Annual Report 2007
www.bendigobank.com.au
Contents
1
2
4
5
7
8
Financial Calendar
Report by Chairman and Managing Director
Results at a Glance
Community Connection
Retail Banking
Specialised Products
9 Wealth Solutions
10
Joint Ventures
10
Technology
11 Corporate Issues
12 Shareholder Information
13
Full Financial Report
Bendigo Bank Limited
ABN 11 068 049 178
Registered Head Office
The Bendigo Centre
PO Box 480
Bendigo, VIC
Australia, 3552
Telephone: (03) 5485 6444
Facsimile: (03) 5485 7668
Email: share.register@bendigobank.com.au
In this report, the expressions “the Bank” and “the
Bendigo” refer to Bendigo Bank Limited; the expressions
“the Group” and “the Company” refers to Bendigo Bank
Limited and its controlled entities.
Customer/Shareholder inquiries
Customer Help Centre
(Head Office inquiries)
1300 361 911 (local call)
8.30am – 6.30pm
(Australian Eastern Standard Time/ Australian Eastern
Daylight Time (AEST/AEDT))
Bendigo Bank OnCall
(Customer inquiries)
1300 366 666 (local call)
8.00am – 8.00pm weekdays
9.00am – 4.00pm Saturdays
10.00am – 4.00pm Sundays
(Australian Eastern Standard Time/ Australian Eastern
Daylight Time (AEST/AEDT))
24-hour Phone Bank
1300 366 666 (local call)
24-hour e-banking
www.bendigobank.com.au
Website: www.bendigobank.com.au
Securities Registry: 1800 646 042
Financial Calendar
2007
27 August
31 August
Ex-dividend date
Final dividend record date
17 September
Bendigo Preference Share dividend
28 September
Distribution of final dividend
29 October
Annual General Meeting
17 December
Bendigo Preference Share dividend
Proposed dates 2008
18 February
Announcement of interim
results and interim dividend
Ex-dividend date
Interim dividend record date
Bendigo Preference Share dividend
Distribution of interim dividend
Bendigo Preference Share dividend
Announcement of final results
and final dividend
Ex-dividend date
Final dividend record date
25 February
29 February
17 March
31 March
16 June
11 August
27 August
2 September
15 September
Bendigo Preference Share dividend
30 September
Distribution of final dividend
27 October
Annual General Meeting
15 December
Bendigo Preference Share dividend
07
06
05
Cash basis earnings ($mil)
118.5
102.5
94.7
07
06
05
07
06
05
07
06
05
07
06
05
Group-managed loans ($mil)
15,829
13,914
14,057
12,497
12,839
11,503
1,915
1,560
1,336
Total
On balance sheet
Managed
Retail deposits and funds under management ($mil)
3,394
2,967
2,710
15,582
12,188
14,314
11,347
12,753
10,043
Total
On balance sheet
Managed funds
Earnings per share (EPS - cents)
EPS
Cash EPS
81.9
82.9
81.5
73.2
67.5
65.5
Dividends (cents per share)
58.0
52.0
45.0
Annual Report 2007 1
Report by Chairman and Managing Director
Bendigo Bank completed a successful 2007 financial
year.
New customers and communities continue to join us.
We opened 22 new branches, increased customer
numbers by 77,000 and continued to lead the banking
industry for customer satisfaction.
These factors contributed to an excellent financial
performance.
A record profit and sixth consecutive year of double-
digit earnings per share growth reaffirmed the earnings
momentum generated by our customer and community
focused strategy.
Cash earnings increased by 15.6 per cent, to
$118.5 million, and we lifted total dividends to
58.0 cents per share (fully franked).
These results were achieved through a disciplined
approach, focused on achieving growth at profitable
prices. This produced quality revenues and therefore
quality earnings.
We continued to broaden our distribution networks,
enhance products and boost our technology capacity and
balance sheet and risk management capabilities.
There were a number of significant achievements during
the year.
> Dromana, in Victoria, opened our 200th Community
Bank® branch.
> Our first Northern Territory branch opened, meaning
the Bendigo brand is now represented in each
Australian State and Territory.
> Our computing capacity was significantly boosted by
our new $10 million data centre in Bendigo.
> Staff began moving into our new $100 million head
office in Bendigo.
> And with partners Mastercard and Customers,
we formed Australia’s newest financial transactions
switching service, Strategic Payment Services.
We entered the new financial year buoyed by our
prospects. Our positioning, and the success we have
achieved, is generating many opportunities to grow and
expand our business.
2 Annual Report 2007
Rob Hunt
Robert Johanson
Managing Director
Chairman
The most significant is our proposed merger with
Adelaide Bank, which we announced on 9 August 2007.
This merger will better position us to continue our strong
growth. It will give us capacity in wholesale banking
and significantly expand our retail business into South
Australia. The merger is the next logical step in our
development. It will free up capital to invest in the many
opportunities we have created. This will enable us to
accelerate development of our customer and community
focused strategy.
The past financial year was not without its challenges.
We rejected a proposal from the Bank of Queensland for
the acquisition of Bendigo Bank. This proposal caused
unease among our staff, customers, shareholders
and community partners. But this did not affect our
performance; our fourth quarter saw our strongest
lending growth for the year, with record monthly volumes
in June.
Of more serious concern is the credit issue now facing
banks. This began in August 2007 when increasing
defaults among US ‘sub-prime’ borrowers resulted in
a tightening of credit and sharply increased pricing for
wholesale funding across the globe.
Currently, around 80 per cent of Bendigo Bank loans
are funded by retail deposits, so this reduces the direct
impact on us of rising wholesale funding costs. There
is, however, the potential for this issue to be felt more
widely across financial sectors and economies. We are
certainly confident of Bendigo’s credit quality and the
strong Australian economy and job market will help the
nation absorb possible flow-on effects.
External issues such as these test our mettle as
managers of our business.
Calendar year 2008 is our Company’s 150th anniversary.
Our first antecedent company was formed on 9 July
1858.
We aim to make our 150th birthday memorable.
Celebrations will be held and we plan to end the year with
the official opening of our new head office. We expect to
further increase profitability and shareholder returns, and
we aim to complete much of the work needed to merge
Bendigo and Adelaide banks (assuming, of course, that
Adelaide Bank shareholders support the proposal).
Mergers are not new to us. Bendigo Bank is the
product of many mergers throughout its history. All have
strengthened the company, as we are confident the
merger with Adelaide Bank will do. While in 2008 we will
spend a little time looking back on our past, our vision is
very much for our future and the next 150 years of the
Bendigo way of banking.
Robert N Johanson
Chairman
Rob Hunt AM
Managing Director
Annual Report 2007 3
15.6%
Cash earnings
13.3%
Cash basis earnings per ordinary share
58.0
Total dividends
cents per share
(fully franked)
6000
Customer base growth per month
Results at a Glance
Cash earnings $118.5 million, an increase of
15.6% from 2005/06
Cash basis earnings per ordinary
share increased from 73.2 cents to
82.9 cents/per share (fully franked), a 13.3%
increase
Dividends for 2006/2007 total 58.0 cents, up
from 52.0 cents in 2005/2006
> We grew our customer base by 77,000
> We plan to open further Community Bank®
and company owned branches – which shows
community demand for our model remains
strong in the face of growing branch banking
competition
> Customer satisfaction continued to lead the
banking industry and tells us our service
standards have kept pace with business
growth
> Our Community Bank® partners are
increasing the financial contributions they
make to their communities
4 Annual Report 2007
Community Connection
Our strong connection with our customers and local
communities remains at the core of our strategy.
If our customers and local communities are successful,
and we are relevant to them, our own success will follow.
We therefore continue to deepen our engagement with
our communities. This is most readily apparent through
our Community Bank® network, but is also being
gradually extended to company owned branches.
As we approach our merger with Adelaide Bank,
our Managing Director Rob Hunt has been charged
with introducing methodologies to ensure the level
of customer and partner advocacy developed by both
organisations continues to grow.
Community Bank®
Through owning and operating their own Community
Bank® branch of Bendigo Bank, communities can build
their prosperity through generating sustainable income
streams and building solid balance sheets.
Over the nine years of community banking, Bendigo Bank
has paid $340 million to local boards as their share
of banking revenues. This has helped to create almost
1000 new jobs, with beneficial flow-on effects from wages
and expenditure on local services. Community Bank®
branches spent $46.7 million in their communities during
2006/07 on wages, rent, accounting, cleaning, buildings,
staff amenities and other employee expenses.
Community Bank® boards have contributed $10 million
to local projects and $7 million in shareholder dividends
since inception. These contributions are growing rapidly.
This demonstration of the benefits of banking through a
locally owned branch is creating a powerful incentive for
people to bank with us.
Our Community Bank® network has more than 410,000
customers and almost $10 billion in total banking.
More than 52,000 Australians are today shareholders
of a Community Bank® company. The network last year
contributed 14.4 per cent of Bendigo Bank’s profit before
tax and significant items, up from 13.6 per cent a year
earlier.
On Friday 29 June 2007 we opened our 200th
Community Bank® branch in the Victorian community of
Dromana.
Community Partnerships
As we have stated, we will continue to invest in what we
term ‘community engagement’ activities to broaden our
commitment to our community partners. This investment
is now being extended to our company owned branch
network.
We are working with numerous communities on a broad
range of local projects and initiatives of importance to
them.
In several pilot sites, we helped communities to establish
locally-owned companies with the objective of generating
revenue streams to fund local projects. Customers can
now pledge their banking business to the company which
generates ongoing commission payments from Bendigo
Bank. This investment has assisted the Victorian town
of Strathfieldsaye to establish new sports facilities
in partnership with local and state governments.
The program has accelerated the growth of our local
branch with more than $40 million in new banking
business being achieved.
We will continue to work with and listen to our
communities’ aspirations to develop solutions that
enhance their future prospects.
Community Telco
Through our joint ownership (with AAPT) of Community
Telco Australia, Bendigo Bank is supporting eight
communities with the delivery of locally-owned
telecommunications services: Bendigo, Ipswich,
Sunshine Coast, Ballarat, Launceston, Oxley (Dubbo,
Orange & Bathurst), Geelong and Newcastle.
This program is not about getting better phone services,
although that can be one benefit. It’s about capturing the
money local communities spend on essential services
like telecommunications and putting it to work to
enhance their economic prosperity.
Annual Report 2007 5
Community Enterprise Foundation™
Lead On™
Launched in early 2005, Community Enterprise
Foundation™ is the philanthropic arm of Bendigo Bank.
Sandhurst Trustees Limited is the Foundation’s trustee.
The past 18 months has seen significant growth in our
Lead On™ youth and community development program
throughout Australia.
Western Australia is now part of the Lead On™ network
with a site opened in Bayswater and an ‘outreach’ centre
launched in Kalamunda. Meanwhile, the sixth Lead On™
site in Queensland was opened – at Townsville.
More than 4500 young people from across Australia have
now participated in Lead On™ projects in conjunction
with local businesses.
The Foundation was created to assist our community
partners to support local charitable community groups
and activities. By listening to and working with local
community members we endeavour to apply our grant
making activities and investment dollars to enhance their
long-term prospects.
By 30 June 2007, the Foundation had administered
funds totalling $16 million.
Indigenous communities
In the indigenous community of Yarrabah (Qld), with a
population of 3000, Bendigo Bank opened an agency
employing local staff in December 2006.
This is in addition to the Bank’s facility in the Cape York
community of Aurukun opened in late 2005. It was a
return to face-to-face banking for this community after a
19-year hiatus.
Sponsorships
Each year, Bendigo Bank contributes more than one per
cent of its after tax profits to community sponsorships.
We are the principal sponsor of Immigration Bridge
Australia, a $30 million project to commemorate
the contribution immigration has made to our nation
through a pedestrian bridge spanning 400 metres
across Canberra’s Lake Burley Griffin. The bridge will
be funded by sponsorship plus public subscription
through the sale of 200,000 handrail pieces on which
forebears’ details will be inscribed. For information, go to
www.immigrationbridge.com.au
In addition to Bendigo Bank sponsorships, Boards of
Community Bank® branches contributed $3.9 million
to their communities in 2006/2007 and this figure
will increase substantially as new branches open and
existing ones mature.
6 Annual Report 2007
Retail Banking
We are a customer and community focussed bank.
Our retail bank services mainly households and small-
to-medium businesses, but our diverse offerings
also include farm banking, wealth management
solutions, retirement income products, insurance and
superannuation.
During the past financial year, business growth was
driven by a robust retail banking performance, a growing
diversity of revenues and a strong net interest margin
which reflects the broad mix of business attracted by
Bendigo’s branded retail strategy. Lending volumes
showed an increasing trend since November 2006. And
while deposits slowed as customers channelled money
into superannuation pre-30 June 2006, they rebounded
in July and our brand is now attracting a good share
of retail deposit money moving back into the banking
system.
Customer satisfaction with Bendigo Bank continued to
lead the industry and tells us our service standards
have kept pace with business growth; the vast bulk
of our Community Bank® partners are doing well and
are increasing the financial contributions they make
to their communities; and our own shareholders are
clearly seeing how these factors are driving improved
performance outcomes for Bendigo. We believe we have
the balance about right.
The Bendigo style of banking continues to be in demand.
Our customer base grew by 6000 per month and
totalled 1.15million at year end. We aim to open further
Community Bank® and company owned branches in
2007/2008 and our strategies to deepen customer
relationships are beginning to take effect, as evidenced
by the continued growth of our wealth management
offering.
Banking options
Our customers can choose to call into one of our
357 branches throughout Australia, telephone Bendigo
OnCall or Customer Help Centre, access funds via one
of our 494 ATMs or use a range of internet or phone
banking options.
Our 494 Bendigo Bank ATMs throughout Australia
process more than two million transactions each month,
with plans for another 70 machines to open in the
current financial year.
Our internet banking service continues to gain in
popularity, with 353,753 registered users in June 2007,
up by almost 69,000 in the 12-month period.
Internet bank customer registrations are growing by
average of 5600 per month. Phone banking users
increased by 14 per cent to 264,260 in June 2007.
Agencies
Our Agency network provides us with great flexibility
in responding to community demands for the Bendigo
Bank service. They are increasingly used as stepping
stones for those communities wishing to join our branch
network. Last year, five agency sites were upgraded
– two to full Community Bank® branches, one to a
Community Bank® sub-branch, one to a Community
Bank® Customer Service Centre and one to a company-
owned branch. Community Bank® campaigns are
currently underway in seven communities where there is
already an established Bendigo Bank Agency.
Our Agency network now holds more than $1 billion
in deposits and in the past 12 months the network
averaged more than 75,000 transactions each month.
A new low-cost, real-time banking system (Agent Delivery
System – ADS) has been developed and is currently
being rolled out, replacing the existing manual system.
ADS provides Agency customers with a significantly better
level of service as well as cost efficiencies for the Bank
and our Agents.
‘Help’ centres
Our Customer Help Centre ensures all aspects of
business - forms, policy, procedures and services are
developed with customers’ needs at the forefront.
Customer Help staff monitor service standards and
research customer needs and perceptions, hoping
to further improve our service. In 2006/2007 staff
responded to 170,000 calls.
Mortgage Help Centre aims to give borrowers every
opportunity available to re-pay their loan, even under
difficult circumstances. The efficacy of this approach is
reflected in the Bank’s excellent credit quality.
Bendigo OnCall
We have call centres in Bendigo and Ipswich. Between
July 2006 and May 2007 the centres received more than
one million calls.
Annual Report 2007 7
Specialised Products
Cards
Credit card receivables grew by 26 per cent to
$140 million and new credit card account acquisition
numbers improved by 47 per cent on the previous year.
Strong contributors to this result included the new “Basic
Black” low interest rate card, continued success with the
RSPCA Rescue co-branded card and improvements in the
Bank’s internal credit card approval process.
Insurance
During 2006/2007 the Insurance Division’s income
grew by 18 per cent. This growth was achieved across
all income streams - general, consumer credit and
health insurance. One of the strongest results was for
our loan protection product Bendigo LoanSure, which
increased by 28 per cent on the previous financial year.
The automation of the LoanSure on-line application
system in November 2006 significantly simplified the
distribution process.
Equipment Leasing
Our Equipment Finance Division supports our
business customers with a range of leasing and
hire purchase solutions. In 2006/2007, equipment
finance sales increased by 16 per cent and receivables
increased by 12 per cent.
Web Partner™
Web Partner™ helps our customers to develop and
maintain websites, and provides regular performance
tracking reports.
Community Web Partner™ establishes local community
sites.
A Community Web Partner™ website, sponsored by
the local Bendigo Bank branch, is a popular online
destination providing information on local events,
community groups, businesses, clubs, sporting groups,
local history, education, shopping, tourism, multi-media
and more.
Incorporating a stand-alone domain name (eg.
www.specificcommunity.com.au), the website enables
the local Bendigo Bank branch to further strengthen its
engagement with, and support of, its local community.
8 Annual Report 2007
Invoice discounting (Oxford Funding)
In the past year the Bank’s commitment to providing
small to medium enterprises relevant solutions to their
needs continued to grow. The acquisition of Oxford
Funding Pty Ltd has enabled the bank to offer its own
cashflow products via the business banking and branch
network. Through Oxford Funding’s membership of
Factors Chain International (an association of world
wide major banks and financial Institutions), we can
now offer funding for international open account
business-to-business trade. This has grown significantly
and is well poised as the global move from letter of credit
to open account continues.
Homesafe Debt Free Equity Release
Through a joint venture company, Homesafe Solutions,
we make this equity release product available to elderly
homeowners looking to access part of the cash value of
their home. Owners make a deferred sale of an agreed
proportion of their home to the company in return for an
up-front cash payment. They continue to own and live in
the home until they die or sell the home. Homesafe then
receives its portion of the sale proceeds. Acceptance
of this new-style product has been encouraging, with
eligible inquiry numbers doubling from the prior year.
The program is currently limited to nominated postcodes
in Melbourne and Sydney.
NMMC
National Mortgage Market Corporation (NMMC) under
its HomeLend™ brand continues to make solid progress
and has recorded another record year of new business
volumes. In a market that is growing in competition,
NMMC has developed a service model which has
underpinned the growth achieved during the year.
Business Relationship Managers are now located in our
key markets, Melbourne, Sydney and Brisbane and are
making a difference in the performance of the business.
HomeLend™ has gained strong acceptance in the market
and is sought after by those customers wanting the
Bendigo connection who choose to do business through
the third party channel. HomeLend™ has also initiated a
program of introducing its customers to the Bank’s retail
branches when a customer is seeking additional banking
services. This is gaining momentum and will ultimately
build greater customer loyalty and business for the
Group.
Wealth Solutions
Bendigo Wealth Solutions incorporates four key
businesses – Sandhurst Trustees, Bendigo Financial
Planning, Margin Lending and Victorian Securities
Corporation Limited.
In 2006/2007, the Wealth Solutions division contributed
$27.5 million to the Bank’s pre-tax profit, up by
10 per cent.
Sandhurst Trustees Limited
A wholly-owned subsidiary of Bendigo Bank, Sandhurst
Trustees aims to create wealth for investors by
providing investment opportunities that are managed by
professional investment managers, including Sandhurst
itself.
During the 2006/2007 financial year, Sandhurst’s funds
under management (comprising the Common Funds,
managed funds and superannuation) grew by 14 per cent
to $3.4 billion.
This included a decrease of $130 million following
Sandhurst Trustee’s retirement as Trustee of the
General Retirement Plan and Pooled Investment Fund on
1 April 2007.
Funds management growth, excluding General Retirement
Plan and Pooled Investment Fund, was 20 per cent.
Bendigo Financial Planning
Funds under advice grew by 11 per cent to $1.3 billion
during the year.
A national campaign was undertaken to assist
customers understand and take advantage of the Federal
Government’s changes to superannuation. This included
a successful series of ‘Super’ seminars which not only
helped many existing Bendigo Bank customers, but also
increased our profile within a number of communities and
introduced new customers to our services.
Bendigo Financial Planning provides a range of financial
planning advice and services including investment
management, risk management, retirement planning and
estate planning.
Margin Lending
A number of product enhancements were implemented to
position Margin Lending for growth during the year.
These enhancements assisted the strong loan growth
of 57 per cent during the year. Approved Margin Lending
limits also increased by 73 per cent during the year.
Victorian Securities Corporation Limited (VSCL)
As the only debenture-issuer for the Group, VSCL,
our Ballarat-based finance company, continued with its
successful philosophy of providing a simple competitive
product consistent with market expectations of investors.
The company has been an important part of Ballarat
since 1960, and since joining the Bendigo Group in
1999, has played an important role in our expansion in
that community.
Annual Report 2007 9
Joint Ventures
Technology
We continue to invest in technology infrastructure and
capability. We are building upgraded data warehouse and
customer information management systems in order to
improve customer service and business intelligence.
These major technology enhancements will also help
us to comply with new international capital standards
(Basel II Accord) and Australian anti-terrorism measures
(Anti-Money Laundering Counter Terrorist Financing
legislation).
> Opened our $10 million Data Centre in Bendigo.
> Our IT department has completed all of the
technology requirements for our new headquarters,
The Bendigo Centre.
Community Sector Banking
Community Sector Banking (CSB) provides sector-
specific financial services and solutions to Australia’s
not-for-profit sector.
CSB grew its client base to more than 11,300 accounts
– an increase of 43.2 per cent during the current
financial year. The total balance of funds under
management grew by 26.5 per cent during that period.
Elders Rural Bank
Elders Rural Bank (ERB), a joint agribusiness banking
venture between Bendigo Bank and Futuris Corporation
enjoyed another year of strong performance.
ERB announced an after-tax profit for the year ended
30 June 2007 of $36.0 million, a 12 per cent increase
over last year’s result. Despite the challenging seasonal
conditions for its client base, ERB grew loans under
management by 14 per cent, to $3.2 billion and deposits
rose by 12 per cent to $3.2 billion. Bendigo Bank
customers can access a range of agribusiness products
and services issued by ERB via our team of specialist
Agribusiness Managers.
Tasmanian Banking Services
A joint venture with Tasmanian Perpetual Trustees,
Tasmanian Banking Services (TBS) provides local
ownership participation in the Tasmanian banking
market. Launched with one branch (Burnie) in November
2000, TBS now operates nine branches. In 2006/2007,
the joint venture reached total business holdings of
$629 million. TBS continues to perform strongly, growing
its banking business by $49.8 million and making a
$4.7 million contribution to Bendigo Bank. Two more
branches have opened in 2006/2007, Kingston in the
south and Kings Meadows in the north of the State.
Silver Body Corporate Financial Services
This joint venture with Queensland-based body corporate
management company Stewart Silver King & Burns
provides banking arrangements for body corporate
companies managed by SSKB. A Bendigo Bank branch
in the Gold Coast offices of SSKB provides a full banking
service to SSKB’s body corporate clients and the Bundall
community. In 2006/2007, the joint venture reached
total business holdings of $68 million. The joint venture
continues to perform strongly, growing its banking
business by almost $28.9 million.
10 Annual Report 2007
Corporate Issues
The Bendigo Centre
More than 600 Bendigo Bank staff are already working
from the Bank’s new headquarters – The Bendigo Centre.
Providing staff with bright, new and modern conditions,
and with a majority of staff under one roof, The Bendigo
Centre is already achieving its aim of a positive and
collaborative work environment.
During 2006/07, the new building achieved a 5-Star
Green Star energy rating - a first for regional Australia.
It is expected to use just 50 per cent of the energy of
a normal office building, and all wastewater is being
recycled to become Class A water to be used for toilet
flushing and irrigation.
It also includes:
> Underfloor air conditioning which saves energy and
provides excellent indoor air quality
> External sun shading on the north and west facades
> Double glazed windows with high performance glass
> Automated internal blinds
> Extensive daylight to the centre of the building
through two atriums
> T5 lighting that automatically dims if there is
sufficient natural light
> Solar hot water heating
> Recycling of grey and black water for use in toilet
flushing and irrigation
> Rainwater collection for irrigation
The final stage of the development, comprising the new
entrance building, is expected to be opened in late 2008.
Our staff
Building a strategy based on the success of our
customers and communities has required committed
staff.
In return, Bendigo Bank aims to provide a range of
flexible work options and benefits.
Bendigo Bank now has 2428 full-time equivalent staff
members. Many staff work on a permanent part-time
basis and a small number of staff work from home.
Our brand is also represented by employees of local
Community Bank® companies.
Our major short-term objectives in areas relating to our
staff include:
> Flexible work options
> Technology developments to enable employee
self service for personal matters and to create a
database of useful information for improving our
people management
> Review our appraisal process, its effectiveness and
bonuses
> Capability profiling for major roles
> Job benchmarking and development of a Total Reward
Framework
The environment
Bendigo Bank’s strong commitment to the environment
continues and this financial year has seen a number of
initiatives introduced and further developed.
Through an agreement with revegetation specialists
Greenhouse Balanced, we have offset the carbon
emissions of our 300-strong car fleet for the past four
years. We also offset emissions from air miles travelled
by our staff for work purposes during 2006/2007.
In 2006/2007, our work in the Victorian Wimmera and
in north central Victoria to develop bio-diesel enterprises
has continued.
Generation Green™
In February 2007, we launched Generation Green™
– a program aimed at assisting customers and
community partners to reduce their impact on the
environment and to promote sustainable living.
Bendigo Carbon Offsets is the first product to be
launched under this program which enables customers
to offset emissions produced by their home, motor
vehicle or lifestyle. It also encourages sustainable living
by providing customers with discounted Green Home
and Personal loans for incorporating energy efficient
measures such as solar panels into their homes.
Annual Report 2007 11
Shareholder Information
At 17 August 2007, Bendigo Bank (ASX Code BEN) had
on issue 138,549,515 quoted ordinary shares and
5,638,375 unquoted employee shares.
Online share information - Bendigo Bank
shareholders are now able to check details of
their holding on the Online Share Registry at
www.bendigobank.com.au/shareholders
The online service aims to provide shareholders with
useful information 24 hours a day, seven days a week.
Shareholders can access information including holding
balance, payment instructions and dividend details.
Change of Address and Dividend Nomination advice
forms are also available to download.
e-Shareholders - Shareholders are encouraged
to record their email address so that reports can
be received online. To register simply log on to
www.bendigobank.com.au/e-shareholder and enter your
details.
Share Registry - Manager Karyn Flynn and staff can
provide assistance with matters relating to all the
Company’s listed securities by:
Mail:
Share Registry
Bendigo Bank Ltd
PO Box 480, BENDIGO VIC 3552
Telephone: (03) 5485 6392 or 1800 646 042
Fax:
(03) 5485 7645
Email:
share.register@bendigobank.com.au
12 Annual Report 2007
Full Financial
Report
For the period ending
30 June 2007
ABN 11 068 049 178
Annual Report 2007 13
BENDIGO BANK LTD
ABN 11 068 049 178
TABLE OF CONTENTS
Corporate Governance
Five Year History
Five Year Comparison
Directors’ Report
Remuneration Report
Income Statement
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Income tax expense
Average balance sheet and related interest
Summary of significant accounting policies
Segment information
Profit
1 Corporate information
2
3
4
5 Underlying profit
6
7
8 Capital adequacy and ace ratio
9
Earnings per ordinary share
10 Dividends
11 Return on average ordinary equity
12 Net tangible assets per ordinary share
13 Cash flow statement reconciliation
14 Cash and cash equivalents
15 Financial assets available for sale -
securities
16 Financial assets available for sale – share
investments
17 Financial assets held to maturity
18 Loans and other receivables
19
Impairment of loans and advances
20 Particulars in relation to controlled entities
21
Investments in associates and joint venture
using the equity method
Full Financial Report
Period ending 30 June 2007
22 Property, plant and equipment
23 Assets held for sale
Investment property
24
Intangible assets and goodwill
25
Impairment testing of goodwill and
26
intangibles with indefinite lives
27 Other assets
28 Deposits
29 Other payables
30 Provisions
31 Subordinated debt
32
Issued capital
33 Reserves
34 Minority interest
35 Employee benefits
36 Share based payment plans
37 Auditor’s remuneration
38 Director and executive disclosures
39 Related party disclosures
40 Financial risk management objectives and
policies
41 Financial instruments
42 Commitments and contingencies
43 Fiduciary activities
44 Events after balance sheet date
Directors’ Declaration
Independent Audit Report
Additional information
Page
101
102
103
103
104
106
107
108
108
109
109
110
111
112
112
117
118
125
128
131
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139
140
142
Page
15
27
28
29
32
55
56
57
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60
60
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14
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
CORPORATE GOVERNANCE STATEMENT
Bendigo Bank is committed to high standards of
that
corporate governance. The Board believes
Bendigo Bank’s commitment to ethical corporate
dealings in the conduct of its business has been an
important element of its success during its 149-year
history. This commitment applies to the dealings by
Bendigo Bank with its shareholders, customers,
employees, suppliers, regulators and the community.
It is also reflected in Bendigo Bank’s corporate
values.
The following is a guide to the discussion in this report
about how Bendigo Bank practices meet the ASX
Corporate Governance Council Principles of Good
Governance and Best Practice Recommendations
(March 2003). The documents referred to below are
the Bendigo Bank website
available
from
corporate
in
(www.bendigobank.com.au)
governance section of “About us”.
the
1. PRINCIPLE
RECOMMENDATION
1. Lay solid foundations for
management and oversight
1.1 Formalise and disclose the functions
reserved to the board and those delegated to
management.
2. Structure the board to
add value
2.1 A majority of the board should be
independent directors.
BENDIGO BANK PRACTICE
Status: Adopted
Annual report: Section 1.a
Documents on website: Constitution,
Board charter
Status: Adopted
Annual report: Section 1.b
2.2 The chairperson should be an
independent director.
Status: Adopted
Annual report: Section 1.b
2.3 The roles of chairperson and chief
executive officer should not be exercised by
the same individual.
Status: Adopted
Annual report: Section 1.b
2.4 The board should establish a nomination
committee.
Status: Adopted
Annual report: Section 2.a
2.5 Provide the information indicated in
Guide to reporting on Principle 2.
3. Promote ethical and
responsible decision-making
3.1 Establish a code of conduct to guide the
directors, the chief executive officer (or
equivalent), the chief financial officer
(or equivalent) and any other key executives
as to:
3.1.1 the practices necessary to maintain
confidence in the company’s integrity
3.1.2 the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
Status: Adopted
Annual report: Section 1.b, 1.f, 2.a, and
see Directors’ Report p.50 for director
attendances at Committee meetings
Documents on website: Constitution,
Board charter, Governance Committee
charter, Committee procedural rules,
Appointment of non-executive directors
Status: Adopted
Annual report: Section 6.a
3.2 Disclose the policy concerning trading in
company securities by directors, officers and
employees.
Status: Adopted
Annual report: Section 6.c
3.3 Provide the information indicated in
Guide to reporting on Principle 3.
Status: Adopted
Annual report: Section 6
Documents on website: Code of conduct,
Reporting of concerns, Staff trading
policy
15
BENDIGO BANK LTD
ABN 11 068 049 178
4. Safeguard integrity in
financial reporting
Full Financial Report
Period ending 30 June 2007
4.1 Require the chief executive officer (or
equivalent) and the chief financial officer (or
equivalent) to state in writing to the board
that the company’s financial reports present
a true and fair view, in all material respects,
of the company’s financial condition and
operational results and are in accordance
with relevant accounting standards.
Status: Adopted
Annual report: Section 3
4.2 The board should establish an audit
committee.
Status: Adopted
Annual report: Section 2.a
4.3 Structure the audit committee so that it
consists of:
(cid:190) only non-executive directors
(cid:190) a majority of independent directors
(cid:190) an independent chairperson, who is
not chairperson of the board
(cid:190) at least three members.
Status: Adopted
Annual report: Section 2.a
4.4 The audit committee should have a
formal charter.
Status: Adopted
Annual report: Section 2
4.5 Provide the information indicated in
Guide to reporting on Principle 4.
5. Make timely and balanced
disclosure
5.1 Establish written policies and procedures
designed to ensure compliance with ASX
Listing Rule disclosure requirements and to
ensure accountability at a senior
management level for that compliance.
5.2 Provide the information indicated in
Guide to reporting on Principle 5.
Status: Adopted
Annual report: Section 1.b, 2.a and see
Directors’ Report p.50 for director
attendances at Committee meetings
Documents on website:
Audit Committee charter, Committee
procedural rules, Selection and
appointment of external auditor
engagement partners; rotation of external
audit partners, Risk management system
description
Status: Adopted
Annual report: Section 5
Status: Adopted
Annual report: Section 5
Documents on website: Continuous
disclosure policy, Communications policy
6. Respect the rights of
shareholders
6.1 Design and disclose a communications
strategy to promote effective communication
with shareholders and encourage effective
participation at general meetings.
Status: Adopted
Annual report: Section 5
Documents on website:
Communications policy
6.2 Request the external auditor to attend
the annual general meeting and be available
to answer shareholder questions about the
conduct of the audit and the preparation and
content of the auditor’s report.
Status: Adopted
Annual report: Section 4
16
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
7. Recognise and manage risk
7.1 The board or appropriate board
committee should establish policies on risk
oversight and management.
Status: Adopted
Annual report: Section 3
7.2 The chief executive officer (or equivalent)
and the chief financial officer (or equivalent)
should state to the board in writing that:
Status: Adopted
Annual report: Section 3
7.2.1 the statement given in accordance with
best practice recommendation 4.1 (the
integrity of financial statements) is founded
on a sound system of risk management and
internal compliance and control which
implements the policies adopted by the
board
7.2.2 the company’s risk management and
internal compliance and control system is
operating efficiently and effectively in all
material respects.
7.3 Provide the information indicated in
Guide to reporting on Principle 7.
Status: Adopted
Annual report: Section 3
Documents on website: Risk Committee,
Credit Committee, Property Committee,
IT Committee Overview, Risk
management system description
8. Encourage enhanced
performance
8.1 Disclose the process for performance
evaluation of the board, its committees and
individual directors, and key executives.
Status: Adopted
Annual report: Section 1.d, 7.a, and
Directors’ Report p.18.
9. Remunerate fairly and
responsibly
9.1 Provide disclosure in relation to the
company’s remuneration policies to enable
investors to understand (i) the costs and
benefits of those policies and (ii) the link
between remuneration paid to directors and
key executives and corporate performance.
Status: Adopted
Annual report: Section 1.e and Directors’
Report under the heading “Remuneration
Report”
9.2 The board should establish a
remuneration committee.
Status: Adopted
Annual report: Section 2.a
9.3 Clearly distinguish the structure of non-
executive directors remuneration from that of
executives.
9.4 Ensure that payment of equity-based
executive remuneration is made in
accordance with thresholds set in plans
approved by shareholders.
9.5 Provide the information indicated in
Guide to reporting on Principle 9.
10. Recognise the legitimate
interests of stakeholders
10.1 Establish and disclose a code of
conduct to guide compliance with legal and
other obligations to legitimate stakeholders.
17
Status: Adopted
Annual report: Section 1.e, and Directors’
Report under the heading “Remuneration
Report”
Status: Adopted
Annual report: Directors’ report under the
heading “Remuneration Report”
Status: Adopted
Annual report: Section 1.e and 2.a, and
see Directors’ Report p.50 for committee
attendance p.33 and p.35 for
remuneration policies
Documents on website: Governance
Committee charter, Remuneration policy
– executives and non-executive
directors; Employee Share Ownership
Plan
Status: Adopted
Annual report: Section 6.a
Documents on website: Code of
Conduct, Reporting of Concerns
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
1. The Board
1.a Role
The Board provides direction to the Bank by approving and
monitoring the Bank’s strategy and financial objectives.
Available from our website, the Board charter sets out the
Board’s detailed responsibilities, including its responsibilities
in relation to committees, nomination, remuneration,
governance, audit, risk and credit matters. Except in relation
to any matters reserved to the Board under the charter, the
day-to-day management of Bendigo Bank and its operations
is delegated to management.
1.b Composition
The constitution provides that the number of directors is to
be decided by the Board, being not fewer than three and not
more than ten. The Board currently consists of eight non-
executive directors and the Managing Director. The roles of
the Chairman and Managing Director are separated.
Information on each of the directors is set out on pages 19
to 22.
The Board believes that the exercise of independent
judgment by directors is an important feature of corporate
governance.
The Board has decided that the majority of directors are to
be independent. For the purpose of assessing the
independence of non-executive directors, the Board regards
an independent director as a director whom the Board
considers to be independent of management and free of any
business or other relationship or association – including
those arising out of a substantial shareholding, involvement
in past management or as a supplier, customer or advisor -
that could materially interfere with, or could reasonably be
perceived to interfere materially with, the exercise of
unfettered and independent judgement. In deciding
materiality, the Board takes into account the quantitative
materiality thresholds in Accounting Standard AASB 1031,
as well as qualitative materiality factors.
Directors must disclose any material personal interest in
accordance with the Corporations Act. Directors must also
comply with the constraints on their participation and voting
in relation to matters in which they may have an interest in
accordance with the Corporations Act.
Each director may from time to time have personal dealings
with Bendigo Bank. Each director may be involved in other
companies or professional firms which may from time to time
have dealings with Bendigo Bank. Full details of related
party dealings are set out in notes to the Bendigo Bank
financial statements as required by law.
The Board has assessed each non-executive director as
independent. In making that assessment, the Board has
taken into account the relationships set out on p.124 and
the following.
(cid:190) No director is, or is associated directly with,
a substantial shareholder of Bendigo Bank.
(cid:190) No director, except as previously disclosed, has ever
been employed by the Bendigo Bank
or any of its subsidiaries.
(cid:190) No director is, or is associated directly with,
a professional adviser, consultant, supplier,
customer or other contractor of Bendigo
Bank that is a material adviser, consultant,
supplier, customer or other contractor
under accounting standards.
(cid:190) No related party dealing referable to any
director is material under accounting
standards.
The Board does not consider that the term of service on
the Board should be considered as a factor affecting a
director’s ability to exercise unfettered and independent
judgement.
1.c Appointment
The policy of Bendigo Bank is to appoint directors with
appropriate skills, knowledge and experience to contribute
to the effectiveness of the Board and to provide leadership
and contribute to the success of Bendigo Bank. The policy
and procedure for the selection and appointment of new
directors is available from the website.
1.d Performance
The Board charter provides for an annual evaluation of the
Board, individual directors and Board Committees. An
evaluation took place in the reporting period. The
evaluation of individual directors and the Board was
conducted by the Chairman. The Board (in the absence of
the Chairman) undertook an evaluation of the Chairman.
The Chairman of each Board Committee conducted a
performance evaluation of the Committee and the results
were discussed in a Board meeting. Information on the
performance evaluation procedure is available from the
website.
1.e Remuneration
The Remuneration report in the Directors’ Report includes
a discussion of non-executive directors’ remuneration.
1.f Procedures
The Board charter (available from the website) sets out
relevant Board procedural matters. This includes
procedures in relation to a conflict of interest and also
provision for access to independent professional advice at
the expense of Bendigo Bank.
18
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
TERM OF
OFFICE
SPECIAL RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE,
RELATIONSHIPS
NAME, AGE,
QUALIFICATIONS
AND
INDEPENDENCE
STATUS
Robert Johanson
Chairman
(56 years)
BA, LLM (Melb)
MBA (Harvard)
Independent director
Director for 20
years and
appointed as
chairman during
2006. Previously
deputy chairman
for 5 years.
*Seeking re-
election at 2007
AGM
Committees
Governance (Chair)
Audit
Group and joint venture
company directorships
Community Telco Australia Pty
Ltd
Elders Rural Bank Ltd
Homesafe Solutions Pty Ltd
(Chair)
Mr Johanson has expertise in corporate
strategy, capital and risk management. He
has provided independent corporate advice
in respect to capital market transactions to
a wide range of public and private
companies. Mr Johanson is a member of
the Council of the University of Melbourne,
a member of its Finance Committee and
Chairman of the Investment Committee. He
is a director of the Robert Salzer
Foundation Ltd and a member of the
Takeovers Panel.
Mr Johanson is a director of Grant Samuel
Group Pty Ltd (and subsidiaries). Grant
Samuel provides professional advisory
services to the Group on normal
commercial terms and conditions. The
services provided during the 2007 financial
year included services in relation to the
Group property review, alliance and joint
venture activities, strategic developments
and the proposed merger announced by
the Bank of Queensland that did not
proceed. Grant Samuel has also been
engaged by Bendigo Bank to provide
advisory services in connection with the
proposed Adelaide Bank merger.
Based in Bendigo, Mr Hunt has led the
Bank’s development from a provincial
building society to a nationally represented,
uniquely positioned and diverse banking
and financial services group.
Mr Hunt is the architect of the Bank’s
Community Banking™ and other alliance
arrangements.
He is also Chairman of Bendigo
Community Telco Ltd. He is a Councillor of
the ABA, a member of the BCA, the Prime
Minister’s Community Business Partnership
and the Victorian Government’s Innovation
Economy Advisory Board.
Employee since
1973 and
appointed CEO
in 1988.
Appointed to
Board in 1990.
Rob Hunt AM
Managing Director
(56 years)
FAICD
Doctor of University
(honoris causa) La
Trobe University,
1999
Executive director
and Chief Executive
Officer
Committees
Governance
Risk
Property
IT Strategy
Group and joint venture
company directorships
Community Telco Australia Pty
Ltd (Chair)
Community Sector Enterprises
Pty Ltd
Elders Rural Bank Ltd
Tasmanian Banking Services
Ltd
Mr Hunt is also chair of a
number of subsidiary
companies involved in
community engagement
activities.
19
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
NAME, AGE,
QUALIFICATIONS
AND
INDEPENDENCE
STATUS
Neal Axelby
(57 years)
Dip CM
FAICD, AIMM, AIFS
Independent director
TERM OF
OFFICE
SPECIAL RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE,
RELATIONSHIPS
Director for 7
years.
* Seeking re-
election at 2007
AGM
Committees
Credit
Governance
Risk
Group and joint venture
company directorships
Sunstate Lenders Mortgage
Insurance Pty Ltd
A Queensland-based director, Mr Axelby
has had 15 years combined years of
experience as an employee and director in
the finance industry before joining the
board. He also has 22 years experience in
senior management positions in the private
sector. Mr Axelby is a director of Ipswich &
West Morton United Friendly Society
Dispensary Ltd and several private
companies. Mr Axelby was a director of
First Australian Building Society Limited
which was acquired by Bendigo Bank in
2000.
Jennifer Dawson
(42 years)
B Bus (Acc)
FCA, MAICD
Independent director
Director for 8
years.
Donald Erskine
(61 years)
Independent director
Director for 8
years.
Committees
Audit (Chair)
Property
Credit
Group and joint venture
company directorships
Community Sector Banking Pty
Ltd
Community Sector Enterprises
Pty Ltd
A Bendigo-based director, Ms Dawson
spent 10 years with Arthur Andersen in the
audit and IT controls division. Ms Dawson
has experience in the areas of financial
reporting and audit, IT internal control
reviews, internal audit and risk
management. Ms Dawson is a director of
Coliban Region Water Corporation and a
member of the Victorian Regional
Development Advisory Committee.
Committees
Credit
Property (Chair)
IT Strategy
Group and joint venture
company directorships
Nil
A Bendigo-based director, Mr Erskine is a
mechanical engineer and chairman of
several private companies. Mr Erskine has
an extensive background in manufacturing
and property development and experience
in international trade. Mr Erskine is the
chairman of Australian Technical College,
Bendigo. He is also a director of Bendigo
Community Telco Ltd.
20
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
TERM OF
OFFICE
SPECIAL RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE,
RELATIONSHIPS
NAME, AGE,
QUALIFICATIONS
AND
INDEPENDENCE
STATUS
Terence O’Dwyer
(57 years)
B Com, Dip Adv Acc
FCA, FAICD
Independent director
Director for 7
years.
*Seeking re-
election at 2007
AGM
Committees
Audit
Risk
IT Strategy (Chair)
Group and joint venture
company directorships
Sunstate Lenders Mortgage
Insurance
Pty Ltd
A Queensland-based director, Mr O’Dwyer
is the former chairman and managing
partner of BDO Kendalls (Chartered
Accountants). He was a partner in the firm
for 28 years and headed its corporate
finance division prior to being appointed its
independent chairman.
Mr O’Dwyer is chairman of Metal Storm
Ltd, Roamfree Ltd and a director of
Queensland Theatre Company Ltd. He has
previously chaired MFS Limited and
Brumby’s Bakeries Holdings Ltd and has
had service on other public company
board’s and government business
enterprises.
Mr O’Dwyer was a director of First
Australian Building Society Limited which
was acquired by Bendigo Bank in 2000.
A Melbourne based director, Ms Radford is
an economics graduate with experience in
both the public and private sector. Ms
Radford has 15 years experience in the
banking industry with both international and
local Banks. Ms Radford is a Director of
Forestry Tasmania, City West Water and
Deb Radford & Associates, a consultancy
company advising on government business
enterprises.
A Geelong-based director, Mr Roache has
extensive experience in advising clients on
business and taxation issues. Mr Roache is
a director of Geelong Community
Enterprise Ltd, a former President of the
Geelong Business Club, member of the
Finance Committee of Geelong Chamber
of Commerce, member of Committee for
Geelong, a former Chairman of Barwon
Health Geelong and has been a board
member of many community and charitable
organisations.
Mr Roache was the Chairman of Capital
Building Society, the business of which was
integrated into Bendigo Bank in 1992. Mr
Roache is the chairman of partners in
Coulter Roache Lawyers which provides
legal services to the Group on normal
commercial terms and conditions.
Director for 2
years.
Director for 16
years.
Deborah Radford
(51 years)
B.Ec
G. Dip Finance &
Investment
John Kennedy
School of
Government
(Harvard)
Independent director
Kevin Roache
(67 years)
LLB, B Com,
ASCPA, FAICD
Barrister & Solicitor
of the
Supreme Court of
Victoria
Independent director
Committees
Audit
IT Strategy
Credit
Group and joint venture
company directorships
Nil
Committees
Credit (Chair)
Risk
Governance
Group and joint venture
company directorships
Nil
21
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
NAME, AGE,
QUALIFICATIONS
AND
INDEPENDENCE
STATUS
Antony Robinson
(49 years)
B Com (Melb)
ASA
MBA (Melb)
Independent director
TERM OF
OFFICE
SPECIAL RESPONSIBILITIES
SKILLS, EXPERIENCE, EXPERTISE,
RELATIONSHIPS
Director for 2
years.
Committees
Risk (Chair)
Governance
Group and joint venture
company directorships
Nil
A Melbourne-based director, Mr Robinson
commenced employment in April 2007 as
an executive director and chief executive
officer of the listed financial services
company, IOOF Holdings Ltd. Mr
Robinson was the managing director and
chief executive officer of OAMPS Limited,
before it was acquired by Wesfarmers
Limited in November 2006. He was
previously also a director of VECCI.
Mr Robinson’s previous management
positions include joint managing director of
Falkiners Stockbroking, managing director
of WealthPoint, chief financial officer of
Link Telecommunications and general
manager corporate services at Mayne
Nickless.
Mr Robinson is also a director of IOOF
Investment Management Limited (“IOOF”)
and Perennial Investment Partners Limited
(“Perennial”), which are subsidiaries of
IOOF Holdings Ltd. These companies
provide investment management services
to managed investment schemes for which
Sandhurst Trustees Ltd is the responsible
entity. The fees paid by Sandhurst
Trustees for these services are on normal
commercial terms and conditions. Bendigo
Financial Planning Ltd, a subsidiary of
Bendigo Bank, is the sponsor and markets
and promotes Bendigo Financial Solutions
Personal Superannuation (“BFSPS”).
BFSPS is a superannuation product offered
by IOOF Investment Management Services
Ltd. The fees paid by IOOF to BFP are
based on normal commercial terms and
conditions.
22
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
2. Board committees
2.a Composition and responsibilities
To help it discharge specific aspects of its responsibility, the Board has established the following
Committees.
COMMITTEE
Audit
COMPOSITION –
REQUIREMENTS
At least 3 members.
All independent directors.
An independent chair, who
is not chairman of the
Board.
Ms Dawson (Chair)
Mr Johanson
Mr O’Dwyer
Ms Radford
MEMBERS
RESPONSIBILITIES
Governance &
HR
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Johanson
(Chair)
Mr Hunt
Mr Axelby
Mr Roache
Mr Robinson
Risk
Credit
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Robinson (Chair)
Mr Roache
Mr O’Dwyer
Mr Hunt
Mr Axelby
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Roache (Chair)
Mr Axelby
Ms Dawson
Mr Erskine
Ms Radford
The role of the Committee is to provide assistance
to the Board in relation to the following.
(cid:190) External audit function (including prudential
audit requirements).
(cid:190)
Internal audit function.
(cid:190) Statutory financial reporting.
(cid:190)
Internal control framework.
The role of the Committee is to provide assistance
to the Board in relation to the following.
(cid:190) Board composition and succession planning.
(cid:190) Board performance and Board and executive
remuneration policy.
(cid:190) Corporate governance matters generally.
(cid:190) Key human resources policies.
The role of the Committee is to provide assistance
to the Board in relation to oversight of the
establishment, implementation, review and
monitoring of risk management systems and
policies for the following.
(cid:190) Balance sheet and off-balance sheet risk.
(cid:190) Operational risk, including regulatory
compliance.
The role of the Committee is to provide assistance
to the Board in relation to oversight of the
establishment, implementation, review and
monitoring of credit risk management systems
and policies, taking into account the risk tolerance
of the Group (comprising the Bank and its
subsidiaries), the overall business strategy and
management expertise.
Property
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Erskine (Chair)
Ms Dawson
Mr Hunt
The role of the Committee is to provide assistance
to the Board in relation to the development of the
Bank’s property strategy including oversight of the
planning, design, establishment, implementation
and review of the Group’s principal properties.
IT Strategy
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr O’Dwyer (Chair)
Mr Erskine
Mr Hunt
Ms Radford
The role of the Committee is to provide oversight
of IT strategic planning and to make sure
frameworks are in place for the efficient and
effective management of the IT investment and
the continuing alignment with business strategy
and plans.
23
BENDIGO BANK LTD
ABN 11 068 049 178
2b. Committee procedures
Membership of all Committees is reviewed annually. Each
Committee is governed by a charter which identifies the
Committee’s role and responsibilities. A Committee may
consult a professional adviser or expert, at the cost of the
Bank, if the Committee considers it necessary to carry out
its duties and responsibilities. A Committee may meet with
employees and third parties without the presence of
management. The minutes of each Committee meeting are
tabled and discussed at the next meeting of the Board.
3. Risk management
The recognition and management of risk is an essential
element of the Group’s strategy. The risk management
strategy is based on risk principles approved by the Board.
The Board is responsible for overseeing the establishment,
implementation, review and monitoring of risk management
systems and policies. It has established an integrated
framework of committee, policies and controls to identify,
assess, monitor and manage risk. Executive management
is responsible for implementing the policies and controls.
The key risks and responsibilities for the Group are:
(cid:190) Credit risk: The risk of financial loss due to the
unwillingness or inability of a counterparty to fully meet
their contractual debts and obligations. Credit risk is
primarily monitored by the Credit Committee and the
framework, policies, analysis and reporting are
managed by the Group Risk business unit (which
includes the Group’s credit bureau and credit
inspection unit).
Interest rate risk: The risk of loss of earnings due to
adverse movements in interest rates. Interest rate risk
is primarily monitored through the Risk Committee and
the Asset Liability Management Committee and
managed through the Strategic Finance business unit.
(cid:190)
(cid:190) Liquidity risk: The risk of the inability to access funds
which may lead to an inability to meet obligations in an
orderly manner as they arise or forgone investment
opportunities. Liquidity risk is primarily monitored by
the Risk Committee and the Asset Liability
Management Committee and managed through the
Group Strategic Finance business unit.
(cid:190) Currency risk: The risk of loss of earnings due to
adverse movements in exchange rates. Currency risk
is primarily monitored by the Risk Committee and the
Asset Liability Management Committee and managed
through the Group Strategic Finance business unit.
(cid:190) Operational risk: The risk resulting from inadequate or
failed internal processes, people and systems or from
external events that are not covered by credit and
market risk. Operational Risk is primarily monitored by
the Risk Committee and the Executive Committee and
managed through the
Full Financial Report
Period ending 30 June 2007
Operational Risk business unit incorporating operational
risk, regulatory compliance, fraud prevention and detection
and business continuity.
In addition, the Bank has an independent internal audit
function that oversees all activities across the Group. The
head of Group Audit has a direct reporting line to the Audit
Committee and an administrative reporting line to the Chief
General Manager, Group Delivery. The head of Group Audit
has direct access to the Managing Director, the Chair of the
Audit Committee and the Chairman of the Board. Group
Audit also has direct access to any member of staff and
access to any information relevant to its work. Group Audit
assists in monitoring the effectiveness of the Group’s risk
management and internal compliance and control system
including implementation. Reports on the outcome of
internal audit programs are provided to the Audit Committee.
The strategic plan for the internal audit function is approved
and monitored by the Audit Committee.
The audit function is also independent of the external
auditor. External audit considers risk management in order
to assess and understand the Group’s business and
financial risks as well as the effectiveness of internal
controls which may have a significant impact on the financial
statements.
The Managing Director and Chief Financial Officer provide
an annual signoff to the Board on the matters summarised
below for the Bank and the consolidated entity for the
reporting period. The statements are made on the basis
that they provide a reasonable, but not absolute, level of
assurance and do not imply a guarantee against adverse
events or circumstances that may arise in future periods.
(cid:190) Whether the financial reports present a true and fair
view, in all material respects, of the Group’s financial
position and performance and are in accordance with
the Corporations Act and relevant accounting
standards.
(cid:190) Whether there are reasonable grounds to believe that
the Bank will be able to pay its debts as and when they
become due and payable.
(cid:190) Whether the financial records of the Group are
maintained in accordance with the Corporations Act.
(cid:190) Whether the financial reports are founded on a sound
system of risk management and internal compliance
and control systems which, in all material respects,
implement the policies adopted by the Board.
(cid:190) Whether the risk management and internal compliance
and control systems are operating efficiently and
effectively in all material respects.
To support this sign off the Bank has implemented due
diligence, verification and certification processes throughout
the business to provide assurance to the Managing Director,
Chief Financial Officer and the Board, both in respect to the
financial statements and the systems of risk management
and internal compliance and control.
24
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
4. External auditor
The Audit Committee is responsible for recommending to
the Board a policy in relation to auditor independence,
rotation and the provision of non-audit services by the
external auditor, and for monitoring compliance with the
policy.
The policy on audit independence sets out the factors
regarded as compromising auditor independence. It
includes a requirement for the engagement of the auditor
for any non-audit services to be approved by the Audit
Committee before the engagement, so that the Audit
Committee can consider any impact on the independence
of the auditor. The policy also provides for the Audit
Committee to receive the annual and half-year
independence declaration from the auditor. As required by
the Corporations Act, the Audit Committee provides an
annual statement to the Board as to whether the Audit
Committee is satisfied that the provision of non-audit
services is compatible with the independence of the auditor
and the reasons for being so satisfied. The Directors’
Report includes a statement about whether the directors
are satisfied that the provision of non-audit services is
compatible with the independence of the auditor and the
reasons for being so satisfied. In addition, while not
required by the Corporations Act, the policy requires the
Audit Committee to provide the same statement for the
half-year and for the directors to consider it with the
auditor’s half-year independence declaration.
The policy provides that a person who plays a significant
role in the audit must rotate if they have acted in that role
for five successive years or, if they were to act, they would
have played a significant role for more than five out of
seven successive financial years, with a two-year cooling-
off period.
The Corporations Act provides for members to submit
written questions to Bank for the auditor about the content
of the auditor’s report to be considered at the annual
general meeting, or the conduct of the audit of the annual
financial report to be considered at the annual general
meeting, no later than the fifth business day before the day
on which the annual general meeting is held.
The external audit engagement partner from Ernst & Young
is required to make sure that a suitably qualified
representative attends the annual general meeting. The
Chairman of the meeting is required to provide an
opportunity for the members as a whole at the meeting to
ask the auditor’s representative questions relevant to the
conduct of the audit, the preparation and conduct of the
auditor’s report, the accounting policies adopted by the
Bank in relation to the preparation of the financial
statements and the independence of the auditor in relation
to the conduct of the audit. The Chairman is also required
to allow a reasonable opportunity for the representative of
the auditor to answer written questions submitted before
the meeting.
5. Continuous disclosure and communications
The Bendigo Bank Board recognises the importance of
making sure that the Bank’s shareholders, and the broader
investment market, are kept informed about the Bank’s
activities and that the Bank meets its continuous disclosure
obligations.
5.a Continuous disclosure
The Bank has a continuous disclosure policy to make sure
that all price sensitive information is disclosed to Australian
Stock Exchange (“ASX”) under the continuous disclosure
requirements of ASX Listing Rules and the Corporations
Act.
The Board meeting agenda includes continuous disclosure
as a standing item for Board consideration. The Managing
Director, Chairman and executive officers are responsible
for identifying matters or transactions arising between Board
meetings which require disclosure in accordance with the
ASX Listing Rules.
All announcements to be lodged with ASX must first be
approved by an authorised officer, generally the Managing
Director, before release.
The company secretary is responsible for coordinating
communications with ASX and for having systems in place
to ensure that information is not released to external parties
until confirmation of lodgement is received from ASX.
5.b Communications
The Bank has also established a communications policy
which provides clear authorities and protocols for all
communications with parties external to the Bank, in
particular, ASX, regulatory authorities, media and brokers.
Bendigo Bank communicates with its shareholders by the
following means.
(cid:190) ASX announcements
(cid:190) Shareholder updates
(cid:190) Annual reporting (as well as the full financial
statements, up until 2007 this included concise reports
and, from 2007 it instead includes shareholder reviews)
(cid:190) Annual general meetings
(cid:190) Shareholder question sheet included with annual
general meetings notice
The following material is made available on the Bendigo
Bank website.
(cid:190) Shareholder updates
(cid:190) Full financial statements (for past three years),
shareholder reviews (commencing 2007), and concise
reports (2004 – 2006)
(cid:190) Media releases (for past three years)
(cid:190) Notices of meeting (for past three years)
(cid:190) Webcasting of results presentation (following
preliminary final announcement)
25
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
(cid:190) Webcasting of annual general meeting
(cid:190) Any material provided in briefings with analysts,
stockbrokers and institutional investors (following its
release to the market).
In addition, there is a link from the Bendigo Bank website to
the ASX website for access to announcements that
Bendigo Bank has made to ASX.
6. Corporate conduct
6a. Code of Conduct and Reporting of Concerns policy
6.c Share trading policy
The staff trading policy imposes restrictions on trading by
directors, members of the Executive Committee and other
designated employees (who may have access to price
sensitive information). A black-out period is imposed for the
10 weeks leading up to each of the half-year and full-year
announcements to ASX. The policy also imposes obligations
on these employees and officers in relation to notifying the
Bank before and after trading. The notifications are reported
to the Board. In addition, all employees and directors are
prohibited from trading if in possession of price sensitive
information.
Bendigo Bank’s corporate values provide a framework to
guide interactions within the Group, with customers,
shareholders, suppliers and the community. The values are
achievement, excellence, equality, integrity, loyalty, respect
and trust.
7. Executives
7.a Performance
The Remuneration Report in the Directors’ Report includes
a discussion of the annual performance assessment
arrangements for executive management, including the
managing director.
7.b Remuneration, contracts with executives
The Remuneration Report in the Directors’ Report includes
a discussion of executive (including the managing director)
remuneration and contracts.
These values have been incorporated in a Code of
Conduct that has been endorsed by the Bank Executive
Committee and adopted by the Board.
The Code of Conduct sets out the Group’s mission
statement, being to focus on building and improving the
prospects of customers, communities and partnerships in
order to develop sustainable earnings and growth for the
business, and thus provide increasing wealth for
shareholders. Engagement with communities is central to
the Group’s strategy and stands Bendigo Bank apart.
The Code of Conduct provides guidelines for directors and
staff, so that there is a common understanding of the
values and expected standards of behaviour, including in
relation to conflicts of interest, staff trading and
confidentiality.
The Group’s Reporting of Concerns policy provides a
reference point for reporting concerns, including on an
anonymous basis. This includes a concern, a grievance,
and report of a suspected breach of law or Group policy
(including any breach of the Code of Conduct). The
Reporting of Concerns policy also explains the protection
provided for employees who raise concerns in good faith.
6.b Regulatory compliance
Bendigo Bank has always placed importance on being law-
abiding, and has a long history of dealing fairly and
ethically with its customers. The Code of Conduct requires
all employees and directors to comply with laws and
policies, and requires directors and officers to promote
compliance. In addition, a regulatory compliance framework
is in place that applies across the Group, setting out
specific responsibilities in relation to compliance with
regulatory obligations. The Board is responsible for
overseeing regulatory compliance and is assisted by the
Risk Committee.
26
BENDIGO BANK LTD
ABN 11 068 049 178
FIVE YEAR HISTORY
The Bendigo Group
Full Financial Report
Period ending 30 June 2007
Interest income
Interest expense
Net interest income
Other income
Bad & doubtful debts expense (net of bad debts recovered)
Other expenses
Profit before income tax expense
Income tax expense
Net (profit)/loss attributable to minority interest
Profit after income tax expense
Adjustments
Cash basis earnings
Financial Position at 30 June
Total assets
Loans and receivables
Cash and cash equivalents
Financial assets and derivatives
Other assets
Equity
Deposits
Subordinated debt
Other liabilities
Share Information
Net tangible assets per ordinary share
Earnings per ordinary share - cents
Cash basis earnings per ordinary share - cents
Dividends per ordinary share:
Interim - cents
Final - cents
Total - cents
Ratios
After tax before significant items return on average assets
Return on average assets
Cash basis return on average ordinary equity
Return on average ordinary equity
1 Figures for 2005 include the acquisition of Oxford Funding Pty Ltd effective 1 May 2005.
Disclosures prepared under AIFRS
previous AGAAP
Comparatives prepared under
2007
$m
1,058.6
701.5
357.1
205.1
8.2
376.1
177.9
(56.2)
(0.1)
121.8
(3.3)
118.5
17,001.6
13,843.5
329.1
2,248.5
580.5
1,015.0
2006
$m
907.5
592.4
315.1
201.8
7.0
344.2
165.7
(49.0)
-
116.7
(14.2)
102.5
(1)
2005
$m
815.0
528.9
286.1
172.9
13.6
309.9
135.5
(41.2)
0.4
94.7
(3.0)
91.7
2004
$m
615.5
361.9
253.6
157.5
13.8
282.0
115.3
(35.8)
0.3
79.8
(6.6)
73.2
2003
$m
500.6
278.3
222.3
125.6
15.3
243.3
89.3
(30.2)
(0.1)
59.0
-
59.0
15,196.1
12,436.7
479.8
1,854.3
425.3
899.5
13,858.6
11,392.4
442.0
1,615.7
408.5
720.7
11,284.5
9,372.6
315.1
1,220.2
376.6
676.4
9,256.6
7,504.0
288.5
1,130.0
334.2
552.7
15,231.0
13,599.8
12,572.2
10,148.9
8,241.2
307.2
448.4
$5.40
81.9
82.9
24.0
34.0
58.0
0.80%
0.76%
15.38%
15.18%
307.1
389.7
$4.78
81.5
73.2
22.0
30.0
52.0
0.75%
0.80%
14.51%
16.16%
262.1
303.6
199.3
259.9
204.7
258.1
$4.21
67.5
65.5
19.0
26.0
45.0
0.73%
0.75%
13.54%
13.98%
$4.40
60.2
58.5
17.0
23.0
40.0
0.71%
0.78%
11.91%
12.99%
$3.80
46.8
50.2
13.5
20.0
33.5
0.69%
0.69%
11.06%
11.06%
Comparatives for financial years 2004 and prior are not prepared under AIFRS. The main adjustments that would make the figures comply with AIFRS are:
Profit -
goodwill and trustee licence are not amortised under AIFRS.
movements in general provision for doubtful debts (general reserve for credit losses) reflect as appropriations of profit under AIFRS rather than expense under
AGAAP.
loan application fees and loan origination fees are recognised on an effective interest rate basis (deferred and amortised) and are disclosed as net interest income
under AIFRS.
Balance sheet - general provision for doubtful debts now disclosed as general reserve for credit losses in equity.
establishment of new collective provision for doubtful debts under AIFRS. This provision is treated as a general provision for prudential purposes.
specific provisions for doubtful debts are assessed on the basis of discounted estimated future cash flows under AIFRS. Future cash flows were not discounted
under AGAAP.
loans to employees in relation to employee share ownership plan disclosed as reduction of equity under AIFRS.
assets and liabilities of securitisation trusts are consolidated under AIFRS.
share investments are carried at fair value under AIFRS.
derivative financial instruments are carried at fair value under AIFRS.
computer software assets have been reclassified from property, plant & equipment to intangible assets under AIFRS.
deferred tax assets and liabilities have been recognised in relation to asset revaluation reserves under AIFRS.
27
BENDIGO BANK LTD
ABN 11 068 049 178
FIVE YEAR COMPARISON
The Bendigo Group
Key Trading Indicators
Retail deposits - branch sourced
Number of depositors' accounts - branch sourced
Total loans approved
Number of loans approved
Liquid assets and cash equivalents
Total assets
Liquid assets & cash equiv as proportion of total assets
Number of branches(1)
Average deposit holdings per branch
Number of staff (excluding Community Banks)
Assets per staff member(3)
Staff per million dollars of assets(3)
Dissection of Loans by Security(4)
Residential loans
($'000)
Commercial loans
Unsecured loans
Other
Gross loans
Dissection of Loans by Security(4)
Residential loans
(%)
Commercial loans
Unsecured loans
Other
Total
Asset Quality
Impaired loans
Specific provisions
Net impaired loans
Net impaired loans % of gross loans
Specific provision for impairment
Specific provision % of gross loans less unearned
income
Collective provision
General reserve for credit losses (general provision)
Collective provision (net of tax effect) & GRCL (general provn)
as a % of risk-weighted assets
Loan write-offs as % of average total assets
Full Financial Report
Period ending 30 June 2007
Disclosures prepared under AIFRS
previous AGAAP
2007
2006
2005
2004
2003
Comparatives prepared under
11,641
1,418,088
7,018.0
73,236
2,577.6
17,001.6
15.16
357
32.6
2,428
7.002
0.14
10,253.8
2,911.7
474.4
274.4
10,771
9,260
8,293
1,309,957
1,201,627
1,094,884
6,189.6
66,227
2,334.1
5,872.6
65,498
2,057.7
6,077.8
72,063
1,535.3
15,196.1
13,858.6
11,284.5
15.36
335
32.2
2,343
6.486
0.15
9,278.1
2,574.4
415.1
229.7
14.85
302
30.7
2,214
5.990
0.17
(2)
8,629.2
2,217.8
490.6
165.2
13.61
276
30.0
2,063
5.470
0.18
7,110.9
1,774.1
492.9
92.0
6,823
974,788
4,822.8
70,175
1,418.5
9,256.6
15.32
246
27.6
1,904
4.862
0.21
5,602.5
1,446.5
463.5
71.4
13,914.3
12,497.3
11,502.8
9,469.9
7,583.9
73.69
20.93
3.41
1.97
100.00
18.2
(8.4)
9.8
0.07
8.4
0.06
11.4
45.3
0.55
0.04
74.24
20.60
3.31
1.85
75.02
19.28
4.26
1.44
75.09
18.73
5.20
0.98
73.87
19.07
6.11
0.95
100.00
100.00
100.00
100.00
14.9
(9.0)
5.9
0.05
9.1
0.07
8.8
40.6
0.55
0.04
16.7
(8.6)
8.1
0.07
8.6
0.08
-
60.3
0.55
0.06
12.9
(8.0)
4.9
0.05
8.1
0.09
-
53.4
0.55
0.07
16.4
(10.6)
5.8
0.08
10.7
0.14
-
43.8
0.55
0.08
($m)
($m)
($m)
($m)
(%)
($m)
(FTE)
($m)
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
(%)
1 Includes Community Bank branches.
2 Includes staff increases from the acquisition of Oxford Funding Pty Ltd.
3 These ratios do not take into account off-balance sheet assets under management, which totalled $2.3 billion at 30 June 2007 (2006: $2.0 billion).
4 For the purposes of this dissection, overdrafts and personal loans secured by residential and commercial property mortgages
are included in residential and commercial loan categories respectively.
Comparatives for financial years 2004 and prior are not prepared under AIFRS. The main adjustments that would make the figures comply with AIFRS are:
Profit -
goodwill and trustee licence are not amortised under AIFRS.
movements in general provision for doubtful debts (general reserve for credit losses) reflect as appropriations of profit under AIFRS rather than expense under
AGAAP.
loan application fees and loan origination fees are recognised on an effective interest rate basis (deferred and amortised) and are disclosed as net interest income
under AIFRS.
Balance sheet - general provision for doubtful debts now disclosed as general reserve for credit losses in equity.
establishment of new collective provision for doubtful debts under AIFRS. This provision is treated as a general provision for prudential purposes.
specific provisions for doubtful debts are assessed on the basis of discounted estimated future cash flows under AIFRS. Future cash flows were not discounted
under AGAAP.
loans to employees in relation to employee share ownership plan disclosed as reduction of equity under AIFRS.
assets and liabilities of securitisation trusts are consolidated under AIFRS.
share investments are carried at fair value under AIFRS.
derivative financial instruments are carried at fair value under AIFRS.
computer software assets have been reclassified from property, plant & equipment to intangible assets under AIFRS.
deferred tax assets and liabilities have been recognised in relation to asset revaluation reserves under AIFRS.
Please note that only Key Trading Indicators based on asset values are impacted by AIFRS.
28
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
DIRECTORS’ REPORT
Your Board of Directors has pleasure in presenting the 142nd Financial Report of Bendigo Bank Limited
and its controlled entities for the year ended 30 June 2007.
DIRECTORS
The names and details of the company's directors in office during the financial year and until the date of this
report are as follows. Directors were in office for this entire period unless otherwise stated.
Robert N Johanson – Chairman
Robert G Hunt AM – Managing Director
Neal J Axelby
Jennifer L Dawson
Donald J Erskine
Terence J O’Dwyer
Deborah L Radford
Kevin E Roache
Antony D Robinson
Mr Richard A Guy OAM retired from the board on 31 August 2006.
Particulars of the skills, experience, expertise and responsibilities of the Directors at the date of this report
are set out in the Corporate Governance section of this Report.
Share Issues
The following share classes were issued during the financial year:
Ordinary shares
Ordinary shares issued under the Dividend Reinvestment Plan
Ordinary shares issued in lieu of dividends under the Bonus Share Scheme
Ordinary shares issued under the Employee Share Plan
Total ordinary shares issued
No.
of shares
1,522,761
293,506
1,520,662
3,336,929
Share Options and Rights
Unissued Shares:
As at the date of this report, there were 1,057,114 unissued ordinary shares under options (632,693,000 at
the reporting date) and 178,769 rights to unissued ordinary shares (100,117 at the reporting date). Refer to
note 36 and 38 of the financial statements for further details of the rights and options outstanding.
The Board may decide how to treat the Participant’s Options or Performance Rights to make sure the
Participant is neither advantaged nor disadvantaged as a result of any share issues or reconstructions.
Shares issued as a result of the exercise of options:
During the financial year no Options vested or were exercised and no Rights vested or were exercised.
29
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Ordinary Share Dividends Paid or Recommended
Dividends paid:
Final dividend 2006 of 30.0¢ per share, paid September 2006
Interim dividend 2007 of 24.0¢ per share, paid March 2007
Dividend recommended:
Final dividend 2007 of 34.0¢ per share, declared by the directors on 9 August 2007, payable 28
September 2007
All dividends were fully franked
Shareholders electing to receive dividends in the form of shares received the following ordinary
shares, paid in full:
September 2006
March 2007
In addition, shareholders electing to receive bonus shares in lieu of dividends received the
following ordinary shares, paid in full:
September 2006
March 2007
Preference Share Dividends Paid or Recommended
Dividends paid:
131.68 cents per share, paid 15 September 2006
134.64 cents per share, paid 15 December 2006
136.36 cents per share, paid 15 March 2007
138.89 cents per share, paid 15 June 2007
Dividend announced:
A dividend of 142.66¢ per security for the period 15 June 2007 to 16 September 2007 (inclusive),
announced on 13 August 2007, payable 17 September 2007
All dividends were fully franked
Operating and Financial Review
Principal Activities
$40.1 million
$32.6 million
$46.6 million
818,654
704,107
156,945
136,561
$1.2 million
$1.2 million
$1.2 million
$1.2 million
$1.3 million
The principal activities of the Company and its controlled entities during the financial year were the
provision of a range of banking and other financial services, including retail banking, business banking and
commercial finance, funds management, treasury and foreign exchange services (including trade finance),
superannuation, financial advisory and trustee services. There was no significant change in the nature of
the activities of the economic entity during the year.
Consolidated Result
The consolidated profit after providing for income tax of the economic entity amounted to $121.7 million
(2006 - $116.7 million).
Review of Operations and Operating Results
An operational and financial review, including information on the operations, financial position and business
strategies and prospects of the economic entity is set out in the Report by Chairman and Managing
Director. Certain information in respect to business strategies and prospects has not been disclosed where
the disclosure is likely to result in unreasonable prejudice to the Company or its controlled entities.
30
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Significant Changes in the State of Affairs
Total equity increased from $899.5 million to $1,015.0 million, an increase of $115.5 million or 12.8 per cent
over the year. Contributed ordinary equity increased by $41.1 million, due to shares issued under the
dividend reinvestment plan ($20.5 million) and shares issued under the Employee share plan ($20.6
million).
Contributed preference share equity increased by $0.2 million due to payment of the unpaid portion of
existing shares.
Reserves increased by $51.2 million. The major contributor to this increase was the $30.9 million increase
in the cash flow hedge reserve relating to unrealised gains/losses. The cash flow hedge reserve for
associate companies also increased by $1.6 million. General reserve for credit losses (GRCL) increased by
$4.7 million and the GRCL for associate companies increased by $1.8 million. The asset revaluation
reserve increased by a net $5.7 million, predominantly due to net valuation increments relating to share
investments.
Significant After Balance Date Events
On 9 August 2007 the Bank declared a final dividend for ordinary shares and on 13 August 2007
announced a dividend for preference shares, details of which are shown above.
On 9 August 2007 the Boards of Bendigo Bank and Adelaide Bank announced their intention to merge.
The merger will be implemented by a Scheme of Arrangement in Adelaide which will require approval by
Adelaide Bank Limited shareholders at a meeting expected to be held in November 2007, as well as the
required regulatory approvals. On 4 September 2007, the Boards of Bendigo Bank and Adelaide Bank
announced that their respective post announcement due diligence inquiries have been concluded
satisfactorily.
Except as referred to in the Report by Chairman and Managing Director, above, or dealt with elsewhere in
the consolidated financial report, there were no matters or circumstances which arose since the end of the
financial year to the date of this report which significantly affected or may significantly affect the operations
of the economic entity, the results of those operations, or the state of affairs of the economic entity in
subsequent financial years.
Likely Developments and Results
Disclosure of information relating to major developments in the operations of the Group and the expected
results of those operations in future financial years, which, in the opinion of the directors, will not
unreasonably prejudice the interests of the Group, is contained in the Report by Chairman and Managing
Director accompanying this Full Financial Report.
31
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
REMUNERATION REPORT
The Directors of the Company present this Remuneration Report for the Company and for the consolidated
entity for the year ended 30 June 2007. This Remuneration Report is prepared in accordance with section
300A of the Corporations Act and Accounting Standard AASB 124 “Related Party Disclosures” and forms
part of the Directors’ Report. The disclosures have been audited other than where indicated.
The Group’s policy in respect to non-executive and executive remuneration is available from the
Company’s web site.
The following overview of the Company’s development and performance is provided as background
information to assist shareholders in their consideration of the Remuneration Report and particularly to
explain the link between Group performance and executive remuneration. Performance hurdles for the
Company’s short and long term incentive programs are directly linked to the performance of the Company.
The Company is a nationally represented, diversified financial services enterprise which is in the top 120
companies listed on the Australian Securities Exchange. The Company has maintained a consistent
branded retail strategy, focussed on the interests and prospects of our customers and communities. This is
supported by a strategically focussed investment program and commitment to our corporate and social
responsibilities. Through this strategy the Company has built a brand that is well recognised, respected and
sought after. Through continued commitment to the strategy, the maturity of investments to date and further
investment, the Company expects to continue to deliver to shareholders improved, and sustainable, growth
in shareholder value.
The accompanying charts set out the Company’s key financial performance measures for the financial year
ended 30 June 2007, and the four previous financial years, to illustrate the consequences of the Company’s
performance on shareholder value and returns.
32
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The Company has experienced consistent growth in after-tax earnings of approximately 20% per year since
2002 resulting in:
• An increase of $8.40 (124%) in the Company’s share price from $6.80 at 30 June 2002 to $15.20 at 30
June 2007. The share price increased by $2.30 in 2007 (18%);
• Growth in cash EPS of 38.1 cents (85%) from 44.8 cents for 2002 to 82.9 cents for 2007. The cash
EPS increased by 9.7 cents for 2007; and
• An increase in dividends of 29 cents per share (100%) from 29 cents per share for 2002 to 58 cents per
share for 2007. The dividend increased by 6 cents per share for 2007.
The Company has announced a final dividend of 34 cents per share on 9 August 2007, payable on 28
September 2007. This results in a total dividend payable by the Company for the 2007 financial year of 58
cents per share (fully franked) which represents an 11.5% increase on the previous year.
As at 30 June 2007 the Company’s share price has increased by $2.30 against the Company’s share price
as at 30 June 2006, which represents an increase of 18%.
This annual report includes a specific disclosure in respect of the key terms and estimated financial impact
of the Company’s equity plans on shareholder returns. The disclosure is presented at Note 36.
During the 5 year period ended 30 June 2007, the total shareholder return, calculated on the basis of the
gain in the Company’s share price and notional reinvestment of dividends paid during the same 5 year
period, equates to 123%.
The benefits to the Company and its shareholders of the Board’s policy on executive director and senior
executive remuneration are shown by these results.
Non-Executive Director Fees
Objectives and Structure:
The Board has adopted a policy in respect of non-executive director fees with the following objectives:
• To attract and retain appropriately qualified and experienced directors;
• To remunerate directors fairly having regard to their responsibilities, including providing leadership and
guidance to management; and
• To build sustainable shareholder value by encouraging a longer-term strategic perspective without
directly linking fees to the performance of the Company.
As the focus of the Board is to build sustainable shareholder value by taking a longer-term strategic
perspective, there is no direct link between non-executive directors’ fees and the annual results of the
Company. In accordance with the Board policy, non-executive director remuneration comprises the
following elements:
• Base fee; and
• Superannuation Guarantee Charge (“SGC”) payments - currently at 9% of directors’ fees.
The Company does not pay additional fees in relation to committee memberships or subsidiary and joint
venture directorships. Non-executive directors do not receive bonuses or incentive payments, nor
participate in the Company’s equity participation plans. Non-executive directors are entitled under the
Company’s constitution to be reimbursed for business related expenses.
Non-executive director fees and SGC payments are determined by the Board within the aggregate limit
approved by shareholders. The current aggregate director fee-limit which was approved by shareholders at
the 2005 Annual General Meeting is $1,200,000 per annum.
33
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The Chairman receives twice the base fee paid to other directors to recognise and compensate for the
Chairman’s additional time commitment.
Non-executive director fees are reviewed annually by the Board to ensure that the structure and amount are
appropriate for the circumstances of the Company. Fees for non-executive directors are decided by the
Board based on the recommendation of the Governance Committee. The Board determined that annual
non-executive director fee payments may be increased annually by the CPI index should the Governance
Committee not recommend a general fee payment increase.
The Committee takes into account survey data and peer analysis to determine the level of director fees paid
in the market by companies of a relatively comparable size and complexity, including the banking and
finance sector, and to ensure that fees and payments reflect the demands and the scope of responsibilities
of directors. The assessment takes into account the remuneration policies of the Company, changes in the
nature and operations of the Group including industry developments which impact the responsibilities and
risks associated with the role of director.
At the date of this report, the base fee paid to each non-executive director is $93,600 per annum. The fee
was effective from 1 November 2006 following an increase by the CPI index.
The Board has recently determined that the base fee paid to each non-executive director shall increase to
$100,000 per annum.
Details of the membership of the Governance Committee, and its responsibilities in relation to remuneration
arrangements, are set out on page 23 of the full Annual Report. The fees of non-executive directors for the
year are detailed in the tables that accompany this report.
Non-Executive Directors’ Retirement Benefits - No Longer Offered
A retirement benefit scheme was in place for non-executive directors since Company conversion on 1 July
1995. Directors in office as at December 2003 were entitled to receive a retirement benefit equal to the
aggregate of the remuneration paid to the director during the three-year period before retirement (including
superannuation contributions by the Company), provided the director had served at least nine years.
The Board decided to wind-up the arrangement with non-executive director retirement benefit entitlements
being crystallized as at 31 August 2005. The majority of the entitlements have now been paid to the
directors. Details of retirement benefit entitlements and payments during the year are disclosed in the non-
executive director remuneration tables and associated notes that accompany this report.
34
BENDIGO BANK LTD
ABN 11 068 049 178
Executive Remuneration
Objectives and Structure:
Full Financial Report
Period ending 30 June 2007
The Board has adopted a policy in respect of executive remuneration with the following objectives:
• To motivate executive management to manage and lead the business successfully and to drive strong
long-term organisational growth in line with the strategy and business objectives;
• To drive successful organisational performance by incorporating an annual performance incentive and
establish longer-term performance objectives;
• To further drive longer-term organisational performance through an equity-based reward structure;
• To make sure that there is transparency and fairness in executive remuneration policy and practices;
• To deliver a balanced solution addressing all elements of total pay – base pay, incentive pay (cash and
shares), and benefits including loans;
• To make sure appropriate superannuation arrangements are in place for executives; and
• To contribute to appropriate attraction and retention strategies for executives.
The Group has pursued a long term “branded retail banking strategy” which has required a significantly
different focus and direction to that typically taken by other organisations in the sector. The Board and
Managing Director have sought to maintain a remuneration framework that provides the desired flexibility
and reward structure to support this strategy whilst recognising the need to provide remuneration
arrangements which are aligned with shareholder interests and commensurate with executive roles,
responsibilities and market relativities.
The strategy has involved a significant investment program by the Group which has included acquisitions,
expansion of the Group’s product range and the distribution network through joint ventures, Community
Bank® and alliance activities, and investments into a range of community enhancement initiatives.
These investments have a medium to longer-term maturity profile with the objective of generating
sustainable improvement in shareholder value. This has been reflected in the Company’s short and long
term incentive remuneration arrangements for senior executives. The arrangements have been designed to
balance the reward for annual performance and provide sufficient flexibility to allow for rewards to be
tailored to recognise the development of business opportunities that present themselves during a year or
programs that stretch across more than one reporting period.
To achieve the above objectives, executive remuneration arrangements have been structured to comprise:
• Fixed annual remuneration;
• Short and Long Term Incentive arrangements; and
• Superannuation guarantee charge payments (currently 15% for the Managing Director and 9% for other
executives).
It is the objective of the Board, and Managing Director, to achieve a balance between fixed remuneration
and incentive components that take into account market relativities and aligns executive remuneration with
shareholder interests. The incentive based components of the total remuneration package for the Managing
Director was 54% and for the executives, including executives who are key management personnel and
executives identified in the executive remuneration table that accompanies this report (“Named
Executives”), ranged between 31% and 39% of their total remuneration package.
The incentive arrangements in place during the 2007 year include the following components:
• an annual (cash) incentive; and
• participation in the Executive Incentive Plan.
35
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The incentive arrangements in place during the year were designed to reward the achievement of annual
financial goals, individual performance criteria and to drive continued improvement in sustainable
shareholder value. The remuneration arrangements apply to the Managing Director, executives (including
the Named Executives) and the Company Secretary of the Company.
The Board decides the remuneration arrangements for the Managing Director, including the proportions of
fixed remuneration and incentive arrangements, and considers whether any change to the nature or amount
should be made to the arrangements, on an annual basis.
The Managing Director, also on an annual basis, reviews and determines the nature and amount of
remuneration for executives (including the Company Secretary), including the proportions of fixed
remuneration and incentive arrangements.
Fixed annual remuneration:
The terms of employment for executives, including the Managing Director, provide for a base salary
component.
It is intended that executive base salaries take into account market relativities having regard to the need for
the Company to attract, motivate and retain the appropriate executive management. The base salary is a
specified dollar amount that the executive may receive in a form agreed by the Company.
The base salary component is set by reference to appropriate benchmark information relevant to the
executive’s role, responsibilities, experience and expertise.
Executives are given the opportunity to receive their base salary in a variety of forms including cash and
non-cash (salary sacrifice) benefits such as motor vehicle, superannuation contributions and expense
payment arrangements. Executives are able to structure their salary sacrifice arrangements so that the
payments are optimal for the recipient, provided they are made available at the same economic cost
(including applicable fringe benefits tax) to the Company.
In setting the fixed remuneration arrangements for the Managing Director, the Board surveys the range of
comparable remuneration arrangements in the market, particularly in the banking and finance sector, to
ensure that the remuneration arrangements take into account market relativities and also take into account
the particular experience, expertise and strategic direction that the Managing Director brings to the role. The
Board’s assessment has regard to changes in the size, nature and complexity of the Group’s business
activities and relevant
the Managing Director’s role and
responsibilities.
industry developments which
impact
In setting the fixed remuneration arrangements for other executives, the Managing Director takes into
account general market and peer information, relative to the particular role and responsibilities of the
executive.
Incentive Arrangements:
It is the Board’s objective that the incentive arrangements for the Managing Director comprise short-term
(annual) and long-term incentive components. The Board has set a targeted remuneration mix for the
Managing Director of:
Fixed: 40%
30%
STI:
30%
LTI:
The Board and Managing Director have set a targeted allocation value of 30% of fixed annual reward for
participation by other executives in the new Executive Incentive Plan. Details of the annual cash and long-
term incentive arrangements for the 2007 year are set out below.
36
BENDIGO BANK LTD
ABN 11 068 049 178
Annual Incentive Arrangements
Full Financial Report
Period ending 30 June 2007
As discussed above, the Managing Director’s and executive remuneration packages for the 2007 year
included an annual incentive component which rewards both annual financial goals and longer term
performance. Payment of any part of the incentive component is at the discretion of the Board in respect of
the Managing Director and at the discretion of the Managing Director for executives.
The maximum amount of the cash incentive is set by the Board for the Managing Director, taking into
account market data. The Managing Director sets the maximum for other executives, taking into account
the executive’s particular role and responsibilities.
The amount of the annual incentive component paid to executives, including the Managing Director, is
contingent primarily upon the Group achieving budgeted profit performance and in addition, subject to the
discretion of the Board and Managing Director, the technical competence, leadership, operational
management performance and achievement of agreed business outcomes. The amounts are set following
the year-end profit announcement.
The objective of the incentive component is to link the annual financial performance of the Group, and the
achievement of individual business priorities which enhance the future prospects of the Company with the
remuneration received by executives.
The total potential annual cash incentive is set for each executive with operational responsibilities at a level
which provides an appropriate incentive to achieve the business and financial targets and at a cost that is
reasonable to the Company in its circumstances.
Managing Director:
The Managing Director’s annual cash incentive component for the year ended 30 June 2007 was based
upon a mix of quantitative and qualitative performance measures and was set at a maximum of $660,000.
The quantitative element focused on the achievement of EPS growth calculated at the rate of $57,900 for
every one cent per share increase in the Company’s reported normalised EPS ratio above the normalised
EPS ratio achieved for the 2006 financial year, with a maximum of $440,000 payable.
The Board selected the EPS measure as it represents a publicly available performance measure that
appropriately reflects the short-term interests of shareholders. The Company’s EPS ratio ensures that an
appropriate focus is placed upon both profit performance and effective application of shareholder capital,
given the minimum capital requirements set by the Australian Prudential Regulation Authority.
The Board has set qualitative performance measures in respect of the balance of the annual cash incentive,
being $220,000, that focus on the continued progress of the Group strategic priorities confirmed by the
Board:
• Deepening existing customer relationships;
• Raising awareness of the brand and creating relevance;
• Growth at profitable prices;
• Making it easier for customers to do business with us;
• Taking advantage of acquisition and expansion opportunities; and
• Continued progression of succession planning for all senior executive roles.
The above qualitative and quantitative performance measures were selected by the Board to reflect a
balance between measures which provide an annual profit-based incentive and measures which provide
incentive to generate further sustainable shareholder value during the short to medium term.
The performance of the Managing Director is reviewed by the Board on an annual basis in two stages. The
Chairman conducts an assessment of the Managing Director’s performance as part of the annual Board
and director performance process completed prior to year-end. The outcomes of the assessment are
presented to the non-executive directors by the Chairman.
37
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The non-executive directors complete the second stage of the assessment process, after the Group’s year-
end profit result announcement, at which time the Board determines the amount of the incentive payment
based upon the achievement of the agreed performance measures. The Board also determines at the same
time the following year’s fixed remuneration and incentive arrangements including performance criteria.
Other Executives:
The annual incentive component for other executives is primarily determined on the basis of the Group’s
cash EPS performance. Details of the Company’s cash EPS performance are set out in the Group
Performance section of this report. At the discretion of the Managing Director, payment of the annual
incentive component may also take into account the executive’s technical competence, leadership,
operational management performance and achievement of relevant business outcomes for the year.
Generally the amount of the annual incentive paid to other executives is contingent upon the achievement
of targeted cash EPS performance, aligned with the market guidance issued by the Company. The
Managing Director will also take into account the individual performance achievements of the executive
member. The incentive paid to executives is based upon an assessment of the Group’s actual EPS
performance and the extent to which the executive has discharged their position responsibilities and
achieved objectives.
Executives may also participate in the bonus pool that is allocated amongst Group employees. Executives
only participate in the bonus pool if Company performance exceeds the Board approved budget
performance. The amount of any payment from the bonus pool to executives is determined by the
Managing Director. Amounts paid from the bonus pool allocation to executives are included in the
accompanying remuneration tables.
Long term incentives
Executive Incentive Plan: Executives
The Company established an Executive Incentive Plan (the “Plan”) in 2006. The Board considers it
important that executives, including the Managing Director, have ongoing share ownership in the company.
The Plan is designed to link executive reward with the key performance drivers which underpin sustainable
growth in shareholder value – including both share price and returns to shareholders. Participation is
offered to executives, including the Managing Director, as decided by the Board. Grants under the Plan are
made on an annual basis.
Overview of the Executive Incentive Plan
The Plan provides for grants of options and performance rights (“Instruments”) to key executives, including
the Managing Director. Under the Plan, eligible executives are granted options and performance rights
subject to performance conditions set by the Board. If the performance conditions are satisfied during the
relevant performance period, the options and performance rights will vest.
The Company intends to make allocations under the Plan annually having regard to the Managing
Director’s and each executives fixed annual remuneration.
The performance conditions and performance periods for grants under the Plan are set out below.
Each option and performance right represents an entitlement to one ordinary share in the company.
Accordingly, the maximum number of shares that may be acquired by the Managing Director and 11
executives is equal to the number of options and performance rights issued.
Options and performance rights are granted at no cost to the Managing Director and executives. The Plan
Rules provide that the Board may determine that a price is payable upon exercise of an option or
exercisable performance right. The exercise price for options will generally be the market price of the
shares at the grant date, and no exercise price will apply to exercisable performance rights.
The number of options and performance rights granted to the Managing Director and key executives have
been based on the value of each option and performance right, calculated using the recognised Black –
Scholes-Merton valuation methodology. The assessed fair value of each option and each performance right
granted under the Plan are set out in the tables which accompany this report.
38
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Executives are entitled to vote and to receive any dividend, bonus issue, return of capital or other
distribution made in respect of shares they are allocated on vesting and exercise of their performance rights
and options, as applicable.
The grants are subject to a dealing restriction. Executives are not entitled to sell, transfer or otherwise deal
with the shares allocated to them until 2 years after the end of the initial performance period. The Plan
Rules also contain a restriction on removing the “at-risk” element of the instruments. Plan participants may
not enter into any transaction designed to remove the “at-risk” element of an instrument before it vests.
Under the implementation policy for invitations under the Plan, executives may enter into a transaction to
remove the “at-risk” element of an instrument after it vests. However, if an executive enters into such a
transaction, the executive must tell the Company Secretary and provide the Company Secretary with any
details requested. This information may be made public, eg in the Annual Report.
If an executive ends their employment with the Company before the performance conditions for the options
or performance rights have been met, the options and performance rights that have not yet vested will
lapse.
However, if the executive’s employment ends because of death, disability, redundancy, or if the Board
consents, the Board may, in its discretion decide that a number of options and performance rights vest.
If there is a takeover or change of control of the Company, the Board may, in its discretion decide that
unvested options or performance rights vest, having regard to the Company’s pro-rata performance against
the relevant performance conditions.
If an executive were to act fraudulently, dishonestly or, in the Board’s opinion, in breach of his or her legal
duties, any unvested options or performance rights will lapse.
Performance Conditions
The performance condition for options granted under the Plan is based on the Company’s total shareholder
return (“TSR”). The performance condition for performance rights granted to the Managing Director and key
executives is based on the Company’s compound growth in cash basis earnings per share (“EPS”), both
measured over a 3 year initial performance period.
Total Shareholder Return (“TSR”)
TSR measures changes in the market value of the Company’s shares over the performance period and the
value of dividends on the shares during that period (dividends are treated as if they were re-invested).
The use of a TSR based hurdle ensures an alignment between comparative shareholder return and reward
for the executives and provides a relative, external market performance measure, having regard to the TSR
performance of other companies in a comparator group. For the purpose of the grants under the Plan, the
comparator group consists of ASX 200 companies (excluding property trusts and resources) (“Peer
Group”).
Earnings Per Share (“EPS”)
Cash basis EPS will be calculated as the reportable earnings which reflect the underlying operating
performance of the business, as approved by the Board. The EPS based hurdle is a fundamental indicator
of financial performance, both internally and externally and links directly to the Company’s long-term
objective of growing earnings.
For the purpose of the grants under the Plan, the EPS performance condition involves a comparison
between the cash basis EPS for the last financial year of the performance period against the cash basis
EPS for the first financial year of the three performance period.
The Board has maintained a three year 10% EPS performance hurdle for performance right grants. The
performance hurdle is consistent with the Board’s view on the longer term sustainable EPS performance of
the sector. Whilst the banking sector has enjoyed buoyant market conditions over a number of years it is
expected that market conditions will become much tougher and even more competitive going forward. The
consistent achievement of a 10% compounded growth rate in EPS will be a challenging hurdle taking into
account the current stage of the credit cycle and intense level of competition across the sector.
39
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Vesting Schedule – Performance Options
Options granted to date under the Plan will vest in accordance with the following table.
Company’s TSR ranking against TSR of Peer
Group
Percentage of options that vest
TSR below 50th percentile
TSR at the 50th percentile
TSR between 51st and 74th percentile
Nil
50%
An additional 2% of options will vest for every
percentage increase.
TSR at or above 75th percentile
100%
Vesting Schedule – Performance Rights
Performance rights granted to date under the Plan will vest as set out below. At the end of the performance
period, the growth in the Company’s cash basis EPS must equal or exceed 10% per annum, calculated on
a compound basis.
Company’s compound growth in EPS
Percentage of performance rights that vest
EPS growth less than 10%
EPS growth at or above 10%
Nil
100%
The Board has discretion to increase or decrease by 20% the number of performance rights provided under
the Plan based on an assessment of whether cash basis EPS growth was due to factors controllable by the
Company or external factors.
Retesting
To the extent that the performance conditions attaching to options and performance rights granted under
the Plan are not satisfied at the end of the initial performance period, the options and performance rights
that do not vest, will be carried forward and retested as described below.
Options: will be retested after a further 6 months and, if still not satisfied, they may be retested one final
time after another 6 months.
Performance rights: will be retested only once, after 12 months. Any options or performance rights that have
not vested at the end of the additional 12 month period will lapse.
The Board believes that retesting in these limited circumstances is appropriate because it ensures that
executives are not disadvantaged by one year of average performance over a longer-term period of strong
performance.
Grants to Managing Director and Group Executives
Shareholders at the 2006 Annual General Meeting approved the grant of instruments in three tranches to
the Managing Director. The first grant, Tranches 1 and 2, was made to the Managing Director shortly after
the 2006 Annual General Meeting. Tranche 3 was granted to the Managing Director in July 2007.
The first offer to executive and committee members to participate in the Plan was also made shortly after
the 2006 Annual General Meeting (“2007 grant”). The offer was made to all executive committee members
at the time of the offer. A second offer to the same executives was made in July 2007 (“2008 grant”). Details
of the instruments granted under the 2007 grant to the Named Executives are presented in the
remuneration tables that accompany this report.
40
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The performance conditions attaching to these grants are those noted above, which apply to the Managing
Director and all executives participating in the Plan, except that the Tranche 1 grant to the Managing
Director had an initial performance period of 2 years as disclosed in the 2006 Notice of Annual General
Meeting.
Employee Share Plan: General Staff
Legacy Plan
The Company discontinued in 2006 the existing loan-based Employee Share Ownership Plan (“Plan”)
which was open to all employees in the Group, including the Managing Director and executives. The Plan
will continue as a Legacy Plan until such time as the loans provided to fund share purchases under the Plan
have been repaid. There have been no issues of shares under this Plan since November 2004.
The notional value of the interest-free loan provided to the Managing Director and relevant executives under
this Legacy Plan is disclosed in the remuneration tables that accompany this report.
Current Plan
As announced on 23 May 2006, the Company has established a new loan-based limited recourse
Employee Share Plan (“Plan”). The Plan is substantially the same as the Legacy Plan. However, it is only
available to general staff. Executives (including the Managing Director) may not participate in it.
Under the terms of the Plan, shares will be issued at the prevailing market value. The shares must be paid
for by the staff member. The Plan provides staff members with an interest-free loan for the sole purpose of
acquiring Plan shares. Net cash dividends after personal income tax obligations are applied to reduce the
loan balance. Staff cannot deal in the shares until the loan has been repaid. The primary benefit under the
terms of the Plan is the financial benefit of the interest-free loan.
The first issue to general staff under this plan was completed in September 2006. There have been no
further issues under this Plan. The share issue in September 2006 was valued and expensed in
accordance with applicable accounting requirements.
Executive Employment Contracts:
It is the Group’s policy that executive employment contracts will not be for fixed terms and are not to include
a provision for payment on early termination, without Board approval. The terms on which the Board has
approved such payment are set out below. Otherwise executive members, except the Managing Director,
are employed under the prevailing employment terms and conditions of the Group as set out in the standard
employment letter signed by the executive.
The following terms apply in relation to the termination for each executive member, excluding the Managing
Director.
The Company may terminate an executive’s employment with cause (such as illegal conduct, gross
misconduct, bankruptcy, disqualification from managing companies) at any time provided that the executive
is given a reasonable opportunity to defend themselves prior to termination of their employment. The
executive is entitled only to payment of pro-rata gross salary and benefits to the date of termination and to
payment in lieu of any accrued but unused statutory leave entitlements as at that date.
The Company may terminate an executive’s employment without cause at any time by giving the executive
twelve months’ notice, or at its sole option, make payment of gross salary in lieu of the notice or any part of
it. The executive is also entitled to payment in lieu of any accrued but unused statutory leave entitlements
calculated to the end of the twelve month notice period.
The executive may terminate their employment at any time by giving the Company not less than six months’
written notice. The Company may at its sole option make a payment in lieu of the notice period or any part
of it. The executive is also entitled to payment in lieu of any accrued leave entitlements calculated to the
end of the six month notice period.
41
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
If a fundamental change occurs to an executive’s employment arrangements, including a change to their
duties, status, authority, reporting line or work location, the executive may elect by written notice within
three months of the fundamental change, to treat their employment as having been terminated by the
Company. Upon receipt of such notice, the Company is to pay the executive an amount equivalent to twelve
months’ gross salary. The executive shall also be entitled to payment in lieu of any statutory leave
entitlements that would have accrued during the twelve months following their termination.
At the date of this report the only other contract the Board has approved which contains a specific provision
for payment on early termination is the employment contract entered into between the Company and the
Managing Director. Details of the contract terms are set out below.
Employment Contract – Managing Director:
The current employment agreement with the Group’s Managing Director commenced on 1 July 2001 and is
open-ended. As announced on 9 August 2007, Mr Hunt will retire on 1 July 2009. A summary of the key
elements of the employment agreement follows.
The agreement provides for termination payments to be made in certain circumstances and the payment
varies depending on the circumstances as explained below. In each case, it includes payment in lieu of
statutory leave entitlements.
The Company may terminate the agreement without cause by giving 12 months’ notice or, at its option,
payment of pro-rata gross salary, in lieu of the required notice, together with any accrued but unused
statutory leave entitlements including any that would have accrued in that period. The Company may also
terminate the agreement for cause, including illegal conduct or gross misconduct (including serious neglect
of duties, which in the reasonable opinion of the Board is injurious to the Company) provided that Mr Hunt is
given the opportunity to defend himself before termination. In that case, Mr Hunt is entitled to payment of
his pro-rata gross salary and benefits to the date of termination and payment in lieu of any accrued but
unused statutory leave entitlements as at that date.
Mr Hunt may terminate the agreement by giving the Company not less than six months’ written notice. Mr
Hunt is entitled to the pro-rata gross salary and benefits for the duration of the six-month notice period. The
Company may at its sole election make a payment in lieu of the notice period.
Mr Hunt may also treat the agreement as terminated if without cause the Company acts or proposes to act
to diminish the job content, status, responsibility or authority of Mr Hunt or reduce his gross salary. In that
case, the Company is required to pay Mr Hunt an amount equivalent to 12 months’ gross salary, together
with any accrued but unused statutory leave entitlements including any that would have accrued in that
period.
The agreement provides for participation in any equity participation plan, other than the general staff plan
and for issues of equity instruments at least every two years during the term of the agreement.
42
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Remuneration of directors and executives of the Group for the 2007 financial year (Audited).
(a) Details of key management personnel
The following tables set out the remuneration details for the directors and executives, including key
management personnel (being the directors of the Bank and the executives who have the authority and
responsibility for planning, directing and controlling the activities of the Group), and the five most highly
remunerated executives of the Group for the 2007 financial year.
(i) Directors
Robert N Johanson
Robert G Hunt AM
Neal J Axelby
Jennifer L Dawson
Donald J Erskine
Richard Guy OAM
Terence J O’Dwyer
Deborah L Radford
Kevin E Roache
Antony (Tony) Robinson
(ii) Executives:
M A Baker
G D Gillett
M J Hirst
R P Jenkins
V M Kelly
K C Langford
R H Hasseldine
Chairman (non executive)
Managing Director
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive) - Retired 31 August 2006
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Chief General Manager, Solutions
Chief General Manager, Strategy and Human Resources
Chief Operating Officer
Chief General Manager, Retail and Distribution
Chief Information Officer
Chief Financial Officer
Chief General Manager, Group Delivery
There were no changes in respect to the Group’s key management personnel between the reporting date
and the date the financial report was authorised for issue other than:
Mr A Watts was appointed to the role of Chief Information Officer in August 2007. Ms Kelly continues as a
member of the group’s executive committee and as Chief General Manager reporting to the Managing
Director.
43
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
(b) Remuneration of Key Management Personnel
The remuneration details of directors and named executives for the financial year ended 30 June
2007 (consolidated) are set out in the following table.
All values presented in the following tables represent dollar ($) figure unless otherwise indicated.
Non-Executive
Directors
Short-Term
Post Employment
Total
Long-Term
Share - Based
Payment
Fees
Cash Bonus
(At-Risk)
(2)
Non
Monetary
Benefits
(3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Long Service
Leave
(7)
Options &
Shares
(8)
R N Johanson (10)
184,796
N J Axelby
92,398
J L Dawson
92,398
D J Erskine
92,398
R A Guy OAM (11)
15,000
T J O'Dwyer
92,398
D L Radford
92,398
K E Roache
92,398
A D Robinson
47,398
Total
801,582
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,232
16,416
1,042
8,315
-
-
-
-
8,315
8,315
1,350
8,315
3,004
8,315
6,296
8,315
45,000
2,661
8,315
45,000
15,235
75,971
-
-
-
-
-
-
-
-
-
-
203,444
101,755
100,713
100,713
16,350
100,713
103,717
107,009
103,374
937,788
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Remuneration of Key Management Personnel (continued)
The remuneration details of directors and named executives for the financial year ended 30 June
2006 (consolidated) are set out in the following table.
Non-Executive
Directors
Short-Term
Post Employment
Total
Long-Term
Share – Based
Payment
Fees
(1)
Cash Bonus
(At-Risk)
(2)
Non
Monetary
Benefits
(3)
Other
(4)
Superannuation
(5)
Retirement
Benefits
(6)
Long Service
Leave
(7)
Options &
Shares
(8)
R N Johanson (9)
107,500
N J Axelby
86,822
J L Dawson
88,534
D J Erskine
86,822
R A Guy OAM (10)
147,500
T J O’Dwyer
85,000
D L Radford
31,150
K E Roache
87,551
A D Robinson
17,300
Total
738,179
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,317
9,675
(5,692)
1,041
7,814
814
113,800
96,491
-
-
7,964
3,611
100,109
7,814
3,277
97,913
1,322
13,275
(5,682)
156,415
-
-
7,650
1,582
94,232
2,804
-
33,954
6,546
7,880
2,488
104,465
-
1,557
-
18,857
11,226
66,433
398
816,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Remuneration of Key Management Personnel (continued)
The remuneration details of directors and named executives for the financial year ended 30 June 2006
(consolidated) are set out in the following table.
Executives
Short-Term
Post Employment
Total Short-
Term & Post
Employment
Long-Term
Share - Based
Payment
Total
Performance
Related (12)
Salary &
Allowances
(1)
Cash Bonus
(At-Risk)
(2)
Non
Monetary
Benefits
(3)
Other
Superannuation
(5)
Retirement
Benefits
(6)
Long Service
Leave Accrual
(7)
Notional
Interest
(9)
Options &
Shares
(8)
R G Hunt AM
769,315
559,000
36,500
M A Baker
261,797
95,000
13,799
G D Gillett
328,940
170,000
53,905
R H Hasseldine
138,144
115,000
132,698
M J Hirst
377,150
195,000
54,483
R P Jenkins
310,700
95,000
15,539
V M Kelly
320,943
125,000
32,717
K C Langford
344,546
170,000
66,029
Total
2,851,535
1,524,000
405,670
Notes:
-
-
-
-
-
-
-
-
-
177,687
30,202
48,702
35,294
53,169
33,906
40,458
50,452
469,870
-
-
-
-
-
-
-
-
-
1,542,502
10,276
245,146
400,798
22,019
15,165
601,547
12,812
30,741
421,136
6,318
14,641
679,802
14,272
16,601
455,145
27,412
17,243
519,118
16,089
28,825
631,027
16,753
28,415
5,251,075
125,951
396,777
-
-
-
-
-
-
-
-
-
36%
23%
28%
27%
29%
20%
24%
27%
1. Cash salary amounts include allowances paid and the net movement in annual leave accrual for the year;
2. The percentage of the incentive payment for the financial year approved by the Board for payment to the Managing Director is
100% with 0% forfeited (2006 - 93% with 7% forfeited). The percentage of the incentive payments for the financial year approved
by the Managing Director for payment to the specified executives is 100% (2006 100%). A minimum level of performance must
be achieved before any annual incentive is paid. Therefore, the minimum potential value of the annual incentive which was
granted in respect of the 2007 financial year was nil. The maximum value of annual incentive grants made during the 2007
financial year is the amount specified in this table. The incentive payments will be paid during September 2007.
3.
4.
"Non monetary" relates to the sacrifice components of salary and fees, as applicable.
“Other” relates to the amount of allowances (business kilometre reimbursement) paid during the year.
5. Represents superannuation contributions made on behalf of key management personnel in accordance with the Superannuation
Guarantee Charge legislation.
6. Represents provisions expensed by the company during the financial year in relation to the contractual retirement benefit
payment to which the non-executive director will be entitled upon retirement from office. As disclosed in the 2005 Concise Annual
Report, the retirement benefit entitlements were crystalised as at 31 August 2005 with the following entitlements payable: RA Guy
$341,052; RN Johanson $170,434; NJ Axelby $93,471; JL Dawson $126,326; DJ Erskine $125,506; TJ O’Dwyer $87,782; KE
Roache $191,722. The respective entitlements have been paid-out by the Bank in accordance with each director’s instructions
since 31 August 2005. The final retirement benefit entitlements were adjusted for Superannuation Guarantee Charge
contributions and associated earnings up to 31 August 2005.
7. The amounts disclosed relate solely to long service leave accruals.
47
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
8. Represents the fair value of grants under the Executive Incentive Plan established in 2006.The realisation of the value of the
grants is subject to the achievement of the performance conditions as described in the Remuneration Report. No options or
performance rights vested, lapsed or were forfeited during the year. Details of the fair value calculation are presented at Note 38
to the financial statements. For the reasons set out in this Report, no equity grants were made to the Managing Director or the
Named Executives during the 2006 financial year. Accordingly, 0% of the remuneration for the Managing Director and Named
Executives for the 2006 financial year consisted of options and rights. There were no equity and other remuneration components
paid to non-executive directors in accordance with the non-executive director remuneration policy.
9.
“Other” relates to the notional value of the interest free loan benefit provided under the legacy Employee Share Ownership Plan.
A notional benefit is calculated using the average outstanding loan balance and the bank’s average cost of funds. Details in
respect to loans provided to the executive under the Employee Share Ownership Plan are disclosed in the full financial
statements at Note 36. As part of the Managing Director’s remuneration arrangements, the Board approved a benefit of a
deferred payment arrangement to finance the purchase of shares in Bendigo Community Telco. The benefit of the deferred
payment arrangement is also included as remuneration under “Short -Term - Other” column in respect to the managing director.
10. Fees include Chairman’s allowance of $92,398 in respect to Mr R N Johanson.
11. Mr Guy retired from the Board on 31 August 2006.
12. Represents the value of cash bonus and share based payment calculated as percentage of aggregate reward. Shareholders at
the 2006 Annual General Meeting approved the grant of two tranches under the Executive Incentive Plan to the managing
director in 2007. For the reasons explained in the 2006 Notice of Annual General Meeting, the value of the first grant (tranche 1)
has been excluded for the purposes of the Managing Director’s calculation. The notional value of the interest-free loan has also
been excluded for the purposes of the calculations.
48
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
(c) Performance Rights and Options granted as part of remuneration
During the financial year performance rights and performance options were granted as equity compensation
under the Executive Incentive Plan (“Plan”) to the key management personnel. Refer to Note 36 for details
and assumptions used in calculations.
Grant
date
Grant
Number
Value per
right / option
at grant date
Value of
rights/options
granted during
the year
Value of
rights
vested/optio
ns exercised
during year(1)
Value of
rights/optio
ns lapsed
during
year(1)
Total value of rights/
options granted,
exercised and
lapsed during year(1)
% of
Remuneration
consisting of
rights &
options for the
year(2)
R Hunt – tranche 1 Rights
Options
– tranche 2 Rights
Options
3.11.06
3.11.06
3.11.06
3.11.06
19,043
120,349
25,391
160,465
M Hirst
G Gillett
Rights
Options
3.11.06
3.11.06
7,058
44,601
Rights
Options
3.11.06
3.11.06
5,944
37,559
C Langford
Rights
Options
3.11.06
3.11.06
6,501
41,080
V Kelly
M Baker
R Jenkins
Rights
Options
3.11.06
3.11.06
4,829
30,516
Rights
Options
3.11.06
3.11.06
4,829
30,516
Rights
Options
3.11.06
3.11.06
5,386
34,038
R Hasseldine
Rights
Options
3.11.06
3.11.06
3,752
23,709
$13.39
$1.90
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$12.91
$2.07
$254,986
$228,834
$327,798
$332,163
$91,119
$92,324
$76,737
$77,747
$83,928
$85,036
$62,342
$63,168
$62,342
$63,168
$69,533
$70,459
$48,438
$49,078
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$254,986
$228,834
$327,798
$332,163
$91,119
$92,324
$76,737
$77,747
$83,928
$85,036
$62,342
$63,168
$62,342
$63,168
$69,533
$70,459
$48,438
$49,078
27%
18%
16%
17%
17%
18%
18%
14%
(1) No options or performance rights vested, lapsed or were forfeited during the year. The first exercise date for the options and right
grants is 30/6/09 (30/6/08 in relation to tranche 1 for Mr R Hunt). The last exercise date for the options, excluding tranche 1
above, is 31/7/11 and 30/6/10 for the rights. The last exercise date for the tranche 1 grants to Mr Hunt are: options - 31/7/10 and
rights - 30/6/09.
The percentage of the long term incentive grant for the financial year to the Managing Director and named executives is 100 %
with 0 % forfeited. A minimum level of performance must be achieved before any rights or options vest. Therefore, the minimum
potential value of the grants made in the financial year was nil. The maximum value of the grants made during the 2007 financial
year is the amount specified in this table.
(2) Shareholders at the 2006 Annual General Meeting approved the grant of two tranches under the Executive Incentive Plan to the
managing director in 2007. For the reasons explained in the 2006 Notice of Annual General Meeting, the value of the first grant
(tranche 1) has been excluded for the purposes of the Managing Director’s calculation. The notional value of the interest-free loan
has also been excluded for the purposes of the calculations.
49
BENDIGO BANK LTD
ABN 11 068 049 178
Meetings of directors
Full Financial Report
Period ending 30 June 2007
The number of meetings of the Bank’s directors (including meetings of committees of directors) held during
the year ended 30 June 2007 and the number attended by each director were:
Board of
directors
Meetings
Audit4
Credit
Risk
Property
Governance
IT Strategy
Meetings in Committees
Attended
by:
R N
Johanson2
R G Hunt AM
N J Axelby
J L Dawson
D J Erskine
T J O’Dwyer
D L Radford3
K E Roache
A D
Robinson
R A Guy1
OAM
A
B
A
B
A
B
A
B
A
B
A
B
A
B
23
23
8
6
23
23
23
23
23
23
23
23
23
23
23
22
22
23
21
23
8
8
8
6
8
6
11
11
11
11
11
11
11
9
10
9
4
6
6
4
5
6
6
6
6
6
5
6
2
2
2
1
2
2
2
2
1
1
1
1
5
5
5
5
5
2
5
5
5
5
4
2
5
5
5
5
5
5
5
5
1 Mr RA Guy resigned from the board on 31 August 2006
2 Mr RN Johanson resigned from the Risk Committee on 31 August 2006
3 Ms DL Radford was appointed to the Audit Committee on 25 September 2006
4 Mr RG Hunt attends audit committee meetings which consider the Group’s half-year and full year result announcement and the
statutory financial statements.
A = Number eligible to attend
B = Number attended
Insurance of Directors and Officers
During or since the financial year end, the Company has paid premiums to insure certain officers of the
company and related bodies corporate. The officers of the Company covered by the insurance policy
include the directors listed above, the secretary and directors or secretaries of controlled entities who are
not also directors and secretaries of Bendigo Bank Limited, and general managers of each of the divisions
of the economic entity.
Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality
clause of the contract of insurance. The Company has not provided any insurance for an independent
auditor of the Company or a related body corporate.
Indemnification of Officers
The constitution stipulates that the Company is to indemnify, to the extent permitted by law, each officer or
employee of the Company against liabilities (including costs, damages and expenses incurred in defending
any proceedings or appearing before any court, tribunal, government authority or other body) incurred by an
officer or employee in, or arising out of the conduct of the business of the Company or arising out of the
discharge of the officer's or employee's duties.
50
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
As provided under the Company's Constitution, the Company has entered into deeds providing for
indemnity, insurance and access to documents for each director who held office during the year. The deed
requires the Company to indemnify, to the extent permitted by law, the director against all liabilities
(including costs, damages and expenses incurred in defending any proceedings or appearing before any
court, tribunal, government authority or other body) incurred by the director in, or arising out of conduct of
the business of the Company, an associated entity of the Company or in the discharge of their duties as a
director of the Company, a subsidiary or associated company.
Directors' Interests in Equity
The relevant interest of each director (in accordance with section 205G of the Corporations Act 2001) in
shares of the company or a related body corporate at the date of this report is as follows:
Director
R N Johanson
R G Hunt AM(1)
N J Axelby
J L Dawson
D J Erskine
T J O’Dwyer
D L Radford
A D Robinson
K E Roache
Ordinary shares
Preference shares
183,496
809,107
26,482
13,280
240,220
50,300
1,000
2,500
45,156
500
-
50
100
-
-
-
-
200
(1) Includes 600,000 shares issued under the Bendigo Employee Share Ownership Plan.
Environmental Regulation
The consolidated entity's operations are not subject to any significant environmental regulations under
either Commonwealth or State legislation. However, the Board believes that the consolidated entity has
adequate systems in place for the management of its environmental requirements and is not aware of any
breach of those environmental requirements as they apply to the consolidated entity.
Company Secretary
David A Oataway B Bus, CA, ACIS
Mr Oataway has been the company secretary of Bendigo Bank Limited for nine years. Prior to this position
he held roles within the Bank's internal audit and secretariat departments. Prior to joining the Bank he was
employed by Melbourne and Bendigo based chartered accounting firms.
51
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Auditor Independence and Non-audit Services
The Company’s audit committee has conducted an assessment of the independence of the external auditor
for the year ended 30 June 2007. The assessment was conducted on the basis of the Company’s audit
independence policy and the requirements of the Corporations Act 2001. The assessment included a
review of non-audit services provided by the auditor and an assessment of the independence declaration
issued by the external auditor for the year ended 30 June 2007 The audit committee's assessment
confirmed that the independence requirements have been met. The audit committee’s assessment was
accepted by the full Board. A copy of the auditor’s independence declaration is provided at the end of this
Directors’ Report.
Non-Audit Services
Non-audit services are those services paid or payable to the Group’s external auditor, Ernst & Young, which
do not relate to Group statutory audit engagements.
Details of all non-audit services for the year ended 30 June 2007:
(a) Audit related fees:
In its capacity as the Group’s external auditor, Ernst & Young are periodically engaged to provide
assurance services to the Group in accordance with Australian Auditing Standards. All assignments
are subject to engagement letters in accordance with Australian Auditing Standards. They include
audit services required for regulatory and prudential purposes and the amounts shown are GST
exclusive.
Service Category
APRA Prudential Standard APS310 report
Australian Financial Services Licence Audits
APRA Prudential Standard GPS220 report
Fees
(excluding GST)
$
Entity
53,500
42,000
16,400
Bendigo Bank Limited
Note 1
Sunstate Lenders Mortgage
Insurance
APRA Targeted Review – APS 310 report
45,000
Bendigo Bank Limited
Trust Deed Report
Report on VSCL debenture prospectus information
APRA peer actuary review report – GPS 310
Sub total – audit related fees
2,575
6,180
18,000
$183,655
Bendigo Bank Limited
VSCL
Sunstate Lenders Mortgage
Insurance
Note 1: Amount attributed to Bendigo Bank and subsidiary companies: Sandhurst Trustees Limited, Victorian Securities
Corporation Ltd, Worley Securities Pty Ltd, Bendigo Financial Planning Limited and National Assets Securitisation Corporation
52
BENDIGO BANK LTD
ABN 11 068 049 178
(b) Consulting fees:
Full Financial Report
Period ending 30 June 2007
Service
Fees
(excluding GST)
$
Entity
Tax compliance software and support service fee
Tax advice
Professional Services
Sub total – Consulting fees
Total – non audit services
20,000
52,853
Bendigo Bank Limited
Bendigo Bank Limited &
Community
Developments Australia
55,000
Bendigo Bank Limited
$127,853
$311,508
The Audit Committee has reviewed the nature and scope of the above non-audit services provided by the
external auditor. In doing so, the Audit Committee has assessed that the provision of those services is
compatible with the general standard of independence for auditors imposed by the Corporations Act.
This assessment was made on the basis that the non-audit services performed did not represent the
performance of management functions or the making of management decisions, nor were the dollar
amounts of the non-audit fees considered sufficient to impair the external auditor's independence. As noted
previously, this Audit Committee's assessment has been reviewed and accepted by the full Board.
53
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Auditor's Independence Declaration to the Directors of Bendigo Bank Limited
In relation to our audit of the financial report of Bendigo Bank Limited for the year ended 30 June 2007, to
the best of my knowledge and belief, there have been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Brett Kallio
Partner
11 September 2007
Ernst & Young
Liability limited by the Accountants Scheme, approved
under the Professional Standards Act 1994 (NSW).
Signed in accordance with a resolution of the Board of Directors
R N Johanson
R G Hunt AM
Chairman
11 September 2007
Managing Director
54
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
INCOME STATEMENT
for the year ended 30 June 2007
Income
Net interest income
Interest income
Interest expense
Net interest income
Other revenue
Dividends
Fees
Commissions
Other revenue
Total other revenue
Income
Profit on sale of SMF shares
Other income
Total income
Share of associates' and joint ventures net profit/losses
Total income after interest expense
Expenses
Bad and doubtful debts on loans and receivables
Bad and doubtful debts
Bad and doubtful debts recovered
Total bad and doubtful debts on loans and receivables
Other expenses
Finance costs
Staff and related costs
Occupancy costs
Amortisation of intangibles
Property, plant & equipment costs
Fees and commissions
Other
Total other expenses
Profit before income tax expense
Income tax expense
Net profit for the period
Net profit for the period attributable to:
Minority interest
Members of the Parent
Note
Consolidated
Bendigo Bank
2007
$m
1,058.6
701.5
357.1
3.8
114.4
48.1
10.9
177.2
-
6.0
6.0
21.9
562.2
8.8
(0.6)
8.2
0.4
187.7
31.5
5.4
10.3
20.2
120.6
376.1
177.9
(56.2)
121.7
2006
$m
2007
$m
2006
$m
907.5
592.4
315.1
2.7
103.7
41.6
13.5
161.5
15.5
2.6
18.1
22.2
516.9
7.3
(0.3)
7.0
0.3
170.8
29.3
5.6
9.9
18.9
109.4
344.2
165.7
(49.0)
116.7
1,009.1
657.6
351.5
41.2
105.6
10.0
16.8
173.6
-
4.1
4.1
-
844.2
538.2
306.0
31.3
94.2
8.0
15.3
148.8
15.5
0.6
16.1
-
529.2
470.9
7.9
(0.6)
7.3
0.4
171.6
42.6
4.1
9.5
16.7
127.8
372.7
149.2
(37.0)
112.2
6.6
(0.3)
6.3
0.3
154.2
38.6
3.7
8.8
15.5
105.0
326.1
138.5
(33.6)
104.9
4
4
4
4
4
4
4
4
4
4
4
4
4
6
34
(0.1)
121.8
-
116.7
-
112.2
-
104.9
Earnings per share for profit attibutable to the ordinary equity holders of the Company:
Basic earnings per ordinary share (cents per share)
Diluted earnings per ordinary share (cents per share)
Franked dividends per ordinary share (cents per share)
9
9
10
81.9
81.1
58.0
81.5
80.6
52.0
55
BENDIGO BANK LTD
ABN 11 068 049 178
BALANCE SHEET
as at 30 June 2007
Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Amounts receivable from controlled entities
Investments in associates and joint ventures accounted for
using the equity method
Property, plant & equipment
Assets held for sale
Investment property
Intangible assets and goodwill
Deferred tax assets
Other assets
Total Assets
Liabilities
Due to other financial institutions
Deposits
Derivatives
Other payables
Income tax payable
Provisions
Deferred tax liabilities
Subordinated debt - at amortised cost
Total Liabilities
Net Assets
Equity
Equity attributable to equity holders of the parent
Issued capital -ordinary
Perpetual non-cumulative redeemable convertible
preference shares
ESOP shares
Reserves
Retained earnings
Total parent interests
Total minority interest
Total Equity
Full Financial Report
Period ending 30 June 2007
Note
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
14
14
41
15
16
20
17
18
21
22
23
24
25
6
27
14
28
41
29
30
6
31
32
32
33
34
257.6
71.5
74.9
428.8
130.4
-
1,614.4
13,843.5
-
156.3
61.5
93.4
34.2
93.7
32.6
108.8
17,001.6
184.0
15,231.0
34.6
151.3
16.3
40.4
21.8
307.2
15,986.6
1,015.0
270.8
209.0
28.4
360.9
94.4
-
1,370.6
12,436.7
-
143.5
81.1
-
-
89.6
27.4
83.7
15,196.1
166.3
13,599.8
20.0
140.0
9.9
37.4
16.1
307.1
14,296.6
899.5
203.5
71.1
74.9
428.8
127.9
134.8
1,530.5
13,483.7
101.0
-
53.6
-
-
54.2
31.5
239.7
16,535.2
184.0
14,822.7
35.4
125.4
16.3
39.9
20.8
307.2
15,551.7
983.5
214.4
209.0
28.4
360.9
94.2
151.2
1,291.8
11,948.0
40.1
-
40.9
-
-
13.5
26.9
190.2
14,609.5
166.3
13,063.1
22.2
110.8
9.9
36.4
15.2
307.1
13,731.0
878.5
605.2
564.1
605.2
564.1
88.5
(40.4)
130.0
232.4
1,015.7
(0.7)
1,015.0
88.3
(25.6)
78.8
194.5
900.1
(0.6)
899.5
88.5
(40.4)
117.6
212.6
983.5
-
983.5
88.3
(25.6)
69.0
182.7
878.5
-
878.5
56
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
CASH FLOW STATEMENT
for the year ended 30 June 2007
Note
Consolidated
Bendigo Bank
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and other items of a similar nature received
Interest and other costs of finance paid
Receipts from customers (excluding effective interest)
Payments to suppliers and employees
Dividends received
Income taxes paid
Net cash flows from operating activities
13
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows for purchases of property, plant and equipment
Cash proceeds from sale of property, plant and equipment
Cash paid for purchases of intangible software
Cash paid for purchases of equity investments
Cash proceeds from sale of equity investments
Net increase in balance of loans outstanding
Net increase in balance of investment securities
Total disposal consideration on derecognition of a subsidiary
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from preference share instalment
Net increase in balance of retail deposits
Net increase/(decrease) in balance of wholesale deposits
Proceeds from issue of subordinated debt
Repayment of subordinated debt
Dividends paid
Repayment of ESOP shares
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
14
2007
$m
1,038.7
(664.5)
172.5
(420.7)
15.7
(43.9)
97.8
(117.8)
1.0
(1.6)
(35.3)
7.7
(1,412.1)
(278.1)
-
(1,836.2)
0.2
831.7
789.3
60.0
(60.0)
(57.0)
5.8
1,570.0
(168.4)
313.5
145.1
2006
$m
904.8
(573.6)
158.9
(288.4)
15.1
(45.6)
171.2
(44.6)
5.8
(9.0)
(28.7)
2.2
(976.1)
(161.5)
0.7
(1,211.2)
44.9
1,286.2
(277.5)
75.0
(30.1)
(48.1)
4.4
1,054.8
14.8
298.7
313.5
2007
$m
985.6
(623.9)
128.2
(407.6)
41.2
(33.4)
90.1
(28.6)
0.7
(1.5)
(59.2)
5.4
(1,596.4)
(275.7)
-
(1,955.3)
0.2
845.6
904.1
60.0
(60.0)
(57.0)
5.8
1,698.7
(166.5)
257.1
90.6
2006
$m
838.3
(519.4)
117.0
(267.6)
31.3
(40.1)
159.5
(17.0)
1.7
(8.8)
(28.7)
0.4
(1,151.1)
(146.8)
-
(1,350.3)
44.9
1,281.3
(34.7)
75.0
(30.1)
(48.1)
4.4
1,292.7
101.9
155.2
257.1
57
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED
At 1 July 2005
Opening balance b/fwd
Net gains on AFS fin assets
Gains/(losses) on c/flow hedges
Total income and expenses
recognised directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from asset reval res
Movements in general reserve
for credit losses
Equity dividends
At 30 June 2006
At 1 July 2006
Opening balance b/fwd
Net gains on AFS fin assets
Gains/(losses) on c/flow hedges
Gains/(loss) on c/flow h-assoc
Increase in employee benef res
After tax incr in asset reval res
Total income and expenses
recognised directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from asset reval res
Movements in general reserve
for credit losses
Equity dividends
At 30 June 2007
Attributable to equity holders of Bendigo Bank Limited
Minority
interest
Total
equity
Issued
capital
ESOP
Perp non-cum
shares
redeem conv
Retained
earnings
Other
reserves
Total
pref shares
$m
$m
$m
$m
$m
$m
$m
$m
148.4
-
-
-
116.7
116.7
-
-
-
0.3
(5.0)
(65.9)
194.5
194.5
-
-
-
-
-
-
121.8
121.8
-
-
-
0.1
(6.5)
(77.5)
232.4
64.1
7.3
2.7
10.0
-
10.0
-
-
-
(0.3)
5.0
-
78.8
78.8
6.5
30.9
1.6
6.5
(0.7)
44.8
-
44.8
-
-
-
(0.1)
6.5
-
771.8
7.3
2.7
10.0
116.7
126.7
17.8
45.3
4.4
-
-
(65.9)
900.1
900.1
6.5
30.9
1.6
6.5
(0.7)
44.8
121.8
166.6
20.5
0.2
5.8
-
-
(77.5)
(0.4)
-
-
-
(0.2)
(0.2)
-
-
-
-
-
-
(0.6)
(0.6)
-
-
-
-
-
-
(0.1)
(0.1)
-
-
-
-
-
-
771.4
7.3
2.7
10.0
116.5
126.5
17.8
45.3
4.4
-
-
(65.9)
899.5
899.5
6.5
30.9
1.6
6.5
(0.7)
44.8
121.7
166.5
20.5
0.2
5.8
-
-
(77.5)
130.0
1,015.7
(0.7)
1,015.0
546.3
-
-
-
-
-
17.8
-
-
-
-
-
564.1
564.1
-
-
-
-
-
-
-
-
41.1
-
-
-
-
-
605.2
(30.0)
-
-
-
-
-
-
-
4.4
-
-
-
(25.6)
(25.6)
-
-
-
-
-
-
-
-
(20.6)
-
5.8
-
-
-
(40.4)
43.0
-
-
-
-
-
-
45.3
-
-
-
-
88.3
88.3
-
-
-
-
-
-
-
-
-
0.2
-
-
-
-
88.5
58
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to equity holders of Bendigo Bank Limited
Issued
capital
ESOP
Perp non-cum
shares
redeem conv
Retained
earnings
Other
reserves
Total
Equity
$m
$m
$m
$m
$m
$m
pref shares
BENDIGO BANK
At 1 July 2005
Opening balance b/fwd
Net gains-AFS financial assets
Gains/(losses) on c/flow hedges
Total income and expense
for the year recognised
directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from asset reval res
Movements in general reserve
for credit losses
Equity dividends
Other
546.3
-
-
-
-
-
17.8
-
-
-
-
-
-
(30.0)
-
-
-
-
-
-
-
4.4
-
-
-
-
43.0
-
-
-
-
-
-
45.3
-
-
-
-
-
At 30 June 2006
564.1
(25.6)
88.3
At 1 July 2006
Opening balance b/fwd
Net gains-AFS financial assets
Increase-employee benefits res
Gains/(losses) on c/flow hedges
Total income and expense
for the year recognised
directly in equity
Profit for the year
Total income/(expense)
for the year
Issue of share capital
Pref share instalment (net)
Reduction in ESOP shares
Transfer from asset reval res
Movements in general reserve
for credit losses
Equity dividends
Other
564.1
-
-
-
-
-
-
41.1
-
-
-
-
-
-
(25.6)
-
-
-
-
-
-
(20.6)
-
5.8
-
-
-
-
88.3
-
-
-
-
-
-
-
0.2
-
-
-
-
-
At 30 June 2007
605.2
(40.4)
88.5
59
147.5
-
-
-
104.9
104.9
-
-
-
-
(3.9)
(65.9)
0.1
182.7
182.7
-
-
-
-
112.2
112.2
-
-
-
-
(4.7)
(77.5)
(0.1)
212.6
55.7
7.1
2.3
9.4
-
9.4
-
-
-
-
3.9
-
-
69.0
69.0
6.3
6.6
30.9
43.8
-
43.8
-
-
-
-
4.7
-
0.1
117.6
762.5
7.1
2.3
9.4
104.9
114.3
17.8
45.3
4.4
-
-
(65.9)
0.1
878.5
878.5
6.3
6.6
30.9
43.8
112.2
156.0
20.5
0.2
5.8
-
-
(77.5)
-
983.5
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The financial report of Bendigo Bank Limited (the Company) for the year ended 30 June 2007 was
authorised for issue in accordance with a resolution of the directors on 11 September 2007.
Bendigo Bank Limited is a company limited by shares incorporated in Australia whose shares are publicly
traded on the Australian stock exchange.
The domicile of Bendigo Bank Limited is Australia.
The Group’s functional and presentation currency is AUD ($).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
Bendigo Bank Limited is a “prescribed corporation” in terms of the Corporations Act 2001. Financial reports
prepared in compliance with the Banking Act are deemed to comply with the accounts provisions of the
Corporations Act 2001.
The financial report is a general purpose financial report which has been prepared in accordance with the
Banking Act, Australian Accounting Standards, Corporations Act 2001 and the requirements of law so far as
they are applicable to Australian banking corporations.
The financial report has been prepared in accordance with the historical cost or amortised cost for loans
and receivables and financial liabilities, except for investment properties, land and buildings, derivative
financial instruments and available-for-sale financial assets which are measured at their fair value.
The amounts contained in the financial statements have been rounded off under the option available to the
Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.
The Class Order allows for rounding to the nearest $'00,000.
2.2 Statement of compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial
report, comprising the financial statements and notes thereto, complies with International Financial
Reporting Standards (IFRS).
Recently issued or amended standards not yet effective.
Australian Accounting Standards that have recently been issued or amended but are not yet effective have
not been adopted for the annual reporting period ending 30 June 2007:
Reference
Title
Summary
Amending standard
issued as a
consequence of AASB
7 Financial Instruments:
Disclosures.
AASB
2005-10
Amendments to
Australian
Accounting
Standards [AASB
132, AASB 101,
AASB 114, AASB
117, AASB 133,
AASB 139, AASB
1, AASB 4, AASB
1023 & AASB
1038]
Application
date for
Group
1 July 2007
Application
date of
standard
1 January
2007
Impact on Group financial
report
AASB 7 is a disclosure
standard so will have no
direct impact on the
amounts included in the
Group’s financial
statements. However, the
amendments will result in
changes to the financial
instrument disclosures
included in the Group’s
financial report.
60
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Reference
Title
Summary
Application
date of
standard
1 March
2007
Amendments to
Australian
Accounting
Standards arising
from AASB
Interpretation 11
[AASB 2]
Amending standard
issued as a
consequence of AASB
Interpretation 11 AASB
2 – Group and Treasury
Share Transactions.
AASB
2007-1
AASB
2007-2
AASB
2007-3
AASB
2007-4
AASB
2007-6
Amendments to
Australian
Accounting
Standards arising
from AASB
Interpretation 12
[AASB 1, AASB
117, AASB 118,
AASB 120, AASB
121, AASB 127,
AASB 131 & AASB
139]
Amendments to
Australian
Accounting
Standards arising
from AASB 8
[AASB 5, AASB,
AASB 6, AASB
102, AASB 107,
AASB 119, AASB
127, AASB 134,
AASB 136, AASB
1023 & AASB
1038]
Amendments to
Australian
Accounting
Standards arising
from ED 151 and
Other Amendments
[AASB 1, 2, 3, 4, 5,
6, 7, 102, 107, 108,
110, 112, 114, 116,
117, 118, 119, 120,
121, 127, 128, 129,
130, 131, 132, 133,
134, 136, 137, 138,
139, 141, 1023 &
1038]
Amendments to
Australian
Accounting
Standards arising
from AASB 123
[AASB 1,
AASB 101,
AASB 107,
AASB 111,
1 January
2008
Amending standard
issued as a
consequence of AASB
Interpretation 12
Service Concession
Arrangements.
Amending standard
issued as a
consequence of AASB
8 Operating Segments.
1 January
2009
Application
date for
Group
1 July 2007
1 July 2008
Impact on Group financial
report
This is consistent with the
Group's existing accounting
policies for share-based
payments, so the
amendments are not
expected to have any
impact on the Group's
financial report.
The Group currently has no
service concession
arrangements or public-
private-partnerships (PPP),
so the amendments are not
expected to have any
impact on the Group's
financial report.
1 July 2009
AASB 8 is a disclosure
standard so will have no
direct impact on the
amounts included in the
Group's financial
statements. However the
amendments may have an
impact on the Group’s
segment disclosures as
segment information
included in internal
management reports is
more detailed than is
currently reported under
AASB 114 Segment
Reporting.
Amendments arising as
a result of the AASB
decision that, in
principle, all options that
currently exist under
IFRSs should be
included in the
Australian equivalents
to IFRSs and additional
Australian disclosures
should be eliminated,
other than those now
considered particularly
relevant in the
Australian reporting
environment.
Amending standard
issued as a
consequence of
revisions to AASB 123
Borrowing Costs.
61
1 July 2007 These amendments are
expected to reduce the
extent of some disclosures
in the Group's financial
report.
1 July 2007
1 July 2009
1 January
2009
The amendments to AASB
123 require that all
borrowing costs associated
with a qualifying asset be
capitalised. The Group has
no borrowing costs
associated with qualifying
assets and as such the
amendments are not
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Reference
Title
Summary
AASB
2007-7
AASB 116 &
AASB 138 and
Interpretations 1 &
12]
Amendments to
Australian
Accounting
Standards
[AASB 1, AASB 2,
AASB 4, AASB 5,
AASB 107 &
AASB 128]
AASB 7
Financial
Instruments:
Disclosures
AASB 8
Operating
Segments
AASB 123
(amended)
Borrowing Costs
AASB
Interpretation
10
Interim Financial
Reporting and
Impairment
AASB
Interpretation
11
AASB 2 – Group
and Treasury
Share Transactions
Amending standards for
wording errors,
discrepancies and
inconsistencies.
New standard replacing
disclosure requirements
of AASB 130
Disclosures in the
Financial Statements of
Banks and Similar
Financial Institutions
and AASB 132
Financial Instruments:
Disclosure and
Presentation.
New standard replacing
AASB 114 Segment
Reporting, which adopts
a management
approach to segment
reporting.
The amendments to
AASB 123 require that
all borrowing costs
associated with a
qualifying asset must be
capitalised.
Addresses an
inconsistency between
AASB 134 Interim
Financial Reporting and
the impairment
requirements relating to
goodwill in AASB 136
Impairment of Assets
and equity instruments
classified as available
for sale in AASB 139
Financial Instruments:
Recognition and
Measurement.
Addresses whether
certain types of share-
based payment
transactions with
employees (or other
suppliers of good and
services) should
be accounted for as
62
Application
date of
standard
Impact on Group financial
report
Application
date for
Group
expected to have any
impact on the Group's
financial report.
1 July 2007 The amendments are minor
1 July 2007
and do not affect the
recognition, measurement
or disclosure requirements
of the standards. Therefore
the amendments are not
expected to have any
impact on the Group's
financial report.
1 January
2007
Refer to AASB 2005-10
above.
1 July 2007
1 January
2009
Refer to AASB 2007-3
above.
1 July 2009
1 January
2009
Refer to AASB 2007-6
above.
1 July 2009
1 July 2007
1 November
2006
The prohibitions on
reversing impairment losses
in AASB 136 and AASB
139, which are to take
precedence over the more
general statement in AASB
134, are not expected to
have any impact on the
Group’s financial report.
1 March
2007
Refer to AASB 2007-1
above.
1 July 2007
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Reference
Title
Summary
Application
date of
standard
Impact on Group financial
report
Application
date for
Group
equity-settled or as
cash-settled
transactions under
AASB 2 Share-based
Payment. It also
specifies the accounting
in a subsidiary’s
financial statements for
share-based payment
arrangements involving
equity instruments of
the parent.
Clarifies how operators
recognise the
infrastructure as a
financial asset and/or
an intangible asset –
not as property, plant
and equipment.
Deals with the
accounting for customer
loyalty programmes,
which are used by
companies to provide
incentives to their
customers to buy their
products or use their
services.
AASB
Interpretation
12
Service
Concession
Arrangements
IFRIC
Interpretation
13
Customer Loyalty
Programmes
1 January
2008
Refer to AASB 2007-2
above.
1 July 2008
1 July 2008
It is anticipated that this
interpretation will not have
any material impact on
Group’s financial report.
1 July 2008
63
BENDIGO BANK LTD
ABN 11 068 049 178
2.3
Basis of consolidation
Full Financial Report
Period ending 30 June 2007
The consolidated financial statements comprise the financial statements of Bendigo Bank Limited and all of
its controlled entities (“the group”).
A controlled entity is any entity (including special purpose entities) over which Bendigo Bank Limited has
the power to govern directly or indirectly decision-making in relation to financial and operating policies, so
as to require that entity to conform with the objectives of Bendigo Bank Limited.
Controlled entities prepare financial reports for consolidation in conformity with group accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist. The financial
statements of controlled entities are prepared for the same reporting period as the parent company.
All inter-company balances and transactions between entities in the economic entity have been eliminated
on consolidation. Where a controlled entity has been sold or acquired during the year its operating results
have been included to the date control ceased or from the date control was obtained.
The acquisitions of subsidiaries is accounted for using the purchase method of accounting. The purchase
method of accounting involves allocating the cost of the business combination to the fair value of the assets
acquired and the liabilities and contingent liabilities assumed at the date of acquisition.
Minority interests represent the interests of Community Exchanges Australia Limited and Community Telco
Australia Limited (until August 2005), not held by the group.
2.4 Business combinations
The purchase method of accounting is used to account for all business combinations regardless of whether
equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given,
shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the
combination. Where equity instruments are issued in a business combination, the fair value of the
instruments is their published price at the date of exchange unless, in rare circumstances, it can be
demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and
that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs
arising on the issue of equity instruments are recognised directly in equity.
Except for non-current assets or disposal groups classified as held for sale (which are measured at fair
value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the cost of the business combination over the net fair value of
the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition
is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the
difference is recognised as a gain in the income statement, but only after a reassessment of the identifiable
and measurement of the net assets acquired.
Where settlement of any part of the consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
2.5
Changes in accounting policies
The accounting policies are consistent with those applied in the previous financial year and corresponding
interim period, except for the investment property held by Homesafe Trust.
The Group has adopted a fair value valuation method in relation to this asset, previously carried at cost.
The change in carrying value better reflects the value of the asset and recognises this movement in
valuation in each accounting period.
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BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The financial impact of this change is to increase the carrying value of the asset as disclosed in the balance
sheet as investment property and to increase income as disclosed in the income statement as other
income.
The adjustment to the 2006/07 financial statements has increased the value of the above items by $1.5
million. It is impractical to estimate the increases that may be recognised in future years.
2.6 Significant accounting judgments, estimates and assumptions
(i) Significant accounting judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognised in the financial statements:
Operating Lease Commitments – Group as Lessor
The entity has entered into commercial property leases on its investment property portfolio. The entity
has determined that it retains all the significant risks and rewards of ownership of these properties and
has thus classified the leases as operating leases.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that
it is probable that future taxable profits will be available to utilise those temporary differences.
(ii) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. The key estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of certain assets and liabilities within the next
annual reporting period are:
Impairment of goodwill and intangibles with indefinite useful lives.
The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least
on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units
to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in
this estimation of recoverable amount and the carrying amount of goodwill and intangibles with
indefinite useful lives are discussed in note 26.
Impairment of financial assets and property, plant & equipment.
The group has to make a judgment as to whether an impairment trigger is evident at each balance date.
If a trigger is evident the asset must be tested for impairment, which requires the estimation of future
cash flows and the use of an appropriate discount rate.
Impairment of non-financial assets other than goodwill
The group assess impairment of all assets at each reporting date by evaluating conditions specific to
the group and to the particular asset that may lead to impairment. If an impairment trigger exists the
recoverable amount of the asset is determined. This involves value in use calculations, which
incorporate a number of key estimates and assumptions.
Employee benefits (leave provisions)
The carrying amount of leave liabilities is calculated based on assumptions and estimates of when
employees will take leave and the prevailing wage rates at the time the leave will be taken. Long
service leave liability also requires a prediction of the number of employees that will achieve entitlement
to long service leave.
65
BENDIGO BANK LTD
ABN 11 068 049 178
2.7
Securitisations
Full Financial Report
Period ending 30 June 2007
Securitised positions are held through a number of Special Purpose Entities (“SPEs”). As the Bank is
exposed to the majority of the residual risk associated with these SPEs, their underlying assets, liabilities,
revenues and expenses are reported in the Bank’s consolidated balance sheet and income statement.
2.8 Trustee and funds management activities
Controlled entities of the Bank act as the Trustee and/or Manager for a number of funds. The assets and
liabilities of these funds are not included in the consolidated financial statements. The parent entity does not
have direct or indirect control of the funds as defined by Accounting Standard AASB 127 "Consolidated and
Separate Financial Statements". Commissions and fees generated by the funds management activities are
brought to account when earned.
2.9 Foreign currency transactions and balances
Both the functional and presentation currency of Bendigo Bank Limited and its subsidiaries is Australian
dollars (AUD). Transactions in foreign currencies are initially recorded in the functional currency at the
exchange rates ruling on the date of the transaction.
All amounts are expressed in Australian currency and all references to "$" are to Australian dollars unless
otherwise stated. Amounts receivable and payable in foreign currencies at balance date are converted at
the rates of exchange ruling at that date. Exchange differences relating to amounts payable and receivable
in foreign currencies are brought to account as exchange gains or losses in the income statement in the
financial year in which the exchange rates change.
2.10 Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the cash flow statement, cash includes cash on hand and in banks, short-term money
market investments readily convertible into cash within 2 working days, net of outstanding overdrafts.
Bank overdrafts are carried at amortised cost. Interest is charged as an expense as it accrues.
2.11 Classification of financial instruments
Financial instruments are classified into one of five categories, which determines the accounting treatment
of the financial instrument.
The classifications are:
Loans & receivables - measured at amortised cost
measured at amortised cost
Held to maturity -
measured at fair value with changes in fair value charged to the income
Held for trading -
statement
measured at fair value with changes in fair value taken to equity
Available for sale -
Non-trading liabilities - measured at amortised cost
All derivative contracts are recorded at fair value in the balance sheet.
66
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
2.12 Financial assets and financial liabilities
All investments are initially recognised at cost, being the fair value of the consideration given and including
acquisition charges associated with the investment. After initial recognition, investments, which are
classified as held for trading and available-for-sale, are measured at fair value. Gains or losses on
investments held for trading are recognised in the income statement. The group currently does not have
any investments held for trading.
All regular way purchases and sales of financial assets are recognised on the settlement date ie. the date
the Group settles the purchase of the asset. Regular way purchases or sales are purchases or sales of
financial assets under contracts that require delivery of the assets within the period established generally by
regulation or convention in the market place.
Gains or losses on available-for-sale investments are recognised as a separate component in equity until
the investment is sold, collected or otherwise disposed of, or until the investment is determined to be
impaired, at which time the cumulative gain or loss previously reported in equity is included in the income
statement.
Treasury financial assets
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as
held-to-maturity where the group has the positive intention and ability to hold to maturity. Investments
intended to be held for an undefined period are not included in this classification.
Investments that are intended to be held to maturity are subsequently measured at amortised cost using the
effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period
to maturity.
For investments carried at amortised cost, gains and losses are recognised in income when the
investments are derecognised or impaired, as well as through the amortisation process.
Treasury financial liabilities
All treasury funding instruments are initially recognised at cost, being the fair value of the consideration
given and including charges associated with the issue of the instrument. They are subsequently measured
at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period
to maturity.
For liabilities carried at amortised cost, gains and losses are recognised in income when the instruments
are derecognised. Treasury funding instruments that are hedged are treated in accordance with the
accounting policy for hedges.
Funding instruments that are issued in currencies other than AUD and are not part of an effective hedge
relationship are accounted for at amortised cost. These transactions are restated to AUD equivalents each
month with adjustments taken directly to income. The group does not currently have any such transactions,
as all liabilities denominated in foreign currencies are hedged.
Financial assets - equity investments
Investment securities available for sale consist of securities that are not actively traded by the economic
entity.
Fair value of quoted investments in active markets are based on current bid prices. If the relevant market is
not considered active (or the securities are unlisted), the economic entity establishes fair value by using
valuation techniques, including recent arm's length transactions, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market participants.
67
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Purchases and sales of financial assets and liabilities that require delivery of assets/securities within the
time frame, and generally established by regulation or convention in the market place are recognised on the
settlement date ie. the date that the group receives or pays the principal sum.
2.13 Loans and receivables
Loans and receivables are carried at amortised cost, using the effective interest method. The effective
interest rate calculation includes the contractual terms of loans together with all fees, transaction costs and
other premiums or discounts.
All loans are subject to continuous management review to assess whether there is any objective evidence
that any loan or group of loans is impaired.
Impairment loss is measured as the difference between the loan's carrying amount and the value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
loan's original effective interest rate.
Impairment losses are recognised in the income statement.
Specific provision
A specific provision is recognised for all impaired loans when there is reasonable doubt over the
collectability of principal and interest in accordance with the loan agreement. All bad debts are written off
against the specific provision in the period in which they are classified as not recoverable.
The provision is determined by specific identification and by estimation of expected losses in relation to loan
portfolios where specific identification is impractical, based on historical impairment experience for these
portfolios. These portfolios include unsecured credit cards, overdrawn accounts and personal loans,
unsecured mortgage loans (property realisation shortfalls) where provisions are calculated based on
historical loss experience.
Collective provision
Where individual loans are found not to be impaired they are grouped together according to their risk
characteristics and are then assessed for impairment. Based on historical loss data and current available
information for assets with similar risk characteristics, the appropriate collective provision is raised.
Adjustments to the collective provisions are recognised as an expense in the income statement.
General reserve for credit losses
In addition a general reserve for credit losses is maintained to cover risks inherent in the loan portfolios.
Movements in the general reserve for credit losses are recognised as an appropriation of retained earnings.
Australian Prudential Regulation Authority (“APRA”) requires that banks maintain a general reserve for
credit losses at a minimum level of 0.50% of risk weighted assets (net of tax). In certain circumstances the
collective provision can be included in this assessment.
2.14 Investments in associates and joint ventures accounted for using the equity method
The group's investment in associates is accounted for under the equity method of accounting in the
consolidated financial statements. These are entities in which the group has significant influence and which
is neither a subsidiary nor a joint venture. The financial statements of associates are used by the group to
apply the equity method. The reporting dates of the associates and the group are identical and both use
consistent accounting policies.
The investments in the associates are carried in the consolidated balance sheet at cost plus post-
acquisition changes in the group's share of the results of operations of the associates, less any impairment
in value. The income statement reflects the share of the results of operations of the associates.
Where there have been changes recognised directly in the associates' equity, the group recognises its
share of any changes and discloses this, when applicable in the consolidated statement of changes in
equity.
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BENDIGO BANK LTD
ABN 11 068 049 178
2.15
Property, plant & equipment
Cost and valuation
Full Financial Report
Period ending 30 June 2007
Plant and equipment is measured at cost less accumulated depreciation and any impairment in value. Land
is measured at fair value. Buildings are measured at fair value less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Asset category
Freehold buildings
Leasehold improvements
Office furniture & equipment
Computer hardware
Motor vehicles
2007
Years
40
3 - 10
5
3
5
2006
Years
40
3 - 10
5
3
5
Impairment
On transition to AIFRS, management identified cash generating units and applicable impairment indicators
in accordance with AASB 136 "Impairment of Assets".
The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. If any such indication exists and where
the carrying values exceed the estimated recoverable amount, the assets are written down to their
recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Impairment losses are recognised in the income statement, unless they relate to revalued assets.
Impairment losses of revalued assets are recognised in the revaluation reserve.
Revaluations
Following initial recognition at cost, land and buildings are carried at a revalued amount which is the fair
value at the date of the revaluation less any subsequent accumulated depreciation on buildings and
accumulated impairment losses.
Fair value is determined by reference to market-based evidence, which is the amount which the assets
could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm's
length transaction as at the valuation date.
Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the
balance sheet unless it reverses a revaluation decrease of the same asset previously recognised in the
income statement.
Any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus of
the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve is made to retained earnings for the depreciation
relating to the revaluation surplus. In addition, any accumulated depreciation as at the revaluation date is
eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued
amount of the asset.
Upon disposal, any revaluation reserve relating to the particular asset being disposed is transferred to
retained earnings.
69
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The fair value of property, plant and equipment is assessed at each reporting date. Also, external valuations
are performed every three years (or more often if circumstances require) ensuring that the carrying amount
does not differ materially from the asset's fair value at the balance sheet date.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included in the income statement in the year the item is
derecognised.
2.16
Assets held for sale
An asset where the carrying amount will be recovered principally through a sale transaction is classified as
held for sale.
The asset must be available for immediate sale in its present condition and the sale must be highly
probable for an asset to be classified as held for sale.
Held for sale assets are measured at the lower of carrying amount and fair value less costs to sell.
Adjustments in carrying value to write the asset down to fair value less costs to sell are recognised as an
impairment loss.
Assets held for sale are not depreciated.
2.17
Investment properties
Investment properties are measured initially at cost, including transaction costs. The carrying amount
includes the cost of replacing part of an investment property at the time the cost is incurred if the recognition
criteria are met, and excludes the costs of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated at fair value, which reflects market
conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment
properties are recognised in profit or loss in the year in which they arise.
Investment properties are derecognised either when they have been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss
in the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by
ending of owner-occupation, commencement of an operating lease to another party or ending of
construction or development. Transfers are made from investment property when, and only when, there is
a change in use, evidenced by commencement of owner-occupation or commencement of development
with a view to sale.
For a transfer from investment property to owner-occupied property or inventories, the deemed cost of
property for subsequent accounting is its fair value at the date of change in use. If the property occupied by
the Group as an owner-occupied property becomes an investment property, the Group accounts for such
property in accordance with the policy stated under ‘Property, plant and equipment’ up to the date of
change in use. For a transfer from inventories to investment property, any difference between the fair value
of the property at that date and its previous carrying value is recognised in profit or loss. When the Group
completes the construction or development of a self-constructed investment property, any difference
between the fair value of the property at that date and its previous carrying amount is recognised in profit or
loss.
70
BENDIGO BANK LTD
ABN 11 068 049 178
2.18 Goodwill
Full Financial Report
Period ending 30 June 2007
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business
combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities at date of acquisition.
Following initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill
is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
On transition to AIFRS, management identified cash generating units and applicable impairment indicators
in accordance with AASB 136 "Impairment of Assets".
Goodwill with respect to business combinations completed prior to 1 July 2004 has been allocated to
identified cash generating units expected to benefit from the synergies of the combination. Impairment
testing was performed by management on transition to AIFRS, resulting in some impairment of goodwill not
previously recognised under AGAAP. Goodwill was found to be impaired under AIFRS due to the new
testing methodologies prescribed under AIFRS. Impairment losses on transition have been recognised in
retained earnings at 1 July 2004.
For business combinations after 1 July 2004 any goodwill acquired is allocated to each of the cash
generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the cash generating unit to which the
goodwill relates.
Where the recoverable amount of the cash generating unit is less than the carrying amount, which includes
the allocated goodwill, an impairment loss is recognised in the income statement, with the goodwill being
impaired first. Impairment losses of goodwill are not subsequently reversed.
Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the operation
when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash generating unit retained.
2.19
Intangibles assets
Acquired both separately and from a business combination
Intangible assets acquired separately are capitalised at cost and from a business combination are
capitalised at fair value as at the date of acquisition.
Following initial recognition, the cost model is applied to the class of intangible assets.
The useful lives of these intangible assets are assessed to be either finite or indefinite.
Where amortisation is charged on assets with finite lives, this expense is taken to the income statement.
Intangible assets, excluding development costs, created within the business are not capitalised and
expenditure is charged against profits in the year in which the expenditure is incurred.
Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of
indefinite life intangibles, annually, either individually or at the cash generating unit level. Useful lives are
also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
The only intangible asset with an indefinite life currently carried by the group is the trustee licence relating to
Sandhurst Trustees Limited.
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BENDIGO BANK LTD
ABN 11 068 049 178
Computer software
Full Financial Report
Period ending 30 June 2007
Computer software, other than software that is an integral part of the computer hardware, is capitalised as
intangible software and amortised on a straight-line basis over the useful life of the asset.
Research and development costs
Research costs are expensed as incurred.
Development expenditure incurred on an individual project is carried forward when it is probable the future
economic benefits attributable to the asset will flow to the group.
Following the initial recognition of the development expenditure, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.
Any expenditure carried forward is amortised over the period of expected future sales from the related
project or expected useful life.
The carrying value of development costs is reviewed for impairment annually when the asset is not yet in
use, or more frequently when an indicator of impairment arises during the reporting period indicating that
the carrying value may not be recoverable.
A summary of the policies applied to the group's intangible assets (excluding goodwill) is as follows:
Trustee Licence
Computer software/
Development costs
Acquired in business
combination
Useful lives
Method used
Internally
generated/acquired
Finite
Indefinite
Not amortised or revalued Usually not in excess of 5
years – straight line (major
software systems – 7 years)
Internally generated or
acquired
Acquired
Finite
Amortised to reflect period
and pattern of economic
benefits
Acquired
Impairment test/
recoverable amount testing
Annually and where an
indicator of impairment
exists
Annually and where an
indicator of impairment
exists
Annually and where an
indicator of impairment
exists
Gains or losses arising from derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement
where the asset is derecognised.
2.20
Trade and other payables
Liabilities for trade creditors and other amounts are carried at amortised cost, which is the fair value of the
consideration to be paid in the future for goods and services received, whether or not billed to the
consolidated entity. Payables to related parties are carried at the amortised cost.
Interest, when charged by the lender, is recognised on an effective interest rate basis.
Deferred cash settlements are recognised at the present value of the outstanding consideration payable on
the acquisition of an asset discounted at prevailing commercial borrowing rates.
Interest, when charged on payables to related parties, is recognised as an expense on an accrual basis
using the effective interest method.
2.21 Reserve fund
The Trustee Companies Act 1984 requires that a reserve fund be maintained to provide for the event of the
appointment of a liquidator, a receiver and manager or an administrator of a trustee company. In such an
event, the monies in the reserve fund are available to be utilised in accordance with Section 39 (3) of the
Trustee Companies Act 1984.
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BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Sandhurst Trustees Limited complies with the Act by setting aside the value of at call investments, freehold
property and other financial assets to the reserve fund.
2.22 Deposits
All deposits and borrowings are initially recognised at cost, being the fair value of the consideration received
net of issue costs associated with the borrowing. After initial recognition, interest-bearing borrowings are
subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated
by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well
as through the amortisation process.
2.23 Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to
make a future sacrifice of economic benefits to other entities as a result of past transactions or other past
events, and it is probable that a future sacrifice of economic benefits will be required and a reliable estimate
can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
A provision for dividend is not recognised as a liability unless the dividend is declared, determined or
publicly recommended on or before the reporting date.
2.24 Employee benefits
Wages and Salaries, Annual leave, Sick leave and Directors' Retirement Provision
Liabilities for wages and salaries have been recognised and measured as the amount which the economic
entity has a present obligation to pay, at balance date, in respect of employees' service up to that date.
Liabilities have been calculated at nominal amounts based on wage and salary rates current at balance
date and include related on-costs. Wages and salaries liabilities are recognised in payables.
Annual leave liabilities are accrued on the basis of full pro rata entitlement at their nominal amounts, being
the amounts estimated to apply when the leave is paid. Sick leave bonus liability has been calculated at
balance date in accordance with the relevant group policy, which provides entitlement dependent on an
individual employees’ years of service and unused sick leave.
Directors’ retirement provision is accrued in accordance with the board approved arrangement. The
entitlement is calculated on the basis of pro rata years of service up to a maximum of nine years. Directors'
retirement provision accruals have ceased with effect 31 August 2005, due to the crystallisation of
entitlements at that date as disclosed in the Bendigo Bank Limited Financial Report 30 June 2005.
Long Service Leave
Long service leave has been assessed at full pro rata entitlement in respect of all employees with more
than five year’s service. The amount provided meets the requirement of Accounting Standard AASB 119
"Employee Benefits", which requires the assessment of the likely number of employees that will ultimately
be entitled to long service leave, the estimated salary rates that will apply when the leave is paid,
discounted to take account of the time value of money.
Annual leave, sick leave, Directors’ retirement and long service leave liabilities are recognised in provisions.
73
BENDIGO BANK LTD
ABN 11 068 049 178
Superannuation
Full Financial Report
Period ending 30 June 2007
Contributions are made to an employee accumulation superannuation fund and are charged to expenses
when incurred.
2.25 Share based payments
The Group provides benefits to its employees (including key management personnel) in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares.
There are currently two plans in place to provide these benefits:
•
the Employee Share Plan (“ESP”), which provides benefits only to the general staff. Executives
(including the Managing Director) may not participate in it.
Under the terms of the ESP, shares are issued at the prevailing market value at the time of the issues. The
shares must be paid for by the staff member. The ESP provides staff members with an interest-free loan for
the sole purpose of acquiring Bendigo Bank shares. Dividends paid on shares issued under the plan are
applied primarily to repay the loans. Staff cannot deal in the shares until the loan has been repaid.
The unpaid portion of the issued shares, reflected in the outstanding balance of interest-free loans
advanced to employees, is accounted for as ESP shares. The outstanding loan value of the ESP shares is
deducted from equity in the balance sheet.
The cost of issues under the plan is measured by reference to the fair value of the equity instruments at the
date at which they are granted. Shares granted under the ESP, vest immediately and are expensed to the
Income Statement with the employee benefits reserve increasing by a corresponding amount.
•
the Executive Incentive Plan (“EIP”), which provides for grants of options and performance rights to
key executives, including the Managing Director.
Under the EIP, eligible executives are granted options and performance rights subject to performance
conditions set by the Board. If the performance conditions are satisfied during the relevant performance
period, the options and performance rights will vest.
The cost of these equity-settled transactions with executives is measured by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by an external
valuer using a binomial model.
The cost of equity-settled transactions is recognised, together with a corresponding increase to employee
benefits reserve, over the period in which the performance conditions are fulfilled (the vesting period),
ending on the date on which the relevant executive becomes fully entitled to the award.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation
of diluted earnings per share.
2.26 Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement conveys a right to use the asset.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,
are charged as expenses over the period of the lease on a straight-line basis unless another systematic
basis is more representative of the time pattern of the benefit.
The economic entity has no leases deemed to be finance leases where substantially all the risks and
benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities
within the economic entity.
74
BENDIGO BANK LTD
ABN 11 068 049 178
2.27 Financial guarantees
Full Financial Report
Period ending 30 June 2007
Bank guarantees have been issued by the bank on behalf of customers whereby the bank is required to
make specified payments to reimburse the holders for a loss they may incur because the customer fails to
make a payment.
The fair value of financial guarantee contracts has been assessed using a probability weighted discounted
cash flow approach.
In order to estimate the fair value under this approach the following assumptions have been made:
• Probability of default (PD): This represents the likelihood of the guaranteed party defaulting in a 1
year period and is assessed on historical default rates.
• Loss given default (LGD): This represents the proportion of the exposure that is not expected to
be recovered in the event of a default by the guaranteed party and is based on historical
experience.
• Exposure to default (EAD): This represents the maximum loss that Bendigo Bank is exposed to if
the guaranteed party were to default. The model assumes that the guaranteed loan/facility/contract
is at maximum possible exposure at the time of default.
The value of the financial guarantee over each future year of the guarantees’ life is then equal to PD x LGD
x EAD, which is discounted over the contractual term of the guarantee, to reporting date to determine the
fair value. The discount rate adopted is the five year Commonwealth government bond yield at 30 June.
The contractual term of the guarantee matches the underlying obligations to which it relates.
As guarantees issued by the bank are fully secured and the bank has therefore never incurred a loss in
relation to financial guarantees, the LGD (proportion of the exposure that is not expected to be recovered) is
zero. This results in the fair value of financial guarantees to be zero.
Therefore, the fair value of financial guarantees has not been included in the balance sheet. The nominal
value of financial guarantees is disclosed in the “Contingent liabilities” note of this financial report.
2.28 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and
the revenue can be reliably measured. The following specific recognition criteria must also be met before
revenue is recognised.
Interest, fees and commissions
Control of a right to receive consideration for the provision of, or investment in, assets has been attained.
Interest, fee and commission revenue is brought to account on an accruals basis. Interest is accrued using
the effective interest rate method, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial instrument.
Loan origination and loan application fees
Loan origination and application fees are amortised as a component of the calculation of the effective
interest rate method in relation to originated loans. They therefore reduce the interest recognised in relation
to this portfolio of loans.
The average life and interest recognition pattern of loans in the relevant loan portfolios is reviewed annually
to ensure the amortisation methodology is appropriate.
Unearned income
Unearned income on the economic entity's personal lending and leasing is brought to account over the life
of the contracts on an actuarial basis.
75
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Dividends
Dividends are recognised when control of a right to receive consideration for the investment in assets is
established.
2.29
Borrowing costs
Borrowing costs are recognised as an expense when incurred unless they are incurred in relation to
qualifying assets.
Borrowing costs for qualifying assets are capitalised as part of the cost of that asset.
2.30 Income tax
The income tax for the period is the tax payable on the current period's taxable income based on the
national income tax rate, adjusted for changes in deferred tax assets and liabilities and unused tax losses.
The group has adopted the balance sheet liability method of tax effect accounting, which focuses on the tax
effects of transactions and other events that affect amounts recognised in either the balance sheet or a tax-
based balance sheet.
Deferred tax assets and liabilities are recognised for temporary differences, except where the deferred tax
asset/liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised
directly in equity.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused
tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax
losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred tax balances are reviewed annually to
determine whether they should be recognised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income
statement.
2.31 Goods and services tax (“GST”)
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
•
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from or payable to the taxation authority is included as part of
receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross
basis, the GST component of cash flows arising from investing and financing activities, which are
recoverable from or payable to the taxation authority are classified as operating cash flows.
76
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
2.32 Derecognition of financial instruments
The derecognition of a financial instrument takes place when the group no longer controls the contractual
rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all
the cash flows attributable to the instrument are passed through to an independent third party.
2.33 Derivative financial instruments
The group uses derivative financial instruments such as foreign currency contracts and interest rate swaps
to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial
instruments are stated at fair value.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates
with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to
market values for similar instruments.
For the purpose of hedge accounting, hedges are classified as either fair value hedges when they hedge
the exposure to changes in the fair value of a recognised asset or liability, or cash flow hedges where they
hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a
recognised asset or liability or a forecasted transaction.
In relation to fair value hedges which meet the conditions for hedge accounting, any gain or loss from
remeasuring the hedging instrument at fair value is recognised immediately in the income statement.
Any gain or loss attributable to the hedged risk on remeasurement of the hedged item is adjusted against
the carrying amount of the hedged item and recognised in the income statement. Where the adjustment is
to the carrying amount of a hedged interest-bearing financial instrument, the adjustment is amortised to the
income statement such that it is fully amortised by maturity.
In relation to cash flow hedges, to hedge firm commitments which meet the conditions for hedge
accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective
hedge is recognised directly in equity and the ineffective portion is recognised in the income statement.
When the hedged firm commitment results in the recognition of an asset or liability, then, at the time the
asset or liability is recognised, the associated gains or losses that had previously been recognised in equity
are included in the initial measurement of the acquisition cost or other carrying amount of the asset or
liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to
the income statement in the same year in which the hedged firm commitment affects the net profit and loss,
for example when the future sale actually occurs.
For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair
value are taken directly to net profit or loss for the year.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised,
or no longer qualifies for hedge accounting.
At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in
equity until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity
is transferred to net profit or loss for the year.
2.34
Issued ordinary capital
Issued and paid up ordinary capital is recognised at the fair value of the consideration received by the
company. Any transaction costs (net of any tax benefit) arising on the issue of ordinary shares are
recognised directly in equity as a reduction of the share proceeds received.
77
BENDIGO BANK LTD
ABN 11 068 049 178
2.35 Perpetual preference capital
Full Financial Report
Period ending 30 June 2007
Perpetual non-cumulative redeemable convertible preference capital is recognised at the fair value of the
consideration received by the company. Any transaction costs (net of any tax benefit) arising on the issue
of preference shares are recognised directly in equity as a reduction of the share proceeds received.
2.36 Earnings per ordinary share (EPS)
Basic EPS is calculated as net profit attributable to members, adjusted to exclude cost of servicing equity
(other than dividends), preference share dividends and movements in general reserve for credit losses,
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
•
costs of servicing equity (other than dividends), preference share dividends and movements in
general reserve for credit losses; the after tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from
the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
Cash basis EPS is calculated as net profit attributable to members, adjusted for:
• after tax intangibles amortisation (except intangible software amortisation); and
• after tax significant income and expense items
•
costs of servicing equity (other than dividends), preference share dividends and movements in
general reserve for credit losses
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
78
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
3. SEGMENT INFORMATION
The group’s primary reporting format is business segments and its secondary format is geographical
segments.
The operating businesses are organised and managed according to the nature of products and services
provided and the key delivery channels, with each segment representing a strategic business unit that
offers a different delivery method and/or different products and services.
Retail banking
Net interest revenue, predominantly derived from the provision of first mortgage finance less the interest
paid to depositors; and fee revenue derived from the provision of banking services delivered through the
company-owned branch network.
Community banking
The group’s share of interest predominantly derived from the provision of first mortgage finance less the
interest paid to depositors; and fee income derived from the provision of banking services delivered through
the community bank branch network.
Wealth solutions
Commission received as Responsible Entity for managed investment schemes and for corporate
trusteeships and other trustee and custodial services. Fees, commission and interest from the provision of
financial planning services.
Joint ventures, Alliances and unallocated corporate support
Share of profit from equity accounted investments in associates, revenue from alliances and minor
subsidiaries and unallocated corporate support business units.
79
BENDIGO BANK LTD
ABN 11 068 049 178
a.
Business segments
Full Financial Report
Period ending 30 June 2007
The following tables present revenue and profit information and certain asset and liability information
regarding business segments for the years ended 30 June 2007 and 2006.
For the year ended 30 June 2007
Income
Retail
Community
Banking
Banking
$m
$m
Gross external interest income
807.9
230.4
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity accounted investments
Total segment income
External income
Intersegment income
Total segment income
Results
Segment result
Internal cost allocations
Consolidated entity profit before income tax
expense
Income tax expense
Minority interests
Consolidated entity profit before income tax
expense
Assets
Segment assets
Equity accounted assets
Total on-balance sheet assets
Originated and managed assets
Total on and off-balance sheet assets
Liabilities
Total on-balance sheet liabilities
Funds under management
Total on and off-balance sheet liabilities
Other segment information
Non-cash expenses
Depreciation
Amortisation of intangibles
Non-cash expenses other than
depreciation & amortisation
Acquisition of property, plant and equipment,
intangible assets and other non-current assets
27.0
-
27.0
-
257.4
-
257.4
60.1
(33.5)
26.6
4,242.0
-
4,242.0
340.5
4,582.5
4,788.2
572.0
5,360.2
1.5
1.2
6.0
0.1
100.3
0.2
100.5
-
908.2
0.2
908.4
163.0
(38.9)
124.1
8,772.3
-
8,772.3
1,180.2
9,952.5
6,900.6
1,568.5
8,469.1
10.9
4.1
20.2
34.1
80
Wealth
Solutions
J/Ventures,
Alliances & Corp
Supp't
$m
20.3
46.7
0.1
46.8
-
67.0
0.1
67.1
29.6
(2.1)
27.5
136.4
-
136.4
775.8
912.2
164.6
1,248.7
1,413.3
0.3
0.1
13.5
$m
-
9.2
(0.3)
8.9
21.9
31.1
(0.3)
30.8
(74.8)
74.5
(0.3)
3,694.6
156.3
3,850.9
13.9
3,864.8
4,133.2
5.0
4,138.2
0.2
-
(10.6)
Total
$m
1,058.6
183.2
-
183.2
21.9
1,263.7
-
1,263.7
177.9
-
177.9
(56.2)
0.1
121.8
16,845.3
156.3
17,001.6
2,310.4
19,312.0
15,986.6
3,394.2
19,380.8
12.9
5.4
29.1
1.0
128.0
163.2
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Business segments (continued)
For the year ended 30 June 2006
Income
Retail
Community
Banking
Banking
$m
$m
Gross external interest income
718.7
170.1
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity accounted investments
Total segment income
External income
Intersegment income
Total segment income
Results
Segment result
Internal cost allocations
Consolidated entity profit before income tax
expense
Income tax expense
Minority interests
Consolidated entity profit before income tax
expense
Assets
Segment assets
Equity accounted assets
Total on-balance sheet assets
Originated and managed assets
Total on and off-balance sheet assets
Liabilities
Total on-balance sheet liabilities
Funds under management
Total on and off-balance sheet liabilities
Other segment information
Non-cash expenses
Depreciation
Amortisation of intangibles
Impairment losses recognised in profit & loss
Non-cash expenses other than
depreciation & amortisation
Acquisition of property, plant and equipment,
intangible assets and other non-current assets
b. Geographic segments
103.0
0.5
103.5
-
821.7
0.5
822.2
145.8
(37.2)
108.6
7,791.3
-
7,791.3
981.7
8,773.0
6,611.9
1,368.9
7,980.8
10.6
4.7
-
18.6
8.0
25.1
-
25.1
-
195.2
-
195.2
43.2
(22.2)
21.0
3,320.0
-
3,320.0
228.8
3,548.8
4,007.3
416.2
4,423.5
1.2
0.6
-
3.7
0.2
Wealth
Solutions
J/Ventures,
Alliances & Corp
Supp't
$m
18.7
41.3
2.3
43.6
-
60.0
2.3
62.3
26.6
(1.6)
25.0
149.5
-
149.5
715.1
864.6
179.3
1,181.0
1,360.3
0.3
0.2
-
10.0
0.8
$m
-
10.2
(2.8)
7.4
22.2
32.4
(2.8)
29.6
(49.9)
61.0
11.1
3,791.8
143.5
3,935.3
15.8
3,951.1
3,498.1
0.8
3,498.9
0.3
0.1
5.5
(12.6)
Total
$m
907.5
179.6
-
179.6
22.2
1,109.3
-
1,109.3
165.7
-
165.7
(49.0)
-
116.7
15,052.6
143.5
15,196.1
1,941.4
17,137.5
14,296.6
2,966.9
17,263.5
12.4
5.6
5.5
19.7
100.3
109.3
Bendigo Bank Limited and controlled entities operate predominantly in the geographic areas of
all Australian states and territories providing banking and other financial services.
81
BENDIGO BANK LTD
ABN 11 068 049 178
4.
PROFIT
Profit before income tax expense has been determined as follows:
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
-
-
-
4.8
128.2
900.1
25.5
1,058.6
-
-
-
3.0
97.0
774.3
33.2
907.5
2.6
-
3.0
4.8
124.8
871.5
2.4
1,009.1
-
0.1
-
3.3
91.7
744.8
4.3
844.2
-
-
0.8
0.4
515.7
76.5
65.0
21.2
23.1
701.5
-
-
3.4
0.4
3.8
23.4
69.8
9.5
11.7
114.4
35.2
9.6
3.3
48.1
0.9
5.1
4.9
10.9
-
6.0
-
6.0
444.1
46.2
53.5
19.8
28.8
592.4
-
-
2.5
0.2
2.7
21.4
62.6
9.0
10.7
103.7
31.9
7.3
2.4
41.6
0.5
5.0
8.0
13.5
(0.1)
0.9
1.8
2.6
506.1
64.5
65.0
21.2
-
657.6
25.9
11.9
3.4
-
41.2
22.3
69.7
2.2
11.4
105.6
0.4
6.3
3.3
10.0
11.6
5.1
0.1
16.8
0.1
4.0
-
4.1
434.9
29.6
53.5
19.8
-
538.2
16.2
12.6
2.5
-
31.3
19.1
62.3
2.5
10.3
94.2
0.4
5.2
2.4
8.0
9.3
5.0
1.0
15.3
(0.3)
0.8
0.1
0.6
(a)
Income:
Interest income
Controlled entities
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables
Other persons/entities
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables
Securitisation interest earning assets
Total interest income
Interest expense
Controlled entities
Wholesale - domestic
Other persons/entities
Deposits
Retail
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation interest bearing liabilities
Total interest expense
Other revenue
Dividends
Controlled entities
Associates
Other
Distribution from unit trusts
Fees
Assets
Liabilities & electronic delivery
Trustee, management & other services
Other
Commissions
Wealth solutions
Insurance
Other
Other
Income from property
Foreign exchange income
Other
Other income
Profit/(loss) on disposal of property, plant & equipment
Profit on sale of other investments
Other
1.1
1.2
1
1.4
1.5
1.6
1.7
1.8
1.9
10.4
10.3
10
10.2
2
2.5
2.7
5
3.2
3.4
3
6
4.3
8
8.2
8.4
82
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
5.5
2.6
0.7
(0.6)
8.2
148.1
14.5
(0.2)
2.0
0.9
9.0
2.5
0.9
10.0
187.7
17.3
0.2
2.5
0.3
0.2
3.2
7.8
31.5
1.2
4.2
-
5.4
10.3
10.3
23.8
34.8
10.9
20.4
23.6
-
7.1
120.6
2006
$m
6.2
1.1
-
(0.3)
7.0
133.9
13.3
1.4
2.1
0.6
8.2
2.6
-
8.7
170.8
15.9
0.2
2.3
0.3
0.2
3.2
7.2
29.3
1.6
3.9
0.1
5.6
9.9
9.9
22.2
28.3
11.7
18.4
22.2
-
6.6
109.4
2007
$m
5.6
2.4
(0.1)
(0.6)
7.3
134.4
13.2
0.1
2.1
1.0
8.2
2.2
0.9
9.5
171.6
29.5
-
2.5
0.2
-
3.0
7.4
42.6
-
4.1
-
4.1
9.5
9.5
23.0
33.7
10.3
20.3
21.3
9.9
9.3
127.8
2006
$m
5.7
0.9
-
(0.3)
6.3
120.6
12.1
1.3
2.0
0.5
7.4
2.2
-
8.1
154.2
26.6
-
2.3
0.2
0.1
2.9
6.5
38.6
-
3.7
-
3.7
8.8
8.8
21.2
27.1
11.3
18.4
19.8
-
7.2
105.0
BENDIGO BANK LTD
ABN 11 068 049 178
PROFIT (continued)
(b) Expenses
Bad and doubtful debts
Specific provision
Collective provision
Bad debts written off
Bad debts recovered
Staff and related costs
Salaries and wages
Superannuation contributions
Provision for annual leave
Provision for long service leave
Other provisions
Payroll tax
Fringe benefits tax
Executive equity transactions expense
Other
Occupancy costs
Operating lease rentals
Depreciation of buildings
Amortisation of leasehold improvements
Property rates
Land tax
Repairs and maintenance
Other
Amortisation of intangibles
Amortisation of intangible assets
Amortisation of intangible software
Impairment losses on goodwill
Property, plant & equipment costs
Depreciation of property, plant & equipment
Administration expenses
Communications, postage and stationery
Computer systems and software costs
Advertising & promotion
Other product & services delivery costs
General administration expenses
Impairment loss on investments - wind-up of subsidiaries
Other
28
28.3
28.2
28.5
20
20.1
20.2
20.3
20.7
20.4
20.5
20.8
20.6
22
22.1
22.2
22.4
22.5
22.6
22.9
33.1
33.2
33.3
27
13
14
14.3
14.5
15
31
50
83
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
5. UNDERLYING PROFIT
Underlying profit shows the growth in the core business of the economic entity
Consolidated
2007
$m
121.8
8.2
1.2
7.3
56.2
194.7
2006
$m
116.7
7.0
1.7
(11.2)
49.0
163.2
67.2
(1.1)
(3.2)
(6.7)
56.2
2.7
0.2
-
2.9
57.6
(1.9)
(3.3)
(6.4)
3.0
49.0
(10.9)
-
2.5
(8.4)
48.4
(1.1)
(3.6)
(6.7)
-
37.0
2.7
0.1
-
2.8
45.1
(1.9)
(3.2)
(6.4)
-
33.6
(10.8)
-
2.5
(8.3)
177.9
165.7
149.2
138.5
53.4
(1.1)
(6.7)
0.5
0.3
0.2
16.1
(3.2)
-
-
0.5
0.6
0.4
2.0
(6.8)
56.2
31.6%
49.7
(1.9)
(6.4)
0.5
0.2
0.1
2.3
(3.3)
(4.7)
(2.0)
1.1
2.8
0.5
1.9
8.2
49.0
29.6%
44.8
(1.1)
(6.7)
0.5
0.3
0.2
5.7
(3.6)
-
-
0.6
0.6
0.4
2.0
(6.7)
37.0
24.8%
41.6
(1.9)
(6.4)
0.5
0.1
0.1
2.3
(3.2)
(4.7)
-
1.0
2.6
0.6
1.9
(0.9)
33.6
24.3%
Profit after income tax expense
Add,
Bad and doubtful debts expense (net of bad debts recovered)
Amortisation of intangibles (except software amortisation)
Significant items before tax
Income tax expense - total (Note 6)
Underlying profit before income tax
6.
INCOME TAX EXPENSE
Major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax
Relating to origination and reversal of temporary differences
Imputation credits
Other items
Income tax expense reported in the income statement
Statement of changes in equity
Deferred income tax related to items charged or credited directly in equity
Net gain/(loss) on hedge
Net gain on revaluation of land and buildings
Tax effect of collective provisions
Income tax benefit reported in equity
A reconciliation between tax expense and the product of accounting profit
before income tax multiplied by the group's applicable income tax rate is
as follows:
Income tax expense attributable to:
Accounting profit before income tax
The income tax expense comprises amounts set aside as:
Provision attributable to current year at statutory rate, being
prima facie tax on accounting profit before tax
under (over) provision in prior years
tax credits and adjustments
Land, buildings and improvements
Plant and equipment
Capital allowances
Expenditure not allowable for income tax purposes
Deferred tax movement
Other non assessable income
Tax effect attributable to associates
Post-employment benefits
Movement in loan provisions
Movement in provisions
Tax effect of franking credits
Other
Income tax expense reported in the consolidated income statement
Effective income tax rate
84
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
INCOME TAX EXPENSE (continued)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
Land, buildings and improvements
Revaluations of available-for-sale financial assets to fair value
Deferred gains and losses on foreign exchange contracts
Deferred expenses
Other
Deferred tax liabilities
Deferred tax assets
Post-employment benefits
Deferred gains and losses of interest rate swaps
Expenses tax depreciable
Land, buildings and improvements
Plant and equipment
Adjustment to provisions
Prepaid income
Adjustment to loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
Bendigo Bank
Deferred tax liabilities
Land, buildings and improvements
Revaluations of available-for-sale financial assets to fair value
Deferred expenses
Other
Deferred tax liabilities
Deferred tax assets
Post-employment benefits
Revaluations of interest rate swaps to fair value
Expenses tax depreciable
Land, buildings and improvements
Plant and equipment
Adjustment to provisions
Prepaid income
Adjustment to loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
Balance sheet
Income statement
2007
$m
(0.4)
(16.3)
(0.1)
(3.6)
(1.4)
(21.8)
7.3
1.5
0.9
3.6
2.1
4.8
1.7
5.9
4.8
32.6
(0.1)
(15.8)
(3.4)
(1.5)
(20.8)
7.2
1.8
0.9
3.2
1.8
4.7
1.7
5.7
4.5
31.5
2006
$m
(0.2)
(13.4)
-
(2.4)
(0.1)
(16.1)
6.8
-
0.6
3.1
1.7
4.4
1.2
5.3
4.3
27.4
(0.1)
(13.0)
(2.1)
-
(15.2)
6.5
0.6
0.6
2.7
1.5
4.3
1.2
5.2
4.3
26.9
2007
$m
-
0.4
0.1
1.2
(0.1)
(0.5)
(1.1)
(0.2)
(0.5)
(0.3)
(0.4)
(0.5)
(0.6)
(0.7)
(3.2)
-
-
1.4
0.1
(0.6)
(1.1)
(0.2)
(0.5)
(0.3)
(0.4)
(0.5)
(0.6)
(0.9)
(3.6)
2006
$m
-
3.3
(0.1)
(0.4)
0.1
(1.1)
(0.6)
-
(0.5)
(0.2)
(0.5)
0.1
(0.3)
(3.1)
(3.3)
-
3.1
(0.3)
(0.1)
(1.0)
(0.6)
-
(0.5)
(0.1)
(0.6)
0.1
(0.1)
(3.1)
(3.2)
At 30 June 2007, there is no unrecognised deferred income tax liability (2006: Nil) for taxes that would be
payable on the unremitted earnings of certain of the group's subsidiaries, associates or joint ventures, as the
group has no liability for additional taxation should such amounts be remitted.
85
BENDIGO BANK LTD
ABN 11 068 049 178
Tax consolidation
Full Financial Report
Period ending 30 June 2007
Effective 1 July 2002, for the purposes of income taxation, Bendigo Bank Limited and its 100% owned
subsidiaries formed a tax consolidated group. Members of the group entered into a tax sharing arrangement
in order to allocate income tax expense to the wholly-owned subsidiaries on a stand alone basis. In addition
the agreement provides for the allocation of income tax liabilities between the entities should the head entity
default on its tax payment obligations. At the balance date, the possibility of default is remote. The head
entity of the tax consolidated group is Bendigo Bank Limited.
There has not been any material effect on tax assets or liabilities as a result of any revised tax legislation.
Bendigo Bank Limited formally notified the Australian Tax Office of its adoption of the tax consolidation
regime upon the lodgement of its 2003 income tax return.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding
agreement provides for the allocation of current taxes to members of the tax consolidated group on a stand
alone taxpayer basis, while deferred taxes are allocated to members of the tax consolidated group in
accordance with the principle of Accounting Standard AASB 112 “Income Taxes”. Allocations under the tax
funding agreement are made at the end of each month.
The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the
subsidiaries inter-company accounts with the tax consolidated group head company, Bendigo Bank Limited.
Because under UIG 1052 Tax Consolidation Accounting the allocation of current taxes to tax consolidated
group members on the basis of accounting profits is not an acceptable method of allocation given the
group's circumstances, the difference between the current tax amount that is allocated under the tax funding
agreement and the amount that is allocated under an acceptable method is recognised as a
contribution/distribution of the subsidiaries' equity accounts.
In preparing the accounts of Bendigo Bank Limited for the current year, the following amounts have been
recognised as tax-consolidation contribution adjustments:
Total increase/(reduction) to tax expense of Bendigo Bank Limited
Total increase/(reduction) to inter-company assets of Bendigo Bank Limited
Bendigo Bank
2007
$m
1.6
(1.6)
2006
$m
(0.1)
0.1
86
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
7. AVERAGE BALANCE SHEET AND RELATED INTEREST
For the twelve month period ended 30 June 2007
Average
Interest
Average
Balance
12 mths
Rate
Note
$m
$m
%
Average balances and rates
Interest earning assets
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables - company
Loans and other receivables - alliances
Securitisation interest earning assets
Total interest earning assets
Non interest earning assets
Property, plant & equipment
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation interest bearing liabilities
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net interest margin
1
2
2
3
4
Impact of community bank/alliances profit share arrangements
Net interest margin before community bank/alliances share of net interest income
Less impact of community bank/alliances share of net interest income
Net interest margin
4.8
128.2
671.5
285.5
1,090.0
25.5
1,115.5
300.2
272.4
76.5
65.0
21.2
735.3
23.1
758.4
235.8
2,001.0
8,644.7
4,059.2
14,940.7
329.2
15,269.9
113.0
(19.2)
607.1
700.9
15,970.8
6,911.6
4,824.4
1,338.6
1,015.7
295.9
14,386.2
314.5
14,700.7
330.0
940.1
1,270.1
15,970.8
15,269.9
(14,700.7)
1,115.5
(758.4)
357.1
2.04
6.41
7.77
7.03
7.30
7.75
7.31
4.34
5.65
5.71
6.40
7.16
5.11
7.34
5.16
7.31
(5.16)
2.15
2.34
2.90
0.56
2.34
1 Average balance is based on monthly closing balances from 30 June 2006 through 30 June 2007 inclusive, with the exception of Wholesale domestic, which is based on a daily
closing balance.
2 Interest payments to alliance partners are net values in the Income Statement. Interest income and expense values have been increased by $56.9m to reflect the gross amounts.
3 Interest spread is the difference between the average interest rate earned on assets and the average interest rate paid on funds.
4 Interest margin is the net interest income as a percentage of average interest earning assets.
87
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
AVERAGE BALANCE SHEET AND RELATED INTEREST (continued)
For the twelve month period ended 30 June 2006
Average
Interest
Average
Balance
12 mths
Rate
Note
$m
$m
%
Average balances and rates
Interest earning assets
Cash and cash equivalents
Financial assets (treasury) available for sale & held to maturity
Loans and other receivables - company
Loans and other receivables - alliances
Securitisation interest earning assets
Total interest earning assets
Non interest earning assets
Property, plant & equipment
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Other borrowings
Subordinated debt
Securitisation interest bearing liabilities
Total interest bearing liabilities
Non interest bearing liabilities and equity
Other liabilities
Equity
Total liabilities and equity
Interest margin and interest spread
Interest earning assets
Interest bearing liabilities
Net interest income and interest spread
Net interest margin
1
2
2
3
4
Impact of community bank/alliances profit share arrangements
Net interest margin before community bank/alliances share of net interest income
Less impact of community bank/alliances share of net interest income
Net interest margin
3.0
97.0
603.0
211.6
914.6
33.2
947.8
277.6
206.8
46.2
53.5
19.8
603.9
28.8
632.7
203.9
1,697.0
8,267.3
3,190.3
13,358.5
463.1
13,821.6
63.6
(21.6)
428.2
470.2
14,291.8
6,763.5
3,958.9
842.8
914.6
294.0
12,773.8
448.6
13,222.4
265.5
803.9
1,069.4
14,291.8
13,821.6
(13,222.4)
947.8
(632.7)
315.1
1.47
5.72
7.29
6.63
6.85
7.17
6.86
4.10
5.22
5.48
5.85
6.73
4.73
6.42
4.79
6.86
(4.79)
2.07
2.28
2.76
0.48
2.28
1 Average balance is based on monthly closing balances from 30 June 2005 through 30 June 2006 inclusive, with the exception of Wholesale domestic, which is based on a daily
closing balance.
2 Interest payments to alliance partners are net values in the Income Statement. Interest income and expense values have been increased by $40.3m to reflect the gross amounts.
3 Interest spread is the difference between the average interest rate earned on assets and the average interest rate paid on funds.
4 Interest margin is the net interest income as a percentage of average interest earning assets.
88
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
8. CAPITAL ADEQUACY AND ACE RATIO
a. Capital adequacy
The Australian Prudential Regulation Authority (“APRA”) guidelines require capital to be allocated
against credit and market risks. Banks must maintain a ratio of qualifying capital (comprising tier 1 and
tier 2 capital), to risk weighted assets, and off-balance sheet exposures determined on a risk weighted
basis, of which at least half must be tier 1 capital. The Bank adopted the ‘standard model’ approach
prescribed by APRA to measure market risk. The resultant capital after applying a numeric conversion
factor, forms part of risk weighted assets.
The group has reported under AIFRS for the financial year commencing 1 July 2005. APRA has
amended its prudential regulations in response to the implementation of AIFRS and that these
changes took effect 1 July 2006. Therefore, capital adequacy calculations were made under previous
AGAAP for the 2005/06 financial year.
Risk weighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Retained profits & reserves
Less,
Intangible assets
Net deferred tax assets
Other adjustments as per APRA advice
Total tier 1 capital
Tier 2
General reserve for credit losses/collective provision (net of tax effect)
Subordinated debt
Asset revaluation reserves
Less,
Subsidiary investment residual
Total tier 2 capital
Less,
Investments in non-consolidated subsidiaries or associates and other bank's
capital instruments
Total qualifying capital
Consolidated
As at
June 2007
$m
7.98%
2.26%
10.24%
As at
June 2006
$m
8.33%
2.44%
10.77%
693.7
234.8
104.9
4.9
40.6
778.1
53.2
307.1
21.5
381.8
9.0
372.8
151.9
999.0
652.4
166.7
77.2
17.9
10.5
713.5
46.7
307.1
3.0
356.8
9.0
347.8
138.2
923.1
Total risk weighted assets
9,754.0
8,566.9
89
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
CAPITAL ADEQUACY AND ACE RATIO (continued)
b. Adjusted common equity (“ACE”)
Adjusted common equity is one measure considered by Standard & Poor’s in evaluating the Bank’s
credit rating. The ACE ratio has been calculated in accordance with the Standard & Poor’s
methodology.
Adjusted common equity
Tier 1 capital
Deduct:
Preference share capital
Subsidiary investment residual
Investments in non-consolidated subsidiaries or associates and other banks'
capital instruments
Total adjusted common equity
Adjusted Common Equity ratio to risk weighted assets
9.
EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share
Diluted earnings per ordinary share
Cash basis earnings per ordinary share
Consolidated
As at
As at
June 2007
June 2006
$m
$m
778.1
713.5
88.5
9.0
151.9
528.7
5.42%
88.3
9.0
138.2
478.0
5.58%
Consolidated
2007
2006
Cents per share
Cents per share
81.9
81.1
82.9
81.5
80.6
73.2
$m
$m
Reconciliation of earnings used in the calculation of basic earnings per ordinary share
Profit after tax
(Profit)/loss attributable to minority interests
Dividends paid on preference shares
Reconciliation of earnings used in the calculation of diluted earnings per ordinary share
Earnings used in calculating basic earnings per ordinary share
Add back dividends on dilutive preference shares
121.7
0.1
(4.8)
117.0
117.0
4.8
121.8
116.7
-
(2.5)
114.2
114.2
2.5
116.7
Reconciliation of earnings used in the calculation of cash basis earnings per ordinary share
Earnings used in calculating basic earnings per ordinary share
117.0
114.2
After tax intangibles amortisation (excluding amortisation of intangible software)
After tax significant income and expense items (1)
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
Weighted average number of ordinary shares used in basic and cash
basis earnings per ordinary share
Effect of dilution - share options relating to executives
Effect of dilution - preference shares
Weighted average number of ordinary shares used in diluted earnings
per ordinary share
(1) Significant income and expense items after tax comprise:
Income
Profit on deemed disposal of Select Managed Funds Limited shares
Accounting gain on change in equity accounted investment in Community Telco Aust P/L
Expense
Expense relating to an issue of shares to staff under the Employee Share Plan
Expense relating to Bank of Queensland proposed merger
Review of carrying value of equity investment portfolio
Relocation costs of Melbourne-based staff to a new building at Docklands
1.2
6.8
(4.7)
(1.8)
1.7
(8.4)
(3.9)
(1.1)
118.5
102.5
No. of shares
No. of shares
142,878,434
140,057,705
100,117
7,155,635
-
4,766,881
150,134,186
144,824,586
$m
-
-
5.6
1.2
-
-
6.8
$m
(10.9)
(1.8)
-
-
3.8
0.5
(8.4)
90
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Conversions, calls, subscription or issues after 30 June 2007
There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential
ordinary shares since the reporting date and before the completion of this financial report.
Information on the classification of securities
Options
Options granted to the Managing Director and executives are considered to be potential ordinary shares and
have been included in the determination of diluted earnings per share to the extent they are dilutive. These
options have not been included in the determination of basic earnings per share.
10.
DIVIDENDS
Dividends paid or proposed
Ordinary shares
Dividends paid during the year
current year
Interim dividend (24.0 cents per share) (2006 - 22.0 cents per share)
previous year
Final dividend (30.0 cents per share) (2006 - 26.0 cents per share)
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
32.6
29.1
32.6
29.1
40.1
72.7
34.3
63.4
40.1
72.7
34.3
63.4
Dividends proposed since the reporting date, but not recognised as a liability
Final dividend (34.0 cents per share) (2006: 30.0 cents per share)
46.6
40.1
46.6
40.1
All dividends paid were fully franked. Proposed dividends will be fully franked out of existing franking credits or out of franking credits arising from
payment of income tax provided for in the financial statements for the year ended 30 June 2007.
Preference shares
Dividends paid during the year
131.68 cents per share paid on 15 September 2006 (2006: 90.80 cents)
134.64 cents per share paid on 15 December 2006 (2006: 62.19 cents)
136.36 cents per share paid on 15 March 2007 (2006: 61.62 cents)
138.89 cents per share paid on 15 June 2007 (2006: 62.68 cents)
Dividend franking account
Balance of franking account as at end of financial year
Franking credits that will arise from the payment of income tax provided for in the
financial report
Impact of dividends proposed or declared before the financial report was authorised
for issue but not recognised as a distribution of equity holders during the period
The tax rate at which dividends have been franked is 30% (2006: 30%).
Dividends proposed will be franked at the rate of 30% (2006: 30%).
Dividend paid
Dividends paid by cash or satisfied by the issue of shares under the dividend
reinvestment plan during the year were as follows:
Paid in cash
Satisfied by issue of shares
1.2
1.2
1.2
1.2
4.8
0.8
0.6
0.5
0.6
2.5
1.2
1.2
1.2
1.2
4.8
116.0
16.3
(21.0)
111.3
0.8
0.6
0.5
0.6
2.5
95.4
9.9
(18.1)
87.2
57.0
20.5
77.5
48.1
17.8
65.9
57.0
20.5
77.5
48.1
17.8
65.9
91
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Dividend Reinvestment Plan
The Dividend Reinvestment Plan provides shareholders with the opportunity of converting their entitlement to
a dividend into new shares. The issue price of the shares is equal to the volume weighted average share
price of Bendigo Bank shares traded on the Australian Stock Exchange over the ten trading days following
the Record Date. Shares issued under this Plan rank equally with all other ordinary shares.
Bonus Share Scheme
The Bonus Share Scheme provides shareholders with the opportunity to elect to receive a number of bonus
shares issued for no consideration instead of receiving a dividend. The issue price of the shares is equal to
the volume weighted average price of Bendigo Bank shares traded on the Australian Stock Exchange over
the ten trading days following the Record Date. Shares issued under this scheme rank equally with all other
ordinary shares.
The last date for the receipt of an election notice for participation in either the Dividend Reinvestment Plan or
Bonus Share Scheme for the 2007 final dividend was 31 August 2007.
92
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
11.
RETURN ON AVERAGE ORDINARY EQUITY
Return on average ordinary equity
Consolidated
2007
%
2006
%
15.18
16.16
Pre-significant items return on average ordinary equity
16.06
14.98
Cash basis return on average ordinary equity
15.38
14.51
Reconciliation of earnings used in the calculation of return on average ordinary equity
Net profit for the year
(Profit)/loss attributable to minority interests
Dividends paid on preference shares
Earnings used in calculation of return on average ordinary equity
After tax significant income and expense items
Earnings used in calculation of pre-significant items return on average
ordinary equity
After tax intangibles amortisation (excluding amortisation of intangible software)
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
$m
$m
121.7
0.1
(4.8)
117.0
6.8
123.8
1.2
(4.7)
(1.8)
116.7
-
(2.5)
114.2
(8.4)
105.8
1.7
(3.9)
(1.1)
Earnings used in calculation of cash basis return on average ordinary equity
118.5
102.5
Reconciliation of ordinary equity used in the calculation of return on average ordinary equity
Total equity
Preference share net capital
Asset revaluation reserve - shares
Unrealised gains/losses on cash flow hedge reserve
General reserve for credit losses
General reserve for credit losses - associates
Minority interest
Ordinary equity
1,015.0
(88.5)
(32.7)
(35.2)
(45.3)
(8.3)
0.7
805.7
899.5
(88.3)
(26.3)
(2.7)
(40.6)
(6.5)
0.6
735.7
Average ordinary equity
770.7
706.5
93
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
12.
NET TANGIBLE ASSETS PER ORDINARY SHARE
Net tangible assets per ordinary share
$
5.40
$
4.78
Reconciliation of net tangible assets used in calculation of net tangible assets
per ordinary share
Consolidated
2007
2006
Net assets
Intangibles
Preference shares - face value
General reserve for credit losses
General reserve for credit losses - associates
Minority interest
Net tangible assets
$m
1,015.0
(93.7)
(90.0)
(45.3)
(8.3)
0.7
778.4
$m
899.5
(89.6)
(90.0)
(40.6)
(6.5)
0.6
673.4
Number of ordinary shares on issue at reporting date
144,187,890
140,850,961
13.
CASH FLOW STATEMENT RECONCILIATION
(a) Reconciliation net profit after tax to net cash flows from operations
Profit after tax
Non-cash items
Doubtful debts expense
Amortisation
Depreciation
Revaluation (increments)/decrements
Equity settled transactions
Share of associates' net (profits)
Dividends received/(accrued) from associates
Profits on sale of investment securities
Impairment loss on investments
(Profits)/losses on sale of property, plant & equipment
Changes in assets and liabilities
Increase/(decrease) in tax provision
Increase/(decrease) in deferred tax assets & liabilities
(Increase)/decrease in accrued interest
Increase in accrued employees entitlements
Increase/(decrease) in other accruals, receivables and provisions
Net cash flows from/(used in) operating activities
31
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
121.7
116.7
112.2
104.9
8.8
5.4
12.9
(1.5)
6.6
(21.9)
11.9
(6.0)
-
-
6.4
0.5
15.1
2.7
(64.8)
97.8
7.3
5.6
12.4
5.4
-
(22.2)
12.5
(16.5)
-
0.1
1.6
5.3
14.2
3.7
25.1
171.2
7.9
4.1
12.0
(1.4)
6.6
-
-
(4.0)
9.9
0.1
6.4
1.0
13.9
3.1
(81.7)
90.1
6.6
3.7
11.1
7.2
-
-
-
(14.6)
-
0.3
1.6
4.4
15.4
3.5
15.4
159.5
Cash flows presented on a net basis
Cash flows arising from the following activities are presented on a net basis in the cash flow statement.
Loans and receivables, Investment securities, Retail deposits, Wholesale deposits and Subordinated debt.
94
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
14.
CASH AND CASH EQUIVALENTS
Notes, coin and cash at bank
Investments at call
Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes:
Cash and cash equivalents
Due from other financial institutions
Due to other financial institutions
Consolidated
Bendigo Bank
2007
$m
200.7
56.9
257.6
257.6
71.5
(184.0)
145.1
2006
$m
252.6
18.2
270.8
270.8
209.0
(166.3)
313.5
2007
$m
146.6
56.9
203.5
203.5
71.1
(184.0)
90.6
2006
$m
197.9
16.5
214.4
214.4
209.0
(166.3)
257.1
Cash and cash equivalents are items readily convertible into cash and generally repayable on demand. Amounts due to and from other financial
institutions relate to inter-bank settlement processes and are generally repaid within 2 working days.
15.
FINANCIAL ASSETS AVAILABLE FOR SALE - SECURITIES
Negotiable securities
Negotiable certificates of deposit
Government securities
Maturity analysis
Not longer than 3 months
Longer than 3 and not longer than 12 months
19.9
408.9
428.8
428.8
-
428.8
205.1
155.8
360.9
179.1
181.8
360.9
19.9
408.9
428.8
428.8
-
428.8
205.1
155.8
360.9
179.1
181.8
360.9
Negotiable certificates of deposit held have an average maturity of 10 days (2006: 45) with effective interest rates of 6.53% to 6.69% (2006: 5.66% to 5.90%).
Government securities held have an average maturity of 11 days (2006: 152) with effective interest rates of 6.21% to 6.29% (2006: 5.80% to 5.97%).
16.
FINANCIAL ASSETS AVAILABLE FOR SALE – SHARE INVESTMENTS
Share investments at fair value
Listed share investments
Unlisted share investments
124.5
5.9
130.4
91.7
2.7
94.4
123.8
4.1
127.9
91.5
2.7
94.2
Available for sale share investments consist of investments in ordinary shares and units in unit trusts, and therefore have no fixed maturity date or
coupon rate.
Fair value of share investments is determined as follows:
Listed shares - quoted market price at balance date.
Unlisted shares - estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates.
Management believes the estimated fair values resulting from the valuation techniques and recorded in the balance sheet and the related
changes in fair values recorded in equity are reasonable and the most appropriate at the balance sheet date.
95
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
17.
FINANCIAL ASSETS HELD TO MATURITY
Negotiable securities
Bank accepted bills of exchange
Negotiable certificates of deposit
Government securities
Other
Non negotiable securities
Deposits - banks
Deposits - other
Other
Maturity analysis
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Over 5 years
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
36.2
299.5
990.5
277.0
1,603.2
-
11.0
0.2
11.2
1,614.4
882.7
475.4
256.3
-
1,614.4
19.8
252.3
745.4
338.4
1,355.9
5.3
3.1
6.3
14.7
1,370.6
605.0
527.2
238.1
0.3
1,370.6
-
262.8
990.5
277.0
1,530.3
-
-
0.2
0.2
1,530.5
798.8
475.4
256.3
-
1,530.5
-
207.8
745.4
338.4
1,291.6
-
-
0.2
0.2
1,291.8
548.7
504.7
238.1
0.3
1,291.8
Bills of exchange and promissory notes held have an average maturity of 45 days (2006: 49 days) with an effective interest rate of 6.33% to 6.44%
(2006: 5.61% to 5.96%). Negotiable certificates of deposit held have an average maturity of 103 days (2006: 103 days) with effective interest rates of
6.35% to 6.91% (2006: 5.83% to 6.20%). Government securities held have an average maturity of 74 days (2006: 81 days) with effective interest rates
of 6.24% to 6.52% (2006: 5.53% to 5.92%). Other securities includes deposits with banks and other parties made with an average maturity of 698 days
(2006: 690 days) with effective interest rates of 6.20% to 6.67% (2006: 5.78% to 6.35%).
96
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
18.
LOANS AND OTHER RECEIVABLES
Overdrafts
Credit cards
Term loans
Lease receivables
Factoring receivables
Accrued interest
Gross loans and other receivables
less:
Specific provision for impairment (Note 19)
Collective provision for impairment (Note 19)
Unearned income
Net loans and other receivables
Impaired loans
Loans
- without provisions
- with provisions
less specific impairment provisions
Net impaired loans
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
3,063.5
139.8
10,241.2
359.4
40.3
70.1
2,736.9
111.4
9,220.2
321.3
46.8
60.7
3,102.9
139.8
9,884.0
356.7
4.5
65.6
2,779.2
111.4
8,737.8
319.2
3.6
56.4
13,914.3
12,497.3
13,553.5
12,007.6
(8.4)
(11.4)
(51.0)
13,843.5
(9.1)
(8.8)
(42.7)
12,436.7
(8.1)
(11.0)
(50.7)
13,483.7
(8.6)
(8.6)
(42.4)
11,948.0
0.6
17.6
(8.4)
9.8
0.6
14.3
(9.0)
5.9
0.6
16.8
(8.1)
9.3
0.6
12.9
(8.5)
5.0
Net impaired loans % of loans and other receivables
0.07%
0.05%
0.07%
0.04%
Portfolios facilities - past due 90 days, not well secured
less impairment provisions
Net portfolio facilities
Loans past due 90 days
Accruing loans past due 90 days, with adequate security balance
Amount in arrears
Accruing loans past due 90 days balance includes $6.5 million (2006: $13.9 milllion)
of loans due to their review date expirying more than 90 days ago, but
which are not in payment default.
2.0
(0.3)
1.7
61.6
7.3
1.8
(0.2)
1.6
74.0
5.2
2.0
(0.3)
1.7
61.2
7.1
1.8
(0.2)
1.6
74.0
5.2
Net fair value of properties acquired through the enforcement of security
15.3
16.0
15.3
16.0
Interest income recognised
Interest income recognised in respect of impaired loans
Interest income recognised in respect of assets acquired through enforcement
0.1
0.6
0.1
0.8
0.1
0.6
0.1
0.8
Interest income recognised is the interest income actually received subsequent to these balances becoming impaired or restructured.
Loans by geographic location (1) (2)
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia / Northern Territory
Western Australia
Tasmania
Overseas/Other
1
Geographic location determined from the customer postcode/address.
Maturity analysis (2)
At call / overdrafts
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Longer than 5 years
2
Balances exclude specific and general provisions for doubtful debts and unearned revenue.
97
7,659.3
1,801.7
249.5
2,262.7
382.1
998.2
507.9
52.9
7,088.7
1,625.7
246.6
1,935.7
324.9
770.2
462.5
43.0
7,422.0
1,738.0
241.9
2,228.9
371.9
993.6
505.5
51.7
6,778.2
1,553.8
228.7
1,874.2
310.1
762.9
461.4
38.3
13,914.3
12,497.3
13,553.5
12,007.6
3,262.5
1,094.4
849.7
5,503.9
3,203.8
13,914.3
2,909.7
1,149.5
679.7
3,822.3
3,936.1
12,497.3
3,251.9
1,091.9
838.0
5,463.2
2,908.5
13,553.5
2,900.0
1,144.5
660.8
3,776.5
3,525.8
12,007.6
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
LOANS AND OTHER RECEIVABLES (continued)
Overdraft facilities (including Consumer Home Equity Facilities) are made available to customers on a secured or unsecured basis and
are withdrawable by the bank. Effective base interest rates range from 7.70% to 13.65% (20065: 6.95% to 13.40%) and interest is
generally charged on a monthly basis. A credit risk margin is applicable to specific commercial overdraft products. Casual overdrafts
incur an additional 6.00% (2006: 6.00%) interest rate margin.
Credit card facilities are made available to customers on an unsecured basis. Customers can choose between various products,
offering the option of "interest free" days, no "interest free" days and various interest rates. Interest is charged on a monthly basis with
effective interest rates ranging from 9.95% to 17.40% (2006: 6.99% to 17.15%). A Business Credit Card is also offered on either an
unsecured or secured basis with the effective interest rate of 14.40% (2006: 13.90%).
Term loans (mortgage loans) are offered to customers as a variety of products, all being secured by mortgage security. Products offer
variable or fixed interest rates, short and long-term payment periods, with or without monthly fees. Interest is charged on a monthly
basis with effective base interest rates ranging from the bank's cost of funds to 9.30% (2006: 9.05%). A credit risk margin is applicable
to specific commercial mortgage loan products. An unsecured business term loan is also offered with effective interest rates from
13.10% to 13.20% (2006: 12.70% to 13.20%).
Term loans (personal loans) are offered on a secured or unsecured basis with terms ranging from one to seven years. Interest is fixed
and charged on a monthly in arrears basis ranging from 9.50% to 11.95% (2006: 10.50% to 11.95%).
Lease receivables are finance leases with terms of two to five years. Interest is fixed. Effective interest rates range from 8.15% to
12.0% (2006: average earning rate 7.50%). All leases are secured by the asset that is subject to the lease.
Factoring receivables are offered to customers as a variety of products by assignment of book debts. Products offered are full service,
partnership and confidential debtor finance. Some of these are combinations of fixed fees and daily interest on funds employed,
others are fees per day based on a set fee. On average these are revolving facilities with debt term on average between 30 and 50
days (2006: 30 and 50 days).
Other loans are generally short-term and are normally settled within 30 days.
Accrued interest on loans is normally charged to the loan accounts in the month following accrual.
19.
IMPAIRMENT OF LOANS AND ADVANCES
Consolidated
Bendigo Bank
IMPAIRMENT OF LOANS AND ADVANCES
Specific provision for impairment
Opening balance
AIFRS transition adjustments - 1 July 2005
Charged to income statement
Impaired debts written-off applied to specific impairment provision
Closing balance
Collective provision for impairment
Opening balance
AIFRS transition adjustments - 1 July 2005
Charged to income statement
Closing balance
General reserve for credit losses
Opening balance
AIFRS transition adjustments - 1 July 2005 - create general reserve for credit losses
Charged to equity
Closing balance
Bad and doubtful debts expense
Specific provisions for impairment
Collective provision
Bad debts written off
Bad debts recovered
2007
$m
9.1
-
5.5
(6.2)
8.4
8.8
-
2.6
11.4
40.6
-
4.7
45.3
5.5
2.6
0.7
(0.6)
8.2
2006
$m
8.6
0.5
6.2
(6.2)
9.1
-
7.7
1.1
8.8
-
36.7
3.9
40.6
6.2
1.1
-
(0.3)
7.0
2007
$m
8.6
-
5.6
(6.1)
8.1
8.6
-
2.4
11.0
40.6
-
4.7
45.3
5.6
2.4
(0.1)
(0.6)
7.3
2006
$m
8.6
0.5
5.7
(6.2)
8.6
-
7.7
0.9
8.6
-
36.7
3.9
40.6
5.7
0.9
-
(0.3)
6.3
Ratios
Specific provision as % of gross loans less unearned income
Collective provision (net of tax) & General reserve for credit losses
as a % of risk-weighted assets
0.06%
0.07%
0.55%
0.55%
98
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
20.
PARTICULARS IN RELATION TO CONTROLLED ENTITIES
(1)
(2)
Name
Chief entity
Bendigo Bank Limited
Directly Controlled Operating Entities
Banksia Series 2 Trust
Banksia Trust Series 2001-1
Banksia Trust Series 2001-2
BBL Caroline Springs Pty Ltd
BBL (SSKB) Financial Services Pty Ltd
BBS Nominees Pty Ltd
Bendigo Finance Pty Ltd
Bendigo Financial Planning Ltd
Community Developments Australia Pty Ltd
(3)
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Homesafe Trust
Sunstate Lenders Mortgage Insurance Pty Ltd
Fountain Plaza Pty Ltd
National Mortgage Market Corporation Pty Ltd
National Assets Securitisation Corporation Pty Ltd
Oxford Funding Pty Ltd
Sandhurst Trustees Ltd
Sandhurst Nominees (Victoria) Ltd
Sandhurst Custodians Ltd
Sandhurst Nominees (Canberra) Ltd
Bendigo Asset Management Limited
Victorian Securities Corporation Ltd
1 Non-Operating controlled entities are excluded from the above list.
2 All entities are 100% owned and incorporated in Australia, unless otherwise specified.
3 In July 2006, Bendigo Investment Services Ltd changed its name to Bendigo Financial Planning Ltd.
Extent of Interest
If not 100%
Principal
Activities
Banking
55%
Securitisation
Securitisation
Securitisation
Investment company
Investment company
Administration company
Leasing finance
Financial advisory services
Community initiatives
Community initiatives
Community initiatives
Community initiatives
Financial services
Mortgage insurance
Property owner
Mortgage origination & m'ment
Securitisation manager
Invoice discounting
Trustee company
Nominee company
Custodian company
Nominee company
Investment manager
Financial services
21.
(i) Name
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES USING THE EQUITY
METHOD
Elders Rural Bank Ltd
Tasmanian Banking Services Ltd
Community Sector Enterprises Pty Ltd
Homesafe Solutions Pty Ltd
Caroline Springs Fin Serv Pty Ltd
Silver Body Corp Fin Serv Pty Ltd
Community Telco Australia Pty Ltd
Strategic Payment Services Pty Ltd
Ownership
interest held by
consolidated entity
Balance date
2007
%
50.0
50.0
50.0
50.0
50.0
50.0
50.0
40.0
2006
%
50.0
50.0
50.0
50.0
50.0
50.0
50.0
40.0
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
(i) Principal activities of associated companies
Elders Rural Bank Ltd - bank
Tasmanian Banking Services Ltd - financial services
Community Sector Enterprises Pty Ltd - financial services
Homesafe Solutions Pty Ltd - financial services
Caroline Springs Financial Services Pty Ltd - financial services
Silver Body Corporate Financial Services Pty Ltd - financial services
Community Telco Australia Pty Ltd - telecommunication services
Strategic Payment Services Pty Ltd - payment processing services
All associate companies were incorporated in Australia.
99
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES USING THE EQUITY METHOD
(continued)
(ii) Share of associates' revenue and profits
Share of associates':
- revenue
- expense
- profit before income tax
- income tax expense
- profit after income tax
Share of associates' operating profits after income tax:
- Elders Rural Bank Ltd
- Tasmanian Banking Services Ltd
- Community Sector Enterprises Pty Ltd
- Homesafe Solutions Pty Ltd
- Caroline Springs Financial Services Pty Ltd
- Silver Body Corporate Financial Services Pty Ltd
- Community Telco Australia Pty Ltd
- Strategic Payment Services Pty Ltd
The consolidated entity's share in the retained profits and reserves of associated
companies is not available for payment of dividends to shareholders of
Bendigo Bank Limited until such time as those profits and reserves are
distributed by the associated companies.
(iii) Carrying amount of investments in associates
Balance at the beginning of financial year
- carrying amount of investment in associate acquired during the year
- dividends received from associates
- share of associates' net profits (losses) for the financial year
- share of associates' movements in retained earnings for the financial year
- share of associates' movements in reserves for the financial year
Carrying amount of investments in associates at the end of the financial year
Represented by:
Investments at equity accounted amount:
- Elders Rural Bank Ltd
- Tasmanian Banking Services Ltd
- Community Sector Enterprises Pty Ltd
- Homesafe Solutions Pty Ltd
- Caroline Springs Financial Services Pty Ltd
- Silver Body Corporate Financial Services Pty Ltd
- Community Telco Australia Pty Ltd
- Strategic Payment Services Pty Ltd
2007
$m
59.8
37.9
21.9
8.1
13.8
18.0
0.9
(0.1)
(1.0)
(0.1)
0.1
(1.4)
(2.6)
13.8
143.5
9.4
(12.0)
13.8
-
1.6
156.3
151.4
2.2
-
-
0.1
0.3
0.8
1.5
156.3
2006
$m
51.1
28.9
22.2
6.7
15.5
16.1
0.8
-
(0.6)
(0.1)
(0.1)
(0.5)
(0.1)
15.5
118.1
18.4
(12.5)
15.5
3.6
0.4
143.5
137.6
1.9
0.1
0.4
0.2
0.2
2.2
0.9
143.5
There are no impairment losses relating to investments in associates.
Unrecognised losses relating to associates
-
-
100
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES USING THE EQUITY METHOD
(continued)
(iv) The consolidated entity's share of the assets and liabilities of associates
in aggregate
Assets
Liabilities
Net Assets
(v) Amount of retained profits of the consolidated entity attributable to
associates
Total
Elders Rural Bank Limited
2007
2006
2007
2006
1,895.1
1,760.7
134.4
70.2
1,640.8
1,519.3
121.5
68.4
1,885.4
1,756.2
129.2
1,631.7
1,516.3
115.4
Subsequent events affecting an associate's profits/losses for the ensuing year (if any) are disclosed in the Events after Balance Sheet Day note.
The consolidated entity's share of associates' commitments and contingent liabilities (if any) are disclosed in the Commitments and Contingencies note.
22.
PROPERTY, PLANT AND EQUIPMENT
(a) Carrying Value
Property
Freehold land - at fair value
(1)
Freehold buildings - at fair value
Accumulated depreciation
(1)
Leasehold improvements - at cost
Accumulated depreciation
Other
Plant, furniture, fittings, office equipment & vehicles - at cost
Accumulated depreciation
Consolidated
Bendigo Bank
2007
$m
5.8
5.8
1.2
-
1.2
37.2
(12.6)
24.6
31.6
91.2
(61.3)
29.9
2006
$m
5.0
5.0
8.0
(0.4)
7.6
24.7
(10.3)
14.4
27.0
111.1
(57.0)
54.1
2007
$m
0.4
0.4
0.3
-
0.3
37.2
(12.6)
24.6
25.3
84.6
(56.3)
28.3
2006
$m
0.2
0.2
0.2
-
0.2
24.7
(10.3)
14.4
14.8
73.9
(47.8)
26.1
61.5
81.1
53.6
40.9
101
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
PROPERTY, PLANT AND EQUIPMENT (continued)
(b) Reconciliations
(1)
Freehold land
Carrying amount at beginning of financial year
Additions
Revaluations
Disposals
(1)
Freehold buildings
Carrying amount at beginning of financial year
Additions
Revaluations
Disposals
Depreciation expense
Leasehold improvements - at cost
Carrying amount at beginning of financial year
Acquisitions
Additions
Disposals
Depreciation expense
Plant, furniture, fittings, office equipment & vehicles
Carrying amount at beginning of financial year
Acquisitions
Additions
Re-classification to assets held for sale
Disposals
Depreciation expense
5.0
0.5
0.3
-
5.8
7.6
1.0
0.1
(7.3)
(0.2)
1.2
14.4
-
12.6
(0.1)
(2.3)
24.6
54.1
-
82.0
(93.4)
(2.5)
(10.3)
29.9
If land and buildings were measured using the cost model the carrying amounts would be as follows:
Land
Buildings
Accumulated depreciation and impairment
Net carrying amount
2.4
8.7
(4.1)
7.0
1
The fair values of freehold land and buildings on freehold land have been determined by reference to director valuations, based
upon independent valuations previously obtained. The independent valuations are performed on an open market basis, being
the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller
in an arm's length transaction at the valuation date. The effective date of the revaluation was 30 June 2007.
6.5
-
-
(1.5)
5.0
11.0
0.2
-
(3.3)
(0.3)
7.6
5.0
-
11.9
(0.2)
(2.3)
14.4
25.0
-
39.9
-
(1.1)
(9.7)
54.1
2.7
8.5
(3.8)
7.4
0.2
-
0.2
-
0.4
0.2
-
0.1
-
-
0.3
14.4
-
12.6
(0.1)
(2.3)
24.6
26.1
-
13.9
-
(2.1)
(9.6)
28.3
0.1
0.1
-
0.2
0.2
-
-
-
0.2
1.7
-
-
(1.5)
-
0.2
4.9
-
11.9
(0.2)
(2.2)
14.4
22.2
-
13.2
-
(0.5)
(8.8)
26.1
0.1
0.1
-
0.2
23. ASSETS HELD FOR SALE
Carrying amount at beginning of financial year
Additions
Consolidated
Bendigo Bank
2007
$m
-
93.4
93.4
2006
2007
2006
$m
-
-
-
$m
-
-
-
$m
-
-
-
In accordance with Accounting Standard AASB 5: “Non-current Assets Held for Sale and Discontinued
Operations”, the carrying value of the new Head Office development in Bendigo, Victoria has been
disclosed as Assets held for sale.
The development is the subject of a Sale and Leaseback contract which takes effect 29 August 2008. This
asset is reported in the Segment Note under “Joint Ventures, Alliances and Corporate Support”.
At 30 June 2006 the carrying value of this asset was $25.8 million and was included in plant & equipment.
102
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
24. INVESTMENT PROPERTY
Carrying amount at beginning of financial year
Additions
Net gain from fair value adjustments
Consolidated
Bendigo Bank
2007
$m
-
32.7
1.5
34.2
2006
2007
2006
$m
-
-
-
-
$m
-
-
-
-
$m
-
-
-
-
Investment properties are carried at fair value, which has been determined in accordance with directors’
valuations.
The fair value represents the amounts at which the assets could be exchanged between a knowledgeable
willing seller at arm’s length transaction at the date of valuation in accordance with Australian Valuation
Standards.
25.
INTANGIBLE ASSETS AND GOODWILL
Consolidated
Bendigo Bank
(a) Carrying value
Intangible assets
Customer list - at cost
Accumulated amortisation
Computer software - at cost
Accumulated amortisation
Trustee licence - at cost
Accumulated impairment
Goodwill
Purchased goodwill
Accumulated impairment
Goodwill on consolidation - at cost
Accumulated impairment
(b) Reconciliations
Intangible assets
Customer list
Carrying amount at beginning of financial year
Additions/fair value adjustment
Amortisation charge
Computer software
Carrying amount at beginning of financial year
AIFRS transition reclassification from property, plant & equipment
Additions
Disposals
Amortisation charge
Trustee licence
Carrying amount at beginning of financial year
Goodwill
Purchased goodwill
Carrying amount at beginning of financial year
Additions/transfer from goodwill on consolidation
Goodwill on consolidation
Carrying amount at beginning of financial year
Additions/(purchase price adjustment)
Transfer to purchased goodwill
Impairment
103
2007
$m
4.6
(3.2)
1.4
29.7
(10.0)
19.7
8.4
-
8.4
34.6
-
34.6
29.6
-
29.6
93.7
2.6
-
(1.2)
1.4
13.6
-
10.3
-
(4.2)
19.7
8.4
8.4
-
34.6
34.6
65.0
(0.8)
(34.6)
-
29.6
93.7
2006
$m
4.6
(2.0)
2.6
19.5
(5.9)
13.6
8.4
-
8.4
2.2
(2.2)
-
66.3
(1.3)
65.0
89.6
4.3
(0.1)
(1.6)
2.6
10.4
-
10.1
(3.1)
(3.8)
13.6
8.4
8.4
-
-
-
67.3
(2.2)
(0.1)
65.0
89.6
2007
$m
-
-
-
28.8
(9.2)
19.6
-
-
-
34.6
-
34.6
-
-
-
54.2
-
-
-
-
13.5
-
10.2
-
(4.1)
19.6
-
-
-
34.6
34.6
-
-
-
-
54.2
2006
$m
-
-
-
18.7
(5.2)
13.5
-
-
-
2.2
(2.2)
-
-
-
-
13.5
-
-
-
-
7.2
-
10.0
-
(3.7)
13.5
-
-
-
-
-
-
-
-
-
13.5
BENDIGO BANK LTD
ABN 11 068 049 178
Intangible assets
Finite useful life
Full Financial Report
Period ending 30 June 2007
The customer list was acquired through a business combination (Oxford Funding Pty Ltd) and has been
capitalised at fair value. The customer list has been assessed as having a finite life and is amortised using
a method that reflects the pattern of the economic benefits of the asset over a period of 5 years.
Computer software includes internally developed software and software that is not an integral part of the
related hardware. Intangible software is capitalised at cost and is amortised over the assessed useful life of
the asset on a straight line basis. This is generally a period of between 2.5 years and 7 years (major
software items).
Indefinite useful life
The trustee licence represents an intangible asset purchased through the effect of a business combination
(Sandhurst Trustees Limited). The useful life of this asset has been estimated as indefinite and the cost
method utilised for measurement. The asset is assessed as having an indefinite life as the authorisation for
Sandhurst Trustees Limited to trade as a trustee company has no end period. Revocation of the authority is
unlikely and would occur only in the event of non-compliance with conditions under which authorisation is
granted. Sandhurst Trustees Limited has specific compliance procedures in place to ensure these
conditions are met.
Goodwill
The goodwill items represent intangible assets purchased through the effect of business combinations.
26.
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES
Goodwill acquired through business combinations has been allocated to cash generating units, or groups of
cash generating units, which are reportable segments for internal reporting, for impairment testing as
follows:
Sandhurst Trustees Limited
Goodwill has been allocated to the cash generating unit (CGU) of Sandhurst Trustees Limited (STL).
The recoverable amount of the STL CGU has been determined based on a fair value calculation using the
projected cash flows for 2006/07 and applying a multiple of 12 (2006:12). Management believe this multiple
is appropriate for this business. For impairment testing purposes, the fair value has been allocated on the
basis of 80% of the fair value relates to the trustee licence and 20% of the fair value relates to the goodwill.
The multiple would have to decline to 1 (2006: 1.1) before impairment would be evident.
Benhold Pty Ltd (IOOF Building Society)
Goodwill for IOOF has been allocated to the group of cash generating units comprising branches in the
state of Victoria, Australia.
The recoverable amount of the IOOF group of branches has been determined based on a value in use
calculation using the projected after-tax cash flows for 2006/07 of the group of units and applying a multiple
of 12 (2006:12). Management believes this multiple is appropriate for the group of branches.
The multiple would have to decline to 4 (2006:4.5) before impairment would be evident.
104
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Victorian Securities Corporation Limited
Goodwill has been allocated to the cash generating unit of Victorian Securities Corporation Limited (VSCL).
The recoverable amount of the VSCL CGU has been determined based on a fair value calculation using the
projected 2006/07 VSCL after-tax profit and a multiple of 12 (2006:12). Management believes this multiple
is appropriate for a business of this nature.
The multiple would have to decline to 8.5 (2006:7.5) before impairment would be evident.
First Australian Building Society Limited
Goodwill for First Australian Building Society Limited (FABS) has been allocated to the group of cash
generating units comprising the branches located in the state of Queensland, Australia. The recoverable
amount of the FABS group of units has been determined based on a fair value calculation using the
projected 2006/07 after-tax profit for the group of units and a multiple of 12 (2006:12). Management
believes this multiple is appropriate for this group of cash generating units.
The multiple would have to decline to 9.7 (2006:12) before impairment would be evident.
Oxford Funding Pty Ltd
Goodwill has been allocated to the cash generating unit of Oxford Funding Pty Ltd (Oxford).
The recoverable amount of the Oxford CGU has been determined based on a value in use calculation using
cash flow projections based on financial budgets and projections approved by senior management covering
a five-year period.
The pre-tax discount rate applied to cash flow projections is 16.2% (2006:16.5%). The terminal value of the
unit has been calculated using a multiple of 10 (2006: 10), which is considered by management to be
appropriate for a company of this nature in the factoring industry.
The multiple would have to decline to 5.7 (2006: 6.2) before impairment would be evident.
The following describes each key assumption on which management has based its cash flow projections
when determining the value in use of the cash generating units or groups of cash generating units:
Oxford Funding Pty Ltd
Income and expense projections have been based on historical trends, together with expectations of senior
management with regard to business growth and expense increases. The 2006/07 cash flows are based on
year-to-date March 2007 actual performance plus forecasts to June 2007. The four years after 2006/2007
are based on a cash flow growth of 10% per annum (2006: 10%), which is believed by management to be
appropriate for this cash generating unit. The company was purchased by Bendigo Bank in April 2005 and
now has access to the business banking distribution network of the bank, which should assist the company
to achieve its projections.
Intangible assets with indefinite lives
Sandhurst Trustees Limited trustee licence
The recoverable amount of the STL cash generating unit has been determined based on a fair value
calculation using the projected cash flows for 2006/07 and applying a multiple of 12 (2006:12).
Management believe this multiple is appropriate for this business. For impairment testing purposes, the fair
value has been allocated on the basis of 80% of the fair value relates to the trustee licence and 20% of the
fair value relates to the goodwill.
The multiple would have to decline to 1.5 (2006: 1.5) before impairment would be evident.
Multiples
Multiples used in impairment testing - management believe that the appropriate multiples to be used in
impairment testing of the majority of cash generating units within the group fall within the range 8 to 12.
This range has been derived taking into account a number of relevant factors that would influence the
multiple relating to businesses within the Bendigo Bank group.
105
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Carrying amount of goodwill allocated to each of the cash generating units or group of cash
generating units
Carrying amount of goodwill and intangible assets
Sandhurst Trustees Limited
- goodwill
- trustee licence
Benhold Pty Ltd (IOOF Building Society)
Victorian Securities Corporation Limited
First Australian Building Society Limited
Oxford Funding Pty Ltd
- goodwill
- customer list
Total value allocated
27.
OTHER ASSETS
Shares in associates
Accrued income
Reserve fund
Prepayments
Sundry debtors
2007
$m
0.8
8.4
13.7
2.7
34.6
12.4
1.4
74.0
2006
$m
0.8
8.4
13.7
2.7
34.6
13.2
2.6
76.0
Consolidated
Bendigo Bank
2007
$m
-
18.3
-
7.2
83.3
108.8
2006
$m
-
21.1
10.5
6.3
45.8
83.7
2007
$m
140.7
15.7
-
7.2
76.1
239.7
2006
$m
131.3
15.8
-
6.3
36.8
190.2
Shares in associates are carried at cost.
Other assets are generally non-interest bearing and are short-term by nature.
Sundry debtors are normally settled within 30 days.
The Reserve fund is required to be maintained by Sandhurst Trustees Limited under the Trustee Companies Act 1984, to provide for the event of the
appointment of a liquidator, a receiver and manager or an administrator of a trustee company. The components of the Reserve Fund have been
reclassified to the respective asset classes in 2007, being at call investments, managed fund and share investments and property.
The total carrying value of these components at 30 June 2007 is $12.5 million (2006: $10.5 million).
106
BENDIGO BANK LTD
ABN 11 068 049 178
28.
DEPOSITS
Retail
Branch network
Treasury sourced
Wholesale
Domestic
Offshore
Deposits by geographic location
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia/Northern Territory
Western Australia
Tasmania
Overseas/other
Maturity analysis
At call
Not longer than 3 months
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Longer than 5 years
z
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
11,641.3
547.0
12,188.3
1,778.9
1,263.8
3,042.7
15,231.0
8,494.4
1,971.3
101.5
2,034.2
235.3
987.8
277.6
1,128.9
15,231.0
6,619.2
4,658.9
2,631.2
1,321.4
0.3
15,231.0
10,771.5
575.3
11,346.8
1,439.8
813.2
2,253.0
13,599.8
8,066.1
1,540.2
84.7
1,916.9
197.4
802.2
268.6
723.7
13,599.8
5,874.1
4,365.1
2,141.0
1,219.3
0.3
13,599.8
11,481.7
557.4
12,039.1
1,519.8
1,263.8
2,783.6
14,822.7
8,236.2
1,928.4
99.7
1,974.9
230.5
970.8
272.6
1,109.6
14,822.7
6,369.0
4,581.7
2,557.6
1,314.1
0.3
14,822.7
10,595.3
588.3
11,183.6
1,066.3
813.2
1,879.5
13,063.1
7,730.3
1,485.7
82.2
1,829.6
191.1
780.0
261.0
703.2
13,063.1
5,507.0
4,283.5
2,057.1
1,215.2
0.3
13,063.1
Deposits-The retail branch network consists of a variety of investor products which can be on an at call (cash management accounts)
or a term deposit basis. Interest is payable monthly, quarterly, half-yearly, annually or at maturity of the deposit, depending on the
term. At call accounts pay interest on a monthly basis. At call accounts also attract transaction fees, which are generally charged on a
monthly basis and are eligible for transaction account rebates. A term deposit interest rate can be reduced during the term should
customer withdrawals exceed 25% of the initial balance or renewed amount. The carded interest rates are based on a tiered structure
depending on the account balance and range from 0.5% to 6.50% (2006: 0% to 5.50%).
Deposits-retail treasury sourced include certificates of deposit issued with an average maturity of 48 days (2006: 51 days) with
effective interest rates of 6.20% to 6.85% (2006: 5.36% to 6.26%) and term deposits and 11am call deposits. Fixed term deposits
have an average maturity of 13 days (2006: 128 days). 11am call monies are available at call. Interest rates on this group of deposits
range from 6.0% to 6.36% (2006: 5.0% to 6.40%).
Deposits-wholesale domestic deposits include certificate of deposits with an average maturity of 105 days (2006: 72 days) with
effective interest rates of 6.36% to 6.75% (2006: 5.65% to 6.08%). Fixed term deposits have an average maturity of 642 days (2006:
1007 days). 11am call monies are available at call. Interest rates on this group of deposits range from 5.7% to 6.84% (2006: 5.5% to
6.60%).
Deposits-wholesale offshore comprise a Euro medium term note program (EMTN) and a Euro commercial paper program (ECP). At
balance date, the principal of borrowings under the EMTN program was AUD 833.265 million (2006: AUD 530.2 million), taking
account of the conversion inherent in the cross currency swaps. The average interest rate in BBSW +.3187% (2006: +.4448%) and
rates are reset on a quarterly basis. The notes on issue mature on 10 September 2007, 1 April 2008 and 29 March 2010.
ECPs on issue have an average maturity of 161 days (2006: 148 days) with an effective interest rate of 6.47% to 7.01% (2006: 5.68%
to 6.27%).
107
BENDIGO BANK LTD
ABN 11 068 049 178
29.
OTHER PAYABLES
Sundry creditors
Accrued expenses and outstanding claims
Payables are non-interest bearing and are generally settled within 30 days.
30.
PROVISIONS
(a) Balances
Employee benefits (Note 35)
Other loss events
Rewards program
Property Rent
Dividends
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
54.7
96.6
151.3
2006
$m
34.0
106.0
140.0
2007
$m
36.8
88.6
125.4
2006
$m
18.6
92.2
110.8
2007
$m
2006
$m
2007
$m
2006
$m
35.0
-
3.2
2.1
0.1
40.4
32.4
0.4
2.6
1.9
0.1
37.4
34.5
-
3.2
2.1
0.1
39.9
31.4
0.4
2.6
1.9
0.1
36.4
Provision for other loss events is in relation to possible losses associated with outstanding legal issues. These are expected to be resolved within 12
months of balance date.
Provision for rewards program is to recognise the liablility to customers in relation to points earned by them under the Bendigo Bank Rewards Program
and is measured on the basis of full value of points outstanding at balance date. As reward points "expire" after three years, the balance will be utilised, or
forfeited within a three year period.
Provision for property rent is to recognise the difference between actual property rent paid and the property rent expense recognised in the income statement.
The value recognised in the income statement is in accordance with Accounting Standard AASB 117 "Leases" whereby the lease expense is to be recognised
on a straight-line basis over the period of the lease. The provision is expected to be utilised over the period of the respective leases, typically a period
between three and ten years. However, it is expected that a balance will continue as old leases expire and are replaced by new leases.
Provision for dividends represents the residual carried forward balance in relation to shareholders that participate in the dividend reinvestment plan. It is
expected that the current balance will be utilised within a 12 month period. However, an ongoing balance will continue unless all outstanding balances
are paid to shareholders upon ceasing participation in the dividend reinvestment plan.
(b) Movements
Employee benefits
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Other loss events
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Rewards program
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Property Rent
Opening balance
Additional provisions recognised
Amounts utilised during the year
Closing balance
Dividends
Opening balance
Additional dividends provided
Dividends paid during the year
Closing balance
32.4
20.2
(17.6)
35.0
0.4
0.2
(0.6)
-
2.6
1.7
(1.1)
3.2
1.9
0.2
-
2.1
0.1
72.7
(72.7)
0.1
28.6
17.6
(13.8)
32.4
1.1
0.5
(1.2)
0.4
2.2
1.6
(1.2)
2.6
-
1.9
-
1.9
0.1
63.6
(63.6)
0.1
31.4
19.4
(16.3)
34.5
0.4
0.2
(0.6)
-
2.6
1.7
(1.1)
3.2
1.9
0.2
-
2.1
0.1
72.7
(72.7)
0.1
27.8
16.9
(13.3)
31.4
1.1
0.5
(1.2)
0.4
2.1
1.6
(1.1)
2.6
-
1.9
-
1.9
0.1
63.6
(63.6)
0.1
108
BENDIGO BANK LTD
ABN 11 068 049 178
31.
SUBORDINATED DEBT
Subordinated capital notes
Rollover notes - series 1
Maturity analysis
Not longer than 3 months
Longer than 5 years
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
307.2
-
307.2
-
307.2
307.2
2006
$m
294.0
13.1
307.1
13.1
294.0
307.1
2007
$m
307.2
-
307.2
-
307.2
307.2
2006
$m
294.0
13.1
307.1
13.1
294.0
307.1
Subordinated capital notes have an average maturity of 7.1 years (2006: 7.64 years) with effective interest rates of 6.88% to 7.76% (2006: 6.29% to 7.95%).
32.
ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid - 144,187,890 (2006: 140,850,961)
Preference shares of $100 face value fully paid - 900,000 (2006: 900,000 fully paid)
Consolidated
Bendigo Bank
2007
$m
605.2
88.5
693.7
2006
$m
564.1
88.3
652.4
2007
$m
605.2
88.5
693.7
2006
$m
564.1
88.3
652.4
Effective 1 July 1998, the corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the parent
does not have authorised capital nor par value in respect of its issued shares.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Preference share (BPS) dividends are non-cumulative and are payable quarterly in arrears, at the discretion of he directors, based on a dividend rate
equal to the sum of the 90 day bank bill rate plus the initial margin multiplied by one minus the company tax rate. It is expected that dividends paid will be
fully franked. The BPS are perpetual, but may be redeemed by Bendigo Bank subject to prior approval of APRA.
Movement in ordinary shares on issue
Opening balance - 1 July
Shares issued under:
Bonus share scheme - 156,945 @ $13.62; 136,561 @ $13.40;
(2006: 168,244 @ $11.07; 124,755 @ $14.01)
Dividend reinvestment plan - 818,654 @ $13.62; 704,107 @ $13.40;
(2006: 866,908 @ $11.07; 584,385 @ $14.01)
Employee share plan - 1,520,662 @ $13.54 (2006: Nil)
Closing balance - 30 June
Movements in preference shares on issue
Opening balance 1 July - 900,000 fully paid (2006: 900,000 partly paid to $50)
Payment of unpaid portion of existing shares
Share issue expenses offset by tax benefit
Closing balance 30 June - 900,000 fully paid to $100 (2006: 900,000 fully paid)
564.1
546.3
-
20.5
20.6
605.2
88.3
0.2
-
88.5
-
17.8
-
564.1
43.0
45.0
0.3
88.3
109
BENDIGO BANK LTD
ABN 11 068 049 178
33.
RESERVES
(a) Balances
Employee benefits reserve
Asset revaluation reserve
Net unrealised gains reserve
Cash flow hedge reserve
Cash flow hedge reserve - associates
General reserve for credit losses
General reserve for credit losses - associates
(b) Nature, purpose and movements
Employee benefits reserve
(a) Nature and purpose
The employee benefits reserve is used to record the assessed cost of shares issue to
non-executive employees under the Employee Share Plan and the assessed cost of
options granted to executive employees under the Executive Incentive Plan.
(b) Movements
Opening balance
Net increase in reserve
Asset revaluation reserve
(a) Nature and purpose
The asset revaluation reserve is used to record increments and decrements in
the value of non-current assets. The reserve can only be used to pay dividends
in limited circumstances.
(b) Movements
Opening balance
AIFRS transition adjustment - after tax value of revaluations
Transfer asset revaluation reserve to retained earnings (sold assets)
Transfer asset revaluation reserve to retained earnings (revalued buildings depn)
Net revaluation increments
Tax effect of net revaluation increments
Net unrealised gains reserve
(a) Nature and purpose
The net unrealised gains reserve is used to record unrealised gains and losses on
investments in the available for sale portfolio.
(b) Movements
Opening balance
Net unrealised gains/(losses)
Cash flow hedge reserve
(a) Nature and purpose
The cash flow hedge reserve records the portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective hedge.
(b) Movements
Opening balance
Net gains on cash flow hedges
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
6.5
34.8
(0.1)
33.2
2.0
45.3
8.3
130.0
2006
$m
-
29.1
(0.1)
2.3
0.4
40.6
6.5
78.8
2007
$m
6.5
32.7
(0.1)
33.2
-
45.3
-
117.6
2006
$m
-
26.2
(0.1)
2.3
-
40.6
-
69.0
-
6.5
6.5
-
-
-
-
6.5
6.5
-
-
-
29.1
-
(0.1)
(0.2)
8.9
(2.9)
34.8
4.0
18.0
(14.3)
(0.2)
24.9
(3.3)
29.1
26.2
-
(0.1)
-
9.4
(2.8)
32.7
1.0
18.0
(14.3)
-
24.8
(3.3)
26.2
(0.1)
-
(0.1)
-
(0.1)
(0.1)
(0.1)
-
(0.1)
-
(0.1)
(0.1)
2.3
30.9
33.2
-
2.3
2.3
2.3
30.9
33.2
-
2.3
2.3
110
BENDIGO BANK LTD
ABN 11 068 049 178
RESERVES (continued)
Cash flow hedge reserve - associates
(a) Nature and purpose
Associates record the group's share of the portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective hedge.
(b) Movements
Opening balance
Net gains on cash flow hedges
General reserve for credit losses
(a) Nature and purpose
The general reserve for credit losses records the value of a reserve maintained to
recognised credit losses inherent in the group's lending portfolio, but not yet
identified. The bank is required to maintain general provisions (includes general reserve
for credit losses and collective provision) by APRA at a minimum level of 0.50% (net of tax)
of risk-weighted assets.
(b) Movements
Opening balance
Creation of GRCL on transition to AIFRS
Increase in general reserve for credit losses
General reserve for credit losses - associates
(a) Nature and purpose
The general reserve for credit losses - associates records the group's share of
an associate company's GRCL in accordance with equity accounting.
(b) Movements
Opening balance
Creation of GRCL on transition to AIFRS
Increase in general reserve for credit losses
Full Financial Report
Period ending 30 June 2007
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
0.4
1.6
2.0
-
0.4
0.4
-
-
-
-
-
.
40.6
-
4.7
45.3
6.5
-
1.8
8.3
-
36.7
3.9
40.6
-
4.8
1.7
6.5
40.6
-
4.7
45.3
-
-
-
-
-
36.7
3.9
40.6
-
-
-
-
Total reserves
130.0
78.8
117.6
69.0
34. MINORITY INTEREST
Interest in:
Ordinary shares
Retained earnings
Reconciliation of minority equity interest in controlled entities:
Opening balance
Add share of operating loss
Derecognition of minority interest
Closing balance
-
(0.7)
(0.7)
(0.6)
(0.1)
-
(0.7)
-
(0.6)
(0.6)
(0.4)
-
(0.2)
(0.6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
111
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
35.
EMPLOYEE BENEFITS
Employee benefits liability
Provision for annual leave
Provision for other employee payments
Provision for long service leave
Provision for sick leave bonus
Provision for employee on costs
Directors' retirement allowance
Aggregate employee benefits liability
Consolidated
Bendigo Bank
2007
$m
11.7
4.6
12.6
2.2
3.8
0.1
35.0
2006
$m
12.0
4.0
10.6
1.8
3.6
0.4
32.4
2007
$m
11.5
4.6
12.4
2.2
3.7
0.1
34.5
2006
$m
11.5
4.0
10.3
1.7
3.5
0.4
31.4
It is anticipated that annual leave provided at balance date will be paid in the ensuing 12 month period.
Other employee payments are expected to be paid in September 2007.
Long service leave is taken with agreement between employee and employer, or on termination of employment.
Sick leave bonus is paid to entitled employees on termination of employment.
Directors' retirement allowance was discontinued as at 31 August 2005. Further details are provided in the 2007 Remuneration Report.
36.
SHARE BASED PAYMENT PLANS
Executive Incentive Plan
The Executive Incentive Plan (“Plan”) was established in 2006. The Plan provides for grants of options and
performance rights (“Instruments”) to key executives, including the Managing Director. Under the Plan,
eligible executives are granted options and performance rights subject to performance conditions set by the
Board. If the performance conditions are satisfied during the relevant performance period, the options and
performance rights will vest.
The performance conditions and performance periods for grants under the Plan are set out in the 2007
Remuneration Report.
Each option and performance right represents an entitlement to one ordinary share in the company.
Accordingly, the maximum number of shares that may be acquired by key executives is equal to the
number of options and performance rights issued.
Options and performance rights are granted at no cost to the managing director and key executives. The
Plan rules provide that the Board may determine that a price is payable upon exercise of an option or
exercisable performance right. The exercise price for options will generally be the market price of the
shares at the grant date, and no exercise price will apply to exercisable performance rights.
The number of options and performance rights granted to the Managing Director and key executives have
been based on the value of each option and performance right. The assessed fair value of each option and
each performance right granted under the Plan are set out in the tables presented at note 38.
Executives are entitled to vote and to receive any dividend, bonus issue, return of capital or other
distribution made in respect of shares they are allocated on vesting and exercise of their performance rights
and options, as applicable.
The grants are subject to a dealing restriction. Executives are not entitled to sell, transfer or otherwise deal
with the shares allocated to them until 2 years after the end of the initial performance period.
The share issue in September 2006 was valued and expensed in accordance with applicable accounting
requirements. The expense recognised in the income statement in relation to share-based payments is
disclosed in note 9.
112
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and
movements in performance options issued during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
2007
No.
-
2007
WAEP
-
632,693
$14.66
-
-
-
-
-
-
Outstanding at the end of the year
632,693
$14.66
2006
No.
2006
WAEP
-
-
-
-
-
-
-
-
-
-
-
-
The following table illustrates the number (No. ) and weighted average exercise prices (WAEP) of and
movements in performance rights issued during the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
2007
No.
-
2007
WAEP
-
100,117
$0.00
-
-
-
-
-
-
Outstanding at the end of the year
100,117
$0.00
The outstanding balance as at 30 June 2007 is represented by:
2006
No.
2006
WAEP
-
-
-
-
-
-
-
-
-
-
-
-
• 632,693 performance options over ordinary shares with an exercise price of $14.66 each, exercisable
upon meeting the above conditions, and until 31 July 2011.
• 100,117 performance rights over ordinary shares with an exercise price of $0.00 each, exercisable
upon meeting the above conditions, and until 30 June 2010.
The weighted average fair value of rights and options granted during the year was $3.54 (2006: Nil).
The fair value of the shares granted under the Plan is estimated as at the date of grant using the Black-
Scholes - Merton Option Pricing Model taking into account the terms and conditions upon which the options
were granted.
113
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The following table lists the inputs to the model used for the year ended 30 June 2007.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Expected life of rights (years)
Option exercise price ($)
Closing share price at grant date ($)
2007
3.75
18
6.00
4.5(1)
3.5 (1)
14.66
14.50
(1) The expected life inputs for the Tranche 1 grant to the Managing Director were:
Options – 4.0 years, Rights – 2.5 years.
The expected life of the rights and options is based on historical data and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility
is indicative of future trends, which may also not necessarily be the actual outcome. No other features of
options granted were incorporated into the measurement of fair value.
Employee Share Plan
Legacy Plan
The Company discontinued in 2006 the existing loan-based Employee Share Ownership Plan (“Plan”)
which was open to all employees in the Group, including the Managing Director and executives. The Plan
will continue as a legacy plan until such time as the loans provided to fund share purchases under the Plan
have been repaid. There have been no issues of shares under this Plan since November 2004.
The notional value of the interest-free loan provided to the managing director and relevant executives under
this legacy Plan is disclosed in the remuneration tables that accompany this report.
Current Plan
The Bank has established a new loan-based limited recourse Employee Share Plan (“Plan”). The Plan is
substantially the same as the Legacy plan. However, it is only available to general staff. Executives
(including the Managing Director) may not participate in it.
Under the terms of the Plan, shares will be issued at the prevailing market value. The shares must be paid
for by the staff member. The Plan provides staff members with an interest-free loan for the sole purpose of
acquiring Plan shares. Net cash dividends after personal income tax obligations are applied to reduce the
loan balance. Staff cannot deal in the shares until the loan has been repaid. The primary benefit under the
terms of the Plan is the financial benefit of the interest-free loan.
The first issue to general staff under this plan was completed in September 2006. There have been no
further issues under this Plan.
The share issue in September 2006 was valued and expensed in accordance with applicable accounting
requirements. The expense recognised in the income statement in relation to share-based payments is
disclosed in note 9.
114
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in
Plan shares issued during the year.
2007
No.
2007
WAEP
2006
No.
2006
WAEP
Outstanding at the beginning of the year
4,798,426
25,600,000
5,251,744
30,000,000
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
1,520,662
20,600,000
-
-
-
-
-
-
608,473
5,800,000
453,318
4,400,000
-
-
-
-
Outstanding at the end of the year
5,710,615
40,400,000
4,798,426
25,600,000
Exercisable at the end of the year
5,710,615
40,400,000
4,798,426
25,600,000
The outstanding balance as at 30 June 2007 is represented by 5,710,615 ordinary shares with a market
value at 30 June 2007 of $15.20 each (value: $86,801,348), exercisable upon repayment of the employee
loans.
The acquisition price of shares granted during the year was $13.54 (2006: Nil) being the volume weighted
average share price of the company’s shares traded on the ASX in the 7 days trading ending one calendar
week before the invitation date.
The fair value of the shares granted under the Plan is estimated as at the date of grant using the Black-
Scholes-Merton Option Pricing Model taking into account the terms and conditions upon which the shares
were granted. The fair value determined by independent valuation was $3.70.
The following table lists the inputs to the model used for the year ended 30 June 2007.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of shares (years)
Share exercise price ($)
Share price at grant date ($)
2007
-
18
5.674
4
13.54
13.92
The expected life of the share options is based on historical data and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility
is indicative of future trends, which may also not necessarily be the actual outcome. No other features of
shares granted were incorporated into the measurement of fair value. The exercise price of the shares
issued will reduce over time as dividends are applied to repay the staff loans.
Recognised share-based payment expenses
Expense arising from equity settled share-based payment transactions
Total expense arising from share-based payment transactions
Consolidated
2007
$m
7.3
7.3
2006
$m
-
-
115
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Employee share and loan values and EPS impact
Consolidated
Employee share and loan values
Value of unlisted employee shares on issue at 30 June 2007 -
5,710,615 shares @ $15.20 (2006 - 4,798,426 shares @ $12.90)
Value of outstanding employee loans at beginning of year relating to employee shares
Value of new loans relating to employee shares issued during year
Value of repayments of loans during year
Value of outstanding employee loans at end of year relating to employee shares
2007
$m
86.8
25.6
20.6
(5.8)
40.4
2006
$m
61.9
30.0
-
(4.4)
25.6
Number of employees with outstanding loan balances
2,555
1,461
Indicative cost of funding employee loans
Average balance of loans outstanding
Average cost of funds
After tax indicative cost of funding employee loans
Earnings per ordinary share - actual
Earnings per ordinary share - adjusted for interest foregone
- cents
- cents
37.1
27.6
5.16%
4.79%
1.3
81.9
82.8
0.9
81.5
82.2
The cost of employee interest-free loans is calculated by applying the bank's average cost of funds for the
financial year to the average outstanding balance of employee loans for the financial year. This cost is then
tax-effected at the company tax rate of 30% (2006: 30%).
Earnings per ordinary share - adjusted is calculated by adding the after tax indicative cost of funding
employee loans to profit available for distribution to ordinary shareholders. This adjusted earnings figure is
divided by the weighted average number of ordinary shares.
116
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
37.
AUDITOR’S REMUNERATION
Chief entity auditors
The auditor of Bendigo Bank Limited is Ernst & Young (Australia)
Amounts received, or due and receivable by the auditors for:
-auditing the financial statements of the chief entity and
any other entity in the economic entity
-taxation services in relation to the chief entity and
any other entity in the economic entity
-other services in relation to the chief entity and
any other entity in the economic entity
Amounts received, or due and receivable by non Ernst & Young audit firms for:
-review of the financial report
-other services in relation to the chief entity and
any other entity in the economic entity
Consolidated
Bendigo Bank
2007
$
2006
$
2007
$
2006
$
615,050
612,456
615,050
612,456
72,853
176,084
70,823
152,103
238,655
926,558
109,000
897,540
238,655
924,528
109,000
873,559
18,000
18,000
5,244
23,244
3,000
21,000
-
2,244
2,244
-
-
-
117
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
38.
DIRECTOR AND EXECUTIVE DISCLOSURES
Details of the remuneration of directors and executives of the group for the 2007 financial year
(a) Details of key management personnel
The directors and executives, including key management personnel (being the directors of the Bank
and the executives who have the authority and responsibility for planning, directing and controlling the
activities of the Group), and the five most highly remunerated executives of the Group and the
Company for the 2007 financial year.
(i) Directors
Robert N Johanson
Robert G Hunt AM
Neal J Axelby
Jennifer L Dawson
Donald J Erskine
Richard Guy OAM
Terence J O’Dwyer
Deborah L Radford
Kevin E Roache
Antony D Robinson
(ii) Executives
Chairman (non executive)
Managing Director
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
- retired from the Board on 31 August 2006
Chief General Manager, Solutions
Chief General Manager, Strategy and Human Resources
Marnie A Baker
Gregory D Gillett
Richard H J Hasseldine Chief General Manager, Group Delivery
Michael J Hirst
Russell P Jenkins
Vicky M Kelly
K Craig Langford
Chief Operating Officer
Chief General Manager, Retail and Distribution
Chief Information Officer
Chief Financial Officer
(b) Compensation of key management personnel
The company has applied the exemption under Corporations Amendments Regulation 2006 which
exempts listed companies from providing remuneration disclosures in relation to their key
management personnel in their annual financial reports by Accounting Standard AASB 124 “Related
Party Disclosures”. These remuneration disclosures are provided in the “Remuneration Report” section
of the Directors’ Report designated as audited.
(c) Compensation by category: for directors and executives, including key management personnel (being
the directors of the Bank and the executives who have the authority and responsibility for planning,
directing and controlling the activities of the Group), and the five most highly remunerated executives
of the Group for the 2007 financial year.
CONSOLIDATED
2007
$
2006
$
Short-term
6,776,652
5,530,610
Post employment
640,785
536,701
Other long-term
568,019
522,728
Termination benefits
-
Share-based payment
2,031,241
-
-
118
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(d) Performance rights and options: Granted and vested during the year (Consolidated)
During the financial year performance rights and performance options were granted as equity
compensation under the Executive Incentive Plan (“Plan”) to certain key management personnel. No
share rights or options have been granted to non-executive Directors under this Plan.
The Plan provides for grants of options and performance rights (“Instruments”) to key executives,
including the Managing Director. Under the Plan, eligible executives are granted options and
performance rights subject to performance conditions set by the Board. If the performance conditions
are satisfied during the relevant performance period, the options and performance rights will vest.
Each option and performance right represents an entitlement to one ordinary share in the company.
Accordingly, the maximum number of shares that may be acquired by the key executives is equal to the
number of options and performance rights issued.
Options and performance rights are granted at no cost to the key executives. The exercise price for
options will generally be the market price of the shares at the grant date, and no exercise price will
apply to exercisable performance rights.
The number of options and performance rights granted to the Managing Director and key executives
have been based on the value of each option and performance right, calculated using the recognised
Black – Scoles-Merton valuation methodology. The assessed fair value of each option and each
performance right granted under the Plan are set out in the tables below. The grants are subject to a
dealing restriction.
Executives are not entitled to sell, transfer or otherwise deal with the shares allocated to them until 2
years after the end of the initial performance period. Further details of the Plan are set out in the 2007
Remuneration Report.
119
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Performance rights and options: Granted and vested during the year (Consolidated) (continued)
Performance Options
Vested Granted
Terms & Conditions for each Grant
30 June 2007
No.
No.
Grant Date
Fair Value per
option at grant
date
Exercise
price per
option
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
RG Hunt (tranche1)
(tranche2)
Executives
MJ Hirst
GD Gillett
KC Langford
VM Kelly
MA Baker
RP Jenkins
RH Hasseldine
Total
-
-
-
-
-
-
-
-
-
-
Performance Rights
120,349
3.11.06
160,465
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
44,601
37,559
41,080
30,516
30,516
34,038
23,709
522,833
$1.90
$2.07
$2.07
$2.07
$2.07
$2.07
$2.07
$2.07
$2.07
$14.66
$14.66
31.7.10
30.6.08
31.7.11
30.6.09
31.7.10
31.7.11
$14.66
$14.66
$14.66
$14.66
$14.66
$14.66
$14.66
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
30.6.09
31.7.11
31.7.11
31.7.11
31.7.11
31.7.11
31.7.11
31.7.11
Vested Granted
Terms & Conditions for each Grant
30 June 2007
No.
No.
Grant
Date
Fair Value per
right at grant
date
Exercise
price per
right
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
RG Hunt (tranche1)
(tranche2)
Executives
MJ Hirst
GD Gillett
KC Langford
VM Kelly
MA Baker
RP Jenkins
RH Hasseldine
Total
-
-
-
-
-
-
-
-
-
-
19,043
25,391
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
3.11.06
7,058
5,944
6,501
4,929
4,829
5,386
3,752
82,833
$13.39
$12.91
$12.91
$12.91
$12.91
$12.91
$12.91
$12.91
$12.91
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
30.6.09
30.6.08
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.10
30.6.09
30.6.09
30.6.10
30.6.10
30.6.10
30.6.10
30.6.10
30.6.10
30.6.10
30.6.10
No shares were issued on the exercise of performance rights or options during the year.
(1) Comparative details have not been provided as the Executive Incentive Plan was established in the 2007 financial
year.
120
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Performance rights and options: Granted and vested during the year (Consolidated) (continued)
Performance Options
30 June 2007
Directors
RG Hunt (tranche1)
(tranche2)
Executives
MJ Hirst
GD Gillett
KC Langford
VM Kelly
MA Baker
RP Jenkins
RH Hasseldine
Total
Balance at
beginning
of period
01-Jul-06
Granted as
Remun-
eration
Options
Exercised
Net Change
Other
Balance at
end of
period
30-Jun-07
Total
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
120,349
160,465
44,601
37,559
41,080
30,516
30,516
34,038
23,709
522,833
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,349
120,349
160,465
160,465
44,601
44,601
37,559
37,559
41,080
41,080
30,516
30,516
30,516
30,516
34,038
34,038
23,709
23,709
522,833
522,833
-
-
-
-
-
-
-
-
-
-
120,349
160,465
44,601
37,559
41,080
30,516
30,516
34,038
23,709
522,833
Performance Rights
30 June 2007
Directors
RG Hunt (tranche1)
(tranche2)
Executives
MJ Hirst
GD Gillett
KC Langford
VM Kelly
MA Baker
RP Jenkins
RH Hasseldine
Total
Balance at
beginning
of period
01-Jul-06
Granted as
Remun-
eration
Rights
Vested
Net Change
Other
Balance at
end of
period
30-Jun-07
Total
Exercisable
Not
Exercisable
-
-
-
-
-
-
-
-
-
-
19,043
25,391
7,058
5,944
6,501
4,929
4,829
5,386
3,752
82,833
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,043
25,391
19,043
25,391
7,058
5,944
6,501
4,929
4,829
5,386
3,752
7,058
5,944
6,501
4,929
4,829
5,386
3,752
82,833
82,833
-
-
-
-
-
-
-
-
-
-
19,043
25,391
7,058
5,944
6,501
4,929
4,829
5,386
3,752
82,833
(1) Comparative details have not been provided as the Executive Incentive Plan was established in the 2007 financial
year.
121
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
(e) Shareholdings of directors and named executives (including their related parties)
Shares held in
Bendigo Bank Ltd
Directors(1)
Balance 1 July 2006
Net Change
Balance 30 June 2007
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
R N Johanson
272,450
-
1,000
(3,850)
-
R G Hunt AM
112,212
740,000
N J Axelby
J L Dawson
D J Erskine
T J O’Dwyer
D L Radford
K E Roache
A D Robinson
Executives
M A Baker
G D Gillett
R H Hasseldine
M J Hirst
V M Kelly
41,559
16,630
231,111
50,300
1,000
44,053
2,500
-
-
-
-
-
-
-
4,729
2,404
150
150
57,850
139,410
45,000
50,000
2,622
129,000
K C Langford
450
123,367
R P Jenkins
15,363
76,160
-
100
150
-
-
-
200
-
500
-
-
-
-
-
-
141,918
(140,000)
325
671
9,109
-
-
1,103
-
191
(1,040)
-
-
-
-
621
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
797,683
1,360,787
1,950
149,048
(140,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
268,600
-
1,000
254,130
600,000
41,884
17,301
240,220
50,300
1,000
45,156
2,500
-
-
-
-
-
-
-
4,920
1,364
150
150
57,850
139,410
45,000
50,000
2,622
129,000
450
123,367
15,984
76,160
-
100
150
-
-
-
200
-
500
-
-
-
-
-
-
946,731
1,220,787
1,950
All equity transactions with directors and named executives have been entered into under terms and
conditions no more favourable than those the entity would have adopted if dealing at arm’s length other
than shares issued under the Employee Share Ownership Plan. Issue of shares under the Employee Share
Ownership Plan are made under conditions disclosed in Note 36.
(1) The comparative figures have been amended to exclude shareholdings of Mr R A Guy OAM who retired from the
board on 31 August 2006.
122
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(f) Loans to directors and named executives (including their related parties)
(i) Details of aggregates of loans to directors and named executives (including their related parties) are as
follows:
Balance
at beginning of
period
Interest
charged
Interest not
charged
Write-off
Balance at
end of
period
Number of
group
30 June
2007
$’000
$’000
$’000
$’000
$’000
$’000
Directors1
Executives1
2007
2006
2007
2006
Total directors and executives
2007
2006
28,629
30,740
5,137
5,476
33,766
36,216
1,742
1,765
204
172
1,946
1,937
239
147
150
152
389
299
-
-
-
-
-
-
25,275
28,629
8,807
5,137
34,082
33,766
9
7
7
7
16
14
1 Balances include loans provided to the Managing Director and executives in connection with share issues under the (legacy)
employee share ownership plan. The comparative figures have been amended to exclude loans to Mr RA Guy OAM who retired from
the board on 31 August 2006.
(ii) Details of individuals (including their related parties) with loans above $100,000 in the reporting period are as
follows:
Directors
R N Johanson
N J Axelby
J L Dawson
D J Erskine
K E Roache
R G Hunt AM
Staff share loan
BCT share loan
Executives
M A Baker
Staff share loan
Loans
K C Langford
Staff share loan
Loans
M J Hirst
Staff share loan
Loans
R J Hasseldine
Staff share loan
Loans
R P Jenkins
Staff share loan
Loans
V Kelly
Staff share loan
Loans
G Gillett
Staff share loan
Loans
Balance
at beginning of
period
Interest
charged
Interest not
charged
Write-off
Balance at
end of
period
Highest owing
in period
$’000
$’000
$’000
$’000
$’000
$’000
670
294
243
20,273
1,424
738
4,811
176
306
81
571
-
338
-
298
-
347
1,050
579
530
617
420
54
20
19
1,501
97
51
-
-
-
6
-
24
-
-
-
9
-
81
-
53
-
31
123
-
-
-
-
-
-
231
8
15
-
28
-
17
-
15
-
17
-
28
-
30
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
642
281
222
17,585
1,256
1,071
4,218
-
283
121
521
766
317
3
279
2,548
315
1,059
526
702
559
808
765
290
243
45,615
1,672
1,451
4,811
176
306
125
571
780
338
4
298
2,548
347
1,127
579
1005
617
880
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
(f) Loans to directors and named executives (including their related parties) (continued)
Terms and conditions of the loans
Staff Share Loans provided to Mr R G Hunt and Executives are under the terms of Bank’s Employee
Share Ownership Plan (“Plan”). Details of the Plan’s terms and conditions are provided at Note 36 to
the financial statements
Loans totalling $17.6 million were made to companies controlled by Mr D J Erskine. The loans were
provided in connection with property development and commercial property investment arrangements
in which Mr Erskine is associated. The loans were made in accordance with the Bank’s prevailing
lending terms and conditions.
(g) Other transactions of directors and director related entities
Mr K Roache as partner of the legal firm Coulter Roache has provided legal services to Bendigo Bank
Ltd by way of mortgage document preparation based on normal commercial terms and conditions. The
amount paid or payable during the year totalled $52,157 (2006: $5,402). The firm also leases its office
premises from Bendigo Bank under a formal lease arrangement. The lease arrangement was
determined on the basis of prevailing market terms and conditions.
Mr R Johanson is a director of the Grant Samuel Group, which provided consulting services to Bendigo
Bank Ltd based on normal commercial terms and conditions. A protocol, approved by the Board, has
been established for the engagement of Grant Samuel by the Bank which includes arrangements for
dealing with conflicts of interest.
The services provided during the 2007 financial year included services in relation to the Group property
review, alliance and joint venture activities, strategic developments and the proposed merger
announced by the Bank of Queensland that did not proceed. Grant Samuel has also been engaged as
joint advisor with Goldman Sachs JBWere by Bendigo Bank to provide advisory services in connection
with the proposed Adelaide Bank merger.
The services are provided in accordance with scheduled fee rates which were discussed and approved
by the Board in the absence of Mr Johanson. The amount paid or payable during the year totalled
$1,157,957 (2006: $832,115).
Mr Hunt and Mr Erskine are Directors of Bendigo Community Telco (“BCT”). BCT supplies
telecommunications and business continuity services to the group. The services are provided on
commercial terms and conditions. Bendigo Bank also provides banking overdraft and lending facilities
to BCT. The banking services are provided in accordance with Bendigo Bank’s prevailing product terms
and conditions.
Associate company directorships:
Mr R Johanson is a non-executive director of Elders Rural Bank Limited, an associate entity of Bendigo
Bank. Mr Johanson was paid a director fee of $58,000 plus Superannuation Guarantee Charge by
Elders Rural Bank Limited in connection with the directorship.
124
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
39. RELATED PARTY DISCLOSURES
Ultimate Parent Entity
Bendigo Bank Limited is the ultimate parent entity.
Wholly owned group transactions
Bendigo Bank Limited is the parent entity of all entities listed in Note 20 - Particulars in relation to controlled
entities. Transactions undertaken during the financial year with those entities are eliminated in the
consolidated financial report. The transactions principally arise from the provision of administrative,
distribution, corporate and the general banking services.
Additionally, Bendigo Bank pays operating costs and banks receipts on behalf of certain controlled entities
which are financed via unsecured interest free intercompany loans. The loans have no fixed repayment
date. Amounts due from and due to controlled entities at balance date are shown in the balance sheet. The
balance of these inter-company loans is included in the net amount owing to/(from) subsidiaries column of
the table below.
Interest received or receivable from and paid or payable to controlled entities and dividends received and
receivable from controlled entities is disclosed in Note 4 - Profit and is included in the table below.
Material transactions between Bendigo Bank and its subsidiaries during the period were as follows:
Bendigo Finance Pty Ltd
Worley Securities Pty Ltd
National Mortgage Market Corporation Limited
National Assets Securitisation Pty Ltd
Fountain Plaza Pty Ltd
Victorian Securities Corporation Limited
Bendigo Financial Planning Limited
Benhold Pty Ltd
IOOF Building Society Pty Ltd
Cass Comm Pty Ltd
Community Developments Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Sandhurst Trustees Limited
Oxford Funding Pty Ltd
First Australian Building Society Limited
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
Net receipts
Supplies,
Net amount
and fees
fixed assets
owing
paid to
and services
to/(from)
subsidiaries
charged to
subsidiaries
subsidiaries
at 30 June
$m
0.9
(0.8)
2.6
0.9
4.3
3.7
0.2
0.1
0.5
4.8
(1.1)
(7.8)
7.8
8.3
0.1
-
-
-
0.1
7.2
1.2
-
0.2
0.1
30.7
8.5
11.8
(1.0)
8.9
1.4
$m
-
-
2.4
0.9
1.4
3.1
0.2
0.2
60.5
26.8
3.0
3.1
10.0
8.7
-
-
-
-
2.1
-
1.2
1.0
0.2
0.4
27.4
8.7
3.9
0.1
3.8
-
$m
(1.4)
(2.3)
-
(0.2)
7.3
4.4
0.8
0.8
(82.7)
(22.7)
(11.8)
(7.7)
(2.0)
0.2
(5.1)
(5.2)
20.4
20.4
-
2.0
(5.6)
(5.6)
(1.4)
(1.4)
1.9
(1.4)
(32.3)
(40.2)
-
(5.1)
Bendigo Bank provides funding and guarantee facilities to several subsidiary companies as detailed in the
following table. The balance outstanding on these facilities is included in the net amount owing to/(from)
subsidiaries in the above table.
125
BENDIGO BANK LTD
ABN 11 068 049 178
Subsidiary
Sandhurst Trustees Limited
Bendigo Asset Management Limited
Bendigo Financial Planning Limited
Victorian Securities Corporation Limited
Community Exchanges Australia Pty Ltd
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Oxford Funding Pty Ltd
Facility
Standby
Overdraft
Guarantee
Standby
Guarantee
Overdraft
Overdraft
Overdraft
Guarantee
Overdraft
Guarantee
Security
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Full Financial Report
Period ending 30 June 2007
Limit
$m
20.0
2.0
-
10.0
-
1.4
0.4
0.8
-
54.0
5.3
Drawn at
30 June 2007
$m
-
1.9
-
-
-
1.4
0.3
0.6
-
32.7
-
Guarantees disclosed in the above table with a zero limit are less than $0.1 million.
All funding and guarantee facilities are provided to subsidiary companies on normal commercial terms and
conditions.
Several subsidiary companies have bank accounts and investment funds held with Bendigo Bank Limited
under normal terms and conditions. These balances are included in the amount owing to/(from) subsidiaries
in the above table.
The following dividends received by Bendigo Bank Limited from subsidiary companies are included in the
net receipts/fees paid column of the above table:
Sandhurst Trustees Limited
Worley Securities Pty Ltd
Cass Com Limited
First Australian Building Society
2007
2006
2007
2006
2007
2006
2007
2006
$m
18.2
16.2
1.9
-
2.1
-
3.8
-
There were no material transactions between subsidiary companies.
126
BENDIGO BANK LTD
ABN 11 068 049 178
Other related party transactions
Securitised and sold loans
Full Financial Report
Period ending 30 June 2007
The bank securitised or sold loans totalling $561 million (2006: $325 million) during the financial year. Of
this total, $561 million (2006: $325 million) were sold to the Common Funds managed by Sandhurst
Trustees Limited.
Associated entities
Bendigo Bank Limited has investments in associated entities as disclosed in Note 21 - Investments in
associates. The group has transactions with the associated entities, principally relating to commissions
received and paid, services and supplies procured from associates and fees charged in relation to the
provision of banking, administrative and corporate services. These revenue and expense items are
included in the relevant values disclosed in Note 4 - Profit. The transactions are conducted on terms and
conditions no more favourable than those which it is reasonable to expect would have been adopted if
dealing with the associated entities at arm's length in the same circumstances.
During the financial year, transactions took place between the Bendigo Bank group and associated entities
as follows:
Elders Rural Bank Ltd
Tasmanian Banking Services Ltd
Community Sector Enterprises P/L
Caroline Springs Financial Services Pty Ltd
Silver Body Corporate Financial Services P/L
Commissions
Supplies and Amount owing
and fees paid
services
to/(from)
to associates
provided to
associates at
associates
30 June
$m
1.3
0.2
8.1
7.7
2.9
2.4
0.4
0.2
0.8
0.2
$m
3.5
3.2
5.7
5.8
3.1
2.2
0.6
0.5
0.5
0.6
$m
(0.3)
0.4
-
0.4
0.1
(0.1)
-
-
0.2
-
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
Dividends received and receivable from associated entities are disclosed in Note 4 – Profit.
Bendigo Bank Limited provides loans, guarantees and/or overdraft facilities to associated companies in
connection with cash flow management, and the payment of administration costs on behalf of the
associated companies. The loans have agreed repayment terms which vary according to the nature of the
facility. The outstanding balances of these loans are disclosed in the above table.
127
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
40.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The recognition and management of risk is an essential element of the Group’s strategy. The Board, being
ultimately responsible for the management of risks associated with the Group’s activities, has established
an integrated framework of committee structures, policies and controls to identify, assess, monitor and
manage risk.
The risk management strategy is based upon risk principles approved by the Board and is underpinned by a
system of delegations, passing from the Board through Board committees, the Managing Director and
management committees to the risk functions and the business.
In accordance with the Bendigo Bank’s Board Charter, the Board is responsible for oversight of the
establishment, implementation, review and monitoring of risk management strategy, systems and policies,
taking into account the risk tolerance of the Group, the overall business strategy and management
expertise.
The Board has established specific audit, risk, credit, governance/HR IT strategy and property committees.
Each committee operates under a formal charter that is reviewed and approved by the full Board annually.
Whilst the Board has responsibility for establishing the priorities and the Group’s risk appetite, the Managing
Director and other executive management are responsible for developing strategies and business plans
commensurate with the risk appetite set by the Board.
The Executive Committee has responsibility for managing and monitoring the day to day activities including
the management of risk of the Group and implementing the Board approved strategies and plans.
To support risk management at the executive management level independent functions charged with
specific responsibility for monitoring, measuring and evaluating risk are in place.
The role of the risk management functions is to facilitate the implementation of the risk policies associated
specifically with both quantifiable and unquantifiable risks arising from the activities of the Group. Group
Risk and the Strategic Finance Unit ensure that a discipline is in place to identify the risks faced by the
Group and that controls to manage these risks are adequate and functioning effectively. The Units have
direct access to the Board through the Board Credit and Risk Committees with are sub committees of the
Board.
On a day to day basis each executive, management and staff are responsible for carrying out their roles iin
a way that manages risk in line with policies and procedures.
The Group’s Internal Audit function is an independent function that operates under a charter and annual
audit plan approved by the Board Audit Committee, a sub committee of the Board. The Board, on
recommendation of the Board Audit Committee, approves the appointment of the head of internal audit.
The independent internal audit function, incorporating the review of the quality and administration of credit,
oversees all functions across the Group and has direct access to the Board through the Board Audit
Committee.
The risk management framework of the Group is based on:
• Core Risk Principles – overriding principles governing all activities, risk management and internal
control procedures; and
• Specific Risk Policies and Procedures – appropriate policies, procedures and processes implemented
to manage specific risks.
The Board, and the industry regulator, have identified the specific key risks to which the Bank is exposed as
being credit, liquidity, market (includes interest rate and currency) and operational risk. Independent risk
management structures have been developed and implemented by the Group to manage these risks.
In addition to managing risk categories below the Board and Executive manage strategic and reputation risk
as well as evaluate emerging risks in any category.
128
BENDIGO BANK LTD
ABN 11 068 049 178
Credit risk
Full Financial Report
Period ending 30 June 2007
Credit risk is the potential that the Group will suffer a financial loss due to the unwillingness or inability of a
counterparty to fully meet their contractual debts and obligations.
The Board Credit Committee is responsible for monitoring adherence to credit policies, practices and
procedures within the Group. The Board has established levels of delegated lending authority that
authorise specific levels of management and the BBL Credit Committee to approve credit transactions.
Group Credit Risk, is responsible for providing the framework, policies, analysis and reporting for managing
credit risk throughout the Group. This includes the review of portfolio credit quality and credit policy
compliance as well as managing the performance of the credit management system at the Group level.
Group Credit Risk has specific responsibility for the assessment of large/maximum credit, portfolio
management including loans in default and provisioning and monitoring development and promulgation of
policies.
A standard risk grading methodology is applied to assess, measure and report the quality of lending assets.
The maximum credit lending exposure at balance date is the outstanding value of those assets and does
not include the value of any security held.
Concentrations of risk
The risk areas of credit concentration appropriate to the Group are:
• Customer concentrations
• Geographic concentrations
•
Industry concentrations
Ceiling and limits are approved by the Board Credit Committee and monitored through Group Credit Risk.
Liquidity risk
Liquidity risk is the inability to access sufficient funds, both anticipated and unforeseen Liquidity risk may
lead to the Group being unable to meet its cash flow and funding obligations as they arise or forgoing
investment opportunities.
Group Strategic Finance is responsible for implementing liquidity risk management strategies in accordance
with approved policies. Compliance with liquidity policies is monitored by the Asset Liability Management
Committee and Board Risk Committee.
Liquidity management strategies require prudent levels of liquid reserves are maintained at all times,
Liquidity strategies also ensure the Group is able to source funds from a diverse base of funding options.
These strategies ultimately ensure the Group meets daily, short-term and long-term liquidity requirements
as well as in abnormal circumstances such as when the market may be interrupted for some reason, or
experience conditions that might temporarily affect the availability of funding from some source.
Liquidity scenarios are calculated under stressed and normal operating conditions to assist in planning and
anticipating cash flow needs and in providing adequate liquidity reserves.
Interest rate risk
Interest rate risk is the potential for loss of earnings to the Group due to adverse movements in interest
rates.
Interest rate risk is managed through the Balance Sheet Management unit within Group Strategic Finance
using gap analysis and interest rate simulation modelling techniques. The objective is to enhance the
Group’s earnings performance by managing and minimising fluctuations in net interest income and market
value that may occur over time as a result of adverse changes in interest rates.
Monitoring of compliance with policies, limits and procedures is through the Asset Liability Management
Committee and the Board Risk Committee.
129
BENDIGO BANK LTD
ABN 11 068 049 178
Currency risk
Full Financial Report
Period ending 30 June 2007
Currency risk is the risk of loss of earnings to the Group which may arise from adverse movements in
exchange rates. Currency risk arises from foreign currency wholesale funding activities and customer
related foreign exchange transactions.
Policy requires foreign currency wholesale funding to be hedged and exposures arising from customer
related foreign exchange transactions must be managed within approved limits and policy requirements.
Group Strategic Finance is responsible for managing currency risk under the supervision of the Asset
Liability Management Committee and Board Risk Committee.
Trading occurs when positions are taken in financial instruments, equities, foreign exchange or commodity
markets with the objective of achieving a benefit from the actual or expected differences that arise between
the buying price and selling price, or from other price or interest rate variations. Generally the benefits
arising from these differences would be realised in a short to medium term time period.
The Group’s policy does not permit the operation of a trading book therefore trading positions in financial
instruments, equities, foreign exchange or commodity markets cannot be taken. Derivatives such as
interest rate swaps are utilised only to mitigate interest rate exposures in the balance sheet and to maintain
interest margin.
Operational risk
Operational Risk is defined as the risk of loss resulting from inadequate or failed internal processes, people
and systems or from external events.
The Operational Risk Management Policy and Framework, in line with Basel II and the Australian Standard
on operational risk, has been developed and is maintained by Group Operational Risk. The Group
considers both the internal and external environment when it monitors and assesses operational risk. In
managing operational risks, the Group is always cognisant of its correlation with strategic and reputation
risk.
The policy is approved by the Board and applies to the whole of the Group. It defines operational risk
management roles and responsibilities. The Executive Committee and each individual Executive member
have day to day responsibility and accountability for the management of operational risk in their line
including, but not limited to:
• Ensuring operational risk management strategies are in place and operating effectively.
•
•
Identifying key operational risks and monitoring the management of these risks.
Implementing measures to manage and appropriately resolve operational risk issues.
• Reporting operational risk events (including business continuity, fraud and regulatory compliance
breach incidents), and the status of operational risk event responses.
In line with their role each staff member also has a responsibility to manage risk.
In addition to this overarching policy the Board has approved key policies relating to compliance, business
continuity, anti money laundering and fraud control.
Group Operational Risk has a role to support the Executive Committee and the business to develop,
implement, monitor and report on the effectiveness of implementation of the policy.
Group Operational Risk reports to the Board Risk Committee on the status of the implementation of the
framework and implications of significant risks and risk events.
130
BENDIGO BANK LTD
ABN 11 068 049 178
Insurance and Reinsurance risk
Full Financial Report
Period ending 30 June 2007
BBL, through its fully owned subsidiary Sunstate Pty Ltd, provides mortgage indemnity insurance to part of
BBL’s lending portfolio.
Insurance risk is the risk that the true value of insurance liabilities, both outstanding claims liability and
premiums liability, will be greater than the estimated value of insurance liabilities. Monitoring of individual
claims is part of the Group’s credit risk process and Sunstate review.
Also, premiums are determined and earned in accordance with independent actuarial advice and are
reviewed by an approved actuary.
Reinsurance risk is the risk of purchasing insufficient reinsurance protection to limit insurer losses during
catastrophic events. Reinsurance risk with Sunstate is managed through a contract with Radian Insurance
Inc.
41.
FINANCIAL INSTRUMENTS
Fair value
Disclosed below is the estimated fair value of the economic entity's financial instruments presented in
accordance with the requirements of Accounting Standard AASB 132 "Financial Instruments: Disclosure
and Presentation”.
A financial instrument is defined by AASB 132 as any contract that gives rise to both a financial asset of one
entity and a financial liability or equity instrument of another entity. A financial liability is a contractual
obligation either to deliver cash or another financial asset to another entity, or, to exchange financial
instruments with another entity under conditions that are potentially unfavourable.
Methodologies
The methodologies and assumptions used depend on the terms and risk characteristics of the various
instruments and include the following:
Cash and cash equivalents, due to and from other financial institutions
The carrying values of certain on-balance sheet financial instruments approximate fair values. These
include cash and short-term cash equivalents, due to and from other financial institutions and accrued
interest receivable or payable. These instruments are short-term in nature and the related amounts
approximate fair value and are receivable or payable on demand.
Derivatives (assets and liabilities)
The fair value of exchange-rate and interest-rate contracts, used for hedging purposes, is the estimated
amount the Group would receive or pay to terminate the contracts at reporting date. The fair value of these
instruments are disclosed under “Derivative financial instruments”.
Financial assets - available for sale and held to maturity (Securities)
The fair value of financial assets available for sale and held to maturity, including bills of exchange,
negotiable certificates of deposit, government securities and bank and other deposits, which are
predominantly short-term, is measured at amortised book value.
Financial assets - available for sale (share investments and shares in controlled entities)
The fair value of share investments is based on market value for listed share investments and carrying
values for unlisted share investments.
131
BENDIGO BANK LTD
ABN 11 068 049 178
Loans and other receivables
Full Financial Report
Period ending 30 June 2007
The carrying value of loans and other receivables is net of specific and collective provisions for doubtful
debts.
For variable rate loans, excluding impaired loans, the carrying amount is a reasonable estimate of fair
value. The net fair value for fixed loans is calculated by utilizing discounted cash flow models (ie the net
present value of the portfolio future principal and interest cash flows), based on the maturity of the loans.
The discount rates applied are based on the current benchmark rate offered for the average remaining term
of the portfolio plus an add-on of the average credit margin of the existing portfolio, where appropriate.
The net fair value of impaired loans is calculated by discounting expected cash flows using a rate which
includes a premium for the uncertainty of the flows.
Other assets
This category includes items such as sundry debtors, which are short-term by nature and the carrying
amount is therefore a reasonable estimate of fair value.
Deposits
The fair value of call, variable rate and fixed rate deposits repricing within six months is the carrying value at
balance date. The fair value of other term deposits is calculated using discounted cash flow models, based
on the deposit type and its related maturity.
Other financial liabilities
This category includes items such as sundry creditors which are short-term by nature and the carrying
amount is therefore a reasonable estimate of fair value.
Subordinated debt and other debt
The fair value of subordinated debt is calculated based on quoted market prices, where applicable. For
those debt issues where quoted market prices were not available, a discounted cash flow model using a
yield curve appropriate to the remaining maturity of the instrument is used.
132
BENDIGO BANK LTD
ABN 11 068 049 178
Fair value (continued)
Summary
Full Financial Report
Period ending 30 June 2007
The following table provides comparison of carrying and net fair values for each item discussed
above, where applicable:
(a) Fair Value (continued)
Summary
The following table provides comparison of carrying and net fair values for each item discussed above, where applicable:
CONSOLIDATED
Financial Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Financial assets held to maturity
Loans and other receivables
Investments in associates and joint ventures accounted for using the equity method
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Other payables
Subordinated debt
BENDIGO BANK
Financial Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets available for sale - securities
Financial assets available for sale - share investments
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Amounts receivable from controlled entities
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Other payables
Subordinated debt
Carrying value
Net fair value
2007
$m
2006
$m
2007
$m
2006
$m
257.6
71.5
74.9
428.8
130.4
1,614.4
13,843.5
156.3
108.8
184.0
15,231.0
34.6
151.3
307.2
203.5
71.1
74.9
428.8
127.9
134.8
1,530.5
13,483.7
101.0
239.7
184.0
14,822.7
35.4
125.4
307.2
270.8
209.0
28.4
360.9
94.4
1,370.6
12,436.7
143.5
83.7
166.3
13,599.8
20.0
140.0
307.1
214.4
209.0
28.4
360.9
94.2
151.2
1,291.8
11,948.0
40.1
190.2
166.3
13,063.1
22.2
110.8
307.1
257.6
71.5
74.9
428.8
130.4
1,614.4
14,309.8
156.3
108.8
184.0
14,979.3
34.6
151.3
307.2
203.5
71.1
74.9
428.8
127.9
134.8
1,530.5
13,525.3
101.0
239.7
184.0
14,577.7
35.4
125.4
307.2
270.8
209.0
28.4
360.9
94.4
1,370.6
12,773.5
143.5
83.7
166.3
13,364.8
20.0
140.0
299.2
214.4
209.0
28.4
360.9
94.2
151.2
1,291.8
12,282.9
40.1
190.2
166.3
12,834.3
22.2
110.8
299.2
133
BENDIGO BANK LTD
ABN 11 068 049 178
Interest rate risk
Full Financial Report
Period ending 30 June 2007
The economic entity's exposure to interest rate risks of financial assets and liabilities, both recognised and
unrecognised at the balance date are disclosed in the following table.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and liabilities. These
mismatches are managed as part of the overall asset and liability management process.
AS AT 30 JUNE 2007
Floating
interest
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
bearing
carrying value
per
average
effective
Fixed interest rate repricing :
Non-interest
Total
Weighted
CONSOLIDATED
$m
$m
$m
$m
$m
$m
$m
$m
%
& 6 months & 12 months
& 5 years
Balance sheet
interest rate
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets available for sale
Financial assets held to maturity
Loans and other receivables
Derivatives
145.1
-
-
11.7
6,632.8
-
-
-
428.8
782.3
1,218.2
-
-
-
-
659.4
384.7
-
-
-
-
161.0
704.9
-
-
-
-
-
4,834.0
-
Total financial assets
6,789.6
2,429.3
1,044.1
865.9
4,834.0
Liabilities
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Total financial liabilities
4,628.2
4,054.1
3,419.9
2,950.6
-
-
4,628.2
-
172.2
4,226.3
-
135.0
3,554.9
2,950.6
93.8
-
93.8
-
-
-
-
-
-
25.8
-
25.8
-
-
-
-
-
112.5
71.5
130.4
-
43.1
74.9
432.4
184.0
84.4
34.6
-
303.0
257.6
71.5
559.2
1,614.4
13,843.5
74.9
16,421.1
184.0
15,231.0
34.6
307.2
15,756.8
3.31
-
6.24
6.46
7.69
-
-
-
4.90
-
7.23
-
AS AT 30 JUNE 2006
Floating
interest
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
bearing
carrying value
per
average
effective
Fixed interest rate repricing :
Non-interest
Total
Weighted
CONSOLIDATED
$m
$m
$m
$m
$m
$m
$m
$m
%
& 6 months & 12 months
& 5 years
Balance sheet
interest rate
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets available for sale
Financial assets held to maturity
Loans and other receivables
Derivatives
171.6
-
-
15.2
7,095.1
-
-
-
179.1
656.0
1,217.2
-
-
-
181.8
619.8
392.2
-
-
-
-
79.6
456.0
-
-
-
-
-
3,224.8
-
Total financial assets
7,281.9
2,052.3
1,193.8
535.6
3,224.8
Liabilities
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Total financial liabilities
3,802.8
4,064.8
2,843.1
2,766.0
-
-
3,802.8
-
172.0
4,236.8
-
135.1
2,978.2
-
24.8
-
-
-
-
-
-
19.0
-
19.0
-
-
-
-
-
99.2
209.0
94.4
-
32.4
28.4
463.4
166.3
98.3
20.0
-
284.6
270.8
209.0
455.3
1,370.6
12,436.7
28.4
14,770.8
166.3
13,599.8
20.0
307.1
14,093.2
3.47
0.00
5.80
5.84
7.42
0.00
-
0.00
4.44
0.00
6.90
-
-
-
-
-
2,766.0
24.8
134
BENDIGO BANK LTD
ABN 11 068 049 178
Interest rate risk (continued)
Full Financial Report
Period ending 30 June 2007
AS AT 30 JUNE 2007
Floating
interest
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
bearing
carrying value
per
average
effective
Fixed interest rate repricing :
Non-interest
Total
Weighted
BENDIGO BANK
$m
$m
$m
$m
$m
$m
$m
$m
%
& 6 months & 12 months
& 5 years
Balance sheet
interest rate
Assets
Cash and cash equivalents
118.4
Due from other financial institutions
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Derivatives
-
-
-
0.7
6,334.1
-
-
-
428.8
-
724.2
1,209.7
-
-
-
-
-
644.6
379.6
-
-
-
-
-
161.0
698.1
-
-
-
-
-
-
4,797.3
-
Total financial assets
6,453.2
2,362.7
1,024.2
859.1
4,797.3
Liabilities
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Total financial liabilities
4,637.1
3,743.1
3,347.5
2,926.1
-
-
4,637.1
-
172.2
3,915.3
-
135.0
3,482.5
2,926.1
86.8
-
86.8
-
-
-
-
-
-
-
25.8
-
25.8
-
-
-
-
-
85.1
71.1
127.9
134.8
-
39.1
74.9
532.9
184.0
82.1
35.4
-
301.5
203.5
71.1
556.7
134.8
1,530.5
13,483.7
74.9
16,055.2
184.0
14,822.7
35.4
307.2
15,349.3
3.42
-
6.24
6.46
7.82
-
-
-
4.87
-
7.23
-
AS AT 30 JUNE 2006
Floating
interest
Less than
Between
Between
Between
rate
3 months
3 months
6 months
1 year
After
5 years
bearing
carrying value
per
average
effective
Fixed interest rate repricing :
Non-interest
Total
Weighted
BENDIGO BANK
$m
$m
$m
$m
$m
$m
$m
$m
%
& 6 months & 12 months
& 5 years
Balance sheet
interest rate
Assets
Cash and cash equivalents
135.6
Due from other financial institutions
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Derivatives
-
-
-
-
6,675.5
-
-
-
179.4
-
619.6
1,214.2
-
-
-
181.5
-
592.6
382.2
-
-
-
-
-
79.6
445.6
-
-
-
-
-
-
3,183.1
-
Total financial assets
6,811.1
2,013.2
1,156.3
525.2
3,183.1
Liabilities
Due to other financial institutions
-
-
-
-
Deposits
Derivatives
Subordinated debt
Total financial liabilities
3,811.3
3,637.5
2,764.4
2,733.5
-
-
3,811.3
-
172.0
3,809.5
-
135.1
2,899.5
-
20.4
-
-
-
-
-
-
-
19.0
-
19.0
-
-
-
-
-
78.8
209.0
94.2
151.2
-
28.4
28.4
590.0
166.3
96.0
22.2
-
284.5
214.4
209.0
455.1
151.2
1,291.8
11,948.0
28.4
14,297.9
166.3
13,063.1
22.2
307.1
13,558.7
3.44
0.00
5.80
5.87
7.59
0.00
-
0.00
4.38
0.00
6.90
-
-
-
-
-
2,733.5
20.4
135
BENDIGO BANK LTD
ABN 11 068 049 178
Derivative financial instruments
Full Financial Report
Period ending 30 June 2007
The economic entity uses derivatives primarily to hedge banking operations and for asset and liability
management. Some derivatives transactions may qualify as either cashflow or fair value hedges. The
accounting treatment of these hedges is outlined in Note 2.33 Derivative Financial Instruments.
The economic entity is exposed to volatility in interest cash flows inherent in its loan portfolio and that of the
securitisation vehicles. Interest rate swaps are used to hedge the risk that this volatility creates.
All swaps that are part of a hedge relationship have been designated as cashflow hedges. As at 30 June
2007 the fair value of outstanding derivatives designated as cashflow hedges by the bank was $40.5 million
positive value (2006: $9.6 million).
During the 2007 financial year the economic entity recognised a loss of less than $1.6 million (2006: less
than $0.1 million) due to hedge ineffectiveness. As at 30 June 2007 the fair value of outstanding derivatives
designated as cashflow hedges by the economic entity was $39.7 million positive value (2006: $7.4 million).
Value of derivatives as at 30 June
Consolidated 2007
Consolidated 2006
Notional
Amount
Asset
Revaluation
Liability
Revaluation Net Fair Value
Notional
Amount
Asset
Revaluation
Liability
Revaluation Net Fair Value
$m
$m
$m
$m
$m
$m
$m
$m
Included in derivatives category
Interest Rate Swaps
Cross Currency
Swaps
Derivatives
4,120.4
830.2
4,950.6
Included in loans and deposits categories
70.8
3.6
74.4
(29.1)
(5.1)
(34.2)
41.7
(1.4)
40.3
2,529.1
530.2
3,059.4
24.6
3.8
28.4
Cross Currency
Swaps
Foreign Exchange
Contracts
(72.1)
(72.1)
50.8
0.5
(0.3)
0.2
40.5
0.2
(15.0)
(5.0)
(20.0)
(5.1)
(0.3)
9.6
(1.2)
8.4
(5.1)
(0.1)
Total derivatives
5,001.4
74.9
(106.6)
(31.6)
3,099.9
28.6
(25.4)
3.2
Outstanding interest rate swaps have interest rates on the receivable legs ranging from 4.74% to 7.126%
and on the payable legs the rates range from 4.81% to 8.07%. All swaps mature between the dates 13 July
2007 and 1 September 2026. The average term to maturity is 737 days.
136
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
42.
COMMITMENTS AND CONTINGENCIES
(a) Commitments
Outstanding expenditure and credit related commitments as at 30 June 2007. Except where specified, all commitments are payable within one year.
Operating lease commitments - group as lessee
The group has entered into commercial property leases and commercial leases on certain motor vehicles and items of office equipment. These leases
have an average life of between 3 and 7 years. Some property leases include optional renewal periods included in the contracts. There are no restrictions
placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Consolidated
Bendigo Bank
2007
$m
37.0
113.8
141.2
292.0
2006
$m
42.9
74.1
13.0
130.0
2007
$m
36.9
113.8
141.2
291.9
2006
$m
42.8
73.9
13.0
129.7
Lease commitments for 2007 includes the lease in relation to the new Head Office development in Bendigo, Victoria which commences August 2008.
Operating lease commitments - group as lessor
The group has entered into commercial property leases on the group's surplus office space. These non-cancellable leases have remaining terms of
between 2 and 5 years. All leases have a clause to enable upward revision of the rental charge on a regular basis according to prevailing market conditions.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Capital expenditure commitments
Capital expenditure commitments not provided for in the financial statements,
payable not later than one year
Later than 1 year but not later than 5 years
Other expenditure commitments
Sponsorship commitments not paid as at balance date, payable not later than one
year
1.1
1.7
-
2.8
12.0
0.7
12.7
1.7
1.1
2.2
-
3.3
47.0
18.7
65.7
1.1
1.1
1.7
-
2.8
12.0
0.7
12.7
1.6
1.1
2.2
-
3.3
47.0
18.7
65.7
1.0
Credit related commitments
Gross loans approved, but not advanced to borrowers, payable not later than one year
419.0
425.5
419.0
425.5
Credit limits granted to clients for overdrafts and credit cards
Total amount of facilities provided
Amount undrawn at balance date
Normal commercial restrictions apply as to use and withdrawal of the facilities
4,871.8
1,668.5
4,304.9
1,456.6
4,936.3
1,693.6
4,361.6
1,471.0
Superannuation commitments
The economic entity participates in an employer sponsored superannuation plan, being a defined contribution plan which provides benefits to employees of
the entities in the economic entity on retirement, death or disability.
The benefits under the plan are based on accumulated contributions and earnings for each employee. Employees contribute various percentages of their
gross income and the company also contributes at least the minimum as required under the superannuation guarantee legislation.
The bank pays an annual insurance premium to provide death, total permanent disability and salary continuence cover for members of the superannuation
plan.
137
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
COMMITMENTS AND CONTINGENCIES (continued)
(b) Contingent liabilities and contingent assets
Contingent liabilities
Guarantees
The economic entity has issued guarantees on behalf of clients
Other
Documentary letters of credit & performance related obligations
Consolidated
Bendigo Bank
2007
$m
2006
$m
2007
$m
2006
$m
111.9
98.3
111.9
98.3
24.0
13.6
24.0
13.6
As the the probability and value of guarantees, letters of credit and performance related obligations that may be called on is unpredictable, it is not practical
to state the timing of any potential payment.
Contingent assets
As at 30 June 2007, the economic entity does not have any contingent assets.
43.
FIDUCIARY ACTIVITIES
The economic entity conducts investment management and other fiduciary activities as trustee, custodian or
manager for a number of funds and trusts, including superannuation and approved deposit funds, unit trusts
and mortgage pools. The amounts of the funds concerned, which are not included in the economic entity's
statement of financial position are as follows:
Funds under trusteeship
Assets under management
Funds under management
Consolidated
2007
$m
3,780.3
2,310.4
1,083.8
2006
$m
3,429.2
1,941.4
1,025.5
As an obligation arises under each type of duty the amount of funds has been included where that duty arises.
This may lead to the same funds being shown more than once where the economic entity acts in more than
one capacity in relation to those funds eg manager and trustee. Where controlled entities, as trustees, incur
liabilities in respect of these activities, a right of indemnity exists against the assets of the applicable trusts. As
these assets are sufficient to cover liabilities, and it is therefore not probable that the Group companies will be
required to settle them, the liabilities are not included in the financial statements. Bendigo Bank does not
guarantee the performance or obligations of its subsidiaries.
44.
EVENTS AFTER BALANCE SHEET DATE
On 9 August 2007 the Bank declared a final dividend, details of which are disclosed in the directors' report and
in Note 10.
On 9 August 2007 the Boards’ of Bendigo Bank Limited and Adelaide Bank Limited announced their intention
to merge. The merger will be implemented by a Scheme of Arrangement in Adelaide, which will require
approval by Adelaide Bank Limited shareholders at a meeting expected to be held in November 2007, as well
as the required regulatory approvals.
On 4 September 2007, the Boards of Bendigo Bank and Adelaide Bank announced that their respective post
announcement due diligence inquiries have been concluded satisfactorily.
No other matters or circumstances have arisen since the end of the financial year which significantly affected
or may significantly affect the operations of the economic entity, the results of those operations, or the state of
affairs of the economic entity in subsequent financial years.
138
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Bendigo Bank Limited, we state that:
In the opinion of the directors:
(a)
the financial statements, notes and the additional disclosures included in the directors’
report designated as audited, of the company and of the consolidated entity are in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and consolidated entity's financial position
as at 30 June 2007 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2007.
On behalf of the Board
R N Johanson
Chairman
R G Hunt AM
Managing Director
11September 2007
139
BENDIGO BANK LTD
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2007
Independent auditor’s report to members of Bendigo Bank Limited
We have audited the accompanying financial report of Bendigo Bank Limited and the entities it controlled
during the year, which comprises the balance sheet as at 30 June 2007, and the income statement,
statement of changes in equity and cash flow statement for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration.
The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of Accounting
Standard 124 Related Party Disclosures (“remuneration disclosures”), under the heading “Remuneration
Report” on pages 20 to 37 of the directors’ report, as permitted by Corporations Regulation 2M.6.04.
Directors’ Responsibility for the Financial Report
the Australian Accounting Standards
The directors of the company are responsible for the preparation and fair presentation of the financial report
the Australian Accounting
in accordance with
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal controls relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In Note 2.2, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial Reporting Standards
ensures that the financial report, comprising the consolidated financial statements and notes, complies with
International Financial Reporting Standards. The directors are also responsible for the remuneration
disclosures contained in the directors’ report.
(including
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement and that the
remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on our judgement, including the assessment of the risks
of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
140
BENDIGO BANK LTD
ABN 11 068 049 178
Independence
Full Financial Report
Period ending 30 June 2007
In conducting our audit we have met the independence requirements of the Corporations Act 2001. We
have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is
included in the directors’ report. In addition to our audit of the financial report and the remuneration
disclosures, we were engaged to undertake the services disclosed in the notes to the financial statements.
The provision of these services has not impaired our independence.
Auditor’s opinion
In our opinion:
1.
the financial report of Bendigo Bank Limited is in accordance with:
(a)
the Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position of Bendigo Bank Limited and the
consolidated entity at 30 June 2007 and of their performance for the year ended on that
date;
and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations); and
(b)
other mandatory financial reporting requirements in Australia.
2.
3.
the consolidated financial statements and notes or financial report also complies with International
Financial Reporting Standards as disclosed in Note 2.2.
the remuneration disclosures that are contained on pages 43 to 49 of the directors’ report comply
with Accounting Standard AASB 124 Related Party Disclosures.
Ernst & Young
Brett Kallio
Partner
Melbourne
11 September 2007
141
BENDIGO BANK LTD
ABN 11 068 049 178
ADDITIONAL INFORMATION
1. MATERIAL DIFFERENCES
Full Financial Report
Period ending 30 June 2007
There are no material differences between the information supplied in this report and the information in
the preliminary final report supplied by Bendigo Bank Ltd to the Australian Stock Exchange on 9
August 2007.
2. AUDIT COMMITTEE
As at the date of the Directors' Report the economic entity had an audit committee of the Board of
Directors.
3. CORPORATE GOVERNANCE PRACTICES
The corporate governance practices adopted by Bendigo Bank Ltd are detailed in the Corporate
Governance section of this report.
4. SUBSTANTIAL SHAREHOLDERS
As at 17 August 2007 there were no substantial shareholders in Bendigo Bank Ltd as defined by the
Listing Rules of the Australian Stock Exchange Ltd.
5. DISTRIBUTION OF SHAREHOLDERS
Range of Securities as at 17 August 2007 in the following categories:
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of Holders
Securities on Issue
6.
MARKETABLE PARCEL
Fully paid
Ordinary
Shares
26,499
19,867
2,852
1,552
66
50,836
Fully Paid
Employee
Shares
BPS
Preference
Shares
1,390
946
113
48
4
2,501
3,370
35
2
3
1
3,411
138,549,515
5,638,375
900,000
Based on the closing price of $14.94 on 17 August 2007 the number of holders with less than a
marketable parcel of the Company’s main class of securities (Ordinary Shares), as at 17 August 2007
was 1767.
7. UNQUOTED SECURITIES
The number of unquoted equity securities that are on issue and the number of holders of those
securities are shown in the above table under the heading of Fully Paid Employee shares.
142
BENDIGO BANK LTD
ABN 11 068 049 178
8. MAJOR SHAREHOLDERS
Full Financial Report
Period ending 30 June 2007
Names of the 20 largest holders of Fully Paid Ordinary Shares, including the number of shares each
holds and the percentage of ordinary share capital that number represents as at 17 August 2007 are:
FULLY PAID ORDINARY SHARES
Rank Name
Number of fully paid
Ordinary Shares
Percentage held of
Issued Ordinary Capital
1 HSBC Custody Nominees (Australia) Limited
2 National Nominees Limited
3 Milton Corporation Limited
4 J P Morgan Nominees Australia Limited
5 HSBC Custody Nominees (Australia) Limited - a/c 2
6 Citicorp Nominees Pty Limited
7 Leesville Equity Pty Ltd
8 Cogent Nominees Pty Limited
9 Choiseul Investments Limited
10 ANZ Nominees Limited (Cash Income a/c)
11 Argo Investments Limited
12 Anthony Detata Nominees Pty Ltd
13 Invia Custodian Pty Limited (Wilson Invmt Fund Ltd a/c)
14 Queensland Investment Corporation
15 RBC Dexia Investor Services Australia Nominees Pty Limited (BKCusta/c)
16 UBS Nominees Pty Ltd
17 Fleet Nominees Pty Limited
18 Brickworks Investment Company Limited
19 UBS Wealth Management Australia Nominees Pty Ltd
20 AMP Life Limited
3,218,241
3,069,539
2,954,743
2,942,991
2,292,955
2,070,339
1,340,477
1,169,802
730,250
608,291
591,940
500,000
495,463
428,570
427,565
398,390
376,848
349,942
339,797
328,913
24,635,056
2.23%
2.13%
2.05%
2.04%
1.59%
1.44%
0.93%
0.81%
0.51%
0.42%
0.41%
0.35%
0.34%
0.30%
0.30%
0.28%
0.26%
0.24%
0.24%
0.23%
17.10%
BBS Nominees Pty Ltd, trustee for the Bendigo employee share ownership plan, held 5,638,375
unquoted shares as at the date of this report. These shares have not been included in the above table.
Names of the 20 largest holders of Bendigo Preference Shares, including the number of shares each
holds and the percentage of preference share capital that number represents as at 17 August 2007
are:
FULLY PAID PREFERENCE SHARES
Rank Name
Number of fully paid
Preference Shares
Percentage held of
Issued Preference Capital
1 J P Morgan Nominees Australia Limited
2 M F Custodians Ltd
3 Citicorp Nominees Pty Limited (CFSIL Cwlth Spec5 a/c)
4 ANZ Nominees Limited (Cash Income a/c)
5 Cogent Nominees Pty Limited
6 Edwards, JF & JR
7 Cambooya Pty Ltd
8 Bruttown Pty Limited
9 Jackson, PD
10 Leesville Equity Pty Ltd
11 Elise Nominees Pty Limited
12 Cambooya Pty Ltd (Foundation a/c)
13 Uniting Church in Australia Property Trust (WA) (UCIF a/c)
14 Rome Pty Ltd
15 Andre, RM
16 Bruce Dixon (Superannuation) Pty Ltd (Bruce Dixon Super Fund a/c)
17 Collier Charitable Fund Custodian Corporation
18 David Komesaroff Pty Ltd (MDA Exec S/F a/c)
19 Equitas Nominees Pty Limited (PB-600056 a/c)
20 Granter FJ
208,675
15,000
14,881
10,500
10,000
8,293
4,900
4,000
4,000
4,000
2,750
2,500
2,500
2,428
2,000
2,000
2,000
2,000
2,000
2,000
306,427
23.19%
1.67%
1.65%
1.17%
1.11%
0.92%
0.54%
0.44%
0.44%
0.44%
0.31%
0.28%
0.28%
0.27%
0.22%
0.22%
0.22%
0.22%
0.22%
0.22%
34.03%
143
BENDIGO BANK LTD
ABN 11 068 049 178
9. VOTING RIGHTS
Full Financial Report
Period ending 30 June 2007
The holders of ordinary shares are entitled to vote at meetings of shareholders in the first instance by
a show of hands of the shareholders present and entitled to vote. If a poll is called, each shareholder
has one vote for each fully paid share held.
Holders of partly paid shares have a vote which carries the same proportionate value as the proportion
that the amount paid up on the total issue price bears to the total issue price of the share.
In the case of an equality of votes the Chairman has, on both a show of hands and at a poll, a casting
vote in addition to the vote to which the Chairman may be entitled as a shareholder, proxy, attorney or
duly appointed representative of a shareholder.
144