BNK Banking Corporation Limited
Level 14, 191 St Georges Terrace
Perth WA 6000
26 August 2022
BNK Banking Corporation Limited – Full Year Final Report
(Appendix 4E) for the year ended 30 June 2022
The Directors of BNK Banking Corporation Limited (the “Company”) are pleased to announce the audited
results of the Company for the year ended 30 June 2022 as follows:
Results for announcement to the market
Extracted from the audited Financial
Statements for the year ended
Revenue from continuing operations1
Revenue from discontinuing operations
Profit/(loss) after tax attributable to
members
Movement
(18%)
(21%)
956%
$’000
30 June 2022
$’000
30 June 2021
21,411
266,225
59,787
26,151
337,405
5,659
From continuing operations (excl. gain on sale
of discontinuing operations)2
(267%)
(12,391)
(3,374)
From discontinuing operations
699%
72,178
9,033
1 Includes gross contract asset reduction of income by $11m during FY22. As comparable FY21 increase in income of
$3m (net movement of $14m)
2 Includes net contract asset expense of $6.6m and $5.9m of Finsure disposal related expenses in FY22.
Dividend Information
Special Dividend 2022
Ex-dividend Date
Record Date
Payment Date
Amount Per
Share (cents)
34
Franked Amount
per Share (cents)
34
Tax rate for
franking credit
30%
18 July 2022
19 July 2022
26 July 2022
Net Tangible Assets per share
30 June 2022
$1.55
30 June 2021
$0.74
The remainder of the information requiring disclosure to comply with Listing Rule 4.3A is contained in the
attached copy of the Financial Statements and comments on performance of the Company included in
the Investor Presentation dated 26 August 2022.
The following subsidiaries were disposed of during the year ended 30 June 2022:
Finsure Finance and Insurance Pty Ltd (previously 100% owned)
Beagle Finance Pty Limited (previously 100% owned)
Finsure Holding Pty Ltd (previously 100% owned)
Finsure Domain Names Pty. Ltd. (previously 100% owned)
1300 Home Loan Holdings Pty Limited (previously 100% owned)
Mystro CRM Pty Limited (previously 100% owned)
Wikibroker Pty limited (previously 100% owned)
Further information regarding BNK Banking Corporation Limited and its business activities can be
obtained by visiting the Company’s website at bnk.com.au
Yours faithfully
Jessie Klarić
Company Secretary
bnk.com.au | info@bnk.com.au | 1300 BNK BANK | ABN 63 087 651 849 | AFSL/Australian Credit License 246884 | BSB 806043
BNK Banking Corporation Limited
Annual Financial Report
ABN: 63 087 651 849
30 June 2022
1
Contents
CORPORATE INFORMATION .......................................................................................................... 3
MESSAGE FROM OUR CHAIRMAN, DON KOCH ........................................................................ 4
DIRECTORS’ REPORT .....................................................................................................................6
REMUNERATION REPORT (AUDITED) ....................................................................................... 14
INDEPENDENT AUDITOR’S DECLARATION ............................................................................. 28
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................ 29
STATEMENTS OF FINANCIAL POSITION ................................................................................. 30
STATEMENTS OF CHANGES IN EQUITY ................................................................................... 31
STATEMENTS OF CASH FLOWS ............................................................................................... 33
NOTES TO THE FINANCIAL REPORT ........................................................................................ 34
DIRECTORS’ DECLARATION ....................................................................................................... 85
INDEPENDENT AUDITOR’S REPORT ......................................................................................... 86
ADDITIONAL ASX INFORMATION .............................................................................................. 93
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
Company Secretary
Ms Jessie Klaric
(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)
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:
Level 5, 50 Cavill Avenue
Surfers Paradise Qld 4217
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 2022
Dear Shareholder,
During the 2022 Financial Year, the BNK Group delivered improved financial performance, whilst concurrently
implementing several initiatives to create a stronger platform for future growth.
FY22 Results
Statutory NPAT was $59.8 million compared to $5.7 million for the prior year.
The Company remains in a strong capital position with a Capital Adequacy Ratio (Level 2) of 47.5%, an increase
of 26.1% from FY21.
A full explanation of the financial results is contained within the Operating and Financial Review.
Strong Platform for Growth
The past 12 months have seen BNK achieve many important milestones, further building on the Company’s
foundation for long term success.
The sale of Finsure to MA Financial Group Limited was completed on 7 February 2022, with BNK receiving
$152.2 million in consideration. The sale represents an outstanding result. The gain on sale was recognised in
the second half of the financial year, which was the primary driver of the Group’s $59.8m Statutory NPAT.
On 3 May 2022, the Board announced its intention to return $60m in sale proceeds to shareholders, with an
initial $40m returned to shareholders as a fully franked dividend on 26 July 2022.
The Board intends to pay the approximate remaining $20m as a capital return upon obtaining regulatory
approval.
The material return to shareholders and the strong capital position of BNK following the Finsure sale are the
first of many highlights. Our growth trajectory in settlements are highlighted by a record $309 million in total
settlements in the fourth quarter, and 83% year on year growth in the balance sheet and Bendigo & Adelaide
Bank funded portfolio to $985m. Our improved deposit base, which grew 52% year on year, and low
arrears/strong risk management capabilities, particularly during Covid, demonstrate the Company’s ability to
perform strongly across all key areas.
Furthermore, the Company commenced its successful securitisation program, which has provided additional
funding diversity in FY22 following the announcement in mid-2021 of a $250 million warehouse program with
Bendigo & Adelaide Bank, and a $500 million warehouse with Goldman Sachs. The success of the Company’s
wholesale arm, Better Choice, was recognised by being awarded Non-Bank Lender of the Year at the Australian
Lending Awards for the second consecutive year, adding to the significant accolades received by the Company.
We are a fast growing and well capitalised company, strongly positioned to accelerate growth, with significant
expansion and margin transformation opportunities ahead.
Board and Leadership Changes
During the 2022 Financial Year, we further bolstered the BNK Board with the appointment of new and
experienced Board & management team driving the next stage of growth, with additional NEDs bringing diverse
capabilities and skills.
Michelle Guthrie and Calvin Ng both joined the Board in July 2021. Michelle brings media, entertainment, funds
management, technology and professional services spanning more than 30 years, with Calvin contributing
significant investment banking, mergers & acquisitions and funds management experience and was also a co-
founder of Finsure.
We also strengthened our management team with the appointment of Allan Savins as CEO. Allan’s impact on
the performance of the business has been immediate and we look forward to Allan’s continued contribution
to the company’s success.
4
MESSAGE FROM OUR CHAIRMAN (continued)
Summary
FY22 represented a milestone year for the Company and I am highly encouraged by the strong results we have
delivered in the last 12 months, which once again demonstrates the value proposition to our distribution
networks and the commitment and dedication of the BNK team.
In closing, I would like to thank shareholders for their continued support of the Company and we look
forward to a strong 2023 Financial Year as we embark on a journey of business transformation towards
higher margin returns and opportunity.
5
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 2022 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 Jon Denovan
Mr Peter Hall
Ms Elizabeth Aris
Ms Michelle Guthrie
Mr Calvin Ng
Mr John Kolenda
Chairman and Non-Executive Director
Deputy Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (commenced 15 July 2021)
Non-Executive Director (commenced 15 July 2021)
Executive Director (ceased 7 February 2022)
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, Co-Chair and Advisor with the UTS
Business School Industry Advisory Board, Chair of Cache Investment Management, (an Investment
Management platform) Chair of ResusRight (a medtech manufacturer), 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) and Chair of the CoreLogic RP Data
sponsored Residential Valuation Industry Advisory Group. 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, was a
Fellow of the Australian Institute of Company Directors 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 (Deputy Chairman and Independent Non-Executive Director)
Mr Denovan is a lawyer with significant banking, commercial, and property experience. Mr Denovan is a Special
Counsel with leading national law firm having previously been the Managing Director/Partner of that firm (then
known Gadens Lawyers Australia Limited).
Mr Denovan is recognised as a leading lawyer in financial services regulation in Australia.
Mr Denovan is currently a director and deputy chair BNK Banking Corporation Limited, chair of Sydney Bus
Museum, and a director numerous other finance and property private companies. He was previously chair of
Trainworks Limited (a NSW government instrumentality), a director of Aussie Home Loans Limited, the Credit
and Investments Ombudsman Limited (CIO), and the Mortgage & Finance Association of Australia (MFAA). Mr
6
DIRECTORS’ REPORT (continued)
Jon Denovan (Independent Deputy Chairman and Non-Executive Director) (continued)
Denovan was the first honorary member of the Mortgage & Finance Association of Australia in recognition of
his contribution to the mortgage industry. Complementing Mr Denovan’s skills in the finance industry is his
significant experience in the property industry having worked with many leading property companies.
Mr Denovan is the Chair of the Audit Committee, a member of the Risk & Compliance Committee and Board
Credit Committee.
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 is a Board Member or Advisor to a number of growth stage Technology
businesses operating in multiple countries, and 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).
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:
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)
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)
FORMER DIRECTORS
John Kolenda (Previous Executive Director)
Mr Kolenda ceased to be a director upon completion of the sale of Finsure to MA Financial Group Limited on
7 February 2022.
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.
7
DIRECTORS’ REPORT (continued)
COMPANY SECRETARY
Jessie Klaric
Ms Klaric was appointed as company Secretary on 14 March 2022. Ms Klaric has over 15 years’ experience
providing legal advice to financial institutions and joined BNK in 2019 as Senior Legal Counsel. Prior to joining BNK
Jessie worked at Dentons for over 10 years including a secondment to Bankwest in 2014.
Malcolm Cowell
Mr Cowell was the previous Company Secretary from 1 March 2017 until 14 March 2022.
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
Disposal of Subsidiary (before tax)
Sale of equities
Expense adjustments
IFRS fair value adjustments from Finsure acquisition
Software development costs
Restructuring and transition costs
Share Based Payments
Tax effect of adjustments
Disposal of Subsidiary (net of tax)
Underlying Net Profit after Tax ($’000s)
(Management-reported results)
FY22
FY21
% change
59,786
5,659
956.9%
-
(319)
-
-
4,833
1,742
(745)
(72,178)
(57)
-
573
1,832
-
-
(888)
-
(6,881)
7,119
(196.7%)
The adjustments summarised above reflect the current year (FY22) impact of:
the gain on sale from the disposal of Finsure including distribution received (note 2.2.1);
the costs related to the Finsure sale, including restructuring and accelerated share based payments
(noted within operating expenses 2.4); and
distribution received from an investment in Cuscal (noted within other income 2.3).
Adjustments for the prior year (FY21) reflect the impact of:
the amortisation of fair value adjustments to intangible assets arising from the acquisition of Finsure in
2018;
the adoption of new accounting standard requirements mandating the expensing of software
development costs that were previously eligible to be capitalised; and
the disposal of non-core subsidiaries.
8
DIRECTORS’ REPORT (continued)
Key operating and financial metrics for the period were as follows:
Key Metric
Amounts in thousands of AUD
30 June 2022
($’000s)
30 June 2021
($000s)
Movement
Net interest revenue
Net-commission (expense)/income
Non-interest revenue/(expense)
Gain from discontinued operations, net of tax
Statutory net profit after tax
Underlying net (loss)/profit after tax
Cash earnings
Total assets
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
12,924
(4,808)
3,306
72,178
59,787
(6,881)
671
1,441,782
782,698
207,825
1,684,559
-
964,589
1.26%
104%
47.51%
7,784*
4,108*
1,933*
9,033
5,659
7,119
2,383
1,321,840
501,705
38,234
1,933,474
56,619,729
635,647
1.67%
72.1%
22.02%
67.3%
(217.0%)
71.0%
699.0%
956.9%
(196.7)
(71.8%)
9.1%
56.0%
443.6%
(12.9%)
-
51.7%
(27.1%)
43.7%
115.6%
* Restated FY21 to exclude discontinued operations elements
OPERATING AND FINANCIAL REVIEW
The Group recorded an underlying net loss after tax for the year ended 30 June 2022 (FY22) of $6,880,730
(2021: profit of $7,119,000). Statutory net profit after tax of $59,786,787 a significant increase on the prior
period due to the gain on disposal of Finsure, whilst cash earnings of $671,125 represented a material decrease
over the comparative year. Earnings per share for 30 June 2022 is 51.61 (2021: 5.85).
Sale of Finsure
The sale of Finsure to MA Financial Group Limited announced to the market on 15 December 2021 completed
on 7 February 2022 with the Group receiving $152.2 million in consideration. On 3 May 2022, the Board
announced an intention to return $60m in sale proceeds to shareholders. On 26 July 2022, $40m was returned
to shareholders as a fully franked dividend. The Board intends to pay the remaining $20m as a capital return,
once regulatory approval is obtained.
The assets and liabilities of Finsure are no longer represented in the financial report for June 2022, and the
gain on sale was recognised in the second half of the financial year.
During the reporting period, Finsure continued to generate loan originations through its platform of funders
reflecting the ongoing productivity growth of accredited brokers and strong property market conditions.
Finsure’s statutory net profit result for the period from 1 July 2021 to 7 February 2022 was $5.1m.
Record settlements and loan-book growth
The Group had increased settlements of on balance sheet loans, with the direct funded loan book increasing
56% 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 52% resulted in
a loan to deposit ratio of 81% demonstrating the ability to continue to raise deposits in the current environment
which will fund growth.
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.
9
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
In August 2021, the Group launched its second securitisation warehouse arrangement funded by Goldman
Sachs. The warehouse leverages the Groups specialist lending capabilities. Loans originated into the
warehouse are not recognized on balance sheet. BNK receives servicing fees and a post term out a profit share.
As at 30 June 2022, the Bullion Trust warehouse’s lending book had grown to $207.8m, with the Goldman
Sach’s warehouse’s lending book being $242.9m
Total lending settlements of $1,044m represented an 85% increase on the prior year. On balance sheet
settlements of $426.6m (for directly funded loans) represented a 77% increase on the comparative year driving
the 67% increase in net interest income. The total loan book for the Banking division of $2.7b increased by 8%,
however the pivot to higher margin on balance sheet lending resulted in improved cash returns from the
portfolio.
Section 5.1 of the annual report provides details on the material risks the Group is facing. There are sections
on market, interest rate, credit, liquidity and operational risk which are the key risks facing the Group. There
is also a section providing an overview of risk management, including roles and responsibilities
Strong credit quality
The loan book comprises 99% residential mortgages with an average loan to valuation ratio of 63.8%.
Credit quality remains sound with loans more than 90 days in arrears equating to less than 0.3% of total on
balance sheet loans. No credit write-offs occurred in the half, and the business now reflects a diversified
national lender
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 $140m reflects the strong
increase in deposits and the proceeds of the Finsure sale.
Operating expenses
The Group continued to invest in its people and processes, with operating expenses increasing by 40% to $25.3m,
compared to a 67.3% increase in Net Interest Income. This included a significant uplift in the risk management
team and building to accommodate continued growth.
Capital
The Group’s policy is to maintain a minimum capital adequacy ratio (CAR) as per APRA required levels plus
1.5%. The CAR at 30 June 2022 of 47.5% presents the Group with further growth opportunity for both on-
balance sheet lending assets as well as investing in growth. In addition, it will fund the $60m distribution
from the proceeds of the Finsure sale.
The Bank launched its second wholesale funding arrangement during the year through the issue of $14m of
floating rate subordinated notes. The notes further diversify the Bank’s sources of funding. 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.
Declared after end of year
After the balance sheet date the following dividends were proposed and paid by the board of directors. The
dividends have not been recognised as liabilities and there are no tax consequences.
Ordinary
Total amount
Cents per
share
0.34
Total
amount
$’000
40,359
40,359
Date of
payment
26 July 2022
The financial effect of these dividends have not been brought to account in the consolidated financial statements
for the year ended 30 June 2022 and will be recognised in subsequent financial reports.
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
-
103,000
-
10,000
-
7,335,747
-
-
-
-
-
-
Interests in ordinary shares noted above were acquired by the Directors at their own expense and do not form
part of their remuneration.
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
D Koch
P Hall
J Denovan
J Kolenda
E Aris
M Guthrie
C Ng
J Sutton
16
16
16
8
16
15
15
-
16
16
16
8
16
15
15
-
4
4
4
-
-
-
-
-
4
4
4
-
-
-
-
-
6
6
6
-
-
-
-
-
3
3
-
-
3
-
-
-
4
4
-
-
4
-
-
-
5
5
5
-
-
-
-
-
5
5
5
-
-
-
-
-
6
6
5
-
-
-
-
-
11
DIRECTORS’ REPORT (continued)
CHANGES IN THE STATE OF AFFAIRS
On 21 September 2021, the Group announced it had appointed advisors to commence a strategic review of the
Group with the objective of maximising shareholder value.
On 15 December 2021, the Group announced the sale of the Finsure aggregation business to MA Financial for $145
million in cash, subject to regulatory approval and cash adjustments.
On 7 February 2022, the Company completed the sale of the Finsure aggregation business for consideration of
$152.2 million (before costs and income tax) comprising the sale price of $145 million plus the Finsure cash
adjustment under the Share Sale Agreement.
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 26 July 2022 a fully-franked special dividend of 34 cents per share, for a total distribution to shareholders of
approximately $40 million was paid.
BNK is proposing to distribute $60 million in proceeds from the sale of Finsure to its shareholders, by way of the
above noted special dividend ($40m) and a capital return. Further information in relation to the planned capital
return of approximately $20 million will be announced once regulatory approvals are obtained.
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.
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 2022:
12
DIRECTORS’ REPORT (continued)
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
$
28,463
510,185
168,686
678,871
707,334
AUDITORS INDEPENDENCE DECLARATION
The lead auditor’s independence declaration provided in accordance with S307C of the Corporations Act 2001
is set out on page 28 and forms part of the Directors’ report for the financial year ended 30 June 2022.
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 2022 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 2022 (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
2022:
Non-Executives
Director
Position
Appointment date
Don Koch1
John Sutton
Jon Denovan
Peter Hall
Elizabeth Aris
Michelle Guthrie
Calvin Ng
Non-Executive Director/Chairman
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
11 June 2019
22 October 2019
2 September 2019
13 November 2015
18 June 2021
15 July 2021
15 July 2021
Resignation/
completion date
-
7 July 2021
-
-
-
-
-
1 Appointed Chairman 7th July 2021.
Executives
Executive
Position
Brett Morgan
John Kolenda
Allan Savins
Simon Bednar
Andrew Kitchen
Dara Wettner
Amber Smith
Chief Executive Officer, Banking
and Wholesale
Executive Director and Chief
Executive Officer, Finsure
Chief Executive Officer
General Manager, Aggregation
Chief Financial Officer
Chief Risk Officer
Chief Operating Officer
Appointment date
12 October 2020
Resignation/
completion date
17 January 2022
13 March 2018
7 February 2022*
17 January 2022
17 September 2018
26 October 2020
11 January 2021
12 October 2020
-
7 February 2022*
-
-
-
* Ceased to be Executives of the Group following the sale of Finsure to MA Financial Group Limited.
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
No remuneration consultants were engaged by the Company for the year ended 30 June 2022.
Remuneration Report approval at 2021 Annual General Meeting (AGM)
The 2021 Remuneration Report received positive shareholder support at the 2021 AGM with a vote of 99.7%.
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:
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).
15
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
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 growth in cash
earnings per share over
the 3 year vesting period
(see note 3.3 for FY22
modification).
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. Equity 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. For STI’s within the
Group, only service vesting conditions are applied.
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.
The Board 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. All rights were valued at the grant date of 18
August 2021. The performance rights are subject to an initial 3 year performance 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 initial 3 year vesting period, the Board will determine the amount of performance
rights to vest based upon the measured outcomes. Subject to achievement of the vesting conditions, 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%
Modified Vesting Conditions of LTIs
On 28 January 2022, due to the sale of Finsure, the Board approved the final vesting of LTIs for Finsure
executives, when the share price was $1.24.This included removing the EPS performance hurdle described
above and subsequently reducing the potential LTI grant by 50%. On 3 May 2022, the Remuneration
Committee of the group approved the final vesting for BNK executives when the share price was $1.125. The
terms of the LTIs prior to alteration were as described above and the LTIP scheme was subsequently
terminated with all performance rights not granted being cancelled. The difference between the fair value
of the rights before and after the alteration is considered immaterial.
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 2022 (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
2022
2021
2020
2019
2018
59,787,040
Nil
$0.96
5,659,000
Nil
$0.735
3,824,000
Nil
$0.43
3,614,000
Nil
$0.64
(406,000)
Nil
$1.28
31.4%1
4.42%
3.50%
3.60%
(1.65%)
1 ROCE for continuing operations equates to (10.48%)
Profitability is one of the financial performance targets considered in setting remuneration for executives,
and has been calculated based on financial information prepared in accordance with Australian Accounting
Standards. Performance to budget is another key measure considered by the BNK Board when appropriate
to the business objectives.
18
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.1 Remuneration of key management personnel
BNK Banking Corporation Limited
Annual Financial Report
30 June 2022
Short-term benefits
Post-
employment
Other long
term
Shared-based payments
Termination
Total
Performance
related
Salary &
fees
Cash
bonus
$
$
Non-
monetary
benefits
(B)
$
Total
Superannuation
Long
service
leave
STI (A)
LTI (C)
$
$
$
$
$
380,452
366,035
330,256
211,559
266,349
121,246
240,669
167,651
50,000
-
-
-
-
-
-
-
-
-
10,000
5,833
-
-
4,376
2,861
430,452
366,035
340,256
217,392
266,349
121,246
245,045
170,512
32,707
33,260
27,500
15,780
25,731
10,962
22,500
14,668
6,806
-
-
-
-
-
-
33,500
24,000
-
-
6,000
-
-
-
225,246
36,022
159,415
-
136,846
-
121,594
-
$
-
-
-
-
-
-
-
-
$
%
721,905
466,123
527,171
233,172
434,925
132,208
389,139
185,180
31%
8%
30%
-
31%
-
31%
-
Current
Executives
Allan Savins1
Year
2022
2021
Andrew Kitchen2 2022
2021
2022
2021
2022
2021
Dara Wettner3
Amber Smith4
1 Appointed Chief Executive Officer from 17 January 2022 (previously General Manager, Banking & Wholesale)
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
(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
Post
employment
Total
Superannuation
Salary &
fees
Cash
bonus
$
$
Non-
monetary
benefits
(B)
$
Shared-based payments
Termination
Total
Performance
related
STI (A)
LTI (C)
Other
long term
Long
service
leave
$
$
$
$
$
$
$
%
Former
Executives
Brett Morgan1
John Kolenda2
Simon Bednar2
Don Koch3
Jussi Nunes4
Malcolm Cowell5
Steve Ellis6
Gerard Ng7
Lisa Stedman8
Total KMP
remuneration
Year
2022
2021
2022
2021
2022
2021
2021
2021
2021
2021
2021
2021
2022 2,085,274 328,000
2021
248,291
306,359
411,189
660,000
208,069
330,003
132,685
86,999
28,846
77,743
48,653
48,843
50,000
-
153,000
-
75,000
-
-
-
-
-
-
-
2,586,622
-
5,417
7,083
11,667
20,000
-
-
-
-
287
-
-
-
31,459
36,064
303,707
313,442
575,856
727,500
283,069
330,003
132,685
86,999
29,133
77,743
48,653
48,843
2,444,733
2,622,686
14,009
16,271
-
-
14,617
30,875
11,479
14,101
2,740
5,305
4,622
4,385
137,064
164,448
-
-
-
-
5,078
8,380
-
-
-
-
-
-
5,078
15,186
32,560
-
-
47,500
53,964
30,000
-
-
-
-
-
36,000
126,024
137,500
-
-
365,841
7,699
226,777
37,330
-
-
3,863
-
-
-
1,235,718
84,914
-
-
-
-
-
-
-
100,000
-
-
-
-
-
100,000
350,276
329,713
941,697
735,199
583,505
436,588
144,164
201,100
35,736
83,048
53,275
89,228
3,948,617
3,124,734
-
-
39%
1%
39%
9%
-
-
11%
-
-
-
31%
3%
1 Appointed Chief Executive Officer from 12 October 2020 and resigned 17 January 2022
2 Ceased to be a KMP of the Company following the sale of Finsure on 7 February 2022
3 Interim Chief Executive Officer from 26 May 2020 to 12 October 2020
4 Resigned 5 September 2020
5 Interim Chief Financial Officer from 5 September 2020 to 26 October 2020
6 Resigned 6 October 2020
7 Interim Chief Risk Officer from 6 October 2020 to 12 December 2020
8 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 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 2022
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.2 Analysis of cash bonuses included in remuneration – audited
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each
key management personnel are detailed below:
Brett Morgan
John Kolenda
Allan Savins
Simon Bednar
Included in
remuneration
$50,000
$153,000
$50,000
$75,000
The amounts included in remuneration for the financial year represent the amount related to performance
for the previous financial year based on achievements, as approved by the Remuneration Committee on
30 July 2021. In determining the extent of any performance based incentive the Board assesses the
achievement of an individual’s performance in context of the overall Group result.
4.3 Equity instruments - audited
Performance rights refer to rights over ordinary shares of BNK, which vest on a one-for-one basis under
the BNK Equity Incentive Plan and the Transformational Long Term Incentive Plan (TLTIP).
4.3.1 Rights over equity instruments granted as compensation – audited
Details on rights over ordinary shares in the Company that were granted as remuneration to each key
management personnel during the reporting period are as follows:
Simon Bednar
26,295
Service
1 September 2021
20,625
Service
1 September 2021
1 September 2021
0.80
0.80
30 June 2026
30 June 2026
Participant
Allan Savins
Allan Savins
Allan Savins
Number
granted
Vesting
condition
FY22
700,000 Service and
performance
Immediate
41,875
Andrew Kitchen
Simon Bednar
Simon Bednar
600,000 Service and
performance
650,000 Service and
performance
Immediate
67,455
Amber Smith
Dara Wettner
Dara Wettner
440,000 Service and
performance
500,000 Service and
performance
Immediate
7,500
Grant date
Fair value
/performance
right at
grant date ($)
Expiry date
18 August 2021
0.5225
30 June 2027
18 August 2021
0.5225
30 June 2027
18 August 2021
0.5225
30 June 2027
1 September 2021
0.80
0.80
30 June 2026
30 June 2026
18 August 2021
0.5225
30 June 2027
18 August 2021
0.5225
30 June 2027
Dara Wettner
5,000
Service
1 September 2021
1 September 2021
0.80
0.80
30 June 2026
30 June 2026
John Kolenda
Brett Morgan
1,200,000 Service and
performance
Immediate
40,700
18 August 2021
0.5225
30 June 2027
1 September 2021
0.80
30 June 2026
21
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.3.2 Performance rights granted
During the reporting period the Group granted the following performance rights to the KMP’s;
a) On 18 August 2021, 3,690,000 performance rights were granted to executives under the
Transformational Long Term Incentive Plan (TLTIP). The vesting conditions for the rights provided for
60% vesting in 3 years with the remainder vesting in 4 years. The sale of Finsure saw the vesting
conditions of these performance rights accelerated by the Board with 1,407,204 rights terminated,
800,000 rights forfeited, and 1,482,796 exercised. Of the rights exercised between 10% and 19% remain
in escrow until 30 June 2025. Refer to 3.3 for details of the modification.
b) On 1 December 2021, 1,200,000 performance rights were awarded to Mr John Kolenda as part of the
TLTIP. These performance rights vesting conditions were accelerated on the sale of Finsure, with
576,000 terminated and 624,000 exercised of which 21% are held in Escrow until 30 June 2025. Refer
to 3.3 for details of the modification.
c) On 1 September 2021, 231,250 performance rights were awarded to 4 employees in recognition of
their performance for the year ended 30 June 2021 (‘FY21 Bonus”). 157,530 of these performance rights
vested immediately, with the remaining rights, deferred to 1 September 2025. The sale of Finsure saw
26,295 of performance rights exercised in February 2022, whilst 21,800 have been forfeited. 25,625
remain vested to 1 September 2025.
4.3.3 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
FY22
FY22
in which grant
Allan Savins
66,667
16 April 2019
66,667
16 April 2019
16,667 5 December 2019
16,667 5 December 2019
100%
100%
100%
100%
16,666 5 December 2019
0%
40,000 28 August 2020
40,000 28 August 2020
100%
0%
0%
0%
0%
0%
0%
0%
0%
700,000
18 August 2021
50.4%
49.6%
41,875
1 September 2021
100%
20,625
1 September 2021
0%
Simon Bednar
66,667
16 April 2019
66,667
16 April 2019
16,667 5 December 2019
16,667 5 December 2019
16,666 5 December 2019
50,000 28 August 2020
50,000 28 August 2020
650,000
18 August 2021
67,455
1 September 2021
26,295
1 September 2021
22
100%
100%
100%
100%
100%
100%
100%
52%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
48%
0%
0%
vests
2021
2022
2021
2022
2023
2021
2025
20221
2022
2026
2021
2022
2021
2022
2022
2021
2022
20221
2022
20221
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.3.3 Details of equity incentives affecting current and future remuneration – audited
(Continued)
Participant
Number
Grant date
%
vested
FY22
% forfeited
FY22
Financial years
in which grant
vests
Brett Morgan
40,700
1 September 2021
100%
Andrew Kitchen
600,000
18 August 2021
Amber Smith
440,000
18 August 2021
John Kolenda
62,500
1 December 2020
62,500
1 December 2020
1,200,000
18 August 2021
50.9%
52.9%
100%
100%
52%
Dara Wettner
500,000
18 August 2021
50.9%
1 Refer to 3.3 for details of modification
7,500
1 September 2021
100%
5,000
1 September 2021
0%
0%
49.1%
47.1%
0%
0%
48%
49.1%
0%
0%
2022
20221
20221
2021
20221
20221
20221
2022
2026
a) On 16 April 2019, 400,000 performance rights were awarded to two senior employees 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 and second tranche, 266,666 have been exercised. For the third tranche, 133,334 vested
on 1 July 2021.
b) On 5 December 2019, 100,000 performance rights were awarded to two employees in recognition of
their performance for the year ended 30 June 2019 (‘FY19 Bonus”). One third of these performance
rights each 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 and second tranche,
66,668 have been exercised. For the remaining tranche, 16,666 were vested and exercised on 7 February
(due to the Finsure Sale), and 16,666 remain to be exercised on 30 September 2022.
c) On 28 August 2020, 180,000 performance rights were awarded to two 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
remaining performance rights, 50,000 were exercised on 7 Feb 2022 (Finsure sale) and 40,000 remain
to be vested.
d) 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. These performance
rights were exercised at the time of the Finsure Sale in February 2022.
4.3.4 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
Andrew Kitchen
Amber Smith
Dara Wettner
Granted in
year
$ (A)
234,301
159,415
121,594
142,846
23
Value of rights
exercised
in year $ (B)
509,562
350,865
267,623
299,888
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
4.3.4 Analysis of movements in equity instruments – audited
Former key management personnel
Participant
Brett Morgan
Simon Bednar
John Kolenda
Granted in
year
$ (A)
32,560
251,605
326,040
Value of rights
exercised
in year $ (B)
32,560
659,547
928,760
(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.
4.3.5 Summary of rights holdings
Current key management personnel
Participant
Allan Savins
Andrew Kitchen
Amber Smith
Dara Wettner
Held at
1 July
2021
140,000
-
-
-
Granted as
remuneration Exercised Lapsed Forfeited
(347,270)
(294,900)
(207,284)
(245,750)
(477,938)
(305,100)
(232,716)
(261,750)
762,500
600,000
440,000
512,500
-
-
-
-
Former key management personnel
Participant
Simon Bednar
Brett Morgan
John Kolenda
Held at 1
July
2021
150,000
-
125,000
5. Executive Contracts
Granted as
remuneration Exercised Lapsed Forfeited
(312,000)
(21,800)
(576,000)
743,750
62,500
1,200,000
(581,750)
(40,700)
(749,000)
-
-
-
Held at
30 June
2022
77,292
-
-
5,000
Vested
during
the year
477,939
305,100
232,716
261,750
Vested and
unexercisable
at 30 June
2022
-
-
-
-
Held at
30 June
2022
-
-
-
Vested
during
the year
581,750
40,700
686,500
Vested and
unexercisable
at 30 June
2022
-
-
-
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts
are provided below:
Executives
Salary per annum
Term for cause
Andrew Kitchen
Dara Wettner
Amber Smith
Allan Savins
$315,000 plus
superannuation
$260,000 plus
superannuation
$260,000 plus
superannuation
$400,000 plus
superannuation
None
None
None
None
24
Term of agreement and
notice period
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 3 month
notice by either party
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 2021 AGM held on 25 November
2021 when shareholders approved an aggregate fee pool of $800,000 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 2022:
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 10.0% (10.5% from 1 July 2022) 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 2022 and 30 June 2021 is detailed in table below.
Short-term benefits
Post-
employment
Salary &
fees $
Non-
monetary
benefits
Other
Superannuation
Long-
term
benefits
Long
service
leave
Non-executive
directors
Don Koch2
Peter Hall
Jon Denovan
Elizabeth Aris3
Michelle Guthrie4
Calvin Ng4
Former directors
Jon Sutton1
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
154,091
62,707
100,000
86,809
89,924
77,821
77,311
2,301
67,348
-
64,167
-
2,936
142,813
Total
2022
2021
555,776
372,451
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,409
5,957
10,000
8,247
8,992
7,393
7,731
219
6,735
-
6,417
-
294
13,567
55,578
35,383
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
169,500
68,664
110,000
95,056
98,917
85,214
85,042
2,520
74,083
-
70,583
-
3,229
156,380
611,354
407,834
1 Retired as Chairman and Director on 7 July 2021
2 Appointed Chairman on 7 July 2021
3 Appointed 18 June 2021
4 Appointed 15 July 2021
25
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
2022
Directors
Peter Hall
Don Koch
Jon Denovan
Elizabeth Aris
Michelle Guthrie
Calvin Ng
2022
Executives
Allan Savins
Andrew Kitchen
Dara Wettner
Amber Smith
Balance at the
start of the
year or
commencement
date
72,034
-
-
10,000
-
7,335,747
Acquired
Other
movement
Balance at the end
of the year or date
of resignation
30,966
-
-
-
-
-
-
-
-
-
-
-
103,000
-
-
10,000
-
7,335,747
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
1,517,939
-
-
-
477,938
305,100
261,750
232,716
(132,386)
-
(236,325)
-
1,863,491
305,100
25,425
232,716
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
2022
483,769
Interest
charged
during
KMP
period
19,3451
Write-off or
allowance
for doubtful
debt
Balance at end
of period
Number of KMP in
group
-
478,7851
1
1 Amounts to 7 Feb 2022, being date Simon Bednar left group.
(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 to the 7 February (Finsure Sale date), 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 1
July 2021 to 7 February 2022 totaled $281,995 (30 June 2021:$446,457) and the balance receivable at 7
February 2022 was $42,835 (30 June 2021:$21,570).
During the period 1 July 2021 to 7 February 2022, the Group paid $27,500 to Shadow Charters Pty Ltd, a
related entity of Mr John Kolenda for boat charter services (30 June 2021:$42,175).
26
DIRECTORS’ REPORT (continued)
REMUNERATION REPORT (AUDITED)
10. Remuneration incentives approved subsequent to balance date
Subsequent to 30 June 2022, and at the date of signing, no incentives have been recommended by the
Remuneration Committee for members of the Executive Leadership Team.
End of Remuneration Report
Signed in accordance with a Resolution of Directors
Don Koch - Chairman
Dated this 26th day of August 2022
27
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 2022 there have been:
i.
ii.
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.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Nicholas Buchanan
Partner
Sydney
26 August 2022
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.
28
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2022
CONTINUING OPERATIONS
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
Consolidated
Bank
Note
2022
$
20211
$
2022
$
2.3
2.3
2.3
2.3
2.3
2.3
20,217
11,334
(7,293)
(3,550)
12,924
7,784
(2,112)
(2,696)
(4,808)
3,306
11,422
12,884
(8,776)
4,108
1,933
13,825
18,668
(7,931)
10,737
-
(1,080)
(1,080)
1,966
11,623
2021
$
10,785
(3,521)
7,264
-
(712)
(712)
5,199
11,751
Operating expenses
Impairment of loans, advances and other
receivables
Impairment of insurance receivable and ATMs
Profit/(Loss) before income tax from continuing
operations
Income tax (expense)/benefit
Profit/(Loss) from continuing operations
2.4
(26,584)
(17,669)
(19,308)
(10,174)
4.1.1
(843)
-
(384)
(881)
(635)
-
(16,005)
(5,108)
(8,321)
2.5.1
3,614
1,735
3,995
(12,391)
(3,374)
(4,325)
(384)
(881)
312
1,013
1,325
Discontinued operations
Profit from discontinued operation, net of tax
2.2.1
72,178
9,033
79,925
-
Profit/(Loss) for the period attributable to equity
holders of the parent
59,787
5,659
75,600
1,325
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss, net of income tax
Total comprehensive income for the period
59,787
5,659
75,600
1,325
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share – continuing operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
5.3
5.3
5.3
5.3
51.61
50.55
5.85
5.77
(10.70)
(10.48)
(3.49)
(3.44)
-
-
-
-
-
-
-
-
1 Comparative amounts have been re-presented due to discontinued operations. See Notes 2.2 restated to
conform to current year of presentation of profit / (loss) from continuing operations.
The accompanying notes form part of these financial statements
29
STATEMENTS OF FINANCIAL POSITION
As at 30 June 2022
In thousands of AUD
Note
2022
2021
2022
2021
Consolidated
Bank
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/liabilities net
TOTAL ASSETS
LIABILITIES
Deposits
Other financial liabilities
Commissions and other payables
Trail commission payable
Current tax liability
Provisions
Deferred tax assets/liabilities net
TOTAL LIABILITIES
4.1.1
4.2
4.2
3.1
4.4.1
4.4.3
6.1.1
7.1
7.2
2.5.2
4.3
4.5
4.4.2
4.4.3
7.3
2.5.2
$
$
$
$
140,027
102,528
164,586
990,066
8,826
21,032
-
812
7,407
-
1,435,284
47,285
8,820
148,148
539,939
25,607
505,706
-
2,646
43,689
-
1,321,840
139,627
102,528
164,586
990,506
7,259
-
19,896
374
306
1,659
1,426,741
964,589
245,519
7,059
7,453
17,423
1,037
1,828
1,244,908
635,647
61,258
27,592
453,381
-
1,678
14,310
1,193,866
964,589
245,190
4,057
-
23,149
444
-
1,237,429
41,591
8,820
148,148
541,527
7,361
-
61,925
538
324
2,121
812,355
635,647
61,646
3,665
-
-
299
-
701,257
NET ASSETS
190,376
127,974
189,312
111,098
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Contributed equity
Issued capital, net of raising costs
Reserves
Retained earnings
TOTAL EQUITY
5.2.2
118,943
1,634
69,799
190,376
116,728
1,234
10,012
127,974
118,943
1,634
68,735
189,312
116,728
1,234
(6,864)
111,098
The accompanying notes form part of these financial statements
30
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2022
In thousands of AUD Consolidated
Attributable to equity holders
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
Balance at 1 July 2021
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 2022
Note
Issued
Capital
Equity
Raising
Costs
Treasury
Shares
$
$
$
106,270
(2,754)
(103)
-
-
-
13,765
-
-
-
-
(553)
-
-
-
-
-
-
-
-
120,035
(3,307)
(103)
120,035
(3,307)
(103)
-
-
2,240
-
-
-
-
(25)
-
-
-
-
-
122,275
-
(3,332)
-
(103)
5.2.2
5.2.3
7.5.2
5.2.2
5.2.3
7.5.2
Property,
Plant and
Equipment
Revaluation
Reserve
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial
Assets
Revaluation
Reserve
General
Reserve for
Credit
Losses
Share-based
Payments
Reserve
Retained
Earnings
Total Equity
$
$
$
(140)
446
1,029
-
140
140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
446
446
-
-
-
-
-
446
$
4,493
5,659
(140)
5,519
-
-
-
$
109,241
5,659
-
5,659
13,000
(553)
627
10,012
127,974
-
-
-
(765)
-
627
891
891
10,012
-
-
59,787
-
127,974
59,787
-
59,787
59,787
(2,240)
-
2,640
1,291
-
-
-
69,799
-
(25)
2,640
190,376
The accompanying notes form part of these financial statements
31
STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 June 2022
In thousands of AUD Bank
Attributable to equity holders
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
Balance at 1 July 2021
Profit for the period
Total comprehensive income
Note
Issued
Capital
Equity
Raising
Costs
Treasury
Shares
$
$
$
106,270
(2,754)
(103)
-
-
13,765
-
-
-
-
-
(553)
-
5.2.3
5.2.4
7.5.2
-
-
-
-
-
120,035
(3,307)
(103)
120,035
(3,307)
(103)
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 2022
5.2.2
5.2.3
7.5.2
2,240
-
-
-
(25)
-
-
-
-
122,275
(3,332)
(103)
Property,
Plant and
Equipment
Revaluation
Reserve
$
-
-
-
-
-
-
-
-
-
-
-
-
General
Reserve for
Credit
Losses
Share-based
Payments
Reserve
Retained
Earnings
$
$
$
446
1,029
(8,189)
-
-
-
-
-
446
446
-
-
-
446
-
-
1,325
1,325
(765)
-
627
891
-
-
-
(6,864)
891
(6,864)
75,600
75,600
-
-
-
68,736
(2,240)
-
2,639
1,291
Total Equity
$
96,699
1,325
1,325
13,000
(553)
627
111,098
111,098
75,600
75,600
-
(25)
2,639
189,312
The accompanying notes form part of these financial statements
32
STATEMENTS OF CASH FLOWS
For the year ended 30 June 2022
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
2022
2021
2022
2021
$
$
$
$
21,786
12,111
20,236
359,607
232,043
785
11,478
1,894
(7,268)
(3,694)
(7,932)
(3,521)
19
827
-
4,005
Payments to suppliers and employees
(386,820)
(233,492)
(22,170)
(12,344)
Net increase in loans, advances and other receivables
Net (decrease)/increase in deposits and other
borrowings
Net (payments)/receipts for financial securities
(447,632)
(254,866)
(447,626)
(253,679)
328,942
289,856
328,942
289,856
(109,810)
(85,494)
(110,147)
(85,494)
Net cash provided by/(used in) operating activities
(241,176)
(42,709)
(237,912)
(47,805)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidiaries
Proceeds from sale of investments
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangible assets
152,225
94
152,225
-
-
(3)
-
-
-
(25)
(411)
356
-
(3)
-
Net cash from/(used in) investing activities
152,222
(342)
152,578
-
-
-
(25)
(184)
(209)
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
5.2.2
5.2.3
5.2.4
-
13,000
-
13,000
(36)
-
(765)
-
(2,502)
(1,279)
(36)
-
(138)
(765)
-
(129)
184,234
61,258
183,544
61,646
Net (used in)/cash from financing activities
181,696
72,214
183,370
73,752
Net increase/(decrease) in cash held
92,742
29,163
98,036
25,738
Cash and cash equivalents at beginning of the year
47,285
18,122
41,591
15,853
Total cash and cash equivalents
140,027
47,285
139,627
41,591
The accompanying notes form part of these financial statements
33
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 2022 was
authorised for issue in accordance with a resolution of the directors on 26th August 2022.
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, except
where stated.
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.
(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. 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 are explained in the relevant notes to
this financial report as referenced below:
Identification and measurement for impairment of loans and receivables
Net present value of future trail commissions receivable and payable
Impairment of goodwill and other intangibles
Reference
3.2
4.4
7.2
34
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE
2.1
Operating segments
The Group has two operating businesses, which are its reportable segments. All operations are in Australia. 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 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, 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 (discontinued during the reporting period)
The Aggregation segment provides contracted administrative and infrastructure support to approximately 2,100
mortgage brokers, connecting them with a panel of approximately 60 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
35
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.1
Operating segments (continued)
In thousands of AUD
Banking1
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
Total segment revenue
Interest expense
Inter-segment interest expense
Other
Total interest expense
Commission expense
Inter-segment commission expense
Total commission expense
$
20,217
-
20,217
1,194
-
1,194
21,411
7,214
-
79
7,293
2,696
-
2,696
30 June 2022
Aggregation
(Discontinued
7 Feb 2022)
$
Total
Banking Aggregation
Total
30 June 2021
$
$
2
-
2
266,223
-
266,223
20,219
-
20,219
267,417
-
267,417
11,345
(11)
11,334
18,817
(4,000)
14,817
$
83
-
83
$
11,428
(11)
11,417
337,323
-
337,323
356,140
(4,000)
352,140
266,225
287,636
26,151
337,406
363,557
-
-
58
58
154,677
-
154,677
7,214
-
137
7,351
157,059
-
157,059
3,461
-
89
3,550
8,775
-
8,775
-
(11)
155
144
309,686
-
309,686
3,461
(11)
244
3,694
318,461
-
318,461
Segment profit/(loss) before tax
(16,005)1
7,5432
(8,462)3
(1,108)
9,129
8,021
Material non-cash expenses:
Depreciation and amortisation
Share-based payments
Segment assets
Segment liabilities
380
2,639
1,441,782
1,251,406
778
-
1,158
2,639
415
627
1,886
-
2,301
627
-
-
1,441,782
1,251,406
778,511
719,350
543,329
474,516
1,321,840
1,193,866
1 Banking segment equates to consolidated position
2 Note 2.2.1 for discontinued operations segment profit before tax
3 Before net tax benefit $1,168k and gain on disposal after tax $67,081k
36
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.2
Discontinued Operation
On 15 December 2021, the Group executed a Share Sale Agreement (SSA) for the sale of BNK’s 100% owned
subsidiary, Finsure Holding Pty Ltd and related Aggregation subsidiaries to MA Financial Group Limited (MAF). The
sale completed on 7 February 2022, resulting in the Group receiving cash consideration of $152.2 million, comprising
$145 million (before costs and tax on disposal) consideration for the shares plus cash adjustments of $7.2 million.
The Aggregation division was previously classified as held-for-sale (31 December 2021). The comparative
Consolidated Statement of Profit or Loss and Other Comprehensive Income has been represented to show the
discontinued operation separately from continuing operations.
2.2.1 Results of discontinued operation
In thousands of AUD
Revenue
Elimination of inter-segment revenue
External revenue
Expenses
Elimination of inter-segment expenses
External expenses
Results from discontinued operating activities
Income tax expense
Results from discontinued operating activities, net of tax
Gain on sale of discontinued operation
Income tax on gain on sale of discontinued operation
Profit from discontinued operations, net of tax
Basic earnings per share
Diluted earnings per share
2.2.2 Assets and liabilities of discontinued operations
In thousands of AUD
Assets
Cash and cash equivalents
Commission receivables
Contract assets
Property, plant and equipment
Goodwill and other intangible assets
Deferred Tax Asset
Liabilities
Commission and other payables
Trail Commission payable
Provisions
Deferred tax liabilities
2022
$
2021
$
266,225
337,405
266,225
337,405
258,682
324,276
258,682
7,543
2,446
5,097
88,089
(21,008)
72,178
62.31
61.02
324,276
13,129
4,096
9,033
-
-
9,033
9.33
9.22
2022
$
2021
$
8,309
3,317
571,978
1,037
5,437
131,734
721,812
4,207
535,509
719
141,597
682,032
3,750
39,252
473,339
1,475
5,777
137,076
660,699
25,527
441,196
923
142,646
610,292
Net assets from discontinued operating activities
39,780
50,377
37
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.2.3 Cash flows from / (used in) discontinued operation
In thousands of AUD
Net cash from/(used in) operating activities
Net cash from/(used in) investing activities
Provisions
Net cash from/(used in) financing activities
Net cash flows for the period
2022
$
5,611
215
(203)
(1,356)
4,267
2021
$
8,392
255
290
(5,198)
3,739
38
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.3
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
20211
$
2022
$
19,399
-
818
20,217
3,868
53
2,233
1,113
26
7,293
10,807
-
526
11,334
3,181
67
44
236
22
3,550
2022
$
17,851
-
817
18,668
3,868
24
2,900
1,113
26
7,931
Bank
2021
$
10,259
-
526
10,785
3,181
31
52
236
21
3,521
12,924
7,784
10,737
7,264
Weighted average interest rate - loans and advances
Weighted average interest rate - deposits
Spread
3.15%
0.95%
2.20%
3.00%
0.45%
2.55%
3.15%
0.95%
2.20%
3.00%
0.45%
2.55%
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
2,657
6,566
(11,335)
(2,112)
3,218
4,210
(4,732)
2,696
1,756
7,832
3,296
12,884
1,723
3,908
3,145
8,776
-
-
-
-
1,080
-
1,080
-
-
-
-
-
712
-
712
Net commission income/(expense)
(4,808)
4,108
(1,080)
(712)
Other income
Service fees and other residual income
Aggregation services fee income
Lending fees
Transaction fees
Sponsorship income
Dividends received
Other
Total other income
977
-
817
1,156
-
337
19
3,306
734
-
803
391
-
4
2
1,933
492
-
(37)
1,155
-
337
19
1,966
577
-
225
391
-
4,004
2
5,199
1 Comparative amounts for consolidated have been re-presented due to discontinued operations. See Notes 2.2
restated to conform to current year of presentation of profit / (loss) from continuing operations.
39
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.3
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.
Commission income and expense
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 note on Interest income and expense).
Other fees 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.
Other income, service fees 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.
Dividends
Revenue is recognised when the Company’s right to receive the payment is established, which is generally when
the dividend has been declared.
40
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.3
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 at the point of the loans being settled, net of any offset balance
(drawdown). Commissions’ clawbacks are recognised upon receipt where loans have been discharged within
contractual timeframes.
Trailing commissions
The Group receives trailing commissions from lenders on settled loans over the life of the loans based on the
individual loan balance outstanding. Contractually, where loans fall into delinquency, trailing commissions may be
reduced or held for such a period until loans are repaired to non-delinquent status. The Group also makes trailing
commission payments to authorised mortgage originators (brokers) based on the individual loan balance
outstanding.
On initial recognition, the Group recognises a contract asset under AASB 15 which represents the Group’s estimate
of the variable consideration to be received from lenders on the settled loans. The Group used the expected value
method of estimating the variable consideration which requires significant judgment. In estimating the variable
consideration the Group assesses observed historical data in determining the extent that it is highly probable that
a significant reversal in the amount of cumulative revenue recognised will not occur. In addition, a corresponding
expense and payable to the relevant brokers is also recognised, initially measured at fair value being the net present
value of expected future trailing commission payable to relevant brokers.
The value of trail commission receivable from lenders and the corresponding payable to brokers is determined by
using a discounted cash flow valuation to determine the expected value. These calculations require the use of
assumptions which are determined using a variety of inputs including analysis of historical information. Key
assumptions underlying the calculation include the average loan life, discount rate and percentage paid to brokers.
Refer to 4.4.1.
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 over time.
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.
41
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.4
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
2022
$
380
1,673
1,053
423
251
14,311
5,877
198
265
2,153
26,584
20211
$
415
1,883
1,869
531
48
10,449
893
213
179
1,189
17,669
2022
$
185
1,185
1,053
423
9,243
5,810
92
123
1,194
19,308
Bank
2021
$
215
1,304
1,576
531
-
4,562
871
87
135
893
10,174
1 Comparative amounts for consolidated have been re-presented due to discontinued operations. See Notes 2.2
restated to conform to current year of presentation of profit / (loss) from continuing operations.
Accounting policy - recognition and measurement
The Group recognises an expense when it has an obligation to settle for goods or services received.
2.5
Income tax
2.5.1 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) on continuing
operations recognised in Profit or Loss
Recognised in OCI
Financial instruments at fair value through OCI
Equity raising costs
Income tax expense/(benefit) on continuing
operations recognised in Other Comprehensive
Income
Tax reconciliation
Profit/(Loss) before tax
Prima facie income tax expense/(benefit) on
profit before income tax at 30% (2021:30%)
Adjust for tax effect of:
Non-assessable income
Non-deductible expenses
Prior period adjustments
Income tax expense/(benefit) on continuing
operations recognised in Profit or Loss
Consolidated
20211
$
20221
$
2022
$
Bank
2021
$
(6,029)
2,415
-
1,735
(7,304)
3,309
-
(1,013)
(3,614)
1,735
(3,995)
(1,013)
-
11
11
-
213
213
-
11
11
(16,005)
(5,108)
(8,321)
(4,801)
(1,533)
(2,496)
-
213
213
312
94
-
1,335
(148)
-
44
(246)
(2,631)
1,132
-
(1,200)
93
-
(3,614)
(1,735)
(3,995)
(1,013)
1 Tax expense from gain on sale and on discontinued operations is shown under note 2.2
42
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.5
Income tax (continued)
2.5.2 Deferred tax assets and liabilities
In thousands of AUD
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)
Consolidated
2021
$
2022
$
584
814
311
450
259
2,235
1,757
2
86
6,498
332
619
528
518
1,010
136,013
1,820
458
3,243
144,541
2022
$
522
670
133
450
121
-
1,561
-
86
3,543
5
228
-
5,360
5
100
6,309
1,779
5
8,326
(6,498)
(1,828)
151,712
787
992
158,851
(144,541)
(14,310)
1,779
-
1,884
(3,543)
1,659
Bank
2021
$
333
201
90
401
163
-
1,580
-
337
3,105
-
-
-
786
198
984
(984)
2,121
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 on continuing operations only except to the extent that it relates to
items recognised in other comprehensive income.
Income tax expense (revenue) relating to discontinued operations is excluded from above table and disclosed in
note 2.2
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 the Group
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.
43
NOTES TO THE FINANCIAL REPORT
2.
FINANCIAL PERFORMANCE (CONTINUED)
2.5
Income tax (continued)
2.5.2 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. The Group 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
Commercial 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
2022
$
972,090
13,166
327
452
986,035
5,895
991,930
(1,864)
990,066
Consolidated
2021
$
522,554
14,009
546
1,299
538,408
2,556
540,964
(1,025)
539,939
2022
$
972,090
13,166
327
452
986,035
6,127
992,162
(1,656)
990,506
Bank
2021
$
522,554
14,009
546
1,299
538,408
4,144
542,552
(1,025)
541,527
452
138
3,152
988,188
991,930
1,299
1,560
4,065
534,040
540,964
452
138
3,152
988,420
992,162
1,299
1,560
4,065
535,628
542,552
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.
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.
Refer to note 5.1.4 for further information regarding credit risk.
44
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
2022
$
1,864
1,864
1,025
839
-
1,864
Bank
2021 2022 2021
$
$
$
1,025
1,656
1,025
1,025
1,656
1,025
1,025
631
725
322
(22)
725
322
(22)
1,025
1,656
1,025
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 2022, the Company had nil
customers subject to COVID-19 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. During the period the level of loan restructures completed were not considered to
have a material effect on the provision.
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.
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).
45
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.2 Provision for credit losses (cont’d)
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. Expert judgement is used by the Group in the
selection and assigned risk weighting of key variables including collateral, LMI, ownership type, number of payments
ahead, counterparty industry and recovery costs. For loans secured by residential properties, LVR ratios are a key
parameter in determining LGD. These are used to determine an expected LGD for the three different economic
scenarios described below.
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.
PD represents the likelihood of a loan experiencing a default ever. As described above, arrears data from the last
24 months is used to calculate a probability measure determining the probability that an exposure will move to a
specific 30 day arrears buckets. From here a Roll Rate Matrix is created based on the average probabilities over the
historic data for each of the arrears buckets. This is then applied to the exposure amount as at 30 June 2022.
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.
Management overlay
An additional overlay has been placed on high debt to income customers. As interest rates were originally
forecast to rise in 2023/24, BNK identified customers with high Debt to Income ratios (being greater than 6) as
being more exposed to mortgage stress and higher probability of default. BNK has provisioned an additional 5bp
overlay on this cohort of balances to account for any future losses, while actual behaviour is observed and
modelled. This overlay will remain until further analysis demonstrates that higher DTI values do not correlate to
a higher probability of default or are incorporated into ECL modelling.
Forward looking information
To incorporate forward looking information into the ECL the Group leverages RBA forecasts to develop a Base,
Negative and Positive economic scenario covering four macroeconomic metrics (unemployment, GDP growth,
House Price Index and bankruptcies rates). These are used to determine a multiplier which is applied to PD and
LGD components of the model and a probability weighting is further applied to each scenario. Judgement is
used in determining the multiplier for each scenario as well as the weighting applied. The three economic
scenarios are described below.
46
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.2 Provision for credit losses (cont’d)
Scenarios and Sensitivity Analysis
Base Scenario:
Within this scenario BNK expects unemployment to remain below historical averages, GDP to perform within
government target rates, house prices to slightly reduce (specifically inner-city Melbourne and Sydney) and
bankruptcy rates to increase to historical averages.
Sensitivity analysis shows a 100% weighting to the base scenario would reduce the ECL provision from $1.86m
to $1.32m.
Negative Scenario:
Within this scenario BNK expects unemployment to increase to historical averages and GDP to fall but not into
recessionary levels. House prices are forecast to significantly reduce (specifically inner-city Melbourne and
Sydney) and bankruptcy rates to increase above long term historical averages in the negative scenario.
Sensitivity analysis shows a 100% weighting to the negative scenario would increase the ECL provision from
$1.86m to $3.85m.
Positive Scenario
Within this scenario BNK expects unemployment to remain at current levels, GDP to outperform historical
averages, house prices to remain flat and bankruptcy rates to remain flat.
Sensitivity analysis shows a 100% weighting to the positive scenario would decrease the ECL provision from
$1.86m to $0.77m.
Sensitivity analysis table
In thousands of AUD
Model Used
Baseline Scenario1
Negative Scenario1
Positive Scenario1
1 Scenarios using 100% weighting
30 June 2022
Model
Outcome
1,864
1,320
3,850
770
Variance to
actual
-
(544)
1,986
(550)
30 June 2021
Model
Outcome
1,025
754
2,565
451
Variance to
actual
-
(271)
1,540
(574)
47
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
Stage 1
Stage 2
Consolidated
Stage 3
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
Opening balance – 1 July 2021
Transfers to/(from)
Stage 1
Stage 2
Stage 3
New and increased provisions
Bad debts written off
Closing balance – 30 June 2022
Gross
exposure
267,520
13,844
-
-
255,383
-
536,747
Provision
205
396
-
-
224
-
825
Gross
exposure
1,481
-
1,412
-
-
-
2,893
536,747
825
2,893
-
-
-
361,649
-
898,396
-
-
-
703
-
1,528
-
307
-
-
-
3,200
Provision
37
-
58
-
-
-
95
95
-
20
-
-
-
115
Gross
exposure
1,441
-
-
123
-
(240)
1,324
1,324
-
-
86
-
-
1,410
Provision
87
-
-
40
-
(22)
105
105
-
-
71
-
-
176
1 Management overlay on exposures with a DTI >6
48
Management overlay
Provision
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
396
(396)
-
-
-
-
-
-
-
540,964
1,025
-
88,9241
-
-
-
88,924
-
45
-
-
-
45
-
89,231
86
361,649
-
991,930
-
65
71
703
-
1,864
3. LOANS AND ADVANCES (CONTINUED)
3.2 Provision for credit losses (continued)
Reconciliation of expected credit loss provision
In thousands of AUD
Stage 1
Stage 2
Bank
Stage 3
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
Opening balance – 1 July 2021
Transfers to/(from)
Stage 1
Stage 2
Stage 3
New and increased provisions
Bad debts written off
Closing balance – 30 June 2022
Gross
exposure
269,165
13,844
-
-
255,328
-
538,337
Provision
205
396
-
-
224
-
825
Gross
exposure
1,481
-
1,412
-
-
-
2,893
538,337
825
2,893
-
-
-
152,234
-
690,571
-
-
-
495
-
1,320
-
307
-
-
-
3,200
Provision
37
-
58
-
-
-
95
95
-
20
-
-
-
115
Gross
exposure
1,441
-
-
123
-
(240)
1,324
1,324
-
-
86
-
-
1,410
Provision
87
-
-
40
-
(22)
105
105
-
-
71
-
-
176
1 Management overlay on exposures with a DTI >6
49
Management overlay
Provision
Gross
exposure
13,844
(13,844)
-
-
-
-
-
Total
Gross
exposure
285,931
-
1,412
123
255,328
(240)
542,554
Provision
725
-
58
40
224
(22)
1,025
396
(396)
-
-
-
-
-
-
-
542,554
1,025
-
88,9241
-
-
-
88,924
-
45
-
-
-
45
-
89,231
86
152,234
-
784,105
-
65
71
495
-
1,656
NOTES TO THE FINANCIAL REPORT
3. LOANS AND ADVANCES
3.3 Derecognition of loans and advances
The Company was 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.
Following the implementation of the Group’s prime residential lending warehouse in 2021, the RASA was placed into
run off.
During 2022, other than loans sold into the Bullion Trust, the remaining loans were purchased back by the Company
and placed on balance sheet with the RASA facility closed.
The balance of loans serviced by the Group and Company at reporting date:
In thousands of AUD
Owner occupier loans
Investment loans
2022
$
-
-
-
2021
$
18,779
18,017
36,796
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.
50
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
2022
$
140,027
Consolidated
2021
$
47,285
2022
$
139,627
Bank
2021
$
41,591
Total cash and cash equivalents
140,027
47,285
139,627
41,591
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
Equity settled share-based payment
transactions
Gain on sale of discontinued operation, net of
tax
Movement in assets and liabilities
Loans and receivables
Investments
Deposits
Other assets
Deferred tax assets
Deferred tax liabilities
Current tax payable
Payables
Provisions
Net cash flow from operating activities
Consolidated
2021
$
2022
$
2022
$
Bank
2021
$
59,787
5,659
75,600
1,325
380
(462,005)
436,464
843
(641)
2,639
2,301
(118,508)
110,428
1,317
370
627
185
-
-
635
144
2,639
215
-
-
1,264
80
627
(72,178)
-
(79,925)
-
(447,631)
(109,810)
328,942
2,107
(6,498)
(5,983)
17,424
14,343
641
(241,176)
(254,866)
(85,494)
289,856
(3,641)
-
2,238
-
6,634
370
(42,709)
(447,626)
(110,147)
328,942
2,555
(1,422)
1,884
(7,121)
(4,111)
(144)
(237,912)
(253,679)
(85,494)
289,856
29
451
-
-
(2,399)
(80)
(47,805)
51
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)
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
2021
$
2022
$
2022
$
Bank
2021
$
102,528
164,586
-
8,820
148,006
142
102,528
164,586
-
8,820
148,006
142
267,114
156,968
267,114
156,968
55,046
39,862
7,620
102,528
51,443
54,758
36,312
22,073
164,586
-
1,200
7,620
8,820
-
-
122,326
25,680
148,006
55,046
39,862
7,620
102,528
51,443
54,758
36,312
22,073
164,586
-
1,200
7,620
8,820
-
-
122,326
25,680
148,006
(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. This
shareholding was sold in FY22.
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.
52
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.
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
2022
$
690,494
274,095
964,589
Consolidated
2021
$
397,535
238,112
635,647
690,495
143,146
126,741
4,207
964,589
397,535
105,445
127,997
4,670
635,647
2022
$
690,494
274,095
964,589
690,495
143,146
126,741
4,207
964,589
Bank
2021
$
397,535
238,112
635,647
397,535
105,445
127,997
4,670
635,647
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
Prepayments
Other debtors
Less provision for impairment
Total commissions and other receivables
53
Consolidated
2021
$
19,418
373
817
1,915
3,168
(84)
25,607
2022
$
530
3,253
-
1,230
3,897
(84)
8,826
2022
$
-
-
-
3,432
3,911
(84)
7,259
Bank
2021
$
-
-
-
1,703
5,742
(84)
7,361
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 trail commission payable
In thousands of AUD
Contract assets
Net present value of future trail commission
receivable
Trail commission payable
Net present value of future trail commission
payable
Consolidated
2021
$
19,863
3,368
4,361
27,592
2022
$
262
866
5,931
7,059
Consolidated
2021
$
2022
$
21,032
505,706
7,453
453,381
2022
$
-
405
3,652
4,057
2022
$
-
-
Bank
2021
$
-
543
3,122
3,665
Bank
2021
$
-
-
Accounting policy - Recognition and measurement
The Group receives trailing commissions from lenders on settled loans over the life of the loans based on the
individual loan balance outstanding. Contractually, where loans fall into delinquency, trailing commissions may be
reduced or held for such a period until loans are repaired to non-delinquent status. The Group also makes trailing
commission payments to authorised mortgage originators (brokers) based on the individual loan balance
outstanding.
On initial recognition, the Group recognises a contract asset under AASB 15 which represents the Group’s estimate
of the variable consideration to be received from lenders on the settled loans. The Group used the expected value
method of estimating the variable consideration which requires significant judgment. In addition, a corresponding
expense and payable to the relevant brokers is also recognised, initially measured at fair value being the net present
value of expected future trailing commission payable to relevant brokers.
The value of trail commission receivable from lenders and the corresponding payable to brokers is determined by
using a discounted cash flow valuation to determine the expected value. These calculations require the use of
assumptions which are determined using a variety of inputs including analysis of historical information. Key
assumptions underlying the calculation include the average loan life, discount rate and percentage paid to brokers.
The key assumptions underlying the estimate 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
2022
Between 1.5% and 6.5%
Between 5% and 93%
-
5.6 years
5.6 years
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
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. The terms and conditions for
creditors and other liabilities are payable between 7 and 30 days.
54
NOTES TO THE FINANCIAL REPORT
4. LIQUIDITY AND FUNDING
4.5 Other financial liabilities
In thousands of AUD
Term funding facility
Securitisation liabilities
Subordinated debt
Total borrowings
2022
$
13,797
208,155
23,567
245,519
Consolidated
2021
$
13,772
37,846
9,640
61,258
2022
$
13,797
207,826
23,567
245,190
Bank
2021
$
13,772
38,234
9,640
61,646
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 comparable 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 comparable 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
2022
$
207,826
42,174
250,000
Consolidated
2021
$
37,846
212,154
250,000
2022
$
207,826
42,174
250,000
Bank
2021
$
37,846
212,154
250,000
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 12 May 2031 and an
optional early redemption date of 1 August 2026, subject to APRA’s approval.
On 30 September 2021, the Group issued a further tranche of subordinated floating rate notes totaling $14
million. The notes have the same terms and conditions as the first tranche with a maturity date of 30 September
2031 and an optional early redemption date of 30 September 2026, subject to APRA’s approval.
55
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.
56
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.
-
57
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
2022
Financial assets
Cash and cash on hand
Due from other financial institutions
Investment securities
Loans and advances
Commission and other receivables
Securitisation deposits
Other financial assets
Total financial assets
Weighted average
Effective interest
Rate (%)
-
0.45
2.08
3.15
-
-
-
Financial liabilities
Deposits
Lease liabilities
Commission and other payables
Securitisation liabilities
Subordinated notes
Term finance Facility
Total financial liabilities
Net financial assets/(liabilities)
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
Financial liabilities
Deposits
Lease liabilities
Commission and other payables
Securitisation liabilities
Subordinated notes
Term finance Facility
Total financial liabilities
Net financial assets/(liabilities)
0.95
5.00
-
2.71
5.90
0.19
-
0.51
0.34
3.00
-
5.00
-
-
0.45
5.00
-
1.93
5.44
0.19
Floating
interest
rate
-
-
7,042
666,201
-
-
-
673,243
690,494
-
-
-
-
-
690,494
(17,251)
-
-
7,070
445,912
-
-
-
-
452,982
397,535
-
-
-
-
-
397,535
55,447
Consolidated
1 year or less
1 to 2 years
Fixed interest rate
2 to 3 years
3 to 5 years
> 5 years
-
102,528
106,201
39,463
-
-
-
248,192
270,571
-
-
208,155
23,567
-
502,293
(254,101)
-
-
7,512
178,222
-
-
-
185,734
2,147
-
-
-
-
-
2,147
183,587
-
-
5,613
101,349
-
-
-
106,962
371
866
-
-
-
13,797
15,034
91,928
-
-
16,145
800
-
-
-
16,945
1,006
-
-
-
-
-
1,006
15,939
-
8,820
-
2,195
-
-
-
-
11,015
234,383
-
-
37,846
9,640
-
281,869
(270,854)
-
-
88,548
34,036
-
817
-
-
123,401
2,044
-
-
-
-
-
2,044
121,357
58
-
-
7,850
55,018
-
-
-
-
62,868
249
3,368
-
-
-
13,772
17,389
45,479
-
-
18,857
1,247
-
-
-
-
20,104
1,389
-
-
-
-
-
1,389
18,715
-
-
22,073
-
-
-
-
22,073
-
-
-
-
-
-
-
22,073
-
-
25,681
-
-
-
-
-
25,681
47
-
-
-
-
-
47
25,634
Non-
interest
bearing
140,027
-
-
-
24,928
3,253
-
168,208
-
-
13,646
-
-
-
13,646
154,562
47,285
-
-
-
528,292
-
373
142
576,092
-
-
477,606
-
-
-
477,606
98,486
Amount per
Statement of
Financial Position
140,027
102,528
164,586
986,035
24,928
3,253
-
1,421,357
964,589
866
13,646
208,155
23,567
13,797
1,224,620
196,737
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
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
2022
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
Weighted average
Effective interest
Rate (%)
-
0.45
2.08
3.15
-
-
Financial liabilities
Deposits
Lease liabilities
Creditors and other payables
Securitisation liabilities
Subordinated notes
Term Finance Facility
Total financial liabilities
Net financial assets/(liabilities)
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)
0.95
5.00
-
2.71
5.90
0.19
-
0.51
0.34
3.00
-
-
0.45
5.00
-
1.93
5.44
0.19
Floating
interest
rate
-
-
7,042
666,201
-
-
673,243
690,494
-
-
-
-
-
690,494
(17,251)
-
-
7,070
445,912
-
-
452,982
397,535
-
-
-
-
-
397,535
57,447
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
-
102,528
106,201
39,463
-
-
248,192
270,571
-
-
207,825
23,567
-
501,962
(253,770)
-
8,820
-
2,195
-
-
11,015
234,383
-
-
38,234
9,640
-
282,257
(271,242)
-
-
7,512
178,222
-
-
185,734
2,147
-
-
-
-
-
2,147
183,587
-
-
88,548
34,036
-
-
122,584
2,044
-
-
-
-
-
2,044
120,540
59
-
-
5,613
101,349
-
-
106,962
371
405
-
-
-
13,797
14,574
92,388
-
-
7,850
55,018
-
-
62,868
249
543
-
-
-
13,772
14,564
49,304
-
-
16,145
800
-
-
16,945
1,006
-
-
-
-
-
1,006
15,939
-
-
18,857
1,247
-
-
20,104
1,389
-
-
-
-
-
1,389
18,715
-
-
22,073
-
-
-
22,073
-
-
-
-
-
-
-
22,073
-
-
25,681
-
-
-
25,681
47
-
-
-
-
-
47
25,634
139,627
-
-
-
3,911
-
143,538
-
-
3,652
-
-
-
3,652
139,886
41,591
-
-
-
5,743
142
47,476
-
-
3,122
-
-
-
3,122
44,354
Amount per
Statement of
Financial Position
139,627
102,528
164,586
986,035
3,911
-
1,396,687
964,589
405
3,652
207,825
23,567
13,797
1,213,835
182,852
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
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 +/- 50 basis points
(2021: +/- 25 basis points) from the year-end rates, with all other variables held constant.
Judgement of reasonably possible
movements(amounts in thousands of
AUD):
100 basis points increase (2021: 25bps)
100 basis points decrease (2021: 25bps)
Consolidated
higher (lower)
Bank
higher (lower)
2022
208
(208)
2021
303
(303)
2022
208
(208)
2021
303
(303)
During the current financial year the methodology of assessment has changed with repricing over the course of 3
years. Comparatives have not been restated.
5.1.3 Market risk - Equity investments
The Group holds no equity investments at 30 June 2022.
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% (2021: +/- 10%) from
the year-end rates, with all other variables held constant.
Judgement of reasonably possible
movements (amounts in thousands of
AUD):
10% increase (2021:10%)
10% decrease (2021: 10%)
Consolidated
Impact on equity
Bank
Impact on equity
2022
-
-
2021
10
(10)
2022
-
-
2021
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.
60
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)
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
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 2022, the Group repossessed one residential property with a fair value of $220,000 which was
sufficient to payout the loan balance and expenses in the amount of $179,639 (2021: one property with a fair value of
$240,000).
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
2022
$
651,087
321,081
13,368
223
26
250
986,035
Consolidated
2021
$
351,443
171,217
14,206
371
68
1,103
538,408
2022
$
651,087
321,081
13,368
223
26
250
986,035
Bank
2021
$
351,443
171,217
14,206
371
68
1,103
538,408
As at 30 June 2022 there were no borrowers (2021: nil) who individually have facilities which represent 10% or more of
the regulatory capital base.
i. Credit quality – loans and advances
The credit quality of the Group’s loans and advances 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
2021
$
2022
$
2,994
697
283
3,974
-
-
2,860
1,192
164
4,216
-
-
2022
$
2,994
697
283
3,974
-
-
Bank
2021
$
2,860
1,192
164
4,216
-
-
982,061
986,035
534,192
538,408
982,061
986,035
534,192
538,408
61
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)
ii. Collateral – loans and advances
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
2022
2021
Principal type of collateral held
-
-
100
53
98
100
-
-
100
91
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
The following table shows the Group’s Loan to Value Ratio (LVR) on its residential mortgages. Valuation amounts
used in these calculations are based on the security value taken at the time the loans were originated or subsequent
revaluation.
In thousands of AUD
Loan To Value Ratio
0 – 60.0%
60.01 – 80.0%
80.01 – 90.0%
>90.01%
Consolidated
2021
$
2022
$
335,844
505,724
104,509
26,091
972,168
162,293
278,709
65,384
16,275
522,661
2022
$
335,844
505,724
104,509
26,091
972,168
Bank
2021
$
162,293
278,709
65,384
16,275
522,661
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
Consolidated
2021
$
2022
$
-
17,620
-
84,908
102,528
-
8,820
-
-
8,820
2022
$
-
17,620
-
84,908
102,528
Bank
2021
$
-
8,820
-
-
8,820
62
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)
Investment securities
In thousands of AUD
Long Term Credit Rating
1 (AAA to AA-)*
2 (A+ to A-)*
Unrated
* 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
2021
$
2022
$
105,088
53,465
6,033
164,586
148,006
-
148,006
2022
$
105,088
53,465
6,033
164,586
Bank
2021
$
148,006
-
148,006
Consolidated
2021
$
2022
$
5
699
8,444
12,414
21,562
327,016
55,579
37,130
105,399
525,124
2022
$
3,911
3,911
Bank
2021
$
-
-
-
5,742
5,742
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-.
Accounting policy - Recognition and measurement
As set out in note 3.1, loans are initially reviewed when they reach 30 days in arrears, and individually assessed for
recoverability. They are then 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.
There have been no instances of loan restructures during this reporting period.
63
NOTES TO THE FINANCIAL REPORT
5.1 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.4
Credit risk (continued)
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.
The Group’s policy is to apply a minimum level of 21% (2021: 18%) 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 21% (2021: 18%); the Board has determined a target liquidity trading range of 18% - 25%
in normal market situations.
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 2022 there were no deposits greater than 10% of total liabilities
(2021: 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
2022
$
363,833
1,069,753
34.0%
Consolidated
2021
$
205,637
622,706
33.1%
2022
$
363,433
1,066,655
34.1%
Bank
2021
$
199,372
601,424
33.0%
64
NOTES TO THE FINANCIAL REPORT
5. FINANCIAL RISK AND CAPITAL MANAGEMENT
5.1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
5.1.6 Operational risk
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
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.
65
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
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. At the reporting date, the Group does not hold any Level 1 financial assets.
66
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 financial assets
Total financial assets
Financial liabilities
Deposits
Accrued commission payable
Other financial liabilities
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
Creditors and other payables
Total financial liabilities
Consolidated
Fair value
Carrying amount
2022
$
2021
$
2022
$
2021
$
140,027
530
102,528
158,477
1,021,766
-
1,423,328
47,285
19,418
8,820
147,236
549,658
142
772,559
47,285
140,027
19,418
530
8,820
102,528
164,586
148,006
990,066 539,939
142
763,610
-
1,397,737
965,437
262
245,519
5,931
1,217,149
635,647
19,863
61,258
4,361
721,129
964,589 635,647
19,863
61,258
4,361
721,129
262
245,519
5,931
1,216,301
Bank
139,627
102,528
158,477
1,018,355
3,911
-
1,422,898
41,591
8,820
147,264
551,246
5,743
142
754,806
139,627
102,528
164,586
990,506
3,911
-
41,591
8,820
148,005
541,527
5,743
142
1,401,158 745,828
965,437
245,190
3,652
1,214,279
635,647
61,646
3,266
700,559
964,589 635,647
61,646
245,190
3,266
3,652
1,213,431 700,559
67
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 held at fair value. This unlisted equity instrument
was sold during current reporting period.
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.
68
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 15.0% capital (2021: 17.5%).
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)
2022
2021
162,362
25,773
188,135
42,126
9,999
52,125
Bank
(Level 1)
2022
$
157,943
25,566
183,509
2021
$
40,861
9,999
50,860
396,023 236,706 396,843 236,825
21.48%
46.24%
22.02%
47.51%
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
5.2.4
Bank
2022
$
122,275
2021
$
120,035
Number of
shares
114,187,400
-
4,015,388
118,202,738
-
118,202,738
2022
$
120,035
-
2,240
122,275
(3,332)
118,943
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
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.
69
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
2022
$
3,307
36
(11)
3,332
Bank
2021
$
2,754
766
(213)
3,307
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
2022
$
(103)
-
(103)
2021
$
(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 7.5.2. At 30 June 2022, 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.
70
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
Discontinuing
operations
Continuing
operations
2022
$
2021
$
2022
$
2021
$
Consolidated
2022
$
Net profit/(loss) attributable to ordinary
share holders
72,178
9,033
(12,391)
(3,374)
59,787
Basic earnings per share (cents)
Diluted earnings per share (cents)
62.31
61.02
9.33
9.22
(10.70)
(10.48)
(3.49)
(3.44)
51.61
50.55
2021
$
5,659
5.85
5.77
Weighted average number of ordinary
shares
Issued Share Capital 1 July
Effect of performance rights exercised
Weighted average ordinary shares for
basic earnings per share 30 June
Effect of performance rights exercised
Weighted average ordinary shares for
diluted earnings per share 30 June
2022
2021
114,187,400
1,656,622
94,270,399
2,505,611
115,844,022
96,776,010
2,438,234
1,244,267
118,282,256
98,020,277
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.
After the balance sheet date the following dividends were proposed by the board of directors. The dividends have
not been recognised as liabilities and there are no tax consequences. (2021: 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% (2021: 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% (2021: 30%)
71
2022
$
2,546
17,408
144
20,098
2021
$
2,544
-
2
2,546
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
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
Bullion Trust No.1
Segment
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Aggregation
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Bank
2022
$
19,896
2021
$
61,925
Ownership
2022
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
2021
100%
100%
100%
100%
100%
100%
100%
100%
100%
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 comparable
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.
72
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
2021
$
2022
$
837
(802)
35
44
(29)
15
171
(165)
6
1,581
(825)
756
1,145
(926)
219
44
(25)
19
539
(426)
113
4,191
(1,896)
2,295
2022
$
66
(45)
21
44
(29)
15
145
(140)
5
761
(428)
333
Bank
2021
$
64
(33)
31
44
(25)
19
145
(124)
21
761
(294)
467
Total property, plant and equipment
812
2,646
374
538
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 2021
Additions
Disposals
Depreciation
Closing written down value at 30 June 2022
In thousands of AUD
Opening written down value at 1 July 2021
Additions
Disposals
Depreciation
Closing written down value at 30 June 2022
Computer
equip &
IT hardware
$
113
Total
$
2,646
(90)
(17)
6
(1,472)
(362)
812
Computer
equip &
IT hardware
$
21
-
-
(16)
5
Total
$
538
3
-
(167)
374
Consolidated
Motor
vehicles
$
19
-
(4)
15
Bank
Motor
vehicles
$
19
-
-
(4)
15
Right
of Use
Asset
$
2,295
(1,240)
(299)
756
Office
Equip &
L/H imp
$
219
(142)
(42)
35
Right
of Use
Asset
$
Office
Equip &
L/H imp
$
467
-
-
(134)
333
31
3
-
(13)
21
73
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 re-measurements 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
3-7 years
3-5 years
8 years
2-5 years
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.
74
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
2021
$
19,172
2022
$
7,100
2022
$
-
Bank
2021
$
-
171
16,565
170
170
-
-
-
-
-
-
176
(40)
136
8,704
(3,116)
5,588
4,075
(1,865)
2,210
176
(22)
154
-
-
-
-
-
-
176
(40)
136
306
-
-
-
-
-
176
(22)
154
324
Total goodwill and other intangibles
7,407
43,689
Consolidated
Software
Broker
relationships
Other
Intangible
Total
$
6,296
571
(345)
(934)
5,588
-
(5,588)
-
-
Bank
Software
$
-
-
-
-
-
-
-
$
$
2,407
-
-
(197)
2,210
-
(2,210)
-
-
$
44,432
755
(345)
(1,153)
43,689
-
(36,264)
(18)
7,407
-
176
-
(22)
154
-
-
(18)
136
Broker
relationships
Other
Intangible
Total
$
-
-
-
-
-
-
-
$
-
176
(22)
154
-
(18)
136
$
162
184
(22)
324
-
(18)
306
Reconciliation of intangible assets
In thousands of AUD
Goodwill
Balance at 1 July 2020
Additions
Disposals
Amortisation
Balance at 1 July 2021
Additions
Disposals
Amortisation
Closing balance at 30 June 2022
Reconciliation of intangible assets
In thousands of AUD
$
19,172
-
-
-
19,172
-
(12,072)
-
7,100
Balance at 1 July 2020
Additions
Amortisation
Balance at 1 July 2021
Additions
Amortisation
Closing balance at 30 June 2022
Brand
names &
trademarks
$
16,557
8
-
-
16,565
-
(16,394)
-
171
Brand
names &
trademarks
$
162
8
-
170
-
-
170
75
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.2 Goodwill and other intangible assets (continued)
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.
Costs incurred in acquiring software or developing software, that is not cloud based Software as a Service (SaaS)
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:
- Other
10 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
Banking
Total goodwill
2022
$
-
7,100
7,100
2021
$
12,000
7,172
19,172
With Aggregation leaving the Group during 2022, the Group now only has a single CGU remaining for Bank.
Bank CGU was tested for impairment using the value in use approach, by discounting future cash flows (5 years)
estimated from the continuing use of the CGU. The recoverable amount for the 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 the Group’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 net income growth rates
Budgeted cost rates
2022
12%
2.5%
10-75%
2–11%
2021
11%
2.5%
8-37%
2-10%
76
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 from companies considered comparable over 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 the CGU taking into account past experience and adjustments
regarding expectations of future outcomes including economic conditions.
No impairment loss has been recognised for the CGU at 30 June 2022. The CGU is generating headroom of $79m.
Management has estimated that changes in two key assumptions could cause the carrying amount to exceed the
recoverable amount, these 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 (reduce the headroom to nil).
Input
Discount rates (post-tax)
Average budgeted revenue growth
Banking
9.5%
(12.5%)
7.3 Provisions
In thousands of AUD
Note
Provision for annual leave
Provision for long service leave
Total provisions
Consolidated
2021
$
1,249
429
1,678
2022
$
749
288
1,037
2022
$
429
15
444
Bank
2021
$
295
4
299
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
Consolidated ($)
Interest
Future
minimum
lease
payments
Present
value of
lease
payments
Future
minimum
lease
payments
Bank ($)
Interest
Less than one year
Between one and five years
358
582
37
22
321
560
168
264
17
10
Present
value of
lease
payments
151
254
77
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.
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.
78
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
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
2022
$
3,127
193
1,241
-
4,561
2021
$
3,097
200
136
100
3,533
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
a) 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 each 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 and second tranche, 116,669 have been exercised whilst 50,001
have been forfeited. For the remaining tranche, 33,332 were vested and exercised on 7 February (due to the
Finsure Sale), 33,332 were forfeited and 16,666 remain to be exercised on 30 September 2022.
b) 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”). Of these, 50% of the performance rights vested
immediately, with the remaining 50% deferred to 31 July 2024 subject to continued service. Of the remaining
performance rights, 65,000 have been forfeited, 90,000 exercised (Finsure sale) and 40,000 remain to be vested.
c) 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. These performance rights were exercised
at the time of the Finsure Sale in February 2022.
d) On 18 August 2021, 4,950,000 performance rights were granted to executives under the Transformational Long
Term Incentive Plan (TLTIP). The vesting conditions for the rights provided for 60% vesting in 3 years with the
remainder vesting in 4 years. The sale of Finsure saw the vesting conditions of these performance rights
accelerated by the Board with 1,790,748 rights terminated, 1,134,572 rights forfeited, and 2,024,680 exercised.
Of the rights exercised between 10% and 19% remain in escrow until 30 June 2025.
e) On 1 December 2021, 1,200,000 performance rights were awarded to Mr John Kolenda as part of the TLTIP.
These performance rights vesting conditions were accelerated on the sale of Finsure, with 576,000 terminated
and 624,000 exercised of which 21% are held in Escrow until 30 June 2025.
f) On 1 September 2021, 287,500 performance rights were awarded to 6 employees in recognition of their
performance for the year ended 30 June 2021 (‘FY21 Bonus”). Of these, 194,885 performance rights vested
immediately, with the remaining rights, deferred to 1 September 2025. The sale of Finsure saw 38,440 of
performance rights exercised in February 2022, whilst 28,550 have been forfeited, 25,625 remain vested to 1
September 2025.
79
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 2022 in relation to the BNKEIP performance rights was
$21,085 (2021: $127,818).
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
options vesting conditions are limited to service. The amount recognised in profit and loss for the year ended 30
June 2022 in relation to these performance rights was $0 (2021:$148).
c) 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 options vesting conditions are limited to service. The amount recognised in profit and loss for
the year ended 30 June 2022 in relation to these performance rights was $130 (2021:$ 47,728).
d) 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 options vesting conditions are limited to service. The amount recognised in profit and loss for
the year ended 30 June 2022 in relation to these performance rights was $16,879 (2021: $46,783)
e) 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 options vesting conditions are limited to service. With the
majority of the remaining shares, after forfeit vesting on the sale of Finsure, the balance of the fair value of the
grant has been recognised in profit and loss for the year ended 30 June 2022 in relation to these performance
rights being $97,518 (2021: $75,482).
f)
The fair value of the FY21 Transformational LTI (TLTIP) of $3,213,375 has been measured using a combination of
the Monte Carlo simulation and Binomial Tree. The inputs used in the measurement of the fair values at grant
date of the TLTIP performance rights are summarised below.
The key terms and conditions related to the grants under the TLTIP 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 TLTIP 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)
$0.275 to $0.770
$0.77
Nil
40.0%
Nil
0.18%
80
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.5.2 Share-Based Payments (continued)
With the accelerated vesting conditions of all LTIs following the sale of Finsure, $592,814 of rights due to employees
leaving the group were forfeited, $1,236,626 fair value of rights were terminated, and $1,383,935 of rights were
exercised. The terminated and exercised elements of these rights were fully recognised in the profit and loss for
the period ended 30 June 2022, being $2,620,561.
g)
The fair value of the FY21 Bonus performance rights (1 September 2021) of $230,000 was determined with reference
to the share price on the grant date of $0.80. The options vesting conditions are limited to service. For the rights
that vested immediately, and the majority of the remaining shares, after forfeit vesting on the sale of Finsure, the
balance remaining has been recognised in profit and loss for the year ended 30 June 2022 being $207,160.
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.
At the reporting date all options remain unexercised.
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.
81
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
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
2022
$
26,239
2021
$
3,644
45
478,7841
19,3451
-
483,768
33,464
1 Where applicable, data only up to 7 February 2022, the date of KMP leaving the group.
7.5.4 Transactions with other related parties
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.
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
1 Period covers 1 July 2021 to 7 February 2022.
2022
$
281,9961
2021
$
446,457
During the period 1 July 2021 to 7 February 2022, the Group paid $27,500 to Shadow Charters Pty Ltd, a related
entity of Mr John Kolenda for boat charter services (30 June 2021: $42,175).
82
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
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
2022
$
510,185
168,686
678,871
2021
$
335,716
111,000
446,716
28,463
28,463
25,047
25,047
707,334
471,763
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 $10,000,000 (2021: $1,200,000) with CUSCAL Ltd which is secured by a cash
deposit. As at 30 June 2022, the entire facility was unused (2021: $nil).
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
2022
$
-
2021
$
-
30,496
29,397
13,861
22,990
256
60,149
113
36,964
32
64
297
637
-
1,030
123
252
1,082
2,253
-
3,710
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.
As part of the Finsure sale, the share sale agreement (SSA) contains certain warranties and indemnities. The SSA
contains warranties covering title, authority, the conduct of business, and a range of other matters. The warranties are
supported by a general indemnity and a tax indemnity which are capped and time bound. BNK considers the warranties
and the indemnities were entered into on market standard terms for a transaction such as the Finsure Transaction. The
Group considers the possibility of any outflow to be remote and therefore no provision has been recognised in relation
to the Finsure sale warranties.
83
NOTES TO THE FINANCIAL REPORT
7. OTHER NOTES
7.8
Commitments and contingencies (continued)
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.
7.9
Events subsequent to balance date
On 26 July 2022 a fully-franked special dividend of 34 cents per share, for a total distribution to shareholders of
approximately $40 million, was paid.
BNK is proposing to distribute $60 million in proceeds from the sale of Finsure to its shareholders, by way of the
above noted special dividend ($40m) and a capital return. Further information in relation to the planned capital
return of approximately $20 million will be announced once regulatory approvals are obtained.
Dividend Declared after end of year
After the balance sheet date the following dividends were proposed and paid by the board of directors. The dividends
have not been recognised as liabilities and there are no tax consequences.
In thousands of AUD
Special
Total
Cents per
share
$
Date of
Payment
0.34
40,359
26 July 2022
40,359
The financial effect of these dividends have not been brought to account in the consolidated financial statements
for the year ended 30 June 2022 and will be recognised in subsequent financial reports.
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.
8. ACCOUNTING POLICIES AND NEW STANDARDS
8.1
Change in accounting policy
There were no new material accounting standards that have significantly impacted the Group during the reporting
period.
84
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 2022 are in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of its financial position as at 30 June 2022 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 2022.
On behalf of the Board
Don Koch
Chairman
26 August 2022
85
Independent Auditor’s Report
To the shareholders of BNK Banking Corporation Ltd
Report on the audits of the Financial Reports
Opinions
We have audited the consolidated Financial
Report of BNK Banking Corporation Ltd (the
Group Financial Report). We have also audited
the Financial Report of BNK Banking Corporation
Ltd (the Company Financial Report).
In our opinion, each of the accompanying Group
Financial Report and the Company Financial
Report are in accordance with the Corporations
Act 2001, including:
•
•
giving a true and fair view of the Group’s
and Company’s financial position as at 30
June 2022 and of their financial performance
for the year ended on that date; and
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Basis for opinions
The respective Financial Reports of the Group and the
Company comprise:
• Statements of financial position as at 30 June 2022
• 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.
The Group consists of BNK Banking Corporation Ltd the
Company and the entities it controlled at the year-end
or from time to time during the financial year.
We conducted our audits 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 opinions.
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 audits of
the Financial Reports in Australia. We have fulfilled our other ethical responsibilities in accordance with these
requirements
86
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
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
• 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 respective audits of the Financial Reports of the
current period.
These matters were addressed in the context of our
audits of each of the Financial Reports as a whole, and
in forming our opinions thereon, and we do not provide
a separate opinion on these matters.
Loans and Advances – Provision for credit losses $1.8 million – Group and Company
Refer to Note 3.2 to the Group Financial Report and Company Financial Report
The key audit matter
How the matter was addressed in our audit
The provision for credit losses relating to loans and
advances held at amortised costs is a key audit matter
due to the:
•
•
significance of the loans and advances balances;
and
the degree of complexity and judgement applied
by the Group and Company in determining the
expected credit loss (ECL) provisions, including
post-model adjustments. 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 reflecting potential future economic
events. This involves significant judgement
applied by the Group and Company and required
by us in challenging these assumptions.
We exercised judgement to assess the ECL model’s
application of the requirements of AASB 9 Financial
Instruments. This includes:
•
•
•
the Group and Company’s definition in
determining what represents a significant increase
in credit risk;
the method used to estimate the probability of
default, loss given default and exposure at default;
and
judgement around the impact of current economic
Working with our credit specialists, our procedures
included:
•
•
•
Assessed the appropriateness of the Group
and Company’s accounting policies against
the requirements of the accounting standard,
including the Group’s definition of what
represents a significant increase in credit risk.
Evaluated the Group and Company’s
processes and tested key controls such as:
o Review and approval by management
of the reconciliation of historical loan
portfolio data used in the ECL model
to the gross balances recorded within
the general ledger as well as the
underlying core banking system;
o
The assessment and approval by
management of the ECL model and
key assumptions used by the Group
and Company.
Assessed the methodology used to estimate
the probability of default, loss given default
and exposure at default used in the ECL
model, including relevant adjustments such as
the impact of increasing interest rates and
inflation on forward looking information,
against the requirements in the accounting
standards and our understanding of industry
87
conditions including increasing interest rates and
inflation on forward looking information.
We involved credit specialists to supplement our
senior audit team members in assessing this key audit
matter.
•
•
•
•
•
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 as well as the assumptions for post-
model adjustments. We did this by comparing
the key assumptions to our understanding of
the related loans and advances portfolio as
well as the industry and markets the Group
and Company operate in;
Compared the output of the ECL model and
the post-model adjustments to the ECL
provision recorded in the financial reports; and
Assessed the Group and Company’s
disclosures in the financial reports using our
understanding obtained from our testing and
against the requirements of the accounting
standards.
Carrying Value of Goodwill $7.1 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 for impairment, required by AASB 136
Impairment of Assets, given the extent of judgement
involved and the size of the balance (being 0.5% of
total assets). We focused on the Group’s
determination of the identified Cash Generating Units
(“CGUs”) as well as the key assumptions the Group
applied in their value in use (“VIU”) model, including:
•
•
•
Forecast cash flows, including growth rate;
Terminal value growth rate; and
Discount rate used.
These assumptions are complicated in nature and vary
according to the conditions and environment the
Group is subject to from time to time. The
assumptions are based on historical performance and
Our procedures included:
•
Evaluated the Group’s identification of the
CGUs against the requirements of the
accounting standards. We also compared the
Group’s assessment against our
understanding of the operations of the
Group’s business and how independent cash
flows were generated;
• Worked with our valuation specialists to:
consider the appropriateness of the VIU
method applied by the Group to perform
the annual test of goodwill for
impairment against the requirements of
the accounting standards
assess the integrity of the VIU model
o
o
88
forward-looking forecasts taking into account the
Group’s strategy, market conditions, current economic
outlook, 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.
o
o
used, including testing the accuracy of
the underlying calculations;
assessed the terminal value growth rate
using our knowledge and experience of
the Group and the industry it operates in;
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.
•
•
•
•
Considered the sensitivity of the models by
varying key assumptions, such as discount
rate and growth rates. We did this to identify
those assumptions at higher risk of bias or
inconsistency in application and to focus our
further procedures;
Comparing the Group’s forecast cash flows
contained in the VIU model to Board approved
forecasts;
Assessing the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the VIU model;
Challenged the Group’s significant forecast
cash flow and growth rate assumptions:
o We compared key events to the
Board approved plan and strategy.
o We checked the consistency of the
growth rates to the Group’s stated
plan and strategy, past performance
of the Group, and our experience
regarding the feasibility of these in
the economic environment in which
they operate.
o We assessed market and regulatory
impacts on the Group’s key
assumptions for indicators of bias and
inconsistent application, using our
knowledge and experience of the
industry, the Group’s performance
and its operations.
•
Assessed the disclosures in the Group’s
financial report using our understanding
obtained from our testing and against the
requirements of the accounting standards.
89
Net Present Value of future trail commission receivable $21.0 million and payable $7.4 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’s policy is to recognise:
Our procedures included:
•
•
a contract asset representing the expected value
of future trail commission receivable in accordance
with AASB 15 Revenue from Contracts with
Customers; and
a corresponding trail commission payable
representing the net present value of future trail
commissions payable in accordance with AASB 9
Financial Instruments.
This is a key audit matter due to the complexity and
the degree of judgement we use in assessing the
Group’s estimate of the value of trail commissions
receivable and payable. Key assumptions in the
estimate are:
•
•
•
Assessed the appropriateness of the Group’s
accounting policy against the requirements of
the accounting standard.
Understand the Group’s processes and tested
key controls such as the assessment and
approval by management of assumptions
used in the Group’s Net Present Value (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;
•
Discount rates ;
• Worked with our valuation specialists to:
• Weighted average life of portfolio loans – there is
a degree of estimation uncertainty in relation to
the expected weighted average life continuing on
the current trend of actual performance of the
underlying portfolio.
We involved our valuation specialists in assessing this
key audit matter.
o
o
o
o
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;
evaluate the discount rates against
publicly available market data for
comparable entities;
assess the weighted average life of
portfolio loans based on actual
performance adjusted for
expectations of future performance.
We do this using our understanding
of the underlying portfolio and the
industry; and
assess the integrity of the Group’s
NPV model including testing the
accuracy of the underlying
calculations.
•
Evaluated the sensitivity of the NPV model
estimate by considering reasonably possible
changes to the discount rate and weighted
average life rates. We did this to identify those
90
assumptions at higher risk of bias or
inconsistency in application and to focus our
further procedures; and
•
Assessed the disclosures in the Group’s
financial report using our understanding
obtained from our testing and against the
requirements of the accounting standards.
Other Information
Other Information is financial and non-financial information in BNK Banking Corporation Ltd’s annual
reporting which is provided in addition to the Financial Reports and the Auditor's Report. The Directors are
responsible for the Other Information.
Our opinions on the Financial Reports do 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 audits of the Financial Reports, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Reports 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 Reports
The Directors are responsible for:
• preparing the Financial Reports 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.
Auditor’s responsibilities for the audits of the Financial Reports
Our objective is:
•
•
to obtain reasonable assurance about whether each of the Financial Reports as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinions.
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
91
Financial Report.
A further description of our responsibilities for the audits of the Financial Reports 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 Ltd for the year ended 30
June 2022, 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 27 of the Directors’ report for the year
ended 30 June 2022.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Nicholas Buchanan
Partner
Sydney
26 August 2022
92
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 26 August 2022.
(a)
Distribution of equity securities
Spread of
holdings
1 -
1,000
1,001 - 5,000
10,000
5,001 -
100,000
10,001 -
100,001+
TOTAL
Number
of
holders
153
1,621
118
310
85
2,287
Number of
units
82,097
3,937,793
968,020
11,186,652
102,528,176
118,702,738
Percentage of
total issued
capital
0.069%
3.317%
0.815%
9.424%
86.338%
100%
(b)
Twenty largest holders of quoted equity securities
Rank
Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SF Legacy Investments Limited
1800homeloans Pty Ltd
J P Morgan Nominees Australia
HSBC Custody Nominees
Resimac Limited
Ng Capital Management Pte Ltd
Resimac Limited
Keybridge Capital Limited
Daring Investments Pty Ltd
Todlaw Pty ltd
National Nominees Limited
Carpe Diem Asset Management
Koleet Pty Ltd
Holding Corporation Pty Ltd
Aoyin Group Limited
Bond Street Custodians Limited
Firstmac Limited
Pyramid Capital Pty Ltd
Citicorp Nominees Pty Limited
Vanval Investments Pty Ltd
Number of
units
11,269,346
7,832,149
6,807,006
5,654,157
5,411,285
5,139,571
4,468,902
4,102,750
3,996,529
3,935,000
3,408,165
2,430,190
2,150,144
1,973,207
1,921,407
1,898,686
1,769,416
1,581,969
1,466,120
1,153,333
Percentage
of issued
capital
9.493%
6.598%
5.734%
4.763%
4.558%
4.329%
3.764%
3.456%
3.366%
3.315%
2.871%
2.047%
1.811%
1.662%
1.618%
1.599%
1.490%
1.332%
1.235%
0.971%
66.02%
93