BNK Banking Corporation Limited
Annual Financial Report
ABN: 63 087 651 849
30 June 2021
1
Contents
CORPORATE INFORMATION ............................................................................................................... 3
MESSAGE FROM OUR CHAIRMAN, DON KOCH ............................................................................ 4
DIRECTORS’ REPORT ........................................................................................................................... 5
REMUNERATION REPORT (AUDITED) ............................................................................................ 14
INDEPENDENT AUDITOR’S DECLARATION .................................................................................. 27
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .................. 28
STATEMENTS OF FINANCIAL POSITION ....................................................................................... 29
STATEMENTS OF CHANGES IN EQUITY ....................................................................................... 30
STATEMENTS OF CASH FLOWS ..................................................................................................... 32
NOTES TO THE FINANCIAL REPORT ............................................................................................. 33
DIRECTORS’ DECLARATION ............................................................................................................. 82
INDEPENDENT AUDITOR’S REPORT .............................................................................................. 83
ADDITIONAL ASX INFORMATION .................................................................................................... 89
2
CORPORATE INFORMATION
ACN: 087 651 849
Directors
Mr. Don Koch
Mr. Jon Denovan
Mr. Peter Hall
Ms. Elizabeth Aris
Ms. Michelle Guthrie
Mr. Calvin Ng
Mr. John Kolenda
Company Secretary
Mr. Malcolm Cowell
(Chairman and Non-Executive Director)
(Independent Non-Executive Director)
(Independent Non-Executive Director)
(Independent Non-Executive Director
(Independent Non-Executive Director)
(Non-Independent, Non-Executive Director)
(Executive Director)
The registered office and principal place of business of the Company is:
Level 14, 191 St George’s Terrace
Perth WA 6000
Phone: +(618) 9438 8888
Other Locations:
Sydney Office
Level 24, 52 Martin Place
Sydney NSW 2000
Share Registry:
Advanced Share Registry
110 Stirling Hwy
Nedlands WA 6009
Tel +(618) 9389 8033
Fax +(618) 6370 4203
Exchange Listing
Australian Securities Exchange Limited
Level 40, Central Park
152-158 St George’s Terrace
Perth WA 6000
ASX Code: BBC
Auditors:
KPMG
300 Barangaroo Avenue
Sydney NSW 2000
Website Address:
www.bnk.com.au
Corporate Governance:
A copy of the Corporate Governance Policy Statement can be located using the following website address:
https://bnk.com.au/investor-centre/corporate-governance/
3
MESSAGE FROM OUR CHAIRMAN, DON KOCH
BNK Banking Corporation Limited
Annual Financial Report
30 June 2021
Dear Shareholder,
BNK delivered an improved financial performance in FY21 while at the same time the Group has implemented
several initiatives to create a stronger platform for future growth.
FY21 Results
Underlying Net Profit After Tax was $7.1 million which was slightly ahead of the guidance provided in May
2021. This represents an increase of 44% on the prior year. Statutory NPAT was $5.6 million compared to
$3.8 million for the prior year, on a restated basis. Underlying earnings per share were 7.4 cents, up 29%
from 5.7 cents in FY20.
The Company remains in a strong capital position with Capital Adequacy Ratio (Level 2) of 22%.
A full explanation of the financial results is contained within the Operating and Financial Review.
Strong Platform for Growth
During the year, the Company implemented a number of initiatives which have improved our competitive
position.
We strengthened the management team with the key appointments of Brett Morgan as CEO of BNK Bank and
Andrew Kitchen as Group CFO. Both Brett and Andrew have made a significant impact since joining BNK and
we look forward to their continued contribution.
The Company’s capital position has been bolstered with the inaugural $10 million Tier 2 subordinated notes
issue and the successful completion of the $13 million capital raising in May. The equity raising has brought
additional institutional shareholders to the BNK register and enhanced trading liquidity.
We commenced a securitisation program to provide further funding diversity to support growth ambitions.
This included a $250 million prime residential mortgage warehouse program with Bendigo & Adelaide Bank
and Blackstone and an alliance with Goldman Sachs to originate, fund and securitise residential mortgages
for a securitisation program with an uncommitted facility limit of $500 million.
Both the Bank and Finsure have made significant progress during the year. BNK Bank continues to strengthen
its competitive position with the BNK-funded loan book growth of 75% in FY21. The Finsure loan book now
exceeds $55 billion with 2,005 brokers; up 15% on the prior year.
The combination of these two businesses creates a strong platform to generate further growth. We operate
a unique model to monetise the entire lending value chain, including mortgage aggregation, product
manufacturing and funding diversity. We are a fast growing and profitable group with significant growth and
margin transformation opportunity ahead.
Board Changes
There were some changes to the Board during 2021.
Jon Sutton stood down as Chairman and as a Non-Executive Director in July 2021. Jon was appointed
Chairman in 2019, and I wish to acknowledge and thank Jon for his significant contribution in that time.
We were pleased to welcome three new Directors to strengthen our Board with significant expertise and
complementary skills. Elizabeth Aris joined the Board in June 2021 and brings extensive and diverse
experience in banking, telecommunications and technology.
Michelle Guthrie and Calvin Ng both joined in July 2021. Michelle brings media, entertainment, funds
management, technology and professional services spanning more than 30 years. Calvin has significant
investment banking, mergers & acquisitions and funds management experience and was also a co-founder
of Finsure.
Summary
BNK made significant progress during the year in strengthening our business and I want to acknowledge our
staff across the Group for their dedication and efforts.
In closing I want to thank shareholders for your continued support of the Company.
4
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity comprising BNK Banking Corporation Limited
(“BNK” or the “Company”) and the entities it controlled (“the Group”) together with the consolidated financial
report for the year ended 30 June 2021 and the auditor’s report thereon.
DIRECTORS
The details of the Company’s Directors in office at any time during or since the end of the year up to the date
of this report are as follows. Directors were in office for the entire period unless otherwise stated below.
Current directors
Mr Don Koch
Mr Peter Hall
Mr Jon Denovan
Ms Elizabeth Aris
Ms Michelle Guthrie
Mr Calvin Ng
Mr John Kolenda
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 18 June 2021)
Non-Executive Director (appointed 15 July 2021)
Non-Executive Director (appointed 15 July 2021)
Executive Director
Don Koch (Independent Chairman and Non-Executive Director)
Mr Koch was appointed a Director on 11 June 2019 and Chairman of the Group on 7 July 2021.
Mr Koch was CEO of ING Bank in Australia from 2009 to 2012 before transferring to become CEO of ING Bank
Italy from 2012 to 2016. He was the former CIO and part of the team that launched ING Direct in Australia.
Mr Koch is a Governor on the Cerebral Palsy Association Research Foundation, Advisor to the UTS Business
School Industry Advisory Board, Director of Target Fifteen and a Board Member of Glaucoma Australia. He
holds a Masters in Banking and Finance from UTS, is a graduate of the Australian Institute of Company
Directors and has completed the International Directors Program with INSEAD in Switzerland.
Mr Koch is the Chair of the Remuneration Committee and a Member of the Risk & Compliance Committee,
Board Credit Committee and Audit Committee.
Peter Hall (Independent Non-Executive Director)
Mr Hall was elected as a Director in November 2015 and is an experienced financial services industry
professional. Previous Board and industry appointments include: Non-Executive Director of BLSSA Pty Ltd
(the licensing Board for Advantedge Financial Services, a NAB subsidiary), Chair of the CoreLogic RP Data
sponsored Residential Valuation Industry Advisory Group, Ministerial Advisory Board Member for NSW Housing
Minister and Chairman and Council Member of the Lenders Mortgage Insurance sub-committee. Mr Hall has
also held the senior executive position of Country Executive of Genworth Financial Aust. & NZ and Managing
Director of Genworth Financial Mortgage Insurance Aust. & NZ.
Mr Hall holds a Graduate Diploma of Management, has completed Executive Management Programs at GE’s
global management college, a former Senior Associate of the Financial Services Institute of Australia and has
received a Distinguished Service Award from the Australian Securitisation Forum.
Mr Hall is the Chair of the Risk & Compliance Committee, Chair of the Board Credit Committee and is also a
Member of the Audit Committee and Remuneration Committee.
Mr Hall is a Non-Executive Director of Pioneer Credit Limit (commenced January 2021).
Jon Denovan (Independent Deputy Chairman and Non-Executive Director)
Mr Denovan was appointed a Director on 2 September 2019. Mr Denovan is a Special Counsel with leading
national law firm, Dentons, and is a leading industry authority on regulation and compliance for the mortgage
industry. He is regularly consulted by the Commonwealth Government and industry bodies on matters
relevant to the National Consumer Credit Protection Act, National Credit Code, best interests obligations,
amongst others.
Mr Denovan is the Chair of the Audit Committee, and a member of the Risk & Compliance Committee,
Remuneration Committee and Board Credit Committee.
5
DIRECTORS’ REPORT (continued)
Ms Elizabeth Aris (Independent Non-Executive Director)
Ms Aris was appointed a Director on 18 June 2021 and is a senior business executive with experience in the
US, China and Australia. Ms Aris was recently Group Executive, Enterprise & Government at TPG Telecom.
Prior to that Ms Aris held senior executive positions at Tasmanet, Trujillo Technology Group, Alcatel-Lucent
(now Nokia) and Telstra, and consulting roles with Microsoft and Sprint. Ms Aris commenced her career in
banking, and was a member of the Retail Bank executive team at Westpac. She has served as a Non-
Executive Director in both publicly listed and private companies and spent 5 years in New York establishing
a technology start up from concept to operations.
Ms Aris holds a Bachelor of Commerce (UWA) and a Post Graduate Diploma of Corporation Finance (UNSW).
Ms Aris is a member of the Remuneration Committee.
During the last three years, Ms Aris has served on the Board of Vivid Technology Limited (Non-Executive
Director from October 2018 to July 2019.
Ms Michelle Guthrie (Independent Non-Executive Director)
Ms Guthrie was appointed a Director on 15 July 2021. Ms Guthrie has had an extensive career in media,
entertainment, funds management, technology and professional services spanning more than 30 years, in
both executive and non-executive roles. Ms Guthrie was Managing Director of the Australian Broadcasting
Corporation between 2016 and 2018. Prior to that, Ms Guthrie held senior roles with Google, where she was
the Managing Director of several divisions in APAC. Ms Guthrie was Managing Director of Providence Equity,
a funds management firm based in Hong Kong, Chief Executive of Star Group and Corporate Counsel for
Foxtel and News International. Ms Guthrie commenced her working career at Allen, Allen & Hemsley and
holds a Bachelor of Arts and Law (Sydney).
Ms Guthrie has served on the Board of the following listed companies in the last three years:
Auckland International Airport Limited (Non-Executive Director from 2013 to 2018)
StarHub Limited (Non-Executive Director from August 2017 to date)
Catapult Group International Limited (Non-Executive Director from December 2019 to date)
Mighty Kingdom Limited (from November 2020 to date)
Mr Calvin Ng (Non-Independent Non-Executive Director)
Mr Ng was appointed a Director on 15 July 2021. Mr Ng has significant investment banking, mergers &
acquisitions and funds management experience. Mr Ng is a co-founder and Managing Director of the Aura
Group, an independent corporate advisory, funds and wealth management firm. He was also a co-founder
of Finsure, which merged with Goldfields Money Limited in 2018 to form BNK. Mr Ng holds a Bachelor of
Commerce and Bachelor of Laws (UNSW) and was admitted to practice in the Supreme Court of NSW in 2010.
Mr Ng has served on the Board of the following listed companies in the last three years:
iBuyNew Group Limited (from February 2013 to September 2019)
Catapult Group International Limited (Non-Executive Director from November 2013 to November
2019)
John Kolenda (Executive Director)
Mr Kolenda was appointed a Director on 13 March 2018. Mr Kolenda is the Managing Director of Finsure
Group, and has extensive experience in the mortgage broking and aggregation sector. Mr Kolenda was the
General Manager Sales & Distribution at Aussie Home Loans for ten years from 1994, before founding X Inc,
which was a successful mortgage originator before its merger with the mortgage broking operations of Ray
White in 2007. Mr Kolenda founded several businesses before launching Finsure Group in 2011. Mr Kolenda
co-founded and chairs Aura Group Pty Ltd, a boutique corporate advisor and investment house.
During the last three years, Mr Kolenda has served on the Board of The Agency Group Australia Limited (from
December 2016 to December 2019).
6
DIRECTORS’ REPORT (continued)
FORMER DIRECTORS
Jon Sutton (Previous Chairman and Independent Non-Executive Director)
Mr Sutton was appointed to the Board on 22 October 2019 and resigned as a director on 7 July 2021.
COMPANY SECRETARY
Malcolm Cowell
Mr Cowell was appointed as Company Secretary on 1 March 2017 and was the Chief Financial Officer of the
Company until December 2018. He is a Chartered Accountant with 30 years’ experience in banking and
professional services, and continues to serve in the Group as General Manager, Finance.
PRINCIPAL ACTIVITIES
The principal activities of the Group were the provision of retail banking, mortgage management and mortgage
broker aggregation services.
RECONCILIATION BETWEEN THE STATUTORY RESULTS (IFRS) AND THE MANAGEMENT REPORTED (NON IFRS)
RESULTS
The discussion of operating performance in the Operating and Financial Review section of this report is
presented on a statutory basis under IFRS with certain adjustments to reflect a management reported basis of
the underlying performance of the business, unless otherwise stated. Management reported results are non-
IFRS financial information and are not directly comparable to the statutory results presented in other parts of
this financial report. A reconciliation between the two is provided in this section and the guidance provided in
Australian Securities and Investments Commission Regulatory Guide 230 'Disclosing non IFRS financial
information' ('RG 230') has been followed when presenting the management reported results. Non-IFRS financial
information has not been audited by the external auditor, but has been sourced from the financial records of
the Group. The reconciliation between the statutory results (IFRS) and the management/underlying reported
(non-IFRS) results is presented below:
Statutory Net Profit After Tax ($’000s)
Revenue adjustments
Non-recurring gain on sale of bonds
ATM insurance receivable recognised
Disposal of subsidiary
Expense adjustments
IFRS fair value adjustments from Finsure acquisition
Software development costs
Restructuring and transition costs
ATM operational loss
Tax effect of adjustments
Underlying Net Profit after Tax ($’000s)
(Management-reported results)
FY21
5,659
FY20
(Restated)
3,824
% change
48%
-
-
(57)
573
1,832
-
-
(888)
(1,152)
(2,917)
480
2,281
36
3,007
(617)
7,119
4,942
44%
The adjustments summarised above reflect the current year (FY21) impact of:
the amortisation of fair value adjustments to intangible assets arising from the acquisition of Finsure
in 2018;
the adoption of new accounting standard requirements mandating the expensing of software
development costs that were previously eligible to be capitalised; and
the disposal of non-core, immaterial subsidiaries.
Adjustments for the prior year (FY20) reflect the impact of:
gains from trading activities being the sale of bonds:
the expense and recovery from the ATM bailment business:
the amortisation of fair value adjustments to intangible assets arising from the acquisition of Finsure
in 2018; and
the adoption of new accounting standard requirements mandating the expensing of software
development costs that were previously eligible to be capitalised.
7
DIRECTORS’ REPORT (continued)
Key operating and financial metrics for the period were as follows:
Key Metric
Amounts in thousands of AUD
30 June 2021
($’000s)
30 June 2020
($000s)*
Movement
Net interest revenue
Net-commission income
Non-interest revenue
Statutory net profit after tax
Underlying net profit after tax
Cash earnings
On balance sheet loans – direct funded
On balance sheet loans – warehouse funded
Off balance sheet lending portfolio
Aggregation loan book
Deposits
Other key metrics
Net interest margin (average)
Cost to income ratio
Capital adequacy ratio
7,723
20,709
12,970
5,659
7,119
2,383
501,705
38,234
1,933,474
56,619,729
635,647
1.67%
72.1%
22.02%
4,813
19,129
14,441
3,824
4,942
1,444
283,561
-
2,203,986
45,472,632
345,791
1.40%
76.8%
21.22%
60.5%
8.3%
(10.2%)
48.0%
44.1%
65.0%
76.9%
n/a
(12.3%)
24.5%
83.8%
19.3%
(6.1%)
3.8%
* Restated due to adoption of new accounting standard
OPERATING AND FINANCIAL REVIEW
The Group recorded an underlying net profit after tax for the year ended 30 June 2021 (FY21) of $7,119,000
(2020: profit of $4,942,000), a 44% increase over the corresponding period. Statutory net profit after tax of
$5,659,000 was a 48% increase on the prior period (restated) whilst cash earnings of $2,383,000 represented
a 65% increase over the comparative year. Earnings per share of 5.85 cents per share was an increase of
34.4% over the prior period.
Record settlements and loan-book growth
Settlements in both the Banking and Aggregation businesses reflected the Group’s ability to leverage the
Australian mortgage market and execute its business strategies. As a bank and mortgage broking aggregator,
BNK has continued to execute its post-merger strategies of increasing broker numbers and originating a
higher proportion of loans on balance sheet. Higher residential sales and refinancing activity enabled the
Group to increase its penetration and grow market share across the country.
Settlements through Finsure’s platform of $22.2b represented a 42.4% increase on the prior year with the
number of accredited brokers increasing by 15% year on year to 2,005. Finsure’s total loan book of $56.6b
represents a 24.5% increase over the prior year reflecting the improved productivity of the brokers and
attractiveness of Finsure’s award winning service offering.
The Banking division experienced increased settlements of on balance sheet loans, with the direct funded
loan book increasing 76.9% year on year. The distribution capability of the Group’s Better Choice brand
combined with capital and deposit raising initiatives during the year were key enables of this growth. Deposit
growth of 83.8% at a reduced cost of funds led to a 27bps improvement in net interest margin to 1.67%. In
May 2021, the Group launched its first securitisation warehouse arrangement funded by Bendigo & Adelaide
Bank and Blackstone. The warehouse further diversifies the Group’s funding sources in a capital efficient
manner. Loans originated into the warehouse are accounted for on balance sheet but the Group has achieved
regulatory capital relief for the structure. The objective is to securitise the warehouse when balances
outstanding approach the facility’s $250m limit.
Total lending settlements for the Banking division of $562m represented a 25.5% increase on the prior year.
On balance sheet settlements of $322.5m (for directly funded and warehouse funded loans) represented a
150% increase on the comparative year driving the 60.5% increase in net interest income. The total loan book
for the Banking division of $2.4b remained flat, however the pivot to higher margin on balance sheet lending
resulted in improved cash returns from the portfolio.
8
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Strong credit quality
Notwithstanding the growth experienced in the on balance sheet loan book during the year, credit quality
remains sound with loans greater than 90 days arrears remaining low at 0.4% (2020: 0.4%) of gross on balance
sheet loans and advances. Despite the ongoing prevalence of COVID-19 in the community, the Company’s
loan customers continue to perform with no customers subject to repayment deferral arrangements at 30
June 2021. The Company continues to adopt prudent credit loss provisions equivalent to 20 basis points
(2020: 26 basis points) of direct funded loans and advances.
The diversification of the on balance sheet loan book has continued with the relative exposure to the
Company’s historic home state of Western Australia continuing to reduce. The reduced concentration to
Western Australia derisks the balance sheet for the longer term and evidences the Company’s move to be a
national lender.
Funding effectively for growth
Deposits comprise at-call accounts and term deposits which are sourced directly from retail customers and
through various deposit brokers. The Bank benefited from the continued supply of liquidity into the market
by the RBA, and demand for transactional accounts from SME customers. The Bank continues to grow its
deposit base, and transform its funding mix. The low interest rate environment, active management and
growth of the at-call deposit portfolio resulted in a reduction in the Bank’s cost of funds.
Deposit balances grew by 83.8% during the year to $635.6m with transaction accounts now comprising 62.5%
of total deposits (2020: 35.3%). During the year, the Bank drew down on a further entitlement under the
Reserve Bank of Australia’s Term Finance Facility, which provides Australian banks low cost funding for 3
years. This initiative was launched in 2020 as part of the Commonwealth Government’s response to COVID-
19. The drawn entitlement of $13.8m has a weighted average cost of 0.18% and is repayable in 2023.
The combination of growing the Bank’s deposit customer base at a lower cost and diversifying funding
sources has resulted in total interest expense (excluding interest on lease liabilities) reducing 38%, a
significant contribution to the improved net interest margin. The weighted average interest rate on deposits
at balance date was 0.45% (2020: 1.30%).
9
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Liquidity investments
The Group’s cash and liquidity investments predominantly comprise physical cash, at call deposits, negotiable
certificates of deposits, government (including semi-government) bonds, and floating rate notes. Liquidity
management falls under the remit of Asset & Liability Committee (ALCO), which ensures the Group operates
within its policy settings. ALCO also reviews and approves changes in product level interest rates and the
implementation of new products. The increase in liquidity assets during the year to $156.8m reflects the
strong increase in deposits and the requirement to maintain minimum liquidity holdings in accordance with
Prudential Standards. The Australian banking system experienced significant levels of excess liquidity during
the year supported by the RBA’s Term Finance Facility and other initiatives. Interest income from liquidity
investments of $0.53m (2020: $0.75m) represented a 29.6% reduction on the prior year reflecting the
significant reduction in market yields during the year.
Operating expenses
The Group continued to invest in its people and processes, with operating expenses (excluding software
development costs) increasing by 8.8% to $30.1m. This included recruitment of the new management team and
building the Bank team to scale to accommodate continued growth. Disciplined cost management processes
have been reinforced across the Group and discretionary expenditure curtailed where possible without undue
detriment to the business. This has resulted in the Group having a Cost to Income ratio of 72.1%, a reduction
of 6.1% on the prior year.
A change in accounting standards announced in 2021 has resulted in the retrospective adjustment of
capitalised software costs. This has resulted in costs previously eligible for capitalisation for cloud-based
Software as a Service (“SaaS”) now being expensed. The Group has restated its comparative opening retained
earnings and comparative profit and loss for the effect of this accounting change. Whilst software
development costs have increased in the current and previous year, the accounting change results in a
reduced amortisation charge going forward.
Capital
The Group’s policy is to maintain a minimum capital adequacy ratio (CAR) as per APRA required levels. The
CAR at 30 June 2021 of 22.0% presents the Group with further growth opportunity for both on-balance sheet
lending assets as well as investing in growth. This provides the means for the Group to generate organic
capital.
The Group completed an equity placement in May 2021, raising $13m of new share capital in an
oversubscribed bid process managed by Bell Potter.
The Bank launched its first wholesale funding arrangement during the year through the issue of $10m of
floating rate subordinated notes. The notes further diversify the Bank’s sources of funding. Further offerings
will be contemplated in the future. Whilst classified as a liability in the financial report, the notes meet the
eligibility criteria to be included in the Bank’s Tier 2 capital for regulatory capital purposes, and are repayable
in 2031.
10
DIRECTORS’ REPORT (continued)
DIVIDENDS
No dividend was paid or declared by the Company in the period and up to the date of this report. The Directors
do not recommend that any amount be paid by way of dividend, for the financial year ended 30 June 2021.
INTEREST IN SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the Directors hold shares of the Company in their own name or a related body
corporate, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001
as follows:
Number of ordinary shares
Number of options or
performance rights over ordinary
shares
Don Koch
Peter Hall
Jon Denovan
Elizabeth Aris
Michelle Guthrie
Calvin Ng
John Kolenda
-
72,034
-
10,000
-
8,484,486
13,302,952
-
-
-
-
-
125,000
Interests in ordinary shares noted above were acquired by the Directors at their own expense and do not form
part of their remuneration.
SHARE OPTIONS AND RIGHTS OVER SHARES
The Company has 1,215,000 performance rights on issue to certain key management personnel and employees.
The performance rights entitle the holder to a grant of shares subject to certain conditions being met. Refer
to the Remuneration Report for further details.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has paid or agreed to pay a premium in relation to a contract insuring the Directors and Officers
listed in this report against those liabilities for which insurance is permitted under S199B of the Corporations
Act 2001. The terms of the policy prohibit disclosure of details of the amount of the insurance cover and the
premium paid.
The Company has not otherwise, during or since the relevant period, indemnified or agreed to indemnify an
Officer or auditor of the Company or of any related body corporate against a liability incurred as such an Officer
or auditor.
MEETINGS OF DIRECTORS
The number of Board and Committee meetings held during the financial year, and attendance by each
Director is as follows:
Board
Audit
Committee
Risk &
Compliance
Committee
Remuneration
Committee
Credit
Committee
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
J Sutton
D Koch
P Hall
J Denovan
J Kolenda
E Aris
13
13
12
12
13
1
13
13
13
13
13
1
6
6
6
6
4*
-
6
6
6
6
-
-
5
5
5
6
3*
-
5
5
5
6
-
-
6
6
6
-
4*
-
6
6
6
-
-
-
3
3
3
2
1*
-
3
3
3
3
-
-
* Attendance by invitation.
11
DIRECTORS’ REPORT (continued)
CHANGES IN THE STATE OF AFFAIRS
On 1 February 2021, the Company completed an issuance of 10-year floating rate subordinated notes to
sophisticated and wholesale investors, raising $8,750,000 (before costs). The notes are eligible to be classified
as Tier 2 capital and will pay interest to holders quarterly at a floating rate of 90-day BBSW plus a margin of
5.40%.
On 21 April 2021, the Company announced it had entered into a $250,000,000 prime residential securitisation
warehouse facility funded by Bendigo & Adelaide Bank and Blackstone. The first drawdown under the facility
occurred on 20 May 2021.
On 13 May 2021, the Company completed an issuance of 10-year floating rate subordinated notes to
sophisticated and wholesale investors, raising a further $1,250,000 (before costs). The notes are eligible to be
classified as Tier 2 capital and will pay interest to holders quarterly at a floating rate of 90-day BBSW plus a
margin of 5.40%.
On 19 May 2021, the Company announced it had entered into an alliance with global investment bank, Goldman
Sachs for the origination and servicing of a $500,000,000 securitisation program funded by Goldman Sachs.
On 31 May 2021, the Company completed an equity raise of $13,000,400 (before costs) to institutional,
sophisticated and wholesale investors. 18,572,000 shares were issued on 1 June 2021.
Except for the matters discussed above and elsewhere in this Directors’ Report, in the opinion of the Directors,
there were no other significant changes in the state of affairs of the Company that occurred during the financial
year under review.
EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
On 7 July 2021, Mr Jon Sutton resigned as Chairman and Director of the Company. On the same date, Ms
Michelle Guthrie and Mr Calvin Ng were appointed as Directors which became effective on 15 July 2021, following
the receipt of APRA approval.
On 4 August 2021, the Company announced it had reached agreement with Goldman Sachs for an alliance to
originate and service specialist residential mortgages funded by Goldman Sachs.
On 18 August 2021, the Company issued 4,950,000 performance rights to executives under the BNK
Transformational Long-Term Incentive Scheme.
Other than the matters noted above, in the opinion of the Directors there has not arisen in the period between
the end of the financial year and the date of this report any other material item, transaction or event that is
likely to significantly affect the operations of the Company.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under S237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of
taking responsibility on behalf of the company for all or part of those proceedings.
ENVIRONMENTAL REGULATIONS AND ADDRESSING CLIMATE RISK
The Company’s operations are not subject to any significant environmental regulations under either
Commonwealth or State legislation.
The Group acknowledges the global threat posed by climate change to the environment and economy, and
supports initiatives to minimise the threat. The Group primarily services individuals through the provision of
residential loans for the construction or purchase of houses, and mortgage brokers through the provision of
aggregation services. The Group does not have any material exposure to environmentally sensitive industries.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
No other matter, circumstance or likely development in the operations has arisen since the end of the financial
year that has significantly affected or may significantly affect:
(i) The operations of the Company;
(ii) The results of those operations; or
(iii) The state of affairs of the Company
in the financial years subsequent to this financial year.
12
DIRECTORS’ REPORT (continued)
NON-AUDIT SERVICES
The following non-audit services were provided by the entity's auditor, KPMG. The directors are satisfied that
the provision of non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001 and APES 110 Code of Ethics for Professional Accountants. The nature
and scope of each type of non-audit service provided means that auditor independence was not
compromised.
Details of the amounts paid to the auditor of the Company, KPMG for audit and non-audit services for the
year ended 30 June 2021:
Non audit services
Accounting and tax opinions
Audit and assurance services
Audit and review of financial statements
Regulatory assurance services
Total audit and assurance services
Total amounts paid to KPMG
$
25,047
335,716
111,000
446,716
471,763
AUDITORS INDEPENDENCE DECLARATION
The lead auditor’s independence declaration provided in accordance with S307C of the Corporations Act 2001
is set out on page 27 and forms part of the Directors’ report for the financial year ended 30 June 2021.
The Remuneration Report commencing on the following page forms part of this Directors’ Report.
ROUNDING OFF
The Group is a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that Instrument, amounts in the consolidated financial statements and
directors’ report have been rounded off the nearest thousand dollars, unless otherwise stated.
13
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
This Remuneration Report for the year ended 30 June 2021 outlines the remuneration arrangements of the
Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This
information has been audited as required by section 308(3C) of the Act. The Remuneration Report is
presented under the following sections:
1. Introduction
2. Remuneration governance
3. Executive remuneration arrangements
A. Remuneration principles and philosophy
B. Approach to setting remuneration
C. Detail of incentive plans
4. Executive remuneration outcomes for 2021 (including link to performance)
5. Executive contracts
6. Non-executive director remuneration (including statutory remuneration disclosures)
7. Additional disclosures relating to options, performance rights and shares
8. Loans to key management personnel and their related parties
9. Other transactions and balances with key management personnel and their related parties
10. Remuneration incentives approved subsequent to balance date
1. Introduction
The Remuneration Report details the remuneration arrangements for key management personnel (KMP)
who are defined as those persons having authority and responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly, including any director (whether executive or
otherwise) of the Group.
The table below outlines the KMP of the Group and their relevant changes during the year ended 30 June
2021:
Non-Executives
Director
Position
Jon Sutton
Don Koch1
Jon Denovan
Peter Hall
Elizabeth Aris
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Appointment date
22 October 2019
11 June 2019
2 September 2019
13 November 2015
18 June 2021
Resignation/completion
date
7 July 2021
-
-
-
-
1 Interim Chief Executive Officer from 25 May 2020 to 12 October 2020.
Executives
Executive
Position
Appointment date
Resignation/completion
date
Brett Morgan
John Kolenda
Allan Savins
Simon Bednar
Jussi Nunes
Malcolm Cowell
Andrew Kitchen
Steve Ellis
Gerard Ng
Dara Wettner
Lisa Stedman
Amber Smith
Chief Executive Officer, Banking
and Wholesale
Executive Director and Chief
Executive Officer, Finsure
General Manager, Banking &
Wholesale
General Manager, Aggregation
Chief Financial Officer
Interim Chief Financial Officer
Chief Financial Officer
Chief Risk Officer
Interim Chief Risk Officer
Chief Risk Officer
Chief Operating Officer
Chief Operating Officer
12 October 2020
13 March 2018
17 September 2018
17 September 2018
10 December 2018
5 September 2020
26 October 2020
17 July 2016
6 October 2020
11 January 2021
10 July 2019
12 October 2020
-
-
-
-
5 September 2020
19 October 2020
-
6 October 2020
12 December 2020
-
29 August 2020
-
14
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
2. Remuneration governance
The Board of Directors is responsible for determining and reviewing compensation arrangements for the
executive team. The Remuneration Committee assists the Board in meeting its responsibilities to ensure
that remuneration practices are appropriate with regards to the Group’s size and scale of operations, and
to ensure that the Group can continue to attract and retain high caliber individuals to key executive roles.
Remuneration Committee
The Remuneration Committee comprises three Non-Executive Directors (NEDs) with all being independent.
The Remuneration Committee meets periodically and is required to make recommendations to the board
on matters related to the remuneration arrangements for NEDs and executives. The Chief Executive
Officers attends certain Remuneration Committee meetings by invitation, where management input is
required. Executives are not present during any discussions related to their own remuneration
arrangements.
The Board approves the remuneration arrangements of the executive leadership team and all awards
including incentive plans and other employee benefit programs. The Board also sets the aggregate
remuneration of NEDs, which is then subject to shareholder approval, and NED fee levels.
Further information on the remuneration committee’s role, responsibilities and membership can be found
on the company website at https://bnk.com.au/investor-centre/corporate-governance/.
Use of remuneration consultants
To ensure the Remuneration Committee is fully informed when making remuneration decisions, the
Remuneration Committee may seek external remuneration advice. During the year, the Remuneration
Committee engaged EY to assist with the formulation and documentation of a Transformational Long-
Term Incentive Plan (TLTIP) for the Executive Leadership Team (ELT). This engagement was undertaken
to ensure the TLTIP is consistent with market practice and complies with the requirements of the Banking
Executive Accountability Regime (BEAR).
EY was paid $20,620 for these services.
The engagement by the Remuneration Committee was based on an agreed set of protocols that would be
followed by EY, members of the Remuneration Committee and members of the key management personnel
for the way in which remuneration recommendations would be developed and provided to the Board.
The protocols included the prohibition of EY providing advice or recommendations to key management
personnel prior to the advice or recommendations being provided to the Remuneration Committee and not
unless EY had approval from the Remuneration Committee. These arrangements were implemented to
ensure that EY would be free to carry out its work free from undue influence by members of the key
management personnel about whom the recommendations may relate.
The Board is satisfied that the recommendations by EY were free from undue influence of members of the
key management personnel about whom the recommendations may relate. The recommendations and
advice provided by EY have been implemented subsequent to 30 June 2021 (refer to the Events Subsequent
to the End of the Financial Year section of the Director’s Report and Note 7.9 to the Financial Report).
Remuneration Report approval at 2020 Annual General Meeting (AGM)
The 2020 Remuneration Report received positive shareholder support at the 2020 AGM with a vote of
96.4%.
3. Executive remuneration arrangements
3.1 Remuneration principles and philosophy
The objective of the Group’s remuneration strategy is to attract and retain executives who will create
shareholder value and fairly and responsibly reward them for performance. The Board believes it is critical
to consider how long-term sustainable value is created in the Group and link remuneration structures to
this value creation. The Group’s remuneration policy is also intended to encourage behaviours that support
an improvement in the financial performance of the business over time, sound risk management practices
and positive customer service experiences.
To this end, the Group applies the following principles to its remuneration framework:
15
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
Provide competitive rewards to attract and retain high-caliber people;
Link executive rewards to shareholder value; and
Provide for a significant proportion of the executive remuneration to be “at risk” – that is,
dependent upon meeting predetermined performance indicators.
In accordance with best practice corporate governance, the structure of NED remuneration is separate and
distinct from executive remuneration (refer to section 6 of this Remuneration Report for information on
NED remuneration).
Remuneration is comprised of three distinct components within BNK, these are described below:
Vehicle
Purpose
Link to performance
Remuneration
component
Fixed remuneration
Short term
performance based
incentive (STI)
Represented by total
employment cost
(TEC).
Comprises base salary,
superannuation
contributions and other
benefits.
Paid in cash or
performance rights.
Long term incentive
plan (LTI)
Performance rights.
To provide competitive
fixed remuneration set
with reference to role,
market and experience.
Group and individual
performance are
considered during the
annual remuneration
review.
Rewards executives for
their contribution
towards achievement
of Company outcomes,
as well as their
performance against
individual key
performance indicators
(KPIs).
Rewards executives for
their contribution to
the creation of
shareholder value over
the longer term.
Linked to other internal
financial measures,
strategic objectives, risk
management, compliance
and leadership.
The TLTIP introduced
from 1 July 2021 links
reward to growth in
shareholder value over a
3 year period, with
hurdles comprising
growth in earnings per
share and underlying net
profit after tax.
3.2 Approach to setting remuneration
The Group aims to reward executives with a level and mix of remuneration commensurate with their
position and responsibilities within the Group and aligned with market practice of entities of a similar size,
nature and complexity.
Remuneration levels are considered annually through a remuneration review that considers the
performance of the Group and individual, and the broader economic environment.
3.3 Detail of incentive plans
Short-term incentive (STI)
In determining the extent of any performance based incentive the Board assesses the achievement of an
individual’s performance in context of the overall Group result. Incentives are awarded in accordance with
the requirements of the Banking Executive Accounting Regime (BEAR). The BEAR was implemented in
Australia to establish clear and heightened expectations of accountability for directors and executives of
Authorised Deposit-taking Institutions, and to ensure there are clear consequences in the event of a
material failure to meet those expectations. BEAR applies to BNK from 1 July 2019 and results in a
proportion of variable remuneration for a year being deferred for a period of 4 years from grant date.
16
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
Long-term incentive (LTI)
LTI awards will be made to executives in order to align remuneration with the creation of shareholder
value over the long-term. As such, LTI awards are only made to executives and other key talent who have
an impact on the Group’s performance against the relevant long-term performance measure.
Shareholders of the Company approved the continuation of the BNK Equity Incentive Plan (“the Plan”) at
the 2019 Annual General Meeting held on 26 November 2019. Pursuant to the terms of the Plan, executives
may be offered performance rights that entitle the executive to the Company delivering fully paid ordinary
shares, either issued by the Company or acquired on-market, at the election of the Board.
In FY21, the Board recognised the achievement of several initiatives that will contribute to the
transformational change of the Group over the coming years that are expected to result in the generation
of significant shareholder value. These initiatives include:
The implementation of a securitisation warehouse program;
The implementation of an alliance program with Goldman Sachs;
Completion of the Bank cover banking system upgrade; and
The potential realisation of value from the Group’s existing asset base.
The Board has therefore implemented the Transformational Long Term Incentive Plan (TLTIP) for members
of the executive leadership team (ELT) with effect from 1 July 2021. Pursuant to the TLTIP, members of
the ELT were granted performance rights equivalent to 150% of their base remuneration on 18 August 2021,
and calculated with reference to the 30 day VWAP for the Company’s securities for the 30 day period
ended 30 June 2021, and underlying earnings per share for the year ended 30 June 2021. The performance
rights are subject to a 3 year measurement period with the following hurdles:
growth in share price over the 3 year vesting period; and
growth in cash earnings per share over the 3 year vesting period.
Upon completion of the vesting period, the Board will determine the amount of performance rights to vest
based upon the measured outcomes. Subject to achievement of the outcomes, 60% of the performance
rights under the TLTIP will be eligible to vest immediately with the remaining 40% deferred for a further
year (i.e. making a 4 year period before the TLTIP can be exercised in accordance with the APRA BEAR
requirements). The vesting criteria for the TLTIP are summarised below
Hurdle 1
Hurdle 2
Compound annual growth in
Share price
Compound annual growth in
underlying EPS
Proportion vesting per Tranche
Less than 15%
15%
>15% – 30%
>30%
Less than 15%
15%
> 15% - 30%
Nil
50%
Pro-rata on a straight-line
basis between 50% – 100%
> 30%
100%
Termination and change of control provisions
Where a participant ceases employment prior to their award vesting due to resignation or termination for
cause, awards will be forfeited unless otherwise agreed by the Board. Where a participant ceases
employment for any other reason, they may retain a portion of the unvested benefit pro-rated to reflect
participant’s period of service during the STI and TLTIP grant performance period. These unvested benefits
only vest subject to meeting the relevant LTI performance measures, subject to the Board’s discretion.
In the event of a change of control of the Group, the performance period end date will generally be brought
forward to the date of the change of control and awards will vest subject to performance over this
shortened period, subject to ultimate Board discretion.
17
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
Hedging of equity awards
The Group has a policy prohibiting executives from entering into arrangements to protect the value of the
equity awards. The prohibition includes entering into contracts to hedge their exposure to options awarded
as part of their remuneration package.
4.1 Executive remuneration outcomes for 2021 (including link to performance)
Group performance and its link to short-term incentives
In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee
has regard to the following:
Profit/(loss)
Dividends paid
Share price
balance date
Return on capital
employed
at
2021
5,659,000
Nil
$0.735
2020
Restated
3,824,000
Nil
$0.43
2019
2018
2017
3,614,000
Nil
$0.64
(406,000)
Nil
$1.28
(996,000)
Nil
$1.00
4.42%
3.50%
3.60%
(1.65%)
(4.93%)
Profitability is one of the financial performance targets considered in setting remuneration for executives,
and has been calculated in accordance with Australian Accounting Standards. Performance to budget is
another key measure considered by the BNK Board when appropriate to the business objectives.
During the year ended 30 June 2021, the Group invested significantly in the executive team with new hires
for the following roles:
Chief Executive Officer, Bank and Better Choice
Chief Financial Officer
Chief Risk Officer
Chief Operating Officer
The new talent have already made a significant impact to the direction and operation of the Bank, helping
to enhance the strategic, operational, risk management and financial processes of the Group. Key to the
ongoing success of retaining and motivating the executive team to deliver improved returns for
shareholders is the LTI Scheme described above. For the year ended 30 June 2021, reward outcomes have
been determined by the Remuneration Committee having regard to the following:
Delivery of significant change to the Group including the negotiation and documentation of the
securitisation programs with Bendigo & Adelaide Bank and Goldman Sachs
The strong financial performance of the Finsure aggregation business
Enhanced risk management function and processes
Rewards approved at the July 2021 Remuneration Committee will be detailed in the next Remuneration
Report, but are summarised as follows:
Payment of STIs to 7 executives totaling $635,000, a portion of which is required to be deferred
for 4 years under the BEAR regime;
Issuance of LTIs to 9 executives on the terms set out above.
18
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.1 Remuneration of key management personnel
Short-term benefits
Post-
employment
Other long
term
Salary &
fees
STI (A)
Cash
bonus
$
$
$
Non-
monetary
benefits
(B)
$
Total
Superannuation
Long
service
leave
$
$
$
$
Current
Executives
Brett Morgan1
John Kolenda
Andrew Kitchen2
Dara Wettner3
Amber Smith4
Allan Savins
Simon Bednar
Year
2021
2021
2020
2021
2021
2021
2021
2020
2021
2020
306,359
660,000
627,000
211,559
121,246
167,651
366,035
358,327
330,003
281,568
-
47,500
-
-
-
-
24,000
-
30,000
-
-
-
-
-
-
-
-
20,000
-
-
7,083
20,000
15,000
5,833
-
2,861
-
-
-
5,010
313,442
727,500
642,000
217,392
121,246
170,512
390,035
378,327
360,003
286,578
16,271
-
-
15,780
10,962
14,668
33,260
36,841
30,875
27,313
-
-
-
-
-
-
6,806
4,828
8,380
16,151
-
7,699
-
-
-
-
36,022
66,057
37,330
66,057
1 Appointed Chief Executive Officer from 12 October 2020
2 Appointed Chief Financial Officer from 26 October 2020
3 Appointed Chief Risk Officer from 11 January 2021
4 Appointed Chief Operating Officer from 12 October 2020
BNK Banking Corporation Limited
Annual Financial Report
30 June 2021
Shared-
based
payments
LTI (C)
Termination
Total
Performance
related
$
-
-
-
-
-
-
-
-
-
-
$
%
329,713
735,199
642,000
233,172
132,208
185,180
466,123
486,053
436,588
396,099
-
8%
-
-
-
-
12%
19%
15%
17%
(A) – The fair value of performance rights granted as a STI is determined by recognising the grant date fair value over the relevant service condition period.
(B) – Non-cash benefits generally comprise housing allowance and/or car parking benefits
(C) – The fair value of performance rights is calculated at the grant date using the Monte-Carlo simulation model, taking into account the impact of the market and non-
market conditions attached to the performance rights.
19
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
Short-term benefits
Salary &
fees
STI (A)
Cash
bonus
$
$
$
Non-
monetary
benefits
(B)
$
Post
employment
Total
Superannuation
Shared-
based
payments
LTI (C)
Other
long
term
Long
service
leave
Termination
Total
Performance
related
$
$
$
$
$
$
%
Former
Executives
Don Koch1
Jussi Nunes2
Malcolm Cowell3
Steve Ellis4
Gerard Ng5
Lisa Stedman6
Simon Lyons
Year
2021
2020
2021
2020
2021
2021
2020
2021
2021
2020
2020
132,685
33,720
86,999
344,846
28,846
77,743
223,385
48,653
48,843
282,692
448,557
-
-
-
-
-
-
-
-
36,000
-
-
-
-
-
25,000
-
-
-
-
-
-
50,000
-
-
-
7,500
287
-
-
-
-
-
76,137
132,685
33,720
86,999
377,346
29,133
77,743
223,385
48,653
84,843
282,692
574,694
11,479
3,203
14,101
32,760
2,740
5,305
21,222
4,622
4,385
26,856
38,285
-
-
-
834
-
-
171
-
-
-
(40,129)
-
-
-
-
3,863
-
27,140
-
-
-
40,680
-
-
100,000
-
-
-
-
-
-
-
212,500
144,164
36,923
201,100
410,940
35,736
83,048
271,918
53,275
89,228
309,548
826,030
Total KMP
remuneration
2021
2020
2,586,622
2,600,095
137,500
-
-
95,000
36,064
103,647
2,760,186
2,798,742
164,448
186,480
15,186
(18,145)
84,914
199,934
100,000
212,500
3,124,734
3,379,511
-
-
-
6%
11%
-
10%
-
40%
-
11%
7%
9%
1 Interim Chief Executive Officer from 26 May 2020 to 12 October 2020
2 Resigned 5 September 2020
3 Interim Chief Financial Officer from 5 September 2020 to 26 October 2020
4 Resigned 6 October 2020
5 Interim Chief Risk Officer from 6 October 2020 to 12 December 2020
6 Resigned 29 August 2020
(A) – The fair value of performance rights granted as a STI is determined by recognising the grant date fair value over the relevant service condition period.
(B) – Non-cash benefits generally comprise housing allowance and/or car parking benefits
(C) – The fair value of performance rights is calculated at the grant date using the Monte-Carlo simulation model, taking into account the impact of the market and non-
market conditions attached to the performance rights.
20
BNK Banking Corporation Limited
Annual Financial Report
30 June 2021
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.2 Analysis of bonuses included in remuneration – audited
No cash bonuses were awarded to KMP in FY21.
4.3 Equity instruments - audited
Performance rights refer to rights over ordinary shares of BNK, which vest on a one-for-one basis under
the BNK Equity Incentive Plan.
4.3.1 Rights over equity instruments granted as compensation – audited
Details on rights over ordinary shares in the Company that were granted as remuneration to each key
management personnel during the reporting period are as follows:
Participant
Lisa Stedman
Number
granted
FY21
120,000
Allan Savins
80,000
Simon Bednar
100,000
John Kolenda
125,000
Vesting
condition
Service and
performance
Service and
performance1
Service and
performance1
Service and
performance1
Grant date
Fair value at
grant date ($)
Expiry date
28 August 2020
28 August 2020
28 August 2020
1 December 2020
0.60
0.60
0.60
0.76
29 Nov 2023
31 March 2025
31 March 2025
31 March 2025
1 Refer to note 7.4.3 for further information of the vesting conditions.
4.3.2 Details of equity incentives affecting current and future remuneration – audited
Details of the vesting profiles of the performance rights held by each executive of the Group are detailed
below:
Participant
Number
Grant date
% vested % forfeited
Financial years
FY21
FY21
in which grant
Steve Ellis1
50,000
1 November 2018
Lisa Stedman2
120,000 28 August 2020
Allan Savins
66,666
16 April 2019
66,667
16 April 2019
66,667
16 April 2019
100%
50%
100%
100%
0%
16,667 5 December 2019
100%
16,667 5 December 2019
16,666 5 December 2019
40,000 28 August 2020
40,000 28 August 2020
0%
0%
100%
0%
0%
50%
0%
0%
0%
0%
0%
0%
0%
0%
vests
2021
2021
2020
2021
2022
2021
2022
2023
2021
2025
21
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.3.2 Details of equity incentives affecting current and future remuneration – audited (continued)
Participant
Number
Grant date
%
%
Financial years
vested
forfeited
in which grant
Simon Bednar
66,666
16 April 2019
66,667
16 April 2019
66,667
16 April 2019
FY21
100%
100%
0%
16,667 5 December 2019
100%
16,667 5 December 2019
16,666 5 December 2019
0%
0%
50,000 28 August 2020
100%
Jussi Nunes3
16,667 5 December 2019
50,000 28 August 2020
16,667 5 December 2019
16,666 5 December 2019
0%
0%
0%
0%
John Kolenda4
62,500
1 December 2020
100%
62,500
1 December 2020
0%
FY21
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
0%
0%
vests
2020
2021
2022
2021
2022
2023
2021
2025
2021
2022
2023
2021
2025
1 Ceased to be an executive on 6 October 2020.
2 Ceased to be an executive on 28 August 2020.
3 Ceased to be an executive on 5 September 2020.
4 Issued following approval by shareholders at the Company’s 2020 Annual General Meeting.
4.3.3 Analysis of movements in equity instruments – audited
The value of performance rights in the Company granted during and exercised during the reporting period
is detailed below:
Current key management personnel
Participant
Allan Savins
Simon Bednar
John Kolenda
Former key management personnel
Participant
Simon Lyons
Lisa Stedman
Steve Ellis
Granted in
year
$ (A)
48,000
60,000
95,000
Granted in
year
$ (A)
-
36,000
-
Value of rights
exercised
in year $ (B)
88,800
94,666
-
Value of rights
exercised
in year $ (B)
414,000
39,600
116,375
(A) The value of rights granted in the year is the fair value of the rights calculated at grant date. This
amount is allocated to remuneration over the vesting period.
(B) The value of rights exercised during the year is calculated at the market price of shares of the Company
as at close of trading on the date the rights are exercised.
22
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.3.4 Summary of rights holdings
Current key management personnel
Participant
Allan Savins
Simon Bednar
Held at 1
July
2020
183,334
183,334
Granted as
remuneration Exercised
(123,334)
(133,334)
80,000
100,000
Lapsed
-
-
Forfeited
-
-
Held at
30 June
2021
140,000
150,000
Vested
during
the year
123,334
133,334
Vested and
exercisable
at 30 June
2021
-
-
Former key management personnel
Participant
Simon Lyons
Steve Ellis
Lisa Stedman
Jussi Nunes
Held at 1
July
2020
766,667
175,000
-
50,000
Granted as
remuneration Exercised
(766,667)
(175,000)
(60,000)
-
-
-
120,000
-
Lapsed
-
-
-
-
Forfeited
-
-
(60,000)
(50,000)
Held at
30 June
2021
-
-
-
-
Vested
during
the year
-
-
60,000
-
Vested and
exercisable
at 30 June
2021
-
-
-
-
5. Executive Contracts
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts
are provided below:
Executives
Salary per annum
Term for cause
Brett Morgan
$400,000 plus
superannuation
John Kolenda
Andrew Kitchen
Consultancy agreement
totaling $660,000 per
annum
$300,000 plus
superannuation
Dara Wettner
Amber Smith
Allan Savins
Simon Bednar
$250,000 plus
superannuation
$220,000 plus
superannuation
$350,000 plus
superannuation
$325,000 plus
superannuation
None
None
None
None
None
None
None
Term of agreement
and notice period
Continuing with 3
months’ notice by
either party
Continuing with 1
month notice by
either party
Continuing with 3
months’ notice by
either party
Continuing with 3
months’ notice by
either party
Continuing with 3
months’ notice by
either party
Continuing with 1
month notice by
either party
Continuing with 1
month notice by
either party
23
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
6. Non-executive director remuneration arrangements - Audited
Remuneration policy
The board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract
and retain directors of the highest caliber, whilst incurring a cost that is acceptable to shareholders. The
amount of aggregate remuneration sought to be approved by shareholders and the fee structure is
reviewed annually against fees paid to NEDs.
The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined
from time to time by a general meeting. The latest determination was at the 2018 AGM held on 9 November
2018 when shareholders approved an aggregate fee pool of $650,000 per year.
Structure
The remuneration of NEDs consists of directors’ fees. The table below summarises the base NED fees
excluding superannuation contributions for the financial year ended 30 June 2021:
Type of Fee
Amount per annum
Chairman base fee
Non-executive Director base fee
Chair of Board sub-committees
Membership of Board sub-committees
$130,000
$70,000
$10,000 per committee
$5,000 per committee
NEDs receive superannuation contributions of 9.5% (10% from 1 July 2021) of earnings but do not receive
any other retirement benefits, nor do they participate in any incentive programs.
The remuneration of NEDs for the years ended 30 June 2021 and 30 June 2020 is detailed in table below.
Short-term benefits
Post-
employment
Salary &
fees $
Non-
monetary
benefits
Other7
Superannuation
Long-
term
benefits
Long
service
leave
Non-executive
directors
Jon Sutton1
Don Koch2
Peter Hall
Jon Denovan3
Elizabeth Aris4
Former directors
Peter Wallace5
Derek La Ferla6
Total
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2020
142,813
79,717
62,707
63,000
86,809
67,667
77,821
56,000
2,301
54,167
11,667
2021
2020
372,451
332,217
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,567
7,573
5,957
5,985
8,247
6,428
7,393
5,320
219
5,146
1,108
35,383
31,561
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
156,380
87,290
68,664
68,985
95,056
74,095
85,214
61,320
2,520
59,313
12,775
407,834
363,777
1 Appointed 22 October 2019 and retired as a Director on 7 July 2021
2 Remuneration for the period 1 July 2019 to 25 May 2020 as a NED and from 12 October 2021
3 Appointed 2 September 2019
4 Appointed 18 June 2021
5 Retired as a Director on 26 November 2019
6 Retired as a Director on 30 August 2019
24
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
7. Additional disclosures relating to options and shares
The numbers of shares in the Company held during the financial year by each director of the Company and
other key management personnel, including their personally related parties, are set out below. There were
no shares granted during the reporting period as compensation.
Shareholdings of key management personnel
2021
Directors
Peter Hall
John Kolenda
Don Koch
Jon Sutton
Jon Denovan
Elizabeth Aris
2021
Executives
Brett Morgan
Dara Wettner
Amber Smith
Allan Savins
Simon Bednar
Balance at the
start of the
year or
commencement
date
72,034
13,302,952
-
60,000
-
10,000
Acquired
Other
movement
Balance at the end
of the year or date
of resignation
-
-
-
-
-
-
-
-
-
-
-
-
72,034
13,302,952
-
60,000
-
10,000
Balance at the
start of the
year or
commencement
date
Acquired
through
exercise of
vested
performance
rights
Other
movement
Balance at the end
of the year or date
of resignation
-
-
-
1,394,605
1,219,999
-
-
-
123,334
133,334
11,380
-
-
-
(9,666)
11,380
-
-
1,517,939
1,343,667
8. Loans to key management and their related parties
(i) Details of aggregate of loans to key management personnel and their related parties:
Aggregate
Balance at
beginning of
period/KMP
appointment
2021
492,354
Interest
charged
during
KMP
period
33,464
Write-off or
allowance
for doubtful
debt
Balance at end
of period
Number of KMP in
group
-
483,768
1
(ii) Terms and conditions of loans to key management personnel and their related parties
Loans to key management personnel are made on terms equivalent to an arm’s length transaction, that is
terms and conditions are similar to those offered to other customers at the time a loan is funded. All loans
are secured by appropriate forms of collateral.
9. Other transactions and balances with key management personnel and their related parties
During the period, the Group sub-leased office space to Aura Group Pty Ltd, a related entity of Mr John
Kolenda. Rental income and recharges received during the period totaled $446,457 (2020:$446,325) and
the balance receivable at 30 June 2021 was $21,570.
During the period, the Group paid $42,175 to Shadow Charters Pty Ltd, a related entity of Mr John Kolenda
for boat charter services.
25
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
10. Remuneration incentives approved subsequent to balance date
Subsequent to 30 June 2021, the Remuneration Committee recommended the following incentives to
the Board for members of the Executive Leadership Team.
Executive
Brett Morgan
John Kolenda
Simon Bednar
Allan Savins
Dara Wettner
Award
Short-term incentive of $100,000 with a portion to be deferred in
accordance with BEAR requirements.
Short-term incentive of $200,000 with a portion to be deferred in
accordance with BEAR requirements.
Short-term incentive of $150,000 with a portion to be deferred in
accordance with BEAR requirements.
Vesting of second tranche of FY19 Bonus performance rights.
Short-term incentive of $100,000 with a portion to be deferred in
accordance with BEAR requirements.
Vesting of second tranche of FY19 Bonus performance rights.
Short-term incentive of $10,000 with a portion to be deferred in
accordance with BEAR requirements.
End of Remuneration Report
Signed in accordance with a Resolution of Directors
Don Koch - Chairman
Dated this 27th day of August 2021
26
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of BNK Banking Corporation Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of BNK Banking
Corporation Limited for the financial year ended 30 June 2021 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Nicholas Buchanan
Partner
Sydney
27 August 2021
©2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG
name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability
limited by a scheme approved under Professional Standards Legislation.
27
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2021
Consolidated
Bank
In thousands of AUD
Interest revenue from banking activities
Interest expense from banking activities
Net interest income
Commission income
Commission expense
Net commission income/(expense)
Other income
Total net revenue
Note
2021
$
2020
Restated
$
2.2
2.2
2.2
2.2
2.2
2.2
11,417
10,643
(3,694)
(5,830)
7,723
4,813
339,170
290,509
(318,461)
(271,380)
20,709
12,970
41,402
19,129
14,441
2021
$
10,785
(3,521)
7,264
2020
Restated
$
10,568
(5,612)
4,956
-
(712)
(712)
5,199
-
(475)
(475)
4,951
38,383
11,751
9,432
Operating expenses
Impairment of loans, advances and other
receivables
Impairment of insurance receivable and ATMs
Impairment of bailment cash
Profit/(Loss) before income tax from continuing
operations
Income tax (expense)/benefit
Profit/(Loss) for the period attributable to equity
holders of the parent
2.3
(32,063)
(30,000)
(10,174)
(9,866)
4.1.1
4.1.1
(437)
(881)
(634)
-
(384)
(881)
(584)
-
-
(2,923)
-
(2,923)
8,021
4,826
312
(3,941)
2.4.1
(2,362)
(1,002)
1,013
495
5,659
3,824
1,325
(3,446)
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss, net of income tax
Net change in fair value of financial assets – OCI
4.2
-
(48)
-
-
Total comprehensive income for the period
5,659
3,776
1,325
(3,446)
Basic earnings per share (cents)
Diluted earnings per share (cents)
5.3
5.3
5.85
5.77
4.35
4.28
Comparative balances restated due to the adoption of a new/revised accounting policy – refer to note 8.1
The accompanying notes form part of these financial statements
28
STATEMENTS OF FINANCIAL POSITION
As at 30 June 2021
In thousands of AUD
Note
ASSETS
Cash and cash equivalents
Due from other financial institutions
Other financial assets
Loans and advances
Commissions and other receivables
Contract assets
Investment in subsidiaries
Property, plant and equipment
Goodwill and other intangible assets
Deferred tax assets
TOTAL ASSETS
LIABILITIES
Deposits
Other financial liabilities
Commissions and other payables
Contract liabilities
Current tax liability
Provisions
Deferred tax liabilities
TOTAL LIABILITIES
4.1.1
4.2
4.2
3.1
4.4.1
4.4.3
6.1.1
7.1
7.2
2.4.2
4.3
4.5
4.4.2
4.4.3
7.3
2.4.2
Consolidated
Bank
2021
$
2020
Restated
$
2021
$
2020
Restated
$
47,285
8,820
148,148
539,939
25,607
505,706
-
2,646
43,689
-
1,321,840
18,122
33,335
38,231
283,561
25,423
387,197
-
3,808
44,432
-
834,109
41,591
8,820
148,148
541,527
7,361
-
61,925
538
324
2,121
812,355
15,853
33,335
38,138
285,206
6,559
-
61,925
744
162
2,572
444,494
635,647
61,258
27,592
453,381
-
1,678
14,310
1,193,866
345,791
-
22,682
342,954
-
1,308
12,133
724,868
635,647
61,646
3,665
-
-
299
-
701,257
345,791
-
1,785
-
-
219
-
347,795
NET ASSETS
127,974
109,241
111,098
96,699
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Contributed equity
Issued capital, net of raising costs
Reserves
Retained earnings
TOTAL EQUITY
5.2.2
116,728
1,234
10,012
127,974
103,516
1,232
4,493
109,241
116,728
1,234
(6,864)
111,098
103,516
1,372
(8,189)
96,699
Comparative balances restated due to the adoption of a new/revised accounting policy – refer to note 8.1
The accompanying notes form part of these financial statements
29
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2021
In thousands of AUD Consolidated
Attributable to equity holders
Note
Issued
Capital
Equity
Raising
Costs
Treasury
Shares
P,P & E
Revaluation
Reserve
Financial
Assets
Revaluation
Reserve
General
Reserve for
Credit
Losses
Share-based
Payments
Reserve
Retained
Earnings
Total Equity
$
$
$
$
$
$
$
$
$
Balance at 1 July 2019
99,188
(2,621)
Adoption of new accounting policy
8.1
-
-
Restated balance at 1 July 2019
99,188
(2,621)
Sale of branch building
Profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of share capital
Equity raising costs, net of tax
Acquisition of treasury shares
Cost of share-based payments
Balance at 30 June 2020
Balance at 1 July 2020
Profit for the period
Sale of financial assets
Total comprehensive income
Transactions with owners of the Company
Issue of share capital
Equity raising costs, net of tax
Cost of share-based payments
Balance at 30 June 2021
5.2.2
5.2.3
7.5.2
13,765
-
120,035
-
-
-
-
-
-
-
-
-
(103)
-
-
-
-
-
7,082
-
-
-
-
-
-
-
-
(133)
-
-
5.2.2
5.2.3
5.2.4
106,270
(2,754)
(103)
106,270
(2,754)
(103)
-
-
-
-
-
-
-
(553)
-
(3,307)
-
-
-
-
-
-
(103)
97
-
97
(97)
-
-
(97)
-
-
-
-
-
-
-
-
-
-
-
-
-
(92)
-
(92)
-
-
(48)
(48)
-
-
-
-
(140)
(140)
-
140
140
-
-
-
-
446
-
446
-
-
-
-
-
-
-
-
446
446
-
-
-
-
-
-
446
624
2,794
100,436
-
(2,125)
669
-
3,824
-
3,824
-
-
-
-
(2,125)
98,312
(97)
3,824
(48)
3,679
7,020
(133)
(103)
467
4,493
109,241
4,493
5,659
(140)
5,519
-
-
-
10,012
109,241
5,659
-
5,659
13,000
(553)
627
127,974
624
-
-
-
-
(62)
-
-
467
1,029
1,029
-
-
-
(765)
-
627
891
The accompanying notes form part of these financial statements
30
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2021
In thousands of AUD Bank
Attributable to equity holders
Balance at 1 July 2019
Note
Issued
Capital
Equity
Raising
Costs
Treasury
Shares
$
$
$
99,188
(2,621)
Property,
Plant and
Equipment
Revaluation
Reserve
$
General
Reserve for
Credit
Losses
Share-based
Payments
Reserve
Retained
Earnings
$
$
$
Adoption of new accounting policy
8.1
-
-
Restated balance at 1 July 2019
99,188
(2,621)
Sale of branch building
(Loss) for the period
Total comprehensive income
Transactions with owners of the Company
Issue of share capital
Equity raising costs, net of tax
Acquisition of treasury shares
Cost of share-based payments
Balance at 30 June 2020
Balance at 1 July 2020
Profit for the period
Total comprehensive income
Transactions with owners of the Company
Issue of share capital
Equity raising costs, net of tax
Cost of share-based payments
Balance at 30 June 2021
5.2.3
5.2.4
5.2.5
5.2.3
5.2.4
7.5.2
-
-
-
-
-
-
-
-
(103)
-
(103)
-
-
-
7,082
-
-
-
-
-
-
-
(133)
-
-
106,270
(2,754)
106,270
(2,754)
(103)
-
-
13,765
-
-
-
-
-
(553)
-
-
-
-
-
-
120,035
(3,307)
(103)
97
-
97
(97)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
446
-
446
-
-
-
-
-
-
-
446
446
-
-
-
-
-
446
The accompanying notes form part of these financial statements
31
Total Equity
$
95,072
(2,081)
92,991
(97)
(3,446)
(3,543)
7,020
(133)
(103)
467
624
(2,662)
-
(2,081)
624
(4,743)
-
-
-
-
(3,446)
(3,446)
(62)
-
-
467
-
-
-
-
1,029
(8,189)
96,699
1,029
(8,189)
-
-
1,325
1,325
(765)
-
627
891
-
-
-
(6,864)
96,699
1,325
1,325
13,000
(553)
627
111,098
STATEMENTS OF CASH FLOWS
For the year ended 30 June 2021
In thousands of AUD
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Fees and commissions received
Interest and other costs of finance paid
Other income received
Consolidated
Bank
Note
2021
$
2020
Restated
$
2021
$
2020
Restated
$
12,111
10,643
11,478
10,568
232,043
177,748
1,894
1,597
(3,694)
(5,830)
(3,521)
(5,612)
827
1,786
4,005
1,108
Payments to suppliers and employees
(233,492)
(183,673)
(12,344)
(10,816)
Net increase in loans, advances and other receivables
Net (decrease)/increase in deposits and other
borrowings
Net (payments)/receipts for investments
(254,866)
(69,400)
(253,679)
(68,216)
289,856
58,665
289,856
58,665
(85,494)
6,903
(85,494)
6,903
Net cash provided by/(used in) operating activities
(42,709)
(3,158)
(47,805)
(5,803)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidiaries
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangible assets
Net cash from/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of capital
Payments for equity raising costs
Payments for treasury shares
Payments for lease liabilities
Proceeds of borrowings
Net (used in)/cash from financing activities
94
-
(25)
(411)
(342)
-
506
(42)
(1,328)
(864)
-
-
(25)
(184)
(209)
-
506
(25)
(71)
410
5.2.2
5.2.3
5.2.4
13,000
(765)
-
(1,279)
61,258
72,214
7,082
13,000
7,082
(133)
(103)
(765)
-
(1,160)
(129)
-
61,646
(133)
(103)
(108)
-
5,686
73,752
6,738
Net increase/(decrease) in cash held
29,163
1,664
25,738
1,345
Cash and cash equivalents at beginning of the year
18,122
19,381
15,853
17,431
Cash and cash equivalents at end of the year
47,285
21,045
41,591
18,776
Less provision for non-recovery of ATM bailment cash
4.1.1
-
(2,923)
-
(2,923)
Total cash and cash equivalents
47,285
18,122
41,591
15,853
Comparative statements restated due to the adoption of a new/revised accounting policy – refer to note 8.1
The accompanying notes form part of these financial statements
32
NOTES TO THE FINANCIAL REPORT
1.
BASIS OF PREPARATION
1.1
Corporate information
BNK Banking Corporation Limited (the “Company”, “the Bank” or “BNK”) is a for-profit entity and provides
a range of retail banking products and financial services directly and through third party intermediaries.
The Company is a publicly listed company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is Level 14, 191 St George’s Terrace, Perth 6000, Western
Australia. BNK is listed on the Australian Securities Exchange (ASX:BBC).
The financial report for BNK and its controlled entities (the Group) for the year ended 30 June 2021 was
authorised for issue in accordance with a resolution of the directors on 27 August 2021.
1.2
Basis of accounting
(a) Basis of preparation
The financial report includes the consolidated and stand-alone financial statements of the Group and the
Bank, respectively. This financial report is a general purpose financial report, which has been prepared in
accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board.
The financial report has been prepared on a going concern basis and is stated at historical costs, not taking
into account changing money values, except where stated. Cost is based on the fair values of the
consideration given in exchange for assets.
The report is presented in Australian dollars with all values rounded to the nearest thousand dollars ($’000)
in accordance with ASIC Corporations Instrument (Rounding in Financial/Directors’ Reports) 2016/191 unless
otherwise indicated.
The Company presents its statement of financial position in order of liquidity. An analysis regarding recovery
or settlement within 12 months after the reporting date (current) and more than 12 months after the
reporting date (non–current) is presented in the notes to the financial statements.
(b) Statement of compliance
The financial report complies with the Corporations Act 2001, Australian Accounting Standards and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board.
1.3
Significant accounting judgements and estimates
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis and adjusted as required. This is particularly pertinent in
the year ended 30 June 2021 where the impact of the COVID-19 pandemic has caused significant impact to
the Australian (and global) economy with inherent uncertainty as to future economic conditions. Revisions
to accounting estimates are recognised in the period on which the estimate is revised and in any future
periods affected. Specific adjustments to inputs and assumptions as a result of COVID-19 are explained in
the relevant notes to this financial report as referenced below:
Identification and measurement for impairment of loans and receivables
Derecognition of financial assets, sale of loans
Utilisation of carry forward tax losses, recognition of deferred tax asset
Net present value of future trail commissions receivable and payable
Impairment of goodwill and other intangibles
Capitalisation of intangible assets
Reference
3.2
3.3
2.4
4.4
7.2
8.1
33
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE
2.1
Operating segments
The Group has two operating businesses, which are its reportable segments. AASB 8 requires operating segments
to be identified on the basis of internal information provided to the chief decision makers, the Chief Executive
Officers, in relation to the business activities of the Group. The Group has determined it has two segments for
which information is provided regularly to the Board of Directors.
The Group has revised its segments from the previous three segments reported on the basis that the previous
Wholesale division is now fully integrated with the Bank such that key operational activities for the origination,
approval and disbursement of residential loans are aligned as a single business line. This has resulted in 75% of
loans originated by Better Choice Home Loans funded by BNK with reduced dependency on third party funders
during the year.
The following describes the operations of each of the Group’s reportable segments:
Banking
The Group’s banking business refers to the provision of banking products and services such as loans and deposits
under the Goldfields Money and Better Choice Home Loans brands (and soon to be launched BNK Bank brand).
Loans are originated via online applications and accredited brokers. Loans are held on balance sheet, through off
balance sheet arrangements and originated through third party wholesale funding providers. Deposits are originated
through direct marketing efforts as well as through a number of third party intermediaries. BNK’s award winning
deposits are guaranteed by the Australian Government Deposit Guarantee for up to $250,000 per customer. The
segment earns net interest income and service fees from providing a range of services to its retail and small
business customers.
Aggregation
The Aggregation segment provides contracted administrative and infrastructure support to approximately 2,000
mortgage brokers, connecting them with a panel of approximately 65 lenders. The segment is primarily branded
as Finsure and LoanKit and is one of Australia’s largest aggregators.
Aggregation derives commissions including upfront commissions which are earned upon each loan settlement, and
ongoing trail commissions. Additional revenue in the form of fees for service including recurring software as a
service (SaaS), compliance, professional development and other support services. The Infynity CRM platform
provides enhanced capability for Aggregation to diversify its revenues from third party lead generation opportunities.
34
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.1
Operating segments (continued)
In thousands of AUD
Revenue
Interest income
Inter-segment interest income
Total interest income
Commission and non-interest income
Inter-segment commission and other income
Total commission and non-interest income
30 June 2021
30 June 2020
Restated
Banking
$
Aggregation
$
Total
$
Banking Aggregation
$
$
11,345
(11)
11,334
18,817
(4,000)
14,817
83
-
83
337,323
-
337,323
11,428
(11)
11,417
356,140
(4,000)
352,140
10,723
(246)
10,477
18,817
(737)
18,080
Total
$
10,889
(246)
10,643
166
-
166
286,870
-
286,870
305,687
(737)
304,950
Total segment revenue
26,151
337,406
363,557
28,951
287,036
315,593
Interest expense
Inter-segment interest expense
Other
Total interest expense
Commission expense
Inter-segment commission expense
Total commission expense
Segment profit/(loss) before tax
Material non-cash expenses:
Depreciation and amortisation
Share-based payments
Segment assets
Segment liabilities
3,461
-
89
3,550
8,775
-
8,775
(1,108)
415
627
-
(11)
155
144
309,686
-
309,686
9,129
1,886
-
3,461
(11)
244
3,694
318,461
-
318,461
5,574
-
62
5,636
6,836
-
6,836
-
(246)
440
194
5,574
(246)
502
5,830
265,281
(737)
264,544
272,117
(737)
271,380
8,021
(4,163)
8,989
4,826
2,301
627
366
422
1,830
2,196
-
422
778,511
719,350
543,329
474,516
1,321,840
1,193,866
417,777
361,488
416,332
363,380
834,109
724,868
35
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.2
Income
Net interest income
In thousands of AUD
Interest revenue
Loans and advances
Sub-lease finance lease
Due from other institutions
Total interest income
Interest expense
Deposits
Lease liabilities
Securitisation liabilities
Subordinated debt
Other
Total interest expense
Net interest income
Consolidated
2020
$
2021
$
10,807
80
530
11,417
3,181
210
44
236
23
3,694
9,756
134
753
10,643
5,574
248
-
-
8
5,830
2021
$
10,259
-
526
10,785
3,181
31
52
236
21
3,521
Bank
2020
$
9,849
-
719
10,568
5,574
38
-
-
-
5,612
7,723
4,813
7,264
4,956
Weighted average interest rate - loans and advances
Weighted average interest rate - deposits
Spread
3.00%
0.45%
2.55%
3.74%
1.30%
2.44%
3.00%
0.45%
2.55%
3.74%
1.30%
2.44%
Net commission income
Commission income
Upfront commission
Trail commission income
Change in net present value of future trail
commissions receivable
Total commission income
Commission expense
Upfront commission expense
Trail commission expense
Change in net present value of future trail
commission payable
Total commission expense
129,760
90,902
94,490
78,183
118,508
339,170
117,836
290,509
125,679
82,354
110,428
318,461
90,345
68,496
112,539
271,380
-
-
-
-
-
712
-
712
-
-
-
-
-
475
-
475
Net commission income/(expense)
20,709
19,129
(712)
(475)
Other income
Service fees and other residual income
Aggregation services fee income
Lending fees
Transaction fees
Sponsorship income
Cash convenience income
Insurance recovery (refer note 4.1.1)
Dividends received
Other
Total other income
2,248
7,503
821
391
2,001
-
-
4
2
12,970
1,616
6,105
679
16
1,659
261
2,898
4
1,203
14,441
577
-
225
391
-
-
-
4,004
2
5,199
442
-
128
16
-
261
2,898
4
1,202
4,951
36
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.2
Income (continued)
Accounting policy - recognition and measurement
Interest income and expense
Interest income and expense is recognised in profit or loss using the effective interest rate method. This is the rate
that exactly discounts the estimated future cash receipts or payments over the expected life of the financial
instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. The
calculation of the effective interest rate includes transaction costs (such as payments made to brokers for the
introduction of loans) and fees and points paid or received that are an integral part of the interest rate. Transaction
costs include incremental costs that are directly attributable to acquisition or issue of a financial asset or financial
liability.
The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset or financial
liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between that initial amount and the maturity
amount and, for financial assets, adjusted for any expected credit loss allowance.
The ‘gross carrying amount of a financial asset’ is the amortised cost of a financial asset before adjusting for any
expected credit loss allowance.
The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial
asset or a financial liability. In calculating interest income and expense, the effective interest rate is applied to the
gross carrying amount of the asset (when the asset is not credit- impaired) or to the amortised cost of the liability.
The effective interest rate is revised as a result of periodic re-estimation of cash flows of floating rate instruments
to reflect movements in market rates of interest.
Banking fees and commissions
Fee and commission income and expense that are integral to the effective interest rate on a financial asset or
financial liability are included in the effective interest rate (refer above).
Other fee and commission income including account servicing fees, cash convenience income is recognised as the
related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, then
the related loan commitment fee is recognised on a straight-line basis over the commitment period.
Service and residual income
A contract with a customer that results in a recognised financial instrument in the Group’s financial statements
may be partially in the scope of AASB 9 Financial Instruments and partially in the scope of AASB 15 Revenue from
Contracts with Customers. If this is the case, then the Group first applies AASB 9 to separate and measure the part
of the contract that is in the scope of AASB 9 and then applies AASB 15 to the residual.
Service fees and residual income arises from the management of loans and receivables which have previously been
originated by BNK and sold to other parties. Service fees are recognised from rendering of services principally for
the management of the loans, and residual income is recognised from the residual amount collected from
customers after transferring to the legal owner of the loans a contractually agreed return.
Other fee and commission expenses relate mainly to transaction and service fees, which are expensed as the
services are incurred.
Dividends
Revenue is recognised when the Company’s right to receive the payment is established, which is generally when
the dividend has been declared.
Rental income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is
included in revenue in the statement of comprehensive income due to its operating nature.
37
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.2
Income (continued)
Accounting policy - recognition and measurement (continued)
Commission revenues
The Group provides loan origination services and receives upfront origination commission on the settlement of
loans. Additionally the lender normally pays a trailing commission over the life of the loan. Commission revenue is
recognised as follows:
Origination commissions
Origination commissions are recognised upon the loans being settled and receipt of commission net of clawbacks.
Trailing commissions
The Group receives trailing commissions from lenders on loans they have settled that were originated by the Group.
The trailing commissions are received over the life of the loans based on the individual loan balance outstanding.
The Group also makes trailing commission payments to authorised mortgage originators (brokers) based on the
individual loan balance outstanding.
On initial recognition, trailing commission revenue and receivables are recognised at the transaction price using the
expected value approach as a contract asset under AASB 15, being the expected future trailing commission
receivables discounted to their net present value. In addition, an associated payable and expense to the relevant
brokers are also recognised, initially measured at fair value being the future trailing commission payable to relevant
brokers discounted to their net present value. These calculations require the use of assumptions which are
determined by management with the assistance of external actuaries.
Subsequent to initial recognition and measurement both the trailing commission asset and trailing commission
liability are measured at amortised cost. The carrying amount of the trailing commission asset and trailing
commission payable are adjusted to reflect actual and revised estimated cash flows by recalculating the carrying
amount with reference to the present value of estimated future cash flows at the original effective interest rate.
The resulting adjustment is recognised as income or expense in the Consolidated Statement of Profit or Loss.
Aggregation service fee income
The Group offers contracts to brokers based upon their settlement volumes. Brokers with high volume transactions
receive 100% distribution of all commissions and are charged a monthly fee in arrears for the aggregation service.
Revenue from flat fees is recognised at the point in time the service is provided.
The Group earns Software as a Service income for subscription to its proprietary loan origination platform "Infynity"
and also provides compliance and licensing services to its brokers. The Group charges a fee for both of these
services, with revenue recognised at the point in time the service is provided.
Sponsorship income
Sponsorship income is the income generated from sponsorship arrangements with other lenders, supporting the
continuous education of the Group's brokers. The income is brought to account when services relating to the
income have been performed over time.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating cash flows.
38
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.3
Operating Expenses
In thousands of AUD
Depreciation and amortisation
Information technology
Cloud based software development
Banking services delivery
Securitisation operating expenses
Employee benefits
Professional services
Marketing
Occupancy
Other administration expenses
Total operating expenses
Consolidated
Bank
2021
$
2020
Restated
$
2021
$
2020
Restated
$
2,301
2,669
1,915
531
48
18,780
1,441
969
287
3,121
32,063
2,196
1,543
2,281
402
-
16,576
1,546
1,784
477
3,195
30,000
215
1,304
1,576
531
-
4,562
871
87
135
893
10,174
284
846
1,811
402
-
4,359
1,080
85
163
836
9,866
Comparative period restated due to adoption of new accounting policy in relation to cloud based software
development costs – refer to note 8.1.
Accounting policy - recognition and measurement
The Group recognises an expense when it has an obligation to settle for goods or services received.
2.4
Income tax
2.4.1 The major components of income tax expense/(benefit) are:
In thousands of AUD
Recognised in profit or loss
Current tax
Deferred tax
Income tax expense/(benefit) recognised in
Profit or Loss
Recognised in equity
Financial instruments at fair value through OCI
Equity raising costs
Income tax expense/(benefit) recognised in
Other Comprehensive Income
Tax reconciliation
Profit/(Loss) before tax
Prima facie income tax expense/(benefit) on
profit before income tax at 30% (2020:30%)
Adjust for tax effect of:
Non-assessable income
Non-deductible expenses
Prior period adjustments
Income tax expense/(benefit) recognised in
Profit or Loss
2021
Consolidated
2020
Restated
$
$
2021
$
Bank
2020
Restated
$
-
2,362
-
1,002
-
(1,013)
-
(495)
2,362
1,002
(1,013)
(495)
-
213
213
(60)
93
(33)
-
213
213
-
93
93
8,021
4,826
312
(3,941)
2,406
1,448
94
(1,182)
-
44
(88)
-
139
(585)
(1,200)
93
-
-
125
562
2,362
1,002
(1,013)
(495)
Comparative period restated due to adoption of new accounting policy in relation to cloud based software
development costs – refer to note 8.1.
39
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.4
Income tax (continued)
2.4.2 Deferred tax assets and liabilities
In thousands of AUD
2021
Consolidated
2020
Restated
$
$
Deferred tax assets comprise temporary
differences attributable to:
Provision for doubtful debts
Accrued expenses
Provisions
Equity raising and s.40-880 costs
Lease liabilities
Net present value of trail commission payable
Cloud based software development costs
Other
Carry forward losses and R&D offsets
Total deferred tax assets
Deferred tax liabilities comprise temporary
differences attributable to:
Prepayments and other assets
Intangible assets
Net present value of trail commission
receivable
Deferred commission expense
Property, plant and equipment
Total deferred tax liabilities
Set-off
Net deferred tax asset/(liability)
332
619
528
518
1,010
136,013
1,820
458
3,243
144,541
1,135
232
420
560
1,360
102,886
1,684
104
2,858
111,240
-
5,360
6
5,418
151,712
787
992
158,851
(144,541)
(14,310)
116,159
410
1,380
123,373
(111,240)
(12,133)
2021
$
Bank
2020
Restated
$
333
201
90
401
163
-
1,580
-
337
3,105
-
-
-
786
198
984
(984)
2,121
1,119
72
65
242
202
-
1,526
-
-
3,226
5
-
-
410
239
654
(654)
2,572
Comparative period restated due to adoption of new accounting policy in relation to cloud based software
development costs – refer to note 8.1.
Accounting policy - Recognition and measurement
The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax
expense (income) recognised in profit or loss except to the extent that it relates to items recognised in other
comprehensive income.
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities
(assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled and their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability.
The Company has formed a tax consolidated group (TCG) under the tax consolidation regime. The members of the
TCG have entered into tax funding and tax sharing agreements, which set out the funding obligations and members.
Any current tax liabilities/assets and deferred tax assets from unused tax losses from subsidiaries in the tax
consolidated group are recognised by the Bank as utilised and funded in line with the tax funding agreement.
The measurement and disclosure of deferred tax assets and liabilities have been performed on a “separate taxpayer
within a group” approach in accordance with UIG 1052 Tax Consolidation Accounting.
40
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.4
Income tax (continued)
2.4.2 Deferred tax assets and liabilities (continued)
Use of judgements and estimates
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can
be utilised. Management assesses the probability through the consideration of factors leading to losses and the
preparation of forecasts that indicate the Group’s ability to generate taxable profits in the future.
3. LOANS AND ADVANCES
3.1 Loans and advances
In thousands of AUD
Residential loans
Term loans
Personal loans
Overdrafts
Add: Unamortised broker commissions
Gross loans and advances
Provision for credit losses – refer note 3.2
Loans and advances net of provisions
Maturity analysis – gross loans and advances
Overdrafts
Not longer than 1 year
Longer than 1 and not longer than 5 years
Longer than 5 years
2021
$
522,554
14,009
546
1,299
538,408
2,556
540,964
(1,025)
539,939
Consolidated
2020
$
263,446
18,796
854
469
283,565
721
284,286
(725)
283,561
2021
$
522,554
14,009
546
1,299
538,408
4,144
542,552
(1,025)
541,527
Bank
2020
$
263,446
19,982
854
469
284,751
1,180
285,931
(725)
285,206
1,299
1,560
4,065
534,040
540,964
469
20
5,863
277,934
284,286
1,299
1,560
4,065
535,628
542,552
469
20
7,508
277,934
285,931
Gross loans and advances stated above includes securitisation warehouse loans recognised for accounting
purposes. Refer to note 4.5 for further information of the warehouse facility.
Accounting policy - Recognition and measurement
All loans are initially recognised at fair value, net of transaction costs incurred and inclusive of loan origination fees.
Loans are subsequently measured at amortised cost based on the Group’s business model objective; this is to
originate loans and advances on its balance sheet and hold to collect repayments of principal and interest. Any
difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the
statement of comprehensive income over the period of the loans using the effective interest method.
Loans and advances are reported at their recoverable amount representing the aggregate amount of principal and
unpaid interest owing to the Group at the reporting date, less any allowance or provision for impairment.
All loans and advances greater than 30 days in arrears are reviewed individually and assessed for recoverability
with reference to the valuation of collateral held. Expected credit loss provisions are recognised as set out in note
3.2. The classification adopted is described below:
Non-accrual loans - are loans and advances where the recovery of all interest and principal is considered
to be reasonably doubtful and hence provisions for impairment are recognised.
Restructured loans - arise when the borrower is granted a concession due to continuing difficulties in
meeting the original terms. Loans with revised terms are included in non-accrual loans when impairment
provisions are required.
Past-due loans - are loans where payments of principal and/or interest are at least 90 days in arrears but
due to mortgage security available full recovery of both principal and interest is expected.
Refer to note 5.1.4 for further information regarding credit risk including detail around the loans subject to
COVID-19 repayment deferrals.
41
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.2 Provision for credit losses
In thousands of AUD
Expected credit loss provision
Total provisions for credit losses
Expected credit loss provision
Opening balance
Bad debts provided for during the year
Bad debts written off during the year
Closing balance
Consolidated
Bank
2021 2020 2021 2020
$
$
$
$
1,025
1,025
725
1,025
725
1,025
725
725
725
322
(22)
258
467
-
725
322
(22)
1,025
725
1,025
258
467
-
725
In March 2020, APRA advised ADIs that for customers who chose to defer loan repayments as part of a COVID-19
support package, ADIs are not required to treat the period of a repayment holiday as a loan in arrears. Similarly,
loans that have been granted a repayment deferral as part of a COVID-19 support package, are not required to be
considered as restructured. APRA noted however that ADIs would need to consider these loans with regards to
credit loss provisioning under AASB 9. Refer to note 5.1.4 for further information on the expected credit loss
provisions recognised at balance date including detail around the loans subject to COVID-19 repayment deferrals.
At 30 June 2021, the Company had nil customers subject to repayment deferrals.
Accounting policy - Recognition and measurement
Financial assets
Expected credit loss provision
Financial assets at amortised cost consist of cash and cash equivalents, amounts due from other financial
institutions, investment securities and loans and advances.
Under AASB 9, loss allowances are measured on either of the following bases:
12-month ECLs: these are ECLs that result from possible default events within the 12 months after the
reporting date (Stage 1); and
lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial
instrument (Stages 2 and 3).
If credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the
Group considers reasonable and supportable information that is relevant and available without undue cost or effort
in determining to reclassify it from Stage 1 to Stage 2 or 3. This includes both quantitative and qualitative
information and analysis, based on the Group’s historical experience and informed credit assessment and including
forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days
past due. The Group considers a financial asset to be in default when:
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held); or
the financial asset is more than 90 days past due.
Upon determination that a customer is in default, an assessment is made whether the loan is to be classified as
past due or impaired. The maximum period considered when estimating ECLs is the maximum contractual period
over which the Group is exposed to credit risk.
42
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.2 Provision for credit losses (cont’d)
The key inputs into the measurement of ECL are the term structure of the following variables:
probability of default (PD);
loss given default (LGD); and
exposure at default (EAD).
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL is
calculated by multiplying the lifetime PD by LGD and EAD.
LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD parameters based on the
history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure,
collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the
financial asset. For loans secured by residential properties, LVR ratios are a key parameter in determining LGD.
They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.
EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current
exposure to the counterparty and potential changes to the current amount allowed under the contract and arising
from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending
commitments, the EADs are potential future amounts that may be drawn under the contract, which are estimated
based on historical observations and forward-looking forecasts.
As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Group
measures ECL considering the risk of default over the maximum contractual period (including any borrower’s
extension options) over which it is exposed to credit risk, even if, for credit risk management purposes, the Group
considers a longer period. The maximum contractual period extends to the date at which the Group has the right
to require repayment of an advance or terminate a loan commitment or guarantee.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial
asset.
43
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.2 Provision for credit losses
Reconciliation of expected credit loss provision
In thousands of AUD
Opening balance – 1 July 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
New and increased provisions
Bad debts written off
Closing balance – 30 June 2021
In thousands of AUD
Opening balance – 1 July 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
New and increased provisions
Bad debts written off
Closing balance – 30 June 2021
Stage 1
Stage 2
Gross
exposure
267,520
13,844
-
-
255,383
-
536,747
Provision
205
396
-
-
224
-
825
Gross
exposure
1,481
-
1,412
-
-
-
2,893
Provision
37
-
58
-
-
-
95
Stage 1
Stage 2
Gross
exposure
269,165
13,844
-
-
255,328
-
538,337
Provision
205
396
-
-
224
-
825
Gross
exposure
1,481
-
1,412
-
-
-
2,893
Provision
37
-
58
-
-
-
95
Consolidated
Stage 3
Gross
exposure
1,441
-
-
123
-
(240)
1,324
Provision
87
-
-
40
-
(22)
105
Bank
Stage 3
Gross
exposure
1,441
-
-
123
-
(240)
1,324
Provision
87
-
-
40
-
(22)
105
44
Management overlay
Provision
Gross
exposure
13,844
(13,844)
-
-
-
-
-
Gross
exposure
13,844
(13,844)
-
-
-
-
-
Total
Gross
exposure
284,286
-
-
1,412
123
255,383
(240)
540,964
Provision
725
-
-
58
40
224
(22)
1,025
Total
Gross
exposure
285,931
-
1,412
123
255,328
(240)
542,554
Provision
725
-
58
40
224
(22)
1,025
396
(396)
-
-
-
-
-
396
(396)
-
-
-
-
-
Management overlay
Provision
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.3 Derecognition of loans and advances
The Company is party to a Receivables Acquisition & Servicing Agreement (RASA) with Bendigo & Adelaide Bank
Limited (BEN) that enabled the Company to sell residential loans (owner occupied and investment) to BEN as required
to assist with regulatory capital and/or liquidity management requirements.
Loans sold to BEN have to meet certain criteria and are derecognised on the basis that the risks and rewards
associated with the loans have been substantially transferred. The Company retains the servicing responsibilities
and is entitled to the residual income from the loans once the funder’s cost of funds and other costs have been met.
Service fee and residual income is recognised in profit and loss as noted in Note 2.2.
Following the implementation of the Group’s prime residential lending warehouse, the RASA has been placed into
run off. In the event that the RASA program criteria were not to BEN’s satisfaction, the limit could be reduced or
cancelled and/or BEN may appoint an alternative servicer of the loans. The Company is not obligated to repurchase
the loans subsequent to their sale.
Loans sold in to the RASA are sold at their carrying amount inclusive of accrued interest, with no gain or loss
recognised by the Company. The RASA is utilised primarily for capital management purposes and the Group’s
business model has been determined as originating loans to hold and collect principal and interest repayments. Loan
sales in current and previous periods have occurred prior to a capital raising in order to ensure the Group complies
with its capital adequacy requirements. The Company’s objective is to originate and hold as many loans on balance
sheet as possible, given the higher yields derived from on balance sheet loans compared to loans sold to the RASA.
Sales therefore only occur when the Company is nearing its prudential capital ratio.
The balance of loans serviced by the Company at reporting date:
In thousands of AUD
Owner occupier loans
Investment loans
Loan sales:
Year ended
30 June 2021
30 June 2020
2021
$
18,779
18,017
36,796
2020
$
28,336
18,471
46,807
Date of sale
Nil
3 October 2019
19 December 2019
22 January 2020
Number of loans
Proceeds $(‘000s)
-
8
14
15
-
3,711
5,684
5,009
Accounting policy - Recognition and measurement
The Company derecognises loans when the contractual rights to the cash flows from the loan expire, or it transfers
the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards
of ownership of the loans are transferred. On derecognition of the loans, the difference between the carrying amount
of the asset and the consideration received is recognised in profit or loss. Any interest in transferred financial assets
that qualify for derecognition that is created or retained by the Company is recognised as a separate asset or liability.
45
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.1.1 Cash and cash equivalents
In thousands of AUD
Cash at bank and on hand
Less provision for non-recovery of bailment cash
Total cash and cash equivalents
Consolidated
2020
$
21,045
(2,923)
18,122
2021
$
47,285
-
47,285
2021
$
41,591
-
41,591
Bank
2020
$
18,776
(2,923)
15,853
In the comparative period, the Company recognised a provision for the non-recovery of cash relating to ATM
bailment and cash in transit arrangements with ATM Co Pty Ltd and Tuff Enterprises Pty Ltd, both of which were
placed into liquidation in August 2019. The liquidator had not identified the location of the Company’s cash totalling
approximately $2,923,000 and the Company lodged a claim with its insurer. In addition, a receivable for the
estimated insurance recovery was recognised (refer note 4.4.1) as at the comparative reporting date.
During the year, the Company received partial indemnification from the insurer in respect of $2,060,000 of the
claim minus the applicable deductible pursuant to the Company’s Financial Institutions Bond Policy. The remaining
balance of $863,000 has been recognised as an impairment expense. The Company continues to consider its
position in relation to the potential recovery of amounts from other third parties. Following the cessation of this
line of business, the Company has also written down the carrying value of ATM assets held.
Recognition and measurement
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of 3 months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities on the statement of financial position.
Cash flows on net basis
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts. Cash flows arising from loans, deposits, and investments are
presented on a net basis in the Statement of Cash Flows.
4.1.2 Reconciliation to the Statement of Cash Flows
In thousands of AUD
Operating profit/(loss) after income tax
Non-cash items
Depreciation and amortisation
Change in fair value of NPV asset
Change in fair value of NPV liability
Impairment of financial assets
Leave provisions
Share-based payments
Gain on sale of financial assets
Gain on sale of property, plant and equipment
Insurance recovery
Movement in assets and liabilities
Loans and receivables
Investments
Deposits
Other assets
Deferred tax assets
Deferred tax liabilities
Payables
Provisions
Net cash flow from operating activities
46
Consolidated
2020
2021
$
$
2021
$
Bank
2020
Restated
$
5,659
3,824
1,325
(3,446)
2,301
(118,508)
110,428
1,317
370
627
-
-
-
(254,866)
(85,494)
289,856
(3,641)
-
2,238
6,634
370
(42,709)
2,196
(117,836)
112,539
3,557
183
405
(1,062)
(78)
(2,898)
(69,400)
6,903
58,665
1,467
-
980
(2,587)
(16)
(3,158)
215
-
-
1,264
80
627
-
-
-
(253,679)
(85,494)
289,856
29
451
-
(2,399)
(80)
(47,805)
284
-
-
3,507
(156)
405
(1,062)
(78)
(2,898)
(68,216)
6,903
58,665
(178)
85
-
227
156
(5,802)
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.2 Financial assets
In thousands of AUD
Due from other financial institutions at
amortised cost
Investment securities at amortised cost (a)
Investment in Cuscal Limited at fair value
through OCI (b)
Investments in listed companies at fair value
through OCI
Maturity analysis
Due from other financial institutions
- Not longer than 3 months
- 3 months to 1 year
- 1 year to 5 years
Investment securities
- Not longer than 3 months
- 3 months to 1 year
- 1 year to 5 years
- More than 5 years
Consolidated
2020
$
2021
$
2021
$
8,820
148,006
142
33,335
37,996
142
8,820
148,006
142
Bank
2020
$
33,335
37,996
142
-
93
-
-
156,968
71,566
156,968
71,473
-
1,200
7,620
8,820
-
-
122,326
25,680
148,006
19,500
6,215
7,620
33,335
11,115
-
19,715
7,166
37,996
-
1,200
7,620
8,820
-
-
122,326
25,680
148,006
19,500
6,215
7,620
33,335
11,115
-
19,715
7,166
37,996
(a) Investment securities are investments in debt securities comprising floating rate notes issued by other banks,
and bonds issued by Commonwealth and state-governments, initially recognised at fair value and subsequently
at amortised cost.
(b) The shareholding in Cuscal Ltd (“Cuscal”) is classified as at fair value through other comprehensive income. These
shares are held to enable the Company to receive essential banking services - refer to Note 7.7. Cuscal operates
an off market exchange whereby financial institutions holding Cuscal shares are able to trade with each other.
The investment in Cuscal is considered a Level 2 investment in the fair value hierarchy and fair value has been
determined using the market comparison technique with reference to recent sales transacted by financial
institutions.
Accounting policy - Recognition and measurement
On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through profit or loss
(FVTPL) or fair value through other comprehensive income (FVOCI).
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as
at FVTPL:
the asset is held within a business model whose objective is to hold assets to collect contractual cash
flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest (SPPI).
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present
subsequent changes in fair value in OCI .This election is made on an investment-by-investment basis. In addition,
on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements
to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
47
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.2 Financial assets (continued)
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of
the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
On derecognition of a financial asset, a gain or loss is recognised based on the difference between the carrying
amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of:
(i) the consideration received (including any new asset obtained less any new liability assumed) and
(ii) any cumulative gain or loss that had been recognised in OCI.
From 1 July 2018 any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as
at FVOCI is not recognised in profit or loss on derecognition of such securities. The cumulative gain/loss recognised
in OCI is transferred from OCI to retained earnings. Any interest in transferred financial assets that qualify for
derecognition that is created or retained by the Group is recognised as a separate asset or liability.
In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership
of a financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of
its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred
asset.
Refer to notes 5.1.2, 5.1.4 and 5.1.5 for further details on interest rate risk, credit risk and liquidity risk.
4.3 Deposits
In thousands of AUD
Call deposits
Term deposits
Maturity analysis
- At call
- Not longer than 3 months
- Longer than 3 months but less than 12 months
- Longer than 12 months but less than 5 years
2021
$
397,535
238,112
635,647
Consolidated
2020
$
122,021
223,770
345,791
397,535
105,445
127,997
4,670
635,647
122,021
100,816
103,694
19,260
345,791
2021
$
397,535
238,112
635,647
397,535
105,445
127,997
4,670
635,647
Bank
2020
$
122,021
223,770
345,791
122,021
100,816
103,694
19,260
345,791
Accounting policy - Recognition and measurement
Call deposits and term deposits are initially recognised at fair value, net of any directly attributable transaction
costs. Subsequent to initial measurement, they are measured at amortised cost using the effective interest rate
method.
4.4 Receivables and payables
4.4.1 Commission and other receivables
In thousands of AUD
Accrued commission income
Securitisation deposits
Sub-lease finance lease receivable
Insurance receivable
Prepayments
Other debtors
Less provision for impairment
Total commissions and other receivables
48
Consolidated
2020
$
2021
$
19,418
373
817
-
1,915
3,168
(84)
25,607
16,551
-
1,121
2,898
1,564
3,372
(83)
25,423
2021
$
-
-
-
-
1,703
5,742
(84)
7,361
Bank
2020
$
-
-
-
2,898
974
2,770
(83)
6,559
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.4 Receivables and payables (continued)
4.4.2 Commissions and other payables
In thousands of AUD
Accrued commission payable
Lease liabilities - refer to note 7.4
Trade creditors and accrued expenses
Total commissions and other payables
4.4.3 Contract assets and liabilities
In thousands of AUD
Contract assets
Net present value of future trail commission
receivable
Contract liabilities
Net present value of future trail commission
payable
Consolidated
2020
$
15,300
4,646
2,736
22,682
2021
$
19,863
3,368
4,361
27,592
Consolidated
2020
$
2021
$
505,706
387,197
453,381
342,954
2021
$
-
543
3,122
3,665
2021
$
-
-
Bank
2020
$
-
671
1,114
1,785
Bank
2020
$
-
-
Accounting policy - Recognition and measurement
The Group receives trailing commissions and mortgage management administration fees from lenders on loans they
have settled that were originated by the Group. The trailing commissions and mortgage management administration
fees are received over the life of the loans based on the individual loan balance outstanding. The Group also makes
trailing commission payments to authorised mortgage originators (brokers) based on the individual loan balance
outstanding.
On initial recognition, trailing commission revenue and receivables are recognised initially at transaction price using
the expected value method as a contract asset under AASB 15, being the expected future trailing commission
receivables discounted to their net present value. In addition, an associated payable and expense to the relevant
brokers are also recognised, initially measured at fair value being the future trailing commission payable to relevant
brokers discounted to their net present value. These calculations require the use of assumptions which are
determined by management.
Subsequent to initial recognition and measurement both the trailing commission asset and trailing commission
payable are measured at amortised cost. The carrying amount of the trailing commission asset and trailing
commission payable are adjusted to reflect actual and revised estimated cash flows by recalculating the carrying
amount with reference to the present value of estimated future cash flows at the original effective interest rate. The
resulting adjustment is recognised as income or expense in the Income Statement.
The key assumptions underlying the fair value calculations of trailing commission receivable and the corresponding
payable to brokers at the reporting date is summarised in the following table:
Discount rate per annum
Percentage paid to brokers
Weighted average life – Aggregation
Weighted average life – Wholesale
Weighted average life – Total portfolio
2021
Between 1.5% and 6.5%
Between 50% and 95%
3.6 to 3.9 years
3.0 to 4.4 years
4.5 years
2020
Between 3.5% and 6.5%
Between 50% and 95%
3.7 to 3.9 years
3.0 to 4.4 years
3.9 years
Liabilities for trade creditors and other amounts are non-interest bearing and carried at amortised cost, which is the
fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the
Company. The terms and conditions for creditors and other liabilities are payable between 7 and 30 days.
49
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.5 Other financial liabilities
In thousands of AUD
Term funding facility
Securitisation liabilities
Payable to securitisation trust
Subordinated debt
Total borrowings
Consolidated
2020
$
-
-
-
-
-
2021
$
13,772
37,846
-
9,640
61,258
2021
$
13,772
38,234
-
9,640
61,646
Bank
2020
$
-
-
-
-
-
Accounting policy - Recognition and measurement
All borrowings are initially recognised at cost, being the fair value of the consideration received net of any issue
costs associated with the borrowings. Subsequent to initial measurement, they are measured at amortised cost
using the effective interest rate method.
Term Funding Facility
During the period, the Group has drawn down its available funding allowance under the RBA’s Term Funding Facility
(TFF). The Group’s drawdown comprises two tranches repayable as follows:
$8.0 million fixed for three years at 0.25% repayable August 2023
$5.7 million fixed for three years at 0.10% repayable October 2023
The Group has provided collateral in the form of RBA repo-eligible semi government securities for an equal value
of the TFF. The Group’s entitlement under the TFF was fully drawn at balance date.
Securitisation liabilities
During the period the Group launched its first prime residential warehouse funding facility. This was facilitated
through the establishment of the Bullion Warehouse No.1 Trust (the Trust). Loans originated and funded by the
warehouse continue to be recognised by the Group with the rights to the cashflows from the loans equitably
assigned to the Trust.
In thousands of AUD
Securitisation warehouse funding facilities - utilised
Securitisation warehouse funding facilities - unutilised
Securitisation warehouse funding approval limit
2021
$
37,846
212,154
250,000
Consolidated
2020
$
-
-
-
2021
$
37,846
212,154
250,000
Bank
2020
$
-
-
-
Subordinated debt
On 1 February 2021, the Group issued $8.75 million of subordinated floating rate notes. The notes are fully paid,
unsecured with a maturity date of 1 February 2031, with an option to redeem the notes early on or after 1
February 2026, subject to APRA’s approval.
On 12 May 2021, the Group issued a further tranche of subordinated floating rate notes totaling $1.25 million. The
notes have the same terms and conditions as the first tranche with a maturity date of 1 August 2031 and an
optional early redemption date of 1 August 2026, subject to APRA’s approval.
50
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.1 Introduction and overview
Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement
and monitoring, subject to risk limits and other controls. The Group has exposure from its use of financial instruments
to market, interest rate, credit, liquidity and operational risk. This note presents information about the Group’s exposure
to each of the above risks, the objectives, policies and processes for measuring and managing those risks, and the
Company’s management of capital.
Risk management framework
The Group’s activities expose it to a variety of risks. Maintaining a robust risk management framework is critical to the
Group’s continued success and remains at the forefront of the Group’s processes and business activities. The Group’s
risk management framework includes a dedicated risk function, various risk committees, risk appetite statements and
limits and attestation processes.
Risk management roles and responsibilities
Board of Directors
The Board of Directors is responsible for the overall risk management framework and approving risk appetite, strategies
and principles. The Prudential Standards issued by the Australian Prudential Regulation Authority (APRA) addresses risk
management requirements and the Board carries out its responsibilities in ensuring the Group maintains appropriate
risk settings relative to the size and the maturity of the Group’s businesses.
Board Risk & Compliance Committee
Risk management is overseen by the Risk & Compliance Committee comprising non-executive directors of the Company.
It assists the Board in the development of the risk strategy, managing and monitoring relevant risk decisions including
policies and limits.
Chief Executive Officers & Executive Management
The Chief Executive Officers are responsible for the ongoing management of the risk management framework including
its periodic review and renewal subject to requisite Board direction and approvals. Executive Management are
responsible for implementing the Board-approved risk management strategy and for developing policies, procedures,
processes and controls for identifying and managing risks.
Chief Risk Officer
The Chief Risk Officer is responsible for managing the risk management function. This includes assisting the Board,
Board committees and divisional management risk committees to develop and maintain the risk management
framework. The position has reporting lines to the Board, Board committees and senior management to conduct risk
management activities in an effective and independent manner.
Internal Audit
Risk management and other processes in the Group are audited annually by the internal audit function, which examines
both the adequacy of the procedures and compliance with the procedures. The results of the work of the internal audit
function are tabled to management and to the Audit Committee.
Asset & Liability Committee (ALCO)
The management ALCO meets regularly to review the Group’s interest rate risk, market risk, liquidity, credit quality and
capital settings. The Committee monitors trends in the economy, reports risk metrics against Board defined triggers
and forecasts movements in balance sheet positions to minimise risk and maximise financial outcomes.
Non-Financial Risk Committee (NFR)
The NFR assists the Board Risk & Compliance Committee in overseeing the implementation of BNK’s risk management
and compliance frameworks, focusing particularly on non-financial risks. The Committee monitors the appropriateness,
adequacy and effectiveness of BNK’s:
Risk Management Strategy (“RMS”) in managing the enterprise-wide risks it faces in achieving its strategic and
business objectives; and
Compliance framework to ensure compliance obligations are met at all times.
51
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.1 Introduction and overview (continued)
Risk Measurement and Reporting Systems
Monitoring and controlling risks is primarily performed based on limits established by the Board of the Company.
These limits reflect the business strategy and market environment of the Group as well as the level of risk the Group
is willing to accept.
Information is compiled, examined and processed in order to analyse, control and identify risks on a timely basis. This
information is presented and explained to the Risk & Compliance Committee and/or the Board. The reporting includes
aggregate counterparty credit exposures, delinquency summary, loan security summary, loan type exposures, liquidity
ratios, value at risk (VaR), and significant changes to risk profile. The Board and/or Risk & Compliance Committee
receive summarised risk reporting on key risk measures.
Market risk
The objective of the Group’s market risk management is to minimise risk and optimise desired return by managing
and controlling market risk. Market risk is the risk that changes in interest rates, foreign exchange rates or other
prices and volatilities that will have an adverse effect on the Group’s financial condition or results. Management of
market risk is the responsibility of senior management through the Asset & Liability Committee (ALCO), who report
directly to the Board Risk & Compliance Committee. The Group does not operate a trading book or involve itself
actively in foreign exchange, commodities or equity markets.
Interest rate risk
Interest rate risk is the risk of variability of the fair value of future cash flows arising from financial instruments due
to the changes in interest rates. The Company is exposed only to interest rate risk arising from changes in market
interest rates (Interest Rate Risk in the Banking Book).
5.1.2 Interest rate risk in the banking book
The Company is exposed to interest rate risk in its banking book due to mismatches between the repricing dates of
assets (loans and advances and investments) and liabilities (deposits and borrowings). The interest rate risk in the
banking book is monitored by management. The level of mismatch on the banking book is set out in the tables below
which displays the period that each asset and liability will reprice as at the balance date.
The major classes of financial assets and liabilities that are subject to interest rate variation are loans and advances,
cash with banks, investments, deposits, borrowings and securitisation notes. The fundamental principles that the
Company applies to mitigate interest rate risk are:
-
Board approved risk appetite and limits include Value at Risk and Book Sensitivity (Present Value Basis
Point);
Forecasting and scenario modelling of growth and interest rates;
-
- Monitoring current and future interest rate yields on its loans and savings portfolio and cash and
investments and effect on profit and equity; and the interest rates on the major proportion of these
assets and liabilities can be adjusted in the short-term to minimise any significant mismatch of interest
margins
- Monitoring market rates for loans and savings and amending the Company’s interest rates to remain
competitive;
Regular meetings to measure and monitor the impact of movements in interest rates.
-
52
NOTES TO THE FINANCIAL REPORT
5. RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.2 Interest rate risk in the banking book (continued)
In thousands of AUD
2021
Financial assets
Cash and cash on hand
Due from other financial institutions
Investment securities
Loans and advances
Commission and other receivables
Sub-lease finance lease receivable
Securitisation deposits
Other financial assets
Total financial assets
Weighted
average
effective
interest rate (%)
-
0.51
0.34
3.00
-
5.00
-
-
Financial liabilities
Deposits
Lease liabilities
Commission and other payables
Securitisation liabilities
Subordinated notes
Term finance Facility
Total financial liabilities
Net financial assets/(liabilities)
2020
Financial assets
Cash and cash on hand
Due from other financial institutions
Investment securities
Loans and advances
Commission and other receivables
Sub-lease finance lease receivable
Other financial assets
Total financial assets
Financial liabilities
Deposits
Lease liabilities
Commission and other payables
Total financial liabilities
Net financial assets/(liabilities)
0.45
5.00
-
1.93
5.44
0.19
-
0.82
0.77
3.74
-
5.00
-
1.30
5.00
-
Floating
interest
rate
-
-
7,070
445,912
-
-
-
-
452,982
397,535
-
-
-
-
-
397,535
55,447
-
-
-
272,772
-
-
-
272,772
122,021
-
-
122,021
150,751
1 year or less
1 to 2 years
Fixed interest rate
2 to 3 years
3 to 5 years
> 5 years
Non-interest
bearing
Consolidated
-
8,820
-
2,195
-
-
-
-
11,015
234,383
-
-
37,846
9,640
-
281,869
(270,854)
-
33,335
37,996
6,568
-
-
-
77,899
204,785
-
-
172,913
(126,886)
-
-
88,548
34,036
-
817
-
-
123,401
2,044
-
-
-
-
-
2,044
121,357
-
-
-
2,082
-
-
-
2,082
18,775
4,646
-
23,468
(21,339)
53
-
-
7,850
55,018
-
-
-
-
62,868
249
3,368
-
-
-
13,772
17,389
45,479
-
-
-
-
-
1,121
-
1,121
-
-
-
-
1,121
-
-
18,857
1,247
-
-
-
-
20,104
1,389
-
-
-
-
-
1,389
18,715
-
-
-
2,139
-
-
-
2,139
163
-
-
-
1,976
-
-
25,681
-
-
-
-
-
25,681
47
-
-
-
-
-
47
25,634
-
-
-
-
-
-
-
-
47
-
-
-
(47)
47,285
-
-
-
528,292
-
373
142
576,092
-
-
477,606
-
-
-
477,606
98,486
18,122
-
-
-
411,499
-
235
429,856
-
-
360,990
360,990
68,866
Amount per
Statement of
Financial
Position
47,285
8,820
148,006
538,408
528,292
817
373
142
1,273,143
635,647
3,368
477,606
37,846
9,640
13,772
1,177,879
94,264
18,122
33,335
37,996
283,561
411,499
1,121
235
785,869
345,791
4,646
360,990
711,427
74,442
NOTES TO THE FINANCIAL REPORT
5. RISK AND CAPITAL MANAGEMENT
5.1.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.2 Interest rate risk in the banking book (continued)
In thousands of AUD
2021
Financial assets
Cash and cash on hand
Due from other financial institutions
Investment securities
Loans and advances
Commission and other receivables
Other financial assets
Total financial assets
Financial liabilities
Deposits
Lease liabilities
Creditors and other payables
Securitisation liabilities
Subordinated notes
Term Finance Facility
Total financial liabilities
Net financial assets/(liabilities)
2020
Financial assets
Cash and cash on hand
Due from other financial institutions
Investment securities
Loans and advances
Commission and other receivables
Other financial assets
Total financial assets
Financial liabilities
Deposits
Lease liabilities
Creditors and other payables
Total financial liabilities
Net financial assets/(liabilities)
Weighted
average
effective
interest rate (%)
-
0.51
0.34
3.00
-
-
0.45
5.00
-
1.93
5.44
0.19
-
0.82
0.77
3.74
-
-
1.30
5.00
-
Floating
interest
rate
-
-
7,070
445,912
-
-
452,982
397,535
-
-
-
-
-
397,535
57,447
-
-
-
276,221
-
-
276,221
122,022
-
-
122,022
154,199
1 year or less
1 to 2 years
Fixed interest rate
2 to 3 years
3 to 5 years
> 5 years
Non-interest
bearing
Bank
-
-
7,850
55,018
-
-
62,868
249
543
-
-
-
13,772
14,564
49,304
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,857
1,247
-
-
20,104
1,389
-
-
-
-
-
1,389
18,715
-
-
-
2,139
-
-
2,139
163
-
-
163
-
-
25,681
-
-
-
25,681
47
-
-
-
-
-
47
25,634
-
-
-
-
-
-
-
47
-
-
47
41,591
-
-
-
5,743
142
47,476
-
-
3,122
-
-
-
3,122
44,354
15,853
-
-
-
6,559
142
22,554
-
-
1,114
1,114
1,976
(47)
21,440
-
8,820
-
2,195
-
-
11,015
234,383
-
-
38,234
9,640
-
282,257
(271,242)
-
33,335
37,996
4,764
-
-
76,095
204,785
-
-
204,785
-
-
88,548
34,036
-
-
122,584
2,044
-
-
-
-
-
2,044
120,540
-
-
-
2,082
-
-
2,082
18,775
671
-
19,446
(128,690)
(17,364)
54
Amount per
Statement of
Financial
Position
41,591
8,820
148,006
538,408
5,743
142
742,710
635,647
543
3,122
38,234
9,640
13,772
700,958
44,752
15,853
33,335
37,996
285,206
6,559
142
379,091
345,792
671
1,114
347,577
31,514
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.2 Interest rate risk in the banking book (continued)
Interest rate sensitivity
Taking into account past performance, future expectations, economic forecasts and management’s knowledge and
experience of the financial markets, the Group believes the impact on profit or loss and the impact on equity in the
following table are ‘reasonably possible’ over the next 12 months, if interest rates had changed by +/- 25 basis points
(2020: +/- 25 basis points) from the year-end rates, with all other variables held constant.
Judgement of reasonably possible
movements(amounts in thousands of
AUD):
25 basis points increase (2020: 25bps)
25 basis points decrease (2020: 25bps)
Consolidated
higher (lower)
Bank
higher (lower)
2021
303
(303)
2020
88
(88)
2021
303
(303)
2020
88
(88)
5.1.3 Market risk - Equity investments
The Group is exposed to market risk on the value of shares through its investments in Cuscal (refer to note 4.2) and
an ASX listed company.
Market rate sensitivity
Taking into account past performance, future expectations, economic forecasts and management’s knowledge and
experience of the financial markets, the Group believes the impact on equity in the following table are ‘reasonably
possible’ over the next 12 months, if the fair value of the investment had changed by +/- 10% (2020: +/- 10%) from
the year-end rates, with all other variables held constant.
Judgement of reasonably possible
movements (amounts in thousands of
AUD):
10% increase (2020:10%)
10% decrease (2020: 10%)
Consolidated
Impact on equity
Bank
Impact on equity
2021
10
(10)
2020
16
(16)
2021
10
(10)
2020
10
(10)
Credit risk
5.1.4
Credit risk is the risk that the Group will incur a loss because its customers or counterparties failed to discharge
their contractual obligations. New or potential exposures are subject to the Group’s credit risk management
framework. The credit risk management framework includes delegated limits, approval levels, collateral
requirements, servicing criteria, concentration limits as well as other principles designed to manage the level of
credit risk exposure.
Maximum exposures to credit risk
The maximum exposure to credit risk in the Bank equals the drawn down portion in the Statement of Financial
Position and the undrawn portion of all committed facilities of loans and receivables as listed in Note 7.8. The
maximum exposure to credit risk in the Aggregation and Wholesale businesses are in respect of accrued commission
receivable and trade debtors. The major classes of financial assets that expose the Group to credit risk are loans
to customers (including undrawn and unused credit commitments), cash with banks, investments and amounts due
from other financial institutions and accrued commission receivable.
Collateral and other credit enhancements
Loans and advances, except unsecured overdrafts, are backed by collateral. The amount and type of collateral
required depends on the assessment of the credit risk of the customer. Guidelines are implemented regarding the
acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:
For retail lending; mortgages over residential properties and consumer assets such as motor vehicles
For commercial lending; mortgages over real estate properties and equitable charges over business assets
55
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
5.1.4 Credit Risk (continued)
Management monitors the market value of collateral however collateral is generally not revalued except in some
circumstances where a loan is individually assessed as impaired or a customer seeks an increased loan against existing
collateral. For residential lending the Group may also require the customer to acquire Mortgage Insurance where the loan
does not meet a specified criteria, usually determined by the loan to value ratio.
The terms and conditions of collateral are specific to individual loan and security types. It is the Group’s policy to dispose
of repossessed collateral in an orderly fashion and the proceeds used to repay or reduce the outstanding claim. During
the year ended 30 June 2021, the Group has repossessed one residential property with a fair value of $240,000 (2020:
one property with a fair value of $280,000).
Concentrations of credit risk – Banking activities
The Group monitors concentration of credit risk by purpose. An analysis of concentrations of credit risk at the reporting
date is shown below:
In thousands of AUD
Owner occupier home loans
Investment home loans
Commercial loans
Secured personal loans
Unsecured personal loans
Overdrafts
2021
$
351,443
171,217
14,206
371
68
1,103
538,408
Consolidated
2020
$
127,889
135,558
18,796
723
130
469
283,565
2021
$
351,443
171,217
14,206
371
68
1,103
538,408
Bank
2020
$
127,889
135,558
19,982
723
130
469
284,751
As at 30 June 2021 there were no borrowers (2020: nil) who individually have facilities which represent 10% or more of
the regulatory capital base.
Historically, the Bank has been exposed to geographical concentration risk by lending predominately to customers in
Western Australia. Since the completion of the merger with Finsure in 2018, the Bank’s distribution capability has
increased significantly, such that broader diversification of the loan portfolio has been achieved. The Group’s objective
is to continue to reduce the concentration risk to Western Australian borrowers over time in order to benefit from a
diversified loan book as a nationwide lender.
56
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.4
Credit risk (continued)
i. Credit quality – loans and receivables
The credit quality of the Group’s loans and receivables is summarised in the tables below:
In thousands of AUD
Past due but not impaired
30 days & less than 90 days
90 days & less than 182 days
182 days or more
Impaired – mortgage loans
Impaired – personal loans
Neither past due or impaired
Total loans and advances
Consolidated
2020
$
2021
$
2,860
1,192
164
4,216
-
-
1,359
164
964
2,487
-
-
2021
$
2,860
1,192
164
4,216
-
-
Bank
2020
$
1,359
164
964
2,487
-
-
534,189
538,408
281,078
283,565
534,189
538,408
282,264
284,751
Following the onset of COVID-19 in 2020, APRA granted capital concessional provisions regarding loans for loans
where repayment deferrals were granted. The Company agreed to vary repayment arrangements for certain
customers. These represented a small proportion of BNK’s customer base. During the year ended 30 June 2021,
all customers with repayment deferral arrangements returned to performing status such that are no further
customers with COVID-19 repayment deferral arrangements in place.
ii. Collateral – loans and receivables
The Group holds collateral and other credit enhancements against certain of its credit exposures. The table below sets
out the principal types of collateral held against different types of financial assets:
Percentage of exposure that
is subject to collateral
requirements
Type of credit exposure
Deposits with banks and
short-term securities
Investment securities
Residential loans
Personal loans
Overdrafts
Term loans
2021
2020
Principal type of collateral held
-
-
100
91
90
100
-
-
100
84
90
100
Marketable securities
Marketable securities
Residential property
Residential property and/or motor vehicles
Residential property
Commercial and/or residential property,
floating charges over business assets
NOTES TO THE FINANCIAL REPORT
57
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.4
Credit risk (continued)
iii. Credit quality – Amounts due from other financial institutions and investment securities
The Group invests in short term securities and investment securities issued by other Australian banks as part of its
liquidity management process (refer to note 5.1.5). The Group’s liquidity investments are held with a range of
Australian banks or Government agencies and are selected with reference to credit ratings determined by Standard
& Poors or Moody’s credit rating agencies.
Deposits with other banks and short-term securities
In thousands of AUD
Long Term Credit Rating
1 (AAA to AA-)*
2 (A+ to A-)*
3 (BBB+ to BBB-)*
Unrated
Investment securities
In thousands of AUD
Long Term Credit Rating
1 (AAA to AA-)*
2 (A+ to A-)*
* Or equivalent rating by other rating agencies
Accrued commission receivable and other debtors
In thousands of AUD
Long Term Credit Rating
1 (AAA to AA-)*
2 (A+ to A-)*
3 (BBB+ to BBB-)*
Unrated
* Or equivalent rating by other rating agencies
Consolidated
2020
$
2021
$
-
8,820
-
-
8,820
-
23,835
-
9,500
33,335
Consolidated
2020
$
2021
$
2021
$
-
8,820
-
-
8,820
2021
$
148,006
-
148,006
37,996
-
37,996
148,006
-
148,006
Consolidated
2020
$
2021
$
327,016
55,579
37,130
105,399
525,124
246,576
37,054
32,814
87,304
403,748
2021
$
-
-
-
5,742
5,742
Bank
2020
$
23,835
-
9,500
33,335
Bank
2020
$
37,996
-
37,996
Bank
2020
$
2,898
-
-
3,661
6,559
The Group’s other outstanding receivables arise from transactions with customers located within Australia. The
amounts owing from other financial institutions include the net present value (NPV) of future trail commission
receivable and accrued commission income.
The majority of the Group’s NPV trail commission and accrued commission receivables are from counterparties that
are rated between BBB and AA-.
58
NOTES TO THE FINANCIAL REPORT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.4
Credit risk (continued)
Accounting policy - Recognition and measurement
As set out in note 3.2, loans are considered to be in default when they reach 90 days past due. An assessment is
then made to determine whether loans are classified as impaired or past due.
Impaired loans
Loans for which the Company determines that it is probable that it will be unable to collect all principal and interest
due according to the contractual terms of the loan.
Past due but not impaired loans
Loans where contractual interest or principal payments are past due, but the Group believes that impairment is not
appropriate on the basis of the level of security / collateral available and / or the stage of collection of amounts
owed to the Group.
Loans with renegotiated terms
The Group renegotiates loans to customers in financial difficulties to maximise collection opportunities and minimise
the risk of loss. Loans that have been restructured due to deterioration in the borrower’s financial position are
considered on a selective basis where the borrower has demonstrated reasonable efforts to meet their
commitments, and where the Group has made concessions that it would not otherwise consider. Once the loan is
restructured it remains in this category for 12 months independent of satisfactory performance after restructuring.
,
Allowances for impairment
Refer to note 3.2 for the Group’s policy with respect to provisioning for expected credit losses.
Write-off policy
Bad debts are written off as determined by management and recommended to the Board of Directors when it is
reasonable to expect that the recovery of the debt is unlikely. Bad debts are written off as expenses in the Income
Statement or against the provision for impairment.
Where the Group holds collateral against loans and advances, it is in the form of mortgage interests over property,
other registered securities over assets, and guarantees. Estimates of fair value are based on the value of collateral
assessed at the time of borrowing. These estimates are generally only updated when loan is individually assessed
as impaired.
5.1.5
Liquidity risk
Liquidity risk is the risk that the company will be unable to meet its payment obligations when they fall due under
normal and stress circumstances.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient funds
available to meet its liabilities under both normal and stressed conditions, without incurring unacceptable losses.
Sources of liquidity risk include unforeseen withdrawals of demand deposits, increased demand for loans and
drawdown on available credit limits, and inability to liquidate a marketable asset. The Group maintains a portfolio
of short term liquid assets to ensure that sufficient liquidity is maintained for daily operational requirements.
The Group has documented its strategy to manage liquidity risk in a liquidity policy and liquidity management plan
which includes the following activities by Management:
- On a daily basis, an assessment is made of the daily cash position and the investment action to be undertaken.
- On a daily basis, a summary of the Group’s liquidity position, including movements in major liquid assets and
liabilities is reviewed.
- On a monthly basis, the liquidity position is reported to the Board, including an explanation of significant
movements and corrective action taken, where applicable.
- Regularly reporting current and emerging liquidity management trends to the Board and highlighting risk areas
and relevant market conditions/expectations.
59
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.5
Liquidity risk (continued)
The Group’s policy is to apply a minimum level of 18% (2020: 13%) of funds as liquid assets to maintain adequate
funds for meeting customer withdrawal requests. This ratio is checked daily. In order to minimise the risk of the
liquidity ratio falling below 18% (2020: 13%); the Board has determined a target liquidity trading range of 18% - 25%
in normal market situations. Since the impact of COVID-19 became prevalent in early calendar year 2020, the Board
recommended the Group hold higher levels of liquidity above this range. In the event that liquidity ratio falls below
13% or is considered to be at risk of falling below that level, specific remedial measures are required to be taken by
the Board and Management.
Deposits are the liability class that presents the major source of risk to the Group’s liquidity management.
Concentrations within this class of financial liability are measured in terms of exposures to individual depositors
and groups of related depositors. As at 30 June 2021 there were no deposits greater than 10% of total liabilities
(2020: nil).
The liquidity ratio is calculated based on the formula prescribed by APRA in APS 210 as summarised below:
In thousands of AUD
High quality liquid assets
Adjusted liability base for regulatory purposes
Liquidity ratio
5.1.6 Operational risk
2021
$
205,637
622,706
33.1%
Consolidated
2020
$
90,197
348,719
25.9%
2021
$
199,372
601,424
33.0%
Bank
2020
$
87,177
331,771
26.2%
Operational risk is a risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s
processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity
risks (such as those arising from legal and regulatory requirements and generally accepted standards of corporate
behaviour). Operational risks arise from all of the Company’s operations and are faced by all business entities.
The Group’s objective is to manage operational risk so as to balance the avoidance of financial loss and damage to
the Group’s reputation, against excessive cost and control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is
assigned to senior management within each business unit. This responsibility is supported by the development of
the Company’s overall standards for management of operational risk in the following areas:
- Compliance with regulatory and other legal requirements
- Third party supplier relationships including the risk of modern slavery
- Business continuity and contingency planning
- People and key person risk including training and professional development
- Outsourcing risk associated with materially outsourced services
- Competition risk
- Fraud risk
- Requirements for appropriate segregation of duties, including independent authorisation of transactions
- Requirements for the reconciliation and monitoring of transactions
- Documentation of controls and procedures
- Anti-money laundering (AML)/Know your customer(KYC) protocols
-
- Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and
IT security and vendor management
procedures to address the risks identified
- Requirements for the reporting of operational losses and proposed remedial action
- Ethical and business standards
- Risk mitigation, including insurance where this is effective
60
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.6 Operational risk
The Group experienced a significant operational risk event in the year ended 30 June 2020 in relation to its ATM
bailment business (refer to note 4.1.1 for further details). As a result, the Group has now exited this line of business.
Resources for lending, operations and aggregation processes are reviewed regularly and significant investment has
occurred in the current year in people and processes to enhance the operational risk management framework.
Following the onset of COVID-19, work from home practices were implemented across the Group in order to protect
our people from the risk of the disease. Security of data and restriction of access to IT systems was a key area of
focus to ensure the businesses of the Group could continue to function and service customers and brokers
effectively, without increasing risk of data breaches. This was a controlled and managed process with oversight by
the Board. Staff in certain locations have commenced a return to office process on a staged basis.
5.1.7 Fair value of financial assets and liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Wherever possible, fair values are calculated by the Group
using unadjusted quoted market prices in active markets for identical instruments. A quoted price in an active
market provides the most reliable evidence of fair value. For all other financial instruments, the fair value is
determined by using other valuation techniques.
As part of the fair value measurement, the Group classifies its assets and liabilities according to a hierarchy that
reflects the observability of significant market inputs. The three levels of the hierarchy are described below:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable in an active market
Level 3 — Valuation techniques for which significant inputs to the fair value measurement are not based on
observable market data
The Group measures most financial instruments at amortised cost, however disclosure of fair value is made
throughout these financial statements.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Fair value is determined on the basis of the present value of expected future cash flows under the terms and conditions
of each financial asset or liability. Significant assumptions used in determining the cash flows are that the cash flows
will be consistent with the contracted cash flows under the respective contracts. The information is only relevant to
circumstances at the reporting date and will vary depending on the contractual rates applied to each asset or liability,
relative to market rates and conditions at the time. No assets held are regularly traded by the Group. Investments in
listed entities are tradeable on public markets and are classified as Level 1 financial assets in the fair value hierarchy.
Amounts due from other financial institutions, investment securities and investments in Cuscal Limited can be traded in
a secondary market. The investment in Cuscal is classified as a Level 2 financial asset in the fair value hierarchy.
61
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.7 Fair value of financial assets and liabilities (continued)
In thousands of AUD
Financial assets
Cash and cash equivalents
Accrued commission receivable
Due from other financial institutions
Investment securities
Loans and advances
Other receivables
Other financial assets
Total financial assets
Financial liabilities
Deposits
Accrued commission payable
Other financial liabilities
Lease liability
Creditors and other payables
Total financial liabilities
Financial assets
Cash and cash equivalents
Due from other financial institutions
Investment securities
Loans and advances
Other receivables
Other financial assets
Total financial assets
Financial liabilities
Deposits
Other financial liabilities
Lease liability
Creditors and other payables
Total financial liabilities
Consolidated
Fair value
Carrying amount
2021
$
2020
$
2021
$
2020
$
18,122
16,551
33,335
37,948
47,285
19,418
8,820
148,006
287,637 539,939
-
142
402,700 763,610
8,872
235
18,122
16,551
33,335
37,996
283,561
8,872
235
398,672
345,791 635,647
19,863
61,258
3,368
4,361
345,791
15,300
-
4,646
2,736
724,497 368,473
15,300
-
4,646
2,736
368,473
Bank
15,853
33,335
37,948
289,282
6,560
142
41,591
15,853
8,820
33,335
37,996
148,005
541,527 285,206
6,560
142
379,092
5,743
142
383,120 745,828
345,791 635,647
61,646
543
3,266
345,791
-
671
1,114
701,102 347,576
-
671
1,114
347,576
47,285
19,418
8,820
147,236
549,658
-
142
772,559
635,647
19,863
61,258
3,368
4,361
724,497
41,591
8,820
147,264
551,246
5,743
142
754,806
635,647
61,646
543
3,266
701,102
62
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.7 Fair value of financial assets and liabilities (continued)
The fair value estimates were determined by the following methodologies and assumptions:
Cash and Amounts Due from other financial institutions
The carrying values of cash and liquid assets and receivables due from other financial institutions redeemable within 12
months approximate their fair value as they are short term in nature or are receivable on demand.
Accrued commission receivable and other receivables
The carrying values of receivables approximate fair value as they are short term in nature and collected within 12 months.
Loans and advances
The carrying value of loans and advances is net of provisions for doubtful debts. For variable rate loans, (excluding
impaired loans) the amount shown in the statement of financial position is considered to be a reasonable estimate of
fair value. For fixed rate loans the fair values are based on cash flows discounted at a rate reflecting current market
rates adjusted for counterparty credit risk.
Investment Securities
Investment Securities comprise floating rate notes issued by Australian banks and bonds issued by the Commonwealth
and state governments. These securities can be traded in secondary markets and fair value has been determined by
indicative prices as quoted on Bloomberg.
Other financial assets
Refer to Note 4.2, the balance comprises unlisted equity instruments.
Deposits
The fair value of call and variable rate deposits, and fixed rate deposits repricing within 12 months, is the
amount shown in the statement of financial position. Discounted cash flows were used to calculate the fair value of
other term deposits, based upon the deposit type and the rate applicable to its related period maturity.
Accrued commission payable, creditors and other payables
The carrying values of payables approximate fair value as they are short term in nature.
Other financial liabilities
Refer to note 4.5. Recognised at amortised cost, the other financial liabilities comprise the RBA Term Funding Facility,
securitisation liabilities and subordinated floating rate notes.
5.2 CAPITAL MANAGEMENT
5.2.1 Overview
The Group is licensed as an Authorised Deposit-taking Institution (ADI) under the Banking Act 1959 and is subject to
prudential supervision by APRA.
5.2.2 Capital management
The Company’s regulator, the Australian Prudential Regulation Authority (APRA) prescribes minimum capital
requirements for the Company (Level 1) and the Group (Level 2). The Board determines the minimum capital
adequacy ratio (CAR) applicable to both Level 1 and 2 in order to ensure sufficient buffer is maintained above the
APRA prescribed minimums. Regulatory capital comprises eligible capital instruments, retained earnings and reserves
less prescribed deductions. The CAR is determined as the percentage of regulatory capital to risk weighted assets.
Risk weighted assets are determined by applying prescribed risk weights to individual assets, with the risk weights
set according to Basel III standard methodology, reflecting the risk attached to each asset.
The Group has documented its strategy to manage capital in its internal capital adequacy assessment process which
includes the capital management plan. Capital management is an integral part of the Group’s risk management
framework.
63
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.2 CAPITAL MANAGEMENT
5.2.2 Overview (continued)
The APRA Prudential Standards include APS 110 Capital Adequacy which:
-
Imposes on the Board a duty to ensure that the Company and Group maintains an appropriate level and quality of
capital commensurate with the level and extent of the risks to which the Company and Group is exposed from its
activities; and
- Obliges the Company and Group to have in place an Internal Capital Adequacy Assessment Process (ICAAP).
The Group’s policy is to apply a minimum target of 17.5% capital (2020: 17.0%).
In accordance with the Group’s capital management objectives, the Company’s and Group’s regulatory minimum capital
requirements were exceeded at all times throughout the year.
In thousands of AUD
Tier 1 capital
Tier 2 capital
Total regulatory capital
Risk weighted assets
Capital adequacy ratio
Consolidated
(Level 2)
2021
2020
42,126
9,999
52,125
31,278
446
31,724
Bank
(Level 1)
2021
$
40,861
9,999
50,860
2020
$
30,082
446
30,528
236,706
22.02%
149,519
21.22%
236,825
21.48%
147,532
20.69%
Disclosures required under Prudential Standard APS 330 Public Disclosure can be located on our website at:
https://bnk.com.au/investor-centre/disclosure-statements/.
5.2.3 Share capital
In thousands of AUD
Note
Share capital
Movements in ordinary shares on issue
Beginning of the financial year
Issued during the year in a placement
Exercise of performance rights
Less equity raising costs
5.2.3
Bank
2021
$
120,035
2020
$
106,270
Number of
shares
94,270,399
18,572,000
1,345,001
114,187,400
-
114,187,400
2021
$
106,270
13,000
765
120,035
(3,307)
116,728
Number of
shares
82,415,399
11,700,000
155,000
94,270,399
-
94,270,399
2020
$
99,188
7,020
62
106,270
(2,754)
103,516
Terms and conditions of ordinary shares
The Company does not have authorised capital nor par value in respect of its issued capital.
Ordinary fully paid shares have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and
amounts paid up on shares held. Ordinary fully paid shares entitle their holder to one vote, either in person or by
proxy, at a meeting of the Company.
64
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.2 CAPITAL MANAGEMENT
5.2.4 Equity raising costs
In thousands of AUD
Balance at the beginning of the year
Equity raising costs incurred
Deferred tax recognised directly in equity
Balance at the end of the year
Accounting policy - Recognition and measurement
2021
$
2,754
766
(213)
3,307
Bank
2020
$
2,621
40
93
2,754
The transaction costs of a new equity transaction are accounted for as a deduction from equity (net of any related
income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that
otherwise would have been avoided. Transaction costs include registration and other regulatory fees, amounts
paid to legal, accounting and other professional advisers, printing costs and stamp duties.
5.2.5 Treasury shares reserve
In thousands of AUD
Balance at the beginning of the year
Acquired during the year to fulfil the exercise of performance rights
2021
$
(103)
-
(103)
2020
$
-
(103)
(103)
Pursuant to the BNK Equity Incentive Plan, the Company may issue new shares or acquire shares on market to
allocate to staff upon exercising performance rights as set out in note 7.4.2. During the year ended 30 June 2020,
the Company acquired shares on market at a cost of $103,000 which were transferred to employees for the
exercise of performance rights at nil consideration. At 30 June 2021, the Company does not hold any treasury
shares.
Accounting policy - Recognition and measurement
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly
attributable costs, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares
and are presented in the treasury shares reserve. When treasury reserve shares are sold or reissued subsequently,
the amount received is recognised as an increase in equity and the resulting surplus or deficit is retained within
the reserve.
65
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.3 EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit or loss for the year attributable to ordinary
equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit or loss attributable to ordinary equity
holders of the Company adjusted for the weighted average number of ordinary shares outstanding during the year
plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
In thousands of AUD
Net profit/(loss) attributable to ordinary
share holders
Weighted average number of ordinary
shares
for basic earnings per share
for diluted earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Consolidated
2021
$
2020
Restated
$
5,659
3,824
96,776,010
98,020,277
86,727,399
88,274,386
5.85
5.77
4.35
4.28
5.4 DIVIDENDS PAID OR PROPOSED AND FRANKING ACCOUNT
No dividend was paid or declared by the Company in the period and up to the date of this report. The Directors do
not recommend that any amount be paid by way of dividend, for the financial period ended 30 June 2021 (2020: nil).
Franking credit balance
In thousands of AUD
The amount of franking credits available for the
subsequent financial years are:
Franking account balance as at the end of the
financial year at 30% (2020: 30%)
Franking credits that will arise from the
payment/(receipt) of income tax payable/receivable
as at the end of the financial year
Franking credits that arise from the receipt of
franked dividends
Franking credits available for subsequent reporting
periods at 30% (2020: 30%)
2021
$
2020
$
2,544
2,542
-
2
-
2
2,546
2,544
66
NOTES TO THE FINANCIAL REPORT
6. GROUP STRUCTURE
6.1.1 Investments in subsidiaries
In thousands of AUD
Note
Investments in subsidiaries at cost
Subsidiaries
Subsidiary name
Finsure Holding Pty Ltd
Finsure Finance & Insurance Pty Ltd
Finsure Domain Names Pty Ltd
Finsure Wealth Pty Ltd
Beagle Finance Pty Ltd
Smart Finance & Wealth Pty Ltd
1300 Home Loan Holdings Pty Ltd
Mystro CRM Pty Ltd
Wikibroker Pty Ltd
Australian Asset Aggregation Pty Ltd
Fintek Pty Ltd
Iden Holdings Pty Ltd
Better Choice Home Loans Pty Ltd
Future Financial 1 Pty Ltd
Pioneer Mortgage Holdings Pty Ltd
Romavale Pty Ltd
Australian Capital Home Loans Pty Ltd
Bare 123 Pty Ltd
Bullion Trust No.1
Segment
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Banking
Banking
Banking
Banking
Banking
Banking
N/A - Dormant
Banking
Bank
2021
$
61,925
2020
$
61,925
Ownership
2021
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
100%
100%
100%
100%
100%
100%
100%
100%
2020
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
60%
100%
100%
100%
100%
100%
100%
100%
-
Accounting policy - Recognition and measurement
‘Subsidiaries’ are entities controlled by the Group. 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 entity. The Group reassesses whether it has control if there are changes to one or more of the elements of
control. This includes circumstances in which protective rights held (e.g. those resulting from a lending relationship)
become substantive and lead to the Group having power over an investee. Consolidated structured entities (CSEs)
are established for specific pre-defined purposes operating within a contractual framework. During the year, the
Group established the Bullion Trust No.1 for the purpose of originating residential loans for securitisation purposes.
The financial statements of subsidiaries and CSEs are included in the consolidated financial statements from the
date on which control commences until the date on which control ceases. Non-controlling interests are measured
at their proportionate share of the acquiree’s identifiable net assets at date of acquisition, and not considered
material to the Group. Intra-group balances and transactions, and any unrealised 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.
Business Combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisitions is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as incurred.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
67
NOTES TO THE FINANCIAL REPORT
6.1.2 Deed of Cross Guarantee
Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 the wholly-owned subsidiaries listed
below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgment of financial
reports and Directors’ reports:
Finsure Holding Pty Ltd
Finsure Finance & Insurance Pty Ltd
Beagle Finance Pty Ltd
It is a condition of the Instrument that the subsidiaries agreeing to guarantee each other’s’ liabilities (“the Closed
Group”) enter into a Deed of Cross Guarantee. The Company, as an APRA regulated ADI is prevented from
guaranteeing its subsidiaries liabilities, and therefore isn’t a party to the Deed of Cross Guarantee. The effect of the
Deed is that each entity listed above guarantees to each creditor payment in full of any debt in the event of a winding
up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up of a subsidiary
party to the Deed occurs under other provisions of the Act, the remaining subsidiary/(ies) will only be liable in the
event that after six months any creditor has not been paid in full.
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the
three entities party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee
are set out as follows:
Statement of Financial Position for the Closed Group
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Property, plant and equipment
Goodwill and other intangibles
Total assets
Liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Total Liabilities
Net assets
Share capital
Reserves
Retained earnings
Total equity
Income Statement for the Closed Group
Commission income
Commission expense
Net commission income
Interest income
Interest expense
Net interest income/(expense)
Other income
Total net revenue
Operating expenses
Profit before income tax from continuing operations
Income tax expense
Net profit after tax
Items that will be reclassified to profit and loss
Revaluation of financial assets
Total comprehensive income for the period, net of tax
68
2021
$
3,772
495,783
11,609
1,475
3,487
516,126
466,779
923
5,628
473,331
42,796
27,880
(2,253)
17,169
42,796
326,269
(309,671)
16,598
83
(154)
(71)
6,831
23,358
(13,047)
10,311
(4,192)
6,119
-
6,119
2020
Restated
$
1,164
377,542
11,702
2,232
3,441
396,081
355,128
702
3,574
359,404
36,677
27,880
(2,337)
11,134
36,677
279,046
(265,228)
13,818
166
(439)
(273)
8,596
22,141
(12,211)
9,930
(2,883)
7,047
(97)
6,950
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.1 Property, plant and equipment
In thousands of AUD
Note
Office equipment and leasehold improvements
Accumulated depreciation
Motor vehicles
Accumulated depreciation
Computer equipment and IT hardware
Accumulated depreciation
Right of use assets
Accumulated depreciation
Consolidated
2020
$
2021
$
1,145
(926)
219
44
(25)
19
539
(426)
113
4,191
(1,896)
2,295
1,131
(851)
280
44
(20)
24
676
(453)
223
4,191
(910)
3,281
2021
$
64
(33)
31
44
(25)
19
145
(124)
21
761
(294)
467
Bank
2020
$
48
(19)
29
44
(20)
24
283
(196)
87
761
(157)
604
Total property, plant and equipment
2,646
3,808
538
744
Reconciliations of the carrying value for each class of property, plant and equipment are set out below:
In thousands of AUD
Opening written down value at 1 July 2020
Additions
Disposals
Depreciation
Closing written down value at 30 June 2021
In thousands of AUD
Opening written down value at 1 July 2020
Additions
Disposals
Depreciation
Closing written down value at 30 June 2021
Computer
equip &
IT hardware
$
223
9
(40)
(79)
113
Computer
equip &
IT hardware
$
87
9
(40)
(35)
21
Total
$
3,808
28
(42)
(1,148)
2,646
Total
$
744
28
(42)
(192)
538
Consolidated
Motor
vehicles
$
24
-
-
(5)
19
Bank
Motor
vehicles
$
24
-
-
(5)
19
Right
of Use
Asset
$
3,281
-
-
(986)
2,295
Office
Equip &
L/H imp
$
280
19
(2)
(78)
219
Right
of Use
Asset
$
Office
Equip &
L/H imp
$
604
-
-
(137)
467
29
19
(2)
(15)
31
69
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.1 Property, plant and equipment (continued)
Accounting policy - Recognition and measurement
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Plant and Equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses. The carrying amount
of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount
from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be
received from the assets employment and subsequent disposal. The expected net cash flows are discounted to their
present values in determining recoverable amounts.
The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the company and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to the statement of
comprehensive income during the financial period in which they are incurred.
Right of use assets
The Group has recognised right of use assets relating to its leases pursuant to AASB 16 Leases.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability (refer to
note 7.4) adjusted for any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove any improvements made to branches or office premises.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the lease liability.
Depreciation
The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold
land, is depreciated on a straight-line basis over their useful lives to the economic entity commencing from the time
the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired
period of the lease or the estimated useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset
Office plant and equipment and
Leasehold improvements
Right of use assets
Motor vehicles
Computer equipment and programs
Depreciation rate
Method of Depreciation
15-33%
20-33%
12.5%
20-50%
Straight-line
Straight-line
Straight-line
Straight-line
The assets' residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date. An
asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or
losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included
in the revaluation reserve relating to that asset are transferred to profit or loss.
70
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.2 Goodwill and other intangible assets
In thousands of AUD
Goodwill – at cost
Brandnames, trademarks and domain
names
Software
Accumulated amortisation
Broker relationships
Accumulated amortisation
Other intangible assets
Accumulated amortisation
Consolidated
Restated
2020
$
19,172
2021
$
19,172
16,565
16,557
8,704
(3,116)
5,588
4,075
(1,865)
2,210
176
(22)
154
8,638
(2,342)
6,296
4,075
(1,668)
2,407
-
-
-
Total goodwill and other intangibles
43,689
44,432
Bank
Restated
2020
$
-
162
-
-
-
-
-
-
-
-
-
162
2021
$
-
170
-
-
-
-
-
-
176
(22)
154
324
Reconciliation of intangible assets
In thousands of AUD
Goodwill
$
19,172
-
19,172
-
-
-
19,172
Balance as previously reported
Adoption of new accounting policy
Restated balance at 1 July 2020
Additions
Disposals
Amortisation
Closing balance at 30 June 2021
Reconciliation of intangible assets
In thousands of AUD
Balance as previously reported
Adoption of new accounting policy
Restated balance at 1 July 2020
Additions
Amortisation
Closing balance at 30 June 2021
Brand
names &
trademarks
$
16,557
-
16,557
8
-
-
16,565
Consolidated
Software
Broker
relationships
Other
Intangible
Total
$
11,474
(5,178)
6,296
571
(345)
(934)
5,588
$
$
2,407
-
2,407
-
-
(197)
2,210
$
49,610
-
-
(5,178)
- 44,432
755
176
(345)
-
(22)
(1,153)
154 43,689
Brand
names &
trademarks
$
162
-
162
8
-
170
Bank
Software
$
4,647
(4,647)
-
-
-
-
Broker
relationships
Other
Intangible
Total
$
-
-
-
-
-
-
$
-
-
-
176
(22)
154
$
4,809
(4,647)
162
184
(22)
324
Refer to note 8.1 for the impact of adopting a new accounting policy in relation to capitalised software costs.
Accounting policy - recognition and measurement
Goodwill and other intangible assets with a finite life recognised upon acquisition of subsidiaries are measured at
cost less accumulated impairment losses.
71
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.2 Goodwill and other intangible assets (continued)
Costs incurred in acquiring software or developing software, that is not cloud based Software as a Service (SaaS)
(refer to Note 8.1) that will contribute to future period financial benefits through revenue generation and/or cost
reduction are capitalised to computer software. Costs capitalised include external direct costs of materials, service,
consultants spent on the project and internal costs of employees directly engaged in delivering the project. For
software in the course of development, amortisation commences once development is complete and the software
is in use.
Other intangible assets are recognised at cost less accumulated amortisation and impairment losses.
Subsequent expenditure is recognised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands
is recognised in profit or loss.
Amortisation
Amortisation is calculated to write-off the asset less its estimated residual value using the straight-line method over
their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not amortised, but tested
annually for impairment.
The estimate useful lives of intangible assets with a finite useful life are as follows:
- Software
- Broker relationships
3-10 years
6 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted as
appropriate.
Impairment testing for CGUs containing goodwill
For the purpose of impairment testing, goodwill has been allocated to the Group’s cash generating units (CGUs) as
follows:
In thousands of AUD
Aggregation
Wholesale
Banking
Total goodwill
2021
$
12,000
-
7,172
19,172
2020
$
12,000
1,000
6,172
19,172
During the year, the Group has reassessed its CGUs in line with the review of segments as set out in note 2. The
Banking and Wholesale CGUs have been combined and are now assessed as a single CGU.
Each CGU was tested for impairment using the value in use approach, by discounting future cash flows estimated
from the continuing use of each CGU. The recoverable amount for each CGU was determined to be above the carrying
amount.
The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to
the key assumptions represent management’s best estimates of future CGU performance, after considering internal
and external sources of information.
Input
Discount rates (post-tax)
Terminal value growth rate
Budgeted revenue growth rates
2021
11%
2.5%
8-37%
2020
11%
2.5%
11-42%
72
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.2 Goodwill and other intangible assets (continued)
Discount rates were determined after assessing the Group’s weighted average cost of capital and adjusting for risks
specific to the CGU and/or the risks inherent to the cash flow forecasts. The cash flow projections include specific
estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on
management’s estimate of the long-term growth rate, consistent with the assumptions that a market participant
would expect.
Budgeted revenue was based on the Group’s plans for each CGU taking into account past experience and adjustments
regarding expectations of future outcomes, including the potential impacts of COVID-19.
No impairment loss has been recognised for any CGU at 30 June 2021.
Management has estimated that a reasonably possible change in two key assumptions could cause the carrying
amount to exceed the recoverable amount, being the discount rate or budgeted revenue growth rates. The following
table shows the amount by which these assumptions would need to change individually for the estimated recoverable
amount to be equal to the carrying amount.
Input
Discount rates (post-tax)
Average budgeted revenue growth
Aggregation
0.4%
(1.0%)
Banking
1.8%
(4.5%)
7.3 Provisions
In thousands of AUD
Note
Provision for annual leave
Provision for long service leave
Total provisions
Consolidated
2020
$
992
316
1,308
2021
$
1,249
429
1,678
2021
$
295
4
299
Bank
2020
$
216
3
219
Accounting policy - recognition and measurement
Provision is made for the Group's liability for employee benefits arising from services rendered by employees to the
reporting date. Employee benefits that are due to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one
year have been measured at the present value of the estimated future cash outflows to be made for those benefits.
Contributions are made by the Group to employee nominated superannuation funds and are charged as expenses
when incurred.
7.4 Leases
Lease liabilities are payable as follows.
IN THOUSANDS OF AUD
Consol ($)
Interest
Future
minimum
lease
payments
Present
value of
lease
payments
Future
minimum
lease
payments
Bank ($)
Interest
Less than one year
Between one and five years
1,198
1,937
140
93
1,338
2,030
3,368
114
379
24
26
Present
value of
lease
payments
138
405
543
73
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.4 Leases (continued)
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains
a lease if the contact conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group
uses the definition of a lease in AASB 16.
Group acting as a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates
consideration in the contract to each lease component on the basis of its relative stand-alone price.
The Group recognises a right-of-use asset (refer to note 7.2) and a lease liability at the lease commencement date.
The lease liability is initially measured at the present value of the lease payments that are not paid at the lease
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
Fixed payments, including in-substance fixed payments; or
Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s
assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-
substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is
made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
The Group presents right-of-use assets within ‘property, plant and equipment’ and lease liabilities in ‘other liabilities’
in the Consolidated Statement of Financial Position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases. The Group recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Group acting as a lessor
At inception or on modification of a contact that contains a lease component, the Group allocates the consideration
in the contract to each lease component on the basis of their relative stand-alone selling prices.
When the Group acts as lessor, it determines at lease inception whether the lease is a finance lease or an operating
lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially
all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, the lease is a finance
lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such
as whether the lease is for the major part of the economic life of the asset.
74
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.5 Related Party Disclosures
Information regarding individual Directors and Executive compensation and some equity instrument disclosures as
required by the Corporations Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors’ report.
Disclosure of the compensation and other transactions with key management personnel (KMP) is required pursuant to
the requirements of Australian Accounting Standard AASB 124 Related Party Disclosures. The KMP of the Company
comprises the Non-Executive Directors and Executives.
7.5.1 Key Management Personnel (KMP)
The aggregate compensation of KMP during the year comprising amounts paid or payable or provided for was as follows:
In thousands of AUD
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
2021
$
3,097
200
136
100
3,533
2020
$
3,136
218
182
212
3,748
In the above table, remuneration shown as short term benefits means (where applicable) wages, salaries and other
contributions, paid annual leave and paid sick leave, and bonuses, value of fringe benefits received, but excludes out of
pocket expense reimbursements.
7.5.2 Share-Based Payments
Shareholders of the Company approved the continuation of the BNK Equity Incentive Plan or (“the Plan”) at the 2019
Annual General Meeting. Pursuant to the terms of the Plan, executives and employees may be offered performance
rights that entitle the executive to the Company delivering fully paid ordinary shares, either issued by the Company or
acquired on market at the election of the Board. Additionally, the Plan enables the Company to grant fully paid ordinary
shares to employees from time to time.
Performance rights – grant dates
On 9 February 2017, 1,700,000 performance rights were granted to executives in accordance with the terms of
the BNK Equity Incentive Plan (BNKEIP). 1,200,000 have been exercised to date;
On 1 November 2018, 100,000 performance rights were granted to four employees in recognition of their
performance for the year ended 30 June 2018 (‘FY18 Bonus’). All FY18 Bonus rights have vested with 20,000
from this grant remaining exercisable.
On 16 April 2019, 500,000 performance rights were awarded to three senior employees of Finsure as retention
rights. One third of these performance rights each vest on 1 July 2019, 1 July 2020 and 1 July 2021. For the
first tranche that vested on 1 July 2019, 133,332 have been exercised. For the second tranche that vested on 1
July 2020, 133,333 have been exercised.
On 5 December 2019, 250,000 performance rights were awarded to five employees in recognition of their
performance for the year ended 30 June 2019 (‘FY19 Bonus”). One third of these performance rights vest on
30 September 2020, 30 September 2021 and 30 September 2022 subject to the approval of the Remuneration
Committee and continued service. For the first tranche, 50,001 have been exercised whilst 83,333 have been
forfeited.
On 28 August 2020, 450,000 performance rights were awarded to six employees in recognition of their
performance for the year ended 30 June 2020 (‘FY20 Bonus”). 50% of the performance rights vested
immediately, with the remaining 50% deferred to 31 July 2024 subject to continued service. Of the performance
rights available for immediate vesting, 190,000 have been exercised, and 40,000 forfeited. On 1 December 2020,
125,000 performance rights were awarded to Mr John Kolenda as a FY20 Bonus following receipt of shareholder
approval at the 2020 Annual General Meeting.
75
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.5.2 Share-Based Payments (continued)
Performance rights – fair value and vesting conditions
a) The fair value of the BNKEIP performance rights has been measured using a Monte Carlo simulation. The inputs
used in the measurement of the fair values at grant date of the BNKEIP performance rights are summarised below.
The key terms and conditions related to the grants under the BNKEIP are as follows; all performance rights are to
be settled by the physical delivery of shares.
The inputs used in the measurement of the fair values at grant date of the BNKEIP performance rights were as
follows:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Expected dividends
Risk free interest rate (based on government bonds)
$0.2613 to $0.7830
$1.02
Nil
31.54%
Nil
2.13%
The amount recognised for the period ended 30 June 2021 in relation to the BNKEIP performance rights was
$127,818 (2020: $128,168).
b) The fair value of the FY18 Bonus performance rights of $90,000 was determined with reference to the share price
on the grant date of $0.90. The fair value of the grant is being recognised over the 20 month vesting period. The
amount recognised in profit and loss for the year ended 30 June 2021 in relation to these performance rights
was $148 (2020:$54,177).
e) The fair value of the retention performance rights of $315,000 was determined with reference to the share price
on the grant date of $0.63. The fair value of the grant is being recognised over the respective vesting period of
each tranche. The amount recognised in profit and loss for the year ended 30 June 2021 in relation to these
performance rights was $47,728 (2020:$ 135,947.)
f)
The fair value of the FY19 Bonus performance rights of $145,000 was determined with reference to the share price
on the grant date of $0.58. The fair value of the grant is being recognised over the respective vesting period of
each tranche. The amount recognised in profit and loss for the year ended 30 June 2021 in relation to these
performance rights was $46,783 (2020: $58,390)
g) The fair value of the FY20 Bonus performance rights of $365,000 was determined with reference to the share price
on the grant dates of $0.60 and $0.76 respectively. The fair value of the grant is being recognised over the
respective vesting period of each tranche. The amount recognised in profit and loss for the year ended 30 June
2021 in relation to these performance rights was $75,482.
Unlisted Options
On 1 October 2020, the Company issued 500,000 unlisted options to Bell Potter Securities Limited (BP). BP has been
engaged to provide a broad range of corporate advisory services. On 1 December 2020, the Company issued a further
1,000,000 unlisted options to BP following receipt of shareholder approval at the Company’s 2020 AGM.
76
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.5.2 Share-Based Payments (continued)
The unlisted options were valued using the Black Scholes method using the following inputs:
Grant date
Number granted
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Expiry date
Expected dividends
Risk-free interest rate
BP Options tranche 1
BP Options tranche 2
1 October 2020
500,000
$0.20
$0.65
$0.75
54%
1 October 2023
-
0.25%
1 December 2020
500,000
$0.22
$0.76
$1.00
53%
1 December 2023
-
0.25%
BP Options tranche 3
1 December 2020
500,000
$0.17
$0.76
$1.25
53%
1 December 2023
- -
0.25%
Accounting policy - recognition and measurement
The grant date fair value of equity-settled share-based payment arrangements granted to employees is generally
recognised as an expense with a corresponding increase in equity over the vesting period of the awards. The amount
recognised is adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised is based on the awards that meet the
related service and non-market performance conditions at the vesting date.
7.5.3 Transactions with KMP
The Company’s policy for lending to Directors and management is that all loans are approved and deposits accepted
on the same terms and conditions that applied to the general public for each class of loan or deposit. There are no
loans that are impaired in relation to the loan balances with Directors or other KMPs.
The Company’s policy for receiving deposits from KMP is that all transactions are approved and deposits accepted on
the same terms and conditions that applied to the general public for each type of deposit.
Total value of term and savings deposits from KMP at
reporting date
Total interest paid/payable on deposits to KMP
Total value of loans to KMP at reporting date
Total interest received/receivable on loans from KMP
7.5.4 Transactions with other related parties
2021
$
3,644
2020
$
4,442
-
483,768
33,464
109
492,354
36,386
Other transactions between related parties include deposits from Director related entities or close family members of
Directors, and other KMP. The Company’s policy for receiving deposits from related parties is that all transactions are
approved and deposits accepted on the same terms and conditions that applied to customers for each type of deposit.
There are no benefits paid or payable to the close family members of the KMP.
77
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.5.5 Related party transactions with director related entities (continued)
Mr John Kolenda is Chairman and major shareholder of Aura Group Holdings Pte Ltd and its controlled entities (Aura
Group). The Group’s subsidiary, Finsure Holding Pty Ltd has a sub-lease agreement with Aura Group and in addition
pays/recoups a number of shared costs relating to the tenancy and certain employees.
Sub-lease income and other amounts recouped for services
from Aura Group
Amounts paid to Aura Group for services
Amounts receivable from Aura Group
2021
$
446,457
2020
$
446,325
-
-
-
79,824
During the period, the Group paid $42,175 to Shadow Charters Pty Ltd, a related entity of Mr John Kolenda for boat
charter services.
7.6
Auditor’s remuneration
Auditors of the Group – KPMG
In AUD
Audit and review of the financial statements
Regulatory audit services
Total audit and assurance services
Accounting and tax opinions
Total advisory and other services
Total amounts paid/payable to KPMG
2021
$
335,716
111,000
446,716
2020
$
291,270
109,000
400,270
25,047
25,047
50,000
50,000
471,763
450,270
Pursuant to the Company’s policy, the Chair of the Audit Committee approves non-audit services prior to their
commencement. The Directors are satisfied the provision of non-audit services has complied with the auditor
independence requirements in Australia.
7.7
Standby borrowing facilities
The Company has an overdraft facility of $1,200,000 (2020: $1,200,000) with CUSCAL Ltd which is secured by a cash
deposit. As at 30 June 2021, the entire facility was unused (2020: $nil).
78
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.8
Commitments and contingencies
In thousands of AUD
(a) Capital expenditure
(b) Outstanding loan commitments
Loans approved not advanced
Loan funds available for redraw
Unutilised overdraft limits
Total lending commitments
(c) Lease commitments
Due not later than one month
Due later than one month and not later than three months
Due later than three months and not later than one year
Due more than one year but less than five years
Due more than five years
2021
$
-
2020
$
-
13,861
22,990
113
36,964
701
14,765
498
15,964
123
252
1,082
2,253
-
3,710
92
187
860
2,765
-
3,904
The Group has obligations under the terms of these leases of its office premises for terms of up to 6 years, with options
to extend the leases. Lease payments are payable in advance by equal monthly instalments due on the 1st day of each
month.
Accounting policy - recognition and measurement
Transactions are classified as contingent liabilities where the Group’s obligations depend on uncertain future events
and principally consist of obligations to third parties. Items are classified as commitments where the Company has
irrevocably committed itself to future transactions. These transactions will either result in the recognition of an asset
or liability in future periods.
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at
the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of
a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly
specified in an arrangement.
7.9
Events subsequent to balance date
On 4 August 2021, the Company announced it had reached agreement with Goldman Sachs for an alliance to originate
and service specialist residential mortgages funded by Goldman Sachs.
On 18 August 2021, the Company issued 4,950,000 performance rights to executives under the BNK Transformational
Long-Term Incentive Scheme.
No other matters or circumstances of a material nature have arisen since the end of the financial year which in the
opinion of the Directors significantly affected or may significantly affect the operations of the Company, the results of
the operations or the state of affairs of the Group in future financial years.
79
NOTES TO THE FINANCIAL REPORT
8. ACCOUNTING POLICIES AND NEW STANDARDS
8.1
Change in accounting policy
IFRIC Agenda Decision – Configuration or customisation costs in a cloud computing arrangement (April 2021)
The International Financial Reporting Standards Interpretations Committee (IFRIC) issued its agenda decision titled
Configuration or customisation costs in a cloud computing arrangement in April 2021. This decision discusses
whether configuration or customisation expenditure relating to Software as a Service (SaaS) arrangements can be
recognised as an intangible asset and if not, over what time period the expenditure is expensed.
The Group’s accounting policy has historically been to capitalise all costs associated with SaaS arrangements as
intangible assets in the Statement of Financial Position. The adoption of the above agenda decision has resulted in
a reclassification of these intangible assets to either a prepaid asset in the Statement of Financial Position and/or
recognition as an expense in the Statement of Comprehensive Income, impacting both the current period and prior
periods presented.
Software as a Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application
software over a contract period. As such, IFRIC has concluded that SaaS arrangements do not provide an entity with
an intangible asset at the commencement of a contract.
As a result of the IFRIC decision, costs previously capitalised as an intangible asset are now expensed in the period
in which the costs are incurred where they relate to costs for use of the application software, customisation,
configuration and data migration, testing and training.
Costs incurred for the development of software code that enhances or modifies, or creates additional capability to
existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised
as intangible assets, as set out in Note 7.2.
Historical financial information has been restated to account for the impact of the change in accounting policy in
relation to SaaS arrangements as follows:
Statement of Financial
Position
In thousands of AUD
ASSETS
Goodwill and other
intangible assets
Deferred tax assets
Total assets
Deferred tax liabilities
Total liabilities
Net assets
Retained earnings
Total equity
Consolidated
Adjustments
2020
As
previously
reported
$
2020
Restated
$
2020
As
previously
reported
$
Bank
Adjustments
2020
Restated
$
49,610
(5,178)
44,432
4,809
(4,647)
162
1,394
2,572
(3,253) 444,495
-
347,795
96,699
(8,189)
96,699
-
-
(3,253)
(3,253)
(3,253)
-
839,287
13,686
726,421
112,866
8,118
112,866
-
(5,178)
(1,553)
(1,553)
(3,625)
(3,625)
(3,625)
-
834,109
12,133
724,868
109,241
4,493
109,241
1,178
447,747
-
347,795
99,952
(4,936)
99,952
80
NOTES TO THE FINANCIAL REPORT
8. ACCOUNTING POLICIES AND NEW STANDARDS
8.1
Change in accounting policy (continued)
Statement of Financial
Performance
In thousands of AUD
Operating expenses
Net profit before tax
Income tax expense/(benefit)
Net profit after tax
Basic earnings per share
(cents)
Diluted earnings per share
(cents)
Statement of Cash flows
In thousands of AUD
2020
As
previously
reported
$
27,857
6,970
(1,645)
5,325
6.14
6.03
2020
As
previously
reported
$
2020
As
previously
reported
$
8,191
(2,267)
8
(2,274)
Bank
Adjustments
2020
Restated
$
1,674
1,674
(502)
1,172
9,865
(3,941)
(495)
(3,446)
Consolidated
Adjustments
2,144
2,144
(643)
(1,501)
2020
Restated
$
30,000
4,826
(1,002)
3,824
4.35
4.28
Consolidated
Adjustments
2020
Restated
$
2020
As
previously
reported
$
Bank
Adjustments
2020
Restated
$
Payments to suppliers and
employees
Net cash used in operating
activities
Payments to acquire
intangible assets
Net cash (used in)/from
investing activities
(181,392)
(2,281)
(183,673)
(9,005)
(1,811)
(10,816)
(877)
(2,281)
(3,158)
(3,992)
(1,811)
(5,802)
(3,609)
2,281
(1,328)
(1,882)
(3,145)
2,281
864
(1,401)
1,811
1,811
(71)
410
81
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of BNK Banking Corporation Limited, I declare that:
1.
In the opinion of the Directors:
a. The consolidated financial statements and notes of BNK Banking Corporation Limited for the financial
year ended 30 June 2021 are in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of its financial position as at 30 June 2021 and performance for the
financial year ended on that date;
ii. Complying with Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
b. The Directors draw attention to Note 1.2(b) to the consolidated financial statements which include a
statement of compliance with International Financial Reporting Standards.
c. There are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2021.
On behalf of the Board
Don Koch
Chairman
27 August 2021
82
Independent Auditor’s Report
To the shareholders of BNK Banking Corporation Limited
Report on the audit of the Financial Report
Opinion
We have audited the consolidated Financial
Report of BNK Banking Corporation Limited (the
Group Financial Report). We have also audited
the Financial Report of BNK Banking Corporation
Limited (the Company Financial Report)
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
• giving a true and fair view of the Group and
Company’s financial position as at 30 June
2021 and of its financial performance for the
year ended on that date; and
The respective Financial Reports of the Group
and the Company comprises:
• Statements of financial position as at 30 June
2021
• Statements of profit or loss and other
comprehensive income, Statements of
changes in equity, and Statements of cash
flows for the year then ended
• Notes including a summary of significant
accounting policies
• Directors’ Declaration.
•
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Group consists of the Company and the
entities it controlled at the year-end or from time
to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group and Company in accordance with the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical
responsibilities in accordance with the Code.
©2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name
and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited
by a scheme approved under Professional Standards Legislation.
83
Key Audit Matters
The Key Audit Matters we identified for both
the Group and Company are:
• Loans and Advances – Provision for credit
losses
The additional Key Audit Matters we identified
for the Group are:
• Carrying Value of Goodwill and other
intangible assets
• Net Present Value of future trail commission
receivable and payable
Key Audit Matters are those matters that, in our
professional judgement, were of most
significance in our audit of the Financial Report of
the current period.
These matters were addressed in the context of
our audit of the Financial Report as a whole, and
in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Loans and Advances - Provision for credit losses $1.2 million – Group and Company
Refer to Note 3.2 to the Group and Company Financial Report
The key audit matter
How the matter was addressed in our audit
Expected credit loss (ECL) provisions for loans
and advances held at amortized cost is a key
audit matter due to the significance of loans and
advance balances, the degree of complexity and
judgement applied by the Group and Company in
determining the provisions, and the judgement
required by us in challenging these estimates.
The ECL model is reliant on numerous data
inputs and assumptions including past historical
data the Group and Company used to determine
probabilities of default as well as incorporating
forward-looking information.
We used judgement to assess the ECL model’s
application of the requirements in AASB 9
Financial Instruments. This includes the
assumptions made by the Group and Company in
determining what represents a significant
increase in credit risk, the method used to
calculate the probability of default and loss given
default based on the staging criteria required and
judgement around the impact of COVID-19 on
forward-looking information.
We involved credit specialists to supplement our
senior audit team members in assessing this key
audit matter.
Our procedures included:
•
Evaluated the Group and Company’s
processes and tested key controls such
as:
-
-
Reconciliation of historical loan
portfolio data used in the model to
determine probability of default to
the underlying core banking
system; and
Management’s review and approval
of the ECL model and key
assumptions used.
Assessed the methodology in the ECL
model, including relevant adjustments for
COVID-19, against the requirements in the
accounting standards and our
understanding of industry practice;
Tested the integrity of the ECL model,
including the accuracy of the underlying
calculations;
Tested a sample of key data elements
used in determining the probability of
default such as historical default rates to
relevant source systems;
Challenged the assumptions for
calculating the exposures at default used
by the Group and Company to determine
the loss given default in the ECL model by
comparing these to our understanding of
•
•
•
•
84
the Group’s loans and advances portfolio,
including those in COVID-19 deferral
programs, and the industry and markets
the Group and Company operate in;
Comparing the output of the ECL model to
the expected credit loss provision
recorded in the financial report; and
Assessment of the Group’s disclosures
using our understanding obtained from our
testing and the requirements of the
accounting standards.
•
•
Carrying Value of Goodwill and other intangible assets $43.7 million – Group
Refer to Note 7.2 to the Group Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter was the Group’s annual
testing of goodwill and other intangible assets for
impairment given the extent of judgement
involved and the financial significance of the
Goodwill and other identifiable intangible assets
recognised. We focused on the key assumptions
the Group applied in their value in use (“VIU”)
models for each Cash Generating Unit (“CGU”),
including:
Our procedures included:
•
Considered the Group’s determination of
their CGUs based on our understanding of
the operations of the Group’s business
and how independent cash flows were
generated, against the requirements of
the accounting standards;
•
Worked with our valuation specialists to:
• Budgeted revenue growth rates;
assess the appropriateness of the
•
Terminal value growth rates; and
• Discount rates used specific to each of the
two CGUs, Banking and Aggregation.
These assumptions and rates are complicated in
nature and vary according to the conditions and
environment the specific CGU is subject to from
time to time. The assumptions and rates are
based on historical performance and forward
looking budgeting taking into account the
Group’s strategy, market conditions, COVID-19
impacts, emerging regulatory changes and
industry developments, making them
judgemental in nature.
The Group’s modelling is sensitive to small
changes in the discount rates and terminal value
growth rates used.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
Group’s use of the value in use method
to perform the annual test of goodwill
for impairment against the requirements
of the accounting standards;
assess the integrity of the VIU models
used, including the accuracy of the
underlying calculation formulas; and
independently develop a discount rate
range considered comparable using
publicly available market data for
comparable entities, adjusted by risk
factors specific to the Group and the
industry it operates in.
• Assessed the reasonableness of the
budgeted revenue growth rates contained in
the VIU models by comparing Board
approved forecasts to Group budgets and
actual results to inform our evaluation of the
forecasts incorporated in the models;
85
• Challenged the significant budgeted revenue
growth rate assumptions and terminal value
growth rates in light of the Group’s strategy
taking into account market conditions,
including the impacts of COVID-19 and
emerging regulatory changes. We compared
budgeted revenue growth rates and terminal
value growth rates to industry trends and
expectations, and considered differences for
the Group’s operations. We used our
knowledge of the Group, their past
performance, business and customers, and
our industry experience;
• Considered the sensitivity of the models by
varying key assumptions, such as discount
rates and growth rates, within a reasonably
possible range. We did this to identify those
assumptions at higher risk of bias or
inconsistency in application and to focus our
further procedures; and
• Assessed the disclosures in the financial
report using our understanding obtained
from our testing and against the
requirements of the accounting standards.
Net Present Value of future trail commission receivable $505.7 million and payable $453.4
million – Group
Refer to Note 4.4 to the Group Financial Report
The key audit matter
How the matter was addressed in our audit
The Group earns and pays trail commissions over
the life of the loans resulting in a trail
commission receivable of $505.7 million and trail
commission payable of $453.4 million.
This is a key audit matter due to the significant
judgement we applied to assess the Group’s
estimation of the value of trail commissions
receivable and payable across trail commission
portfolios. We focused on the key assumptions
the Group applied in their net present value (NPV)
model, including:
• Discount rates per annum;
Our procedures included:
•
•
Evaluated the Group’s processes and
tested key controls such as the review
and approval of assumptions used in the
Group’s NPV model for estimating the
value of the trail commissions receivable
and payable;
Assessed the extraction of loan data used
in the Group’s NPV model for
completeness and accuracy by testing a
sample of commission contract rates back
to broker agreements;
• Percentage of commissions paid to
•
Worked with our valuation specialists to:
brokers across different portfolios; and
• Weighted average life of aggregation,
wholesale, and total portfolio loans.
We involved our valuation specialists in
assessing this key audit matter.
assess the appropriateness of the
methodology adopted in the Group’s
NPV model across the trail commission
portfolios against accepted industry
practice and the requirements of the
accounting standards;
86
evaluate the key assumptions such as
discount rates, weighted average life
and percentages of commissions paid
against publicly available market data for
comparable entities; and
assess the integrity of the Group’s NPV
model including the accuracy of the
underlying calculation formulas.
•
•
Evaluated the sensitivity of the NPV model
calculations by considering reasonably
possible changes to the discount rate and
weighted average life rates. We did this to
identify those assumptions at higher risk
of bias or inconsistency in application and
to focus our further procedures; and
Assessment of the adequacy of
disclosures against the requirements of
the accounting standards.
Other Information
Other Information is financial and non-financial information in BNK Banking Corporation’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors
are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error
• assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
87
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of BNK
Banking Corporation Limited for the year ended
30 June 2021, complies with Section 300A of the
Corporations Act 2001.
The Directors of the Company are responsible for
the preparation and presentation of the
Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report
included in pages 14 to 26 of the Directors’
report for the year ended 30 June 2021.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit
conducted in accordance with Australian Auditing
Standards.
ss
KPMG
Nicholas Buchanan
Partner
Sydney
27 August 2021
88
ADDITIONAL ASX INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is
as follows. The information is current as at 27 August 2021.
(a)
Distribution of equity securities
Spread of
holdings
1 -
1,000
1,001 - 5,000
10,000
5,001 -
10,001 -
100,000
100,001+
TOTAL
Number
of
holders
114
1,563
86
275
92
2,130
Number of
units
60,674
3,771,330
701,565
9,914,324
99,739,507
114,187,400
Percentage of
total issued
capital
0.053%
3.303%
0.614%
8.683%
87.347%
100%
(b)
Twenty largest holders of quoted equity securities
Rank
Shareholder
1
2
3
4
5
6
7
8
9
10
11
Somers Limited
John Kolenda
SF Legacy Investments Pty Ltd
Kar Wing Ng
HSBC Custody Nominees (Australia) Pty Ltd
National Nominees Limited
Aoyin Group Limited
Carpe Diem Asset Management Pty Ltd
Noah James Investments Pty Ltd
Koleet Pty Ltd
RTL Group Investments Pty Ltd
Firstmac Limited
Citicorp Nominees Pty Ltd
Savot 1 Pty Ltd
12
13
14
15 Wayne Hosking and Bernadette Williams
16
17
18
19
20
Simon and Jennifer Bednar
BNP Paribas Noms Pty Ltd
CS Third Nominees Pty Ltd
Vanval Investments Pty Ltd
Aura Private Wealth Pty Ltd
Number of
units
Percentage
of issued
capital
16,236,911
13,302,952
12,981,315
7,335,747
6,107,143
3,642,233
2,629,996
2,430,190
2,361,515
2,150,144
2,000,000
1,769,416
1,615,484
1,517,939
1,440,000
1,343,666
1,292,028
1,244,060
1,153,333
808,913
14.22%
11.65%
11.25%
6.42%
5.35%
3.19%
2.30%
2.13%
2.07%
1.88%
1.88%
1.55%
1.41%
1.33%
1.26%
1.18%
1.13%
1.09%
1.01%
0.71%
73.01%
89