,586
-
-
2,964
2,046
1,263
8,202
258
347
12,665
9,543
6,854
(138,715)
(26,032)
2,093
(37,730)
(29,586)
1,279
(1,602)
-
-
-
-
-
-
-
-
-
62,595
31,281
-
37,787
38,033
-
1,602
28,642
17,281
12,209
10,635
1,770
4,347
23,265
9,543
6,854
-
35,279
2,093
3,330
38,033
1,279
-
31
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740. REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
7. Transactions with Directors and Senior Executives
Loan transactions
Loans to Directors and Senior Executives are provided in the ordinary course of business. Normal terms and conditions are applied to all loans and any discounts
are the same as those available to all employees of the Consolidated Entity. There have been no write downs or amounts recorded as provisions during the
financial year 2014.
Details of loans outstanding at the reporting date to Senior Executives, where the individual’s aggregate loan balance exceeded $100,000 at any time in the
reporting period, are as follows:
2014
Interest
paid and
payable
during
the year
$
Balance
at
31 August
2014
$
Highest
balance
during
the year
$
Balance at
1 September
2013
$
Directors:
Stuart Grimshaw
2,138,400
107,229
2,140,004
2,148,667
Executives:
Matthew Baxby
Brendan White
-
153,762
30,475
15,663
1,198,641
1,608,001
271,367
271,769
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the economic entity to all Senior Executives and their related parties,
and the number of individuals in each group are as follows:
Balance at
1 September
2013
$
Balance at
31 August
2014
$
Interest paid
and payable
$
Number in
group at
31 August
2014
#
Directors:
Executives:
2,138,400
2,140,004
107,229
153,762
1,470,008
46,138
1
2
Other transactions
Transactions between the Consolidated Entity and Directors and Senior Executives other than loans and shares during the financial year related to personal banking,
investment and deposit transactions. All transactions were on normal commercial terms and conditions and are trivial or domestic in nature.
Transactions between the Consolidated Entity and other related parties of Directors and Senior Executives relate to loans on normal commercial terms and
conditions. Details of loans outstanding at the reporting date to other related parties of Directors and Senior Executives are as follows:
2014
Interest
paid and
payable
during
the year
$
Balance
at
31 August
2014
$
Highest
balance
during
the year
$
Balance at
1 September
2013
$
Richard Haire Related Party
191,000
9,148
191,000
191,777
32
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
8. Executive Contracts
The remuneration and terms of the MD and other Senior Executives are formalised in their employment agreements. Each of these employment agreements
provide for the payment of fixed and performance-based remuneration, superannuation and other benefits such as statutory leave entitlements.
Table 10 Senior Executives Notice Periods
KMP
Term of agreement
$
Fixed Annual
Remuneration
Notice period by
executive
Notice period by the
Consolidated Entity
Stuart Grimshaw
Jon Sutton
Anthony Rose
Peter Deans
Brendan White
Matthew Baxby
Karyn Munsie
Julie Bale
Brian Bissaker
Open
Open
Open
Open
Open
Open
Open
Open
Open
1,350,000
6 months
6 months
700,000
3 months
3 months
625,000
3 months
3 months
650,000
3 months
3 months
600,000
3 months
3 months
525,000
3 months
3 months
440,000
3 months
3 months
400,000
3 months
3 months
550,000
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)
9 months base pay
(including notice period)
9 months base pay
(including notice period)
9 months base pay
(including notice period)
As part of the contractual sign-on arrangements, Stuart Grimshaw received an allocation of PARS based on an allocation of $1 million at the volume
weighted average of shares after announcement of the FY11 financial results. These PARS vest over three years subject to satisfaction of the relevant
performance hurdle.
Details of restricted shares that were provided to the MD and Senior Executives that joined the Consolidated Entity as part of their sign-on arrangements
are included in Table 8.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
33
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Indemnification of officers
Audit and Non–audit services
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
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.
Directors’ interests
Directors’ interests as at the date of this report were as follows:
28,642
17,281
12,209
10,635
1,770
4,347
23,265
6,854
9,543
Steve Crane
Roger Davis
Carmel Gray
Michelle Tredenick
David Willis
Richard Haire
Neil Berkett
Bruce Carter (1)
Margaret Seale (2)
(1) Bruce Carter was appointed as a Non-Executive Director on 27 February 2014.
(2) Margaret Seale was appointed as a Non-Executive Director on 21 January 2014.
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)
Non-audit services – KPMG Australia
- Taxation services
- Compliance services
- Other
- Due diligence 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:
• 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.
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
2014
$000
1,010.9
400.8
1,411.7
224.8
224.8
184.4
-
-
234.4
422.8
2013
$000
919.8
342.2
1,262.0
230.2
230.2
225.1
249.2
88.7
64.5
627.5
2014
$000
681.1
202.6
883.7
168.8
168.8
143.2
-
-
234.4
377.6
2013
$000
595.9
182.2
778.1
-
-
225.1
249.2
72.6
64.5
611.4
(1) Other assurance services comprise audit related services provided in relation to mortgage securitisation trusts which are consolidated under Australian Accounting Standards.
34
ANNUAL REPORT 2014
REMUNERATION REPORT
(Continued) Year Ended 31 August 2014
Lead Auditor’s Independence Declaration
The lead auditor’s independence declaration is set out on page 38 and forms
part of the Directors’ report for the year ended 31 August 2014.
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.
Signed in accordance with a resolution of the Directors:
Roger Davis
Chairman
8 October 2014
Richard Haire
Director
8 October 2014
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
35
LEAD AUDITOR’S INDEPENDENCE DECLARATION
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 2014 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
Sydney 8 October 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
36
ANNUAL REPORT 2014
Overview
Directors and Management of Bank of Queensland Limited (the “Bank”
or “BOQ”) and its subsidiaries (the “Group”) are committed to excellence
in corporate governance. In striving to achieve its objectives, the Group
endeavours to be a bank that looks after its staff, values and services its
customers, rewards its shareholders and partners with the community - and
prove ‘It’s Possible to Love a Bank’.
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 Group 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 Prudential Standard CPS 510 “Governance”. In addition,
the Board has adopted a Fit and Proper Policy, as required by CPS 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 (‘SAI’) and
St Andrew’s Life Insurance Pty Ltd (‘SALI’) (together, the “St Andrew’s Group”)
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.
On 31 July 2014, the Bank settled the acquisition of Investec Bank (Australia)
Limited (now re-named BOQ Specialist Bank Limited, or ‘BOQS’). Pending
the completion of the full integration of BOQS into the Bank’s Group structure,
BOQS will operate as a separate authorised deposit-taking institution, and
so must also comply with CPS 510, CPS 520 and the corporate governance
standards which apply to the Bank. BOQS is a wholly owned-subsidiary of
the Bank.
The Group’s policies comply with all of these standards. The Nomination &
Governance Committee is responsible for reviewing the Group’s corporate
governance framework and policies, and makes recommendations to the
Board in relation to governance improvements. 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 codes, policies and charters.
The Group’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 Group is required to disclose in this report the extent to which it has
followed the best practice recommendations in the Principles throughout
the 2014 financial year. The Group has followed those recommendations
throughout the year. A summary of the Group’s corporate governance
policies and practices, organised in order of the Principles, is set out below.
The Third Edition of the Principles is to take effect from the commencement
of the Bank’s 2015 financial year. Where it is in a position to do so now, the
Bank has also provided information which would be required to be disclosed
under the Third Edition of the Principles. Otherwise, the Bank has complied
with the Second Edition of the Principles.
CORPORATE GOVERNANCE
Principle 1: Lay solid foundations for
management and oversight
BOQ Board and Management
The BOQ Board Charter sets out the key governance principles adopted by
the BOQ Board in governing the Group. There is a functional difference
between the Board’s role and responsibilities and that of Management, which
is recognised in the Board Charter.
Board Responsibilities
The responsibilities of the Board include:
•
the overall corporate governance of the Group, such as:
• Monitoring the effectiveness of the Group’s governance practices;
• overseeing regulatory compliance; and
• ensuring the Group observes appropriate ethical standards.
•
•
•
the overall strategy and direction of the Group, including approving,
monitoring and
implementation and
performance against strategic, financial and operational plans;
reviewing Management’s
the appointment of the Managing Director & CEO, including the
delegation of powers to the Managing Director & CEO within authorised
discretionary levels;
approving the appointment and removal of senior executives reporting
directly to the Managing Director & CEO;
•
the appointment of Directors to subsidiary companies of the Group;
• succession planning, including Board and Committee composition; and
•
overseeing the Group’s process for making timely and balanced
disclosure of all material information concerning the Group that a
reasonable person would expect to have a material effect on the price or
value of its securities.
In order to fulfil these responsibilities, the Board reserves to itself certain
powers including:
Board Operation
•
•
establishing Board Committees;
reviewing the Board’s performance, and those of its Committees, in
carrying out key responsibilities;
• acting within the overall policies established by the Board from time
to time;
Strategy
•
providing leadership, and reviewing and approving the Group’s
strategic plan at least annually;
Financial
•
overseeing the integrity of the Group’s accounting and corporate
reporting systems;
• approving annual budgets and major capital expenditure;
•
reviewing and approving financial results;
• determining dividend policy and the amount and timing of dividends
to be paid;
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
37
CORPORATE GOVERNANCE
(Continued)
Principle 1: Lay solid foundations for
management and oversight (continued)
Certain powers are delegated to the Managing Director & CEO, Key
Management Personnel and Management including:
Risk Management
•
•
•
•
•
setting the risk appetite for the Group;
monitoring the effectiveness of risk management of the Group,
including reviewing and approving risk management policies,
operational risk policies and procedures and systems of internal
controls within the Group, to ensure that they take account of
changing risk profiles of Group entities;
ensuring that areas of significant business risk are identified and
effectively managed;
monitoring the environmental, social and governance impact of the
Group’s activities;
ensuring the Bank maintain compliance with the obligations and
responsibilities under APRA Prudential Standard CPS 220 Risk
Management;
Human Resources
•
•
•
•
•
•
determining the terms and conditions of appointment of the
Managing Director & CEO, and the executives reporting directly to
the Managing Director & CEO, including the right to suspend, remove
or dismiss the Managing Director & CEO from executive office;
setting targets for and assessing the performance of the Managing
Director & CEO;
approving the remuneration framework for the Group;
reviewing succession plans for the Managing Director & CEO and
senior executives;
establishing
for achieving
transparent, measurable objectives
diversity across the Group and articulation of the corporate benefits
arising from employee and board diversity;
in relation to Directors of subsidiary companies within the Group,
determining the terms and conditions surrounding their appointment
and the fees payable in respect of their appointment, assessing their
performance and retaining the right to remove them from the board
of the subsidiary company; and
General
•
dealing with all matters which are outside discretions conferred on
the Managing Director & CEO.
BOQ Board Committees
The Board has established the following Committees:
• Audit Committee
• Risk Committee
• Human Resources and Remuneration Committee
• Nomination & Governance Committee
•
Information Technology Committee
A separate Charter has been prepared for each Committee and is reviewed at
least annually. The composition of the Board Committees is also reviewed at
least annually. Details of the current membership of the Board Committees
are contained in the Directors’ Report.
The powers of the Board are also governed by the Bank’s constitution. A
copy of the constitution is available on the Bank’s website at the following
address: www.boq.com.au/aboutus_corporate_governance.htm.
Management Responsibilities
The role of Management is the day-to-day running of the Group, within the
overall strategy and frameworks approved by the Board.
38
ANNUAL REPORT 2014
• developing strategy for approval by the Board;
• financial and capital management and reporting;
• operations;
•
information technology;
• brand management;
• managing the current business of the Group 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;
•
risk management;
•
reporting to the Board on the performance of the Group and its
management; and
• performing duties that are delegated by the Board.
BOQ Group APRA Regulated Subsidiaries
St Andrew’s Group
The St Andrews Group offers general and life insurance products. The St
Andrew’s Group board comprises five non-executive directors, of which
three are independent. All members of the St Andrew’s Group Board are
also members of the St Andrew’s Group Audit & Risk Committee (the ‘A&R
Committee’). The BOQ Group Human Resources & Remuneration Committee
also acts for the St Andrew’s Group.
The following specific policies have been adopted by the St Andrew’s Group
board, and appear on the BOQ website – SAI Board Charter, SALI Board
Charter, SAI & SALI Policy on Independence of Directors, SAI & SALI Board
Performance & Renewal Policy, SAI & SALI Audit & Risk Committee Charter.
Where not replaced by a specific policy, other BOQ Group policies apply.
The Boards of these entities comply with Prudential Standards CPS 510
Governance and 520 Fit and Proper.
BOQ Specialists
The membership of the BOQS Board mirrors that of the BOQ Board, and
complies with CPS 510 and 520. The BOQS Board has its own Charter and the
BOQ Group Board Committees have been appointed to act for BOQS. Where
not replaced by a specific BOQS policy, other BOQ Group policies referred to in
this Statement apply to BOQS. These documents appear on the BOQ website.
Fit & Proper Assessments
All new and existing Directors are subject to an 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
to comply with CPS 520 and also applies to the St Andrews Group and
BOQS. This Policy requires an assessment of each Director’s or potential
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.
Similar initial and annual assessments are undertaken for ‘Responsible
Persons’, as defined in CPS 520 as including senior managers who are
considered by the Bank to make, or participate in making, decisions that
affect the financial soundness of the Group, the operation of its businesses
and monitoring and management of risks.
Principle 1: Lay solid foundations for
management and oversight (continued)
Senior Management Performance Evaluations
The Board undertakes an annual formal performance review of the
Managing Director & CEO, in accordance with key financial and non-financial
performance indicators (‘KPIs’) set by the Board.
Management has a program of formal half and full year performance reviews
for all levels of Management, and the review program includes the annual
setting of KPIs by the Managing Director & CEO for his direct reports at the
start of the financial year. These KPIs are then cascaded down into individual
KPIs for each member of Management.
A formal evaluation of each individual’s performance against their
KPIs is undertaken following the conclusion of the half year and the full
financial year. The results of this process are then incorporated into the
annual remuneration review. Performance reviews have been carried out
in accordance with the program for all levels of Management, with the
exception of the former Managing Director & CEO, who left the organisation
on 31 August 2014.
The Group has a written agreement with each of its senior executives which
sets out the terms of their appointment.
Company Secretary
The Company Secretary of a listed entity plays an important role in supporting
the effectiveness of the Board and its Committees. The Company Secretary’s
role includes managing the Board processes; providing assistance with
the preparation of agendas for Board and Board Committee meetings,
in consultation with the Chair of the Board or Committee; preparation of
Minutes of Board and Board Committee meetings; maintaining the Company
Registers; ensuring all statutory obligations and regulatory requirements are
met (including continuous disclosure obligations); ensuring directors’ and
members’ meetings are properly called and held; advising the Board on good
practices; and participating in risk management initiatives.
The Company Secretary has a direct reporting line to Chairman of the Board
and is accountable to the Board, through the Chairman, for the proper
functioning of the Board.
All Directors have unfettered access to the Company Secretary. The decision
to appoint or remove the Company Secretary is a responsibility reserved by
the Board.
Information in relation to the qualifications of the Company Secretary appears
in the Directors’ Report.
Principle 2: Structure the Board to add value
Board Structure
On 12 August 2014, the Managing Director & CEO, Mr Stuart Grimshaw,
announced his resignation and left the Company on 31 August 2014. As
the result, the Board currently has nine Directors (including the Chairman),
all of whom are Non-Executive Directors (Ms Margaret Seale was appointed
to the Board on 21 January 2014 and Mr Bruce Carter was appointed on 27
February 2014). The position of Managing Director & CEO, when it is filled,
is an Executive Director role.
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 has robust succession planning in place and plans ahead 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.
CORPORATE GOVERNANCE
(Continued)
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. Detailed information about the professional
experience of Directors standing for election or re-election at the Annual
General Meeting is provided in the Notice of Meeting.
Prior to their commencement, all new directors are required to sign formal
letters of appointment.
The Bank delivers an induction program to assist all new Board members
to introduce them to the working environment of the Group. As part of the
induction, new Board members are given a detailed overview on the Group’s
business operations, copies of all material Group policies and procedures,
information on the functions and responsibilities of the Board, Board
Committees and Management, and meetings between new Board members
and Group Executives and other Senior Management are held.
During the course of a financial year, education sessions are provided to the
Board on topical matters.
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 & Governance Committee monitors
the skills and experience of existing Directors and the balance between
this experience and any new skills which may be required and which may
lead to consideration of appointments of new Directors. The Nomination
& Governance Committee considers Board and Committee succession
planning, the process for evaluating the performance of the Board, its
Committees and subsidiary Boards, the Chairman and individual Directors,
and has oversight of the process of selecting the Managing Director & CEO.
When appointing a new Director, the Board has regard to the Board
Performance Review & Renewal Policy and 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.
The names and qualifications of those appointed to the Nomination &
Governance Committee, and number of meetings of the Nomination &
Governance Committee, during the financial year are set out in the Directors’
Report. The Charter of the Nomination & Governance 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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
39
CORPORATE GOVERNANCE
(Continued)
Principle 2: Structure the Board to add value
(continued)
Independence
The Board assesses a potential Non-Executive Director’s independence prior
to their 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 Independence of Directors Policy and the Board has
assessed that all of the current non-executive Directors are “independent”.
No Directors have any relationship, association, interest or position of the
type described in Box 2.3 of the Principles, such that they are not considered
to be 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 though they may not meet one
or more of the specific thresholds or tests set out in the Independence of
Directors Policy, having regard to the underlying policy of the independence
requirement and the qualitative nature of the director’s circumstances.
The Independence of Directors Policy 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.
At the commencement of each Board meeting, all Non-Executive Directors
confer privately without the presence of Management.
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 is formally 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. From time to time, the Board uses the assistance of an
external facilitator and progress against any recommendations arising from
the review are considered by the Board, together with any new issues which
may have arisen.
The Chairman meets at least once a year with each individual Director to
discuss Board and Committee performance and the individual Director’s
performance, and at least once a year on a formal basis with the Managing
Director & CEO to discuss management’s view of the Board’s performance,
the performance of Board Committees and the 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.
40
ANNUAL REPORT 2014
An 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);
The expectation that each Director will actively participate in open,
honest discussion and bring an independent mind to bear on matters
before the Board and the Committees on which the Director serves;
The expectation that Directors and the Board as a whole will perform
their duties:
• the interests of shareholders and other stakeholders;
•
•
in a manner consistent with the Bank’s CANDO behaviours –
Collaborative, Accountable, No problems, Do what we say &
Openness; and
in accordance with
applicable laws.
the duties and obligations
imposed by
• Attendance at briefings, seminars and ongoing training programs.
In addition, the Chairman is available to the Board and to senior executives at
any time to discuss Board and Board Committee performance.
During the 2013/14 financial year, the Board engaged an independent
external facilitator to undertake a review of Board and Committee
performance.
The rationale for the review was to allow the Chairman and the Board
to obtain an objective view of the operation of the Board. As part of this
process, the facilitator sought and obtained input from each Director and
members of senior management through the completion of interviews and/
or an online questionnaire.
Based on the information provided and material reviewed, the external
facilitator rated the Board’s and the Committees’ practices across a range
of criteria including, the effectiveness of the Board, the performance of the
Committees, and the quality of meetings (including issues such as, the
effectiveness of agendas and papers, the working relationship between
the Board and Management and the performance of Board members). A
comprehensive report, detailing the findings of the review and recommending
areas for discussion and improvement, was presented to the Board for
discussion. The Chairman and the Board continue to discuss and explore
ways to improve Board and Committee performance.
The Board considers that the benefits gained from the review include the
improvement of Board and Committee processes and effectiveness.
Principle 3: Promote ethical and responsible
decision-making
Code of Conduct
The Group’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 Group and
its shareholders and drive its relationships with employees, customers
and the community. The Code details the Group’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 Group actively promotes ethical
and responsible decision-making within the Group.
The Code of Conduct is available on the Bank’s website.
Principle 3: Promote ethical and responsible
decision-making (continued)
Securities Trading Policy
The Group’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 Group’s Securities Trading Policy meets the requirements of the ASX
Listing Rules and is located in the Corporate Governance section of the
Bank’s website.
Diversity
In order to attract and retain a diverse workforce, the Group is committed to
maintaining a workforce that reflects the diversity of the Australian population
and to providing an environment in which all employees are treated fairly and
equitably, and where diversity is embraced.
In line with this commitment, the Group’s Diversity Policy seeks to ensure a
workplace where:
All employees are valued and respected for their skills, experiences and
perspectives;
•
•
CORPORATE GOVERNANCE
(Continued)
The Group recognises that diversity encompasses many different factors
(such as gender, age, cultural background and disability) and it works actively
to promote an inclusive working environment.
Gender Diversity
The Group 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 of candidates for the appointment which
must include an equal balance of gender wherever possible. Further, all
managers and employees are responsible for behaving in a way that does
not discriminate against other employees, prospective employees, agents,
contractors, customers and suppliers, and are expected to promote the spirit
of diversity and equal opportunity to the full.
The Group’s Human Resources & Remuneration Committee is responsible
for overseeing diversity issues within the Group and annually assesses the
Group’s progress against its stated diversity targets and objectives, which
are as follows:
•
to increase the representation of women on its Board;
Structures, policies and procedures are in place to assist employees to
balance their work, family and other responsibilities effectively;
•
to continue to grow the number of women in senior roles, with a target of
25% of women in senior management roles by 2015;
• Decision-making processes in recruitment take account of diversity;
•
encouraging the participation of women in leadership programs; and
• Employees have access to opportunities based on merit;
•
encouraging women to participate in the Bank’s My Mentor Program.
•
The Group’s culture is free from discrimination, harassment and bullying;
and
The Board has determined that by 2017 it wants to achieve a target of 27%
of women in senior management roles.
• Employment decisions are transparent, equitable and procedurally fair.
The percentage of women employed by the Group is detailed below:
Board
% of the Board who are female
Senior Management
% of Senior Management who are female
% of total workforce who are female
Part – time employees
% of total workforce who work part-time
% of part-time workforce who are female
Casual employees
% of casual workforce who are female
2010/11
2011/12
2012/13
2013/14
22%
17.9%
60%
12.2%
95%
82%
22%
14%
57%
9.9%
92%
86%
25%
22%
57%
10%
91%
76%
30%
22.5%
56%
9.7%
92%
66%
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
41
CORPORATE GOVERNANCE
(Continued)
Principle 3: Promote ethical and responsible
decision-making (continued)
The Group’s Senior Management roles are defined as Levels 1-4 of the
Bank’s occupational categories. At the end of the 2013/14 financial year,
the employee breakdown by gender across the Group is as follows:
Category
Board of Directors
Independent Non-Executive Directors
Managing Director & CEO (Level 1)
Employees*
Senior Management:
Group Executives (Level 2)
General Managers (Level 3)
Heads of Divisions (Level 4)
Total of Levels 2 - 4:
Other Management:
All Other Employees:
Total Employees*
Male
Female
6
1
7
6
21
36
63
116
581
767
3
-
3
2
4
15
21
57
931
1,012
*Includes full-time permanent, part-time permanent, full-time contract, part-time contract and casual
staff, but not employees of Owner-Managed Branches.
The My Mentor Program is designed to support the building of the Group’s
female leadership pipeline and has been run in Brisbane since 2012. 58
women participated in the Program during 2013/14, compared to 62 in the
prior financial year. During the course of 2015, the Program will be offered
to women in the Group’s subsidiaries, BOQ Specialist Bank Limited, BOQ
Finance Limited and Virgin Money (Australia) Pty Ltd in Sydney, and SAI and
SALI in Perth. To date, 21.4% of participants who have completed the
program have been subsequently promoted. 49.6% of participants in the
Group’s management training are women (62% in 2012, 67% in 2013).
In addition, the former Managing Director & CEO was an active participant in
the Queensland Male Champions of Change group. The Male Champion of
Change Group was formed in April 2010 by the Australian Sex Discrimination
Commissioner, and comprises of some of Australia’s most influential and
diverse male Chief Executive Officers and Chairpersons who aim to use
their individual and collective influence and commitment to ensure the
issue of women’s representation in leadership is elevated on the national
business agenda. The Acting CEO is continuing the Bank’s involvement with
this group.
Other Diversity enhancements
The Group has continued to build upon the work undertaken in prior years to
ensure that it has an engaged, flexible and diverse workplace. The following
steps were taken towards achieving this objective:
•
The further refinement of the Group’s recruitment processes to require
that external recruitment agencies and search firms to remove all
gender identifiers (as well as name, address and age) from resumes of
candidates applying for positions with Job Grades between levels 1 - 5.
The aim of this measure is to boost the number of women in Senior
Management and Executive positions and to remove any unconscious
bias, so that managers make hiring decisions from a position of neutrality
to gender, age and race;
42
ANNUAL REPORT 2014
•
•
•
The completion of Unconscious Bias and Harassment, Discrimination &
Bullying training by Group Executives, their senior leadership teams, and
the internal recruitment team. An e-learning tool which is compulsory for
all managers and employees was also launched during the year;
The completion of a second gender pay equity review, under which
remuneration decision-making processes were reviewed, a gender-
based job evaluation process was undertaken and an action plan was
created to address the causes of any inequities; and
The development of a Flexible Work Policy for the Group. Rather than
an employee having to prove to their manager why their position should
be flexible, the onus is on the manager to prove why it cannot be. The
Bank’s leaders are aware of the expectation that the Bank will provide
flexible work opportunities to all our employees.
A copy of the Diversity Policy is available on the ‘Corporate Governance’ page
on the Bank’s website. The Group’s annual report to the Workplace Gender
Equality Agency (WGEA) was submitted in May 2013 and is available on the
WGEA website at: http://search.wgea.gov.au/.
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 APRA Prudential Standard CPS 510
Governance. 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 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:
•
External financial reporting, APRA and ASIC reporting requirements;
•
•
Adequacy of the external audit and the independence of the external
auditor;
The Group Assurance function across the Group, the scope of the internal
audit work program, and Management’s responsiveness to findings from
the internal audit process;
•
Actuarial engagements and independence; and
•
The Audit Committee will refer to the Risk Committee any matters that
have come to the Audit Committee’s attention that are relevant for the
Risk Committee for noting and consideration, or which should be dealt
with by that Committee.
The Bank’s Group Assurance function reports to the Audit Committee in
relation to the effectiveness of internal controls which may have a significant
impact on the annual financial report.
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.
CORPORATE GOVERNANCE
(Continued)
Principle 4: Safeguard integrity in financial
reporting (continued)
Principle 5: Make timely and balanced
disclosure
External Auditor
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
CPS 510 ‘Governance’ and Accounting Professional 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;
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 External Auditor attends the Annual General Meeting and is available to
answer questions from shareholders relevant to the audit.
Management Attestations
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.
The Group’s Market Disclosure Policy provides a framework to assist the
Group 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 Group 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 Group will also
provide relevant information to media organisations, to ensure the broadest
possible communication with investors and the general market.
The Policy requires Group employees to notify a Designated Disclosure
Officer when they become aware of information which may require release to
the market. The Managing Director & CEO (or Acting CEO) 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 Group to the ASX are accessible via the
Bank’s website. A copy of the Market Disclosure Policy is available on the
Bank’s website.
Principle 6: Respect rights of shareholders
BOQ aims to provide all security holders with ready access to information
about the Bank by communicating timely and transparent information about
the Bank’s business, financial performance, governance and prospects.
BOQ maintains a Shareholder Centre on its website which provides links for
security holders to:
•
•
•
View details of their holding through the Bank’s share registry provider’s
secure website, as well as to access contact details for the share registry;
View details on historical dividend payments and information on the
Bank’s Dividend Reinvestment Plan;
A financial calendar for the key events in the upcoming year, including results
announcements, the annual general meeting and dividend payments;
•
Details of how to elect to receive shareholder information electronically;
•
Financial disclosures, including results announcements, annual reports
and other investor presentations, as well as webcasts of previous
announcements, presentations and annual general meetings;
•
ASX announcements made by the Bank;
•
Details of Annual General Meetings, which are webcast on the Bank’s
website. Security holders have the opportunity to ask questions or
make comment on the management of the Bank, including ahead of the
meeting if they cannot attend the meeting in person;
•
Details of the Bank’s preference shares and previous capital raisings;
and
•
Other regulatory disclosures required by APRA.
In addition, BOQ maintains an ‘About Us’ section on its website which
provides links for security holders to:
• An overview of the Bank and its history;
• Photographs and profiles of the Directors and Management team;
• Electronic copies of media releases made by the Bank;
•
A corporate governance page which contains electronic links to all of
the Bank’s key governance documents including constitution, Board and
Board sub-committee charters and numerous Bank policies; and
• Contact details for the Bank.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
43
CORPORATE GOVERNANCE
(Continued)
Principle 6: Respect rights of shareholders
(continued)
BOQ operates an ongoing investor relations program to facilitate effective
two-way communication with investors on the Bank’s market activities
which involves:
•
Half-yearly results briefings (made available via webcast on the Bank’s
website) which allow for questions from market participants;
• Half-yearly post-results meetings with key institutional investors;
• Annual or semi-annual meetings with key proxy adviser groups;
• Meetings with domestic and international institutional investors;
• Presentations to institutional and retail brokers and their clients; and
•
Responding to ad-hoc queries from analysts and investors (institutional
and retail), as well as financial media, on the market releases made by
the Bank.
These initiatives represent an opportunity for the Bank to provide investors,
market participants and the general public with a greater understanding
of the Bank’s business, financial performance, governance and prospects,
whilst also providing investors and other market participants the opportunity
to express their views to the Bank on matters of concern or interest to them.
These views are gathered and communicated to Management and the Board
wherever appropriate.
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 overseen by the Board and the Risk Committee,
a sub-committee of the Board which assists the Board to discharge its
responsibilities. The role of the Board in this respect is outlined in its
Charter, which is summarised under Principle 1, above. 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 and for the management of the Group’s
compliance obligations.
Other responsibilities of the Risk Committee include the following:
•
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 all regulatory and compliance requirements;
•
•
•
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 Chairman of the Audit Committee on relevant
audit matters that should come to the attention of the Risk Committee.
A copy of the Risk Committee’s Charter is available on the ‘Corporate
Governance’ page of the Bank’s website. 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.
44
ANNUAL REPORT 2014
BOQ’s Risk Management Framework
BOQ has an integrated risk management framework in place to identify,
assess, manage and report risks on a consistent and reliable basis. This
framework has been developed to accord with the tolerance levels set out in
the Group’s Risk Appetite Statement.
The risk management framework requires each business to manage the
outcome of its risk-taking activities and allows it to benefit from the resulting
risk-adjusted returns. Accountability for risk management is structured by a
“Three Lines of Defence” model as follows:
First Line - Business Management. Management within each of BOQ’s
business areas are responsible for managing the risks for their business.
This includes agreeing with the Managing Director & CEO and Chief Risk
Officer the level of risk they wish to take, determining and implementing an
approach to the management of these risks, and using risk management
outcomes and considerations as part of
their day-today business
making processes.
Second Line – BOQ Group Risk. Group Risk Management provides risk
management expertise and oversight for business management risk-taking
activities. Group Risk develop specialist policies and procedures for risk
management and ensure they are embedded and in use as part of the
day-to-day management of the business. Group Risk also establishes and
maintains aligned and integrated risk management frameworks and monitors
compliance with the frameworks, policies and procedures.
Third Line – Group Assurance. Group Assurance, BOQ’s internal audit
function, provides independent assurance to key stakeholders regarding
the adequacy and effectiveness of the Group’s system of internal controls,
risk management procedures and governance processes. It is responsible
for reviewing risk management frameworks and Business Unit practices for
risk management and internal controls. To maintain independence and to
prevent any conflict of interest, the Head of Group Assurance reports directly
to the Chairman of the Audit Committee. The Group Assurance strategic plan
is approved and monitored by the Audit Committee.
Management’s responsibility
Management is responsible for designing and implementing a risk
management and internal control system to manage the Bank’s material
business risk, and implementing the policies and controls established by the
Board. To enable Management to effectively do this, a number of committees
have been established, including an Asset and Liability Committee, an
Executive Committee, an Executive Credit Committee and an Operational
Risk Committee. Operating under their respective charters, each committee
has a role in the effective management and oversight of risk management in
BOQ. The Executive Committee is also charged with ensuring that the Group
has appropriately trained and skilled staff to identify, measure and monitor
risk throughout the business.
The Board has received a report from Management as to the effectiveness of
the Group’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.
Key Business Risks
BOQ is a diversified financial services organisation that offers a range of
financial products and services to a number of different customer segments
across a large geographic area (but predominantly Australia and New
Zealand).
Principle 7: Recognise and Manage Risk
(continued)
The following categories of risk have been identified as the material business
risks of BOQ under its risk management framework:
•
•
•
•
•
•
•
•
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. The policies adopted to manage
Compliance Risk include a Conflicts of Interest Policy, Whistleblowing Policy
and Breach & Incident Management Process. The Group also undertakes
a range of compliance training of employees to manage Compliance Risk,
including in relation to Consumer Credit Insurance, Consumer Protection,
Code of Banking Practice, National Consumer Credit Protection and Anti-
money Laundering & Counter Terrorism Financing;
Credit Risk, being the risk that a debtor or transactional counterparties
will default and/or fail to meet their contractual obligations, and includes
the risk of loss of value of assets due to deterioration in credit quality and
credit concentration risk. This risk primarily arises from BOQ’s lending
activities and the holding of various financial instruments for investment or
liquidity purposes. BOQ has a set of well documented credit risk policies
to manage these risks within the limits set by the Board. They include the
Treasury Credit Policy, Large Exposures Policy, Sector Risk Concentration
Policy, the Delegated Approval Authority Policy, and specific credit policies
for each customer segment and their respective lending products;
Insurance Risk, which is the risk that the BOQ incorrectly assesses its
risk of exposure to financial loss and inability to meet its liabilities due to
inadequate or inappropriate insurance product design, claims management
or reinsurance management;
Liquidity and Funding Risk, which is the risk that BOQ, 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’s Liquidity Policy and Liquidity Contingency
Plan are used to manage this risk;
Market Risk, which includes Traded Market Risk (the risk that the value
of an investment will decrease due to moves in market factors such as
foreign exchange rates, interest rates, equity prices, commodity price and
credit spreads) and Non Traded Market Risk (the risks arising from the
various structural dimensions of the balance sheet including Interest Rate
Risk in the Banking Book (IRRBB), Liquidity, Funding, Securitisation and
Capital Risk). BOQ has adopted a number of Treasury Risk Policies to
manage Market Risk;
Operational Risk, which is the risk of loss resulting from inadequate or
failed internal processes, people and systems, or from external events.
Operational risk management covers a wide variety of risks including legal
risk, franchise risk, environmental sustainability, Enterprise Continuity
Management
(comprising business continuity management, crisis
management and disaster recovery, IT Security and technology/system
risk) and human resources risk management The Group has implemented
a number of systems and policies to address Operational risks including
a Code of Conduct, Outsourcing Policy (including off-shoring of services),
Product Approval Policy, IT Security Policy, IT Risk Management Policy,
Workplace Health & Safety Policy, Workplace Rehabilitation Policy and
Harassment, Discrimination & Bullying Policy;
Contagion Risk, being the risk that problems arising in other BOQ Group
members compromise the financial and operational position of the
Authorised Deposit-taking Institution in BOQ Group;
Regulatory Risk, being the exposure to financial loss arising from the
possibility that regulatory bodies, government departments or other
authorised agencies make changes to existing rules and regulations, or
introduce new rules or regulations that negatively impact the business
strategies or activities of the Bank;
CORPORATE GOVERNANCE
(Continued)
•
•
•
•
•
Reputation Risk, being the risk to earnings or capital arising from
negative public opinion resulting from the loss of reputation, public
trust or standing, and is considered to be a risk derived from business
activities and is considered in conjunction with the underlying risks
resulting from those activities;
Franchise Risk, being the risk to earning or capital arising from the need
to transition to a corporate operating model. Site selection policies and
procedures ensure that branches are only opened in locations that are
considered sustainable;
Residual Value Risk, being the risk of loss on the sale of leased equipment
or assets that have been returned at the end of their contractual lease
term. This risk arises in the operation of the BOQ Finance asset finance
business on certain operating lease contracts. BOQ has a sophisticated
residual value management process in place to determine the level of
residual value risk it takes on individual lease contracts and portfolios of
similar asset classes to manage this risk;
Strategic Risk, being the potential for financial loss associated with
the vulnerability of business earnings to changes in the strategic
environment; and
Project Risk, being the risk of loss due change management and
operational risks undertaken in large projects. BOQ is undertaking
a number of large transformational projects across its back office, IT
and lending processes. This change management program introduces
operational risk to the portfolio and may adversely impact on business
earnings if not adequately managed.
Sustainability
The Group is aware of the increasing calls for business to address matters
of economic, environmental and social sustainability, and the increasing
demand from investors for greater transparency on these matters so they
can properly assess investment risk. The Group has determined it does
not have any material exposure to economic, environmental or social
sustainability risks. These matters are continually monitored as part of the
Group’s sustainability approach, the framework for which is available in the
Shareholder Review.
Principle 8 : Remuneration
The Human Resources & 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 such as diversity.
The Human Resources & Remuneration Committee is comprised solely
of non-executive directors and has been in place for the whole of the
financial year.
The Board has approved a Remuneration Policy which is in accordance with
the APRA requirements set out in CPS 510 Governance (see the Directors’
Report). The remuneration of the Board, the Managing Director & CEO
and Senior Management is overseen by the Human Resources &
Remuneration Committee.
Structure of Remuneration
Non-Executive Directors’ remuneration is distinguished from the remuneration
of the Managing Director & CEO and senior managers. Non-Executive
Directors are remunerated by cash fees which reflect the time commitment
and responsibilities of their role and superannuation contributions. Non-
Executive Directors do not receive performance-based or equity-based
remuneration. Shareholders approved an increase in the fee pool for the
Non-Executive Directors at the 2013 Annual General Meeting, and following
advice from an independent, external consultant, Non-Executive Directors’
fees were increased from 1 July 2014.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
45
CORPORATE GOVERNANCE
(Continued)
Principle 8 : Remuneration (continued)
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:
• Constitution
• Board Charter
• Policy on Independence of Directors
•
Information Technology Committee Charter
• Nomination & Governance Committee Charter
• Audit Committee Charter
• Risk Committee Charter
• Human Resources & Remuneration Committee Charter
• Diversity Policy
• Market Disclosure Policy
• Securities Trading Policy
• St Andrew’s Group charters and policies
• BOQS charters and policies
• BOQ Group Fit and Proper Policy
• Code of Conduct
• AML / CTF Statement
• Award Rights Plan
• Restricted Share Plan
The Managing Director & CEO (or Acting CEO) and senior managers are
provided with remuneration packages which incorporate a balance of
fixed and performance-based remuneration. The performance-based
remuneration is based on specific performance targets which are aligned
to short and long-term performance, and comprise cash and equity-based
elements. Further details in relation to the quantum of remuneration for
Non-Executive Directors, the Managing Director & CEO (or Acting CEO) and
senior Management are provided in the Remuneration Report. Short-term
incentives will be deferred when they meet the Board’s threshold amount
and could take the form of cash or Restricted Shares. They will be subject
to claw back in the event that employees’ behaviour is inconsistent with
the Bank’s risk and compliance standards or if financial misstatement has
occurred. All employees are benchmarked independently with respect to
their performance-based remuneration. Any employee found not to have
complied with these standards may, at Board discretion, become ineligible
for an award in addition to any other appropriate measures that may be
taken by the Bank in such cases. Where applicable, such employees remain
ineligible for awards in any further periods until such time as the matter is
resolved to the Board’s satisfaction. The Board has set a deferral period of
up to two years. Vesting of deferred short term incentives is subject to Board
approval and the Board may choose to request input from the Chief Risk
Officer in making its decision.
Long term incentives have been delivered either as Deferred Award Rights
(DARs), Performance Award Rights (PARs), or a combination of the two.
However, from the end of the 2014 financial year, DARs will no longer be
offered as part of Key Management Personnel remuneration packages.
Awards of long term incentives are also contingent upon compliance with
the Bank’s risk and compliance standards and forfeiture and claw back
procedures similar to those for short term incentives apply.
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).
The Group’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 any employee
shares, securities or options received as part of their performance-based
remuneration, whether directly or indirectly. Any employee who attempts
to hedge any shares, securities or options renders those instruments liable
to forfeiture.
A copy of the Human Resources & Remuneration Committee Charter is
available on the ‘Corporate Governance’ page of the Bank’s website. The
names and qualifications of those appointed to the Committee, and number
of meetings of the Committee during the financial year are set out in the
Directors’ Report.
46
ANNUAL REPORT 2014
INCOME STATEMENTS
Year Ended 31 August 2014
Consolidated
Bank
2014
$m
2,112.0
1,351.2
760.8
136.2
897.0
70.4
4.9
33.7
41.6
938.6
469.4
86.2
383.0
122.5
260.5
2013
$m
2,297.4
1,604.3
693.1
122.5
815.6
70.2
5.8
35.7
40.3
855.9
465.5
114.6
275.8
90.0
185.8
2014
$m
2,026.1
1,437.5
588.6
233.9
822.5
-
-
-
-
822.5
421.4
62.8
338.3
100.7
237.6
2013
$m
2,236.6
1,711.1
525.5
218.8
744.3
-
-
-
-
744.3
418.9
87.2
238.2
68.5
169.7
260.5
185.8
237.6
169.7
77.4
75.9
57.6
56.5
Interest income
Less: Interest expense
Net interest income
Other operating income
Net banking operating income
Premiums from insurance contracts
Investment revenue
Less: Claims and policyholder liability expense from insurance contracts
Net insurance operating income
Total operating income
Less: Expenses
Less: Impairment on loans and advances
Profit before income tax
Less: Income tax expense
Profit for the year
Profit attributable to:
Equity holders of the parent
Basic earnings per share - Ordinary shares (cents)
Diluted earnings per share - Ordinary shares (cents)
The income statements should be read in conjunction with the accompanying notes.
Section
2.1
2.1
2.1
2.1
2.1
2.1
2.2
3.4
2.3
2.4
2.4
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
47
STATEMENTS OF COMPREHENSIVE INCOME
Year Ended 31 August 2014
Consolidated
Bank
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss
Cash flow hedges:
Net (losses) / gains taken to equity
Net gains transferred to profit and loss
Foreign currency translation differences on foreign operations
Net 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
2014
$m
260.5
(26.9)
(0.5)
0.4
(0.5)
28.9
1.4
2013
$m
185.8
11.9
(0.9)
1.6
(1.6)
(4.2)
6.8
Total comprehensive income for the year
261.9
192.6
2014
$m
237.6
(26.1)
(0.5)
-
-
28.4
1.8
239.4
2013
$m
169.7
(3.1)
(0.9)
-
-
(3.9)
(7.9)
161.8
Total comprehensive income attributable to:
Equity holders of the parent
261.9
192.6
239.4
161.8
The statements of comprehensive income should be read in conjunction with the accompanying notes.
48
ANNUAL REPORT 2014
Assets
Cash and liquid assets
Due from other financial institutions - Term deposits
Financial assets available-for-sale
Financial assets held for trading
Derivative financial assets
Loans and advances at amortised cost
Other assets
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Intangible assets
Investments in joint arrangements
Total assets
Liabilities
Due to other financial institutions - Accounts payable at call
Deposits
Derivative financial liabilities
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 balance sheets should be read in conjunction with the accompanying notes.
3.3
3.3
3.8
3.4
6.5
2.3
4.1
6.7
3.2
3.8
4.2
5.1
3.5
BALANCE SHEETS
Year Ended 31 August 2014
Consolidated
Bank
Section
2014
$m
2013
$m
2014
$m
2013
$m
3.1
1,033.6
92.8
3,864.4
2,473.1
160.3
873.2
118.5
1,066.8
4,334.6
260.4
397.0
15.0
3,348.9
2,473.1
131.9
242.2
23.8
1,268.4
4,334.6
234.0
38,135.5
34,989.3
32,035.2
31,491.2
131.4
-
53.6
112.2
827.2
20.5
129.1
-
37.8
104.5
592.7
21.4
242.5
1,527.2
40.8
101.3
101.5
-
276.7
975.7
26.4
95.5
71.5
-
46,904.6
42,528.3
40,414.4
39,040.0
207.5
201.1
207.5
201.1
35,935.8
31,698.7
34,068.7
31,785.5
248.7
399.1
71.5
104.1
63.0
137.4
362.0
23.0
78.9
72.5
6,534.4
7,136.9
207.0
336.4
71.4
88.2
-
947.9
-
-
1,224.1
109.5
320.7
23.1
68.7
-
1,312.8
2,457.5
43,564.1
39,710.5
37,151.2
36,278.9
3,340.5
2,817.8
3,263.2
2,761.1
3,020.6
2,562.6
3,024.1
2,564.2
114.4
205.5
111.1
144.1
99.0
140.1
95.3
101.6
3,340.5
2,817.8
3,263.2
2,761.1
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
49
STATEMENTS OF CHANGES IN EQUITY
Year Ended 31 August 2014
Consolidated
Ordinary
shares
Employee
benefits
reserve
Equity
reserve
for credit
losses
Cashflow
hedge
reserve
Translation
reserve
Available-
for-sale
reserve
Retained
profits
Total
equity
Year ended 31 August 2014
$m
$m
$m
$m
$m
$m
$m
$m
Balance at beginning of the year
2,562.6
31.4
70.2
0.4
0.6
8.5
144.1
2,817.8
Total comprehensive income for the year
Profit
-
-
-
-
-
-
260.5
260.5
Other comprehensive income, net of income tax
Cash flow hedges:
Net losses taken to equity
Net gains transferred to profit and loss
Net losses on hedge of net investment in foreign
operation
Foreign currency translation differences on foreign
operations
Change in fair value of assets available-for-sale
Total other comprehensive income / (expense)
Total comprehensive income / (expense) for the year
Transactions with owners, recorded directly in
equity
Contributions by and distributions to owners
Dividend reinvestment plan
Dividends to shareholders
Equity settled transactions
Treasury Shares (1)
Instutitional entitlement offer (2)
Retail entitlement offer (2)
Costs of capital issue (2)
-
-
-
-
-
-
-
65.6
-
-
(1.5)
182.6
218.0
(6.7)
-
-
-
-
-
-
-
-
-
1.9
-
-
-
-
Total contributions by and distributions to owners
458.0
1.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26.9)
(0.5)
-
-
-
(0.5)
-
0.4
-
-
-
-
-
-
28.9
(27.4)
(27.4)
(0.1)
(0.1)
28.9
28.9
-
-
-
-
-
-
(26.9)
(0.5)
(0.5)
0.4
28.9
1.4
260.5
261.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65.6
(199.1)
(199.1)
-
-
-
-
-
1.9
(1.5)
182.6
218.0
(6.7)
(199.1)
260.8
Balance at the end of the year
3,020.6
33.3
70.2
(27.0)
0.5
37.4
205.5
3,340.5
(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.
(2) As part of the acquisition of BOQ Specialist Bank Limited formerly Investec Bank (Australia) Limited, the Bank issued $393.9 million worth of new shares in two tranches. The institutional and retail tranches were for $182.6
million and $218.0 million respectively.
The statements of changes in equity should be read in conjunction with the accompanying notes.
50
ANNUAL REPORT 2014
STATEMENTS OF CHANGES IN EQUITY
(Continued) Year Ended 31 August 2014
Consolidated
Ordinary
shares
Perpetual
Equity
Preference
shares
Employee
benefits
reserve
Equity
reserve
for credit
losses
Cashflow
hedge
reserve
Translation
reserve
Available-
for-sale
reserve
Retained
profits
Total
equity
Year ended 31 August 2013
$m
$m
$m
$m
$m
$m
$m
$m
$m
Balance at beginning of the year
2,464.4
195.7
33.3
70.2
(10.6)
0.6
12.7
132.9
2,899.2
Total comprehensive income for the year
Profit
-
-
-
-
-
-
-
185.8
185.8
Other comprehensive income, net of
income tax
Cash flow hedges:
Net gains taken to equity
Net gains transferred to profit and
loss
Net losses on hedge of net investment in
foreign operation
Foreign currency translation differences
on foreign operations
Change in fair value of assets availa-
ble-for-sale
Total other comprehensive income /
(expense)
Total comprehensive income / (expense)
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exchange to CPS (1)
(4.3)
(175.8)
Redemption of Perpetual Preference
Shares (“PEPs”) (1)
-
(19.9)
Dividend reinvestment plan
62.7
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Treasury Shares (2)
Acquisition of Virgin Money (Australia) Pty
Limited (3)
Total contributions by and distributions
to owners
-
-
-
7.0
32.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.9)
-
-
98.2
(195.7)
(1.9)
-
11.9
-
(0.9)
-
-
-
-
-
-
-
11.0
-
11.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.6)
1.6
-
-
-
-
-
-
11.9
(0.9)
-
(1.6)
-
1.6
-
(4.2)
-
(4.2)
-
-
-
-
-
-
-
-
-
-
-
(4.2)
-
6.8
(4.2)
185.8
192.6
-
-
-
-
-
-
-
-
-
(180.1)
-
(19.9)
-
62.7
(168.7)
(168.7)
(5.9)
-
-
-
(5.9)
(1.9)
7.0
32.8
-
(174.6)
(274.0)
Balance at the end of the year
2,562.6
-
31.4
70.2
0.4
0.6
8.5
144.1
2,817.8
(1) On 24 December 2012, 1,801,339 PEPS shares were reinvested into CPS and the remaining 198,661 PEPS shares were redeemed on 15 April 2013.
(2) 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.
(3) On 30 April 2013, the Bank acquired 100% of Virgin Money (Australia) Pty Limited for consideration of $42.6 million. $30.6 million worth of new shares were issued in two tranches (Tranche 1 - 1,585,353 and Tranche
2 - 1,617,762) as part of the acquisition consideration. Refer to section 3.10(a) for further details.
The statements of changes in equity should be read in conjunction with the accompanying notes.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
51
STATEMENTS OF CHANGES IN EQUITY
(Continued) Year Ended 31 August 2014
Bank
Ordinary
shares
Employee
benefits
reserve
Equity
reserve
for credit
losses
Cashflow
hedge
reserve
Available-
for-sale
reserve
Retained
profits
Total
equity
Year ended 31 August 2014
$m
$m
$m
$m
$m
$m
$m
Balance at beginning of the year
2,564.2
31.4
57.3
(2.2)
8.8
101.6
2,761.1
Total comprehensive income for the year
Profit
-
-
-
-
-
237.6
237.6
Other comprehensive income, net of income tax
Cash flow hedges:
Net losses taken to equity
Net gains transferred to profit and loss
Change in fair value of assets available-for-sale
Total other comprehensive income / (expense)
Total comprehensive income / (expense) for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
Dividend reinvestment plan
Dividends to shareholders
Equity settled transactions
Treasury Shares (1)
Instutitional entitlement offer (2)
Retail entitlement offer (2)
Costs of capital issue (2)
-
-
-
-
-
65.6
-
-
0.4
182.6
218.0
(6.7)
-
-
-
-
-
-
-
1.9
-
-
-
-
Total contributions by and distributions to owners
459.9
1.9
-
-
-
-
-
-
-
-
-
-
-
-
-
(26.1)
(0.5)
-
-
-
28.4
(26.6)
(26.6)
28.4
28.4
-
-
-
-
(26.1)
(0.5)
28.4
1.8
237.6
239.4
-
-
-
-
-
-
-
-
-
-
65.6
-
(199.1)
(199.1)
-
-
-
-
-
-
-
-
-
-
-
1.9
0.4
182.6
218.0
(6.7)
(199.1)
262.7
Balance at the end of the year
3,024.1
33.3
57.3
(28.8)
37.2
140.1
3,263.2
(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.
(2) As part of the acquisition of BOQ Specialist Bank Limited formerly Investec Bank (Australia) Limited, the Bank issued $393.9 million worth of new shares in two tranches. The institutional and retail tranches were for $182.6
million and $218.0 million respectively.
The statements of changes in equity should be read in conjunction with the accompanying notes.
52
ANNUAL REPORT 2014
STATEMENTS OF CHANGES IN EQUITY
(Continued) Year Ended 31 August 2014
Bank
Ordinary
shares
Perpetual
Equity
Preference
shares
Employee
benefits
reserve
Equity
reserve
for credit
losses
Cashflow
hedge
reserve
Available
-for-sale
reserve
Retained
profits
Total
equity
Year ended 31 August 2013
$m
$m
$m
$m
$m
$m
$m
$m
Balance at beginning of the year
2,470.3
195.7
33.3
57.3
1.8
12.7
106.5
2,877.6
Total comprehensive income for the year
Profit
-
-
-
-
-
-
169.7
169.7
Other comprehensive income, net of income tax
Cash flow hedges:
Net losses taken to equity
Net gains transferred to profit and loss
Change in fair value of assets available-for-sale
Total other comprehensive expense
Total comprehensive income / (expense) for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
Exchange to CPS (1)
Redemption of PEPs (1)
Dividend reinvestment plan
Dividends to shareholders
Dividends to PEPs
Equity settled transactions
Treasury Shares (2)
Acquisition of Virgin Money (Australia) Pty Limited (3)
-
-
-
-
-
-
-
-
-
-
(4.3)
(175.8)
-
(19.9)
62.7
-
-
-
2.7
32.8
-
-
-
-
-
-
Total contributions by and distributions to owners
93.9
(195.7)
Balance at the end of the year
2,564.2
-
-
-
(3.1)
(0.9)
(3.9)
(7.9)
(3.1)
(0.9)
-
-
-
(3.9)
(4.0)
(3.9)
-
-
-
-
(4.0)
(3.9)
169.7
161.8
-
-
-
-
-
-
-
-
-
-
-
-
-
(180.1)
-
-
(19.9)
62.7
-
(168.7)
(168.7)
-
-
-
-
(5.9)
-
-
-
(5.9)
(1.9)
2.7
32.8
-
(174.6)
(278.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57.3
(2.2)
8.8
101.6
2,761.1
-
-
-
-
-
-
-
-
-
-
(1.9)
-
-
(1.9)
31.4
(1) On 24 December 2012, 1,801,339 PEPS shares were reinvested into CPS and the remaining 198,661 PEPS shares were redeeemed on 15 April 2013.
(2) 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.
(3) On 30 April 2013, the Bank acquired 100% of Virgin Money (Australia) Pty Limited for consideration of $42.6 million. $30.6 million worth of new shares were issued in two tranches (Tranche 1 - 1,585,353 and Tranche
2 - 1,617,762) as part of the acquisition consideration. Refer to Section 3.10 (a) for further details.
The statements of changes in equity should be read in conjunction with the accompanying notes.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
53
STATEMENTS OF CASH FLOWS
Year Ended 31 August 2014
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 liabilities
Net cash from operating activities
Cash flows from investing activities
Acquisition of BOQ Specialist Bank Limited
3.5
3.1
Acquisition of Virgin Money (Australia) Pty Limited
Cash acquired upon acquisition of BOQ Specialist Bank Limited
Payments for property, plant and equipment
Payments for intangible assets
Cash distribution received from equity accounted investments
Capital contribution for equity accounted investments
Capital injection in BOQ Specialist Bank Limited
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
Net proceeds from issue of Convertible Preference Shares (“CPS”)
3.5
Redemption of PEPS
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 in cash and cash equivalents
Cash and liquid assets at beginning of year
Consolidated
Bank
Section
2014
$m
2013
$m
2014
$m
2013
$m
2,112.7
2,303.3
1,861.1
2,058.8
182.7
1.3
170.0
1.1
217.5
0.5
(1,341.2)
(1,604.4)
(1,436.4)
(387.1)
(80.0)
488.4
(723.8)
(243.5)
1,920.5
(984.9)
456.7
(210.0)
-
52.0
(31.0)
(51.7)
4.3
(0.2)
-
4.1
(393.0)
(48.3)
428.7
(966.9)
280.2
543.8
(65.2)
220.6
-
(5.9)
-
(17.0)
(31.1)
2.4
(0.5)
-
5.3
(350.5)
(77.1)
215.1
(1,212.9)
(55.2)
2,289.7
-
1,236.7
(210.0)
-
-
(22.3)
(47.9)
-
-
(330.0)
-
(232.5)
(46.8)
(610.2)
400.6
(9.6)
719.7
-
-
-
-
-
-
1,631.2
111.8
(19.9)
-
-
400.6
(9.6)
719.8
-
-
-
(429.7)
(8.3)
(133.5)
-
(63.8)
160.4
873.2
-
(111.9)
-
28.9
202.7
670.5
873.2
(8.3)
(133.5)
21.5
(471.7)
154.8
242.2
397.0
212.3
1.1
(1,701.1)
(367.3)
(45.8)
158.0
(1,037.1)
150.6
509.6
-
(218.9)
-
(5.9)
-
(8.3)
(30.7)
-
-
-
0.5
(44.4)
-
-
1,631.0
111.8
(19.9)
766.8
(541.2)
(1,582.1)
-
(111.9)
23.3
277.8
14.5
227.7
242.2
3.5
(1,032.7)
(1,582.3)
(1,032.5)
Cash and liquid assets at end of year
3.1
1,033.6
54
ANNUAL REPORT 2014
The statements of cash flows should be read in conjunction with the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
Year Ended 31 August 2014
Section 1
Basis of preparation
1.1
1.2
1.3
Reporting entity
Basis of accounting
Use of estimates and judgements
Section 2
Financial performance
2.1
2.2
2.3
2.4
2.5
2.6
Operating income
Expenses
Income tax expense and deferred tax
Earnings per share
Dividends
Segment reporting
Section 3
Capital and balance sheet management
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Cash and liquid assets
Deposits
Financial assets
Loans and advances at amortised cost
Borrowings including subordinated notes
Risk management
Financial instruments
Derivative financial instruments
Capital management
3.10
Capital and reserves
Section 4
Other assets and liabilities
4.1
4.2
Intangible assets
Provisions
Section 5
Insurance Business
5.1
Insurance business
Section 6
Other notes
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
Employee benefits
Commitments
Contingent liabilities
Related parties information
Controlled entities
Deed of cross guarantee
Investments in joint arrangements
Auditor’s remuneration
Events subsequent to balance date
6.10
Significant accounting policies and new accounting standards
Page
56
56
56
57
58
59
61
62
63
65
66
66
67
69
70
80
84
87
88
90
92
93
98
99
100
100
102
105
107
108
108
109
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
55
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
1.3. 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 below:
• Provisions for impairment – Section 3.4;
• Financial instruments – Section 3.7;
• Intangible assets – Section 4.1;
• Provisions – Section 4.2;
• Insurance policy liabilities – Section 5.1; and
• Contingent liabilities – Section 6.3.
SECTION 1. BASIS OF PREPARATION
1.1. 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 (+61 7 3336 2420). The consolidated financial report
of the Bank for the financial year ended 31 August 2014 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
is a for-profit entity primarily involved in retail banking, leasing finance and
insurance products.
1.2. BASIS OF ACCOUNTING
(a) Statement of compliance
These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards and interpretations issued
by the Australian Accounting Standards Board (“AASB”) and the Corporations
Act 2001. The consolidated financial statements and notes thereto also
comply with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”). The consolidated
financial report was authorised for issue by the Directors on 8 October 2014.
(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;
• assets and liabilities acquired through business combinations; 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.
(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.
56
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
SECTION 2. FINANCIAL PERFORMANCE
2.1. OPERATING INCOME
Consolidated
Bank
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
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
Revenue - Accounting policy
Interest income and expense
2014
$m
1,916.6
195.4
2,112.0
772.3
578.9
1,351.2
760.8
101.0
(12.8)
-
10.9
23.9
-
8.7
(2.4)
6.9
136.2
136.2
41.6
938.6
2013
$m
2,084.3
213.1
2,297.4
897.9
706.4
1,604.3
693.1
102.1
(14.2)
-
5.4
12.1
-
7.5
3.2
6.4
2014
$m
1,603.0
423.1
2,026.1
766.0
671.5
1,437.5
588.6
99.4
(12.8)
72.5
10.6
12.7
23.7
8.6
(4.8)
24.0
122.5
233.9
122.5
40.3
855.9
233.9
-
822.5
2013
$m
1,765.0
471.6
2,236.6
897.9
813.2
1,711.1
525.5
101.9
(14.2)
55.7
3.7
11.4
24.9
7.5
0.1
27.8
218.8
218.8
-
744.3
Interest income and expense for all interest bearing financial instruments are recognised in the profit or loss using the effective interest rates of the financial
assets or financial liabilities to which they relate.
Other operating income
Other operating income and expense (e.g. lending fees) that are considered an integral part of the effective interest rate on a financial asset or liability are
included in the measurement of the effective interest rate. Non-yield related application and activation lending fee revenue is recognised when the loan is dis-
bursed 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.
Dividends are recognised when control of a right to receive consideration is established.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
57
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.2. EXPENSES
Operating expenses
Advertising
Commissions to Owner Managed Branches
Communications and postage
Printing and stationery
Non-lending losses
Processing costs
Other
Administrative expenses
Professional fees
Directors fees
Other
IT expenses
Data processing
Amortisation and impairment – computer software (intangible)
Depreciation – IT equipment
Occupancy expenses
Lease rental
Depreciation - 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
Expenses
58
ANNUAL REPORT 2014
Consolidated
Bank
2014
$m
16.9
6.8
20.1
4.6
33.7
25.4
17.3
2013
$m
12.4
8.7
22.5
4.0
47.5
25.0
15.0
2014
$m
13.4
6.6
19.4
4.3
33.6
25.4
13.2
2013
$m
11.8
9.2
21.3
3.8
47.5
25.0
12.2
124.8
135.1
115.9
130.8
15.5
2.0
6.4
23.9
65.3
14.7
1.3
81.3
29.3
7.5
2.9
39.7
149.7
14.0
4.0
10.4
8.5
7.2
20.4
1.6
8.3
30.3
61.1
18.6
1.5
81.2
21.9
7.7
2.5
32.1
144.5
11.9
1.7
8.4
5.2
7.0
13.3
1.8
10.3
25.4
60.9
12.9
0.8
74.6
25.8
7.1
2.8
35.7
129.7
12.4
3.1
9.0
7.8
6.8
17.9
1.1
9.3
28.3
58.2
16.5
0.8
75.5
19.9
6.5
2.4
28.8
123.7
10.5
1.8
7.1
4.6
6.4
193.8
178.7
168.8
154.1
5.9
469.4
8.1
465.5
1.0
421.4
1.4
418.9
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.3. INCOME TAX EXPENSE AND DEFERRED TAX
Income tax expense
The major components of income tax expense for the years ended 31 August 2014 and 2013 along with a reconciliation between pre-tax profit and tax expense
are detailed below:
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense
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
Profit before tax – continuing operations
Profit before tax
Income tax using the domestic corporate tax rate of 30% (2013: 30%)
Increase in income tax expense due to:
Non-deductible expenses
Decrease in income tax expense due to:
Other (1)
Under / (Over) provided in prior years
Income tax expense on pre-tax net profit
Consolidated
Bank
2014
$m
140.4
(8.4)
132.0
(9.5)
(9.5)
2013
$m
75.3
(3.2)
72.1
17.9
17.9
2014
$m
112.0
(5.9)
106.1
(5.4)
(5.4)
2013
$m
58.0
(1.8)
56.2
12.3
12.3
122.5
90.0
100.7
68.5
122.5
90.0
100.7
68.5
(2.9)
(8.9)
11.3
(0.5)
383.0
383.0
114.9
-
5.1
(1.8)
3.3
275.8
275.8
82.7
(2.9)
(9.5)
12.2
(0.2)
338.3
338.3
101.5
-
(1.3)
(1.7)
(3.0)
238.2
238.2
71.5
9.5
8.3
6.6
4.8
(0.9)
123.5
(1.0)
122.5
(0.4)
90.6
(0.6)
90.0
(6.4)
101.7
(1.0)
100.7
(7.3)
69.0
(0.5)
68.5
(1) In the Bank, this includes the impact of dividends received from subsidiary Group members which are eliminated at a Group level and franking credits.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
59
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.3. INCOME TAX EXPENSE AND DEFERRED TAX (CONTINUED)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
Consolidated
Accruals
Capitalised expenditure
Provision for impairment
Other provisions
Equity reserves
Other
2014
$m
5.3
-
94.5
22.9
-
7.4
2013
$m
5.0
-
104.1
10.3
-
7.0
Tax assets / (liabilities)
130.1
126.4
Bank
Accruals
Capitalised expenditure
Provision for impairment
Other provisions
Equity reserves
Other
2.3
-
81.5
19.5
-
7.9
3.1
-
91.3
9.6
-
6.9
Tax assets / (liabilities)
111.2
110.9
2014
$m
-
(3.2)
-
-
(5.9)
(8.8)
(17.9)
-
(1.1)
-
-
(5.3)
(3.5)
(9.9)
2013
$m
-
(11.4)
-
-
(3.6)
(6.9)
(21.9)
-
(9.6)
-
-
(2.7)
(3.1)
(15.4)
2014
$m
5.3
(3.2)
94.5
22.9
(5.9)
(1.4)
112.2
2.3
(1.1)
81.5
19.5
(5.3)
4.4
101.3
2013
$m
5.0
(11.4)
104.1
10.3
(3.6)
0.1
104.5
3.1
(9.6)
91.3
9.6
(2.7)
3.8
95.5
Income tax - Accounting policy
Income tax expense comprises current and deferred tax. Income tax is recognised in profit or loss in the Income Statement except to the extent that it relates to
items recognised directly in equity, or other comprehensive income.
Current tax is the expected tax payable / receivable on the taxable income / loss for the year and any adjustment to the tax payable / receivable in respect of
previous years. It is measured using tax rates enacted or substantially enacted at the reporting date.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes.
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they 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.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantially
enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Consolidated Entity
expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
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.
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.
Any subsequent period amendments to deferred tax assets arising from unused tax losses as a result of revised assessment of the probability of recoverability is
recognised by the head entity only.
60
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.3. INCOME TAX EXPENSE AND DEFERRED TAX (CONTINUED)
Nature of tax funding and tax sharing arrangements
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 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 was fully amortised in the 31 August 2014 financial year.
2.4. EARNINGS PER SHARE
Basic Earnings Per Share (“EPS”) is calculated by dividing the relevant earnings by the average weighted number of shares on issue. Diluted EPS takes into
account the dilutive effect of all outstanding share rights vesting as ordinary shares.
Consolidated
Basic earnings per share - Ordinary shares (cents)
Diluted earnings per share - Ordinary shares (cents)
Earnings reconciliation
Net profit
Less other equity instrument dividends (1)
Basic earnings
Effect of PEPS (1)
Effect of distributions on CPS
Effect of convertible notes
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
Effect of PEPS
Effect of CPS
Effect of convertible notes
2014
cents
77.4
75.9
$m
260.5
-
260.5
-
16.4
-
2013 (2)
cents
57.6
56.5
$m
185.8
(2.7)
183.1
2.7
11.8
0.6
276.9
198.2
2014
Number
2013
Number
336,579,927
317,717,540
336,579,927
317,717,540
2,930,399
2,414,842
-
7,360,404
25,448,063
21,988,604
-
1,277,927
364,958,389
350,759,317
(1) PEPS distribution on an accrual basis.
(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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
61
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.5. DIVIDENDS
Bank
2014
2013
Cents per share
$m
Cents per share
$m
Ordinary shares
Final 2013 dividend paid 4 December 2013 (2012: 10 December 2012)
Interim 2014 dividend paid 23 May 2014 (2013: 27 May 2013)
Preference shares
Half-yearly CPS dividend paid on 15 April 2014 (2013: 15 April 2013)
Half-yearly CPS dividend paid on 15 October 2013 (2013: Nil)
Half-yearly PEPS dividend paid on 15 October 2012
Prorated PEPS dividend paid on 24 December 2012
Half-yearly PEPS dividend paid on 15 April 2013
30
32
269
286
-
-
-
All dividends paid on ordinary and preference shares have been fully franked at 100%.
95.9
103.2
199.1
8.1
8.6
-
-
-
16.7
26
28
177
-
217
69
179
Since the end of the financial year, the Directors have determined the following dividends:
Cents per share
- CPS half-yearly dividend
- Final – ordinary shares
30% franking credits available to shareholders of the Bank for subsequent financial years
275
34
2014
$m
131.8
Bank
80.2
88.5
168.7
5.3
-
4.3
1.3
0.3
11.2
$m
8.2
123.3
2013
$m
106.2
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 2014, is $131.8 million credit calculated at the 30% tax rate (2013: $106.2
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.
Dividend reinvestment plan
As resolved by the Board, The Bank of Queensland Dividend Reinvestment Plan (“DRP”) provides shareholders with the opportunity to convert all or part of their
entitlement to a dividend into new shares at a discount of 1.5%. The discount applied is 1.5% of the arithmetic average, rounded to four decimal places, of the
daily volume weighted average price of:
•
•
where shares are sold on trading platforms of Australian licensed financial markets operated by persons other than ASX, all shares sold in the ordinary
course of trading on such of those trading platforms determined by the Board from time to time,
all shares sold in the ordinary course of trading on the Australian Securities Exchange automated trading system; and
during the 10 trading day period commencing on the second trading day after the record date in respect of the relevant dividend. Shares issued or transferred
under the Plan will be fully-paid. If, after this calculation there is a residual balance, that balance will be carried forward (without interest) and added to the next
dividend for the purpose of calculating the number of shares secured under the DRP at that time.
The last date for election to participate in the DRP for 2014 final dividend is 7 November 2014.
62
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.6. SEGMENT REPORTING
Segment information
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. The Bank has determined and presented the following two segments based on information provided to the Chief Operating Decision Maker.
Banking
Retail banking, commercial, personal, small business loans, equipment, debtor finance, treasury, savings and transaction accounts.
Insurance
Consumer credit insurance, life insurance, accidental death insurance, funeral insurance and motor vehicle gap insurance.
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 2014 or 2013.
The Consolidated Entity’s business segments operate principally in Australia.
The following table presents income and profit and certain asset and liability information regarding the Bank’s operating segments.
Income
External
Inter-segment
Total operating income
Segment profit before income tax
Income tax expense
Segment profit after income tax
Results
Interest income
Interest expense
Depreciation and amortisation
Impairment losses
Assets
Liabilities
Banking
Insurance
Segment Total
2014
$m
2013 (1)
$m
2014
$m
2013 (1)
$m
2014
$m
2013 (1)
$m
897.4
4.5
901.9
351.8
113.1
238.7
2,112.0
1,351.2
23.5
86.2
46,834.4
43,528.9
816.5
5.7
822.2
248.7
81.9
166.8
2,297.4
1,604.3
27.8
114.6
42,438.1
39,657.4
41.2
(1.5)
39.7
31.2
9.4
21.8
-
-
-
-
39.4
(0.7)
38.7
27.1
8.1
19.0
-
-
-
-
125.8
86.1
122.9
82.7
938.6
3.0
941.6
383.0
122.5
260.5
2,112.0
1,351.2
23.5
86.2
46,960.2
43,615.0
855.9
5.0
860.9
275.8
90.0
185.8
2,297.4
1,604.3
27.8
114.6
42,561.0
39,740.1
(1) The prior year has been restated so that the amounts are comparable to the current year.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
63
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
2.6. SEGMENT REPORTING (CONTINUED)
The following table sets out the reconciliation between the operating segments and the consolidated entity:
Segment total
Elimination of inter-segment revenue
Consolidated total
Segment total
Elimination of inter-segment bank accounts
Adjustment for other consolidation eliminations
Consolidated total
(1) The prior year has been restated so that the amounts are comparable to the current year.
2014
$m
2013 (1)
$m
2014
$m
2013 (1)
$m
Revenue
Profit before tax
941.6
(3.0)
938.6
861.6
(5.7)
855.9
383.0
-
383.0
275.8
-
275.8
Assets
Liabilities
46,960.2
42,561.0
43,615.0
39,740.1
(55.1)
(0.5)
(33.9)
1.2
(55.1)
4.2
(33.9)
4.3
46,904.6
42,528.3
43,564.1
39,710.5
64
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
SECTION 3. CAPITAL AND BALANCE SHEET MANAGEMENT
3.1. CASH AND LIQUID ASSETS
Notes, coins and cash at bank
Remittances in transit
Consolidated
Bank
2014
$m
904.8
128.8
1,033.6
2013
$m
712.8
160.4
873.2
2014
$m
268.2
128.8
397.0
2013
$m
81.8
160.4
242.2
Notes to the statements of cash flows
Reconciliation of profit for the year to net cash provided by operating activities.
Profit from ordinary activities after income tax
260.5
185.8
237.6
169.7
Add / (less) items classified as investing / financing activities or
non-cash items
Depreciation
Amortisation
Dividends received from subsidiaries
Software amortisation
Investments equity accounted
Equity settled transactions
(Profit) / loss on sale of property, plant and equipment
(Increase) / decrease in due from other financial institutions
(Increase) / decrease in financial assets
Increase in loans and advances at amortised cost
(Increase) / decrease in derivatives
Decrease in provision for impairment
(Increase) / decrease 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
Decrease in accounts payable and other liabilities
Increase in current tax liabilities
Increase in provisions
Decrease in deferred tax liabilities
Decrease in insurance policy liabilities
Increase / (decrease) in borrowings including subordinated notes
Net cash from operating activities
Accounting policy
16.9
11.3
-
14.7
(3.2)
8.5
2.4
25.7
(269.2)
(619.8)
45.3
(22.4)
12.7
10.9
-
6.4
1,914.2
(17.3)
48.5
25.2
(17.8)
(9.5)
(986.5)
456.7
16.1
16.0
-
18.6
1.1
5.2
(3.2)
1.2
288.0
(741.6)
(25.4)
(100.5)
41.4
(16.7)
-
23.3
518.3
(75.2)
23.3
35.9
(18.8)
(1.0)
28.8
220.6
7.9
1.0
(21.5)
12.9
-
7.8
4.8
8.8
(97.3)
(499.6)
40.0
(44.4)
(1.7)
32.2
(772.2)
6.4
2,283.3
(12.9)
28.1
19.5
(4.0)
-
-
7.3
1.4
(23.3)
16.5
-
4.6
(0.1)
(0.3)
174.0
(741.5)
(25.3)
(95.1)
23.1
(1.8)
(212.3)
23.3
488.2
(75.3)
24.3
35.2
(11.5)
-
-
1,236.7
(218.9)
Cash and liquid assets comprise cash at branches, cash on deposit and balances with the Reserve Bank of Australia. 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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
65
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.2. DEPOSITS
Deposits at call
Term deposits
Certificates of deposit
Total
Concentration of deposits:
Retail deposits
Wholesale deposits
Total
3.3. FINANCIAL ASSETS
Held for trading
Floating rate notes and bonds
Negotiable certificates of deposit
Deposits at call
Bank accepted bills
Promissory notes
Available-for-sale
Debt instruments
Unlisted equity instruments
Consolidated
Bank
2014
$m
10,885.4
19,631.0
5,419.4
35,935.8
2013
$m
10,252.1
16,857.9
4,588.7
31,698.7
2014
$m
10,936.6
17,835.4
5,296.7
34,068.7
2013
$m
10,306.3
16,890.5
4,588.7
31,785.5
26,614.7
9,321.1
35,935.8
23,968.0
7,730.7
31,698.7
24,811.3
9,257.4
34,068.7
24,022.2
7,763.3
31,785.5
Consolidated
Bank
2014
$m
949.5
1,448.7
-
-
74.9
2013
$m
931.8
2,812.3
176.0
377.6
36.9
2014
$m
949.5
1,448.7
-
-
74.9
2013
$m
931.8
2,812.3
176.0
377.6
36.9
2,473.1
4,334.6
2,473.1
4,334.6
3,854.8
1,057.0
3,339.4
1,258.6
9.6
9.8
9.5
9.8
3,864.4
1,066.8
3,348.9
1,268.4
Total financial assets
6,337.5
5,401.4
5,822.0
5,603.0
66
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.4. LOANS AND ADVANCES AT AMORTISED COST
Consolidated
Bank
2014
$m
2013
$m
2014
$m
2013
$m
Residential property loans – secured by mortgages
19,284.5
18,577.0
19,124.9
18,577.0
Securitised residential property loans – secured by mortgages
7,224.1
7,571.9
7,223.3
7,571.9
Total residential property loans – secured by mortgages
26,508.6
26,148.9
26,348.2
26,148.9
Personal loans
Overdrafts
Commercial loans
Credit cards
Leasing finance
288.2
330.2
7,174.2
53.6
4,527.0
180.7
387.3
161.6
330.2
180.7
387.3
5,079.4
5,425.7
5,049.3
-
3,909.6
-
-
-
-
Gross loans and advances at amortised cost
38,881.8
35,705.9
32,265.7
31,766.2
Less:
Unearned lease finance income
Specific provision for impairment
Collective provision for impairment
(456.3)
(152.7)
(137.3)
(404.3)
(174.8)
(137.5)
-
(127.6)
(102.9)
-
(162.7)
(112.3)
Total loans and advances at amortised cost
38,135.5
34,989.3
32,035.2
31,491.2
Accounting policy
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 to the table below for impairment of loans and advances.
Provision for impairment
Consolidated
Bank
Specific provision:
Balance at the beginning of the year
Add: Expensed during the year
Acquired during the year
Less: Bad debts written off net of recoveries
Transfers from collective provision
Unwind of discount
Balance at the end of the year
Collective provision:
Balance at the beginning of the year
Add: Released during the year
Acquired during the year
Impairment losses provided for / (written off)
Transfers to specific provision
Balance at the end of the year
2014
$m
174.8
93.5
7.6
(115.7)
2.5
(10.0)
152.7
137.5
(7.3)
6.9
2.7
(2.5)
137.3
2013
$m
220.3
151.6
-
(195.1)
14.5
(16.5)
174.8
192.6
(37.0)
-
(3.6)
(14.5)
137.5
2014
$m
162.7
69.6
-
(97.6)
2.5
(9.6)
127.6
112.3
(6.8)
-
(0.1)
(2.5)
102.9
2013
$m
204.3
122.6
-
(162.8)
14.5
(15.9)
162.7
165.8
(35.4)
-
(3.6)
(14.5)
112.3
Total provisions for impairment
290.0
312.3
230.5
275.0
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
67
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.4. LOANS AND ADVANCES AT AMORTISED COST (CONTINUED)
Transfer of financial assets
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”). Refer to Section 6.10 (a)(ii) for further information.
The following table sets out the transferred financial assets that did not qualify for derecognition and associated liabilities from conducting the securitisation
program.
Transferred financial assets
Loans and advances at amortised cost
Lease receivables
Associated financial liabilities
Securitisation liabilities - external investors
Amounts due to controlled entities
Consolidated
Bank
2014
$m
4,751.6
613.2
5,364.8
2013
$m
4,564.5
899.1
5,463.6
2014
$m
2013
$m
4,250.1
4,564.5
-
-
4,250.1
4,564.5
5,516.3
5,836.0
-
-
5,516.3
5,836.0
-
4,367.9
4,367.9
-
4,865.8
4,865.8
For those liabilities that have recourse only to transferred assets:
Fair value of transferred assets
Fair value of associated liabilities
Net Position
5,378.5
5,497.3
4,259.0
4,575.5
(5,516.3)
(5,836.0)
(4,367.9)
(4,865.8)
(137.8)
(338.7)
(108.9)
(290.3)
Lease receivables
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.
Consolidated
Bank
2014
$m
1,679.3
2,758.9
88.8
4,527.0
(456.3)
4,070.7
1,478.6
2,539.4
52.7
2013
$m
1,572.6
2,312.1
24.9
3,909.6
(404.3)
3,505.3
1,370.0
2,112.6
22.7
4,070.7
3,505.3
2014
$m
2013
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Gross investment in finance lease receivables:
Less than one year
Between one and five years
More than five years
Unearned lease 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
68
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.5. 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
$m
Convertible
Preference
Shares (2)
$m
Syndicated
Loan
$m
Total
$m
Year ended 31 August 2014
Balance at beginning of year
Acquired during the year (3)
Proceeds from issues
Repayments
Deferred establishment costs
Amortisation of deferred costs
Foreign exchange translation
5,824.1
667.2
759.6
(1,744.5)
(1.5)
7.1
(2.1)
Balance at end of the year
5,509.9
96.3
-
65.1
(93.8)
-
-
(3.0)
64.6
430.4
-
628.0
(717.9)
-
-
(21.6)
318.9
270.2
76.8
-
(0.4)
-
-
-
292.8
223.1
7,136.9
-
-
-
-
1.6
-
-
-
744.0
1,452.7
(220.6)
(2,777.2)
-
0.4
(2.9)
-
(1.5)
9.1
(29.6)
6,534.4
346.6
294.4
Securitisation
liabilities (1)
$m
EMTN
Program
$m
ECP
Program
$m
Borrowings
including
subordinated
notes
$m
Convertible
Preference
Shares (2)
$m
Syndicated
Loan
$m
Total
$m
Year ended 31 August 2013
Balance at beginning of year
Proceeds from issues
Exchange to CPS
Repayments
Deferred establishment costs
Amortisation of deferred costs
Foreign exchange translation
(3,461.0)
(11.0)
(1,341.4)
(229.9)
5,792.6
3,395.8
-
33.0
63.8
-
169.6
1,535.6
-
(8.6)
5.5
99.8
-
-
10.5
96.3
-
-
66.6
430.4
500.1
-
192.8
-
-
-
-
-
119.9
180.1
-
(8.1)
0.9
-
-
-
-
-
0.8
29.5
6,688.1
5,115.1
180.1
(5,043.3)
(16.7)
7.2
206.4
Balance at end of the year
5,824.1
270.2
292.8
223.1
7,136.9
(1) 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.
(2) 3,000,000 Convertible Preference Shares (CPS) were issued on 24 December 2012. CPS are fully-paid, perpetual, convertible, unguaranteed and unsecured preference shares with preferred, discretionary,
non-cumulative dividends. CPS will mandatorily convert into ordinary shares on 15 April 2020. The Bank is entitled to convert, redeem or transfer some or all of the CPS on the optional conversion / redemption
date of 15 April 2018 subject to the prior written approval from the Australian Prudential Regulation Authority (“APRA”). The Bank is also entitled to convert, redeem or transfer some or all of the CPS on the
occurrence of a regulatory event or tax event and in addition, conversion of the CPS into ordinary shares must occur immediately following the occurrence of a capital trigger event or a non-viability trigger event.
CPS rank for payment of capital ahead of ordinary shareholders, equally with other securities or instruments ranking equally with CPS, but behind all other securities or instruments ranking ahead of CPS, and
behind all depositors and other creditors.
(3) Borrowings acquired during the year relate to the acquisition of BOQ Specialist Bank Limited formerly Investec Bank (Australia) Limited.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
69
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.5. BORROWINGS INCLUDING SUBORDINATED NOTES (CONTINUED)
The Bank recorded the following movements on borrowings including subordinated notes:
EMTN
Program
$m
ECP
Program
$m
Borrowings including
subordinated notes (1)
$m
Convertible
Preference
Shares (2)
$m
Syndicated
Loan
$m
Year ended 31 August 2014
Balance at beginning of year
Proceeds from issues
Repayments
Amortisation of deferred costs
Foreign exchange translation
Balance at end of the year
Year ended 31 August 2013
Balance at beginning of year
Proceeds from issues
Exchange to CPS
Repayments
Deferred establishment costs
Amortisation of deferred costs
Foreign exchange translation
Balance at end of the year
96.3
65.1
430.4
628.0
(93.8)
(717.9)
-
(3.0)
64.6
-
(21.6)
318.9
(220.6)
(1,032.5)
292.8
223.1
-
-
1.6
-
-
0.4
(2.9)
-
270.0
294.4
EMTN
Program
$m
ECP
Program
$m
Borrowings including
subordinated notes (1)
$m
Convertible
Preference
Shares (2)
$m
Syndicated
Loan
$m
(11.0)
(1,341.4)
(229.7)
33.0
63.8
-
169.6
1,535.6
-
-
-
10.5
96.3
-
-
66.6
430.4
499.9
-
192.8
119.9
180.1
-
(8.1)
0.9
-
-
-
-
-
0.8
29.5
270.2
292.8
223.1
1,312.8
270.2
-
(0.2)
-
-
-
-
-
-
-
Total
$m
1,312.8
693.1
2.0
(27.5)
947.9
Total
$m
895.3
1,719.3
180.1
(1,582.1)
(8.1)
1.7
106.6
(1) Convertible Notes were issued 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, sub-
ject to a solvency condition, a monthly coupon equal to the 30 day bank bill rate plus 400 basis points. The Convertible Notes are unlisted with the final Tranche being Tranche 1, redeemed during the prior financial year.
(2) 3,000,000 Convertible Preference Shares (CPS) were issued on 24 December 2012. CPS are fully-paid, perpetual, convertible, unguaranteed and unsecured preference shares with preferred, discretionary, non-cumu-
lative dividends. CPS will mandatorily convert into ordinary shares on 15 April 2020. The Bank is entitled to convert, redeem or transfer some or all of the CPS on the optional conversion / redemption date of 15 April
2018 subject to the prior written approval from the Australian Prudential Regulation Authority (“APRA”). The Bank is also entitled to convert, redeem or transfer some or all of the CPS on the occurrence of a regulatory
event or tax event and in addition, conversion of the CPS into ordinary shares must occur immediately following the occurrence of a capital trigger event or a non-viability trigger event. CPS rank for payment of capital
ahead of ordinary shareholders, equally with other securities or instruments ranking equally with CPS, but behind all other securities or instruments ranking ahead of CPS, and behind all depositors and other creditors.
3.6. 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.
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.
2.
3.
4.
5.
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.
70
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
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. Credit
3. Liquidity
4.
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 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.
The figures in the table below indicate the potential increase in net interest income for an ensuing 12 month period of a 1% parallel shock increase to the yield
curve. A 1% decrease in the yield curve has an equal but opposite impact.
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
(ii) Foreign exchange risk
2014
%
1.16
1.19
2.16
(0.03)
2013
%
0.90
0.78
1.41
0.16
2014
$m
8.6
8.8
15.9
(0.2)
2013
$m
6.2
5.4
9.7
1.1
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.
(iii) Traded market risk
Market risks attributable to trading activities are primarily measured using a parametric Value-at-Risk (“VaR”) based on historical data. The Bank 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 2 years 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 on historical data may prove insufficient to predict the severity of possible outcomes; and
• 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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
71
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(iii) Traded market risk (continued)
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, foreign exchange, credit and equity sensitivities are monitored and measured against limits delegated
by the Asset-Liability Committee (“ALCO”).
The portfolio (interest rate, foreign exchange, credit and equity) VaR for the Bank’s trading portfolio for the year was as follows:
Trading VaR
Average
Maximum
Minimum
(b) Credit risk
2014
$m
0.65
1.33
0.28
2013
$m
0.80
1.67
0.35
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;
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 used for these purposes 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 the reporting date.
72
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
Maximum exposure to credit risk (continued)
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)
Consolidated
Bank
2014
$m
1,033.6
92.8
6,398.7
160.3
7,685.4
38,881.8
46,567.2
1,897.9
2013
$m
873.2
118.5
5,462.5
260.4
6,714.6
35,705.9
42,420.5
1,470.3
2014
$m
397.0
15.0
5,881.9
131.9
6,425.8
32,265.7
38,691.5
1,024.4
2013
$m
242.2
23.8
5,662.6
234.0
6,162.6
31,766.2
37,928.8
921.7
Total potential exposure to credit risk
48,465.1
43,890.8
39,715.9
38,850.5
(1) Refer to Note Section 6.2 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
Consolidated
Bank
2014
$m
2013
$m
2014
$m
2013
$m
37,459.1
33,958.4
31,003.7
7,685.4
6,714.6
6,425.8
30,134.1
6,162.6
Gross loans and advances at amortised cost
1,129.8
1,365.9
999.0
1,269.7
Impaired
Gross loans and advances at amortised cost
292.9
381.6
263.0
362.4
46,567.2
42,420.5
38,691.5
37,928.8
There is no individual exposure included in impaired assets which exceeds 5% of shareholders’ equity (2013: 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.
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 outlined below.
It is not practicable to determine the fair value of collateral held against performing loans.
Held against past due but not impaired assets
Held against impaired assets
Consolidated
Bank
2014
$m
1,593.2
202.3
2013
$m
1,679.0
260.4
2014
$m
1,485.8
186.0
2013
$m
1,608.1
252.1
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
73
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
Credit quality
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
2014
$m
2013
$m
Gross loans and advances
Gross loans and advances
Total
loans and
advances
Financial
assets other
than loans
and advances
Retail
Commercial
Total
loans and
advances
Financial
assets other
than loans
and advances
Retail
Commercial
22,770.8
2,980.0
25,750.8
7,675.8
22,172.9
2,231.4
24,404.3
6,704.8
3,539.6
7,367.6
10,907.2
412.4
404.2
1,366.8
1,779.2
40.4
444.6
-
9.6
-
3,618.4
457.4
468.3
5,173.0
1,553.4
31.1
8,791.4
2,010.8
499.4
-
9.8
-
27,127.0
11,754.8
38,881.8
7,685.4
26,717.0
8,988.9
35,705.9
6,714.6
Bank
2014
$m
2013
$m
Gross loans and advances
Gross loans and advances
Total
loans and
advances
Financial
assets other
than loans
and advances
Retail
Commercial
Total
loans and
advances
Financial
assets other
than loans
and advances
Retail
Commercial
22,610.5
1,540.0
24,150.5
6,293.9
22,172.9
1,525.3
23,698.2
5,932.1
3,412.9
3,254.9
412.4
404.2
590.4
40.4
6,667.8
1,002.8
444.6
80.8
51.1
-
3,618.3
2,783.7
457.4
468.3
709.2
31.1
6,391.7
1,208.0
468.3
142.3
88.2
-
26,840.0
5,425.7
32,265.7
6,425.8
26,716.9
5,049.3
31,766.2
6,162.6
High Grade
Satisfactory
Weak
Unrated (1)
High Grade
Satisfactory
Weak
Unrated (1)
(1) Those items that remain unrated for gross loans and advances represent mainly 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.
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.
- Retail
- Commercial
- Retail
- Commercial
- Retail
- Commercial
Less than 30 days
31 to 90 days
More than 90 days
74
ANNUAL REPORT 2014
Consolidated
Bank
2014
$m
445.3
228.8
174.2
60.3
145.6
75.6
2013
$m
611.4
231.5
176.2
76.0
152.2
118.6
1,129.8
1,365.9
2014
$m
445.3
129.7
174.2
34.2
145.7
69.9
999.0
2013
$m
611.4
159.8
176.2
56.5
152.2
113.6
1,269.7
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
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 the report-
ing date is shown below:
Geographical concentration of credit risk for loans and advances at amortised cost
(before provisions and unearned income):
2014
$m
2013
$m
2014
$m
2013
$m
Consolidated
Bank
Queensland
New South Wales
Victoria
Northern Territory
Australian Capital Territory
Western Australia
South Australia
Tasmania
International (New Zealand)
20,911.8
20,580.5
18,899.3
19,169.4
6,903.8
6,185.2
260.4
313.8
5,387.8
5,659.0
237.2
347.2
4,948.9
4,854.0
255.6
241.2
4,517.2
4,849.3
231.7
227.0
3,519.3
2,885.1
2,778.0
2,458.7
369.7
182.9
234.9
213.8
196.9
198.4
110.7
178.0
-
120.3
192.6
-
38,881.8
35,705.9
32,265.7
31,766.2
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
75
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk
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, matching
maturity profiles of financial assets and liabilities and liquidity scenario analysis.
Consolidated
2014
Financial liabilities
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
Policyholder
$m
Due to other financial institutions
207.5
207.5
-
-
-
Deposits
35,935.8
12,301.2
12,969.3
8,371.0
2,917.8
Derivative financial instruments (1)
5.0
Accounts payable and other
liabilities
Securitisation liabilities (2)
Borrowings including
subordinated notes
Insurance policy liabilities
399.1
5,509.9
1,024.5
63.0
-
-
-
-
-
1.9
399.1
932.7
69.7
-
1.8
-
2.0
-
1,692.6
2,549.4
871.4
347.6
723.7
-
-
-
-
Total
43,144.8
12,508.7
14,372.7
10,413.0
6,192.9
888.2
-
16.8
-
-
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
2013
Financial liabilities
-
-
112.6
-
-
-
419.7
(408.3)
11.4
774.3
(737.3)
37.0
826.7
(724.8)
101.9
396.2
(321.4)
74.8
-
-
-
252.2
1,645.7
1,897.9
-
-
-
-
-
-
-
-
-
-
-
-
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
Policyholder
$m
Due to other financial institutions
201.1
201.1
-
-
-
Deposits
31,698.7
10,310.4
13,627.5
6,601.0
1,657.9
Derivative financial instruments (1)
3.4
Accounts payable and other
liabilities
Securitisation liabilities (2)
Borrowings including
subordinated notes
Insurance policy liabilities
362.0
5,824.1
1,312.8
72.5
-
-
-
-
-
1.4
362.0
868.4
1.2
-
1.1
-
1,087.7
3,379.9
1,227.7
313.7
474.5
672.6
-
-
-
-
-
-
-
-
-
Total
39,474.6
10,511.5
15,173.0
8,164.4
5,711.5
1,227.7
(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.
76
ANNUAL REPORT 2014
Total
contractual
cash flows
$m
207.5
36,576.1
5.7
399.1
6,046.1
1,141.0
63.0
44,438.5
2,416.9
(2,191.8)
225.1
252.2
1,645.7
1,897.9
Total
contractual
cash flows
$m
201.1
32,196.8
3.7
362.0
6,563.7
1,460.8
72.5
40,860.6
-
-
-
-
-
-
63.0
63.0
-
-
-
-
-
-
-
-
-
-
-
-
72.5
72.5
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
-
-
-
-
-
-
Total
contractual
cash flows
$m
2,102.1
(2,143.4)
(41.3)
235.7
1,234.6
1,470.3
Total
contractual
cash flows
$m
207.5
34,655.7
5.7
336.4
1,056.3
1,224.1
37,485.7
Carrying
amount
$m
-
-
(103.3)
-
-
-
Consolidated
2013
Derivative financial
instruments (hedging
relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and
letters of credit
Customer funding commitments
Bank
2014
Financial liabilities
235.7
1,234.6
1,470.3
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
Policyholder
$m
-
-
-
485.7
(533.7)
(48.0)
772.4
(802.1)
(29.7)
620.0
(582.0)
38.0
224.0
(225.6)
(1.6)
-
-
-
-
-
-
-
-
-
-
-
-
At Call
$m
3 mths or less
$m
3 to 12 mths
$m
1 to 5 years
$m
Over 5 years
$m
Due to other financial institutions
207.5
207.5
-
-
-
Deposits
34,068.7
12,333.8
11,925.3
7,705.7
2,690.9
Derivative financial instruments (1)
Accounts payable and other liabilities
Borrowings including subordinated notes
5.0
336.4
947.9
-
-
-
Amounts due to controlled entities
1,224.1
1,224.1
1.9
336.4
68.3
-
1.8
-
2.0
-
324.2
663.8
-
-
Total
36,789.6
13,765.4
12,331.9
8,031.7
3,356.7
-
-
-
-
-
-
-
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and letters of credit
Customer funding commitments
-
-
100.3
-
-
-
309.7
(314.8)
(5.1)
709.2
(677.8)
31.4
696.5
(618.1)
78.4
207.9
1,923.3
(116.8)
(1,727.5)
91.1
195.8
-
-
-
227.7
796.7
1,024.4
-
-
-
-
-
-
-
-
-
-
-
-
227.7
796.7
1,024.4
(1) Derivative financial instruments other than those designated in a cashflow hedge relationship.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
77
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
Bank
2013
Financial liabilities
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
Due to other financial institutions
201.1
201.1
-
-
-
Deposits
31,785.5
10,397.2
13,627.5
6,601.0
1,657.9
Derivative financial instruments (1)
Accounts payable and other liabilities
Borrowings including subordinated notes
Amounts due to controlled entities
3.4
320.7
1,312.8
2,457.5
-
-
-
2,457.5
1.4
320.7
313.7
-
1.2
-
1.1
-
474.5
672.6
-
-
Total
36,081.0
13,055.8
14,263.3
7,076.7
2,331.6
-
-
-
-
-
-
-
Total
contractual
cash flows
$m
201.1
32,283.6
3.7
320.7
1,460.8
2,457.5
36,727.4
Derivative financial instruments
(hedging relationship)
Contractual amounts payable
Contractual amounts receivable
Off balance sheet positions
Guarantees, indemnities and letters of credit
Customer funding commitments
-
-
(101.6)
-
-
-
457.3
(507.8)
(50.5)
699.8
(738.5)
(38.7)
420.3
(418.5)
1.8
18.2
(11.4)
6.8
1,595.6
(1,676.2)
(80.6)
-
-
-
235.7
686.0
921.7
-
-
-
-
-
-
-
-
-
-
-
-
235.7
686.0
921.7
(1) Derivative financial instruments other than those designated in a cashflow hedge relationship.
78
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.6. RISK MANAGEMENT (CONTINUED).
(d) 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 subsidiaries issue consumer credit insurance, term life insurance, group life insurance, accidental death insurance and motor vehicle gap
insurance contracts. The performance of the Bank’s insurance subsidiaries and its continuing ability to write business depends on its ability to pre-empt and
control risks. The Bank’s insurance subsidiaries have a risk management strategy which has been approved by their respective Board’s. It summarises the
approach to risk and risk management.
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.
Prudential capital requirements
Prudential capital requirements established by the APRA are in place to safeguard policyholders’ interests, which are primarily the ability to meet future claim
payments to policyholders. These require the Company’s Capital Base to exceed the Prudential Capital Requirement throughout the year, not just at year end. The
level of capital requirements also take into account specific risks faced by the Bank’s insurance subsidiaries.
(iii) Methods to limit or transfer insurance risk exposures
Reinsurance
The insurance subsidiary uses reinsurance arrangements to pass on or cede to reinsurers, risks that are outside of the subsidiary’s risk appetite.
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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
79
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.7. FINANCIAL INSTRUMENTS
(a) Financial instrument classifications
In addition to Loans and Advances and financial liabilities at amortised cost the Bank classifies its financial instruments into one of the following four categories
upon initial recognition:
(i) Financial assets held for trading
Financial assets that are held as part of the Bank’s Trading Book (refer Section 3.3) 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 Income Statement 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 Income Statement.
(ii) Available-for-sale financial assets
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 section 3.4), being recognised in other comprehensive income and accumulated in reserves in equity 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 in the
Income Statement.
(iii) 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.
(iv) Derivative financial instruments
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. Refer to Section 3.8 for further information on Derivative Financial Instruments.
(b) Fair value of financial instruments
The financial assets and liabilities listed below are recognised and measured at fair value and therefore their carrying value equates to their face value:
Available-for-sale financial assets;
Financial assets and liabilities designated at fair value through the profit and loss;
•
•
•
•
The fair value estimates for instruments carried at amortised cost are based on the following methodologies and assumptions:
Insurance policy liabilities.
Derivatives; and
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 the reporting date for similar types
of loans and advances, if the loans and advances were performing at the reporting 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.
80
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.7. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Comparison of fair value to carrying amounts
The table below discloses the fair value of financial instruments where their carrying value is not a reasonable approximation of their fair value :
Assets carried at amortised cost
Loans and advances at amortised cost
Liabilities carried at amortised cost
Deposits
Borrowings including subordinated notes
Assets carried at amortised cost
Loans and advances at amortised cost
Liabilities carried at amortised cost
Deposits
Borrowings including subordinated notes
Consolidated Entity
Carrying value
Fair value
2014
$m
38,135.5
38,135.5
(35,935.8)
(6,534.4)
(42,470.2)
2013
$m
34,989.3
34,989.3
(31,698.7)
(7,136.9)
(38,835.6)
2014
$m
38,197.2
38,197.2
(35,950.1)
(6,539.0)
(42,489.1)
Bank
Carrying Value
Fair Value
2014
$m
32,035.2
32,035.2
(34,068.7)
(947.9)
(35,016.6)
2013
$m
31,491.2
31,491.2
(31,785.5)
(1,312.8)
(33,098.3)
2014
$m
32,068.2
32,068.2
(34,083.0)
(952.2)
(35,035.2)
2013
$m
35,104.7
35,104.7
(31,766.7)
(7,168.7)
(38,935.4)
2013
$m
31,540.8
31,540.8
(31,853.5)
(1,344.6)
(33,198.1)
Section
3.4
3.2
3.5
3.4
3.2
3.5
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 Group’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
2014
2013
2.53% - 3.95%
2.51% - 4.58%
6.12% - 20.3%
6.24% - 13.5%
4.65% - 7.30%
4.75% - 6.85%
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
81
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.7. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Fair value hierarchy
The Consolidated Entity measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements:
• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
• Level 2: inputs other than quoted prices included within level 1 that are observable either directly or indirectly.
• Level 3: inputs that are unobservable i.e. there is no observable market data.
The table below analyses financial instruments carried at fair value, by valuation method. There were no material movements in Level 3 during the year.
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
Level 1
$m
1,893.0
-
-
1,893.0
-
1,893.0
Level 1
$m
426.2
134.2
-
560.4
-
560.4
2014
Level 3
$m
9.6
-
-
9.6
-
9.6
2013
Level 3
$m
9.8
-
-
9.8
-
9.8
Level 2
$m
1,961.8
2,473.1
160.3
4,595.2
(248.7)
4,346.5
Level 2
$m
630.8
4,200.4
260.4
5,091.6
(137.4)
4,954.2
Total
$m
3,864.4
2,473.1
160.3
6,497.8
(248.7)
6,249.1
Total
$m
1,066.8
4,334.6
260.4
5,661.8
(137.4)
5,524.4
The fair value hierarchy classification of instruments in Section 3.7 (c) is Loans and advances level 3, Deposits and Borrowings including subordinated notes level 2.
82
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.7. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Fair value hierarchy (continued)
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
(e) Master netting or similar arrangements
Level 1
$m
1,254.6
-
-
1,254.6
-
1,254.6
Level 1
$m
426.2
134.2
-
560.4
-
560.4
2014
Level 3
$m
9.5
-
-
9.5
-
9.5
2013
Level 3
$m
9.8
-
-
9.8
-
9.8
Level 2
$m
2,084.8
2,473.1
131.9
4,689.8
(207.0)
4,482.8
Level 2
$m
832.4
4,200.4
234.0
5,266.8
(109.5)
5,157.3
Total
$m
3,348.9
2,473.1
131.9
5,953.9
(207.0)
5,746.9
Total
$m
1,268.4
4,334.6
234.0
5,837.0
(109.5)
5,727.5
There have been no financial assets or financial liabilities offset in the balance sheets. The Consolidated Entity has netting arrangements in place with counter
parties on Derivative Financial Instruments and the effects of these netting arrangements if they were to be applied in the balance sheets has been disclosed at
Section 3.8(c).
(f) Impairment of financial instruments policy
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 Income Statement - is reclassified from equity and recognised
in profit or loss in the Income Statement as a reclassification adjustment. Impairment losses recognised in profit or loss in the Income Statement on equity
instruments classified as available-for-sale are not reversed through the profit or loss in the Income Statement.
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 of loss in the income statement.
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 in the Income Statement.
(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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
83
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.7. FINANCIAL INSTRUMENTS (CONTINUED)
(f) Impairment of financial instruments policy (continued)
(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 Income
Statement.
3.8. DERIVATIVE FINANCIAL INSTRUMENTS
(a) Accounting for derivatives
The Consolidated Entity and Bank used derivative financial instruments for both hedging and trading purposes in the current year. Refer to Section 3.6(a) for an
explanation of the Consolidated Entity’s and Bank’s risk management framework.
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 Income Statement. However, when derivatives qualify for hedge accounting, recognition
of any resultant gain or loss depends on the nature of the hedge relationship as 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 reporting 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 reporting date, being the present value of the quoted forward price. The fair value of futures contracts is their quoted market price.
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 and accumulated in
reserves in equity. The ineffective portion of any gain or loss is recognised immediately in profit or loss in the Income Statement. 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 Income Statement in the same period or periods in which the asset acquired or liability assumed
affects the Income Statement (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 Income Statement.
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 Income Statement within other income or other expenses.
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 Income Statement and are included in other income. The Bank has not designated any hedges as fair value hedges.
(b) Fair value of derivatives
The following table summarises the notional and fair value of the Consolidated Entity’s and Bank’s commitments to derivative financial instruments at reporting
date. Fair value in relation to derivative financial instruments is estimated using net present value techniques. The table on the following page set out the fair values
of the derivative financial instruments at 31 August 2014.
84
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(b) Fair value of derivatives (continued)
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
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
Consolidated
2014
Fair Value
2013
Fair Value
Asset / (Liability)
Notional Amount
Asset / (Liability)
Asset
$m
Liability
$m
$m
Asset
$m
Liability
$m
23.9
1.0
4.6
29.5
99.3
29.7
1.5
130.5
0.3
160.3
(11.4)
(1.3)
-
(12.7)
(173.7)
(44.3)
(17.9)
(235.9)
18,519.9
72.4
8,300.0
26,892.3
22,857.4
914.5
455.6
24,227.5
-
15.5
(248.7)
51,135.3
18.8
1.5
5.8
26.1
143.6
57.4
33.1
234.1
0.2
260.4
(2.5)
(0.9)
-
(3.4)
(94.6)
(38.5)
(0.9)
(134.0)
-
(137.4)
Bank
2014
Fair Value
2013
Fair Value
Asset / (Liability)
Notional Amount
Asset / (Liability)
Asset
$m
Liability
$m
$m
Asset
$m
Liability
$m
23.9
2.3
4.6
30.8
99.3
0.3
1.5
101.1
131.9
(3.7)
(1.3)
-
(5.0)
18,519.9
87.9
8,300.0
26,907.8
(173.8)
22,857.4
(10.3)
(17.9)
(202.0)
(207.0)
377.3
455.6
23,690.3
50,598.1
18.8
1.7
5.8
26.3
143.6
31.0
33.1
207.7
234.0
(2.5)
(0.9)
-
(3.4)
(94.6)
(10.6)
(0.9)
(106.1)
(109.5)
Notional
Amount
$m
21,491.2
261.3
12,720.0
34,472.5
29,512.5
577.6
387.1
30,477.2
17.4
64,967.1
Notional
Amount
$m
20,915.8
422.8
12,720.0
34,058.6
29,512.5
159.0
387.1
30,058.6
64,117.2
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
85
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.8 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(c) Master netting or similar arrangements
The Consolidated Entity enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements. Amounts owed
by each counterparty are aggregated into a single net amount that is payable by one party to another. The Consolidated Entity has not offset these amounts in the
Balance Sheets and the following table sets out the effect of netting arrangements on derivative financial assets and derivative financial liabilities if they were to
be applied. The Consolidated Entity normally settles on a net basis or realises the derivative assets and liabilities simultaneously.
The Consolidated Entity receives and gives collateral in the form of cash in respect of derivatives and such collateral is subject to standard industry terms.
Derivative financial assets
Derivative financial liabilities
Derivative financial assets
Derivative financial liabilities
2014
Gross amounts as
presented in the
Balance Sheets
Net amounts of
recognised assets
and liabilities offset
Cash collateral
Net amounts if
offsetting applied in
the balance sheets
160.3
(248.7)
(84.0)
84.0
-
51.2
76.3
(113.5)
2013
Gross amounts as
presented in the
Balance Sheets
Net amounts of
recognised assets
and liabilities offset
Cash collateral
Net amounts if
offsetting applied in
the balance sheets
260.4
(137.4)
(71.5)
71.5
-
-
188.9
(65.9)
86
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.9. CAPITAL MANAGEMENT
The Bank and Consolidated Entity’s capital management strategy aims to ensure adequate capital levels are maintained to protect deposit holders and to maximise
shareholder return. The Bank’s capital is measured and managed in line with Prudential Standards issued by APRA. The capital management plan is updated
annually and submitted to the Board for approval. The approval process is designed to ensure the plan is consistent with the overall business plan and for managing
capital levels on an ongoing basis.
The Board has set the Common Equity Tier 1 capital target range to be between 8.0% and 9.0% of risk weighted assets and the total capital range to be between
11.5% and 12.5% of risk weighted assets. As at August 2014:
• Common Equity Tier 1 capital was 8.6%; and
• Total capital adequacy ratio was 12.0%.
Qualifying capital
Common Equity Tier 1 Capital
Paid-up ordinary share capital
Reserves
Retained profits, including current year profits
Total Common Equity Tier 1 Capital
Regulatory adjustments
Deferred expenditure
Goodwill and intangibles
Other deductions
Total Regulatory adjustments
Net Common Equity Tier 1 Capital
Additional Tier 1 Capital
Net Tier 1 Capital
Tier 2 Capital
Tier 2 Capital
General Reserve for Credit Losses
Net Tier 2 Capital
Capital Base
Risk Weighted Assets
Capital Adequacy Ratio
Prepared in accordance with APS 110.
Consolidated
2014
$m
2013
$m
3,020.6
2,562.6
58.0
207.0
41.7
149.6
3,285.6
2,753.9
(122.1)
(824.6)
(177.6)
(1,124.3)
2,161.3
300.0
2,461.3
340.2
207.4
547.6
(124.5)
(586.8)
(182.0)
(893.3)
1,860.6
300.0
2,160.6
270.0
207.7
477.7
3,008.9
2,638.3
25,031.7
21,551.7
12.0%
12.2%
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
87
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.10. CAPITAL AND RESERVES
(a) Ordinary 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.
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 thy 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.
Consolidated
Bank
2014
Number
2013
Number
2014
Number
2013
Number
Movements during the year
Balance at the beginning of the year – fully paid
319,810,294
308,797,525
319,810,294
308,797,525
Dividend reinvestment plan
5,437,296
7,809,654
5,437,296
7,809,654
Virgin Money (Australia) Pty Limited acquisition (1)
-
3,203,115
-
3,203,115
BOQ Specialist Bank Limited (2)
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
37,269,245
-
37,269,245
-
362,516,835
319,810,294
362,516,835
319,810,294
162,371
135,208
297,579
867,293
29,851
304,580
(704,922)
(29,851)
(274,729)
162,371
-
29,851
(1) In the prior year, the Bank acquired 100% of Virgin Money (Australia) Pty Limited for $42.6m. $30.6 million of new shares were issued in two tranches (Tranche 1 - 1,585,353 and Tranche 2 - 1,617,762) as part of the
acquisition consideration. Fair value of the ordinary shares issued was based on the listed share price of BOQ at 30 April 2013 of $10.24 per share.
(2) On 31 July 2014, the Bank acquired 100% of BOQ Specialist Bank Limited formerly Investec Bank (Australia) Limited. $210 million of the consideration was financed through the issue of new shares by way of
Institutional Entitlement and Retail Entitlement offers.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as determined 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 preference shareholders and creditors and are fully entitled to any residual proceeds of
liquidation.
(b) Perpetual Equity Preference Shares (“PEPS”)
Preference shares
Preference share capital is classified as equity if it is non-redeemable. 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. Dividends thereon are recognised as interest expense in the
Income Statement as accrued.
Balance at beginning of the year – fully paid
Balance at end of the year – fully paid
Consolidated
Bank
2014
Number
-
-
2013
Number
2,000,000
-
2014
Number
-
-
2013
Number
2,000,000
-
On 15 April 2013, the Bank redeemed the 198,661 remaining PEPS on issue in accordance with the PEPS terms of issue. The remaining PEPS were redeemed
at the redemption price of $100 per PEPS plus the final PEPS dividend paid on 15 April 2013.
88
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
3.10. 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 Section 6.1 for further details of these plans.
Equity reserve for credit losses
Refer to significant accounting policies Section 6.10 (h).
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 Section 3.7 (a)(ii) 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 Section 3.8 (a). Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
89
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
SECTION 4. OTHER ASSETS AND LIABILITIES
4.1. INTANGIBLE ASSETS
Consolidated
Customer
related
intangibles
and brands
$m
Computer
software
$m
Goodwill
$m
Cost
Balance as at 1 September
2012
Additions
Disposals
444.4
107.4
203.8
43.6
-
-
-
29.0
(2.0)
Balance as at 31 August
2013
488.0
107.4
230.8
488.0
107.4
230.8
213.7
-
-
-
50.7
(5.4)
Bank
Other
$m
Total
$m
Goodwill
$m
Customer
contracts
$m
Computer
software
$m
Other
$m
Total
$m
7.4
2.1
-
9.5
9.5
1.0
-
763.0
8.1
5.0
191.0
74.7
(2.0)
-
-
-
-
28.6
(0.6)
835.7
8.1
5.0
219.0
835.7
265.4
(5.4)
8.1
5.0
219.0
-
-
-
-
46.9
(4.1)
Balance as at 1 September
2013
Additions
Disposals
Balance as at 31 August
2014
Amortisation and impair-
ment losses
Balance as at 1 September
2012
Amortisation for the year
Balance as at 31 August
2013
Balance as at 1 September
2013
Amortisation for the year
Disposals
Balance as at 31 August
2014
Carrying amounts
Carrying amount as at 1
September 2012
Carrying amount as at 31
August 2013
Carrying amount as at 31
August 2014
90
ANNUAL REPORT 2014
701.7
107.4
276.1
10.5
1,095.7
8.1
5.0
261.8
-
-
-
-
-
-
-
60.7
14.6
144.2
18.6
75.3
162.8
75.3
10.3
-
162.8
14.7
(0.5)
85.6
177.0
444.4
46.7
59.6
488.0
32.1
68.0
701.7
21.8
99.1
3.5
1.4
4.9
4.9
1.0
-
5.9
3.9
4.6
4.6
208.4
34.6
243.0
243.0
26.0
(0.5)
268.5
554.6
592.7
827.2
-
-
-
-
-
-
-
8.1
8.1
8.1
5.0
-
5.0
140.5
16.5
157.0
5.0
157.0
-
-
12.9
(0.1)
5.0
169.8
-
-
-
50.5
62.0
92.0
2.1
2.1
-
4.2
4.2
1.0
-
5.2
1.4
1.4
2.8
2.8
1.0
-
3.8
0.7
1.4
1.4
206.2
30.7
(0.6)
236.3
236.3
47.9
(4.1)
280.1
146.9
17.9
164.8
164.8
13.9
(0.1)
178.6
59.3
71.5
101.5
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
4.1. INTANGIBLE ASSETS (CONTINUED)
Impairment testing of the cash generating units containing goodwill
The aggregate carrying amounts of goodwill are:
BOQ Equipment Finance Limited
Orix debtor finance division
Pioneer Permanent Building Society Limited
Home Building Society Ltd
Virgin Money (Australia) Pty Ltd
BOQ Specialist Bank Limited
Consolidated
Bank
2014
$m
12.9
8.1
24.0
399.4
43.0
214.3
701.7
2013
$m
12.9
8.1
24.0
399.4
43.6
-
488.0
2014
$m
-
8.1
-
-
-
-
2013
$m
-
8.1
-
-
-
-
8.1
8.1
Goodwill on acquisition of all of the above entities has been allocated to the Banking cash generating unit (“CGU”). The impairment test for goodwill is performed
by comparing the CGU’s carrying amount with its recoverable amount. The recoverable amount is based on the CGU’s value in use for both CGU’s. The excess of
the recoverable amount over the carrying amount was $640.9 million (2013: $1,297.3 million).
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 banking segment’s 3 year projections (2013: 3 years);
• a medium term growth rate of 9% (2013: 9%) for the 7 years (2013: 7 years) subsequent to these projections;
• a terminal value at year 10 based on a long term growth rate of 3% (2013: 3%) and a terminal price earnings multiple of 11.7 (2013: 13.6) times earnings;
and
• a pre tax discount rate of 15.8% (2013: 14.8%).
The values assigned to the key assumptions represent management’s assessments of future trends in banking and are based on both external and internal
sources. In assessing the volatility of these assumptions management has identified two key assumptions that if a reasonably possible change occurred could
cause the carrying amount of the Banking CGU to exceed the recoverable amount. The two assumptions identified are set out below along with the amount by
which each would need to change in order for the estimated recoverable amount to be equal to the carrying amount.
Pre tax discount rate
Medium term growth rate
Accounting policy
2014
%
18.0
6.0
2013
%
18.7
3.7
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 Income Statement 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. 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.
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 Income Statement.
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 Income Statement 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
Years
3-10
3-10
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
91
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
4.2. PROVISIONS
Employee benefits (1)
Leases
Product Review (2)
Provision for non-lending loss (3)
Other (4)
Total
Consolidated
Bank
2014
$m
21.5
5.3
36.4
34.0
6.9
104.1
2013
$m
15.4
0.8
44.6
10.6
7.5
78.9
2014
$m
15.3
3.1
36.4
33.4
-
88.2
2013
$m
13.1
0.4
44.6
10.6
-
68.7
(1) Employee benefits provisions consist of annual leave and long service leave entitlements for employees.
(2) Product review provision for customer refunds and review costs.
(3) Included within the Non-lending losses provision is $31.5m in respect of the Storm Financial settlement. On 22 September 2014, the Bank announced an agreement to settle the outstanding Storm Financial proceed-
ings which had been brought against the Bank by the Australia Securities and Investment Commission (ASIC) and a class action on behalf of borrowers advised by Storm Financial. Timing of settlement is unknown and
subject to court approval of the agreed settlement provisions.
(4) 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:
Consolidated
Bank
Leases
$m
0.8
5.6
(1.1)
5.3
Product
Review
$m
44.6
-
(8.2)
36.4
Non-lending
loss
Other
$m
Leases
$m
10.6
33.0
(9.6)
34.0
7.5
(0.6)
-
6.9
0.4
3.6
(0.9)
3.1
Product
Review
$m
44.6
-
(8.2)
36.4
Non-lending
loss
Other
$m
10.6
32.5
(9.7)
33.4
-
-
-
-
2014
Carrying amount at beginning of year
Additional provision recognised
Amounts utilised during the year
Carrying amount at end of year
Accounting policy
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.
92
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
SECTION 5. INSURANCE BUSINESS
5.1. INSURANCE BUSINESS
(a) Basis of preparation
The effective date of the actuarial report on life insurance policy liabilities and regulatory capital requirements, is 31 August 2014. 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 and LPS: 340 Valuation of Policy Liabilities. These require 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.
Accumulation methods have been used to estimate the policy liabilities, as the provision for unearned premium reserve less a deferred acquisition cost
component. Outstanding claims liabilities and Incurred But Not Reported (IBNR) liabilities are included in provisions.
Premium earning pattern
For single premium 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 claims frequencies. Past experience is used to set these assumptions. This earning pattern is also used to recognise commissions incurred.
For regular premium products, the UPR is based on the unearned proportion of premium for the given premium payment frequency.
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 by the Company and recent experience. The disputed claims provision is based on individual claim estimates and an assumed 50% probability of
disputed claims being incurred.
(b) 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. As at 31 August 2014, 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.
Changes in assumptions relating to claims provisions would affect policy liabilities in the current period.
Variable
Impact of movement in underlying variable
Mortality rates
For 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.
Morbidity rates
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 shareholder’s equity.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
93
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
5.1. INSURANCE BUSINESS (CONTINUED)
(c) Reconciliation of movements
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) = change in life insurance contract liabilities reflected in the Income Statement
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
2014
$m
2013
$m
60.7
(8.8)
51.9
(2.3)
0.4
(1.9)
50.0
(8.4)
75.9
(25.9)
50.0
12.1
0.9
13.0
63.0
62.6
(1.9)
60.7
(2.8)
0.5
(2.3)
58.4
(1.4)
81.4
(23.0)
58.4
13.3
0.8
14.1
72.5
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.
(d) Life Insurance Regulatory Capital requirements
The regulatory capital requirement of each fund and for the subsidiary in total is the amount required to be held in accordance with LPS 110: Capital Adequacy.
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 the Capital Base and regulatory capital requirements are in accordance with relevant Prudential Requirements.
94
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
5.1. INSURANCE BUSINESS (CONTINUED)
(d) Life Insurance Regulatory Capital requirements (continued)
Capital Base
Net Assets
Add / (subtract) regulatory adjustments to Net Assets
Total capital base
Asset risk charge
Operational risk charge
Total prescribed capital amount
Assets in excess of prescribed capital amount
Capital adequacy multiple
Composition of capital Base
Common equity tier 1 capital
Subtract regulatory adjustments to common equity tier 1 capital
Total capital base
Prescribed Capital Amount
Statutory Fund No. 1
Additional amount to meet company minimum
Total prescribed capital amount
Assets in excess of prescribed capital amount
Capital adequacy multiple
2014
Statutory
Fund No. 1
$m
Shareholders’
Fund
$m
29.0
(8.7)
20.3
1.3
1.9
3.2
17.1
6.5
2014
$m
29.9
(8.7)
21.2
3.2
6.8
10.0
11.2
2.1
0.9
-
0.9
-
-
-
0.9
88.2
2013
$m
33.4
(11.6)
21.8
3.4
6.6
10.0
11.8
2.2
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
95
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
5.1. INSURANCE BUSINESS (CONTINUED)
(d) Life Insurance Regulatory Capital requirements (continued)
Disaggregated information life insurance (before consolidation adjustments)
Summarised Statement of Profit and Loss and Other Comprehensive Income
Revenue
Life insurance premium revenue
Investment income
Net life insurance revenue
Expenses
Net claims and other liability expense from insurance contracts
Other expenses
Profit before income tax
Income tax expense
Profit after income tax
Statement of Sources of Profit for Statutory Funds
Operating profit after income tax arose from:
Components of profit related to movement in life insurance liabilities:
Planned margins of revenues over expenses released
Difference between actual and assumed experience
Investment earnings on assets in excess of life insurance policy liabilities and provision
Summarised Balance Sheet
Assets
Investment assets
Other assets
Liabilities
Net life insurance liabilities
Liabilities other than life insurance liabilities
Issued capital, reserves and retained profits
Directly attributable to shareholders
The life insurance business has no life investment contracts.
Accounting policy
Principles for life insurance
2014
$m
56.2
3.6
59.8
26.6
5.5
32.1
27.7
(8.3)
19.4
16.7
1.2
1.4
99.0
1.7
100.7
46.8
24.0
70.8
29.9
29.9
2013
$m
62.3
4.4
66.7
35.0
7.4
42.4
24.3
(7.3)
17.0
15.3
(0.1)
1.2
98.5
2.1
100.6
50.2
16.9
67.1
33.4
33.4
The life insurance operations of the Consolidated Entity are conducted within separate funds as required by the Life Insurance Act 1995 and is reported in
aggregate with the Shareholders’ Fund in the Income Statement, Balance Sheet and Statement of Cash Flows of the Consolidated Entity. The life insurance
operations of the Consolidated Entity comprise the selling and administration of life insurance contracts.
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).
96
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
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 Income Statement. 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 Consolidated Entity’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.
5.1. INSURANCE BUSINESS (CONTINUED)
Accounting policy (continued)
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 Consolidated Entity, and the
financial risks are substantially borne by the Consolidated Entity.
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 policy owners. Therefore, the
Consolidated Entity’s financial statements comprise the total of all statutory
funds and the Shareholders’ Fund.
Insurance contract liability
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 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 Income Statement 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.
Revenue Recognition
Premiums in respect of life insurance contracts are recognised as revenue
in the Income Statement 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 Balance Sheet.
Investment income is recognised on an accruals basis. Realised and
unrealised gains and losses are included in the Income Statement as
investment income.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
97
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
SECTION 6. OTHER NOTES
6.1. EMPLOYEE BENEFITS
(a) Superannuation commitments
The Consolidated Entity contributes to defined contribution superannuation plans which comply with the Superannuation Industry (Supervision) Act 1993.
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 to Section 2.2.
(b) Share based payments
(i) Description of share based payments
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 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). a
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.
The number of award rights and restricted shares on issue is as follows:
Deferred Award Rights
Performance Award Rights
Restricted Shares
2014
’000
1,029
408
(39)
(457)
941
2013
’000
1,112
515
(136)
(462)
1,029
2014
’000
1,462
904
(90)
(78)
2,198
2013
’000
1,099
756
(352)
(41)
1,462
2014
’000
29
198
-
(30)
197
2013
’000
204
-
-
(175)
29
Balance at beginning of the year
Granted during the year
Forfeited / expired during the year
Exercised during the year
Outstanding at the end of the year
(ii) Measurement of fair values
The fair value of the PARs and DARs has been measured using the trinomial pricing methodology.
Restricted shares have been valued based on the volume weighted average price of ordinary shares in BOQ sold on the ASX during a 10 day trading period. The
shares vest on the respective expiry dates and meeting certain service conditions.
98
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.1. EMPLOYEE BENEFITS (CONTINUED)
(b) Share based payments (continued)
The weighted average of the inputs used in the measurements at grant date of the long-term incentive award rights were as follows:
Deferred Award Rights
Performance Award Rights
Restricted Shares
2014
$7.64
$8.82
36.5%
2.9%
7.1%
2013
$7.63
$8.50
36.7%
3.5%
6.4%
2014
$5.00
$9.08
31.7%
2.9%
6.2%
2013
$4.75
$8.61
35.7%
3.5%
6.2%
2014
$11.43
$11.43
25.2%
2.8%
5.0%
Fair value at grant date
Share price at grant date
Expected volatility
Risk free interest rate
Dividend yield
6.2. COMMITMENTS
Consolidated
Bank
2014
$m
2013
$m
2014
$m
(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
39.8
91.4
98.9
230.1
1,375.7
522.2
1,897.9
39.0
65.6
0.3
104.9
1,021.5
448.8
1,470.3
34.9
87.3
98.9
221.1
680.2
344.2
1,024.4
2013
$6.84
$7.30
-
-
-
2013
$m
37.1
61.7
0.3
99.1
564.5
357.2
921.7
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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
99
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.3. CONTINGENT LIABILITIES
Guarantees
Letters of credit
Guarantees, indemnities and letters of credit
Consolidated
Bank
2014
$m
239.9
12.3
252.2
2013
$m
227.3
8.4
235.7
2014
$m
215.4
12.3
227.7
2013
$m
227.3
8.4
235.7
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 13 February 2014 judgement was given in favour of the Bank for proceedings involving the Bank by a number of former Owner-Managers in NSW. An appeal
has been filed in relation to this judgement. At this stage no estimate of any potential liability can be made.
6.4. RELATED PARTIES INFORMATION
(a) Controlled entities
Details of interests in material controlled entities are set out in Section 6.5.
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, BOQ Finance (NZ) Ltd and Virgin Money (Australia) Pty Limited 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 joint ventures, refer to Section 6.7.
(b) Key management personnel compensation
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.
Key management personnel compensation included in ‘administrative expenses’ and ‘employee expenses’ (refer to Section 2.2) is as follows:
Short-term employee benefits
Post-employment benefits
Long term employee benefits
Termination benefits
Share based employment benefits
Consolidated and Bank
2014
$
2013
$
9,599,506
9,343,008
298,792
25,703
-
5,192,081
15,116,082
263,992
11,446
755,978
3,554,972
13,929,396
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 Remuneration Report, 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.
100
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.4. RELATED PARTIES INFORMATION (CONTINUED)
(c) 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.
The following are transactions undertaken between the Consolidated Entity and key management personnel as at 31 August 2014:
Balance as at
For the period (1)
01/09/13
$
31/08/14
$
Total Loan
Repayments
$
Total Loan
Redraws /
Further
Advances
$
Total Loan /
Overdraft
interest
$
Total Fees on
Loans /
Overdraft
$
Term Products (Loans / Advances)
(2,292,172)
(3,619,345)
791,954
(1,965,439)
(153,368)
(320)
Balance as at
For the period (1)
01/09/12 (2)
$
31/08/13
$
Total Loan
Repayments
$
Total Loan
Redraws /
Further
Advances
$
Total Loan /
Overdraft
interest
$
Total Fees on
Loans /
Overdraft
$
Term Products (Loans / Advances)
(1,210,036)
(2,292,172)
493,850
(2,603,395)
(91,740)
(113)
(1) Amounts are included only for the period that the Director / Executive is classified as a member of the key management personnel.
(2) Balance as at 1 September 2012 will not equal 31 August 2012 closing balance due to changes in key management personnel during the year.
Other transactions
Transactions between the Consolidated Entity and Key Management Personnel (other than loans/advances and shares) during the financial year related to personal
banking, investment and deposit transactions. These transactions are considered trivial or domestic in nature, were on normal commercial terms and conditions and
in the ordinary course of business.
Transactions between the Consolidated Entity and other related parties of Key Management Personnel relate to loans on normal commercial terms and conditions.
Details of loans outstanding at the reporting date to other related parties of Directors and Senior Executives are as follows:
2014
Interest
paid and
payable
during
the year
$
Balance at
31 August
2014
$
Highest
balance
during
the year
$
Balance at
1 September
2013
$
Richard Haire Related Party
191,000
9,148
191,000
191,777
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
101
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.5. CONTROLLED ENTITIES
(a) Particulars in relation to material controlled entities
The Group’s principal subsidiaries at 31 August 2014 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that
are held directly by the Group. The Bank owns 100% of all subsidiaries with nil ownership interest held by non-controlling interests. The country of incorporation
or registration is also their principal place of business.
Place of business/
country of incorpo-
ration
Parent entity’s
interest
Amount of Investment
(at cost)
Principal activities
2014
2013
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%
2014
$m
-
-
5.0
-
0.1
15.4
2013
$m
-
-
5.0
-
0.1
15.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60.1
600.2
60.1
600.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Trust management
Dormant
Dormant
Dormant
Asset Finance & Leasing
Insurance
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Dormant
Dormant
Dormant
Investment holding entity
Dormant
Dormant
Trust management
Trust management
Life Insurance
General Insurance
230.2
230.2
Asset Finance & Leasing
-
-
-
-
-
-
Financing and credit
Asset Finance & Leasing
Asset Finance & Leasing
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
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 2012-1E EHP REDS Trust
Series 2012-1E REDS Trust
Series 2013-1 EHP REDS Trust
Series 2013-1 REDS Trust
Pioneer Permanent Limited
BOQ Home Limited (1)
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
BOQ Funding Pty Ltd
BOQ Credit Pty Limited
BOQ Funding Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(1) Entity was formerly known as Pioneer Permanent Building Society Limited.
(2) Entity was formerly known as Home Building Society Ltd.
102
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.5. CONTROLLED ENTITIES (CONTINUED)
(a) Particulars in relation to material controlled entities (continued)
Place of business/
country of incorpo-
ration
Parent entity’s
interest
Amount of Investment
(at cost)
Principal activities
Controlled entities:
BOQ Finance (NZ) Limited
New Zealand
Equipment Rental Billing Services Pty Ltd
Hunter Leasing Ltd
Newcourt Financial (Australia) Pty Limited
Virgin Money (Australia) Pty Limited
Virgin Money Home Loans Pty Limited
Virgin Money Financial Services Pty Ltd
BOQ Specialist Bank Limited
BOQ Specialist Pty Ltd
BOQ Asset Finance and Leasing Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(b) Significant restrictions
2014
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
2014
$m
22.1
-
-
-
2013
$m
22.1
Asset Finance & Leasing
-
-
-
Dormant
Dormant
Dormant
42.6
42.6
Financial services
-
-
551.5
-
-
-
-
-
-
-
Dormant
Financial services
Professional Finance and Asset
Finance & Leasing
Professional Finance
Asset Finance & Leasing
1,527.2
975.7
In accordance with Prudential Standard APS 222, the Bank and its subsidiaries that form part of the Extended Licensed Entities are restricted from having unlimited
exposures to related entities, including general guarantees. These related entities are as follows:
• Virgin Money (Australia) Pty Limited;
• Virgin Money Home Loans Pty Limited;
• Virgin Money Financial Services Pty Ltd;
• St Andrews Australia Services Pty Ltd;
• St Andrews Life Insurance Pty Ltd
• St Andrews Insurance (Australia) Pty Ltd;
• BOQ Specialist Bank Limited;
• BOQ Specialist Pty Ltd; and
• BOQ Asset Finance and Leasing Pty Ltd.
(c) Disposal of controlled entities
Series 2005-2 REDS Trust was closed on 12 June 2014.
(d) Acquisition of controlled entities
On 31 July 2014, the Bank acquired 100% of BOQ Specialist Limited formerly known as the Professional Finance and Asset Finance & Leasing businesses of
Investec Bank (Australia) Limited (Investec) for consideration of $210 million. The purchase was funded through a $400 million fully-underwritten, renounceable
entitlement offer, as well as excess capital.
BOQ Specialist Limited focuses on providing banking, advisory and investment products and services to a wide range of private, corporate and institutional
clients. The Bank purchased BOQ Specialist Limited for further diversification of the business and for the access to a niche market in Professional Finance.
In the period from 1 August 2014 to 31 August 2014 BOQ Specialist Bank Limited contributed a profit after tax of $3.1 million.
The effect of the provisional accounting on the Consolidated Entity’s assets and liabilities is set out on the following page.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
103
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
(d) Acquisition of controlled entities (continued)
The provisional acquisition accounting had the following effect on the consolidated entity’s assets and liabilities:
Assets
Cash and liquid assets
Other financial assets
Loans and advances at amortised cost
Other assets
Property, plant & equipment
Deferred tax assets
Total assets
Liabilities
Deposits
Derivative financial instruments
Accounts payable and other liabilities
Borrowings including subordinated notes
Deferred tax liabilities
Total liabilities
Net identifiable assets and liabilities
Goodwill and other identifiable assets on acquisition
Total Consideration
Consideration paid, satisfied in cash
Cash acquired
Net cash outflow
Recognised values
on acquisition
$m
Pre-acquisition
carrying amounts
$m
52.0
544.5
2,504.1
13.2
3.0
1.8
52.0
544.4
2,507.8
13.2
3.0
-
3,118.6
3,120.4
(2,328.1)
(2,325.6)
(7.6)
(42.6)
(744.0)
(0.6)
(7.6)
(42.6)
(744.0)
(0.6)
(3,122.9)
(3,120.4)
-
(4.3)
214.3
210.0
210.0
(52.0)
158.0
At 31 August 2014, the acquisition accounting balances were provisional due to ongoing work related to various matters which will impact the acquisition
accounting entries.
104
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.6. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated 19 August 2005, 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 Limited;
BOQ Home Limited;
• 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 summarised consolidated Income Statement 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 2014 is set out as follows:
SUMMARISED INCOME STATEMENT AND RETAINED PROFITS
Profit before tax
Less: Income tax expense
Profit for the year
Retained profits at beginning of year
Dividends to shareholders
Retained profits at end of year
Profit attributable to:
Equity holders of the parent
Profit for the year
Consolidated
2013
$m
273.3
(80.7)
192.6
138.2
(174.6)
156.2
192.7
192.7
2014
$m
368.3
(110.7)
257.6
144.2
(199.1)
202.7
257.6
257.6
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
105
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.6. DEED OF CROSS GUARANTEE (CONTINUED)
BALANCE SHEET
Assets
Cash and liquid assets
Due from other financial institutions - Term Deposits
Financial assets available-for-sale
Financial assets held for trading
Derivative assets
Loans and advances at amortised cost
Other assets
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Intangible assets
Investments in joint arrangements
Total assets
Liabilities
Due to other financial institutions - Accounts Payable at call
Deposits
Derivative liabilities
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
106
ANNUAL REPORT 2014
Consolidated
2014
$m
430.9
-
2,472.6
3,348.9
131.9
2013
$m
350.9
1.9
4,333.6
1,268.4
234.0
35,592.4
34,992.4
252.8
645.9
41.6
111.5
564.0
20.5
284.2
92.4
29.6
104.5
543.6
21.4
43,613.0
42,256.9
233.2
33,648.0
207.0
372.7
71.4
94.9
941.6
4,712.2
40,281.0
201.1
31,705.3
109.5
348.9
23.0
73.9
1,300.9
5,666.6
39,429.2
3,332.0
2,827.7
3,017.8
111.5
202.7
3,332.0
2,562.6
108.9
156.2
2,827.7
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.7. INVESTMENTS IN JOINT ARRANGEMENTS
The consolidated entity holds interests in a number of collectively and individually immaterial joint ventures that are accounted for using the equity method.
The principal activity of the joint venture entities is land subdivision, development and sale. Set out below are the joint ventures of the Consolidated Entity as at
31 August 2014 which, in the opinion of the directors, are immaterial to the Consolidated Entity. Australia is the place of business and also the country of
incorporation for all joint ventures. The proportion of ownership interest is the same as the proportion of voting rights held.
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)
Provence 2 Pty Ltd (Provence 2)
Total equity accounted investments
Percentage Ownership Interest
Carrying amount
2014
(%)
9.31
17.08
-
25.00
5.81
25.00
2013
(%)
9.31
17.08
21.42
25.00
5.81
25.00
2014
$m
11.6
8.4
-
0.4
0.1
-
20.5
2013
$m
12.6
8.5
-
0.2
0.1
-
21.4
Summary financial information for equity accounted joint ventures, not adjusted for the percentage of ownership held by the consolidated entity and fair value
adjustments on acquisition, is contained below:
Profit from continuing operations
Post-tax profit from discontinued operations
Other comprehensive income
Total comprehensive income
Accounting policy
2014
$m
39.6
-
-
39.6
2013
$m
26.0
-
-
26.0
The Consolidated Entity’s investments in joint venture entities are accounted for under the equity method of accounting in the consolidated financial statements.
These are entities in which the Consolidated Entity 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
Consolidated Entity’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 Consolidated Entity’s.
The Consolidated Entity’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.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
107
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.8. AUDITOR’S 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)
Non-audit services – KPMG Australia
- Taxation services
- Compliance services
- Other
- Due diligence services
Consolidated
Bank
2014
$’000
1,010.9
400.8
1,411.7
224.8
224.8
188.4
-
-
234.4
422.8
2013
$’000
919.8
342.2
1,262.0
230.2
230.2
225.1
249.2
88.7
64.5
627.5
2014
$’000
681.1
202.6
883.7
168.8
168.8
143.2
-
-
234.4
377.6
2013
$’000
595.9
182.2
778.1
-
-
225.1
249.2
72.6
64.5
611.4
(1) Other assurance services comprise audit related services provided in relation to mortgage securitisation trusts which are consolidated under Australian Accounting Standards.
6.9. EVENTS SUBSEQUENT TO BALANCE DATE
Other than as disclosed below, no matters or circumstances have arisen since the end of the financial year and up until the date of this report which significantly
affects the operations of the Bank, the results of those operations, or the state of affairs of the Bank in subsequent years.
Dividends have been determined after 31 August 2014, refer to Section 2.5.
The financial effect of the above transaction has not been brought to account in the financial statements for the year ended 31 August 2014.
On 22 September 2014, the Bank announced an agreement to settle the outstanding Storm Financial proceedings which had been brought against the Group
by the Australian Securities and Investment Commission (ASIC) and a class action on behalf of borrowers advised by Storm Financial. Refer to Section 4.2 for
further details.
108
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.10. SIGNIFICANT ACCOUNTING POLICIES &
NEW ACCOUNTING STANDARDS
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”).
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.
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 transferred assets are equitably assigned to the securitisation trusts.
The investors in the securities issued by the Trusts have full recourse to
the assets transferred to the Trusts. 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.
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 reporting 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.
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
Section 3.8, Derivative financial instruments.
Foreign operations
The consolidated entity has no foreign operations, all overseas activities are
carried out through non-incorporated branches.
(c) New accounting standards
The following, are the amendments to standards and interpretations
applicable for the first time to the current year:
• AASB 10 Consolidated Financial Statements - Establishes a new
control model and broadens the situations when an entity is
considered to be controlled. The standard replaces the guidance on
control and consolidation of AASB 127 Consolidated and Separate
and Separate Financial Statements. This new standard did not
have a material impact on the Consolidated Entity, as assessments
made identified that there are no new entities under the new control
model which were not previously consolidated.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
109
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
• AASB 2012-3 Amendments to Australian Accounting Standards
- Offsetting Financial Assets and Financial Liabilities - This
amendment adds application guidance to AASB 132 Financial
Instruments: Presentation to address inconsistencies identified in
applying some of the offsetting criteria of AASB 132. The potential
effects on adoption of the amendments are yet to be determined.
(d) Business combinations
Acquisitions on or after 1 July 2009
The Consolidated Entity has adopted revised AASB 3 Business
Combinations (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. The
Consolidated Entity has also adopted AASB 10 Consolidated Financial
Statements (2013) which has superseded AASB 127 Consolidated and
Separate Financial Statements (2018).
For every business combination, the Group identifies the acquirer, which is
the combining entity that obtains control of the other combining entities or
businesses. The Group controls an entity if it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the investee.
Contingent Liabilities
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.
(e) Impairment of 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 Income Statement 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.
6.10. SIGNIFICANT ACCOUNTING POLICIES &
NEW ACCOUNTING STANDARDS (CONTINUED)
(c) New accounting standards (continued)
• AASB 11 Joint Arrangements - This standard replaces AASB
131 Interests in Joint Ventures and introduces a principles based
approach to joint arrangements accounting. The standard uses the
principle of control in AASB 10 to define joint control. Accounting
for a joint arrangement is dependent on the nature of the rights and
obligations arising from the joint arrangement. This new standard
did not have a material impact on the Consolidated Entity.
• AASB 12 Disclosure of Interests in Other Entities - This standard
includes all disclosures relating to an entity’s interests in
subsidiaries, joint arrangements, associates and structured
entities. The Consolidated Entity has assessed all of its interests in
subsidiaries and joint arrangements and has adequately disclosed
the details of these in the financial statements. This new standard
did not have a material impact on the Consolidated Entity.
• AASB 13 Fair Value Measurement - Establishes a new single
framework for measuring fair value and making disclosures about
fair value measurement. AASB 13 also expands the disclosure
requirements for all assets or liabilities carried at fair value. The
Consolidated Entity has recorded additional fair value hierarchy
disclosures in the financial statements regarding financial assets
and liabilities and level 3 assets and liabilities.
• AASB 119 Employee Benefits - The main change introduced by this
standard is to revise the accounting for defined benefit plans. The
amendment removes the options for accounting for the liability, and
requires that the liabilities arising from such plans is recognised
in full with actuarial gains and losses being recognised in other
comprehensive income. The standard also changes the definition of
short-term employee benefits. The distinction between short-term
and other long-term employee benefits is now based on whether the
benefits are expected to be settled wholly within 12 months after the
reporting date. From 1 July 2013 the Consolidated Entity changed the
basis for determining the classification of annual leave between ‘short-
term employee benefits’ and ‘other long-term employee benefits’. This
change did not result in a material impact to the Consolidated Entity.
• AASB 2012-2 Amendments to Australian Accounting Standards
- Disclosures: Offsetting Financial Assets and Financial Liabilities
- Amends AASB 7 Financial Instruments: Disclosures to require
disclosure of the effect or potential effect of netting arrangements,
including rights of set-off associated with the entity’s recognised
financial assets and financial liabilities, on the entity’s financial
position, when all the offsetting criteria of AASB 132 are not met.
The result of these amendments has been an expansion to the
Consolidated Entitiy’s disclosures with respect to the offsetting of
financial assets and financial liabilities in Sections 3.6 and 3.7.
All other amendments to standards applicable for the 2014 year end do not
impact the Consolidated Entity.
The following standards and amendments have been identified as those
which may impact the Bank and the majority were available for early adoption
at 31 August 2014 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. The standard also introduces new requirements for hedge
accounting that align hedge accounting more closely with risk
management. This standard becomes mandatory for the Consolidated
Entity’s 31 August 2018 financial statements. The potential effects on
adoption of the amendments are yet to be determined.
110
ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.10. OTHER ACCOUNTING POLICIES (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 employees’ 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 Industry (Supervision) Act
1993. Contributions are charged to profit or loss in the Income Statement
as they are made.
(iv) Share based payments
The Consolidated Entity currently operates an Award Rights Plan for equity-
settled compensation. The plan allows 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.
(j) Property, plant & 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.
(e) Impairment of non-financial assets
(continued)
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.
(f) Leases
Finance Leases
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.
(g) 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.
(h) Equity reserve for credit losses
The Bank is required by 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 an equity reserve for credit
losses. The equity reserve for credit losses and the eligible component of
the collective provision for impairment are aggregated for the purpose of
satisfying the APRA requirement for a general reserve for credit losses.
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.
(i) 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 discounted amounts based on
remuneration wage and salary rates that the Bank expects to pay as at
reporting date including related on-costs.
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
111
NOTES TO THE FINANCIAL STATEMENTS
(Continued) Year Ended 31 August 2014
6.10. OTHER ACCOUNTING POLICIES (CONTINUED)
(j) Property, plant & equipment (continued)
Depreciation
Depreciation is charged to the profit or loss in the Income Statement 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 are as follows:
IT Equipment
Plant, furniture and equipment
Leasehold improvements
Years
3-10
3-25
11 (or term of lease if less)
The residual value if not significant, is reassessed annually.
112
ANNUAL REPORT 2014
DIRECTORS’ DECLARATION
Year Ended 31 August 2014
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 4 to 36, 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 2014 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 Section 6.5 (a) 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 Acting Chief Executive Officer and Chief
Financial Officer for the financial year ended 31 August 2014.
The Directors draw attention to Section 1.2 (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:
Roger Davis
Chairman
8 October 2014
Richard Haire
Director
8 October 2014
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
113
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
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 2014,
and Income Statements, Statements of Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows for the year ended on that date,
Sections 1 to 6 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 Section 1.2 (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 gives 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 2014 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 Section 1.2 (a).
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
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ANNUAL REPORT 2014
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
(Continued)
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included on pages 14 to 35 of the Directors’ Report for the year ended 31 August 2014. 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 Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of Bank of Queensland Limited for the year ended 31 August 2014, complies with Section 300A of the Corporations Act 2001.
KPMG
Martin McGrath
Partner
Sydney
8 October 2014
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
115
SHAREHOLDING DETAILS
As at 29 September 2014, the following shareholding details applied:
1. Twenty largest ordinary shareholders
Shareholder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
MILTON CORPORATION LIMITED
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
QIC LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
JBWERE (NZ) NOMINEES LTD
KARATAL HOLDINGS PTY LTD
BKI INVESTMENT COMPANY LIMITED
CARLTON HOTEL LIMITED
UBS NOMINEES PTY LTD
THE MANLY HOTELS PTY LIMITED
Total
Voting rights
No. of ordinary shares
%
57,813,903
43,879,856
34,845,406
16,986,153
7,922,624
7,306,078
5,302,490
2,178,799
2,007,172
1,533,621
1,410,327
1,349,324
1,344,347
1,246,233
1,095,257
843,011
810,000
767,873
702,446
655,540
15.95%
12.10%
9.61%
4.69%
2.19%
2.02%
1.46%
0.60%
0.55%
0.42%
0.39%
0.37%
0.37%
0.34%
0.30%
0.23%
0.22%
0.21%
0.19%
0.18%
190,000,460
52.39%
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.
116
ANNUAL REPORT 2014
As at 29 September 2014, the following shareholding details applied:
2. Twenty largest CPS shareholders
Shareholder
J P MORGAN NOMINEES AUSTRALIA LIMITED
MILTON CORPORATION LIMITED
NATIONAL NOMINEES LIMITED
NAVIGATOR AUSTRALIA LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
DOMER MINING CO PTY LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
MR JOHN HARRISON VALDER & MRS KAY ORMONDE VALDER
BNP PARIBAS NOMS PTY LTD
WENTHOR PTY LTD
CITICORP NOMINEES PTY LIMITED
F & B INVESTMENTS PTY LIMITED
EASTCOTE PTY LTD
THE AUSTRALIAN NATIONAL UNIVERSITY
SOUTHERN METROPOLITAN CEMETERIES
JILLIBY PTY LTD
CANTALA PTY LTD
BCITF (QLD)
BAPTIST INVESTMENTS AND FINANCE LTD
Total
Voting rights
SHAREHOLDING DETAILS
(Continued)
No. of ordinary shares
%
102,078
50,000
44,738
42,231
41,858
37,542
32,200
25,746
19,500
16,400
15,000
11,393
10,000
10,000
10,000
10,000
9,500
9,150
8,800
8,546
3.40%
1.67%
1.49%
1.41%
1.40%
1.25%
1.07%
0.86%
0.65%
0.55%
0.50%
0.38%
0.33%
0.33%
0.33%
0.33%
0.32%
0.31%
0.29%
0.28%
514,682
17.96%
The CPS do not give the holders any voting rights at any general shareholders meetings, except in certain circumstances.
3. Distribution of equity security holders
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 - and over
Total
The number of ordinary shareholders holding less than a marketable parcel is 3,246.
The number of convertible preference shareholders holding less than a marketable parcel is nil.
Ordinary Shares
CPS
2014
56,165
26,067
4,847
2,463
71
2013
56,120
24,722
4,164
2,134
77
2014
6,214
355
19
11
1
2013
6,332
355
22
15
-
89,613
87,217
6,600
6,724
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
117
SHAREHOLDING DETAILS
(Continued)
4. Partly Paid Shares
There are no partly paid shares.
5. There are currently no substantial shareholders in the Bank
6. Stock exchange listing
The shares of Bank of Queensland Limited (“BoQ”) and CPS (“BOQPD”) are quoted on the Australian Securities Exchange.
7. Options
At 31 August 2014 there were no options over unissued ordinary shares.
8. On market buy-back
There is no current on market buy-back.
9. Other information
Bank of Queenland Limited is a publicly listed company limited by shares and is incorporated and domiciled in Australia.
118
ANNUAL REPORT 2014
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
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 3990
Facsimile: +61 7 3212 3399
boq.com.au
twitter.com/boq
facebook.com/BOQOnline
CUSTOMER SERVICE
1300 55 72 72 (within Australia)
+61 7 3336 2420 (overseas)
ABN 32 009 656 740
CAN 009 656 740
SHAREHOLDER INFORMATION
KEY SHAREHOLDER DATES
2014
Final ex-dividend date
3 November 2014
Final dividend record date
6 November 2014
Final dividend payment date
27 November 2014
Annual General Meeting
27 November 2014
2015
Financial half year end
28 February 2015
Interim results and
dividend announcement
Interim ex-dividend date
Interim dividend record date
Interim dividend payment date
26 March 2015
16 April 2015
20 April 2015
12 May 2015
Financial full year end
31 August 2015
Full year results and
dividend announcement
Final ex-dividend date
8 October 2015
29 October 2015
Final dividend record date
2 November 2015
Final dividend payment date
24 November 2015
Annual General Meeting
26 November 2015
*dividend dates for ordinary shares only
Bank of Queensland Limited and its Controlled Entities A.B.N. 32 009 656 740.
119
We’ve laid the foundations for
building a truly loveable bank
and our hard work is starting
to make a difference.
At the Asia-Pacific Banking & Finance Awards we were recognised
as the 2014 Financial Institution of the Year (non big four banks).
Independent Roy Morgan research shows our customer satisfaction
and advocacy scores are significantly above the average of the
major banks, placing us third overall compared to our 11 most
direct competitors.
This is a great result but we know we can do more –
we want to be Australia’s most loved bank. Ambitious? Sure.
But by making it even easier for our customers to deal with us,
growing our business in the right way, finding better ways to
do things and making sure our culture is built around customer
service, we believe we can give people an even
better experience.
Our competitive advantage has always been the close relationships
we have with our customers. But now we’re taking it to the next
level and we’ll get there by putting the customer at the heart of
everything we do.
120
ANNUAL REPORT 2014
YOU’RE WHY WE DO
WHAT WE DO
ISO 14001
Environmental
Management
System in use.
Manufactured
using elemental
chlorine free (ECF)
pulps.
Pulp is sourced
only from
responsibly
managed forests.