Bendigoand
AdelaideBank
Milestones
fullannualreport08
Contents
1
2
Financial Calendar
2008/2009
Report by Chairman
and Managing Director
4
Results at a Glance
5
6
7
9
Bendigo and
Adelaide Limited
> Our New Bank
Our Milestones
Our Community
Our Retail Business
10 Our Wholesale
Businesses
11 Specialised Products
12 Our Wealth
Businesses
13 Our Future
14 Our Technology
14 Our Partners
15 Our Staff
16
Executive Profiles
18 Shareholder
Information
19
Financials
Bendigo and Adelaide 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 expression “the Bank”, “the Company” or
“the Group” refers to Bendigo and Adelaide Bank Limited
and its controlled entities.
Customer/Shareholder Inquiries
Customer Help Centre
(Head Office inquiries)
1300 361 911 (local call)
Mondays to Fridays
8.30am – 6.30pm
Australian Eastern Standard Time/
Australian Eastern Daylight Time (AEST/AEDT)
Bendigo OnCall
(Bendigo Bank customer inquiries)
1300 366 666 (local call)
8.00am – 8.00pm weekdays
9.00am – 4.00pm Saturdays
10.00am – 4.00pm Sundays
(AEST/AEDT)
Adelaide Bank customers
13 22 20 (within SA) or
1300 65 22 20 (outside SA)
8.00am – 8.00pm weekdays
9.00am – 6.00pm Saturdays
10.00am – 6.00pm Sundays
Australian Central Standard Time/
Australian Central Daylight Time (ACST/ACDT)
24-hour Phone Bank
Bendigo Bank customers -1300 366 666 (local call)
Adelaide Bank customers - 08 8300 7000
or 1300 300 893 (outside metropolitan SA)
24-hour e-banking
www.bendigobank.com.au
www.adelaidebank.com.au
Website
www.bendigobank.com.au
www.adelaidebank.com.au
Securities Registry: 1800 646 042
Financial Calendar
2008
27 August
2 September
15 September
30 September
Ex-dividend date
Final dividend record date
Bendigo Preference Share dividend
Distribution of final dividend
10 October
Bendigo Step Up Preference Share dividend
27 October
Annual General Meeting
3 November
Bendigo Reset Preference Share dividend
15 December
Bendigo Preference Share dividend
Proposed 2009
12 January
Bendigo Step Up Preference Share dividend
16 February
26 February
4 March
16 March
31 March
10 April
1 May
15 June
10 July
Interim results &
interim dividend announcement
Ex-dividend date
Interim dividend record date
Bendigo Preference Share dividend
Distribution of interim dividend
Bendigo Step Up Preference Share dividend
Bendigo Reset Preference Share dividend
Bendigo Preference Share dividend
Bendigo Step Up Preference Share dividend
10 August
Final results & final dividend announcement
27 August
2 September
15 September
30 September
Ex-dividend date
Final dividend date
Bendigo Preference Share dividend
Distribution of final dividend
12 October
Bendigo Step Up Preference Share dividend
27 October
Annual General Meeting
2 November
Bendigo Reset Preference Share dividend
15 December
Bendigo Preference Share dividend
08
07
06
Profit after tax ($mil)
170.5
121.8
116.7
15.6%
Cash earnings
Gross loans and other recievables
42,853
40,393
2,460
2,310
1,941
16,154
13,844
15,998
14,057
Total
On balance sheet
Managed
Retail deposits and funds under management ($mil)
30,291
23,641
6,650
3,394
2,967
15,498
12,104
14,314
11,347
Total
On balance sheet
Managed funds
EPS
Cash EPS
Earnings per share (EPS - cents)
74.8
93.7
81.9
82.9
81.5
73.2
Dividends (cents per share)
65.0
58.0
52.0
Full Financial Report 2008 1
Full Financial Report 2008 1
08
07
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08
07
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Report by the
Chairman and Managing Director
Heading here
The past financial year
has been a difficult year
for the world’s banks but
at Bendigo and Adelaide
Bank we increased
our cash earnings per
share by 13 per cent.
We continue to grow
our business across
Australia steadily by
being disciplined in the
business we write.
2 Full Financial Report 2008
We expect to grow shareholder
value again this year, even if
there is no improvement in
the difficult market conditions
facing the banking and financial
sectors. We are confident in the
capacity of the merged bank
to perform through different
business cycles and through the
varied challenges that emerge
from time to time (and have
done so throughout our history).
With confidence levels in
worldwide financial markets
seriously challenged, like all
banks, we found wholesale
funding (previously flowing to
fund domestic activities) was
more difficult to obtain and more
expensive. We have been able
to adequately fund all profitable
activities and businesses in our
group and have not needed to
make large provisions against
doubtful loans.
The fact that Australia has
strong employment levels
and a quite resilient economy,
coupled with our adherence to
prudent underwriting standards,
has kept our credit performance
in good shape. However, we do
remain watchful for any impact
on Australian households and
businesses, from changes in
performance of the Australian
economy given the pressures of
higher interest rates, fuel and
energy costs, food, etc. And we
will be working proactively with
our customers through any such
difficulties, should the domestic
environment deteriorate.
Given the change in market
conditions during the year,
we quickly adjusted our
priorities to focus on growing
retail deposits and reshaping
our asset and liability bases
to better reflect the new
environment. By taking this
disciplined and focussed
approach, we have delivered
revenue growth and profitability
in line with the market guidance
we provided prior to the market
dislocation which, as stated,
followed the global credit
crisis. In our view, this provides
evidence of the strength of our
now enlarged and merged entity.
For years now we have said
we focus on producing growth
at profitable prices; on writing
business that is prudent,
profitable and promotes strong
relationships that will endure
and deliver reliable, quality
earnings into the future.
We have steadfastly refused
to take risks onto the balance
sheet or into our business just
in pursuit of growth or market
share. This has helped us build
a resilient balance sheet, a good
reputation, and an excellent
customer and partner franchise.
We have so far enjoyed 16 years
of uninterrupted economic
growth in our domestic market.
Conditions have become more
difficult this year, particularly
in the international credit
markets, but this only reminds
us that we have survived – and
thrived – for so long because
successive boards, executive
teams and our staff have
learned the lessons of hard
times endured en route to
this year’s 150th anniversary
celebrations. We are utilising
the same disciplined approach
of our forebears – who
managed depressions, credit
squeezes, wars, droughts
and other challenges. We are
applying our limited resources
to writing business that is
sound and profitable. It is not
rocket science but, as Reserve
Bank Governor Glenn Stevens
reminded guests at our
anniversary dinner, it is a lesson
forgotten by managers of many
large and seemingly powerful
banks around the globe.
The challenges we face are
considerable and we must
not be complacent about
the task confronting us.
Financial markets remain
uneasy, economic growth has
slowed, confidence levels
have deteriorated, and our
businesses previously benefiting
from the funds emanating from
wholesale markets (in particular)
still face further challenges.
However, we believe we are
the best partner business in
financial services and, therefore,
the best placed to work with
our partners to reshape these
customer channels to be more
sustainable in the future.
We remain confident in the
future of our now enlarged and
more robust merged bank and
its capacity to handle changed
circumstances. Just as our
retail bank is flourishing from
the current flow of capital back
to the banking system, so we
believe our partner advised
businesses can be reshaped to
deliver certainty, quality earnings
(to ourselves and our partners),
and high quality services to
customers who choose these
channels.
Our merger, while far from
complete, is on target. Our new
leadership team has been in
place since early 2008, and
most business units have
been restructured to capitalise
on the opportunities that will
emerge over the next decade.
Approximately one-third of the
forecast merger synergies had
been delivered by 30 June
2008 – with a $20 million
reduction in the cost base run
rate, due to implementation
of the early expected merger
synergies. We are well advanced
in reshaping the Adelaide Bank
retail network to become part
of the national Bendigo Bank
retail network (embracing our
community banking style).
We will ensure we pay respect
to the Adelaide brand – chosen
by more than 180,000 South
Australians – but we see a
great opportunity for Bendigo to
become a meaningful competitor
in Adelaide Bank’s home State.
While we keep our eye on future
possibilities, we believe it is
important to celebrate, reflect
and learn from our past and our
milestones:
> The merger between
Bendigo and Adelaide on
30 November 2007 created
Australia’s sixth largest bank.
> The oldest strand of our
company, Bendigo Bank,
turned 150 on 9 July 2008.
> Sandhurst Trustees
celebrated its 120th
anniversary.
> More than 600 delegates
from across Australia
congregated in Bendigo to
share their experiences,
to learn new skills, and
to celebrate the 10th
anniversary of our first
Community Bank®branches.
> Our joint venture with Futuris
Corporation was signed in
1998. The result of this
partnership was the launch
of Elders Rural Bank in
2000.
> Our headline profit topped
$200 million for the first
time.
> And another milestone
looms: our new headquarters
in Bendigo will be officially
opened in December 2008.
This report celebrates these
milestones in the simplest
and most appropriate way
– with ‘snapshots’ of people
celebrating. We think these
photographs best reflect the
qualities that differentiate us
from our competitors. Ours is
a business built by people with
the welfare of people in mind.
Whether it was helping miners to
build their own homes in 1858,
helping struggling borrowers to
remain in their homes during the
1930s, providing communities
the wherewithal to overcome
adversity in the 1990s, or giving
our partner advised channels
hope in these uncertain times,
our belief has predominated.
Successful customers,
successful communities and
partners, help us create a
successful bank – in that order.
We believe Bendigo and
Adelaide Bank can be Australia’s
leading customer-connected
banking group, whether those
connections are established
directly or through our
community and business
partners. In whatever way our
customers choose to deal with
us, it will be because we have
developed banking models and
a style of banking that aspires
to be relevant, connected and
valued by our customer base
(for having focussed on their
aspirations and needs).
Australia has one of the best
banking systems in the world
– and vibrant local economies
and strong support for small
business are two of the key
drivers for a highly effective
national economy. The global
credit crisis has served to
remind us that banks (such
as ours) remain the most
efficient way to deliver capital
– from wherever that funding
is sourced – to local markets
and economies. Just as we
developed the Community
Bank® model to connect us
with those communities, so we
will continue to shape all of
our businesses to fulfil the
vital role played by banks in all
local economies – feeding into
prosperity.
Today in more than
400 Australian communities
the connection with our bank
(through our company and
Community Bank®branches) is
proving invaluable to the future
success of their towns, suburbs,
and local economies. A bank
which is strongly connected and
contributes to the wellbeing of
its customers and local markets
is generally afforded greater
customer support and strong
advocacy. And this approach is
also helping us to secure our
own ongoing and sustainable
future – and therefore more
reliable growth in shareholder
value.
Robert Johanson
Chairman
Rob Hunt
Managing Director
From left to right
> Chief General Manager Brand
Development & Positioning Greg
Gillett (left), Director Jenny Dawson
and The Right Reverend Bishop
Ron Stone at the Bank’s 150th
anniversary dinner.
> A re-enactment of the historic meeting
held at Abbott’s Hotel on 9 July 1858
votes to form the Bendigo Land and
Building Society that 150 years later
is the Bendigo and Adelaide Bank.
> Managing Director Rob Hunt and
Chairman Robert Johanson enjoy the
anniversary festivities.
Full Financial Report 2008 3
Results at a Glance
Heading here
After-tax profit of $170.5 million
for the 12 months ending
30 June 2008 (this result
represents seven months
contribution from Adelaide
Bank following November 2007
merger).
Cash earnings $201.9 million,
an increase of 70.4 per cent from
2006/2007.
Cash basis earnings per ordinary
share increased to 93.7 cents per
share (fully franked), a 13.0 per cent
increase.
Dividends for the financial year
total 65.0 cents, an increase of
12.1 per cent
> Another 18 Community Bank®
branches and four company owned
branches joined the network.
This does not include the addition
of 25 South Australian branches
resulting from the Adelaide Bank
merger.
> Customer numbers increased
by more than 70,000,
with our customer base
approaching 1.4 million.
> Customer and business satisfaction
ratings lead the industry with
ratings consistently reported in the
90-plus per cent bracket.
> Our 200-plus strong Community
Bank® network continues to make
significant financial contributions,
returning almost $12 million to their
shareholders and spending more
than $21.7 million on communities
and projects.
> Launched our biggest ever
marketing campaign during the
Beijing Olympics – At the Bendigo it
starts with U.
4 Full Financial Report 2008
From left to right
> The Balsillie family represents three generations of Bendigo Bank shareholders. John (left), Alexandra and
Neil (right) have held shares in the bank originally accumulated by John’s grandfather Andrew Balsillie.
Andrew worked for the building society for 50 years from the turn of the 20th century and as manager played
a role in forging its strong ethical reputation. The family is pictured at the dinner celebrating Bendigo Bank’s
150th anniversary.
> The Bendigo Town Hall was the setting of our 150th anniversary dinner.
> Customer Help Centre team members Jo-Anne Denbrok (left) and Mary Headon (right) and Receptionist Michele
Van den Berg (middle) at the staff event.
$170.5 m
n
o
i
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i
After-tax profit
13.0%
Cash basis earnings per ordinary share
Bendigo and Adelaide
Bank Limited > Our New Bank
15.6%
Cash earnings
Three more increases
followed, aimed at reducing
demand and slowing price
and wages pressure.
The rise in wholesale
funding costs as a result
of credit issues in the US
sub-prime market meant
that competition increased
among Australian banks
for retail deposits. Bendigo
and Adelaide Bank,
which funds more than
70 per cent of on balance
sheet loans through retail
deposits, was particularly well
positioned to take advantage
of these circumstances
through its strong retail
network.
The expectation for 2008/09
is that intense competition
will continue among banks
for retail deposits. Attention
is also expected to focus
on capital management
requirements rather than
traditional asset growth.
Bendigo and Adelaide Bank
worked last year to ensure
we were allocating available
resources to the businesses
which would offer the most
profitable returns. In the
current environment, that
is in the retail business.
While we are not expecting to
significantly grow our balance
sheet in the short term,
we are expecting revenues
to continue to grow through
a disciplined approach to
writing profitable business.
We have also taken a
targeted approach to cost
management.
Merger Integration
Our focus last year was to
build a solid foundation on
which to construct a fully
integrated bank.
The priorities are to
support staff through the
process, improve business
performance and realise
revenue and cost synergies.
This is all critical groundwork
towards creating a strong but
pliant organisation.
In addition, we have had
a strong focus on building
the awareness of the
community philosophies
that our business is built
on. The response of the
Adelaide Bank team has
been overwhelmingly positive,
and there is a genuine desire
to be involved in community
engagement.
A key step in the integration
process involves the transfer
of Adelaide Bank’s banking
business to Bendigo and
Adelaide Bank.
Adelaide Bank and Bendigo
and Adelaide Bank have
applied to the Australian
Prudential Regulation
Authority under the Financial
Sector (Business Transfer
and Group Restructure) Act
1999 (Cth) (the Transfer Act)
to carry out the transfer.
If approved by the Treasurer
and APRA, the process will
occur in two stages, with
the initial transfer involving
Adelaide Bank’s remaining
listed securities and the
transfer of the balance of
the business scheduled to
be complete by the end of
calendar year 2008.
Bendigo and Adelaide
Bank was able to
deliver an improvement
in shareholder value
in 2007/08 despite
difficult market
conditions.
The Bank has prospered
through past market
cycles. Prudent financial
management that
is a feature of our
operational style, has
held the Bank in good
stead through good
times and bad during
150 years.
The merger enacted
in 2007/08 to create
Bendigo and Adelaide
Bank makes us still
more resilient.
Market overview
Bendigo and Adelaide Bank’s
share price during the
year reflected the funding
pressures that constrained
all Australian banks.
As we finished the year,
the Australian economy was
showing signs of slowing
and expectations are for
weaker economic conditions
to remain through the rest of
2008.
Conversely, the start of
2007/08 was dominated
by the strong consumer
demand and record levels of
employment we have enjoyed
for several years but with
signs of rising inflation. In a
bid to stem this latter trend
the RBA moved rates in
August 2007.
From left to right
> Victorian Premier, the Hon.
John Brumby, proposes a toast at
the anniversary dinner.
> Rob Hunt responds to the toast.
The merits of the merger, as
spelt out at the time of the
proposal, remain the same.
Bendigo and Adelaide Bank
recognises that the merger
is one of two distinctive but
complementary businesses,
combining partnering,
wholesale manufacturing and
processing with a community
focussed retail banking
business. The merged bank
boasts superior customer
service and community
standing, established
brands, minimal overlap in
businesses and cultural
compatibility.
It enhances the value
proposition for customers,
partners, communities and
staff by supplying more
products, more branches
and more ATMs for retail
customers, by preserving
and continuing to invest
in the Community Bank®
and wholesale partnership
models, and by creating
greater career opportunities
for staff through a larger,
more diversified company.
We are financially stronger
and better positioned to grow
and innovate.
Full Financial Report 2008 5
Our Milestones
Heading here
Happy birthday Sandhurst
Trustees Ltd
18 January 2008
Sandhurst Trustees Ltd which
celebrated 120 years since
its incorporation.
Sandhurst Trustees has
provided Australian families
with estate management
and financial services since
1888. It has been a wholly
owned subsidary of Bendigo
Bank since 1991.
This special occasion was
marked with a morning
tea for Sandhurst staff
in recognition of their
contribution to the Company.
Thanks also to our customers
and retail network staff
who have helped to build a
portfolio of $3.5 billion in
funds under management.
Elders Rural Bank
10 years
June 1998
Although the banking licence
for Elders Rural Bank was
issued in 2000, it was in
1998 that our joint venture
with Futuris Corporation,
parent company of Elders,
was formalised. In June
of that year, Bendigo and
Futuris agreed to the
50/50 joint venture.
Elders Rural Bank applied for,
and was granted a banking
licence and established a
banking service that catered
specifically for agribusiness
customers.
Bendigo Bank’s 150th
anniversary
9 July 2008
On this day 150 years ago,
100 locals gathered at Abbott’s
Hotel on Pall Mall to establish
a building society.
Calling the meeting to order,
Chairman James Sullivan
said the “paramount object
of the institution” would be
to encourage people to settle
permanently in Bendigo.
“Surely every man of right
feeling would rather see men
living in comfortable houses
than in tents” he stated.
After much discussion,
the following resolution was
carried unanimously:
‘That it is considered expedient
to establish a society to be
called The Bendigo Land
and Building Society for
the purpose of enabling
shareholders of such a
society to become possessed
of freehold and leasehold
property, and other benefits.’
More than 150 men and
women subscribed for the
initial share issue. They had
come from across the world
and now they pooled their
savings to finance housing
for each other and to build a
community.
Today that company is Bendigo
and Adelaide Bank. We are a
national financial organisation
with our head office in Bendigo.
We have more than 400 retail
branches in every State and
Territory. We remain committed
to our founders’ original
philosophy. If we help to
create successful, sustainable
communities, our own success
will follow.
6 Full Financial Report 2008
Community Bank®
network 10 years young
26 June 2008
Just over 11 years ago
Rob Hunt outlined what
was, given that it coincided
with branch closures and
perceived industry focus
on profits rather than
community, a very clear
vision of our business
direction.
That vision encompassed
an unprecedented mix of
community, localism, vision,
use of rapidly developing
technology, corporate
expertise and perhaps most
of all, belief.
Today we see the outcomes
of that vision in our
community and alliance
banking models, and indeed,
every one of our bank’s
decisions and actions.
It may not always be visible
or readily tangible, but it is
there.
And what a way to do
business. More than
55 per cent of our branches
are run by our partners.
The Community Bank®
network alone accounts
for 217 branches in our
total network of more than
400 branches.
In June, Rupanyup’s David
Matthews, Minyip’s Stewart
Petering and Bendigo Bank
celebrated their remarkable
effort to open the first two
Community Bank® branches.
It is just as special to think
we have repeated that
process 215 more times in
From left to right
> Bendigo’s Rob Hunt and Adelaide’s Jamie McPhee at
the announcement of the merger in November 2007.
> Marketing Liaison Officer Michele Schepers (left)
and Public Relations Officer Lauren Treacy at the
Community Day celebrating the anniversary.
> Business Analyst Kelly Stevens (left), National Human
Resources Manager Jy Pertzel (middle) and Community
Development Support Officer Fiona Keating (right) at
the anniversary dinner.
the ensuing years. We share
a truly special partnership
with these communities.
Happy 10th birthday to
the Community Bank®
network and to all who have
participated in, and continue
to participate in, this journey.
Bendigo Bank and
Adelaide Bank merger
November 2007
Bendigo is no stranger to
mergers and the latest
merger, with South Australia’s
Adelaide Bank is the most
significant, and certainly the
largest, in the company’s 150
year history.
The merger creates a bank
better positioned to achieve
our strategic aspirations.
Announced on Thursday
9 August 2007, the merger
was implemented on Friday
30 November. The first day
we traded as a merged
company was on Monday
3 December 2007.
Our Community
The diverse ways we
can directly contribute
to communities, and the
increasing number that
accept our contribution,
are key measures of our
success.
Bendigo and Adelaide
Bank is proud to be
able to assist Australian
communities to enhance
their security, wellbeing
and connection.
We believe it starts
with finding a way to
retain capital within
communities. From that
foundation, residents can
be the architects of their
own future.
“It is a worthwhile
dream, and operating
a Community Bank®
branch has proven
that it can be a
catalyst for positive
change.” – David
Matthews, Australia’s
first Community
Bank® company
Chairman.
Community Bank®
network
The pioneers of the
Community Bank®network
had the opportunity
to celebrate the 10th
anniversary of their work
at the annual Community
Bank® National Conference
in Bendigo in July.
The conference attracted
600 delegates from branches
throughout Australia, including
representatives from our
newest Community Bank®
branch openings - from
Queensland’s Mission Beach,
Nowra in New South Wales
and the regional Victorian
town of Balnarring.
As at 30 June 2008, there
were 217 Community
Bank® branches throughout
Australia.
After 10 years, Bendigo
Bank has paid $444 million
to local boards as their
share of banking revenues.
This has helped to create
more than 1000 new jobs,
with beneficial flow-on effects
from wages and expenditure
on local services. Last
year, Community Bank®
branches spent $59 million
in their communities on
wages, rent, accounting and
cleaning services, buildings,
staff amenities and other
expenses.
During the past decade,
Community Bank®
boards have contributed
$21.7 million to local projects
and groups and $12 million in
shareholder dividends.
Our Community Bank®
branch network services more
than 664,000 accounts and
has $11.9 billion in total
banking.
Community
Partnerships
Our Community
Bank®program is the best
known, but is only one of the
many partnerships we have
with communities. We partner
with communities in banking,
but also in the more holistic
sense of working with towns,
regional cities and suburbs to
improve their prospects.
For example, in a three-way
partnership, Bendigo and
Adelaide Bank, Delfin Lend
Lease and Queensland’s
Varsity Lakes residents will
begin banking in their locally
owned Community Bank®
branch within the next
12 months. In the case of
Varsity Lakes, talks centred
on the type of specialised
services required for this
community and a plan was
developed. The community
plans to use profits
generated from their branch
to develop, and sustain
facilities for young people, for
health and safety programs
and to enhance existing
community activities and
events.
In several communities
we have helped establish
locally-owned companies with
the objective of generating
revenue streams to fund
local projects. Customers can
now pledge their new banking
business to the company
which generates ongoing
commission payments
from Bendigo and Adelaide
Bank. We continue to work
with, and towards, our
communities’ aspirations to
develop solutions to enhance
their future prospects.
From left to right
> Marking the 10th birthday of the
opening of the first Community
Bank® branches at Rupanyup and
Minyip, Chief General Manager Russell
Jenkins and Coolalinga Community
Bank® Branch Chairman Maureen
Newman cut the cake, watched by
Rupanyup/Minyip Community Bank®
Group Chairman Stewart Petering (left)
and Chairman Robert Johanson.
> Delegates at the annual Community
Bank® National Conference celebrate
10 years of the Community Bank®
concept.
> More than 600 delegates from around
Australia attended the conference.
Community Telco
Community Telco Australia
(CTA) is a supplier of
telecommunications services
to telco franchises of Bendigo
and Adelaide Bank’s wholly
owned subsidary Community
Developments Australia.
Under this supply agreement,
CTA uses the aggregated
buying power of these
franchise communities to form
strategic alliances with large
telco providers. Communities,
particularly those in regional
Australia, can then be certain
of accessing telephone,
data and internet solutions
that city customers take for
granted.
This access improves
the capacity of rural and
regional communities
to compete globally.
Access to the operational
efficiencies that can be
delivered to communities by
telecommunication solutions
is no longer a luxury but
essential for long term
sustainability.
Since the initial pilots
in Bendigo in 2000 and
Ipswich in 2001, six more
communities have signed
franchise agreements
including the Sunshine Coast,
Ballarat, Tasmania, Oxley
(Dubbo, Orange, Bathurst),
Geelong and Newcastle.
Full Financial Report 2008 7
Our Community continued
From left to right
> Lang Lang Community Bank® Branch
Company Chairman Max Papley (left)
receives an award marking the branch’s
entry into the Community Bank® Hall of
Fame from Chief General Manager Retail
Customers Russell Jenkins.
> Chief Manager Strategic Solutions
Graeme Harvey (left), Western Australia
State Manager Vicki Pearce and
shareholder John Balsillie (right) at the
dinner.
> City of Greater Bendigo Mayor David Jones
(left), Bendigo and Adelaide Bank Head of
Retail Delivery & Design Georgina Pickett
and Victorian Premier The Hon. John
Brumby.
Lead On™
Successful communities
value and understand the
importance of their young
people as the next generation
of leaders and community
custodians. They actively
encourage the participation of
young people and value the
contribution they can make to
the community’s prosperity.
Lead On is a community-building
model that helps communities
become successful by
engaging, supporting and
connecting young people.
Sponsorships
Each year, Bendigo and
Adelaide Bank contributes
more than one per cent of its
after tax profits to community
sponsorships.
Nine years into the Lead On
journey, almost 7000 young
people have been actively
involved in 1100 community
and business sponsored
projects nationally.
This is in addition to the
sponsorships made by
the boards of Community
Bank®branches which are
committed to returning
a percentage of profits
to community groups
and projects. Millions of
dollars are being returned
to communities across
Australia. This will only
continue to increase as new
community branches open
and the business of existing
branches grows.
Community
Enterprise™
Foundation
Launched in early 2005 as
the philanthropic arm of
Bendigo and Adelaide Bank,
Community Enterprise™
Foundation provides grant
making support.
As of June 2008 the
Foundation had raised
more than $13.6 million,
and distributed $7.9 million.
The two components of the
Community Enterprise™
Foundation, its Charitable
Fund and Tax-Deductible
Fund, provide a wide range
of funding capacity for
communities. Both can
receive bequests, corporate
donations, individual
donations, shares, property
and stock.
In an exciting year ahead we
will see the Adelaide Bank
Charitable Foundation merge
into Bendigo’s Foundation
structure.
The Adelaide Bank Charitable
Foundation was established
in 1981. The concept
was considered visionary
for its time and required
the passing of an Act of
Parliament that year for it to
become a reality.
The Foundation’s contribution
to South Australia has
been significant over its
history. Hundreds of worthy
causes have been assisted
through funding of more than
$7 million.
8 Full Financial Report 2008
Our
Retail Business
The starting point for
our business is listening
to and focussing on
customers and their
communities. The result
in the past financial year
is that, for the tenth
consecutive year, we
were the Australian bank
with the most satisfied
customers.
This outcome can be
attributed to the service and
value we offer customers,
whether it be through our
partners, our Community
Bank® branches, joint
venture partners or our own
branches and agencies.
The financial outcome
resulted in retail banking
contributing a 28.1 per cent
rise in pre-tax profit to the
Group.
Last year we placed even
greater priority on customers
as we went about merging
Bendigo Bank and Adelaide
Bank. This focus has seen
the Bank benefit from
market conditions that
favoured liability growth.
The Bank enjoyed a
record inflow of retail
deposits in June 2008 in a
hypercompetitive market,
a trend that continued into
the first quarter of 2008/09.
For the year, deposits
increased by 15.8 per
cent, helped in part by the
addition of 250,000 new
customers – 180,000 of
which are Adelaide Bank
customers. This growth is a
continuation of an increase
of 70,000 customers per
year since 2003.
How our retail customers
benefit from the merger
is simple. As we continue
to grow, so does our
accessibility and the retail
banking options we offer.
There are now more than
400 Bendigo and Adelaide
Bank branches, including
217 Community Bank®
branches. Add on
100 Bendigo Bank agencies
and 700 ATMs and there
will soon be 1200-plus
service points wherever our
customers travel in Australia.
Having developed a national
network, our objective now
is to deliver greater value
to our community and
customers. We are doing
that by evolving our branch
design and structure, with
the latest ‘branch of the
future’ in North Adelaide
opening in July. The branch
is a response to the
reduction by 29 per cent in
branch-based transactions
and features more space
to talk and meet with
customers, greater use
of technology and areas
available for community
interaction.
As we integrate the
businesses, we are striving
to ensure all customers
can take full advantage
of an expanding banking
service and product range
as quickly as possible. What
we achieved during the
past financial year was an
integration of ATM services
with customers able to
utilise any Adelaide Bank
or Bendigo Bank-branded
ATM free of any ‘other
bank’ fees. Adelaide Bank
customers have also started
to see some Bendigo Bank
products introduced into the
25 South Australian-based
Adelaide Bank branches.
Customers can look forward
to the following completion
of steps leading up to the
realisation of a full interbank
branch service:
> By early 2009, we expect
customers from Adelaide
Bank will be able to
transact on their Adelaide
Bank accounts in Bendigo
Bank branches, and
Bendigo customers in
Adelaide Bank branches.
> Full integration – where
products of both banks
will be available in all
branches – will take
longer, around late 2009.
As outlined when the merger
was announced, the longer
term objective is that the
national retail brand will be
Bendigo, while the national
wholesale brand will be
Adelaide. The transition
of the retail brand from
Adelaide to Bendigo in
South Australia will be a
gradual one, with a key focus
recognising the heritage of
Adelaide’s customer base.
Underpinning all of our
retail banking objectives
are the broader themes of
our community engagement
strategy. This has created
our major point of difference
and we won’t lose sight of
the community focus that
underpins our success.
We are terribly proud of what
we have achieved within the
communities in which we
operate.
From left to right
> Managing Director Rob Hunt,
Chairman Robert Johanson and
Reserve Bank of Australia Governor
Glenn Stevens at the anniversary
dinner.
> Chief General Manager Solutions/
Product Marnie Baker thanks the
Reserve Bank Governor Glenn
Stevens for his speech and
attendance at the dinner.
> Guests at the dinner included
Bendigo and Adelaide Bank Manager
Business Analysis Will Conlan (left),
Deputy Chairman Kevin Osborn
(centre), Bendigo Health Chief
Executive Officer John Mulder (right)
and partner Anne Hepner.
We see these results
reinforced in the feedback
from our customers and
ongoing market research.
Our agencies provide us with
great flexibility in responding
to community demands for
the Bendigo Bank service.
They are often used as
stepping stones for those
communities wishing to join
our branch network. Last
year, five agency sites were
upgraded to full sites – four
as Community Bank®
branches and one company
owned branch. Community
Bank® campaigns are
currently underway in several
communities where there
is a Bendigo Bank agency
operating.
The agency network last
year averaged about 70,000
transactions per month. With
the introduction of the low
cost Agent Delivery System,
two thirds of our agency
network now provides a real
time transactional banking
service.
Full Financial Report 2008 9
Our
Wholesale Businesses
The Wholesale
business unit includes
Partner Advised and
Business Partners
(portfolio funding and
specialised lending).
This area of the
business contributed
a pre-tax profit of
$56.1 million to
Bendigo and Adelaide
Bank.
Partner Advised
business
The Partner Advised
business unit manufactures
and processes residential
home loans, which are
distributed through mortgage
brokers and mortgage
managers. The business is
a product developer and a
highly efficient home loan
processor. Ratings agency
Standard & Poors recently
reaffirmed Adelaide Bank’s
servicer rating as strong
(outlook – stable), the highest
ranking available, which
confirmed the strength of our
processing capability.
Market conditions have been
very difficult for this business
in the past 12 months.
The cost of funds from the
international capital markets
became unacceptably
expensive. The business
responded by minimising
costs and focussing on
only writing soundly priced
residential home loans.
Commissions to distribution
partners were adjusted to
reflect the ongoing cost
pressures in a move that
will build stronger and more
sustainable relationships
with mortgage brokers
and mortgage managers.
Growth in business was
actively managed to fit the
prevailing trading conditions.
10 Full Financial Report 2008
From left to right
> Bendigo and Adelaide Bank National Community Enterprise Manager Chris DeAraugo talks to The Advertiser
Editor Peter Kennedy.
> Chief Executive Wholesale Bank Jamie McPhee (left), Director Terry O’Dwyer (middle) and Australian
Prudential Regulation Authority Chairman John Laker (right) at the dinner.
> Henty Community Bank® Branch Company Chairman Milton Taylor (left), Bendigo and Adelaide Bank Chief
Risk Officer Tim Piper (middle) and Customer Relationship Officer Lachlan Pinner (right).
Business Partners
Portfolio Funding is focussed
on providing funding solutions
using our securitisation
expertise to finance
companies.
The business was
constrained by increased
funding costs but the credit
quality of the portfolio
is sound. There were no
write-offs for any program
with subordination structures.
Write-offs and arrears were
below forecasts for on
balance sheet portfolios.
Specialised Lending focusses
predominately on lending to
the aged care and retirement
village sectors.
Strong synergies exist
between this unit and
the bank’s retail network.
Combined with ongoing
strong industry demand,
we believe this unit has
strong growth potential.
The Wholesale business has
a strong focus on customers
and partners rather than
on products. This allows
us to execute our business
strategy in line with the
organisation’s overall focus
on its customers, partners
and communities. This is in
line with the industry trend
of converging third party
distribution through the
various channels – in our
case through stockbrokers,
financial planners, mortgage
managers, mortgage brokers,
accountants and fixed
income brokers.
Pricing changes as well
as slowing demand in the
Australian housing market
due to rising interest
rates saw the unit’s asset
portfolio fall 4.2 per cent
to $16.7 billion. This is
consistent with our aim of
preparing the business to
increase lending volumes
when appropriately costed
funding becomes available.
We do believe the business
is reshaping and we will
continue to be a part of
it in the future. Almost
40 per cent of Australian
customers use third parties
to choose their mortgage
products and we will continue
to service them.
In the early stages of merger
integration we reviewed the
structure of the division and
in the process introduced a
team dedicated to analysing
where our business fits in
the market. The Products &
Solutions team will ensure
our products and services
remain in a preferred
competitive position,
manage and launch product
and service innovations
and refresh our operating
environment to ensure
that we remain a low cost
provider. This division will
also identify future business
trends.
Specialised
Products
Cards
Web Partner™
Equipment Finance
Credit card receivables
grew by $266 million during
the year. This result was
underwritten by the merging
of the Bendigo and Adelaide
Bank card portfolios and
continued strong growth with
the award winning “Basic
Black” credit card and the
RSPCA Rescue Co-branded
card.
Insurance
Income from the general
insurance activities of the
Bank grew 12 per cent during
the financial year. This growth
included an improved
result from our Health and
Commercial insurance
businesses and the
successful introduction of our
newest product, Compulsory
Third Party Insurance, in
Queensland and NSW.
The Bendigo-based Insurance
Department has been
expanded to cater for the
increased customer numbers
from the merger.
Web Partner™,
a comprehensive website
development service,
develops websites that work
hard for our customers to
help achieve their business
goals.
Our Web Partner™ team
works closely with the
customer to collect
information about their
business, which our Web
Partner™ team then convert
to professional website
graphics and content.
We build the website for the
customer and host it on the
Internet at their individual
domain name. Included are
ongoing website updates,
statistical reporting and of
course, technical support.
International Trade
International Trade is an
important and growing field
of enterprise for our business
customers. It can offer
great rewards, but can also
bring with it certain risks.
International Trade division
throughout 2007/08 has
continued to provide valuable
support and guidance to our
business customers through
a comprehensive range of
international trade products
and services and a dedicated
team of international trade
specialists.
In a competitive environment
free trade agreements have
opened the door to increased
global competition and
industry players (including
Bendigo and Adelaide
Bank) are better positioning
themselves to service this
ever increasing market
segment.
Businesses looking to finance
equipment face a range of
options. Two of the primary
financial considerations
are cash flow and taxation.
Bendigo and Adelaide Bank
Equipment Finance division
supports our business
customers with a range of
leasing commercial chattel
mortgage and asset purchase
solutions designed to
either enhance cash flow or
minimise tax.
During 2007/08 equipment
finance sales increased by
14 per cent and receivables
increased by 12 per cent.
The equipment finance
industry continues to seek
and use more efficient, user
friendly computer systems to
gain a competitive advantage.
Debtor Finance
In the past year the Bank’s
commitment to providing
small to medium enterprises
relevant solutions to
their cash flow financing
needs continued to grow.
Oxford Funding Pty Ltd,
Bendigo and Adelaide Bank’s
debtor finance arm, offers
additional cash flow products
tailored to customers needs.
As the only bank-owned
Australian member of
Factors Chain International
(an association of worldwide
major banks and financial
institutions), the Bank
can now offer funding for
international open account
business-to-business trade.
The Debtor Finance Market
has grown by over 20 per cent
for each of the past 10
years and this growth is set
to continue. Oxford Funding
is well placed to participate
significantly in this growth
sector.
From left to right
> Staff members Janelle Taig, Anthea
Mawby and Stacey Blake attend a
staff celebration for Bendigo-based
employees.
> We continue to expand our range of
agribusines products and services
through the Elder’s Rural Bank
joint-venture and within our own
national branch network.
> Fun at the Community Day celebrating
the bank’s anniversary.
Homesafe Debt Free
Equity Release
Through a joint venture
company, Homesafe
Solutions Pty Ltd, we make
this equity release product
available to over 60’s
homeowners seeking to
safely access extra cash
from their home. Unlike
a loan, Homesafe Debt
Free Equity Release allows
homeowners to sell a share
of the future sale proceeds
of their home in return for
a debt free cash payment.
They continue to own and
live in the home until they die
or sell the home. Homesafe
receives its share of the
sale proceeds when the
home is eventually sold.
Homesafe is widely regarded
as a ‘safe’ equity release
option for seniors. Interest
in the product remains
strong with eligible enquiries
increasing in 2007/08 by
13 per cent. The offering is
currently limited to nominated
postcodes in Melbourne and
Sydney.
Full Financial Report 2008 11
Our Wealth Businesses
From left to right
> Bendigo’s Neil Athorn and Denis Kelly
were among the hundreds of staff who
attended anniversary celebrations.
> Sack races in the Gala Marquee at
the Community Day.
> Chief Executive Retail Bank
Mike Hirst, Chief General Manager
Wealth & Partner Advised Anthony
Baum, Chief Executive Wholesale
Bank Jamie McPhee and Chief Risk
Officer Tim Piper.
Bendigo Financial Planning
also provides the Associate
Planner Program, a training
program for Bendigo and
Adelaide Bank employees
who are interested in
becoming financial planners.
The program allows the
Bank to draw on talent
within the organisation and
to establish a professional
team committed to doing
business according to our
customer focussed approach.
There is no minimum
education requirement to
enter the program, however
associates are required to
complete the Diploma of
Financial Services (Financial
Planning) or its equivalent.
The Wealth businesses
of Bendigo and
Adelaide Bank deliver
proportionally greater and
more diverse earnings to
the Group as a result of
the merger.
These businesses include
funds management,
margin lending, our
finance company and
financial planning.
The combining of our two
wealth businesses has
provided our retail customers
with access to a broader range
of wealth products while at
the same time expanding the
range of products and services
offered by the organisation
to independently advised
customers.
The Wealth division includes
the Cannex 5-Star rated
Leveraged Equities margin
lending business and the
funds management arms
currently operated through
Sandhurst Trustees Limited
and Adelaide Managed
Funds Limited. A process
to amalgamate the Funds
Management activities is
underway.
In retail, Bendigo Financial
Planning and Victorian
Securities Corporation Limited
are also aimed at the wealth
market.
In 2007/08, the Wealth
Solutions division contributed
$42.3 million to the Bank’s
pre-tax profit, an increase
of 54 per cent (taking into
account seven months
contribution from Adelaide
Bank).
12 Full Financial Report 2008
The division’s performance
was pleasing given the
backdrop of the weakening
global economic environment
and investment markets in
particular.
Managed funds
Total funds and assets under
management increased by
97 per cent to $6.7 billion,
reflecting the inclusion of
Adelaide Bank’s business.
Despite the negative
sentiment that accompanied
falling equity markets for
most of 2007/08, demand
in the sector will continue
to grow as Australia’s
population ages. We regard
the managed funds arm
as one that will benefit
exponentially from the
merger through increased
opportunity for product
innovation and business
growth as well as being able
to leverage an increased
retail customer base and
greater connections.
Margin Lending
Our margin lending business
remains a key growth
opportunity for us.
The merger allows greater
distribution to a larger retail
customer base.
Having traversed difficult
equity markets which reduced
the value of the portfolio to
$3.8 billion at 30 June 2008,
the business continues to
enjoy a strong market share
and increasing customer
numbers.
Victorian Securities
Corporation Limited
As the only debenture-issuer
for the Group, our
Ballarat-based finance
company operated during
the year according to its
successful philosophy
of providing a simple
competitive product
consistent with the market
expectations of investors.
As a specialist commercial
and development lender,
VSCL offers a variety of
lending products tailored
specifically to meet the
needs of borrowers.
Bendigo Financial
Planning
Funds under advice declined
by about six per cent for the
year, the main influence being
fluctuating market conditions.
However, strong demand
continues for our financial
planning offering featuring
transparent fee disclosure.
In 2006, we moved toward
more transparent disclosure
of payment for financial
advice by adopting a Fee for
Service business model.
Since then many of our
competitors have changed
their models to the same
approach, a move which we
strongly support. The main
difference between a Fee
for Service business model
and a commission structure
is that, in the first scenario,
the customer pays a fee
for the service the financial
planner provides similar to a
fee paid to an accountant or
solicitor. The fee, therefore,
is independent from the
amount of money invested
and bias to an investment
provider.
Our Future
It may seem unusual for
a bank to play an active
role in the conservation of
the environment. But the
concept of sustainability has
always been at the heart
of what we do. It’s what led
to our introduction of the
Community Bank® model
and all of our community
engagement activities.
So we have taken a lead
on caring for our future by
creating the means by which
people and communities
can look after theirs. And we
have followed the example
by building headquarters in
Bendigo that meet a
5–Green Star rating,
the first of its kind in regional
Australia.
Generation Green™
Generation Green™ is an
exciting range of solutions
that make it easy for
everybody to help the
environment. Generation
Green™ provides a range of
green loans, carbon offsets
and other services that
encourage ‘green’ behaviour
and make looking after the
environment simply a part of
everyday life.
Some of the ways Generation
Green™ is helping us live a
greener life is by providing
tips online through the
sustainability guide and the
Green range’s three stage
program that helps save
money and the environment
at the same time.
And at a community level,
Generation Green™ has
developed a suite of
community engagement
programs that help our
Community Bank® network
prepare their local community
for the effects of climate
change.
Last financial year we
implemented Ban the Bulb
campaigns through eight
Community Bank® branches
which have exchanged
approximately 60,000
incandescent light bulbs for
new energy efficient ones.
The exchange programs
have involved more than
600 volunteers who raised
approximately $160,000
in funds for their local
community groups while
reducing greenhouse gas
emissions by around 60,000
tonnes. That’s equivalent to
taking 14,000 cars off the
road for a whole year.
More than just a range
of products and services,
Generation Green™ is a way
of thinking. We encourage
you and your community
to be part of Generation
Green™ - a generation that
will act to make a difference.
And by being a part of
Generation Green™ you’ll
be helping to ensure that
future generations can enjoy
a beautiful, sustainable
environment.
The environment
Bendigo and Adelaide Bank
is committed to minimising
the emissions created in
everyday business. Our staff
spend a significant amount
of time on the road and in
the air as part of their job.
We intend to offset the
effects of our corporate fleet
and our business air travel
for 2007/08.
The Victorian farming
communities of Lockington,
Elmore, Rupanyip and Minyip
are working in partnership
with Bendigo and Adelaide
Bank, Victor Smorgon Group
and Atlas Fuels to establish a
fuel distribution business.
The fuel project will work
under the same principles
as our Community
Bank®concept. Under
the proposed model, the
community will own the
local storage facility and be
able to capture some of the
profits associated with fuel
purchases. This initiative
will bring huge benefits to
the region, creating another
income stream for the
community and securing
a supply of all liquid fuels,
including access to Bio-Fuels.
The Bendigo Centre
Our new headquarters in the
centre of Bendigo will open in
December, three years after the
first sod was turned.
The building is distinct for more
than its modern design. It has
earned 5–Green Star status
for its range of environmental
features including:
> external sun shading.
> Double glazed windows.
> Automatic light dimming.
> Solar hot water.
> Underfloor air conditioning
allowing individual user
control.
> Rainwater collection
> Grey and black water
recycling.
> Recycled water used in
toilets and mixed with rain
water for irrigation.
As well as creating a world
class building for environmental
performance, we have also
delivered a world class working
environment. The complex will
ultimately house more than
1000 workers, bringing together
people who have been working
in various buildings throughout
Bendigo’s central business
district.
From left to right
> Our new building, which opens
in December, uses ecologically
sustainable principles in design and
construction.
> One of our young customers enjoys
being a butterfly at the Community Day.
> The virtual Green family shows on
our website the cost and benefits of
creating a more environmentally friendly
home.
On 1 September 2006 we signed
a sale and leaseback agreement
to sell the building and lease it
back for a minimum of 18 years.
That agreement was settled on
1 September 2008. We have now
sold the land and building for
$100 million and leased it back
until at least 2026.
Adelaide building plans
In February, Bendigo and
Adelaide Bank announced
it was looking for new office
accommodation in Adelaide.
At the time, the project team
issued a general request
to the property market that
it was looking for A grade
accommodation in Adelaide’s
central business district, between
13,000 to 17,000 square metres
in size, which could support a
5–Green Star rating.
The Board later reaffirmed its
commitment to the plan, in the
process acknowledging that a
new office development would
benefit Adelaide-based staff and
the broader South Australian
community.
By the end of the financial year,
an executive sub-committee had
been established to evaluate
options. A Board sub-committee
has also been formed, and will
assist in evaluating the final
recommendation.
The project team has reduced
25 different proposals to a
shortlist of three preferred
options and will present a final
recommendation to the Executive
and Board in 2008/09.
Full Financial Report 2008 13
Our
Heading here
Technology
Our Partners
We continue to invest in
technology to support
the expansion of our
business and to deliver new
capabilities to our staff,
partners and customers.
A new system which will
provide a single view of our
customers’ relationship with
the Bank will be implemented
during the next few months,
and will be rolled out
progressively across our
branch network and call
centres. It will also underpin
our compliance under the
new Anti Money Laundering
legislation. An extensive
branch training program will
be undertaken to ensure that
staff and partners harness
the full capabilities of the
new system.
A new data warehouse is
also being progressively built,
with the first achievement
being our compliance with
the recently introduced Basel
II accord. The warehouse
will be expanded to provide
a consolidated repository
of all corporate data, and to
provide information to better
serve our customers, staff
and partners.
Planning is well advanced to
consolidate our technology
platforms for the merged
Group. Networks are in
place and our program to
consolidate data centres is
well advanced. A full program
is underway to implement
common processes and
systems to meet the
business goals of the merged
bank.
Investments in technology
are a key to supporting
our growth to meeting
regulatory compliance and to
implementing new products
and services.
14 Full Financial Report 2008
Through our partners,
we are able to offer specialist
services to discrete customer
groups. Our partners are as
important as our customers.
In 2007/08, our joint
ventures and alliances
contributed before tax
earnings of $26.4 million.
Elders Rural Bank Ltd is
a joint venture between
Bendigo and Adelaide
Bank Limited and Futuris
Corporation which provides
specialist banking services
to Australia’s farming sector.
Elders Rural Bank (ERB)
products are available
through 240 Elders Limited
branches Australia-wide
and selected co-branded
agribusiness products are
available from Bendigo Bank
branches.
ERB, of which we own
50 per cent, reported a
net profit (after tax) of
$41 million for the year
ended 30 June 2008.
This was despite the ongoing
challenges experienced by
rural communities.
The result can be attributed
to continued customer
confidence in ERB.
Retail deposit growth was
19 per cent in 2007/08.
ERB’s funding is more than
90 per cent retail deposits.
It also reported strong
credit quality. The ratio of
net non-performing loans
to gross loans under
management improved
to 0.33 per cent from
0.36 per cent the year
before.
Community Sector
Enterprises Pty Ltd is a joint
venture between the Bendigo
and Adelaide Bank and
Community 21 Ltd (which is
owned by 20 not-for-profit
sector organisations). Based
on the Community Bank®
model, it delivers banking
services to the not-for-
profit sector in return for
a share of the margin and
fee income. This improves
the return on capital for the
sector, enhancing its ability
to deliver services to the
community.
Banking business totals
$352.7 million, representing
a 39 per cent rise during the
year.
Tasmanian Banking
Services Ltd is a joint
venture between Bendigo
and Adelaide Bank and
Tasmanian Perpetual
Trustees Ltd, a provider
of banking services in
Tasmania. The company
operates nine branches
across Tasmania.
Banking business now totals
$721.6 million, representing
an 18.7 per cent increase
over the previous year.
Strategic Payments
Services Pty Ltd was
established in May 2006
and is a joint venture
between Bendigo and
Adelaide Bank, Customers
Limited and MasterCard
International. The company
is building an independent
payment business that will
handle the processing and
management of all Bendigo
and Adelaide Bank’s and
Customers’ ATM and Eftpos
transactions. To date,
all Bendigo Bank ATMs and
more than 90 per cent of
Eftpos terminals have been
transferred to this new
system.
Ours is a great partnership
business, and we have a
great history in making
partnerships work.
We continue to look to the
partnership model to see
how it can enhance our
business in the future.
The merger has only
highlighted how effectively
the model has worked.
That is because both
banks have focussed on
building partnerships.
In the case of Bendigo
Bank, the relationships it
has developed over the
years – with Elders Rural
Bank, Tasmanian Banking
Services, Community Sector
Enterprises and Strategic
Payment Services Pty Ltd
– are starting to meaningfully
benefit us. We have
also focussed on retail
partnering, most significantly
through the partner
businesses in communities
which have helped us
establish Community Bank®
branches.
Adelaide Bank has focussed
on wholesale partnering
to form an extensive
distribution network through
which to deliver the lending
products it manufactures
and processes.
It is interesting to note that
both banks have come from
building society backgrounds
and have needed, in order
to be competitive, to be
innovative and adaptable.
They have done this by
building partnerships.
Importantly, the merger
does not in any way threaten
the partnerships each
bank has created, nor the
customer channels each
has invested in. This gives
the merged entity the
opportunity to continue with
the partnerships that work
so well.
And in this regard, the
merger rationale has been
vindicated.
Our Staff
At Bendigo and Adelaide
Bank we believe happy,
healthy, satisfied and
engaged employees help
us to achieve ‘successful
customers, partners and
communities’.
We are committed to
working with our employees
so that we can provide an
exceptional work environment
with valued rewards and
benefits.
Work is almost complete on
bringing the 1144 Adelaide
and 2744 Bendigo staff
(Full Time Equivalent) onto
the one payroll system.
Of great importance is the
need for our employees
to maintain a balance
between their work and life
commitments. By offering a
flexible work options program
we aim to assist employees
meet their needs, while not
compromising the needs of
our customers and the wider
business.
Our dedicated Health,
Safety and Environment
team ensures the business
has the right systems in
place to keep people safe,
happy and healthy. The Bank
recently subsidised a group
of employees to participate
in the Global Corporate
Challenge – a worthwhile
staff engagement activity,
which not only benefits the
health and wellbeing of our
employees, but also brings
them closer together as many
of our teams work in different
locations.
Staff have access to an
Employee Assistance
Program, a confidential
counselling service available
to all employees and the
company’s subsidiaries
to assist with both work
related and family related
difficulties that come up from
time to time and can affect
general wellbeing and work
performance.
As a result of the merger,
employees are now part of a
larger and financially stronger
organisation that provides
greater career and training
opportunities. We support
and provide career
management initiatives
across the Bank and this,
together with employees
wanting to develop their own
career pathways, means
greater opportunities are
available to them.
We also provide tailored
and unique training and
development courses across
the organisation at all levels,
with the aim of building our
future people capability.
Our large Learning and
Development team located
throughout Australia has
the expertise to develop
education and training
that will contribute to a
sustainable and engaged
workforce.
Our employees continue to
be central to the success of
Bendigo and Adelaide Bank
- staff enjoy being part of a
larger and more diversified
business that is relevant
and connected to our
communities.
15.6%
Cash earnings
Above From left to right
> Chief General Manager Brand
Development & Positioning
Greg Gillett and Senior Manager
Customer Help Centre Leonie Higgs.
> Dja Dja Wrung Elder Uncle Brien
Nelson gives the Welcome to
Country at the anniversary dinner.
> Our mailroom staff (from left to
right) Hamish Riley, Hayley Ketterer,
Bill Whatley and Tessie Dole enjoy
the anniversary celebrations.
Opposite page from left to right
> The Bendigo Centre Concierge John
Pitto anchors the tug-of-war at the
Community Day.
> The popular sausage sizzle
– cooked by the Rotary Club of
Bendigo Sandhurst.
Full Financial Report 2008 15
Executive profiles
The merger resulted in a restructure of the Bank’s Executive team, which brings a wide range of skils and
financial sector experience to the Company - profiles below.
Profiles of our Board of Directors are available in the Corporate Governance section of this report .
Jamie McPhee
Chief Executive
Wholesale Bank
Mr McPhee was Group
Managing Director of Adelaide
Bank before the merged bank
was formed on 30 November
2007 when he was appointed
Chief Executive Wholesale
Bank of Bendigo and Adelaide
Bank.
Mr McPhee began his
financial services career in
the dealing room of merchant
bank Wallace Smith Trust
Company based in London.
He returned to Adelaide
in 1998 and joined The
Co-operative Building Society
of South Australia Limited
(which later became Adelaide
Bank) within the Treasury
function.
He held various positions in
Adelaide Bank before 2003
when he was appointed
Chief General Manager of
Operations, responsible
for the day-to-day banking
operations of the Bank and
its subsidiaries. In 2005 he
was appointed Chief Operating
Officer, responsible for all
bank operations. He has a
civil engineering degree with
Honours and a MBA from the
University of Adelaide.
Mike Hirst
Chief Executive
Retail Bank
Mr Hirst was Chief Operating
Officer of Bendigo Bank before
the merger with Adelaide Bank.
He started with Bendigo Bank
in July 2001 as Executive
Director of Sandhurst
Trustees Limited. Mr Hirst was
responsible for the creation
of the Group’s new Wealth
Management business, and
16 Full Financial Report 2008
brings extensive experience
and qualifications in the
areas of banking, treasury,
capital markets and funds
management. He joined the
Group after 11 years in senior
executive and management
positions with Colonial Ltd.
Prior to this, Mr Hirst held
senior finance roles with Chase
AMP Bank, for three years,
and with Westpac, for seven
years, in branch banking,
finance and planning roles.
Mr Hirst holds a Bachelor
of Commerce, Melbourne
University, and is a Director
of Treasury Corporation of
Victoria, Elders Rural Bank and
Barwon Health.
Marnie Baker
Chief General Manager
Solutions/Product
Ms Baker was Chief General
Manager Solutions before the
merger. She holds a Bachelor
of Business (Accounting),
Latrobe University, and is a
member of the Australian
Society of Certified Practicing
Accountants, a member of the
Australian Institute of Company
Directors and a Fellow of the
Financial Services Institute of
Australasia. Ms Baker joined
Bendigo in 1989 and has
held senior positions within
Treasury, Structured Finance,
Capital Planning and Balance
Sheet Management prior to
being appointed to her role
of Chief General Manager
Solutions. In that role,
Ms Baker is also the Chief
Executive Officer and Executive
Director of Sandhurst Trustees
Ltd, executive Director of
Bendigo Financial Planning
Ltd, Victorian Securities
Corporation Ltd and Oxford
Funding Pty Ltd and a Director
of Australian Friendly Society
Ltd.
Anthony Baum
Chief General Manager Wealth
& Partner Advised
Mr Baum has more than
17 years experience in the
banking sector. He was
appointed to his current role of
Chief General Manager, Wealth
& Partner Advised in May
2007. Mr Baum is responsible
for the merged Group’s
growing wealth management
businesses which includes,
margin lending, investment
and structured products and
common funds through our
managed funds arm Sandhurst
Trustees Ltd.
Prior to his current role,
Mr Baum was Chief General
Manager of Financial Markets
for Adelaide Bank. Mr Baum
joined the business in May
2000 from BNP Paribas in
London.
Richard Fennell
Chief General Manager
Strategy
Mr Fennell joined Adelaide
Bank in March 2007 after an
18 year career in management
consulting, primarily with
PricewaterhouseCoopers.
As a partner with
PricewaterhouseCoopers in
Australia and Hong Kong,
Mr Fennell managed change
programs with banks and
other financial services
organisations in Australia
and across South East Asia.
Following the acquisition of
PricewaterhouseCoopers
Consulting by IBM, Mr Fennell
led IBM’s Finance and
Administration Outsourcing
business for the Asia Pacific
region.
Greg Gillett
Chief General Manager
Brand Development &
Positioning
Mr Gillett spent 20 years with
National Bank (10 years in
management) before joining
Bendigo in 1995. Mr Gillett’s
previous positions within
the Group include Manager,
Branch Planning & Productivity,
Executive Assistant to the
Managing Director, before
heading up the Group’s retail
distribution network. He is
a Senior Fellow of Finsia
and former member of the
Australian Banking Industry
Ombudsman Ltd.
David Hughes
Chief Financial Officer
Mr Hughes was Chief
General Manager, Finance
& Information Services
at Adelaide Bank before
the merger. He came to
Adelaide Bank in June
2007 after seven years as
Chief Financial Officer and
Company Secretary for Codan
Limited, an Adelaide-based
designer and manufacturer of
communications equipment.
Mr Hughes was instrumental
in the successful listing of
the company on the ASX and
was heavily involved in its
predominantly export-focussed
business planning. Prior to
Codan Limited, Mr Hughes was
Executive General Manager
– Information Services for
Normandy Mining Limited and
held global responsibility for
information services.
Mr Hughes also has
experience in senior roles with
Southcorp Limited and James
Hardie Industries Limited.
Mr Hughes has led a number
of large business system
Group Managing Director
Rob Hunt
Retail Bank
Mike Hirst
Chief Executive
Wholesale Bank
Jamie McPhee
Chief Executive
Retail Customers
Russell Jenkins
Wealth & Partner
Advised
Anthony Baum
People &
Corporate
Services
Craig Langford
CFO
David Hughes
Brand
Development
& Positioning
Greg Gillett
Information
Technology
Andrew Watts
Strategy
Richard Fennell
Solutions/
Product
Marnie Baker
Business Partners
Philip Riquier
Group Risk
Tim Piper
Financial Markets
& Treasury
Managed Funds
Bruce Speirs
HR, Training &
Lean
Julian Carne
implementations and business
process re-design projects, as
well as senior finance roles
across a number of diverse
industries.
He holds a Bachelor
of Accounting and the
qualification of CPA.
Russell Jenkins
Chief General Manager
Retail Customers
Mr Jenkins was Chief
General Manager Retail &
Distribution before the merger.
He joined Bendigo in 1992
and undertook a variety of
roles ranging from Corporate
Services to Chief Manager
Group Strategy and Planning.
Mr Jenkins led the Bank’s
Community Bank® team from
inauguration in 1998. In 2002
the role was broadened to
incorporate responsibility for
the Group’s other Alliance
Partners, Business Banking,
Cards and Marketing arms.
In 2005 Mr Jenkins was
appointed to the role of Chief
General Manager – Retail
& Distribution, covering all
of the Group’s distribution
networks.
Mr Jenkins holds an Honours
degree in Engineering from
Melbourne University. Prior
to joining Bendigo Bank he
spent three years with the
Pratt Group/Visyboard and five
years with Price Waterhouse
in a senior consulting role in
their Australian and European
practices.
Craig Langford
Chief General Manager People
& Corporate Services
Mr Langford has more
than 30 years experience
in the financial sector.
He holds a Master of Business
Administration, University
of Melbourne (Melbourne
Business School), a Bachelor
of Business (Accounting),
University of Tasmania, and is
a Fellow of Financial Services
Institute of Australasia, and
a Fellow of the Australian
Society of Certified Practicing
Accountants. He was
General Manager Financial
Management with Trust Bank
before joining Bendigo Bank in
October 1997.
Tim Piper
Chief General Manager
Group Risk
Mr Piper joined Adelaide
Bank in 2005 following
nearly 18 years with a major
Australian bank. During
a career spanning nearly
30 years he has had direct
experience with most facets
of banking, from personal
finance, through to middle and
large commercial lending, and
credit risk. In particular, his
credit risk experience has seen
him closely involved with asset
restructuring and international
capital and debt markets.
He held global responsibilities
– with a strong Asian
focus – for three years
Marketing
Owen Davies
Community
& Partners
Robert Musgrove
of his career. He initially
joined Adelaide Bank as the
General Manager of Credit
Risk, spent a short time
leading the Shared Services
division and most recently
assumed responsibility for
Wholesale Mortgages as Chief
General Manager Wholesale
Mortgages.
Philip Riquier
Chief General Manager
Business Partners
Mr Riquier has had a career in
the financial services sector
spanning more than 20 years.
His experience includes
commercial and corporate
banking with a major Australian
bank prior to joining Adelaide
Bank in 1993.
Mr Riquier has held several
positions, including Head of
Products, Head of National
Business Lending and General
Manager of Portfolio Funding.
He has a Bachelor of Business
and a Masters in Business
Administration from the
University of Adelaide.
Andrew Watts
Chief Information Officer
Mr Watts joined Bendigo Bank
in 1994, just prior to bank
conversion in 1995. He has
held senior management
positions in Marketing,
Product Development, Direct
Banking, Electronic Banking
and Retail, and has overseen
a number of strategic projects.
Mr Watts moved into IT in
2006 as General Manager,
Business Integration &
Strategy, and was appointed
to the role of Chief Information
Officer in 2007, overseeing
the information technology
operations in Bendigo and
Adelaide. Mr Watts holds a
Bachelor of Engineering and
Graduate Diploma of Business
Administration.
Opposite page from left to right
> Chief General Manager People & Corporate Services Craig Langford (left), Group
Secretariat’s Sharyn McKitterick and Assistant Company Secretary June Wilde
(right) at the staff event celebrating our anniversary.
> Director Tony Robinson
> Two generations of Board involvement: former Bendigo Building Society director
Warwick Johanson (left), Yvonne Johanson and Chairman Robert Johanson.
Full Financial Report 2008 17
Shareholder Information
Heading here
Online Shareholder
Services
www.bendigobank.com.au/
shareholders
Bendigo and Adelaide Bank
shareholders can check
share prices of the Bank’s
listed shares as well as
their shareholder privileges
and details of their holding
(including balance, dividend
payments and dividend
payment instructions)
on the Online Share Registry.
Forms including Change of
Address, Dividend Nomination
Advice and Off Market Transfer
are all available to download.
The online service aims to
provide shareholders with
useful information 24 hours a
day, seven days a week.
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 and Adelaide 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
18 Full Financial Report 2008
Full Financial
Report
For the 12 month period ending
30 June 2008
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
TABLE OF CONTENTS
Corporate Governance - Overview
Five Year History
Five Year Comparison
Directors’ Report
Remuneration Report (Audited) FY2008
Income Statement
Balance Sheet
Statement of Recognised Income and
Expenses
Cash Flow Statement
Notes to the Financial Statements
Corporate information
Summary of significant accounting policies
Segment information
Profit
Underlying profit
Income tax expense
Average balance sheet and related interest
Capital management
Earnings per ordinary share
1
2
3
4
5
6
7
8
9
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 held for trading
16 Financial assets available for sale - securities
17 Financial assets available for sale – share
investments
18 Financial assets held to maturity
19
Loans and other receivables
Impairment of loans and advances
20
21 Particulars in relation to controlled entities
22
Investments in associates and joint venture
using the equity method
Property, plant and equipment
Assets held for sale
23
24
Page
21
33
34
36
39
68
69
70
71
72
72
72
87
90
92
92
95
97
99
101
102
103
103
104
104
104
105
105
106
107
108
109
111
112
25
26
27
Investment property
Intangible assets and goodwill
Impairment testing of goodwill and intangibles
with indefinite lives
28 Other assets
29 Deposits
30 Other payables
31
Provisions
32 Reset preference shares
Subordinated debt
33
34
Issued capital
35 Retained earnings and reserves
36 Minority interest
37
38
39
40 Director and executive disclosures
41 Related party disclosures
42 Risk management
43
44 Derivative Financial Instruments
45 Commitments and contingencies
46
Employee benefits
Share based payment plans
Auditor’s remuneration
Financial instruments
47
48
49
Standby arrangements and uncommitted credit
facilities
Fiduciary activities
Events after balance sheet date
Business combinations
Directors’ Declaration
Independent Audit Report
Additional information
Page
112
113
114
115
116
116
116
117
117
118
119
121
121
122
126
127
136
139
150
154
156
160
160
160
160
162
163
165
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
CORPORATE GOVERNANCE - OVERVIEW
Bendigo and Adelaide Bank is committed to high standards of corporate governance. The Board believes that Bendigo and
Adelaide Bank’s commitment to ethical corporate dealings in the conduct of its business has been an important element of
its success during its 150-year history. This commitment applies to the dealings by Bendigo and Adelaide Bank with its
shareholders, customers, employees, suppliers, regulators and the community. It is also reflected in Bendigo and Adelaide
Bank’s corporate values.
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
remuneration,
governance, audit, risk, IT strategy and credit matters.
Except in relation to any matters reserved to the Board
under the charter, the day-to-day management of Bendigo
and Adelaide Bank and its operations is delegated to
management.
to committees, nomination,
relation
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 twelve. The Board currently consists of eight non-
executive directors, the Managing Director and an executive
director. The roles of the Chairman and Managing Director
are separated. Information on each of the directors is set out
on pages 22 to 25.
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. Available from our website, the Board
Independence Policy sets out the test for the purpose of
assessing the independence of non-executive directors. An
independent director is a director who is free from any
business or other 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 the exercise of their independent judgment. In
deciding materiality, the quantitative materiality thresholds in
Accounting Standard AASB 1031 are taken into account, 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 and Adelaide Bank. Each director may be
involved in other companies or professional firms which may
from time to time have dealings with Bendigo and Adelaide
Bank. Full details of related party dealings are set out in
notes
financial
the Bendigo and Adelaide Bank
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 pages 22 to
25 and the following.
(cid:190) No director is, or is associated directly with, a substantial
to
shareholder of Bendigo and Adelaide Bank.
(cid:190) No director, except as previously disclosed, has ever
been employed by the Bendigo and Adelaide 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 and Adelaide Bank that is a
material adviser, consultant, supplier, customer or other
contractor under accounting standards.
(cid:190) No director has any other connection (eg family ties or
cross-directorships) with Bendigo and Adelaide Bank
which affect independence.
(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 and Adelaide 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 and
Adelaide 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
the performance evaluation
Information on
meeting.
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 and Adelaide Bank.
21
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
THE BOARD
Current
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Robert Johanson
Chairman
(57 years)
BA, LLM (Melb)
MBA (Harvard)
Independent Director
TERM OF OFFICE
Director for 21 years and appointed as
Chairman during 2006. Previously
Deputy Chairman for 5 years.
SPECIAL RESPONSIBILITIES
Committees
Governance & HR (Chair)
IT Strategy
Rob Hunt AM
Managing Director
(57 years)
FAICD
Doctor of University (honoris causa) La
Trobe University, 1999
Executive Director and Chief Executive
Officer
TERM OF OFFICE
Employee since 1973 and appointed
CEO in 1988.
Appointed to Board in 1990.
SPECIAL RESPONSIBILITIES
Committees
IT Strategy
Governance & HR
Risk
Audit (attendee only)
Property (ceased in Jan ’08)
Kevin Abrahamson
(63 years)
BSc (Hons)
MA
MBA
FAICD, FFin, FAIM
Independent Director
TERM OF OFFICE
Appointed to Board in November 2007
Appointed to Adelaide Bank Board in
2000
*Seeking election at 2008 AGM
SPECIAL RESPONSIBILITIES
Committees
Audit
IT Strategy
Group and joint venture company directorships
Adelaide Bank Limited (Chair)
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 2008 financial year included
services in relation to corporate matters including alliance and joint venture
activities, strategic developments and the merger of Adelaide Bank.
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.
Group and joint venture company directorships
Adelaide Bank Limited
Community Telco Australia Pty Ltd (Chair)
Community Sector Enterprises Pty Ltd
Elders Rural Bank Ltd (ceased April 2008)
Tasmanian Banking Services Ltd
Mr Hunt is also chair of a number of subsidiary companies involved in community
engagement activities.
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 and a
member of the Community Bank® Strategic Advisory Board. He is a Councillor of
the ABA, a member of the BCA and a former member of the Prime Minister’s
Community Business Partnership and the Victorian Government’s Innovation
Economy Advisory Board (both of which ceased during the year).
Group and joint venture company directorships
Adelaide Bank Limited
Sunstate Lenders Mortgage Insurance Pty Ltd
A Sydney based director, Mr Abrahamson is an Australian finance sector specialist
and consultant who has been on the Adelaide Bank Board since 2000. As a
specialist in the area of corporate strategy and information technology, he has
worked as a consultant to the financial sector since 1997 as the head of KD
Abrahamson Consultants.
From 1988 to 1997, he held the position of General Manager, Group Services with
Advance Bank and St George Bank. Mr Abrahamson was also a director of
Fiducian Portfolio Services Limited between 2000 and 2004.
22
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Jenny Dawson
(43 years)
B Bus (Acc)
FCA, MAICD
Independent Director
TERM OF OFFICE
Director for 9 years.
SPECIAL RESPONSIBILITIES
Committees
Audit (Chair)
Credit
Property (ceased in Jan ’08)
Jamie McPhee
(43 years)
BEng (Hons)
MBA
FAICD, SF Fin
Executive Director
TERM OF OFFICE
Appointed to Board in November 2007
Appointed to Adelaide Bank Board in
2006
*Seeking election at 2008 AGM
SPECIAL RESPONSIBILITIES
Committees
Risk
Credit
IT Strategy
Terry O’Dwyer
(58 years)
B Com
Dip Adv Acc
FCA, FAICD
Independent Director
TERM OF OFFICE
Director for 8 years.
SPECIAL RESPONSIBILITIES
Committees
Audit
Risk
IT Strategy (Chair)
Kevin Osborn
Deputy Chairman
(57 years)
FAICD, FPNA
Independent Director
TERM OF OFFICE
Appointed to Board in November 2007
Appointed to Adelaide Bank Board in
2003
*Seeking election at 2008 AGM
SPECIAL RESPONSIBILITIES
Committees
Credit (Chair)
Audit
Risk
Group and joint venture company directorships
Adelaide Bank Limited
Adelaide Managed Funds Limited (Chair)
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.
Group and joint venture company directorships
Adelaide Bank Limited
Adelaide Managed Funds Limited
Elders Rural Bank Limited
Mr McPhee joined Adelaide Bank in 1988 within the Treasury function, and was
appointed Group Managing Director of Adelaide Bank in December 2006. Mr
McPhee began his financial services career in the dealing room of merchant bank
Wallace Smith Trust Company based in London. He returned to Adelaide in 1988
and joined The Co-operative Building Society of South Australia Limited (which later
became Adelaide Bank). He was appointed Chief Manager of Treasury at the time
of the merger between The Co-operative Building Society of South Australia Limited
and the Hindmarsh Building Society in January 1992 and in 1993 was promoted to
the organisation’s executive committee.
Mr McPhee was the Treasurer of The Co-operative Building Society of South
Australia Limited during its conversion to Adelaide Bank on 1 January 1994. In
2003, he was appointed Chief General Manager of Operations and in 2005 was
appointed Chief Operating Officer, responsible for all bank operations in the group.
Group and joint venture company directorships
Adelaide Bank Limited
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, Backwell Lombard Capital Pty Ltd and
Retravision Southern 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 and Adelaide Bank in 2000.
Group and joint venture company directorships
Adelaide Bank Limited
An Adelaide based director, Mr Osborn was appointed to the Adelaide Bank Board
in 2003. He was formerly the Chief Executive of Bank One in Australia (now part of
JPMorgan Chase). Mr Osborn is a director of the Economic Development Board of
South Australia, and was formerly a director of the American Chamber of
Commerce in Australia.
He is a director of ABB Grain Limited, the SA Government Projects Co-ordination
Board, the Leadership Institute of South Australia and chairs the Adelaide
Desalination Project Committee. Mr Osborn is a Fellow of the National Institute of
Accountants and a Foundation Fellow of the Australian Institute of Company
Directors. The Board has approved a protocol that sets out arrangements for
dealing with potential conflicts of interest connected with the financial services
activities of ABB Grain Limited.
23
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
Deborah Radford
(52 years)
B.Ec
G. Dip Finance & Investment
John Kennedy School of Government
(Harvard)
Independent Director
TERM OF OFFICE
Director for 3 years.
SPECIAL RESPONSIBILITIES
Committees
Audit
IT Strategy
Credit
Kevin Roache
(68 years)
LLB, B Com, ASCPA, FAICD
Barrister & Solicitor of the
Supreme Court of Victoria
Independent Director
TERM OF OFFICE
Director for 17 years.
SPECIAL RESPONSIBILITIES
Committees
Credit
Risk
Governance & HR
Tony Robinson
(50 years)
B Com (Melb)
ASA
MBA (Melb)
Independent Director
TERM OF OFFICE
Director for 3 years.
SPECIAL RESPONSIBILITIES
Committees
Risk (Chair)
Governance & HR
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Group and joint venture company directorships
Adelaide Bank Limited
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. Following seven years
with the Victorian State Treasury, she ran her own consulting business between
2001 and 2007 advising the government on commercial transactions. Ms Radford is
a Director of Forestry Tasmania and City West Water.
Group and joint venture company directorships
Adelaide Bank Limited
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 and Adelaide 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.
Group and joint venture company directorships
Adelaide Bank Limited
A Melbourne-based director, Mr Robinson commenced employment in 2007 as an
executive director and chief executive officer of IOOF Holdings Ltd. Mr Robinson
was previously the managing director and chief executive officer of OAMPS Limited.
He was previously also a director of VECCI. Mr Robinson’s other 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 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 and Adelaide 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. The Board has approved a protocol that sets out arrangements for
dealing with potential conflicts of interest connected with the financial services
activities of IOOF Holdings Limited and its subsidiaries.
24
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Previous
NAME, AGE, QUALIFICATIONS AND
INDEPENDENCE STATUS
SKILLS, EXPERIENCE, EXPERTISE, RELATIONSHIPS
Neal Axelby
(57 years)
Dip CM
FAICD, AIMM, AIFS
Independent Director
TERM OF OFFICE
Director for 7 years
Retired from Board in November 2007
SPECIAL RESPONSIBILITIES
Committees
Credit
Governance
Risk
Roger Cook
(64 years)
FREI, MAICD
Independent Director
TERM OF OFFICE
Appointed to Board in November 2007
Retired from Board in December 2007
SPECIAL RESPONSIBILITIES
Committees
Nil
Donald Erskine
(62 years)
Independent Director
TERM OF OFFICE
Director for 8 years
Retired from Board in November 2007
SPECIAL RESPONSIBILITIES
Committees
Credit
Property
IT Strategy
Adele Lloyd
(61 years)
PhD
Med Admin
BA (Hons)
DipT
Independent Director
TERM OF OFFICE
Appointed to Board in November 2007
Retired from Board in June 2008
SPECIAL RESPONSIBILITIES
Committees
Governance & HR
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 23 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 and
Adelaide Bank in 2000.
Group and joint venture company directorships
Adelaide Bank Limited
Mr Cook is an international commercial real estate authority who joined the
Adelaide Bank Board in 1997 and was appointed Deputy Chairman in 2005. He is
the Chairman of the SA Motor Sport Board, Urban Construct Pty Limited and the
Motor Accident Commission (SA). Mr Cook is a director of V8 Supercars Australia
Pty Limited, TEGA Pty Limited and a number of other private companies.
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.
Group and joint venture company directorships
Adelaide Bank Limited
Adelaide Managed Funds Limited
Dr Lloyd joined the Adelaide Bank Board in 1997. She was appointed Deputy
Chairman of Adelaide Bank in March 2003 and Chairman in October 2005. Dr Lloyd
has a number of family business interests. She holds a Masters and Doctorate in
Administration and Management and is currently a member of the Council of the
University of South Australia. Dr Lloyd was a director of Adelaide Bank Limited and
Adelaide Managed Funds until June 2008.
25
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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
COMPOSITION –
REQUIREMENTS
MEMBERS
RESPONSIBILITIES
Audit
At least 3 members.
All independent directors.
An independent chair, who is
not chairman of the Board.
Ms Dawson (Chair)
Mr Abrahamson
Mr O’Dwyer
Mr Osborn
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).
Internal audit function.
(cid:190)
(cid:190) Statutory financial and APRA reporting.
(cid:190)
Internal control framework.
Governance &
HR
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Johanson (Chair)
Mr Hunt
Mr Roache
Mr Robinson
The role of the Committee is to provide
assistance to the Board in relation to the
following.
(cid:190) Board composition and succession
Risk
Credit
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Robinson (Chair)
Mr Hunt
Mr McPhee
Mr O’Dwyer
Mr Osborn
Mr Roache
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr Osborn (Chair)
Ms Dawson
Mr McPhee
Ms Radford
Mr Roache
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 risk and includes the establishment,
implementation, review and monitoring of risk
management systems and policies for the
following.
(cid:190) Balance sheet and off-balance sheet risk,
including trading.
(cid:190) Operational risk, including regulatory
compliance and business continuity.
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 appetite of the Group (comprising the Bank
and its subsidiaries), the overall business
strategy and management expertise.
IT Strategy
At least 3 members.
A majority of independent
directors.
An independent chair.
Mr O’Dwyer (Chair)
Mr Hunt
Mr Abrahamson
Mr Johanson
Mr McPhee
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
26
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
2b. 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
the presence of
third parties without
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, policies and internal controls to manage the Bank’s
material risks. 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 Bank has established a system of regular reporting from
independent risk, audit and credit functions to the executive
and the board committees on the implementation and
effectiveness of the risk management systems, policies and
internal controls designed to manage the material business
risks outlined below.
The key risk management responsibilities of the risk, credit
and audit committees are outlined at Section 2.a.
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 Credit Risk business unit (which
includes retail and wholesale).
Interest rate risk: The risk of volatility in 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 Group Treasury.
(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 Liquidity and
Balance Sheet Management Unit within Group
Treasury.
(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 Financial Markets Unit within Group
Treasury.
(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 risks. Operational Risk is primarily monitored by
the Risk Committee and the Executive Committee and
managed through the Group Operational Risk business
unit
regulatory
compliance, fraud prevention and detection, anti-money
laundering and business continuity. The Audit
Committee has primary responsibility for the oversight
of financial reporting risk.
incorporating
operational
risk,
Each of Adelaide Bank and Bendigo and Adelaide
their own Operational Risk
Bank had adopted
the
Management Policy and Frameworks prior
merger.
to
The frameworks are in line with Basel II (operational risk
management) and the Australian Standard – AS/NZS
4360:2004 (risk management). Group Operational Risk
is in the process of reviewing these documents to
consolidate the approaches.
(cid:190)
into
Integration risk: The risks associated with merging the
operations of Adelaide Bank
the Group and
achieving the merger benefits contained in the merger
“Scheme Book”. A Merger
Integration Steering
Committee (comprising the managing director and group
chief executives) and a merger integration project office
have been established
integration
project.
to oversee
the
In addition, the Group 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, People and Corporate Services. 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 sign-off 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 comply with the Corporations
Regulations 2001 and Accounting Standards.
the
(cid:190) Whether
financial records of
maintained in accordance with the Corporations Act.
(cid:190) Whether the financial reports are founded on a sound
system of risk management and internal control and that
the system is operating effectively in all material
respects in relation to financial reporting risks.
the Group are
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 system of risk management
and internal control.
This process is conducted on a six-monthly basis in
conjunction with the Bank’s half year and year end reporting
obligations.
27
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
information on
risk management
Further
including risk management responsibilities,
framework,
reporting and control arrangements, is presented in the full
financial statements at Note 42.
the Bank’s
4. External auditor
The Audit Committee is responsible for recommending to
the Board the appointment of the external auditor and 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 the 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
that a suitably qualified
representative attends the annual general meeting. The
Chairman of
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.
to make sure
the meeting
is required
required
5. Continuous disclosure and communications
The Bendigo and Adelaide 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 assist the
Bank in making sure that all price sensitive information is
disclosed to Australian Securities 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
for all
which provides clear authorities and protocols
communications with parties external
in
particular, investors, ASX, regulatory authorities, media and
brokers.
Bendigo and Adelaide Bank communicates with
shareholders by the following means.
(cid:190) ASX announcements
(cid:190) Shareholder updates
(cid:190) Annual reporting (as well as the full financial
the Bank,
its
to
statements, it includes annual reviews)
(cid:190) Annual general meetings
(cid:190) Shareholder question sheet included with annual
general meeting notice
The following material is made available on the Bendigo and
Adelaide 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 four years)
(cid:190) Notices of meeting (for past four years)
(cid:190) Webcasting of
results presentation
(following
preliminary final announcement) 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 and Adelaide
to
Bank website
announcements that Bendigo and Adelaide Bank has made
to ASX.
the ASX website
for access
to
6. Corporate conduct
6a. Code of Conduct and Reporting of Concerns policy
Bendigo and Adelaide Bank’s corporate values provide a
framework to guide interactions within the Group, with
customers, shareholders, suppliers and the community. The
integrity,
values are achievement, excellence, equality,
loyalty, respect and trust.
28
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 and Adelaide 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.
The Group’s Code of Conduct and Reporting of Concerns
policy apply to all Group members except Adelaide Bank
Limited, which has its own Code of Conduct and Reporting
of Concerns policy.
As part of the merger integration process, it is anticipated
that Adelaide Bank employees will become employees of
Bendigo and Adelaide Bank.
6.b Regulatory compliance
Bendigo and Adelaide 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
for overseeing
obligations. The Board
regulatory compliance and
the Risk
Committee.
is assisted by
is responsible
6.c Share trading policy
The staff trading policy imposes restrictions on trading in the
company’s shares and securities 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.
The policy prohibits directors, members of the Executive
Committee and other designated employees from using their
Bendigo and Adelaide Bank securities as part of a margin
loan portfolio. This prohibition does not apply to shares
issued under the group’s loan based share plans as
described in Note 38.
The policy also prohibits
instruments granted under the Executive Incentive Plan.
the hedging of unvested
29
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
The following is a guide to the above discussion in this report about how Bendigo and Adelaide Bank practices meet the
ASX Corporate Governance Council Corporate Governance Principles and Recommendations (and Guides to reporting)
(August 2007). The documents referred to below are available from the Bendigo and Adelaide Bank website
(www.bendigobank.com.au) in the corporate governance section of “About us”.
1. PRINCIPLE
RECOMMENDATION
1. Lay solid foundations for
management and oversight
1.1 Companies should establish the functions
reserved to the board and those delegated to
senior executives and disclose those functions.
2. Structure the board to add
value
1.2 Companies should disclose the process for
evaluating the performance of senior executives.
Recommendation 1.3: Companies should provide
the information indicated in the Guide to reporting
on Principle 1.
2.1 A majority of the board should be
independent directors.
2.2 The chair should be an independent director.
2.3 The roles of chair and chief executive officer
should not be exercised by the same individual.
2.4 The board should establish a nomination
committee.
2.5 Companies should disclose the process for
evaluating the performance of the board, its
committees and individual directors,
2.6 Companies should provide the information
indicated in the Guide to reporting on Principle 2.
3. Promote ethical and
responsible decision-making
•
3.1 Companies should establish a code of
conduct and disclose the code or a summary of
the code as to:
•
the practices necessary to maintain
confidence in the company’s integrity
The practices necessary to take into
account their legal obligations and the
reasonable expectations of their
stakeholders
the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
3.2 Companies should establish a policy
concerning trading in company securities by
directors, senior executives and employees and
disclose the policy or a summary of that policy.
3.3 Companies should provide the information
indicated in the Guide to reporting on Principle 3.
•
BENDIGO AND ADELAIDE BANK
PRACTICE
Status: Adopted
Annual report: Section 1.a
Documents on website:
Constitution, Board charter
Status: Adopted
Annual report: Section 7.a
Status: Adopted
Annual report: section 7.a
Directors’ Report p.46
Status: Adopted
Annual report: Section 1.b
Documents on website:
Independence Policy
Status: Adopted
Annual report: Section 1.b
Status: Adopted
Annual report: Section 1.b
Status: Adopted
Annual report: Section 2.a
Status: Adopted
Annual report: Section 1.d
Documents on website:
Performance Evaluation Policy
Status: Adopted
Annual report: Section 1.b, 1.f, 2.a,
and see Directors’ Report p.22 to
p.25 for director details and p.64 for
director attendances at Committee
meetings
Documents on website:
Constitution, Board charter,
Governance & HR Committee
charter, Committee procedural
rules, Appointment of non-executive
directors
Status: Adopted
Annual report: Section 6.a
Status: Adopted
Annual report: Section 6.c
Documents on website:
Staff Trading Policy
Status: Adopted
Annual report: Section 6
Documents on website: Code of
conduct, Reporting of concerns,
Staff Trading Policy
30
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Status: Adopted
Annual report: Section 2.a
Status: Adopted
Annual report: Section 2.a
Status: Adopted
Annual report: Section 2
Status: Adopted
Annual report: Section 1.b, 2.a and
see Directors’ Report p.64 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
Documents on website:
Continuous Disclosure Policy
Status: Adopted
Annual report: Section 5
Documents on website: Continuous
disclosure policy, Communications
policy
Status: Adopted
Annual report: Section 5
Documents on website:
Communications policy
Status: Adopted
Annual report: Section 5
Documents on website:
Communications policy
Status: Adopted
Annual report: Section 3
Documents on website:
Risk Management Principles &
Systems Description - Summary
Status: Adopted
Annual report: Section 3
4. Safeguard integrity in
financial reporting
4.1 The board should establish an audit
committee.
4.2 The audit committee should be structured so
that it:
(cid:190)
(cid:190)
consists only of non-executive directors
consists of a majority of independent
directors
is chaired by an independent chair, who is
not chair of the board
(cid:190)
(cid:190) has at least three members.
4.3 The audit committee should have a formal
charter.
4.4 Companies should provide the information
indicated in the Guide to reporting on Principle 4.
5. Make timely and balanced
disclosure
6. Respect the rights of
shareholders
5.1 Companies should establish written policies
and procedures designed to ensure compliance
with ASX Listing Rule disclosure requirements
and to ensure accountability at a senior executive
level for that compliance and disclose those
policies or a summary of those policies.
5.2 Companies should provide the information
indicated in the Guide to reporting on Principle 5.
6.1 Companies should design a communications
policy for promoting effective communication with
shareholders and encouraging their participation
at general meetings and disclose their policy or a
summary of that policy.
6.2 Companies should provide the information
indicated in the Guide to reporting on Principle 6.
7. Recognise and manage risk
7.1 Companies should establish policies for the
oversight and management of material business
risks and disclose a summary of those policies.
7.2 The Board should require management to
design and implement the risk management and
internal control system to manage the company’s
material business risks and report on whether
those risks are being managed effectively. The
board should disclose that management has
reported to it as to the effectiveness of the
company’s management of its material business
risks.
31
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
7.3 The Board should disclose whether it has
received assurance from the chief executive
officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration
provided in accordance with section 295A of the
Corporations Act1 is founded on a sound system
of risk management and internal control and that
the system is operating effectively in all material
respects in relation to financial reporting risks.
7.4 Companies should provide the information
indicated in the Guide to reporting on Principle 7.
8. Remunerate fairly and
responsibly
8.1 The Board should establish a remuneration
committee.
Status: Adopted
Annual report: Section 3
Status: Adopted
Annual report: Section 3
Documents on website: Risk
Committee, Credit Committee, IT
Committee Overview, Risk
management system description
Status: Adopted
Annual report: Section 2.a
8.2 Companies should clearly distinguish the
structure of non-executive directors remuneration
from that of executive directors and senior
executives.
Status: Adopted
Annual report: Section 1.e, and
Directors’ Report under the heading
“Remuneration Report”
8.3 Companies should provide the information
indicated in the Guide to reporting on Principle 8.
Status: Adopted
Annual report: Section 1.e and 2.a,
and see Directors’ Report p.64 for
committee attendance p.42 and
p.61 for remuneration policies
Documents on website:
Governance & HR Committee
charter, Remuneration policy –
executives and non-executive
directors; Employee Share
Ownership Plan
1 Section 295A CA provides for the CEO and CFO to give a declaration that financial records have been properly maintained, financial
statements comply with accounting standards and financial statements give a true and fair view.
32
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
FIVE YEAR HISTORY
The Bendigo and Adelaide Bank Group
Financial Performance for the year ended 30 June
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
Net loans and other receivables
Cash and cash equivalents
Financial assets and derivatives
Other assets
Equity
Deposits and Notes payable
Reset preference share
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
D is c lo s ure s pre pa re d unde r :
A IF R S
(1)
2 0 0 8
$m
2,605.7
2,091.4
514.3
300.7
23.1
545.3
246.6
(75.4)
(0.7)
170.5
31.4
201.9
A IF R S
A IF R S
A IF R S A G A A P
P re v io us
2 0 0 7
$ 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
2 0 0 6
$ m
907.4
592.4
315.0
201.8
7.0
344.1
165.7
(49.0)
-
116.7
(14.2)
102.5
(2)
2 0 0 5
$ 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
2 0 0 4
$ 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
48,022.9
40,239.5
1,608.6
3,647.8
2,527.0
3,270.0
17,001.6
13,773.3
329.1
2,249.0
650.2
1,015.0
15,196.1
12,376.0
479.8
1,854.3
486.0
899.5
13,858.6
11,337.4
442.0
1,615.7
463.5
720.7
11,284.5
9,329.3
315.1
1,220.2
419.9
676.4
42,781.2
15,146.6
13,525.8
12,513.5
10,098.1
89.5
681.8
1,200.4
$5.59
74.8
93.7
28.0
37.0
65.0
-
307.2
532.8
$5.40
81.9
82.9
24.0
34.0
58.0
-
307.1
463.7
$4.78
81.5
73.2
22.0
30.0
52.0
-
262.1
362.3
$4.21
67.5
65.5
19.0
26.0
45.0
-
199.3
310.7
$4.40
60.2
58.5
17.0
23.0
40.0
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
0.58%
0.48%
10.82%
8.65%
0.80%
0.76%
15.38%
15.18%
0.75%
0.80%
14.51%
16.16%
0.73%
0.75%
13.54%
13.98%
0.71%
0.78%
11.91%
12.99%
1 Figures fo r 2008 include the merger with A delaide B ank effective 30 No vember 2007.
2 Figures fo r 2005 include the acquisitio n o f Oxfo rd Funding P ty Ltd effective 1 M ay 2005.
Comparatives for financial year 2004 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.
33
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
FIVE YEAR COMPARISON
The Bendigo and Adelaide Bank Group
Financial Performance for the year ended 30 June
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(4)
Staff per million dollars of assets (4)
Dissection of Loans by Security (5)
Residential loans
($'000)
Commercial loans
Margin lending
Unsecured loans
Other
Gross loans
Dissection of Loans by Security (5)
Residential loans
(%)
Commercial loans
Margin lending
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
($m)
($m)
($m)
($m)
(%)
($m)
(FTE)
($m)
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
(%)
D is c lo s ure s pre pa re d unde r :
A IF R S
A IF R S
A IF R S
A IF R S A G A A P
(2)
(3)
2 0 0 8
2 0 0 7
2 0 0 6
2 0 0 5
2 0 0 4
P re v io us
14,986.8
11,641.3
10,771.4
9,259.8
8,293.3
1,638,443
1,418,088
1,309,957
1,201,627
1,094,884
8,845.2
81,853
5,256.4
7,018.0
73,236
2,578.1
6,189.6
66,227
2,334.1
5,872.6
65,498
2,057.7
6,077.8
72,063
1,535.3
48,022.9
17,001.6
15,196.1
13,858.6
11,284.5
10.95
404
37.1
3,478
13.808
0.07
(2)
15.16
357
32.6
2,428
7.002
0.14
29,964.9
10,193.3
5,722.8
3,774.0
737.9
193.2
2,905.0
90.5
472.4
182.9
15.36
335
32.2
2,343
6.486
0.15
9,233.0
2,561.9
-
413.1
228.6
14.85
302
30.7
2,214
5.990
0.17
(3)
13.61
276
30.0
2,063
5.470
0.18
8,588.0
2,207.2
-
488.3
164.4
7,078.4
1,766.0
-
490.6
91.6
40,392.8
13,844.1
12,436.6
11,447.9
9,426.6
74.18
14.17
9.34
1.83
0.48
73.63
20.98
0.65
3.41
1.33
74.24
20.60
-
3.32
1.84
75.02
19.28
-
4.27
1.43
75.09
18.73
-
5.20
0.98
100.00
100.00
100.00
100.00
100.00
43.2
(21.6)
21.6
0.05
22.1
0.06
36.8
76.2
0.51
0.03
18.2
(8.4)
9.8
0.07
8.4
0.06
11.4
45.3
0.55
0.04
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
Includes staff increases fro m the merger with A delaide B ank.
Includes staff increases fro m the acquisitio n o f Oxfo rd Funding P ty Ltd.
1 Includes Co mmunity B ank branches.
2
3
4 These ratio s do no t take into acco unt o ff-balance sheet assets under management, which to talled $ 2.5 billio n at 30 June 2008 (2007: $ 2.3 billio n).
5 Fo r the purpo ses o f this dissectio n, o verdrafts and perso nal lo ans secured by residential and co mmercial pro perty mo rtgages
are included in residential and co mmercial lo an catego ries respectively.
34
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Comparatives for financial year 2004 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.
35
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
DIRECTORS’ REPORT
Your Board of Directors has pleasure in presenting the 144th Financial Report of Bendigo and Adelaide Bank Limited and its
controlled entities for the year ended 30 June 2008.
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.
Current
Robert Johanson (Chairman)
Rob Hunt (Managing Director)
Kevin Osborn (Deputy Chairman) 1
Kevin Abrahamson 1
Jenny Dawson
Jamie McPhee 1
Terry O’Dwyer
Deborah Radford
Kevin Roache
Tony Robinson
Former
Neal Axelby 2
Roger Cook 1 3
Don Erskine 2
Dr Adele Lloyd 1 4
1 Appointed on 30 November 2007
2 Resigned on 30 November 2007
3 Resigned on 17 December 2007
4 Resigned on 23 June 2008
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 Share Purchase Plan
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
Ordinary shares issued as consideration for the acquisition of Adelaide Bank Limited
Total ordinary shares issued
No.
of shares
9,333,865
2,879,447
362,500
226,790
117,687,891
130,490,493
Share Options and Rights
Unissued Shares:
As at the date of this report, there were 1,034,849 unissued ordinary shares under options and 294,427 rights to
unissued ordinary shares. Refer to notes 38 and 40 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, 9,462 performance rights vested (and automatically exercised) to acquire 9,462 ordinary
shares in the Company at a nil exercise price. Also during the year 33,251 options to acquire ordinary shares in the
Company vested. These options had not been exercised as at the date of this report.
36
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Ordinary Share Dividends Paid or Recommended
Dividends paid:
Final dividend 2007 of 34.0¢ per share, paid September 2007
Interim dividend 2008 of 28.0¢ per share, paid March 2008
Dividend recommended:
Final dividend 2008 of 37.0¢ per share, declared by the directors on 11 August 2008, payable 30
September 2008
All dividends were fully franked
Shareholders electing to receive dividends in the form of shares received the following ordinary
shares, paid in full:
September 2007
March 2008
In addition, shareholders electing to receive bonus shares in lieu of dividends received the following
ordinary shares, paid in full:
September 2007
March 2008
Preference Share Dividends Paid or Recommended
Dividends paid:
142.66 cents per share, paid 17 September 2007 (2007: 131.68 cents)
147.76 cents per share, paid 17 December 2007 (2007: 134.64 cents)
154.28 cents per share, paid 17 March 2008 (2007: 136.36 cents)
162.85 cents per share, paid 16 June 2008 (2007: 138.89 cents)
Dividend announced:
A dividend of 161.60¢ per security for the period 16 June 2008 to 14 September 2008 (inclusive),
announced on 8 August 2008, payable 15 September 2008
All dividends were fully franked
Step-up Preference Share Dividends Paid or Recommended
Dividend paid:
152.00 cents per share, paid 10 January 2008 (2007: nil)
155.00 cents per share, paid 10 April 2008 (2007: nil)
Dividend announced:
A dividend of 168.0¢ per security for the period 10 April 2008 to 9 July 2008 (inclusive), announced on
16 June 2008, payable 10 July 2008
All dividends were fully franked
Operating and Financial Review
Principal Activities
$46.8 million
$71.7 million
$99.4 million
854,591
2,024,856
149,813
212,687
$1.3 million
$1.3 million
$1.4 million
$1.5 million
$1.5 million
$1.5 million
$1.6 million
$1.7 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, wholesale mortgages, business banking, margin lending 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 except those new activities introduced or expanded following the merger with Adelaide Bank on 30 November
2007.
Consolidated Result
The consolidated profit after providing for income tax of the economic entity amounted to $170.5 million (2007 - $121.7 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.
37
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Significant Changes in the State of Affairs
The following significant change in the state of affairs of the chief entity occurred during the financial year:
In September 2007, 854,591 shares were allotted at an issue price of $14.87 to those shareholders participating in the
Dividend Reinvestment Plan, increasing share capital by $12.7 million.
In November 2007, 117,687,891 shares were allotted at an issue price of $16.80 to the ordinary shareholders of Adelaide
Bank to acquire the issued ordinary capital of Adelaide Bank, increasing ordinary share capital by $1,977.2 million.
In November 2007, 1,000,000 step-up preference shares (fully paid) were allotted at an issue price of $100.00 to the holders of
Adelaide Bank step-up preference shares as part of the merger with Adelaide Bank, increasing share capital by $100.0 million.
In January 2008, 226,790 ordinary shares were allotted to Community Bank companies employees at an issue price of $13.40
under the Employee Share Plan, increasing ordinary share capital by $3.0 million.
In March 2008, 2,024,856 shares were allotted at an issue price of $9.60 to those shareholders participating in the Dividend
Reinvestment Plan, increasing share capital by $19.4 million.
In May 2008, 9,333,865 shares were allotted at an issue price of $9.60 to shareholders under the share purchase plan,
increasing share capital by $89.6 million.
During the financial year, share issue costs of $0.8 million were incurred, reducing share capital.
On 31 March 2008 the parent entity, Bendigo Bank Limited, changed its name to Bendigo and Adelaide Bank Limited as
approved by shareholders in January 2008.
In the opinion of the directors, there were no other significant changes in the state of affairs of the economic entity that
occurred during the financial year under review not otherwise disclosed in this report or the financial statements.
Significant After Balance Date Events
On 11 August 2008 the Bank declared a final dividend for ordinary shares, on 8 August 2008 announced a dividend for
preference shares and on 16 June 2008 announced a dividend for Step up preference shares, details of which are shown
above.
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.
38
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
REMUNERATION REPORT (AUDITED) FY2008
The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the
Corporations Act for the Company and the consolidated entity (“Group”) for the year ended 30 June 2008. The information
provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act. This
Remuneration Report forms part of the Directors’ Report.
This report describes the remuneration arrangements established by the Company for our Non-Executive Directors and Senior
Executives as well as the equity participation arrangements for our general staff.
The Company has maintained a branded retail banking strategy for many years focussing on our customers, the communities
and partners we work with and building sustainable shareholder value. The realisation of the value from this strategy will only
be delivered by successful staff that are capable, committed and motivated to deliver the business strategy.
Each year we make a significant investment in recruiting, training and developing our staff. To attract and retain skilled and
committed staff we must pay competitively and, more importantly, have a work environment where our staff know they are
valued and respected. It is through arrangements such as the staff incentive plans, staff bonus pool, staff benefits and flexible
working arrangements that we can achieve this objective.
The merger of Adelaide Bank was also implemented during the 2008 fiscal year. The remuneration strategy of the Company is
being progressively implemented across the Non-Executive Directors, Senior Executives and general staff from Adelaide Bank
as part of the merger integration process. The Board will continue to monitor the appropriateness of its remuneration
framework and at this time considers the arrangements described in this report as appropriate for its circumstances.
REMUNERATION SNAPSHOT
Table 1 - Senior Executive remuneration snapshot
SENIOR EXECUTIVES
Throughout this Remuneration Report, we use the term Senior Executives to refer to:
•
•
the 5 most highly remunerated Company/Group executives; and
all other Executives who fall within the definition of key management personnel of the Group (being those persons with
authority and responsibility for planning, directing and controlling the activities of the Group) (KMP) including the
Managing Director (Mr Rob Hunt) and Executive Director (Mr Jamie McPhee).
Current
Rob Hunt
Jamie McPhee 1
Mike Hirst 2
Marnie Baker 2
Anthony Baum 1,3
Richard Fennell 1
Greg Gillett 2
David Hughes 1
Russell Jenkins 2
Craig Langford 2
Tim Piper 1,4
Philip Riquier 1
Andrew Watts
Former
Managing Director & Chief Executive Officer
Executive Director & Chief Executive Wholesale Bank
Chief Executive Retail Bank (previously Chief Operating Officer)
Chief General Manager Solutions and Product (previously CGM Solutions)
Chief General Manager Wealth & Partner Advised
Chief General Manager Strategy
Chief General Manager Brand Development & Positioning (previously CGM Strategy and Human
Resources)
Chief Financial Officer
Chief General Manager Retail (previously CGM Retail & Distribution)
Chief General Manager People & Corporate Services (previously Chief Financial Officer)
Chief General Manager Chief Risk Officer
Chief General Manager Business Partners
Chief Information Officer (appointed 27 August 2007)
1 Former Adelaide Bank Ltd executive appointed to position on 30 November 2007
2 Appointed to new positions on 30 November 2007
3 Appointed to new position on 25 August 2008 (previously was Chief General Manager Wealth)
4 Appointed to new position on 25 August 2008 (previously was Chief General Manager
Wholesale Mortgages)
Richard Hasseldine
Chief General Manager Group Delivery (ceased Senior Executive role on 30 November 2007)
Vicky Kelly
Chief Information Officer (ceased Senior Executive role on 27 August 2007 and ceased
employment on 31 January 2008)
39
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
ISSUE
SUMMARY
DISCUSSION
IN REPORT
Key changes
for 2008
The new senior management structure for the Group was announced on 30
November 2007 to coincide with the implementation of the merger of Adelaide
Bank. The terms and conditions for each senior manager role were formalised
in new employment agreements following the merger. The Company’s
remuneration structure was otherwise unchanged for the year.
Remuneration
Strategy
To attract, retain and motivate Senior Executives to manage and lead the
business successfully including driving organisational growth and
performance in line with the Company’s strategy and business objectives.
i.
Fixed
Remuneration
ii. Short-term
incentive
iii. Long-term
incentive
Service Agreements
Fixed remuneration is set taking into account market relativities and having
regard to the Senior Executive’s direct accountability and responsibility for
operational management, strategic direction, decision making and their
demonstrated leadership.
Senior Executive remuneration arrangements include an annual (cash)
incentive component. Payment of the annual at-risk component is dependent
on (in the first instance) the achievement of targeted financial performance
and then (at the discretion of the Board and Managing Director) the
achievement of position objectives set at the start of the year and the level of
performance achieved by the Senior Executive in discharging their role.
Senior Executive remuneration arrangements include participation in the
Executive Incentive Plan (“Plan”) established in 2006. The Plan gives Senior
Executives the opportunity to participate in grants of Performance Rights and
Options to acquire shares in the Company subject to the achievement of
performance conditions over a 3 year performance period set by the Board.
The remuneration and other terms of employment for Senior Executives are
formalised in employment agreements. The employment agreements also
deal with Senior Executive duties, conflicts of interest, confidentiality,
termination rights, notice periods and entitlements upon termination.
Remuneration paid
Details of Senior Executive remuneration for the 2008 financial year are
presented at Table 7.
Linking remuneration
and company
performance
The remuneration structure for Senior Executives is designed to provide the
desired flexibility and reward structure to support the Company’s short term
performance targets and continued investment in its strategy and business
objectives that have a medium to longer term maturity profile.
Page 42
Page 44
Page 45
Page 47
Page 60
Page 52
Page 51
Page 51 demonstrates the correlation between the Company’s progress and
financial performance and the short term incentive remuneration received by
Senior Executive over the past 5 years.
As mentioned above, the long term incentive plan has only been in place
since 2006 and requires a 3 year performance period to be completed before
any Performance Rights or Options may vest (subject to the achievement of
performance conditions over the 3 year period). At the date of this report, no
Performance Rights or Options have vested to current Senior Executives of
the Group.
40
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Table 2 - Non-Executive Director remuneration snapshot
NON-EXECUTIVE DIRECTORS
Current
Robert Johanson (Chairman)
Kevin G Osborn (Deputy Chairman) 1
Kevin Abrahamson 1
Jennifer Dawson
Terry O’Dwyer
Deborah Radford
Kevin Roache
Tony Robinson
Former
Neal Axelby 2
Roger Cook 1 3
Donald Erskine 2
Dr Adele Lloyd 1 4
1 Appointed on 30 November 2007
2 Resigned on 30 November 2007
3 Resigned on 17 December 2007
4 Resigned on 30 June 2008
ISSUE
SUMMARY
Remuneration
strategy
Base Fee
Not at risk
To attract and retain appropriately qualified and experienced directors.
Following the Board’s annual Non-Executive Director fee review process in
July 2008, the annual base fee increased effective from 1 July 2008. The
chairman receives twice the annual base fee in recognition of the additional
time commitment. The base fee is reviewed annually with reference to survey
data and peer analysis.
Non-Executive Directors do not receive additional fees for committee
memberships. The Board may determine additional fees for subsidiary and
joint venture appointments.
The focus of the Board is to build sustainable shareholder value by taking a
longer-term strategic perspective. Non-Executive Director fees are not linked
to the short-term results of the Company. Non-Executive Director
remuneration comprises a fixed annual fee plus superannuation
contributions1.
Non-Executive Directors do not receive bonuses or incentive payments or
participate in the Company’s employee equity plans.
DISCUSSION
IN REPORT
Page 61
Pages
61 & 62
Page 61
Alignment with
shareholders
interests
A Non-Executive Director may enter into a salary-sacrifice arrangement under
which the director may acquire shares rather than receiving cash. The
Company will seek shareholder approval at the 2008 Annual General Meeting
for a Non-Executive Director Fee Sacrifice Plan.
Page 62
Remuneration paid
Details of Non-Executive Director remuneration for the 2008 financial year are
presented at Table 15.
Page 63
1
Non-Executive Directors do not accrue separate retirement benefits in addition to superannuation contributions. The
Company’s former retirement benefit arrangement was crystallised as at 31 August 2005 and all accrued
entitlements at that date have since been paid out by the Company.
41
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
SENIOR EXECUTIVE REMUNERATION
Board policy on Senior Executive remuneration
The Board’s policy on Senior Executive remuneration is designed to attract, retain and motivate Senior Executives to manage
and lead the business successfully including driving organisational growth and performance in line with the branded retail
banking strategy and business objectives. More specifically, the remuneration policy aims 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;
drive successful organisational performance by incorporating an annual performance incentive and establish longer-term
performance objectives;
further drive longer-term organisational performance through an equity-based reward structure;
•
• make sure that there is transparency and fairness in executive remuneration policy and practices;
•
deliver a balanced solution addressing all elements of total pay – base pay, incentive pay (cash and shares), and
benefits;
contribute to appropriate attraction and retention strategies for Senior Executives.
• make sure appropriate superannuation arrangements are in place for Senior Executives; and
•
The key aspects of the Company’s remuneration strategy for Senior Executives (including all Senior Executives and the
Company Secretary) are set out in the diagram and commentary below.
Summary of Senior Executive remuneration strategy
Objectives of
Remuneration
Strategy
Drive strong organisational
growth and performance in
line with the strategy and
business objectives
Flexibility to support
strategy and business
objectives
Attract and retain
key executives
Remunerate on basis of leadership
and performance and commensurate
with roles and responsibilities
Remuneration set by
reference to market and peers
Fixed
Remuneration
At-risk
STI
At-risk
LTI
Fixed salary set by reference to
benchmark information relative to
role, responsibilities, experience
and expertise
STI targets linked to company
performance and (at Board and
Managing Director’s discretion)
consideration of individual and
business unit performance.
LTI performance targets are set by
reference to Company and market
relative performance over a 3 year
period linked to sustainable
shareholder value creation.
The Company has pursued a long term “branded retail banking strategy” focussed on the interests and prospects of its
customers, communities and partners, and building sustainable shareholder value. The strategy has required a significantly
different focus and direction to that typically taken by other organisations in the sector.
The strategy is supported by a strategically focussed investment program and commitment to our corporate and social
responsibilities. The Company has undertaken a significant investment program to expand its customer base, product range
and distribution capability through mergers and acquisitions, joint ventures, community bank® and alliance activities and
investments into community enhancement initiatives. These investments have a medium to longer-term maturity profile with
the objective of generating sustainable improvement in shareholder value.
Through its strategy the Company has built a brand that is well recognised, respected and sought after. With 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 merger with Adelaide Bank during the year represents a further continuation of the strategy. While the merger is still in its
early stages, combining two successful organisations with specialist skills in wholesale and relationship banking, wealth
management and retail banking creates an opportunity to be Australia’s leading customer connected banking group.
42
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 Senior Executive roles, responsibilities and market relativities.
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
rewards to be tailored to recognise the development of business opportunities that present themselves during a year or
investments that stretch across more than one reporting period.
Specific Arrangements for the Managing Director
As announced on 9 August 2007, Mr Rob Hunt will continue to head the merged organisation as Managing Director until 1 July
2009 and will lead the merger implementation and integration process until this date. The Board has restructured the Managing
Director’s long term incentive arrangement. The Board is not proposing further grants to the Managing Director under the
Executive Incentive Plan having regard to the Plan’s three year performance period and the Managing Director’s remaining
term with the Company.
The implementation and integration process will be critical in realising the value of the synergies and business opportunities
from the merger. Accordingly the Board has decided that it will restructure the Managing Director’s long term incentive
component for 2009 as a cash incentive that focuses on the following areas:
1.
Integration of the Adelaide Bank businesses;
2. Realisation of synergies and business opportunities from the merger; and
3. Continued development of the Adelaide Bank businesses.
The amount of the above cash incentive will equate to the value of the previous LTI component (being approximately 30% of
the Managing Director’s annual remuneration package).
43
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
COMPONENTS OF REMUNERATION
The remuneration for Senior Executives has the following components:
a. Fixed Remuneration (including any salary sacrifice arrangements and company superannuation);
b. Performance Based “at-risk” Remuneration comprising:
•
•
Short-term Incentive Component – cash payment based on annual company performance and takes into
consideration performance at a business unit and individual level.
Long-Term Incentive Component – annual grants of Performance Rights and Options that are subject to achievement
of company and market relative performance hurdles over a 3 year performance period.
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 Senior Executive remuneration with shareholder interests. 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.
c. Remuneration amounts and disclosures
The remuneration details for Mr K Abrahamson, Mr R Cook, Dr A Lloyd and Mr K Osborn disclosed at Table 15 represents the
remuneration paid by the Company to these directors for the period 30 November 2007 (merger date) to 30 June 2008 or their
date of retirement from the board (as applicable). A new leadership team for the merged group, including Senior Executives,
was announced on 30 November 2007. The short term employee benefit details for former Adelaide Bank executives
appointed to Senior Executive positions (identified at Table 1) also only relates to the period 30 November 2007 to 30 June
2008. The remuneration component percentages for the same Senior Executives presented in this report (including Table 3)
are however based on annualised remuneration arrangements.
The relative proportions of Senior Executives’ 2008 remuneration that were ‘‘at-risk’’ (including the relative proportion that is
performance-based) are set out in Table 3 below:
Table 3 - Proportion of fixed and at-risk remuneration
% of Total Aggregate Remuneration (annualised) *
Fixed Remuneration
‘At risk’ – performance-based
FAR
46%
42%
STI**
29%
29%
LTI**
25%
29%
Between 52% and 60%
Between 20% and 25%
Between 19% and 24%
Managing
Director/CEO
Executive Director
Other Senior
Executives
* Aggregate Remuneration is comprised of fixed annual reward (including base salary, superannuation and allowances),
STI at-risk available for the F’08 year and the remuneration value of LTI grants for the F’08 year.
** These amounts are subject to ‘target’ performance levels being achieved. For the Managing Director, the LTI component
for the 2009 year has been replaced by a cash incentive linked to merger integration goals set by the Board.
(a)
Fixed remuneration
The terms of employment for all Senior Executives contain a fixed remuneration component expressed as a dollar amount.
The fixed remuneration package is inclusive of a base salary and company superannuation.
The base salary includes any salary sacrifice or deductions from salary resulting from participation in benefit programs
available to Senior Executives. This amount of remuneration is not ‘at risk’ but is set by reference to appropriate benchmark
information for an individual’s role, responsibilities, experience and expertise.
It is intended that Senior 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 amount and
Senior 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. Senior
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 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 industry developments which impact the Managing Director’s role and responsibilities.
The Board also considered independent advice from a remuneration consultant in setting the Managing Director’s 2009
remuneration arrangements.
In setting the fixed remuneration arrangements for other Senior Executives, the Managing Director takes into account general
market and peer information, relative to the particular role and responsibilities of the Senior Executive.
44
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
(b)
Performance-based ‘at risk’ remuneration
Short Term Incentive (STI)
Table 4 - Summary of STI
What is the STI?
The Senior Executive remuneration packages include an annual cash incentive component which
rewards both annual financial goals and Senior Executive contributions to longer term growth and
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 other Senior
Executives.
The maximum amount of the cash incentive is set by the Board for the Managing Director, taking
into account market data, and for the 2009 year, independent remuneration advice. The Managing
Director sets the maximum cash incentive for other Senior Executives, taking into account market
data and the Senior Executive’s particular role and responsibilities.
Who participates in
the STI?
All members of the Group’s leadership team, including Senior Executives, as decided by the Board
and Managing Director.
Why does the Board
consider the STI an
appropriate incentive?
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 Senior Executives.
Are both target and
stretch performance
conditions imposed?
What are the
performance
conditions and why
were these conditions
chosen?
The total potential annual cash incentive is set for each Senior 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.
The STI is based on target performance conditions. Payment of the STI for Senior Executives and
other participants (other than the Managing Director whose arrangements are described below) is at
the discretion of the Managing Director and is based, in the first instance, on the achievement of the
Company’s target financial performance for the year. If the targeted financial performance is not
achieved, the Managing Director will take into consideration the Senior Executive’s business unit
performance and individual performance in determining the amount of any STI payment.
In addition, Senior Executives may also participate in the bonus pool that is allocated amongst
Group employees. Senior Executives only participate in the bonus pool if Company performance
exceeds the Board approved targeted cash EPS performance. The amount of any payment from the
bonus pool to Senior Executives is also at the discretion of the Managing Director.
Managing Director
The Managing Director’s annual cash incentive component for the year ended 30 June 2008 was
based upon a mix of quantitative and qualitative performance measures and was set at a maximum
of $726,000.
The quantitative element focused on the Group achieving its targeted cash EPS performance with a
maximum of $484,000 payable. The qualitative performance measures in respect of the balance of
the annual cash incentive focused on the continued progress of the Group strategic priorities
including:
Brand positioning objectives;
• Growth at profitable prices, revenue diversity and customer relationship objectives;
•
• Customer, product, distribution, community engagement and IT capability objectives; and
• Other internal and organisational priorities.
Other Senior Executives
The amount of the annual incentive component paid to Senior Executives and other participants is
primarily contingent upon the Group achieving its targeted cash EPS performance set by the Board.
The amounts are determined following the year-end profit announcement.
At the discretion of the Managing Director, payment of the annual incentive component may also
take into account the Senior Executive’s technical competence, leadership, operational
management performance and achievement of relevant business outcomes for the year.
The Board selected the cash EPS measure for the Managing Director as it represents a publicly
available performance measure that appropriately reflects the short-term interests of shareholders.
The Company’s cash EPS ratio ensures that an appropriate focus is placed upon both profit
performance and effective application of shareholder capital. The Managing Director selected the
same measure for the other Senior Executives for the same reasons.
The above qualitative and quantitative performance measures were selected by the Board and
Managing Director (respectively) 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.
45
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
How are the
performance
conditions measured
and who assesses the
performance?
The achievement of the quantitative cash EPS performance condition for the Managing Director and
other Senior Executives is measured on the basis of the Company’s reported (audited) cash EPS
ratio.
The performance of the Managing Director is assessed by the non-executive directors on an annual
basis.
How well were the
performance
conditions met in the
2008 financial year?
The Chairman and Non-Executive Directors conduct the assessment of the Managing Director’s
performance, taking into account the qualitative measures set by the Board, 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.
The Managing Director reviews and determines the annual STI payment for Senior Executives after
the Group’s year-end profit result announcement based on the reported cash EPS result and his
assessment of the achievement of Senior Executive qualitative performance measures.
The Company reported the following key achievements for the 2008 financial year:
The Group recorded a cash profit of $201.9 million (including a 7 month contribution from Adelaide
Bank) representing a 70.4% increase on the previous year. The cash basis earnings per ordinary
share increased to 93.7 cents representing an increase of 13% on the 2007 cash EPS ratio.
The Company declared a final dividend of 37 cents per share (fully franked) taking the full year
dividend paid for the year to 65 cents. This represents an increase of 12.1% on the previous year.
Strong contributions from all major business divisions were recorded during the year. The Group
increased its retail funding with more than 75% of all on-balance sheet funding coming from this
source at year end.
Branch openings included four new company owned sites, 18 Community Bank® branches and the
addition of 25 branches through the merger of Adelaide Bank.
Customer numbers grew by a further 70,000 during the year.
Information on the percentage of the STI that was paid and the percentage that was forfeited for the
Senior Executives are presented in Table 8 on page 55.
46
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Long Term Incentive
Table 5 - Summary of LTI (includes LTI grants, employee share plans & policies affecting shareholdings)
The Company established an Executive Incentive Plan (the “Plan”) in 2006. Shareholder approval for grants under the Plan
was obtained at the 2006 Annual General Meeting. The Board considers it important that Senior Executives have ongoing
share ownership in the Company.
The Plan provides for grants of Options and Performance Rights (“Instruments”) to Senior Executives, including the Managing
Director and Executive Director. Under the Plan, Senior Executives are granted Options and Performance Rights subject to
performance conditions set by the Board. If the performance conditions are not satisfied during the relevant performance
period, the Options and Performance Rights will lapse and the Senior Executives will derive no value from the grants.
For the Managing Director, the LTI component for the 2009 year will be replaced by a cash incentive linked to merger
integration goals set and assessed by the Board.
What is the purpose
of the LTI?
The plan is designed to link Senior Executive reward with key performance measures that underpin
sustainable growth in shareholder value including both share price and returns to shareholders.
Who participates in
the LTI?
What proportion of
total remuneration
does the LTI
represent?
How is reward
delivered under the
LTI?
All members of the Group’s leadership team as decided by the Board. Grants under the plan are
made on an annual basis having regard to the Managing Director’s and each Senior Executive’s
annual remuneration.
In the case of the Managing Director and Executive Director, the fair value of grants made under
the plan target approximately 30% of their total annual remuneration at the time the grant is made.
In the case of other Senior Executives, the grants under the LTI are structured to equate to
between 19% and 24% of their total annual remuneration.
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 Senior
Executives is equal to the number of Options and Performance Rights issued (subject to the
achievement of performance hurdles over a 3 year performance period).
Do participants pay
for the Performance
Rights & Options?
Options and Performance Rights are granted at no cost to the Senior Executives. The plan rules
provide that the Board may determine that a price is payable upon exercise of an Option or
exercisable Performance Right. Generally the exercise price for Options will be the market price of
the shares at the grant date, and no exercise price will apply to exercisable Performance Rights.
What rights are
attached to the
Performance Rights &
Options?
Senior 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. Senior 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 (Refer to section “Policies Affecting Shareholdings”
and subheading “Hedging restrictions”).
What are the
performance hurdles?
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 under the
plan is based on the Company’s compound growth in cash basis earnings per share (“EPS”). Both
are measured over a 3 year initial performance period.
How is EPS
measured?
Why does the
Company think the
EPS hurdle is
appropriate?
Cash basis EPS will be calculated as the reportable earnings which reflect the underlying operating
performance of the business, as approved by the Board. 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 year performance period.
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
Performance Rights granted to date under the Plan, the Board has maintained a three year 10%
EPS performance hurdle for Performance Right grants. The Board has set a 5% EPS performance
hurdle for the 2009 Performance Right grant. The performance hurdle is consistent with the Board’s
view on the longer term sustainable EPS performance of the sector taking into account the impacts
of the global credit crisis, equity market volatility and economic outlooks.
Whilst the banking sector has enjoyed buoyant market conditions over a number of years, market
conditions have become much tougher and are expected to get even more competitive going
forward. The consistent achievement of the EPS hurdle will be extremely challenging taking into
account the current market environment, the stage of the credit cycle and intense level of
competition across the sector.
How is TSR
measured?
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).
47
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Why does the
Company think the
TSR hurdle is
appropriate?
The use of a TSR based hurdle ensures an alignment between comparative shareholder return and
reward for the Senior 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).
What are the Plan’s
vesting terms –
Performance Rights?
Performance Rights granted to date under the Plan will vest as set out below. At the end of the
relevant 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.
What are the Plan’s
vesting terms –
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%
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 Senior Executives are not disadvantaged by one year of average performance over a longer-
term period of strong performance.
If a Senior 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 Senior Executive’s employment ends because of
death, disability, redundancy, or any other reason approved by the Board for this purpose, the
Board may, in its discretion decide that a number of Options and Performance Rights vest.
If a Senior 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.
Does the Plan provide
for retesting?
What if a Senior
Executive ceases
employment?
What if a Senior
Executive breaches
their duties?
What happens in the
event of a change in
control?
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.
What about
Performance Rights &
Options that were
tested in FY2008?
The plan’s performance hurdles are tested over a three year period (except for the Tranche 1 grant
to the Managing Director which had a 2 year performance period). The first offer to be tested will
be in 2008 for the Managing Director’s Tranche 1 grant made in November 2006. Satisfaction of the
performance conditions attaching to these Performance Rights and Options will be tested after the
release of the Company’s full year result for 2008 but had not been tested at the date of this report.
48
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Grants to Senior 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. For the reasons explained at page 43 there have been no
further grants to the Managing Director.
The first offer to other Senior Executives 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 of the Company at the time of the offer. A
second offer to the same Senior Executives was made in July 2007 (“2008 grant”).
It is intended that a third grant to Senior Executives will be made in November 2008 (“2009 grant”). The grant will be made in
accordance with the terms as described in Table 5.
Replacement Grant to Adelaide Bank Executives
Prior to the merger, senior executives of Adelaide Bank (including Mr McPhee) were granted Performance Rights under an
Adelaide Bank employee incentive scheme. As a result of the merger, the executives lost the benefit of those rights. Under the
merger terms, the Company committed to replace the grant of Performance Rights on terms which, taken as a whole, were
economically equivalent to the terms of the Adelaide Bank offer.
Shareholders at the 2008 extraordinary general meeting approved the grant of replacement instruments to Executive Director,
Mr Jamie McPhee, which was made shortly after the extraordinary meeting. The replacement offer was also made to new
Senior Executives from Adelaide Bank at the same time.
For the replacement grant to satisfy the above mentioned “economically equivalent” requirement it was necessary to make a
grant on different terms to some of those described in Table 5 above. A summary of the differences is set out below:
Table 6 - Summary of differences
Grant Instruments
The replacement offer comprised only Performance Rights. There were no grants of Options.
Performance Conditions
Half the Performance Rights are subject to an EPS condition and half the Performance Rights
are subject to a TSR condition.
Comparator group for TSR
performance hurdle
The TSR growth of companies in the S&P/ASX 200 Financials Index (excluding property trusts
and resources and Bendigo and Adelaide Bank Limited).
Vesting terms – EPS
Condition
The Performance Rights granted 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 8% per annum,
calculated on a compound basis.
Company’s compound growth in
EPS
Percentage of Performance Rights that vest
EPS growth less than 8%
EPS growth at or above 8%
0%
25%
EPS growth between 9% and
13%
An additional 12.5% of Performance Rights will vest
for every 1% increase in EPS growth
EPS growth at or above 14%
100%
Details of the instruments granted to all Senior Executives under the above grants are presented in the remuneration tables
that accompany this report.
49
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Policies Affecting Shareholdings
Hedging Restriction (LTI)
The Company’s Executive Incentive Plan (“Plan”) Rules prohibit hedging of unvested instruments. A Plan participant may not
enter into a transaction designed to remove the “at-risk” element of an entitlement under the Plan before it vests. Plan
participants may only enter into a transaction designed to remove the “at risk” element of an entitlement under the Plan after it
vests and if the Board has not decided to restrict or prohibit the participant from doing this. If a Plan participant enters into such
a transaction, they must tell the Company Secretary and provide any details requested.
At the end of each financial year, the Company requires formal confirmation from each participant in the Plan that this policy
has been adhered to. The above restrictions are also contained in the Staff Trading Policy.
Margin Loan Facility Restriction
The Staff Trading Policy also prohibits designated officers, including Non-Executive Directors and Senior Executives, from
using the Company’s securities as collateral in any margin loan arrangements. The restriction was adopted by the Board on 28
April 2008.
Employee Share Plans: General Staff
The Company operated a limited recourse loan-based employee share plan for many years (from 1995 to 2006) with grants
under the Plan being made every two to three years at the Board’s discretion. A new loan limited recourse loan-based
employee share plan was established in 2006 (as described below).
Adelaide Bank has operated a tax-exempt share allocation plan for many years with grants under the Plan made on an annual
basis. As part of the process to align the employment arrangements of the two organisations, it is intended that the Company
will establish a tax-exempt share allocation plan, similar to the tax-exempt plan operated by Adelaide Bank (as outlined below)
as the main equity participation platform for the Group’s full-time and permanent part-time employees.
It is intended that the loan-based plan established in 2006 (described below) will be retained to provide an opportunity for
continued participation in share ownership of the Company by employees of joint venture and community bank companies and
for discretionary grants to employees as determined by the Board.
a. Current Plan
The Company has established a loan-based limited recourse Employee Share Plan (“ESP”). Shareholder approval for grants
under the ESP was obtained at the 2006 Annual General Meeting. The ESP is only available to general staff. Senior
Executives (including the Managing Director) may not participate in it.
Under the terms of the ESP, shares are issued at the prevailing market value and 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 ESP is the financial benefit of the limited recourse interest-free loan.
The first issue to general staff under this ESP was completed in September 2006. An issue to employees of Community Bank®
companies was also completed during the year. Shares issued under this ESP are valued and expensed in accordance with
applicable accounting requirements.
b. Proposed Plans
The Board will seek shareholder approval at the 2008 Annual General Meeting for future issues of shares under a new tax-
exempt Employee Share Grant Plan (“ESGP”). The ESGP will be open to all full-time and permanent part-time staff in the
Group (excluding Directors and Senior Executives) and it is currently intended that grants under the ESGP would be made
annually subject to Board discretion.
The Board will also seek shareholder approval for future issues of shares under a new Employee Salary Sacrifice and
Deferred Share Plan (“DSP”). The DSP will provide a vehicle that will facilitate the purchase of shares on a salary-sacrifice
basis and the making of additional discretionary grants as may be required from time to time in line with the Company’s
employee attraction and retention objective.
The Plans will provide additional flexibility to the Company’s remuneration arrangements and establish a uniform and more
cost effective approach to equity participation for Group employees. Full details of these plans will be disclosed in the 2008
Notice of Annual General Meeting.
c. Discontinued Plans
The Company has the following legacy employee share plans which are now closed. The plans will continue until all shares
have been withdrawn and / or outstanding loans repaid as appropriate. Details of shares issued and loans outstanding to
Senior Executives under these plans are disclosed in Notes 38 and 40 of the 2008 Financial Statements.
1. Bendigo and Adelaide Bank Limited Employee Share Ownership Plan
2. Adelaide Bank Deferred Employee Share Plan
3. Adelaide Bank Allocation Scheme
4. Adelaide Bank Loan Scheme
50
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Company Performance
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 the Company’s
performance and Senior Executive remuneration.
The Company is a nationally represented, diversified financial services enterprise which is in the top 100 companies on the
Australian Securities Exchange. As described earlier, the Company has maintained a consistent strategy focussing on the
interests and success of its customers, communities and partners. Through continued commitment to the strategy and the
maturity of past and future investments the Company expects to continue to deliver to shareholders improved, and sustainable,
growth in shareholder value.
The Company announced on 11 August 2008 an after-tax profit of $170.5 million. The result represents a 13% improvement in
cash earnings per share. This result was achieved despite the challenges experienced by the banking sector due to global
credit and equity market volatility and a slowing in economic activity.
The accompanying charts set out the Company’s key financial performance measures for the financial year ended 30 June
2008, and the four previous financial years, to illustrate the consequences of the Company’s performance on shareholder
value and returns and the link to Senior Executive remuneration.
The following graphs demonstrate the recent progress in the Company’s performance:
The Company has experienced consistent growth in after-tax cash earnings of approximately 29% per annum since 2003
resulting in:
•
An increase of $2.76 (33.8%) in the Company’s share price from $8.17 at 30 June 2003 to $10.93 at 30 June 2008. The
share price decreased by $4.27 in 2008 (28%). During the same period the ASX S&P 200 Index decreased by 17% and
the S&P/ASX 200 Financials Index decreased by 51%;
• Growth in cash EPS of 43.5 cents (87%) from 50.2 cents for 2003 to 93.7 cents for 2008. The cash EPS increased by
10.8 cents (13%) for 2008; and
•
An increase in dividends of 31.5 cents per share (94%) from 33.5 cents per share for 2003 to 65.0 cents per share for
2008. The dividend increased by 7.0 cents per share (12%) for 2008.
Full details of the Company’s recent performance are set out in the Chairman’s and Managing Director’s Review on pages 2
and 3 of this Annual Report.
Performance against key short-term metrics
The above graphs highlight the improvement over the past 5 years in respect of key performance indicators used by the Board
to measure and compare year-on-year performance. The performance indicators include the cash EPS ratio that the Company
uses as a performance condition for Senior Executive STI payments and LTI grants. The second key performance indicator
used for the LTI is the Company’s TSR performance.
The Company has achieved its targeted cash EPS performance for each of the past 5 years.
TSR performance
The Company’s market relative TSR performance is one of the key performance conditions for the Company’ LTI component.
As the LTI was established in 2006 (and has a 3 year performance period) the amount of maximum LTI which has been
awarded to participating Senior Executives based on performance against the key indicators has to date been nil.
51
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
REMUNERATION PAID (Details of the remuneration paid to the Senior Executives are set out in Table 7 below)
The remuneration details for the former Adelaide Bank executives(1) are for the period 30 November 2007 to 30 June 2008. All values are in A$ unless otherwise stated.
Table 7 – Senior Executive remuneration paid for FY2008 and FY2007
Short-term Employee Benefits
Post-employment benefits
Cash
Salary 4
Bonuses
(at-risk) 5
Non-
Monetary
Benefits6
Other7
Super-
annuation
benefits 8
Other
Other Long-
term
employee
benefits9
Termination benefits
Share-based Payments 10 11
Total
Termination
Other
Performance
Rights
Options
Senior Executives of the Company and the Group
Current
R Hunt
2008
2007
J McPhee 1
2008
2007
M Hirst
2008
2007
M Baker
2008
2007
A Baum 1
2008
2007
R Fennell 1
2008
2007
G Gillett
2008
2007
964,402
726,000
49,943
93,971
248,828
823,791
660,000
49,875
243,096
233,475
412,647
350,000
-
-
396
-
13,350
49,846
-
-
538,117
320,000
27,761
487,734
200,000
38,891
322,091
140,000
35,517
297,498
140,000
36,199
172,438
100,625
8,450
-
-
-
175,870
94,792
7,032
-
-
-
10,454
16,771
10,481
15,081
-
-
-
-
352,729
170,000
103,850
25,105
337,925
170,000
107,286
30,138
73,384
61,512
43,770
37,835
21,859
-
20,592
-
54,263
52,373
52
-
-
-
-
-
-
-
-
-
-
-
-
-
-
164,312
135,038
11,450
-
10,285
12.140
9,103
16,872
-
-
-
-
10,036
(2,037)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
342,092
330,386
2,919,934
236,759
225,053
2,607,087
196,452
-
-
-
1,034,141
-
65,373
30,373
44,945
20,781
56,482
-
53,209
-
53,910
25,579
65,775
1,111,149
30,775
878,196
45,223
651,130
21,056
585,322
-
-
-
-
359,854
-
351,495
-
54,249
824,142
25,916
747,180
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
D Hughes 1
2008
2007
R Jenkins
2008
2007
C Langford
2008
2007
T Piper1
2008
2007
P Riquier 1
2008
2007
A Watts
2008
2007
Former
R Hasseldine 2
2008
2007
V Kelly 3
2008
164,230
91,875
20,314
-
-
-
378,307
150,000
19,585
389,423
150,000
18,423
369,764
190,000
95,122
413,629
190,000
71,666
168,159
94,792
7,242
-
-
-
111,519
80,208
26,647
-
-
-
-
-
12,362
16,945
22,749
19,975
-
-
-
-
19,958
-
48,752
41,711
59,774
55,973
20,592
-
17,058
-
223,031
91,000
52,100
5,203
34,042
-
-
-
-
-
46,993
37,500
50,175
219,364
120,000
117,009
4,356
8,782
11,728
36,973
61,822
25,000
8,019
5,912
9,786
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,313
(3,684)
10,614
12,716
-
-
3,681
-
5,499
-
5,901
6,272
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,370
405,573
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
51,572
-
49,844
23,178
57,977
27,976
53,204
-
45,020
-
-
-
347,949
-
50,152
718,315
23,486
659,482
58,345
864,345
28,345
820,280
-
-
-
-
343,989
-
284,133
-
35,916
36,150
482,941
-
-
-
33,646
16,146
33,859
224,158
16,359
540,905
42,448
42,723
688,653
71,614
150,000
266,655
2007
1 Commenced employment with the Company on 30 November 2007. The remuneration represents the amounts paid or payable by the Company for the period 30 November 2007 to 30 June 2008.
2 Ceased senior executive role on 30 November 2007. The amounts included under short term employee benefits and post-employment benefits are pro-rata for the period the executive was a KMP.
3 Ceased senior executive role on 27 August 2007 and ceased employment on 31 January 2008. The amounts included under short term employee benefits and post-employment benefits are pro-rata
for the period the executive was a KMP.
4 Cash salary amounts include the net movement in the KMP’s annual leave accrual for the year.
5 This amount represents STI payments to Senior Executives for 2008, which are expected to be paid in September 2008.
6 “Non-monetary” relates to sacrifice components of KMP salary.
28,293
20,781
21,056
11,621
44,962
-
-
-
614,988
53
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
7 “Other” relates to the notional value of the interest free loan benefit provided under the group’s employee share plans. 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 Senior Executive under the employee share plans are disclosed in the full financial statements at Note 38.
8 Represents superannuation contributions made on behalf of key management personnel in accordance with the Superannuation Guarantee Charge legislation.
9 The amounts disclosed relate to movements in long service leave entitlement accruals.
10 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year. The fair value
of equity instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not
related to or indicative of the benefit (if any) that individual Senior Executives may ultimately realise should the equity instruments vest. The fair value of Performance Rights and Options as at the date
of their grant has been determined in accordance with AASB 124 applying a Black-Scholes-Merton valuation method incorporating a Monte Carlo simulation option pricing model to estimate the
probability of achieving the TSR hurdle and the number of options vesting. The assumptions underpinning these valuations are set out in Note 38 to the financial statements.
11 The amortisation value of Performance Rights and Options as a percentage of total remuneration was: R Hunt 23% (2007: 27%), J McPhee 19% (2007: 0%), M Baker 14% (2007: 18%), A Baum
16% (2007: 0%), R Fennell 15% (2007: 0%), G Gillett 13% (2007: 16%), M Hirst 12% (2007: 18%), D Hughes 15% (2007: 0%), R Jenkins 13% (2007: 18%), C Langford 13% (2007: 17%), T Piper 15%
(2007: 0%), P Riquier 17% (2007: 0%), A Watts 15% (2007: 0%)
54
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
The percentages of maximum STI paid and not achieved for FY2008 are detailed in the table below.
Table 8 – Percentage of STI paid and forfeited for Senior Executives
Senior Executives
Current
Rob Hunt
Jamie McPhee 6
Mike Hirst
Marnie Baker
Anthony Baum 6
Richard Fennell 6
Greg Gillett
David Hughes 6
Russell Jenkins
Craig Langford
Tim Piper 6
Philip Riquier 6
Andrew Watts
Former
Vicky Kelly (4)
Richard Hasseldine (5)
Actual STI payment
($)(1)(2) (3)
Actual STI payment
as % of maximum
STI
% of maximum STI
payment forfeited
726,000
350,000
278,500
140,000
100,625
94,792
170,000
91,875
150,000
190,000
94,792
80,208
91,000
25,000
37,500
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
75%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
49%
25%
(1) STI constitutes a cash incentive earned during fiscal 2008, and is expected to be paid in September 2008.
(2) A minimum level of performance must be achieved before any STI is paid as outlined above. Therefore, the minimum
potential value of the STI which was granted in respect of the year was nil. The maximum value of grants under the STI is
the actual amount of STI paid.
(3) The grant date for the STI is August 2008.
(4) Ms V Kelly ceased employment on 31 January 2008 and forfeited a pro-rata proportion of her STI award for 2008. The
amount disclosed represents a pro-rata allocation of the total STI applicable to the period the senior executive was a
KMP.
(5) Mr R Hasseldine’s STI award was adjusted during the year on a pro-rata basis following change in employment
arrangements. The amount disclosed represents a pro-rata allocation of the total STI applicable to the period the senior
executive was a KMP.
(6) Actual STI payment represents a pro-rata allocation of the total STI applicable to the period 30 November 2007 to 30 June
2008.
55
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
EQUITY INSTRUMENTS GRANTED AS REMUNERATION
As part of its remuneration strategy, the Company granted Performance Rights and Options to Senior Executives during the
year, as set out in Table 9 below.
Table 9 – Performance Rights and Options granted in FY2008
Senior Executive
Instrument
Number of
Performance Rights/
Options granted
(a)
Future years
payable
Fair value per
Performance Right/
Option
(b)
Maximum value of
grant
(c) (d)
Current
Rob Hunt(c)
Performance Rights
22,523
Options
121,538
Jamie McPhee(b)
Performance Rights
20,767
20,766
Mike Hirst (c)
Performance Rights
7,484
Options
40,385
Marnie Baker (c)
Performance Rights
5,167
Options
27,885
Anthony Baum(b)
Performance Rights
5,971
5,970
Richard Fennell(b)
Performance Rights
5,625
5,624
Greg Gillett(c)
Performance Rights
6,058
Options
32,692
David Hughes(b)
Performance Rights
5,452
5,451
Russell Jenkins(c)
Performance Rights
5,702
Options
30,769
Craig Langford(c)
Performance Rights
6,415
Options
34,615
Tim Piper(b)
Performance Rights
5,625
5,624
Philip Riquier(b)
Performance Rights
4,759
4,759
Andrew Watts(c)
Performance Rights
3,920
Options
21,154
Former
Vicky Kelly
(c)
Richard
Hasseldine
(c)
Total - Rights
Total - Options
Performance Rights
4,633
Options
25,000
Performance Rights
3,742
Options
20,192
162,037
354,230
2010
2010
2009
2010
2010
2010
2010
2010
2009
2010
2009
2010
2010
2010
2009
2010
2010
2010
2010
2010
2009
2010
2009
2010
2010
2010
2010
2010
2010
2010
$14.03
$2.60
$16.03
$15.74
$14.03
$2.60
$14.03
$2.60
$16.03
$15.74
$16.03
$15.74
$14.03
$2.60
$16.03
$15.74
$14.03
$2.60
$14.03
$2.60
$16.03
$15.74
$16.03
$15.74
$14.03
$2.60
$14.03
$2.60
$14.03
$2.60
$315,998
$315,999
$332,895
$326,857
$105,001
$105,001
$72,493
$72,501
$95,715
$93,968
$90,169
$88,522
$84,994
$84,999
$87,396
$85,799
$79,999
$79,999
$90,002
$89,999
$90,169
$88,522
$76,287
$74,907
$54,998
$55,000
$65,001
$65,000
$52,500
$52,499
$2,452,190
$920,998
(a) The grants made to Senior Executives constituted 100% of the grants available for the year and were made on the terms
summarised above. As the Performance Rights and Options only vest on satisfaction of performance conditions which
are to be tested in future financial periods, other than as disclosed at (e) below, none of the Senior Executives forfeited
Performance Rights or Options during 2008.
56
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
(b) The fair value of the Performance Rights was calculated as at the grant dates of 1 December 2007. The exercise price
for the Performance Rights is nil and expiry date is 30 June 2010. An explanation of the pricing model used to calculate
these values is set out in Note 38 to the financial statements.
(c) The fair values were calculated as at the grant dates of 9 July 2007 for Performance Rights and Options. The exercise
price for the Options is $15.47 and expiry date is 31 July 2012. The exercise price for the Performance Rights is nil and
the expiry date is 30 June 2011. An explanation of the pricing model used to calculate these values is set out in Note 38
to the financial statements.
(d) The maximum value of the grant has been estimated based on the fair value per instrument. The minimum total value of
the grant, if the applicable performance conditions are not met, is nil.
(e) Ms V Kelly forfeited the unvested Performance Options upon ceasing employment with the Company on 31 January
2008.
57
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Table 10 sets out details of the movement in the number of Performance Rights and Options held by Senior Executives during
the year.
Table 10 – Movement in Performance Rights and Options in FY2008 (number)
Senior Executive
Instrument
Balance at 1
July 2007
Granted
Vested
Exercised
Forfeited/La
psed
Balance at
30 June
2008
Movements in value
Current
Rob Hunt
Performance Rights
44,434
22,523
Options
280,814
121,538
Jamie McPhee
Performance Rights
-
Mike Hirst
Performance Rights
7,058
41,533
7,484
Options
44,601
40,385
Marnie Baker
Performance Rights
4,829
5,167
Share Awards
30,516
27,885
Anthony Baum
Performance Rights
Richard Fennell
Performance Rights
-
-
11,941
11,249
Greg Gillett
Performance Rights
5,944
6,058
Options
37,559
32,692
David Hughes
Performance Rights
-
10,903
Russell Jenkins
Performance Rights
5,386
5,702
Options
34,038
30,769
Craig Langford
Performance Rights
6,501
6,415
Options
41,080
34,615
Tim Piper
Performance Rights
Philip Riquier
Performance Rights
-
-
Andrew Watts
Performance Rights
4,096
11,249
9,518
3,920
Options
25,822
21,154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Former
Vicky Kelly
Performance Rights
4,829
4,633
9,462
9,462
Options
30,516
25,000
33,251
Richard Hasseldine
Performance Rights
3,752
3,742
Options
23,709
20,192
-
-
Total
Total
Performance Rights
86,829
162,037
9,462
Options
548,655
354,230
33,251
-
-
-
-
9,462
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,265
-
-
-
66,957
402,352
41,533
14,542
84,986
9,996
58,401
11,941
11,249
12,002
70,251
10,903
11,088
64,807
12,916
75,695
11,249
9,518
8,016
46,976
-
33,251
7,494
43,901
239,404
22,265
880,620
58
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Table 11 sets out details of changes in the value of Performance Rights and Options (a) held by Senior Executives during the
year.
Table 11 – Movement in Performance Rights and Options in FY2008 (value)
Senior Executive
Instrument
Granted(a)
Vested(b)
Forfeited/Lapsed(c)
Current
Rob Hunt
Performance Rights
Options
Jamie McPhee
Performance Rights
Mike Hirst
Performance Rights
Options
Marnie Baker
Performance Rights
Options
Anthony Baum
Performance Rights
Richard Fennell
Performance Rights
Greg Gillett
Performance Rights
Options
David Hughes
Performance Rights
Russell Jenkins
Performance Rights
Options
Craig Langford
Performance Rights
Options
Tim Piper
Performance Rights
Philip Riquier
Performance Rights
Andrew Watts
Performance Rights
Options
$315,998
$315,999
$659,752
$105,001
$105,001
$72,493
$72,501
$189,683
$178,691
$84,994
$84,999
$173,195
$79,999
$79,999
$90,002
$89,999
$178,691
$151,194
$54,998
$55,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Former
Vicky Kelly
Performance Rights
$65,001
$65,001
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Options
$65,000
$32,500
$32,500
Richard Hasseldine
Performance Rights
Options
$52,500
$52,499
-
-
-
-
-
Total
Total
(a)
(b)
(c)
Performance Rights
$2,452,192
$65,001
Options
$920,997
$32,500
$32,500
The value of the Performance Rights and Options granted to Senior Executives during the year is set out in Table 10
above.
On the vesting of each Performance Right and Option, the holder received one fully paid ordinary share in the
Company. The market value of each Performance Right and Option on the date of vesting was $12.00, being the
closing price of the Company’s shares on the ASX on the preceding trading day.
These amounts relate to Performance Rights and Options granted in 2006 and 2007 to Ms V Kelly that were forfeited
upon cessation of employment with the Company and having regard to the achievement of the performance measures
on a pro-rata basis. The value of each Performance Right and Option on the date it lapsed or was forfeited was
calculated using the fair value of the Performance Rights and Options (for the Performance Rights forfeited by Ms V
Kelly). An explanation of the pricing model used to calculate this value is set out in Note 38 to the financial statements.
59
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
SERVICE AGREEMENTS
The remuneration and other terms of employment for Senior Executives are formalised in Service Agreements. Each
agreement provides for the payment of performance-related cash STI component (as discussed above) and participation in the
Company’s LTI component (as discussed above). It is the Group’s policy that Senior 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 material
terms of the Service Agreements are set out below.
Table 12 – Summary of Service Agreements
About the Contract
Contractual Provision
Applies To
What is the duration of the
contracts?
What notice must be
provided by a Senior
Executive to terminate a
Service Agreement
without cause?
What notice must be
provided by the Company
to terminate a Service
Agreement without cause?
(a)
What payments must be
made by the Company for
termination without
cause?
On-going until notice is given by either party.
All Senior Executives
6 months’ notice or payment in lieu.
No notice period required if material change in duties or
responsibilities.
All Senior Executives
12 months’ notice or payment in lieu.
All Senior Executives
Payment of gross salary in lieu of period of notice (including
payment of accrued / unused leave entitlements calculated to end of
relevant notice period).
Senior Executives (b)
Up to 31 December 2009:
Payment of gross salary and superannuation (including payment of
accrued / unused leave entitlements and any entitlement under STI
and LTI plans) calculated to date of termination, an amount
equivalent to 12 months’ base salary and a pro-rata payment based
on years of service (including service with Adelaide Bank). The pro-
rata payment equates to seven weeks pay plus three weeks pay for
every year of service up to a maximum of ninety weeks.
From 1 January 2010 – as described for Senior Executives above
Executive Director
(J McPhee)
What are notice and
payment requirements for
termination for cause?
Termination for cause does not require notice. Payment of pro-rata
gross salary and benefits (including payment of accrued / unused
leave entitlements) is required to date of termination.
Up to 31 December 2009:
Termination for cause does not require notice. Payment of pro-rata
base salary and benefits (including payment of accrued / unused
leave entitlements and any entitlement under STI and LTI plans) is
required to date of termination.
From 1 January 2010 – as described for Senior Executives above
Are there any post-
employment restraints?
12 month non-solicitation restriction
Up to 31 December 2009:
Must not engage in competitive business activity for 6 months in
Australia or New Zealand (applies only if employment ceases before
1 January 2010).
From 1 January 2010
12 month non-solicitation restriction
Senior Executives (b)
Executive Director
(J McPhee)
Senior Executives (b)
Executive Director
(J McPhee)
(a)
(b)
In certain circumstances, such as a substantial diminution of responsibility, the Company may be deemed to have
terminated the employment of a Senior Executive and will be liable to pay a termination benefit as outlined above at
“What payments must be made by the Company for termination without cause”.
Being the current Senior Executives listed at Table 1 excluding the Executive Director.
60
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
BOARD POLICY ON REMUNERATION
The table below sets out the key principles that underpin the Board’s policy on Non-Executive Director remuneration:
Table 13 – Principles underpinning remuneration policy for Non-Executive Directors
Principle
Comment
Aggregate Board fees are
approved by shareholders
The current aggregate fee pool for Non-Executive Directors of $1,700,000 was
approved by shareholders at the 2008 Extraordinary General Meeting.
Remuneration structured to
encourage longer term
perspective
Fees are set by reference to key
considerations
Fees changes recommended by
Board committee
(Note: Some benefits are payable outside of the shareholder-approved cap –
refer Table 14 for details)
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
Non-Executive Directors do not receive bonuses or incentive payments, nor
participate in the Company’s employee equity participation plans. Approval will
be sought at the 2008 Annual General Meeting for future issues of shares to
non-executive directors under a new fee-sacrifice share plan.
Non-Executive Director fees are set by reference to considerations including:
• The demands and the scope of responsibilities of Non-Executive Directors
• Fees paid by peer companies and companies of similar market capitalisation
The Committee takes into account changes in director responsibilities and time
commitments during the year, at both the board and committee level, as well as
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.
Non-Executive Director fees are reviewed annually by the Board to ensure that
the structure and amounts 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.
No retirement benefits
No additional benefits are paid to Non-Executive Directors upon their retirement
from office (ie in addition to their existing superannuation entitlements).1
Regular reviews of remuneration
The Board periodically reviews its approach to Non-Executive Director
remuneration to ensure it remains in line with general industry practice and best
practice principles of corporate governance.
1. The retirement benefit scheme which was in place for Non-Executive Directors since 1982 has been closed. No retirement
benefits (other than superannuation) have accrued to existing or new Non-Executive Directors after 31 August 2005.
61
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
COMPONENTS OF NON-EXECUTIVE DIRECTOR REMUNERATION
Table 14 – Components of remuneration for Non-Executive Directors
Element
Board fees
Other fees/benefits
Post-employment
benefits
Equity/NED Share
Plan
Details/
Explanation
Current fees per
annum are:
• $125,000 for Board
members from 1
July 2008
(previously
$100,000).
• $250,000 for Chair
to recognise extra
time commitment.
No additional
committee fees.
Fee payments may be
increased annually by
the CPI index should
the Governance and
HR Committee not
recommend a general
fee increase
The Company will
seek shareholder
approval at the 2008
AGM for a Non-
Executive Director
Fee Sacrifice Plan
under which Non-
Executive Directors
may elect to sacrifice
part of their fees to
acquire shares in the
Company.
Superannuation
contributions are
made on behalf of the
Non-Executive
Directors at a rate of
9%, which satisfies
the Company’s
statutory
superannuation
obligations.
Non-Executive
Directors appointed
prior to 31 August
2005 were entitled to
a retirement benefit
under the Company’s
legacy retirement
benefit scheme. The
scheme is closed and
no retirement benefits
have accrued to
existing or new Non-
Executive Directors
after 31 August 2005.
All entitlements at that
date were crystallised
and have since been
paid to the Non-
Executive Directors.
1 The Board may
determine
additional fees for
appointments to
Subsidiary or Joint
Venture Boards.
2 Non-Executive
Directors are
permitted to be
paid additional
remuneration for
special services or
journey on the
business of the
Company. No
such fees were
paid during the
year.
3 Non-Executive
Directors are
entitled under the
Company’s
Constitution to be
reimbursed for all
reasonable travel,
accommodation
and other
expenses incurred
in attending
meetings or when
engaged on
company
business.
Included in
shareholder
approved cap?
Yes
Yes – 1 & 2
Yes (Superannuation) N/A
No – 3
62
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
REMUNERATION PAID
Details of Non-Executive Directors’ remuneration are set out in Table 15.
Table 15 – Non-Executive Director Remuneration for FY2008 and FY2007
Short-term benefits
Post-employment benefits
Fees
Non-monetary
benefits1
Superannuation
Contributions2
Retirement
Benefits
Share-based
payments
Non-Executive
Director Share
Plan
R Johanson
(Chairman)
2008
2007
K Osborn 3
2008
2007
K Abrahamson 3
2008
2007
N Axelby 4
2008
2007
R Cook 3 5
2008
2007
J Dawson
2008
2007
D Erskine 4
2008
2007
A Lloyd 3 5
2008
2007
T O’Dwyer
2008
2007
D Radford
2008
2007
K Roache
2008
2007
A Robinson
2008
2007
197,538
184,796
57,692
-
6,634
-
41,078
92,398
4,658
-
98,769
92,398
41,078
92,398
9,297
-
98,769
92,398
98,769
92,398
98,769
92,398
53,769
47,398
-
-
-
-
51,058
-
-
-
-
-
-
-
-
-
48,395
-
-
-
-
-
-
-
45,000
45,000
17,778
16,416
5,192
-
5,192
-
3,697
8,315
419
-
8,889
8,315
3,697
8,315
5,192
-
8,889
8,315
8,889
8,315
8,889
8,315
8,889
8,315
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
215,316
201,212
62,884
-
62,884
-
44,775
100,713
5,077
-
107,658
100,713
44,775
100,713
62,884
-
107,658
100,713
107,658
100,713
107,658
100,713
107,658
100,713
1 Represents fee sacrifice component of base director fee amount
2 Company superannuation contributions paid in accordance with the Superannuation Guarantee Legislation.
3 Appointed as a director on 30 November 2007. The remuneration represents the fees paid or payable by the Company for
the period 30 November 2007 to 30 June 2008.
4 Ceased as a director on 30 November 2007
5 Ms Lloyd resigned on 30 June 2008 and Mr Cook resigned on 17 December 2007.
The preceding Remuneration Report has been audited.
63
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Meetings of directors
The number of meetings of the Bank’s directors (including meetings of committees of directors) held during the year ended 30
June 2008 and the number attended by each director were:
Board of
directors
Meetings
Audit5
Credit
Risk
Governance
IT Strategy
Property 6
Meetings in Committees
Attended by:
R Johanson
K Osborn2
R Hunt AM
K Abrahamson2
N Axelby1
R Cook2 3
J Dawson
D Erskine1
A Lloyd2 4
J McPhee
T O’Dwyer
D Radford
K Roache
A Robinson
A
18
8
18
8
10
1
18
10
8
8
18
18
18
18
A
3
3
8
4
B
3
3
5
4
B
17
8
17
8
8
1
17
8
8
9
8
8
16
17
17
16
8
8
7
8
A
B
A
B
6
6
5
4
11
5
10
4
5
4
11
11
11
11
3
6
3
3
3
6
6
6
3
4
2
3
3
6
5
5
A
3
3
2
B
3
2
1
1
1
3
3
2
3
A
B
1
1
1
1
1
1
A
4
6
4
2
4
6
6
B
3
6
4
2
4
5
6
A = Number eligible to attend
B = Number attended
1 Mr N Axelby and D Erskine resigned from the board on 30 November 2007
2 Mr K Osborn, Mr K Abrahamson, Mr R Cook and Dr A Lloyd were appointed to the board on
30 November 2007
3 Mr R Cook resigned from the board on 17 December 2007
4 Dr A Lloyd resigned from the board on 23 June 2008
5 Mr R Hunt is a standing attendee for audit committee meetings. In particular, Mr Hunt attends the meetings that consider the group’s
half-year and full-year result announcements and the statutory financial statements
6 The Property Committee ceased in January 2008
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 its
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 and Adelaide
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 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.
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.
64
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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
Ordinary shares
Preference shares
Step-Up
Preference
Shares
Reset Preference
Shares
R N Johanson
R G Hunt AM(1)
K D Abrahamson
J L Dawson
J L McPhee (2)
T J O’Dwyer
K G Osborn
D L Radford
K E Roache
A D Robinson
195,337
869,915
16,801
14,280
608,076
61,900
9,078
1,000
49,079
2,500
500
-
-
100
-
-
-
-
200
-
-
-
180
-
-
-
-
-
-
-
-
-
129
-
-
-
-
-
-
-
(1) Includes 600,000 shares issued under the Bendigo Employee Share Ownership Plan.
(2) Includes 236,500 shares issued under the Adelaide Bank Deferred Employee Share Plan. Mr McPhee also holds 90,723 units in the
Asset Backed Yield Trust. Adelaide Managed Funds Limited (a subsidiary of Adelaide Bank) is the responsible entity for the Trust.
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 and Adelaide Bank Limited for ten 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.
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 2008. 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 2008. 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.
65
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 2008:
(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
APRA Targeted Review – APS 310 report
Trust Deed Report – Euro Medium Term Note Program
Trust Deed Report- Adelaide Bank Securitisation
Report on VSCL debenture prospectus information
APRA peer actuary review report – GPS 310
Sub total – audit related fees
Fees
(excluding GST)
$
89,500
59,100
15,500
30,900
15,000
52,123
3,605
18,000
283,728
Entity
Bendigo and Adelaide Bank
Limited
Note 1
Sunstate Lenders Mortgage
Insurance
Bendigo and Adelaide Bank
Limited
Bendigo and Adelaide Bank
Limited
Bendigo and Adelaide Bank
Limited
VSCL
Sunstate Lenders Mortgage
Insurance
Note 1: Amount attributed to Bendigo and Adelaide Bank and subsidiary companies: Sandhurst Trustees Limited, Victorian
Securities Corporation Limited, Adelaide Managed Funds Limited, Leveraged Equities Nominees Proprietary Limited, Bendigo
Financial Planning Limited and National Assets Securitisation Corporation
(b)
Consulting fees:
Service
Tax advice
Professional Services
Sub total – Consulting fees
Total – non audit services
Fees
(excluding GST)
$
Entity
579,751
Bendigo and Adelaide
Bank Limited
Bendigo and Adelaide
Bank Limited
272,237
851,988
1,135,716
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.
66
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Auditor's Independence Declaration to the Directors of Bendigo and Adelaide Bank Limited
In relation to our audit of the financial report of Bendigo and Adelaide Bank Limited for the financial year ended 30 June 2008,
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
9 September 2008
Liability limited by a scheme approved under
Professional Standards Legislation.
Ernst & Young
This Directors Report is signed in accordance with a resolution of the Board of Directors
R N Johanson
Chairman
9 September 2008
R G Hunt AM
Managing Director
67
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
INCOME STATEMENT
for the year ended 30 June 2008
Income
Net interest income
Interest income
Interest expense
Net interest income before cash flow hedge/derivative income/(expense)
Adelaide Bank derivatives ineffective post acquistion
Cash flow derivative - controlled entity
Net interest income
Other revenue
Dividends
Fees
Commissions
Other revenue
Total other revenue
Other income
Realised accounting gain on Visa Inc shares
Other
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
Staff and related costs
Occupancy costs
Amortisation of intangibles
Property, plant & equipment costs
Fees and commissions
Impairment loss on equity investments
Integration costs
Other
Total other expenses
Profit before income tax expense
Income tax expense
Net profit for the period
Note
C o ns o lida t e d
P a re nt
2 0 0 8
2 0 0 7
2 0 0 8
2 0 0 7
$ m
$ m
$ m
$ m
2,634.0
2,091.4
542.6
(28.3)
-
514.3
1,058.6
701.5
357.1
-
-
357.1
1,227.6
863.0
364.6
-
(148.4)
216.2
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
6
3.9
172.4
54.4
16.2
246.9
25.2
2.2
27.4
26.4
815.0
25.7
(2.6)
23.1
256.3
43.0
11.1
13.4
20.4
30.3
9.4
161.4
545.3
246.6
(75.4)
171.2
3.8
114.4
48.1
10.9
177.2
-
6.0
6.0
21.9
562.2
8.8
(0.6)
8.2
187.7
31.5
5.4
10.3
20.2
-
-
121.0
376.1
177.9
(56.2)
121.7
1,009.1
657.6
351.5
-
-
351.5
41.2
105.6
10.0
16.8
173.6
-
4.1
4.1
-
197.0
121.0
11.4
21.1
350.5
18.6
2.2
20.8
-
587.5
529.2
7.7
(0.7)
7.0
188.4
52.2
5.2
9.9
16.6
30.2
4.8
128.7
436.0
144.5
18.5
163.0
7.9
(0.6)
7.3
171.6
42.6
4.1
9.5
16.7
-
-
128.2
372.7
149.2
(37.0)
112.2
Net profit / (loss) for the period attributable to:
Minority interest
Members of the Parent
36
0.7
170.5
(0.1)
121.8
-
163.0
-
112.2
Earnings per share for profit attributable 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
74.8
74.7
65.0
81.9
81.1
58.0
68
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
BALANCE SHEET
as at 30 June 2008
Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets held for trading
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 - investment
Net 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
Deferred tax assets
Intangible assets and goodwill
Other assets
Total Assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Provisions
Deferred tax liabilities
Reset preference shares
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
Step up preference shares
Employee Share Ownership Plan (ESOP) shares
Reserves
Retained earnings
Total parent interests
Total minority interest
Total Equity
Note
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
14
14
44
15
16
17
18
19
19
22
23
24
25
6
26
28
14
29
29
44
30
31
6
32
33
34
34
34
34
35
35
36
1,195.9
412.7
311.8
1,414.8
422.0
84.6
-
1,414.6
517.6
39,721.9
-
185.2
113.5
105.5
80.4
113.8
1,460.4
468.2
48,022.9
269.7
31,425.1
11,356.1
72.4
680.9
11.1
67.8
98.5
89.5
681.8
44,752.9
3,270.0
257.6
71.5
75.4
-
428.8
130.4
-
1,614.4
-
13,773.3
-
156.3
61.5
93.4
34.2
32.6
93.7
178.5
17,001.6
184.0
14,887.5
259.1
35.0
235.3
16.3
40.4
21.8
-
307.2
15,986.6
1,015.0
440.5
237.6
128.1
-
611.5
77.2
2,272.5
1,673.4
-
15,018.4
164.2
-
66.7
3.2
-
84.3
53.4
450.7
21,281.7
151.7
16,948.2
-
173.2
282.5
11.1
52.8
38.8
89.5
301.3
18,049.1
3,232.6
203.5
71.1
75.4
-
428.8
127.9
134.8
1,530.5
-
13,418.1
101.0
-
53.6
-
-
31.5
54.2
304.8
16,535.2
184.0
14,740.6
-
35.8
207.1
16.3
39.9
20.8
-
307.2
15,551.7
983.5
2,706.3
605.2
2,706.3
605.2
88.5
100.0
(37.4)
170.6
242.0
3,270.0
-
3,270.0
88.5
-
(40.4)
130.0
232.4
1,015.7
(0.7)
1,015.0
88.5
100.0
(37.4)
129.1
246.1
3,232.6
-
3,232.6
88.5
-
(40.4)
117.6
212.6
983.5
-
983.5
69
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
STATEMENT OF RECOGNISED INCOME AND EXPENSES
for the year ended 30 June 2008
Available for sale financial assets revaluation
Transfer available for sale assets impairment loss to income
Net gain/(loss) on cash flow hedges taken to equity
Net gain/(loss) on reclassification from equity to income
Net unrealised gain/(loss) on investments in AFS portfolio
Actuarial gain/(loss) on superannuation defined benefits plan
Tax effect on items taken directly to or transferred from equity
Net income/(loss) recognised directly in equity
Profit for the year
Total recognised income and expenses for the period
Total recognised income and expenses for the period attributable to:
Minority interest
Members of the Parent
Note
C o ns o lida t e d
P a re nt
35
35
35
35
35
35
35
2 0 0 8
$ m
(56.0)
29.9
14.4
28.4
0.1
(1.4)
(13.9)
1.5
171.2
172.7
0.7
172.0
2 0 0 7
$ m
8.9
-
32.0
0.5
-
-
(2.9)
38.5
121.7
160.2
(0.1)
160.3
2 0 0 8
$ m
(56.7)
29.8
47.7
(0.3)
0.1
-
(16.1)
4.5
163.0
167.5
-
167.5
2 0 0 7
$ m
9.4
-
30.4
0.5
-
-
(2.8)
37.5
112.2
149.7
-
149.7
70
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
CASH FLOW STATEMENT
for the year ended 30 June 2008
Note
C o ns o lida t e d
P a re nt
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)/decrease in balance of loans and other receivables outstanding
Net (increase)/decrease in balance of investment securities
Net cash received/(paid) on acquisition of a subsidiary
Net cash flows from/(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
Net increase/(decrease) in balance of notes payable
Repayment of ESOP shares
Payment of share issue costs
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents the at end of period
14
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2,515.9
(1,993.4)
211.1
(510.3)
16.8
(81.9)
158.2
(85.9)
6.9
(0.2)
(34.4)
11.8
768.4
808.6
474.4
1,949.6
89.8
2,050.9
(955.6)
50.0
(56.0)
(94.9)
(2,000.8)
3.0
(0.4)
(914.0)
1,193.8
145.1
1,338.9
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
1,027.1
(828.4)
150.6
(193.6)
107.0
(46.0)
216.7
(29.2)
1.6
(0.2)
(91.2)
11.8
(1,662.2)
(213.0)
-
(1,982.4)
92.1
2,041.9
165.8
50.0
(56.0)
(94.9)
-
3.0
(0.4)
2,201.5
435.8
90.6
526.4
2 0 0 7
$ 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
71
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The financial report of Bendigo and Adelaide Bank Limited (the Company) for the year ended 30 June 2008 was authorised for
issue in accordance with a resolution of the directors on 9 September 2008.
Bendigo and Adelaide Bank Limited is a company limited by shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange.
The domicile of Bendigo and Adelaide Bank Limited is Australia.
The registered office of the Company is:
The Bendigo Centre
PO Box 480
Bendigo, Victoria
Australia 3552
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
Bendigo and Adelaide 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 one hundred thousand dollars ($’00,000).
Due to the business combination on 30 November 2007 the current year figures represent 7 months contribution of Adelaide
Bank. Comparatives represent Bendigo Bank only.
2.2 Compliance with IFRS
The financial report complies with Australian Accounting Standards and 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 2008:
Application
date of
standard *
1 January
2008
1 January
2008
Impact on Group financial
report
Unless the Group enters into
service concession
arrangements or public-
private-partnerships (PPP),
the amendments are not
expected to have any impact
on the Group's financial
report.
Refer to AASB Int. 12 and
AASB 2007-2 above.
Application
date for
Group
1 July 2008
1 July 2008
1 January
2008
Refer to AASB Int. 12 and
AASB 2007-2 above.
1 July 2008
Reference
Title
Summary
AASB Int. 12
and AASB
2007-2
AASB Int. 4
(Revised)
AASB Int. 129
Service Concession
Arrangements and
consequential
amendments to
other Australian
Accounting
Standards
Clarifies how operators
recognise the
infrastructure as a
financial asset and/or an
intangible asset – not as
property, plant and
equipment.
Service Concession
Arrangements and
consequential
amendments to
other Australian
Accounting
Standards
Service Concession
Arrangements:
Disclosures
Clarifies how operators
recognise the
infrastructure as a
financial asset and/or an
intangible asset – not as
property, plant and
equipment.
Requires disclosure of
provisions or significant
features necessary to
assist in assessing the
amount, timing and
certainty of future cash
flows and the nature and
extent of the various
rights and obligations
involved. These
disclosures apply to both
grantors and operators.
72
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Application
date for
Group
1 July 2008
1 July 2008
1 July 2009
1 July 2009
1 July 2009
Impact on Group financial
report
The Group does have a
customer loyalty programme
but this interpretation is not
expected to have any
material impact on the
Group’s financial report.
The Group has a defined
benefit pension plan and as
such this interpretation may
have an impact on the
Group’s financial report.
However, the Group has not
yet determined the extent of
the impact, if any. Any
impact would not be material
to the group in light of the
relatively small balances
involved. The majority of
employees participate in an
accumulation fund.
AASB 8 is a disclosure
standard so will have no
direct impact on the amounts
included in the Group's
financial statements,
although it may indirectly
impact the level at which
goodwill is tested for
impairment. In addition, the
amendments may have an
impact on the Group’s
segment disclosures.
These 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
expected to have any impact
on the Group's financial
report.
These amendments are only
expected to affect the
presentation of the Group’s
financial report and will not
have a direct impact on the
measurement and
recognition of amounts
disclosed in the financial
report. The Group has not
determined at this stage
whether to present a single
statement of comprehensive
income or two separate
statements.
Reference
Title
Summary
AASB Int. 13
Customer Loyalty
Programmes
AASB Int. 14
AASB 119 – The
Limit on a Defined
Benefit Asset,
Minimum Funding
Requirements and
their Interaction
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.
Aims to clarify how to
determine in normal
circumstances the limit
on the asset that an
employer’s balance sheet
may contain in respect of
its defined benefit
pension plan.
Application
date of
standard *
1 July 2008
1 January
2008
AASB 8 and
AASB 2007-3
Operating Segments
and consequential
amendments to
other Australian
Accounting
Standards
New standard replacing
AASB 114 Segment
Reporting, which adopts
a management reporting
approach to segment
reporting.
1 January
2009
AASB 123
(Revised) and
AASB 2007-6
Borrowing Costs and
consequential
amendments to
other Australian
Accounting
Standards
The amendments to
AASB 123 require that all
borrowing costs
associated with a
qualifying asset be
capitalised.
1 January
2009
AASB 101
(Revised) and
AASB 2007-8
Presentation of
Financial
Statements and
consequential
amendments to
other Australian
Accounting
Standards
1 January
2009
Introduces a statement of
comprehensive income.
Other revisions include
impacts on the
presentation of items in
the statement of changes
in equity, new
presentation
requirements for
restatements or
reclassifications of items
in the financial
statements, changes in
the presentation
requirements for
dividends and changes to
the titles of the financial
statements.
73
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Application
date of
standard *
1 January
2009
Impact on Group financial
report
The Group has share-based
payment arrangements that
may be affected by these
amendments. However, the
Group has not yet
determined the extent of the
impact, if any.
Application
date for
Group
1 July 2009
1 July 2009
1 July 2009
The Group may enter into
some business combinations
during the next financial year
and may therefore consider
early adopting the revised
standard. The Group has not
yet assessed the impact of
early adoption, including
which accounting policy to
adopt.
1 July 2009
If the Group changes its
ownership interest in existing
subsidiaries in the future, the
change will be accounted for
as an equity transaction. This
will have no impact on
goodwill, nor will it give rise to
a gain or a loss in the
Group’s income statement.
1 July 2009 Refer to AASB 3 (Revised)
and AASB 127 (Revised)
above.
1 July 2009
1 July 2009
Reference
Title
Summary
AASB 2008-1
Amendments to
Australian
Accounting Standard
– Share-based
Payments: Vesting
Conditions and
Cancellations
AASB 3
(Revised)
Business
Combinations
AASB 127
(Revised)
Consolidated and
Separate Financial
Statements
AASB 2008-3
Amendments to
Australian
Accounting
Standards arising
from AASB 3 and
AASB 127
The amendments clarify
the definition of 'vesting
conditions', introducing
the term 'non-vesting
conditions' for conditions
other than vesting
conditions as specifically
defined and prescribe the
accounting treatment of
an award that is
effectively cancelled
because a non-vesting
condition is not satisfied.
The revised standard
introduces a number of
changes to the
accounting for business
combinations, the most
significant of which
allows entities a choice
for each business
combination entered into
– to measure a non-
controlling interest
(formerly a minority
interest) in the acquiree
either at its fair value or
at its proportionate
interest in the acquiree’s
net assets. This choice
will effectively result in
recognising goodwill
relating to 100% of the
business (applying the
fair value option) or
recognising goodwill
relating to the percentage
interest acquired. The
changes apply
prospectively.
Under the revised
standard, a change in the
ownership interest of a
subsidiary (that does not
result in loss of control)
will be accounted for as
an equity transaction.
Amending standard
issued as a consequence
of revisions to AASB 3
and AASB 127.
74
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Reference
Title
Summary
Amendments
to International
Financial
Reporting
Standards**
Cost of an
Investment in a
Subsidiary, Jointly
Controlled Entity or
Associate
Improvements to
IFRSs
Amendments
to International
Financial
Reporting
Standards**
The main amendments of
relevance to Australian
entities are those made
to IAS 27 deleting the
‘cost method’ and
requiring all dividends
from a subsidiary, jointly
controlled entity or
associate to be
recognised in profit or
loss in an entity's
separate financial
statements (i.e., parent
company accounts). The
distinction between pre-
and post-acquisition
profits is no longer
required. However, the
payment of such
dividends requires the
entity to consider whether
there is an indicator of
impairment. AASB 127
has also been amended
to effectively allow the
cost of an investment in a
subsidiary, in limited
reorganisations, to be
based on the previous
carrying amount of the
subsidiary (that is, share
of equity) rather than its
fair value.
The improvements
project is an annual
project that provides a
mechanism for making
non-urgent, but
necessary, amendments
to IFRSs. The IASB has
separated the
amendments into two
parts: Part 1 deals with
changes the IASB
identified resulting in
accounting changes; Part
II deals with either
terminology or editorial
amendments that the
IASB believes will have
minimal impact.
Application
date for
Group
1 July 2009
Application
date of
standard *
1 January
2009
Impact on Group financial
report
Recognising all dividends
received from subsidiaries,
jointly controlled entities and
associates as income will
likely give rise to greater
income being recognised by
the parent entity after
adoption of these
amendments. In addition, if
the Group enters into any
group reorganisation
establishing new parent
entities, an assessment will
need to be made to
determine if the
reorganisation meets the
conditions imposed to be
effectively accounted for on a
‘carry-over basis’ rather than
at fair value.
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
1 July 2009
1 January
2009 except
for
amendments
to IFRS 5,
which are
effective
from 1 July
2009.
*designates the beginning of the applicable annual reporting period unless otherwise stated
** pronouncements that have been issued by the IASB and IFRIC but have not yet been issued by the AASB.
75
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
2.3
Basis of consolidation
The consolidated financial statements comprise the financial statements of Bendigo and Adelaide Bank Limited and all of
its controlled entities (“the Group”). Interests in associates are equity accounted and are not part of the consolidated
group.
A controlled entity is any entity (including special purpose entities) over which Bendigo and Adelaide Bank Limited has the
power to govern directly or indirectly decision-making in relation to financial and operating policies, so as to obtain benefits
from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether they group controls another entity.
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.
Investments in subsidiaries held by Bendigo and Adelaide Bank Limited are accounted for at cost in separate financial
statement of the parent entity.
The acquisition 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 interest not held by the group are allocated their share of net profit after tax in the income statement and are
presented within equity in the consolidated balance sheet, separately from parent shareholders’ equity.
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.
Due to the business combination on 30 November 2007 the current year figures represent 7 months contribution of
Adelaide Bank. Comparatives represent Bendigo Bank only.
Changes in accounting policies
2.5
The accounting policies are consistent with those applied in the previous financial year and corresponding interim period.
During the current financial year the balances of accrued interest in relation to loans and receivables and deposits have
been reclassified to be disclosed as other assets, other payables respectively and derivatives. This change in balance
sheet classification was made to adopt industry practice. The impact of this reclassification when compared to the
previous classifications is as follows:
Consolidated
Parent
Decrease loans and receivables
Increase other assets
Increase derivatives
Decrease deposits
Increase other payables
Increase derivatives
2008
$m
173.1
172.9
0.2
136.7
135.2
1.5
2007
$m
70.2
69.7
0.5
84.4
84.0
0.4
2008
$m
81.3
81.1
0.2
134.7
133.2
1.5
2007
$m
65.6
65.1
0.5
82.1
81.7
0.4
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:
76
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 27
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.
Superannuation defined benefit plan
Various actuarial assumptions are required when determining the group’s superannuation obligations. The bank’s
policy on superannuation defined benefit plan is disclosed in Note 2.24 and Note 44
Loan provisioning
The group determines whether loans are impaired on an ongoing basis. This requires an estimation of the value of
future cash flows. The bank’s policy for calculation of loan loss allowance is disclosed in Note 2.13
Assets held for sale – head office development asset
The fair value carrying amount of the head office development has been determined based on estimates of cost to
completion and other variables associated with a development of this nature.
Securitisations
2.7
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.
Trustee and funds management activities
2.8
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.
Foreign currency transactions and balances
2.9
Both the functional and presentation currency of Bendigo and Adelaide Bank Limited and each of 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.
77
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified into
one of five categories, which determines the accounting treatment of the financial instrument.
The classification depends on the purpose for which the instruments were acquired. Designation is re-evaluated at each
financial year end, but there are restrictions on reclassifying to other categories.
The classifications are:
Loans & receivables -
Held to maturity -
Held for trading -
Available for sale -
Non-trading liabilities -
measured at amortised cost
measured at amortised cost
measured at fair value with changes in fair value charged to the income statement
measured at fair value with changes in fair value taken to equity
measured at amortised cost
All derivative contracts are recorded at fair value in the balance sheet.
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.
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 – held to maturity
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 – deposits and subordinated debt
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 are accounted for at amortised cost. These
transactions are restated to AUD equivalents each month with adjustments taken directly to income.
Financial assets – available for sale share 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.
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.
78
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
Loans with renegotiated terms are accounted for in the same manner, taking account of any change to the terms of the
loan.
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
Individual loans not subject to specific provisioning 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.
Investments in associates and joint ventures accounted for using the equity method
2.14
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. The cumulative post
acquisition changes in reserves are adjusted against the carrying amount of the investment.
Dividends receivable from associates are recognised in the parent entity’s income statement, while in the consolidated
financial statements they reduce the carrying amount of the investment.
When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured
long-term receivables and loans, the group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
2.15
Property, plant & equipment
Cost and valuation
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
Plant & equipment
2008
Years
40
3 - 10
2 - 10
2007
Years
40
3 - 10
3 - 10
Impairment
Management has identified cash generating units and applicable impairment indicators in accordance with AASB 136
"Impairment of Assets".
79
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
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.
Assets held for sale
2.16
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.
Investment properties
2.17
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.
80
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
2.18
Goodwill
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.
Management has identified cash generating units and applicable impairment indicators in accordance with AASB 136
"Impairment of Assets".
Goodwill with respect to business combinations is allocated to identified cash generating units expected to benefit from the
synergies of the combination.
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.
Computer software
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:
Useful lives
Method used
Trustee Licence
Computer software/
Development costs
Intangible assets
acquired in business
combination
Indefinite
Finite
Finite
Not amortised or revalued
Usually not in excess of 5 years
– straight line (major software
systems – 7 years)
Amortised to reflect period
and pattern of economic
benefits
Internally generated/acquired
Acquired
Internally generated or acquired
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
81
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
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 accruals ceased with effect 31 August 2005, due to the crystallisation of entitlements at that
date as disclosed in the Bendigo and Adelaide 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.
Superannuation
Accumulation fund
Contributions are made to an employee accumulation superannuation fund and are charged to expenses when incurred.
82
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Defined benefit plan
Contributions made to the defined benefit plan by entities within the consolidated entity are added to the superannuation
asset in the balance sheet. Any actuarial gains or losses are applied to the retained earnings with other fund movements
being recognised in the income statement.
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, rights or options over shares.
There are currently two plans in place to provide these benefits:
1.
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 and Adelaide 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.
2.
the Executive Incentive Plan (“EIP”), which provides for grants of performance options and 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 under the EIP 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 with the assistance of 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.
2.27 Financial guarantees
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 and Adelaide 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.
83
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
Loan portfolio premium
The loan portfolio premium is included as part of net loans and receivables in the balance sheet. The amortisation of the
loan portfolio premium is charged to the Income statement on an effective yield basis and is included in net interest
income.
Day 1 Profit
Where the transaction price in a non-active market is different to the fair value from other observable market transactions
in the same instrument or based on a valuation technique whose variables include only data from observable markets, the
Bank immediately recognises the difference between the transaction price and fair value (a 'Day 1' profit) in the income
statement in 'Other income'.
Dividends
Dividends are recognised when control of a right to receive consideration for the investment in assets is established.
Borrowing costs
2.29
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.
84
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
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 discounting the expected future cash
flows associated with the swaps. Discount rates are determined by reference to swap curves available through
independent market data providers.
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.
The group tests each of the designated cash flow hedges for effectiveness on a monthly basis both retrospectively and
prospectively using regression analysis. A minimum of 30 data points is used for regression analysis and if the testing falls
within the 80:125 range the hedge is considered highly effective and continues to be designated as a cash flow hedge.
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.
Issued ordinary capital
2.34
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.
2.35 Hybrid capital instruments
Perpetual non-cumulative redeemable convertible preference shares
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. Dividends on the shares are recognised as a distribution of equity.
85
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Reset preference shares
These instruments are classified as debt within the Balance sheet and distributions to the holders are treated as interest
expense in the Income statement.
Step up preference shares
These instruments are classified as equity and the dividends are recognised as a distribution of equity.
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) and preference share dividends, 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.
86
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
SEGMENT INFORMATION
3.
The Group’s primary reporting format is business segments and its secondary format is geographical segments.
Business segments
The Group's business segments have been realigned to reflect the organisational structure following the merger with
Adelaide Bank. These segments are 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 income predominantly derived from the provision of first mortgage finance less the interest paid to depositors;
and fee income from the provision of banking services delivered through the company-owned branch network and the
Group’s share of net interest and fee income from the community bank branch network.
Wholesale banking
Net interest income and fees derived from the Partner Advised business unit, which manufactures and processes
residential home loans, distributed through mortgage brokers and mortgage managers and the Portfolio Funding and
Specialised Lending businesses of the Group.
Wealth solutions
Fees, commissions and interest from the provision of financial planning services and margin lending activities.
Commission received as Responsible Entity for managed investment schemes and for corporate trusteeships and other
trustee and custodial services.
Joint ventures and Alliances
Profit share from equity accounted investments in associates and revenue from alliances and minor subsidiaries.
Corporate support
Unallocated corporate support business units.
Geographic segments
Bendigo and Adelaide Bank Limited and its controlled entities operate predominately in the geographic areas of all
Australian states and territories, providing banking and other financial services.
Intersegment transactions
Applicable commercial rates are used as the basis for pricing intersegment transactions.
87
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
SEGMENT INFORMATION (continued)
Business segments
The following tables present revenue and profit information and certain asset and liability information regarding business
segments for the years ended 30 June 2008 and 2007.
For the year ended 30 June 2008
Income
$ m
$ m
$ m
$ m
$ m
$ m
$ m
R e t a il
Who le s a le
We a lt h
J / V e nt ure s
T o t a l
C o rpo ra t e
B a nk ing
B a nk ing
S o lut io ns
& A llia nc e s
S e gm e nt s
S uppo rt
T o t a l
Net interest income
420.7
73.4
48.5
172.1
-
172.1
19.2
-
19.2
54.6
-
54.6
-
-
-
-
542.6
(28.3)
514.3
245.9
-
245.9
28.4
-
28.4
274.3
-
274.3
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity
accounted investments
Total segment income after interest
expense
External income
Intersegment income
Total segment income
Results
Segment result from continuing
operations before income tax expense
Income tax expense
Minority interests
Consolidated entity profit from continuing
operations after income tax expense
Assets
Segment assets
Equity accounted assets
Total assets
Liabilities
Total liabilities
Impairment losses recognised in
profit and loss
Other segment information
Non-cash expenses
Depreciation
Amortisation of intangibles
Impairment losses recognised in
profit & loss
Non-cash expenses other than
depreciation and amortisation
Acquisition of property, plant &
equipment, intangible assets and
other non-current assets
-
-
-
26.4
26.4
-
26.4
592.8
-
592.8
92.6
-
92.6
103.1
-
103.1
26.4
-
26.4
814.9
-
814.9
0.1
-
0.1
815.0
-
815.0
193.1
56.1
42.3
26.4
317.9
(71.3)
246.6
(75.4)
(0.7)
170.5
17,013.3
-
17,013.3
18,888.8
-
18,888.8
3,860.2
-
3,860.2
482.7
185.2
667.9
40,245.0
185.2
40,430.2
7,592.7
-
7,592.7
47,837.7
185.2
48,022.9
14,913.3
8,101.8
10,110.1
632.8
33,758.0
10,994.9
44,752.9
-
-
-
14.2
6.4
-
33.0
0.9
0.4
-
4.9
1.1
0.3
-
20.0
57.1
0.3
0.7
-
-
-
-
-
-
-
35.4
35.4
16.2
7.1
-
57.9
0.5
-
4.0
(7.8)
16.7
7.1
4.0
50.1
58.1
71.9
130.0
88
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
For the year ended 30 June 2007
Income
Net interest income
Other income
Other external income
Other intersegment income
Total other income
Share of net profit of equity
accounted investments
Total segment income after interest
expense
External income
Intersegment income
Total segment income
Results
Segment result from continuing
operations before income tax expense
Income tax expense
Minority interests
Consolidated entity profit from continuing
operations after income tax expense
Assets
Segment assets
Equity accounted assets
Total assets
Liabilities
Total liabilities
Other segment information
Non-cash expenses
Depreciation
Amortisation of intangibles
Impairment losses recognised in
profit & loss
Non-cash expenses other than
depreciation and amortisation
Acquisition of property, plant &
equipment, intangible assets and
other non-current assets
R e t a il
Who le s a le
We a lt h
J / V e nt ure s
T o t a l
C o rpo ra t e
B a nk ing
B a nk ing
S o lut io ns
& A llia nc e s
S e gm e nt s
S uppo rt
T o t a l
$ m
8.1
46.7
0.1
46.8
$ m
$ m
-
-
-
-
357.1
174.0
0.3
174.3
$ m
-
9.2
(0.3)
8.9
$ m
357.1
183.2
-
183.2
-
21.9
21.9
-
21.9
54.8
0.1
54.9
21.9
-
21.9
553.0
0.3
553.3
9.2
(0.3)
8.9
562.2
-
562.2
27.5
21.9
200.1
(22.2)
177.9
(56.2)
0.1
121.8
136.4
-
136.4
426.2
156.3
582.5
13,576.9
156.3
13,733.2
3,268.4
-
3,268.4
16,845.3
156.3
17,001.6
164.6
470.4
12,323.8
3,662.8
15,986.6
0.3
0.1
-
13.5
1.0
-
-
-
-
-
12.7
5.4
-
0.2
-
-
12.9
5.4
-
39.7
(10.6)
29.1
35.2
128.0
163.2
$ m
$ m
349.0
127.3
0.2
127.5
-
476.3
0.2
476.5
150.7
13,014.3
-
13,014.3
11,688.8
12.4
5.3
-
26.2
34.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
89
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
PROFIT
4.
Profit before income tax expense has been determined as follows:
(a)
Income:
Interest income
Controlled entities
Cash and cash equivalents
Financial assets (treasury) held for trading, available for sale
and held to maturity
Loans and other receivables
Other persons/entities
Cash and cash equivalents
Financial assets (treasury) held for trading
Financial assets (treasury) available for sale
Financial assets (treasury) held to maturity
Loans and other receivables
Adelaide Bank derivatives ineffective post acquistion
Cash flow derivative - controlled entity
Total interest income
Interest expense
Controlled entities
Wholesale - domestic
Other persons/entities
Deposits
Retail
Wholesale - domestic
Wholesale - offshore
Other borrowings
Notes payable
Reset preference shares
Subordinated debt
Total interest expense
Other revenue
Dividends
Controlled entities
Associates
Other
Distribution from unit trusts
Fees
Assets
Liabilities & electronic delivery
Securitisation income
Trustee, management & other services
Trading profit/(loss) - held for trading securities
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
Realised accounting gain on Visa Inc shares
90
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
-
-
-
7.2
89.8
40.7
128.1
2,368.2
2,634.0
(28.3)
-
2,605.7
-
-
-
4.5
-
24.6
104.0
925.5
1,058.6
-
-
1,058.6
0.2
3.7
3.0
7.2
-
40.7
115.3
1,057.5
1,227.6
-
(148.4)
1,079.2
2.6
-
3.0
4.5
-
24.6
100.5
873.9
1,009.1
-
-
1,009.1
-
-
0.9
0.8
1,036.5
304.1
119.2
583.8
3.2
44.6
2,091.4
-
-
3.7
0.2
3.9
44.6
85.0
15.9
11.5
(0.6)
16.0
172.4
37.7
12.9
3.8
54.4
1.2
6.5
8.5
16.2
0.4
1.8
25.2
27.4
515.7
76.5
65.0
23.1
-
21.2
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
663.5
89.4
79.2
-
3.7
26.3
863.0
178.8
14.6
3.6
-
197.0
30.8
76.4
-
0.6
-
13.2
121.0
0.4
7.3
3.7
11.4
16.9
6.5
(2.3)
21.1
0.4
1.8
18.6
20.8
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
1.1
1.4
1.3
1.2
1
2.3
1.5
1.6
1.7
2.1
2.2
1.8
10.4
10.3
10
10.2
2
2.5
2.8
2.7
2.9
5
3.2
3.4
3
6
4.3
8
8.2
8.4
8.1
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
13.7
2.9
9.1
(2.6)
23.1
182.1
18.9
5.2
10.6
0.6
12.4
3.4
3.3
19.8
256.3
22.2
-
3.3
2.1
0.1
5.3
2.9
3.5
3.6
43.0
0.8
6.3
4.0
11.1
13.4
20.4
30.3
9.4
28.9
44.2
16.9
26.8
1.1
34.8
7.5
160.2
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
1.5
0.2
3.2
2.0
2.5
2.1
31.5
1.2
4.2
-
5.4
10.3
20.2
-
-
23.8
34.8
10.9
20.4
-
23.6
7.1
120.6
8.3
(1.0)
0.4
(0.7)
7.0
140.2
14.0
0.8
1.6
0.6
8.9
2.4
5.0
14.9
188.4
35.1
-
3.3
1.4
-
4.1
2.4
3.1
2.8
52.2
-
5.2
-
5.2
9.9
16.6
30.2
4.8
24.5
36.8
14.5
24.9
1.1
20.9
5.4
128.1
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
1.4
-
3.0
1.8
2.4
2.0
42.6
-
4.1
-
4.1
9.5
16.7
-
-
23.0
33.7
10.3
20.3
9.9
21.3
9.3
127.8
1.2
0.4
0.6
0.4
161.4
121.0
128.7
128.2
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
22.7
22.8
22.9
33.1
33.2
33.3
27
11
13
14
14.3
14.5
31
15
50
12
(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 and outgoings
Land tax
Repairs and maintenance
Utililities
Cleaning
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
Fees and commissions
Impairment loss on equity investments
Integration costs
Other
Administration expenses
Communications, postage and stationery
Computer systems and software costs
Advertising & promotion
Other product & services delivery costs
Impairment loss - asset held for sale
(2007 - shares in controlled entities)
General administration expenses
Other
Borrowing costs
Total other
91
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
UNDERLYING PROFIT
5.
Underlying profit shows the growth in the core business of the economic entity
Profit after income tax expense
Add,
Bad and doubtful debts expense (net of bad debts recovered)
Amortisation of intangibles excluding software amortisation)
Significant items before tax (Note 9)
Income tax expense - total (Note 6)
Underlying profit before income tax
INCOME TAX EXPENSE
6.
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
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 cash flow hedge
Net gain/(loss) on revaluation of investments
Net gain on revaluation of land and buildings
Net gain on acquisition revaluations
Other
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
C o ns o lida t e d
2 0 0 8
$ m
2 0 0 7
$ m
170.5
121.8
23.1
4.8
49.9
75.4
323.7
8.2
1.2
7.3
56.2
194.7
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
117.8
0.6
(35.9)
(7.1)
75.4
33.1
(8.0)
-
3.2
0.6
28.9
2 0 0 7
$ m
67.2
(1.1)
(3.2)
(6.7)
56.2
-
2.7
0.2
-
-
2.9
2 0 0 8
$ m
41.2
(0.7)
(51.9)
(7.1)
(18.5)
24.2
(8.0)
-
-
-
16.2
2 0 0 7
$ m
48.4
(1.1)
(3.6)
(6.7)
37.0
-
2.7
0.1
-
-
2.8
246.6
177.9
144.5
149.2
92
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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
Accrued expenses
Borrowing costs
Deferred Expenses
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
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
74.0
0.6
(7.1)
0.6
3.4
(7.1)
21.5
0.6
0.1
15.8
(35.9)
(7.5)
5.7
0.1
3.2
3.1
2.1
2.2
75.4
30.6%
53.4
(1.1)
(6.7)
0.5
0.1
-
(1.2)
0.3
0.2
16.1
(3.2)
-
-
0.5
0.6
0.4
2.0
(5.7)
56.2
31.6%
43.3
(0.7)
(7.1)
0.6
-
-
(6.6)
0.6
0.1
10.9
(51.9)
(6.7)
-
0.7
0.1
3.2
2.1
(7.1)
(18.5)
-12.8%
44.8
(1.1)
(6.7)
0.5
0.1
-
(1.3)
0.3
0.2
5.7
(3.6)
-
-
0.6
0.6
0.4
2.0
(5.5)
37.0
24.8%
Deferred income tax
Deferred income tax at 30 June relates to the following:
B a la nc e s he e t
Inc o m e s t a t e m e nt
2 0 0 8
$ m
(4.3)
(3.6)
(68.3)
1.3
(5.5)
(3.6)
(12.7)
(1.8)
(98.5)
5.2
22.4
8.0
12.1
(0.1)
1.1
4.9
3.7
8.0
24.1
19.5
4.9
113.8
2 0 0 7
$ m
(0.4)
(16.3)
-
(0.1)
(3.6)
-
-
(1.4)
(21.8)
0.1
-
-
7.3
1.5
0.9
3.6
2.1
4.8
1.7
5.9
4.7
32.6
2 0 0 8
$ m
2 0 0 7
$ m
(0.1)
(5.1)
0.8
(0.6)
2.4
7.1
(0.1)
0.1
(3.4)
(23.6)
(1.9)
(0.1)
-
(0.1)
(1.2)
(0.6)
(3.1)
(3.1)
(3.2)
(0.1)
(35.9)
-
0.4
0.1
1.2
-
-
(0.1)
(0.1)
-
-
(0.5)
(1.1)
(0.2)
(0.5)
(0.3)
(0.4)
(0.5)
(0.6)
(0.6)
(3.2)
Consolidated
Deferred tax liab ilities
Land, buildings and improvements
Revaluations of available-for-sale financial assets to fair value
Deferred gains and losses of interest rate swaps
Deferred gains and losses on foreign exchange contracts
Deferred expenses
Borrowing costs
Lease receivable
Other
Deferred tax liabilities
Deferred tax assets
Accrued expenses
Deferred expenses
Merger costs
Post-employment benefits
Deferred gains and losses of interest rate swaps
Expenses tax depreciable
Land, buildings and improvements
Plant and equipment
Movement in provisions
Prepaid income
Movement in loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
93
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
INCOME TAX EXPENSE (continued)
Bendigo and Adelaide Bank
Deferred tax liab ilities
Land, buildings and improvements
Revaluations of available-for-sale financial assets to fair value
Revaluations of interest rate swaps 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
Movement in provisions
Prepaid income
Movement in loan provisions
Other
Deferred tax assets
Deferred tax income/(expense)
B a la nc e s he e t
Inc o m e s t a t e m e nt
2 0 0 8
$ m
(0.1)
(1.8)
(27.7)
(9.6)
0.4
(38.8)
7.9
46.3
1.1
3.8
2.7
7.9
1.5
5.8
7.3
84.3
2 0 0 7
$ m
(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
2 0 0 8
$ m
(0.1)
(6.7)
-
6.6
(0.4)
(0.7)
(43.7)
(0.1)
(0.7)
(0.5)
(3.2)
0.2
(0.1)
(2.5)
(51.9)
2 0 0 7
$ m
-
-
1.4
0.1
(0.6)
(1.1)
(0.2)
(0.5)
(0.3)
(0.4)
(0.5)
(0.6)
(0.9)
(3.6)
At 30 June 2008, there is no unrecognised deferred income tax liability (2007: 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.
Tax consolidation
Effective 1 July 2002, for the purposes of income taxation, Bendigo and Adelaide Bank Limited and its 100% owned subsidiaries
formed a tax consolidated group. Members of the group entered into a tax sharing agreement 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 and Adelaide Bank Limited.
There has not been any material effect on tax assets or liabilities as a result of any revised tax legislation. Bendigo and
Adelaide 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 and Adelaide 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 and Adelaide 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
Parent
2 0 0 8
$ m
6.6
(6.6)
2 0 0 7
$ m
1.6
(1.6)
94
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
7.
AVERAGE BALANCE SHEET AND RELATED INTEREST
For the twelve month period ended 30 June 2008
A v e ra ge Int e re s t
A v e ra ge
B a la nc e
12 m t hs R a t e
Footnote
$ m
$ m
%
Average balances and rates
Interest earning assets
Cash and investments
Loans and other receivables - company
Loans and other receivables - alliances
Total interest earning assets
Non interest earning assets
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Notes payable
Reset preference shares
Subordinated debt
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 before cash flow hedge - ineffectiveness
Adelaide Bank derivatives ineffective post acquistion
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
and cash flow hedge ineffectiveness
Less impact of community bank/alliances share of net interest income
Net interest margin before cash flow hedge ineffectiveness
4,125.7
24,576.4
5,060.1
33,762.2
(41.0)
1,902.1
1,861.1
35,623.3
13,036.6
5,906.0
4,474.0
1,483.6
7,326.7
52.2
552.6
32,831.7
536.5
2,255.1
2,791.6
35,623.3
33,762.2
(32,831.7)
265.8
2,061.3
386.4
2,713.5
6.44
8.39
7.64
8.04
732.9
383.1
304.1
119.2
583.8
3.2
44.6
2,170.9
2,713.5
(2,170.9)
542.6
(28.3)
514.3
5.62
6.49
6.80
8.03
7.97
6.13
8.07
6.61
8.04
(6.61)
1.43
1.61
(0.09)
1.52
1.93
0.32
1.61
1 A verage balance is based o n mo nthly clo sing balances fro m 30 June 2007 thro ugh 30 June 2008 inclusive, with the exceptio n o f Who lesale do mestic,
which is based o n a daily clo sing balance.
2 Interest payments to alliance partners are net values in the Inco me Statement. Interest inco me and expense values have been increased by $ 79.5m to
reflect the gro ss amo unts.
3 Interest spread is the difference between the average interest rate earned o n assets and the average interest rate paid o n funds.
4 Interest margin is the net interest inco me as a percentage o f average interest earning assets.
95
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
AVERAGE BALANCE SHEET AND RELATED INTEREST (continued)
For the twelve month period ended 30 June 2007
A v e ra ge Int e re s t
A v e ra ge
B a la nc e
12 m t hs R a t e
Footnote
$ m
$ m
%
Average balances and rates
Interest earning assets
Cash and investments
Loans and other receivables - company
Loans and other receivables - alliances
Total interest earning assets
Non interest earning assets
Provisions for doubtful debts
Other assets
Total assets (average balance)
Interest bearing liabilities
Deposits
Retail - company
Retail - alliances
Wholesale - domestic
Wholesale - offshore
Notes payable
Reset preference shares
Subordinated debt
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
133.1
696.9
285.5
1,115.5
5.86
7.80
7.03
7.31
300.2
272.4
76.5
65.0
23.1
-
21.2
758.4
2,271.6
8,939.1
4,059.2
15,269.9
(19.2)
720.1
700.9
15,970.8
6,911.6
4,824.4
1,338.6
1,015.7
314.5
-
295.9
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
4.34
5.65
5.71
6.40
7.34
-
7.16
5.16
7.31
(5.16)
2.15
2.34
2.90
0.56
2.34
1 A verage balance is based o n mo nthly clo sing balances fro m 30 June 2006 thro ugh 30 June 2007 inclusive, with the exceptio n o f Who lesale do mestic, which
is based o n a daily clo sing balance.
2 Interest payments to alliance partners are net values in the Inco me Statement. Interest inco me and expense values have been increased by $ 56.9m to reflect
the gro ss amo unts.
3 Interest spread is the difference between the average interest rate earned o n assets and the average interest rate paid o n funds.
4 Interest margin is the net interest inco me as a percentage o f average interest earning assets.
96
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
8.
CAPITAL MANAGEMENT
a. Capital management
Bendigo and Adelaide Bank Limited’s (Bendigo’s) key capital management objectives are to:
•
•
•
Optimise the level and use of capital resources to enhance shareholder value through maximising financial performance;
Maintain a sufficient level of capital above the regulatory minimum to provide a buffer against loss arising from
unanticipated events, and allow the Group to continue as a going concern;
Ensure that capital management is closely aligned with the Group’s business and strategic objectives; and
Achieve progressive improvement to short- and long-term credit ratings.
•
The Group manages capital adequacy according to the framework provided by APRA’s Prudential Standards. Capital adequacy
is measured at two levels:
•
•
Level 1 includes Bendigo and Adelaide Bank Limited (Bendigo) and certain controlled entities that meet the APRA
definition of extended licensed entities; and
Level 2 consists of the consolidated group, excluding non-controlled subsidiaries and subsidiaries involved in insurance,
funds management, non-financial operations and securitisation special purpose vehicles.
APRA determines minimum prudential capital ratios (eligible capital as a percentage of total risk-weighted assets) that must be
held by all authorised deposit-taking institutions. Accordingly, Bendigo is required to maintain a minimum prudential capital ratio
(eligible capital as a percentage of total risk-weighted assets) at both Level 1 and Level 2 as determined by APRA. As part of
Bendigo’s capital management process, the Board considers the Group’s strategy, financial performance objectives, ACE ratio,
credit ratings and other factors relating to the efficient management of capital in setting target ratios of capital above the
regulatory required levels. These processes are formalised within Bendigo’s internal capital adequacy assessment process (or
iCAAP).
Bendigo has adopted APRA’s Standardised Approach to credit risk, which requires the Group to determine capital requirements
based on standards set by APRA.
Bendigo satisfied APRA’s minimum capital requirements at Levels 1 and 2 throughout the 2007/8 financial year.
APRA has defined two broad categories of capital, and the form and substance of their components must meet APRA’s specific
requirements in order to be eligible for inclusion in the Group’s capital base. Tier 1 capital comprises the highest quality
components of capital, and Tier 2 includes other components of lesser quality, but which still contribute to the overall strength of
the Group as a going concern. At least half of Bendigo’s eligible capital must be held in the form of Tier 1 capital.
97
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
CAPITAL MANAGEMENT (continued)
b. Capital adequacy
Risk w eighted capital ratios
Tier 1
Tier 2
Total capital ratio
Qualifying capital
Tier 1
Contributed capital
Retained profits & reserves
Innovative tier 1 capital
Less,
Intangible assets, cash flow hedges and capitalised expenses
Net deferred tax assets
50/50 deductions
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,
50/50 deductions
Other adjustments as per APRA advice
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 2008
$m
As at
June 2007
$m
7.52%
2.91%
10.43%
7.98%
2.26%
10.24%
2,706.3
207.5
277.9
1,592.5
66.9
40.6
-
1,491.7
103.6
681.8
11.4
796.8
40.6
179.5
-
576.7
-
2,068.4
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
Total risk w eighted assets
19,820.8
9,754.0
98
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
c.
Adjusted common equity (“ACE”) and Adjusted total equity (“ATE”)
Adjusted common equity and Adjusted total equity are measures considered by Standard & Poor’s in evaluating the Bank’s
credit rating. The ACE and ATE ratios have been calculated in accordance with the Standard & Poor’s methodology.
Shareholders' equity
Minority interest equity
Retained earnings
Expected dividends
Goodw ill
Other deductions
C o ns o lida t e d
A s a t
A s a t
J une 2 0 0 8
J une 2 0 0 7
$ m
$ m
2,766.9
-
242.0
(99.4)
(1,460.4)
(4.5)
1,444.6
624.9
(0.7)
232.4
(46.6)
(93.7)
-
716.3
Adjusted Common Equity ratio to risk w eighted assets
7.29%
7.34%
Investments in associates and joint ventures equity accounted for
Hybrid capital
Subsidiary investment residual
Adjusted total equity
Adjusted Total Equity ratio to risk w eighted assets
9.
EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share
Diluted earnings per ordinary share
Cash basis earnings per ordinary share
(185.2)
278.0
(9.0)
1,528.4
7.71%
(156.3)
88.5
(9.0)
639.5
6.56%
C o ns o lida t e d
2 0 0 8
2 0 0 7
C e nt s pe r s ha re C e nt s pe r s ha re
74.8
74.7
93.7
81.9
81.1
82.9
$ 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
Dividends paid/accrued on step up 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
171.2
(0.7)
(5.5)
(3.7)
161.3
161.3
-
161.3
121.7
0.1
(4.8)
-
117.0
117.0
4.8
121.8
99
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
EARNINGS PER ORDINARY SHARE (continued)
Reconciliation of earnings used in the calculation of cash basis earnings per ordinary share
Consolidated
2008
2007
Earnings used in calculating basic earnings per ordinary share
After tax intangibles amortisation (excluding software amortisation)
After tax significant income and expense items ( 1 )
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
Significant general reserve for credit losses movement - BBL move
to 0.51% of RWA
Weighted average number of ordinary shares used in basic and cash
basis earnings per ordinary share
Effect of dilution - executive performance rights
Effect of dilution - preference shares
161.3
4.8
35.1
5.7
(1.0)
(4.0)
201.9
117.0
1.2
6.8
(4.7)
(1.8)
-
118.5
No. of shares No. of shares
215,528,083 142,878,434
294,427
-
100,117
7,155,635
Weighted average number of ordinary shares used in diluted earnings
per ordinary share
215,822,510 150,134,186
(1) Significant income and expense items after tax comprise:
$m
$m
Income
Adelaide Bank derivatives ineffective post acquistion
Realised accounting gain on Visa Inc shares
Expense
Expense relating to an issue of shares to staff under the Employee Share Plan
Shortfall relating to Employee Share Plan
Impairment loss - equity investments
Integration costs
Fair value adjustment - head office development
ATO audit costs
Expense relating to Bank of Queensland proposed merger
19.8
(17.6)
1.0
2.1
21.1
6.6
1.4
0.7
-
35.1
-
-
5.6
-
-
-
-
-
1.2
6.8
Significant items are items of income or expense that are, by management judgement, of significant value and/or
are unusual or non-recurring by nature. These items are excluded from cash basis earnings.
Conversions, calls, subscription or issues after 30 June 2008
There have been not 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 - Executive performace rights
Executive performance rights are treated as dilutive from the date of issue and remain dilutive so long as the
performance conditions are satisfied. In the event of a performance condition not being satisfied, the number of
dilutive rights would be reduced to the number that would have been issued if the end of the period was the end
of the contingency period.
Potentially dilutive instruments
The following instruments are potentially dilutive in the future, but are assessed as not being dilutive as at the
reporting date:
Preference shares
Step up preference shares
Reset preference shares
Executive share options
Executive performance rights
Dilutive
2007
Yes
Yes
Yes
No
Yes
2008
No
No
No
No
Yes
100
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
10.
DIVIDENDS
Dividends paid or proposed
Ordinary shares
Dividends paid during the year
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
current year
Interim dividend (28.0 cents per share) (2007 - 24.0 cents per share)
71.7
32.6
71.7
32.6
previous year
Final dividend (34.0 cents per share) (2007 - 30.0 cents per share)
46.8
118.5
40.1
72.7
46.8
118.5
40.1
72.7
Dividends proposed since the reporting date, b ut not recognised as a liab ility
Final dividend (37.0 cents per share) (2007: 34.0 cents per share)
99.4
46.6
99.4
46.6
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 2008.
Preference shares
Dividends paid during the year
142.66 cents per share paid on 17 September 2007 (2007: 131.68 cents)
147.76 cents per share paid on 17 December 2007 (2007: 134.64 cents)
154.28 cents per share paid on 17 March 2008 (2007: 136.36 cents)
162.85 cents per share paid on 16 June 2008 (2007: 138.89 cents)
Step up preference shares
Dividends paid during the year
152.00 cents per share paid on 10 January 2008 (2007: Nil)
155.00 cents per share paid on 10 April 2008 (2007: Nil)
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% (2007: 30%).
Dividends proposed will be franked at the rate of 30% (2007: 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
Dividend Reinvestment Plan
1.3
1.3
1.4
1.5
5.5
1.5
1.6
3.1
1.2
1.2
1.2
1.2
4.8
-
-
-
1.3
1.3
1.4
1.5
5.5
1.5
1.6
3.1
1.2
1.2
1.2
1.2
4.8
-
-
-
233.9
116.0
11.1
16.3
(43.6)
201.4
(21.0)
111.3
95.0
32.1
127.1
57.0
20.5
77.5
95.0
32.1
127.1
57.0
20.5
77.5
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 and Adelaide Bank
shares traded on the Australian Securities Exchange over the ten trading days following the Record Date at a current discount
of 2.5% for 2008. 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 and Adelaide Bank shares traded on the Australian Securities Exchange over the ten trading days following the Record
Date at a current discount of 2.5% for 2008. 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 2008 final dividend was 2 September 2008.
101
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
11.
RETURN ON AVERAGE ORDINARY EQUITY
C o ns o lida t e d
2 0 0 8
%
2 0 0 7
%
Return on average ordinary equity
8.65
15.18
Pre-significant items return on average ordinary equity
10.53
16.06
Cash basis return on average ordinary equity
10.82
15.38
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
Dividends paid/accrued on step up 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 item s return on average
ordinary equity
After tax intangibles amortisation (excluding amortisation of intangible softw are)
Movement in general reserve for credit losses
Movement in general reserve for credit losses - associates
Significant general reserve for credit losses movement - BBL move to 0.51% of RWA
$ m
$ m
171.2
121.7
(0.7)
(5.5)
(3.7)
161.3
35.1
196.4
4.8
5.7
(1.0)
(4.0)
0.1
(4.8)
-
117.0
6.8
123.8
1.2
(4.7)
(1.8)
-
Earnings used in calculation of cash basis return on average ordinary equity
201.9
118.5
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
3,270.0
(188.5)
(14.8)
(55.8)
(76.2)
(9.3)
-
2,925.4
1,015.0
(88.5)
(32.7)
(35.2)
(45.3)
(8.3)
0.7
805.7
Average ordinary equity
1,865.6
770.7
The above calculation uses a basic average balance calculation, consistant w ith previous years.
If a monthly average balance calculation w ere used for the current period, the return on average ordinary
equity w ould be 8.55%. This is due to the significant increase in ordinary equity follow ing the merger w ith
Adelaide Bank on 30 November 2007.
102
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
12.
NET TANGIBLE ASSETS PER ORDINARY SHARE
Net tangible assets per ordinary share
Reconciliation of net tangible assets used in calculation of net tangible assets
per ordinary share
Net assets
Intangibles
Preference shares - face value
Step up preference shares - face value
General reserve for credit losses
General reserve for credit losses - associates
Minority interest
Net tangible assets
C o ns o lida t e d
2 0 0 8
2 0 0 7
$
5.59
$
5.40
$ m
3,270.0
(1,460.4)
(90.0)
(100.0)
(76.2)
(9.3)
-
1,534.1
$ m
1,015.0
(93.7)
(90.0)
-
(45.3)
(8.3)
0.7
778.4
Num ber of ordinary shares on issue at reporting date
274,678,383
144,187,890
13.
CASH FLOW STATEMENT RECONCILIATION
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
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
171.2
121.7
163.0
112.2
25.7
11.1
16.7
16.0
4.4
(26.4)
13.0
(0.5)
4.0
(0.4)
34.1
(4.4)
(21.5)
21.6
(106.4)
158.2
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
7.7
5.2
13.2
19.5
6.1
-
-
(0.5)
-
(0.4)
(29.7)
(34.8)
(15.9)
11.1
72.2
216.7
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
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.
103
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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
15.
FINANCIAL ASSETS HELD FOR TRADING
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
809.1
386.8
1,195.9
1,195.9
412.7
(269.7)
1,338.9
2 0 0 7
$ m
200.7
56.9
257.6
257.6
71.5
(184.0)
145.1
2 0 0 8
$ m
198.6
241.9
440.5
440.5
237.6
(151.7)
526.4
2 0 0 7
$ m
146.6
56.9
203.5
203.5
71.1
(184.0)
90.6
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
Bank discount securities
Other discount securities
Floating rate notes
Government securities
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
16.
FINANCIAL ASSETS AVAILABLE FOR SALE - SECURITIES
Negotiable securities
Negotiable certificates of deposit
Government securities
Bank accepted bills of exchange
Reset preference Shares
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
29.9
1,026.9
259.7
98.3
1,414.8
745.7
481.7
187.4
-
1,414.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
307.2
15.0
99.8
-
422.0
422.0
-
-
-
422.0
2 0 0 7
$ m
19.9
408.9
-
-
428.8
428.8
-
-
-
428.8
2 0 0 8
$ m
407.2
15.0
99.8
89.5
611.5
522.0
-
-
89.5
611.5
-
-
-
-
-
-
-
-
-
-
2 0 0 7
$ m
19.9
408.9
-
-
428.8
428.8
-
-
-
428.8
Recognised gains / (losses) before tax:
Gain/(loss) recognised directly in equity
Amount removed from equity and recognised in profit/(loss)
0.1
-
-
-
-
-
-
-
104
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
17.
FINANCIAL ASSETS AVAILABLE FOR SALE – SHARE INVESTMENTS
Share investments at fair value
Listed share investments
Unlisted share investments
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
79.7
4.9
84.6
2 0 0 7
$ m
124.5
5.9
130.4
2 0 0 8
$ m
74.5
2.7
77.2
2 0 0 7
$ m
123.8
4.1
127.9
Recognised gains / (losses) before tax:
Gain/(loss) recognised directly in equity
Amount removed from equity and recognised in (profit)/loss
(56.0)
29.9
8.9
-
(56.7)
29.8
9.4
-
18.
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
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
5.3
798.9
204.3
394.1
1,402.6
-
12.0
-
12.0
1,414.6
813.8
333.9
266.9
-
1,414.6
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
-
1,131.4
204.3
337.7
1,673.4
-
-
-
-
1,673.4
1,077.9
328.6
266.9
-
1,673.4
-
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
105
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
19.
LOANS AND OTHER RECEIVABLES
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
Loans and other receivables - investments
517.6
-
-
-
Overdrafts
Credit cards
Term loans
Margin lending
Lease receivables
Factoring receivables
3,184.3
289.9
32,153.2
3,767.3
434.3
46.2
2,973.0
139.8
3,136.2
169.9
10,241.1
11,313.4
90.5
359.4
40.3
63.4
405.9
9.4
3,012.4
139.8
9,884.0
90.5
356.7
4.5
Gross loans and other receivables
39,875.2
13,844.1
15,098.2
13,487.9
Specific provision for impairment (Note 20)
Collective provision for impairment (Note 20)
Unearned income
(22.1)
(36.8)
(106.7)
(165.6)
(8.4)
(11.4)
(51.0)
(70.8)
(9.5)
(10.0)
(60.3)
(79.8)
(8.1)
(11.0)
(50.7)
(69.8)
Deferred costs
12.3
-
-
-
Net loans and other receivables
39,721.9
13,773.3
15,018.4
13,418.1
Impaired loans
Loans
- without provisions
- with provisions
less specific impairment provisions
Net impaired loans
-
43.2
(21.6)
21.6
0.6
17.6
(8.4)
9.8
-
12.9
(9.0)
3.9
0.6
16.8
(8.1)
9.3
Net impaired loans % of loans and other receivables
0.05%
0.07%
0.03%
0.07%
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
Net fair value of properties acquired through the enforcement of security
Interest income recognised
Interest income recognised in respect of impaired loans
Interest income recognised in respect of assets acquired through enforcement
2.4
(0.5)
1.9
174.3
15.3
88.3
0.3
0.5
2.0
(0.3)
1.7
61.6
7.3
15.3
0.1
0.6
2.4
(0.5)
1.9
54.1
6.2
15.3
0.3
0.5
2.0
(0.3)
1.7
61.2
7.1
15.3
0.1
0.6
Interest income recognised is the interest income actually received subsequent to these balances becoming impaired or restructured.
Maturity analysis ( 1)
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
2,242.7
4,699.9
2,621.9
8,712.5
22,115.8
40,392.8
3,261.7
1,092.8
844.4
5,467.3
3,177.9
13,844.1
2,111.2
1,036.7
2,072.7
6,534.0
3,343.6
15,098.2
3,251.9
1,090.1
832.5
5,427.0
2,886.4
13,487.9
1
Balances exclude specific and general provisions for doubtful debts and unearned revenue.
106
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
20.
IMPAIRMENT OF LOANS AND ADVANCES
Specific provision for impairment
Opening balance
Provision acquired in business combination
Charged to income statement
Impaired debts written-off applied to specific impairment provision
Closing balance
Collective provision for impairment
Opening balance
Provision acquired in business combination
Charged to income statement
Closing balance
General reserve for credit losses
Opening balance
Provision acquired in business combination
Charged to equity
Closing balance
Bad and doubtful debts expense
Specific provisions for impairment
Collective provision
Bad debts written off
Bad debts recovered
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
8.4
6.9
13.7
(6.9)
22.1
11.4
22.5
2.9
36.8
45.3
36.6
(5.7)
76.2
13.7
2.9
9.1
(2.6)
23.1
2 0 0 7
$ 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
2 0 0 8
$ m
8.1
-
8.3
(6.9)
9.5
11.0
-
(1.0)
10.0
45.3
-
0.9
46.2
8.3
(1.0)
0.4
(0.7)
7.0
2 0 0 7
$ 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
Ratios
Specific provision as % of gross loans less unearned income
0.06%
0.06%
Collective provision (net of tax) & General reserve for credit losses
as a % of risk-weighted assets
0.51%
0.55%
107
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
21.
PARTICULARS IN RELATION TO CONTROLLED ENTITIES
N a m e
Chief entity
Bendigo and Adelaide Bank Limited
Directly Controlled Operating Entities
Adelaide Bank Limited
(1)
(2)
AB Management Pty Ltd
ABL Custodian Services Pty Ltd
ABL NIM Pty Ltd
ABL Nominees Pty Ltd
ABL Securities Pty Ltd
Adelaide Bank Charitable Foundation Ltd
Adelaide Equity Finance Pty Ltd
Adelaide Managed Funds Ltd
Co-operative Member Services Pty Ltd
Hindmarsh Adelaide Property Trust
Leveraged Equities Ltd
Pirie Street Custodian Ltd (formerly Leveraged Equities Nominees Ltd)
Pirie Street Nominees Pty Ltd (formerly Leveq Nominees Pty Ltd)
BBS Nominees Pty Ltd
Bendigo Finance Pty Ltd
Bendigo Financial Planning Ltd
Community Developments Australia Pty Ltd
Community Energy Australia Pty Ltd
Community Solutions Australia Pty Ltd
Community Exchanges Australia Pty Ltd
Fountain Plaza Pty Ltd
Homesafe Trust
National Mortgage Market Corporation Pty Ltd
Asia Pacific Receivables 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
CS Cust Pty Ltd (nine custodian subsidiaries)
CS Subcust 1 Pty Ltd
CS Subcust 2 Pty Ltd
Sunstate Lenders Mortgage Insurance Pty Ltd
Victorian Securities Corporation Ltd
Securitisation
Banksia Trust Series 2001-1
Banksia Trust Series 2001-2
AIL Trust No 1
Series 2007-1 Torrens Trust
Portfolio Funding Trust 2007-1
Series 2006-1(E) Torrens Trust
Series 2005-1 Torrens Trust
Series 2001-1 Torrens Trust
Series 2008-1 Torrens Trust
Lighthouse Warehouse Trust No 6
Lighthouse Warehouse Trust No 4
Series 2004-1 Torrens Trust
Series 2005-3 (E) Torrens Trust
NIM Trust
108
P rinc ipa l
A c t iv it ie s
Banking
Banking
Securitisation Manager
Security Trustee
Trust Manager
Trustee company
Investment company
Trustee company
Margin Lending
Responsible Entity for listed trust
Trustee for executive & staff equity plans
Property Owner
Margin Lending
Provider of share nominee services for
margin lending
Acquires and sells financial products
held as security for LE margin loans
Administration company
Leasing finance
Financial advisory services
Community initiatives
Community initiatives
Community initiatives
Community initiatives
Property owner
Financial services
Mortgage origination & m'ment
Securitisation Manager
Securitisation manager
Invoice discounting
Trustee company
Nominee company
Custodian company
Nominee company
Investment manager
Custodian company
Custodian company
Custodian company
Mortgage insurance
Financial services
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
N a m e
Securitisation (cont)
Series 2003-1 Torrens Trust
Series 2002-1 Torrens Trust
Series 2005-1AAA Torrens Trust
Lighthouse Warehouse Trust No 12
Lighthouse Warehouse Trust No 2
Lighthouse Warehouse Trust No 1
Lighthouse Warehouse Trust No 11
Series 2004-2 (W) Torrens Trust
Series 2005-2(S) Torrens Trust
Q9 Trust
Lighthouse Warehouse Trust No. 5
Q10 Trust
P rinc ipa l
A c t iv it ie s
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
1 No n-Operating co ntro lled entities are excluded fro m the abo ve list.
2 A ll entities are 100% o wned and inco rpo rated in A ustralia.
22.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES USING THE EQUITY METHOD
Nam e
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 Payments Services Pty Ltd
Ow nership
interest held by
consolidated entity
2008
2007
%
%
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
100.0
50.0
50.0
50.0
50.0
40.0
33.3
Balance date
30 June
30 June
30 June
30 June
30 June
30 June
30 June
30 June
(i) Principal activities of joint venture companies
Elders Rural Bank Ltd - financial services
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 Payments Services Pty Ltd - payment processing services
* Effective 30 June 2008, Caroline Springs Financial Services Pty Ltd is a w holly-ow ned subsidiary.
All joint venture companies w ere incorporated in Australia.
(ii) Share of joint ventures' revenue and profits
Share of joint ventures':
- revenue
- expense
- profit before income tax
- income tax expense
- profit after income tax
109
2008
$m
67.3
40.9
26.4
9.2
17.2
2007
$m
59.8
37.9
21.9
8.1
13.8
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES USING THE EQUITY METHOD (continued)
Share of joint ventures' 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 Payments Services Pty Ltd
The consolidated entity's share in the retained profits and reserves of joint venture
companies is not available for payment of dividends to shareholders of
Bendigo and Adelaide Bank Limited until such time as those profits and reserves are
distributed by the joint venture companies.
(iii) Carrying amount of investments in joint ventures
Balance at the beginning of financial year
- carrying amount of investment in joint ventures acquired during the year
- dividends received from joint ventures
- share of joint ventures' net profits (losses) for the financial year
- share of joint ventures' movements in retained earnings for the financial year
- share of joint ventures' movements in reserves for the financial year
Carrying amount of investments in joint ventures 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
2008
$m
20.8
1.0
0.5
(0.7)
-
0.2
(1.9)
(2.7)
17.2
156.3
24.3
(14.6)
17.2
0.1
1.9
185.2
179.4
2.3
0.5
0.1
-
0.5
1.3
1.1
185.2
2007
$m
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
There are no impairment losses relating to investments in joint ventures.
Unrecognised losses relating to joint ventures
-
-
** Caroline Springs Financial Services Pty Ltd became a wholly owned subsidiary of Bendigo and Adelaide Bank Ltd
on 30 June 2008
(iv) The consolidated entity's share of the assets and liabilities of joint venture
in aggregate
Assets
Liabilities
Net Assets
(v) Amount of retained profits of the consolidated entity attributable to
joint ventures
T o t a l
E lde rs R ura l B a nk Lim it e d
2 0 0 8
2 0 0 7
2 0 0 8
2 0 0 7
2,122.4
1,959.8
162.6
72.8
1,895.1
1,760.7
134.4
70.2
2,111.5
1,954.5
157.0
1,885.4
1,756.2
129.2
Subsequent events affecting a joint ventures' profits/losses for the ensuing year (if any) are disclosed in the Events after Balance Sheet
Date note.
The consolidated entity's share of joint ventures' commitments and contingent liabilities (if any) are disclosed in the Commitments and
Contingencies note.
110
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
23.
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
(b) Reconciliations
(1 )
Freehold land
Carrying amount at beginning of financial year
Additions
Additions through acquisition of entities
Revaluations
Disposals
(1 )
Freehold buildings
Carrying amount at beginning of financial year
Additions
Additions through acquisition of entities
Revaluations
Disposals
Depreciation expense
Leasehold improvements - at cost
Carrying amount at beginning of financial year
Acquisitions
Additions
Additions through acquisition of entities
Disposals
Depreciation expense
Plant, furniture, fittings, office equipment & vehicles
Carrying amount at beginning of financial year
Acquisitions
Additions
Additions through acquisition of entities
Re-classification to assets held for sale
Disposals
Depreciation expense
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
9.3
9.3
24.5
(0.5)
24.0
47.4
(17.3)
30.1
63.4
178.2
(128.1)
50.1
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
5.8
5.8
1.2
-
1.2
37.2
(12.6)
24.6
31.6
91.2
(61.3)
29.9
0.3
0.3
0.2
-
0.2
44.1
(15.8)
28.3
28.8
101.8
(63.9)
37.9
0.4
0.4
0.3
-
0.3
37.2
(12.6)
24.6
25.3
84.6
(56.3)
28.3
113.5
61.5
66.7
53.6
5.8
-
8.2
-
(4.7)
9.3
1.2
-
23.4
-
(0.1)
(0.5)
24.0
24.6
-
7.3
1.6
-
(3.4)
30.1
29.9
-
21.8
12.5
-
(1.2)
(12.9)
50.1
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
2.4
8.7
(4.1)
7.0
0.4
-
-
-
(0.1)
0.3
0.3
-
-
-
(0.1)
-
0.2
24.6
-
6.9
-
-
(3.2)
28.3
28.3
-
20.6
-
-
(1.1)
(9.9)
37.9
0.1
0.1
-
0.2
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
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
16.9
(6.3)
13.0
1
The fair values of freehold land and buildings 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.
111
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
24. ASSETS HELD FOR SALE
Carrying amount at beginning of financial year
Additions
Fair value adjustment
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
93.4
15.2
(3.1)
105.5
2 0 0 7
$ m
-
93.4
-
93.4
2 0 0 8
2 0 0 7
$ m
-
4.3
(1.1)
3.2
$ 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 took effect 29 August 2008.
25. INVESTMENT PROPERTY
Carrying amount at beginning of financial year
Additions
Net gain from fair value adjustments
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
34.2
41.0
5.2
80.4
2 0 0 7
$ m
-
32.7
1.5
34.2
2 0 0 8
2 0 0 7
$ m
-
-
-
-
$ m
-
-
-
-
Investment properties are carried at fair value, which has been determined in accordance with directors’ valuations and have
not been independently valued.
The fair value represents the amounts at which the assets could be sold in an arm’s length transaction at the date of valuation.
As the asset represents residential properties, the realisability of the properties and the remittance of income and proceeds of
disposal can be impacted by the real estate market conditions in relation to residential properties, particularly Melbourne and
Sydney.
112
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
26.
INTANGIBLE ASSETS AND GOODWILL
C o ns o lida t e d
P a re nt
(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
Addition acquired through business combination
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
Addition acquired through business combination/(purchase price adjustment)
Transfer to purchased goodwill
Impairment
2 0 0 8
$ m
4.7
(4.0)
0.7
37.1
(15.3)
21.8
8.4
-
8.4
34.6
-
34.6
1,398.9
(4.0)
1,394.9
1,460.4
1.4
0.1
(0.8)
0.7
19.7
3.2
4.3
-
(5.4)
21.8
8.4
8.4
34.6
-
34.6
29.6
1,369.3
-
(4.0)
1,394.9
1,460.4
2 0 0 7
$ 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
2 0 0 8
$ m
2 0 0 7
$ m
-
-
-
33.4
(14.6)
18.8
-
-
-
34.6
-
34.6
-
-
-
53.4
-
-
-
-
19.6
-
4.6
-
(5.4)
18.8
-
-
34.6
-
34.6
-
-
-
-
-
53.4
-
-
-
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
113
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
INTANGIBLE ASSETS AND GOODWILL (continued)
Intangible assets
Finite useful life
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.
IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES
27.
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 2007/08 and applying a multiple of 12 (2007:12). Management believe this multiple is appropriate for this business.
For impairment testing purposes, the fair value has been allocated on the basis of 80% to the trustee licence and 20% to the
goodwill.
The multiple would have to decline to 1 (2007: 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 2007/08 of the group of units and applying a multiple of 12 (2007:12). Management believes
this multiple is appropriate for the group of branches.
The multiple would have to decline to 4.9 (2007:4) before impairment would be evident.
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 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 16.1%. The terminal value of the unit has been calculated using a
multiple of 10 (2007: 12), which is considered by management to be appropriate for a company of this nature.
The multiple would have to decline to 5.5 (2007: 8.5) 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 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 13.6%. The terminal value of the unit has been calculated using a
multiple of 12 (2007: 12), which is considered by management to be appropriate for a company of this nature.
The multiple would have to decline to 6 (2007: 9.7) before impairment would be evident.
114
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 15.6% (2007: 16.2%). The terminal value of the unit has been
calculated using a multiple of 8 (2007: 10), which is considered by management to be appropriate for a company of this nature
in the factoring industry.
The results of this test have required the recognition of a goodwill impairment loss of $4.0 m (2007: Nil). The goodwill relating
to this cash generating unit is now carried at $8.1 m.
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 2007/08 and applying a multiple of 12 (2007:12). Management believe this multiple is appropriate for
this business. For impairment testing purposes, the fair value has been allocated on the basis of 80% relates to the trustee
licence and 20% relates to the goodwill.
The multiple would have to decline to 1.5 (2007: 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 and Adelaide
Bank group.
Carrying amount of goodwill allocated to each of the cash generating units or group of cash generating units
Sandhurst Trustees Limited
- goodw ill
- trustee licence
Benhold Pty Ltd (IOOF Building Society)
Victorian Securities Corporation Limited
First Australian Building Society Limited
Oxford Funding Pty Ltd
Adelaide Bank Limited
Total value allocated
- goodw ill
- customer list
2008
$m
0.8
8.4
13.7
2.7
34.6
8.4
0.7
-
69.3
2007
$m
0.8
8.4
13.7
2.7
34.6
12.4
1.4
-
74.0
At 30 June 2008 the goodwill in relation to the acquisition of Adelaide Bank Limited in November 2007 has not been allocated
to a group of cash generating units. This is due to the complexity and timing of this business combination. As there is no
current indication of impairment, allocation of cash generating units and impairment testing will be made in line with goodwill
impairment testing of all other group goodwill and intangible assets with indefinite lives prior to June 2009.
28.
OTHER ASSETS
Shares in associates
Accrued income
Prepayments
Sundry debtors
Accrued interest
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
-
24.1
24.4
245.6
174.1
468.2
2 0 0 7
$ m
-
18.3
7.3
83.3
69.6
178.5
2 0 0 8
$ m
162.8
108.6
9.3
88.9
81.1
450.7
2 0 0 7
$ m
140.7
15.7
7.2
76.1
65.1
304.8
115
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
29.
DEPOSITS
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
NOTES PAYABLE
30.
OTHER PAYABLES
Sundry creditors
Accrued expenses and outstanding claims
Accrued interest
Prepaid interest
31.
PROVISIONS
(a) Balances
Employee benefits (Note 37)
Other loss events
Rewards program
Property Rent
Dividends
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
20,537.7
3,103.0
23,640.7
6,326.6
1,457.8
7,784.4
31,425.1
9,863.8
3,385.5
111.6
2,657.6
12,852.6
1,221.9
366.0
966.0
31,425.1
11,556.9
547.0
12,103.9
1,519.8
1,263.8
2,783.6
14,887.5
8,297.5
1,928.7
99.2
1,986.1
229.5
965.7
271.4
1,109.4
14,887.5
13,247.2
751.6
13,998.8
1,708.6
1,240.8
2,949.4
16,948.2
9,179.4
2,842.6
110.4
2,316.8
309.6
1,086.0
354.9
748.5
16,948.2
11,399.6
557.4
11,957.0
1,519.8
1,263.8
2,783.6
14,740.6
8,185.6
1,919.5
99.0
1,961.8
228.8
965.5
271.1
1,109.3
14,740.6
11,356.1
259.1
-
-
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
35.7
211.7
358.2
75.3
680.9
2 0 0 7
$ m
54.7
96.6
84.0
-
235.3
2 0 0 8
$ m
16.1
132.5
133.9
-
282.5
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
56.6
3.0
3.5
2.1
2.6
67.8
2 0 0 7
$ m
35.0
-
3.2
2.1
0.1
40.4
2 0 0 8
$ m
42.6
3.0
3.5
2.1
1.6
52.8
2 0 0 7
$ m
36.8
88.6
81.7
-
207.1
2 0 0 7
$ m
34.5
-
3.2
2.1
0.1
39.9
Provision for rewards program is to recognise the liability to customers in relation to points earned by them under the Bendigo
and Adelaide 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.
Provision employee shares shortfall is in relation to possible losses associated with employee loans relating to the Employee
share plan. This provision will only be utilised if:
(a) employees instruct the administrator of the plan to sell their shares in settlement of the employee loan relating to those
shares: and,
(b) at the time of the sale the market price of Bendigo and Adelaide Bank Limited shares is below the outstanding value of
those shares in the loan account.
116
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
(b) Movements
Employee benefits
Opening balance
Provision acquired in business combination
Additional provisions recognised
Decrease due to change in discount rate
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
Provision acquired in business combination
Additional dividends provided
Dividends paid during the year
Closing balance
32.
RESET PREFERENCE SHARES
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
35.0
15.7
30.1
-
(24.2)
56.6
-
3.0
-
3.0
3.2
1.9
(1.6)
3.5
2.1
-
-
2.1
0.1
1.3
128.2
(127.1)
2.5
2 0 0 7
$ m
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
2 0 0 8
$ m
34.5
-
24.5
(0.1)
(16.3)
42.6
-
3.0
-
3.0
3.2
1.9
(1.6)
3.5
2.1
-
-
2.1
0.1
-
128.5
(127.1)
1.5
2 0 0 7
$ m
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
Reset preference shares - 895,740 fully paid $100 preference shares
89.5
89.5
-
-
89.5
89.5
-
-
Reset preference shares are perpetual, but can be exchanged at the request of the holder or Bendigo and Adelaide Bank. Dividends are
non-cumulative and are payable six-monthly in arrears at the discretion of the directors, based on a dividend rate of the five year mid swap
reference rate plus the initial margin multiplied by one less the corporate tax rate.
33.
SUBORDINATED DEBT
Subordinated capital notes
681.8
307.2
301.3
307.2
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
-
80.3
526.7
74.8
681.8
-
56.3
250.9
-
307.2
-
30.3
271.0
-
301.3
-
56.3
250.9
-
307.2
117
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
34.
ISSUED CAPITAL
Issued and paid up capital
Ordinary shares fully paid - 274,678,383 (2007: 144,187,890)
Preference shares of $100 face value fully paid - 900,000 (2007: 900,000 fully paid)
Step-up preference shares of $100 face value fully paid - 1,000,000 (2007: Nil)
Employee share ownership plan shares
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2,706.3
88.5
100.0
(37.4)
2,857.4
2 0 0 7
$ m
605.2
88.5
-
(40.4)
653.3
2 0 0 8
$ m
2,706.3
88.5
100.0
(37.4)
2,857.4
2 0 0 7
$ m
605.2
88.5
-
(40.4)
653.3
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 and Adelaide Bank subject to prior
approval of APRA.
Step up Preference share (SPS) dividends are non-cumulative and are payable quarterly in arrears, at the discretion of the 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 SPS are perpetual, but may be redeemed by Bendigo and Adelaide Bank subject to
prior approval of APRA.
Employee share ownership plan shares is the value of loans outstanding in relation to shares issued to employees under this plan and
effectively represents the unpaid portion of the issued shares.
Movement in ordinary shares on issue
Opening balance - 1 July
Shares issued under:
Bonus share scheme - 149,813 @ $14.87; 212,687 @ $9.60;
(2007: 156,945 @ $13.62; 136,561 @ $13.40)
Dividend reinvestment plan - 854,591 @ $14.87; 2,024,856 @ $9.60;
(2007: 818,654 @ $13.62; 704,107 @ $13.40)
Employee share plan - 226,790 @ $13.40 (2007: 1,520,662 @ $13.54)
Issue to Adelaide Bank shareholders - 117,687,891 @ $16.80
Share purchase plan - 9,333,865 @ $9.60
Share issue costs
Closing balance - 30 June
Movements in preference shares on issue
Opening balance 1 July - 900,000 fully paid (2007: 900,000 partly paid to $50)
Payment of unpaid portion of existing shares
Closing balance 30 June - 900,000 fully paid to $100 (2007: 900,000 fully paid)
Movements in step up preference shares on issue
Opening balance 1 July - Nil (2007: Nil)
Issue of 1,000,000 $100 fully paid step up preference shares
Closing balance 30 June - 1,000,000 fully paid to $100 (2007: Nil)
Movements in Employee share ownership plan shares
Opening balance 1 July
Issue of share capital
Reduction in Employee share ownership plan shares
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
605.2
564.1
605.2
564.1
-
-
-
-
32.1
20.5
32.1
20.5
3.0
1,977.2
89.6
(0.8)
2,706.3
88.5
-
88.5
-
100.0
100.0
(40.4)
(3.0)
6.0
(37.4)
20.6
-
-
-
605.2
88.3
0.2
88.5
-
-
-
(25.6)
(20.6)
5.8
(40.4)
3.0
1,977.2
89.6
(0.8)
2,706.3
88.5
-
88.5
-
100.0
100.0
(40.4)
(3.0)
6.0
(37.4)
20.6
-
-
-
605.2
88.3
0.2
88.5
-
-
-
(25.6)
(20.6)
5.8
(40.4)
653.3
Total issued and paid up capital
2,857.4
653.3
2,857.4
118
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
35.
RETAINED EARNINGS AND RESERVES
RETAINED EARNINGS
Movements
Opening balance 1 July
Profit for the year
Transfer from asset revaluation reserve
Movements in general reserve for credit losses
Dividends
Establishment of Adelaide Bank GRCL on acquisition
Defined benefits actuarial adjustment
Other
Balance 30 June
OTHER 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
Transfer asset revaluation reserve to retained earnings (sold assets)
Transfer asset revaluation reserve to retained earnings (revalued buildings
depreciation)
Transfer impairment loss to income
Net revaluation increments/(decrements)
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)
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
232.4
170.5
-
4.7
(127.6)
(36.6)
(1.4)
-
242.0
12.4
16.9
-
51.9
3.9
76.2
9.3
170.6
2 0 0 7
$ m
194.5
121.8
0.1
(6.5)
(77.5)
-
-
-
232.4
6.5
34.8
(0.1)
33.2
2.0
45.3
8.3
130.0
2 0 0 8
$ m
212.6
163.0
-
(1.0)
(128.5)
-
-
-
246.1
12.6
13.9
-
56.4
-
46.2
-
129.1
2 0 0 7
$ m
182.7
112.2
-
(4.7)
(77.5)
-
-
(0.1)
212.6
6.5
32.7
(0.1)
33.2
-
45.3
-
117.6
6.5
5.9
12.4
-
6.5
6.5
6.5
6.1
12.6
-
6.5
6.5
34.8
-
(0.1)
29.9
(56.0)
8.3
16.9
29.1
(0.1)
(0.2)
-
8.9
(2.9)
34.8
32.7
-
-
29.8
(56.7)
8.1
13.9
26.2
(0.1)
-
-
9.4
(2.8)
32.7
(0.1)
0.1
-
(0.1)
-
(0.1)
(0.1)
0.1
-
(0.1)
-
(0.1)
119
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RETAINED EARNINGS AND RESERVES (continued)
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
Changes due to mark to market
Tax effect of changes due to mark to market
Changes due to transfer to the income statement
Tax effect of changes due to transfer to the income statement
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
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
33.2
12.5
(13.7)
28.4
(8.5)
51.9
2.3
30.4
0.2
0.5
(0.2)
33.2
33.2
47.7
(24.3)
(0.3)
0.1
56.4
2.3
30.4
0.2
0.5
(0.2)
33.2
2.0
1.9
3.9
0.4
1.6
2.0
-
-
-
-
-
.
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. The bank maintains a GRCL of 51% as at 30 June 2008 (2007:55%).
(b) Movements
Opening balance
Establishment of Adelaide Bank GRCL on acquisition
Increase/(decrease) 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
Increase in general reserve for credit losses
45.3
36.6
(5.7)
76.2
8.3
1.0
9.3
40.6
-
4.7
45.3
6.5
1.8
8.3
45.3
-
0.9
46.2
40.6
-
4.7
45.3
-
-
-
-
-
-
Total reserves
170.6
130.0
129.1
117.6
120
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
36.
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
37.
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
-
-
-
-
-
-
-
2 0 0 7
$ m
11.5
4.6
12.4
2.2
3.7
0.1
34.5
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
-
-
-
(0.7)
-
0.7
-
2 0 0 7
$ m
-
(0.7)
(0.7)
(0.6)
(0.1)
-
(0.7)
-
-
-
-
-
-
-
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
17.0
9.8
23.1
2.5
4.2
-
56.6
2 0 0 7
$ m
11.7
4.6
12.6
2.2
3.8
0.1
35.0
2 0 0 8
$ m
12.4
9.8
14.0
2.4
4.0
-
42.6
121
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
38.
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 the group’s senior leadership team including the Managing Director and Executive Director (“Senior
Executives”). Under the Plan, Senior 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 2008 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 Senior 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 Senior Executives is 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 40.
Senior 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. Senior 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.
Two grants were made under the Plan during the year. The first grant was the scheduled annual grant to Senior Executives of
the group as at July 2007. A second grant was made to senior executives of Adelaide Bank in December 2007.
As set out in the 2008 Remuneration Report, prior to the merger senior executives of Adelaide Bank were granted
Performance Rights under an Adelaide Bank employee incentive scheme. As a result of the merger, the executives lost the
benefit of those rights. Under the merger terms, the Company committed to replace the grant of Performance Rights on terms
which, taken as a whole, were economically equivalent to the terms of the Adelaide Bank offer.
Each of the grants made in 2008 were 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 40.
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
Outstanding at the end of the year
2008
No.
632,693
424,421
(22,265)
-
-
1,034,849
2008
WAEP
$14.66
$15.47
-
-
-
$14.98
2007
No.
-
632,693
-
-
-
632,693
2007
WAEP
-
$14.66
-
-
-
$14.66
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
Outstanding at the end of the year
2008
No.
100,117
203,772
-
(9,462)
-
294,427
2008
WAEP
$0.00
$0.00
-
-
-
$0.00
2007
No.
-
100,117
-
-
-
100,117
2007
WAEP
-
$0.00
-
-
-
$0.00
The outstanding balance as at 30 June 2008 is represented by:
•
•
622,928 performance options over ordinary shares with an exercise price of $14.66 each and 411,921 performance
options over ordinary shares with an exercise price of $15.47 each, exercisable upon meeting the above conditions, and
until 31 July 2012.
294,427 performance rights over ordinary shares with an exercise price of $0.00 each, exercisable upon meeting the
above conditions, and until 30 June 2011.
The weighted average fair value of rights granted during the year was $15.17 (2007: $13.00). The weighted average fair value
of options and granted during the year was $2.60 (2007: $2.03).
122
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
The fair value of the performance options and performance rights granted under the Plan takes into account the terms and
conditions upon which the options were granted. The fair value is estimated as at the date of grant using the Black-Scholes –
Merton Option Pricing Model incorporating a Monte Carlo simulation option pricing model to estimate the probability of
achieving the TSR hurdle and the number of options vesting.
The following table lists the inputs to the model used for the year ended 30 June 2008.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Expected life of rights (years)
Option exercise price ($) (1)
Closing share price at grant date ($)
(1) For performance rights the exercise price is nil.
July
2007
December
2007
(Rights & Options)
(Rights only)
3.75
18 and 20
6.38
4.3
3.5
15.47
15.94
3.75
22 to 25
6.47
-
3.5
-
17.31
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.
Employee Share Plans
Current Plan
The Bank established a new loan-based limited recourse Employee Share Plan (“Plan”) in 2006. The Plan is substantially the
same as the Legacy plan that was in place from 1995 to 2006. However, the new Plan is only available to general staff.
Executives (including the Managing Director) may not participate in it.
Under the terms of the new 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 limited recourse
interest-free loan.
The first issue to general staff under this plan was completed in September 2006. A grant to Community Bank® employees
was made in December 2007. There have been no further issues under this Plan.
The share issue in December 2007 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 on the following page.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in Plan
shares 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
Outstanding at the end of the year
2008
No.
5,710,615
226,790
-
384,036
-
5,553,369
2008
WAEP
40,400,000
3,038,986
-
6,038,986
-
37,400,000
2007
No.
4,798,426
1,520,662
-
608,473
-
5,710,615
2007
WAEP
25,600,000
20,600,000
-
5,800,000
-
40,400,000
Exercisable at the end of the year
5,553,369
37,400,000
5,710,615
40,400,000
The outstanding balance as at 30 June 2008 is represented by 5,553,369 ordinary shares with a market value at 30 June 2008
of $10.93 each (value: $60,698,323), exercisable upon repayment of the employee loans.
The acquisition price of shares granted during the year was $13.40 (2007: $13.54) 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 $4.56.
123
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
SHARE BASED PAYMENT PLANS (continued)
The following table lists the inputs to the model used for the year ended 30 June 2008.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of shares (years)
Share exercise price ($)
Share price at grant date ($)
2008
-
22 and 25
6.66
5
13.40
14.16
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.
Consolidated
Recognised share-based paym ent expenses
Expense arising from equity settled share-based payment transactions
Total expense arising from share-based payment transactions
Em ployee share and loan values and EPS im pact (1)
Em ployee Share and Loan Values
Value of unlisted employee shares on issue at 30 June 2008 -
5,553,369 shares @ $10.93 (2007 - 5,710,615 shares @ $15.20)
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
2008
$m
4.4
4.4
60.7
40.4
3.0
(6.0)
37.4
2007
$m
7.3
7.3
86.8
25.6
20.6
(5.8)
40.4
Number of employees w ith outstanding loan balances
3,075
2,555
Indicative cost of funding em ployee 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
39.0
37.1
6.61%
5.16%
1.8
74.8
75.7
1.3
81.9
82.8
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% (2007: 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.
(1) The EPS analysis relates to shares issued under the Company’s current and legacy employee share plans. The analysis
does not take into account the plans operated by Adelaide Bank as summarised on the next page.
124
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Proposed Plans
The Board will seek shareholder approval at the 2008 Annual General Meeting for future issues of shares under a new tax-
exempt Employee Share Grant Plan (“ESGP”). The ESGP will be open to all full-time and permanent part-time staff in the
Group (excluding Directors and Senior Executives) and it is currently intended that grants under the ESGP would be made
annually subject to Board discretion.
The Board will also seek shareholder approval for future issues of shares under a new Employee Salary Sacrifice and
Deferred Share Plan (“DSP”). The DSP will provide a vehicle that will facilitate the purchase of shares on a salary-sacrifice
basis and the making of additional discretionary grants as may be required from time to time in line with the Company’s
employee attraction and retention objective.
No shares have been issued under these plans to date. Further details of these plans are disclosed in the 2008 Notice of
Annual General Meeting.
Discontinued Plans
The Group has the following legacy employee share plans which are now closed.
Bendigo and Adelaide Bank Employee Share Ownership Plan
The Company discontinued in 2006 the existing loan-based Employee Share Ownership Plan (“Plan”) that was open to all
employees in the Group, including the Managing Director and senior 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. Shares were issued under the Plan at market value.
The notional value of the limited recourse interest-free loan provided to the managing director and relevant senior executives
under this legacy Plan is disclosed in the remuneration tables that accompany this report.
Adelaide Bank Deferred Employee Share Plan
Adelaide Bank operated a deferred employee share plan (“Plan”) for senior and executive staff whereby that part of total
remuneration allocated to short-term incentive and long-term incentive were received by way of shares held in the Plan.
Participation in the Plan was at the Board’s discretion and the shares were purchased on-market.
The shares are held by the Plan Trustee for the benefit of plan participants. A participant’s right to receive shares allocated
under the Plan may be subject to performance and/or vesting criteria (“requirements”). When the requirements have been met
the participant may request the Trustee to transfer the vested shares from the Plan or direct the Trustee to sell the shares on
market.
As at 30 June 2008 there were 53,307 shares were held by the Plan Trustee with 53,307 shares having vested.
Adelaide Bank Share Allocation Scheme
The Adelaide Bank Share Allocation Scheme (“Scheme”) allowed the Board to allocate a percentage of Adelaide Bank’s pre-
tax operating profit each year towards the acquisition of fully paid shares for eligible non-executive employees (free of charge).
The Scheme was open to all part time, full time and casual employees who had completed at least one year of continuous
service with Adelaide Bank.
The percentage of profit at the discretion of the Board that could be allocated under the scheme ranged between 2% and 5%.
Invitations were issued to eligible employees and, in relation to accepted invitations, the Scheme Trustee would acquire and
hold the shares on trust for the participants. Three years after the shares had been acquired, the Trustee must transfer the
shares to the participant provided the participant had not previously ceased their employment.
As at 30 June 2008, 45,518 shares were held by the Scheme Trustee with 6,517 shares having vested and 39,001 shares
having not yet vested.
Adelaide Bank Loan Plan
Adelaide Bank operated an employee share plan (“Plan”) whereby shares were allotted from time to time to eligible staff that
elected to take up their entitlement. The Plan was open to all part time, full time and casual employees who had completed at
least one year of continuous service and participation in the Plan was at the Board’s discretion.
The price was generally set at market price and funded by an interest free loan from a subsidiary of Adelaide Bank. The Plan
provided participants with a right to take up a limited recourse loan from an Adelaide Bank subsidiary to fund the purchase of
the shares. Until the loan is repaid the shares are held in trust by the Trustee of the Plan. Dividends paid on the shares were
applied to repay the outstanding loan balance. The last allocation of shares made under the Plan was in 2001.
As at 30 June 2008 the Plan Trustee held 317,125 shares under the Plan with a market value of $3.5 million. The aggregate
amount of loans outstanding at year end was $365,525.
The above discontinued plans will continue until all shares have been withdrawn and / or outstanding loans repaid as
appropriate.
125
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
39.
AUDITOR’S REMUNERATION
Chief entity auditors
The auditor of Bendigo and Adelaide 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
C o ns o lida t e d
P a re nt
2 0 0 8
$
2 0 0 7
$
2 0 0 8
$
2 0 0 7
$
1,358,071
615,050
784,875
615,050
579,751
72,853
154,378
70,823
555,965
2,493,787
238,655
926,558
228,247
1,167,500
238,655
924,528
15,000
18,000
10,420
25,420
5,244
23,244
-
-
-
-
2,244
2,244
126
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
40.
DIRECTOR AND EXECUTIVE DISCLOSURES
Details of the remuneration of directors and executives of the group for the 2008 financial year
(a) Details of key management personnel
The 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 2008 financial year are set out in the 2008 Remuneration Report at
pages 39 and 63.
(b) Compensation of key management personnel
The Corporations Legislation Amendment Act made a number of changes to section 300A of the Corporations Act and
Regulations relating to the disclosure of executive and director remuneration by disclosing entities. These changes were
made in order to remove the duplication of disclosures which existed in the Corporations Act and Accounting Standard
AASB124 Related Party Disclosures. The remuneration disclosures (including comparative information) in relation to key
management personnel are provided in the “Remuneration Report” section of the Directors’ Report.
(c) Compensation by category: for 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 2008 financial year.
CONSOLIDATED
2008
$
2007
$
Short-term employee benefits
8,791,280
6,737,651
Post employment benefits
Other long-term benefits
Termination benefits
819,844
327,564
405,573
639,435
188,938
-
Share-based payment
1,898,952
793,619
Total Compensation
12,243,213
8,359,643
(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 2008 Remuneration Report.
A Plan participant may not enter into a transaction designed to remove the “at-risk” element of an entitlement under the
Plan before it vests. Plan participants may only enter into a transaction designed to remove the “at risk” element of an
entitlement under the Plan after it vests and if the Board has not decided to restrict or prohibit the participant from doing
this. If a Plan participant enters into such a transaction, they must tell the Company Secretary and provide any details
requested.
127
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
DIRECTOR AND EXECUTIVE DISCLOSURES (continued)
Performance Options
Vested Granted
Terms & Conditions for each Grant
30 June 2008
No.
No.
Grant
Date
Fair Value
per option
at grant
date
Exercise
price per
option
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
R Hunt
J McPhee
Executives
M Baker
A Baum
R Fennell
G Gillett
R Hasseldine
M Hirst
D Hughes
R Jenkins
V Kelly
C Langford
T Piper
P Riquier
A Watts
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121,538
9.7.07
$2.60
$15.47
31.7.12
30.6.10
31.7.12
-
-
-
-
-
-
-
27,885
9.7.07
$2.60
$15.47
31.7.12
30.6.10
31.7.12
-
-
32,692
20,192
40,385
-
30,769
34,615
-
-
-
-
9.7.07
9.7.07
9.7.07
-
9.7.07
9.7.07
9.7.07
-
-
-
-
$2.60
$2.60
$2.60
-
$2.60
$2.60
$2.60
-
-
-
-
$15.47
$15.47
$15.47
-
$15.47
$15.47
$15.47
-
-
-
-
-
-
31.7.12
30.6.10
31.7.12
30.6.10
31.7.12
30.6.10
-
-
31.7.12
30.6.10
31.7.12
30.6.10
31.7.12
30.6.10
-
-
-
-
-
-
31.7.12
31.7.12
31.7.12
-
31.7.12
31.7.12
31.7.12
-
-
21,154
9.7.07
$2.60
$15.47
31.7.12
30.6.10
31.7.12
12,500
25,000
12,500
354,230
128
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Performance Rights
Vested Granted
Terms & Conditions for each Grant
30 June 2008
No.
No.
Grant
Date
Fair Value per
right at grant
date
Exercise
price per
right
Expiry
Date
First
Exercise
Date
Last
Exercise
Date
Directors
R Hunt
J McPhee
J McPhee
Executives
M Baker
A Baum
A Baum
R Fennell
R Fennell
G Gillett
R Hasseldine
M Hirst
D Hughes
D Hughes
R Jenkins
V Kelly
C Langford
T Piper
T Piper
P Riquier
P Riquier
A Watts
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,633
-
-
-
-
-
-
22,523
9.7.07
20,767
12.12.07
20,766
12.12.07
5,167
5,971
5,970
5,625
5,624
6,058
3,742
7,484
5,452
5,451
5,702
4,633
6,415
5,625
5,624
4,759
4,759
3,920
9.7.07
12.12.07
12.12.07
12.12.07
12.12.07
9.7.07
9.7.07
9.7.07
12.12.07
12.12.07
9.7.07
9.7.07
9.7.07
12.12.07
12.12.07
12.12.07
12.12.07
9.7.07
4,633
162,037
$14.03
$16.03
$15.74
$14.03
$16.03
$15.74
$16.03
$15.74
$14.03
$14.03
$14.03
$16.03
$15.74
$14.03
$14.03
$14.03
$16.03
$15.74
$16.03
$15.74
$14.03
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
30.6.11
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.11
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.11
30.6.10
30.6.11
30.6.10
30.6.11
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.11
30.6.10
30.6.11
30.6.10
30.6.11
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.10
30.6.09
30.6.10
30.6.10
30.6.11
30.6.10
30.6.11
30.6.10
30.6.10
30.6.11
30.6.10
30.6.10
30.6.10
30.6.10
30.6.11
30.6.11
30.6.11
30.6.10
30.6.10
30.6.11
30.6.11
30.6.11
30.6.10
30.6.10
30.6.10
30.6.10
30.6.11
During the year 9,462 shares were issued on the exercise of performance rights. No shares were issued on the exercise of
vested options.
129
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Performance Options
30 June 2008
Directors
R Hunt
J McPhee
Executives
M Baker
A Baum
R Fennell
G Gillett
R Hasseldine
M Hirst
D Hughes
R Jenkins
V Kelly
C Langford
T Piper
P Riquier
A Watts
Total
Balance at
beginning of
period
01-Jul-07
Granted as
Remun-
eration
Options
Exercised
Net Change
Other
Balance at
end of
period
30-Jun-08
Total
Exercisable Not
Exercisable
280,814
121,538
-
-
30,516
27,885
-
-
37,559
23,709
44,601
-
34,038
30,516
41,080
-
-
-
-
32,692
20,192
40,385
-
30,769
25,000
34,615
-
-
25,822
21,154
548,655
354,230
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22,265)
-
-
-
-
402,352
402,352
-
-
58,401
58,401
-
-
-
-
70,251
70,251
43,901
43,901
84,986
84,986
-
-
64,807
64,807
33,251
75,695
33,251
75,695
-
-
-
-
46,976
46,976
-
-
-
-
-
-
-
-
-
-
33,251
-
-
-
-
(22,265)
880,620
880,620
33,251
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
130
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Performance Rights
30 June 2008
Directors
R Hunt
J McPhee
J McPhee
Executives
M Baker
A Baum
A Baum
R Fennell
R Fennell
G Gillett
R Hasseldine
M Hirst
D Hughes
D Hughes
R Jenkins
V Kelly
C Langford
T Piper
T Piper
P Riquier
P Riquier
A Watts
Total
Balance at
beginning of
period
01-Jul-07
Granted as
Remun-
eration
Rights
Vested
Net Change
Other
Balance at
end of
period
30-Jun-08
Total
Exercisable Not
Exercisable
44,434
-
-
4,829
-
-
-
-
5,944
3,752
7,058
-
-
5,386
4,829
6,501
-
-
-
-
4,086
86,819
22,523
20,767
20,766
5,167
5,971
5,970
5,625
5,624
6,058
3,742
7,484
5,452
5,451
5,702
4,633
6,415
5,625
5,624
4,759
4,759
3,920
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,957
20,767
20,766
9,996
5,971
5,970
5,625
5,624
12,002
7,494
14,542
5,452
5,451
66,957
20,767
20,766
9,996
5,971
5,970
5,625
5,624
12,002
7,494
14,542
5,452
5,451
11,088
11,088
9,462
(9,462)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,916
12,916
5,625
5,624
4,759
4,759
8,006
5,625
5,624
4,759
4,759
8,006
162,037
9,462
(9,462)
239,394
239,394
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
(e) Shareholdings of directors and named executives (including their related parties)
Shares held in
Bendigo and
Adelaide Bank
Directors (4)
Balance 1 July 2007
Net Change
Balance 30 June 2008
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
Ordinary
shares
Employee
shares
Preference
Shares
R Johanson
268,600
-
1,000
R Hunt AM
K Abrahamson 2
N Axelby 1
J Dawson
D Erskine 1
J McPhee 2
T O’Dwyer
K Osborn 2
D Radford
K Roache
A Robinson
Senior
Executives
M Baker
A Baum 2
G Gillett
R Hasseldine 1
M Hirst
D Hughes 2
R Jenkins
V Kelly 1
C Langford
T Piper 2
P Riquier 2
A Watts 2
254,130
600,000
-
41,884
17,301
240,220
-
50,300
-
1,000
45,156
2,500
-
-
-
-
-
-
-
-
-
-
-
-
100
150
-
-
-
-
-
200
-
-
-
1,364
139,410
150
150
-
45,000
50,000
-
15,984
76,160
2,622
450
129,000
123,367
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,628
94,604
16,801
(41,884)
1,813
(240,220)
-
-
-
-
-
-
371,576
236,500
11,600
9,078
-
3,923
-
-
-
-
-
-
(2,130)(3)
30,746
(6,820)(3)
538
372
(150)
(45,000)
300
208
1,143
-
-
(6,280)(3)
(2,622)
(129,000)
300
16,878
-
-
-
2,467
1,630
19,470
-
-
309
(100)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284,228
-
1,000
348,734
600,000
16,801
-
19,114
-
-
-
-
-
371,576
236,500
61,900
9,078
1,000
49,079
2,500
-
-
-
-
-
7,609
538
55,720
30,746
1,736
132,590
-
450
208
-
50,000
-
17,127
69,880
-
750
-
123,367
16,878
-
-
2,467
1,630
19,470
-
309
-
150
-
-
-
-
-
200
-
500
-
-
-
-
-
-
-
-
-
-
-
4,920
57,850
500
2,689
Total
946,731
1,220,787
1,950
264,205
99,953
209
1,120,936
1,320,740
2,159
1 Ceased as key management personnel during the year.
2 Commenced as key management personnel during the year.
3 Converted to ordinary shares.
4 Dr A Lloyd held 4,780 shares and Mr R Cook held 3,359 shares during their term on the Board.
132
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Shares held in
Bendigo and
Adelaide Bank
Directors
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
K C Langford
R P Jenkins
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
450
123,367
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 key management personnel 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 Plans are made under conditions disclosed in Note 38.
133
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
(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 atp
30 June
2008
$’000
$’000
$’000
$’000
$’000
Directors1
Executives1
2008 2
2007
2008 2
2007
Total directors and executives
2008 2
2007
8,294
28,629
7,046
5,137
15,340
33,766
550
1,742
465
204
1,015
1,946
117
239
85
150
202
389
-
-
-
-
-
-
14,070
25,275
8,298
8,807
22,368
34,082
7
9
10
7
17
16
(ii) Details of individuals (including their related parties) with loans above $100,000 in the reporting period are as
follows:
Balance
at beginning of
period
$’000
Interest
charged
Interest not
charged
Write-off
$’000
$’000
$’000
Balance at
end of
period
$’000
Directors
R Johanson
R Hunt AM
Staff share loan
J Dawson
J McPhee
Staff share loan
D Radford
K Roache
T Robinson
Senior Executives
M A Baker
Staff share loan
Loans
A Baum
Loans
R Fennell
Loans
G Gillett
Staff share loan
Loans
M Hirst
Staff share loan
Loans
R Jenkins
Staff share loan
Loans
C Langford
Staff share loan
Loans
642
1,071
4,218
222
468
417
-
1,256
-
283
121
363
400
559
808
317
3
315
1,059
521
766
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
556
2,230
3,934
473
1,906
275
992
2,204
1,500
255
114
288
400
494
786
293
-
280
1,125
462
1,757
-
-
94
-
-
23
-
-
-
10
-
-
-
25
-
10
-
12
-
23
-
51
97
-
38
76
-
43
181
64
-
9
19
37
-
65
-
-
-
91
-
119
134
Highest owing
in period
$’000
710
2,262
4,218
497
1,969
417
1,004
2,729
1,500
283
121
723
400
559
845
317
6
315
1,170
521
1,999
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Balance
at beginning of
period
$’000
Interest
charged
Interest not
charged
Write-off
$’000
$’000
$’000
Balance at
end of
period
$’000
Highest owing
in period
$’000
Senior Executives
cont’d..
T Piper
Loans
P Riquier
Loans
A Watts
Staff share loan
Loans
1,212
241
78
-
78
10
-
37
-
-
5
-
-
-
-
-
1,299
1,310
237
69
439
242
78
455
1 Balances include interest-free loans provided to the Managing Director and Senior Executives in connection with share
issues under employee share plans as described at Note 38.
2 Opening balances have been adjusted to include loans to directors and senior executives appointed during the year and to
exclude directors and senior executives who ceased during the year.
Terms and conditions of director and senior executive loans
The loans to directors and senior executives are made in the ordinary course of the company’s business and on an arms
length basis. The loans are processed and approved in accordance with the Bank’s standing lending processes and
prevailing terms and conditions.
Terms and conditions of the loans under Staff Share Plan
Loans have been provided to Mr R G Hunt and Senior Executives under the terms of Bank’s legacy Employee Share
Ownership Plan (“Plan”). Details of the Plan’s terms and conditions are provided at Note 38 to the financial statements.
(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 and Adelaide Bank Ltd by
way of mortgage document preparation based on normal commercial terms and conditions. The amount paid or payable
during the year totalled $93,774 (2007: $52,157).
Mr R Johanson is a director of the Grant Samuel Group, which provided professional advisory services to Bendigo and
Adelaide 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 are provided in accordance with scheduled fee rates which were discussed and approved by the Board
in the absence of Mr Johanson.
The services provided during the 2008 financial year included services in relation to corporate matters including alliance and
joint venture activities, strategic developments and the merger of Adelaide Bank. The amount paid or payable for the year
was $5,444,190 (2007: $1,157,957).
Mr Robinson is a director of IOOF Holdings Limited. 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. The fees paid for the year totalled $304,000 (2007 $300,000).
Bendigo Financial Planning Ltd, a subsidiary of Bendigo and Adelaide 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. The Board has approved a protocol that sets out arrangements for dealing with potential conflicts of interest
connected with the financial services activities of IOOF Holdings Limited and its subsidiaries. The fees paid to BFP for the
year were $3,236,000 (2007 $2,857,028).
Mr Hunt is a Director 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 and Adelaide Bank also
provides banking overdraft and lending facilities to BCT. The banking services are provided in accordance with Bendigo and
Adelaide 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 and Adelaide Bank.
Mr Johanson was entitled to receive a director fee of $58,000 plus Superannuation Guarantee Charge by Elders Rural Bank
Limited in connection with the directorship.
135
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
41.
RELATED PARTY DISCLOSURES
Ultimate Parent Entity
Bendigo and Adelaide Bank Limited is the ultimate parent entity.
Wholly owned group transactions
Bendigo and Adelaide 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 and Adelaide 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 and Adelaide 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
Adelaide Bank Limited
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
Net receipts
Supplies,
Net am ount
and fees
fixed assets
ow ing
paid to and services
to/(from )
subsidiaries
charged to
subsidiaries
subsidiaries
at 30 June
$m
(0.6)
0.9
-
2.6
2.3
4.3
0.2
0.2
(2.9)
0.5
10.6
(1.1)
10.5
7.8
-
0.1
-
-
-
0.1
(1.3)
1.2
0.2
0.2
28.1
30.7
3.5
11.8
-
8.9
(2.6)
-
$m
-
-
-
2.4
0.6
1.4
0.1
0.2
2.2
60.5
2.7
3.0
10.6
10.0
-
-
-
-
-
2.1
1.3
1.2
0.2
0.2
30.3
27.4
8.1
3.9
-
3.8
54.7
-
$m
(2.0)
(1.4)
-
-
9.0
7.3
0.9
0.8
(87.8)
(82.7)
(3.9)
(11.8)
(2.1)
(2.0)
(5.1)
(5.1)
20.4
20.4
-
-
(8.2)
(5.6)
(1.4)
(1.4)
(0.3)
1.9
(36.9)
(32.3)
-
-
(57.3)
-
Bendigo and Adelaide 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.
136
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Subsidiary
Facility
Sandhurst Trustees 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
Adelaide Bank Limited and its subsidiaries
Standby
Guarantee
Standby
Guarantee
Overdraft
Overdraft
Overdraft
Guarantee
Overdraft
Guarantee
Counterparty limit
Guarantee
Limit
$m
20.0
-
10.0
-
1.4
0.4
0.8
-
62.0
4.6
2,600.0
100.0
Drawn/issued at
30 June 2008
$m
-
-
-
-
1.0
0.2
0.8
-
47.1
-
1,723.5
-
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 and Adelaide 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 and Adelaide Bank Limited from subsidiary companies are included in
the net receipts/fees paid column of the above table:
Adelaide Bank Limited
Sandhurst Trustees Limited
Worley Securities Pty Ltd
Cass Com Limited
First Australian Building Society
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
$m
54.7
-
20.6
18.2
-
1.9
-
2.1
-
3.8
There were no material transactions between subsidiary companies.
Other related party transactions
Securitised and sold loans
The bank securitised or sold loans totalling $3,308.0 million (2007: $561 million) during the financial year. Of this
total, $359.1 million (2007: $561 million) were sold to the Common Funds managed by Sandhurst Trustees Limited.
The consolidated entity does not invest in any of its own securitisation programs other than the Torrens Series 2008-1
Trust where the Bank holds A & B notes equivalent to $2,102.6 million as at 30 June 2008. The Bank does invest in
other securitisation programs unrelated to the Bank as part of normal investment activities.
Associated entities
Bendigo and Adelaide 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.
137
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RELATED PARTY DISCLOSURES (continued)
During the financial year, transactions took place between the Bendigo and Adelaide 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
Strategic Payments Services P/L
Com m issions Supplies andAm ount ow ing
and fees paid
services
to/(from )
to associates
provided to associates at
associates
30 June
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
$m
1.5
1.3
9.6
8.1
4.6
2.9
0.5
0.4
1.2
0.8
2.2
-
$m
3.5
3.5
4.8
5.7
2.3
3.1
0.6
0.6
0.6
0.5
-
-
$m
(0.3)
(0.3)
0.6
-
0.2
0.1
-
-
-
0.2
-
-
Dividends received and receivable from associated entities are disclosed in Note 4 – Profit.
Bendigo and Adelaide 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.
138
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
42.
RISK MANAGEMENT
RISK OVERSIGHT
Overview
The management of risk is an essential element of the Group’s strategy and profitability and the way the Group
operates.
The Board, being ultimately responsible for risk management associated with the Group’s activities, has established
an integrated governance and accountability framework, policies and controls to identify, assess, monitor and
manage risk.
In addition to strategic and reputation risk the material business risks relating to the Group can be categorised as:
credit, market (including interest rate and currency), liquidity, and operational risk (includes compliance, contagion,
environment/sustainability risks). In addition to these material risks, the Group acknowledges the risk arising from
integrating the operations of Bendigo and Adelaide Banks.
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 (“MD”), management
committees to the various risk, support and business units of the Group.
An essential element of the risk framework is the risk culture of the Group. Management of risk is the responsibility of
the business units of the Group. Embedded in our culture is the value in all staff to doing the right thing, taking
responsibility for managing risks inherent in their role and engaging with our stakeholders including the broader
community to deliver a sustainable business proposition for all. The Group’s risk management culture is also
demonstrated by many aspects of management of the Group, including:
• Risk is managed both top down and bottom up.
• Risk management is embedded in strategy, planning, policy and procedures.
•
An ability to identify opportunities, strive for quality and efficiency and minimise losses.
• Maintaining risk competencies especially for key roles.
• Regular discussion on risk at the business unit level.
•
•
Acting promptly to manage risks and events whether internal or external.
The existence of a close working relationship/partnership between the business and risk functions and
acceptance of a “healthy tension” between the functions.
Board Responsibilities
In accordance with the Board Charter, the Board principally through the Audit, Credit, Risk and Governance & HR
Committees oversees the establishment, implementation, review and monitoring of risk management systems and
policies, taking into account the risk appetite of the Group, the overall business strategy, management expertise and
the external environment. This includes approving risk limits and risk policies.
Board Committee Responsibilities
The Board has approved policies that support the implementation of a risk oversight and management framework for
the Group. These policies are overseen by the Board Committees with each Committee operating under a Board
approved charter that is reviewed annually.
Each Committee has established a reporting structure that describes the relevant responsibilities in respect to
oversight and monitoring of Board-approved risk management policies.
The Committees evaluate developments in respect to the Group’s structure and operations, as well as economic,
industry and market developments that may impact the Group’s management of risk.
Executive Responsibilities
On a day to day basis each Executive, management and staff are responsible for carrying out their roles in a way that
manages risk in line with policies and procedures.
Whilst the Board has responsibility for setting the Group’s appetite for risk, the MD and other Executive Committee
members are responsible for developing strategies and business plans commensurate with that risk appetite.
The Executive Committee has responsibility for ensuring that the Board approved strategies and decisions are
appropriately implemented as well as managing and monitoring the day to day activities of the Group including the
management of risk and consideration of emerging risks and opportunities.
The Executive has a number of sub-committees that consider risk management matters including the Asset Liability
Management Committee, Executive Credit Committee and the OH&S and Security Committee.
139
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RISK MANAGEMENT (continued)
Independent Review
Internal Audit
The internal audit function operates under a charter and annual audit plan approved by the Board Audit Committee.
The Board, on recommendation of the Board Audit Committee, approves the appointment of the Head of Internal
Audit. The Committee receives reports at each meeting in respect to the outcomes and status of the internal audit
plan. The independent internal audit function audits all functions across the Group including the effectiveness of the
Group’s risk management and internal compliance and control systems, in line with the audit plan and has direct
access to the Board through the Board Audit Committee.
Group Risk
Group Risk is an independent function of the Group, providing the frameworks, policies and procedures to assist the
Group in managing credit and operational risk in line with the strategy and risk appetite set by the Board.
The Group Credit Risk function is responsible for reviewing portfolio credit quality, policy development and
promulgation, credit policy compliance, the assessment of large/maximum credit and manages the performance of
the credit management system at the Group level.
The Group Operational Risk function is responsible for providing the frameworks, tools and support to assist the
business in the management of its operational risk (including regulatory compliance, business continuity, financial
crimes and dealings through Partners).
The Group Insurance function develops an insurance strategy and program for “insurable risk” which is approved by
the Board Risk Committee
The Group Risk function has direct access to the Board through the Board Credit and Risk Committees.
Group Treasury
A function has been established within Group Treasury that is responsible for monitoring Treasury Policy compliance
(including adherence to tolerance limits). Group Treasury has direct access to the Asset Liability Management
Committee and in turn the Board Risk Committee.
MD/CEO and CFO Assurance
As part of the statutory reporting arrangements for the Group, the Managing Director (MD/CEO) and Chief Financial
Officer (CFO), provide a written declaration to the Board that:
•
•
•
•
The Group’s financial statements present a true and fair view, in all material respects, of the Group’s financial
position and performance, are in accordance with the Corporations Act and comply with the Corporations
Regulations 2001 and comply with accounting standards.
The financial records of the Group for the financial year have been properly maintained in accordance with
Section 286 of the Corporations Act 2001.
The above statements regarding the integrity of the financial reports are founded on a sound system of risk
management and internal control and that the systems, including those relating to business continuity, are
operating effectively in all material respects in relation to financial reporting risks.
Any other matters that are prescribed by the Corporations Act regulations as they relate to the financial
statements and notes to the financial statements are met.
To provide this assurance a formal due diligence and verification process, including attestations from management, is
conducted. This assurance is provided each six months in conjunction with the half year and full year financial
reporting obligations. 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 circumstances that may arise in future periods.
Further a description of the systems and policies employed to manage the key risks to which the Bank and Group is
exposed is provided to APRA. The MD confirms annually the integrity of these descriptions to APRA with the
endorsement of the Board.
RISK PRINCIPLES
Overview
The Group’s Risk Management Principles and Systems Description document summarises the risk management
control framework of the Group. These principles are approved by the Board and may be amended with
endorsement of the Board. Specific details and responsibilities for managing each category of risk are contained in
the relevant policy statements, frameworks and procedural manuals.
The risk principles are summarised below.
Risk Management Strategy
A structured framework has been established to ensure that the risk management objectives are linked to the Group’s
business strategy and operations. The risk management strategy is underpinned by an integrated framework of
responsibilities and functions driven from Board level down to operational levels, covering all aspects of risk, most
notably market, credit, liquidity, operational (includes compliance, contagion and environmental), strategic and
reputation risks.
The framework recognises the governance structure and risk management framework referred to above.
140
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Risk Limits
Risk limits for market risk, credit risk and capital at risk are set and monitored by the appropriate management
committees within the parameters approved by the Board.
The management of operational risk is performed using qualitative self assessment and the Group has defined
general parameters to manage the Group-wide operational risk profile to comply with the approved risk appetite and
tolerances.
Limits are based upon the level of capital (which may be in the form of net interest income, net profit before or after
tax, retained earnings, market value of equity or other key performance indicators) the Board is willing to place at risk.
Limits are calculated by aggregating quantifiable measures of market, credit and operational risk.
Prior to approval by the Board, limits are formally reviewed on a regular basis by the appropriate management and
Board committees, and consider changes in market conditions, strategy or risk appetite with limits:
•
•
•
•
Set and reviewed regularly by the Asset Liability Management Committee (“ALMAC”), Executive Credit
Committee and Executive Committee.
Aligned with the budgeting and planning cycle.
Taking into account historic and projected risk-adjusted performance.
Independently monitored.
Risk Management Measurement Reporting and Control
Effective measurement, reporting and control of risk is vital to manage the Group’s business activities in accordance
with overall strategic and risk management objectives. The risk management, reporting and control framework
requires the quantification of market, credit and liquidity risk, the capability to aggregate and monitor exposures, a
comprehensive set of limits to ensure that exposures remain within agreed boundaries, and a mechanism for
evaluating performance on a risk-adjusted basis. The management of operational risk is based on a documented
policy and framework. The Board has defined general parameters to manage the Group-wide operational risk profile
to comply with the approved risk appetite and tolerances which considers both downside risk and opportunities.
Internal controls
The risk management framework requires robust internal controls across all aspects of the business as well as strong
support functions covering legal, regulatory, governance, reputation, finance, information technology, human
resources and strategy. Consequently the effectiveness and efficiency of controls is evaluated in all new and
amended products, processes and systems or where external and internal factors impact the operating environment
(e.g. changes in organisation structure, growth, new regulation).
Risk Management Systems
Accurate, reliable and timely information is vital to support decisions regarding risk management at all levels. The
requirements span a diverse range of risk functionality including market and credit risk analysis systems, budgeting,
strategic planning, asset and liability management, performance measurement, operational risk and regulatory
reporting, as well as trading and trade processing systems and those systems supporting our staff.
Data reconciliation is established to provide for the integrity of the information used and appropriate security controls
around all systems. Back-up and recovery procedures are defined and business continuity plans approved and
communicated to promote resilience and minimise the impact of an incident.
The Group maintains and implements specific policies and procedures to measure, monitor, manage and report on
the material risks to which the Group is exposed. Each policy contains requirements to be met for review and
approval.
MATERIAL RISKS
Overview
The risk management framework of the Group is structured upon:
• Core Risk Principles – overriding principles governing all activities and risk monitoring procedures; and
•
Specific Risk Policies – appropriate policies, framework documents, procedures and processes implemented to
manage specific risks to which the Group is exposed.
The Board, and industry regulators, have identified the material risks to which the Group is exposed as being credit,
market (including interest rate and currency), liquidity and operational risk. The Group has identified a further short
term risk, termed integration risk, relating to the merger of Bendigo and Adelaide Bank Group and Adelaide Bank
Group on 30 November 2007. Specific risk management structures have been developed and implemented by the
Group to manage these and other risks (e.g. reputation, strategic, contagion and sustainability).
The material risks are described below.
141
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RISK MANAGEMENT (continued)
Credit Risk
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 under which various levels of
management (including the Executive Credit Committee), partners and the Board Credit Committee can approve
transactions.
Group Credit Risk has responsibility for:
•
•
•
Managing, maintaining and enhancing the currency and relevance of the Group’s Credit Policies;
Providing support and analysis of credit portfolio information for credit management purposes; and
Reporting to the Executive Credit Committee and the Board Credit Committee.
The table below shows the maximum exposure to credit risk for the components of the balance sheet, including
derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting
and collateral agreements.
Gross maximum exposure
Consolidated
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets held for trading
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 - investment
Gross loans and other receivables
Amounts receivable from controlled entities
Other assets
Contingent liabilities
Commitments
Total credit risk exposure
2008
$ m
1,195.9
412.7
311.8
1,414.8
422.0
84.6
-
1,414.6
517.6
39,875.2
-
468.2
46,117.4
179.4
3,954.2
2007
$ m
257.6
71.5
75.4
-
428.8
130.4
-
1,614.4
-
13,844.1
-
178.5
16,600.7
135.9
2,393.9
Parent
2008
$ m
440.5
237.6
128.1
-
611.5
77.2
2,272.5
1,673.4
-
2007
$ m
203.5
71.1
75.4
-
428.8
127.9
134.8
1,530.5
-
15,098.2
164.2
450.7
21,153.9
137.5
2,671.7
13,487.9
101.0
304.8
16,465.7
135.9
2,418.8
4,133.6
50,251.0
2,529.8
19,130.5
2,809.2
23,963.1
2,554.7
19,020.4
Where financial instruments are recorded at fair value the amounts shown above represent the current credit risk
exposure but not the maximum risk exposure that could arise in the future as a result of changes in values.
The effect of collateral and other risk mitigation techniques is shown below.
Concentrations of the maximum exposure to credit risk
Concentration of risk is managed by client/counterparty, by geographical region and by industry sector. The
maximum credit exposure to any client or counterparty as at 30 June 2008 was $232.5 million (2007: $403.3 million)
before taking account of collateral or other credit enhancements and $232.5 million (2007: $403.3 million) net of such
protection.
Geographic
The group’s financial assets, before taking into account any collateral held or other credit enhancements can be
analysed by the following geographic regions:
Gross maximum exposure
Victoria
New South Wales
Australian Capital Territory
Queensland
South Australia/Northern Territory
Western Australia
Tasmania
Overseas/other
Total credit risk exposure
Consolidated
2008
$ m
2007
$ m
Parent
2008
$ m
2007
$ m
14,847.0
11,369.5
470.2
8,568.5
9,579.3
3,663.2
1,093.6
659.7
50,251.0
10,362.2
2,826.8
288.7
2,678.9
454.1
1,499.9
592.7
427.3
19,130.5
11,446.1
2,969.1
314.1
3,292.8
3,319.7
1,478.1
742.4
400.7
23,963.1
10,305.9
2,728.9
281.1
2,636.7
560.7
1,495.1
591.0
421.0
19,020.4
142
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Industry sector
An industry sector analysis of the group’s financial assets, before taking into account collateral held or other credit
enhancements, is as follows:
Consolidated
Parent
Accom, cafes & restaurants
Agriculture & associated industries
Communication services
Construction
Cultural & recreational services
Education
Electricity, Gas and Water Supply
Finance & insurance
Financial services
Government Administration and Defence
Health & community services
Manufacturing
Margin Lending
Mining
Other
Personal & other services
Property & business services
Residential/consumer
Retail trade
Retirement
Transport & storage
Wholesale trade
Gross
maximum
exposure
2008
$ m
458.6
1,557.6
195.8
1,670.9
206.5
396.7
153.7
550.0
5,447.0
418.4
966.8
857.8
3,716.2
229.5
607.8
525.6
3,283.4
25,932.0
1,529.9
248.6
825.4
472.8
50,251.0
Gross
Gross
Gross
maximum maximum maximum
exposure
exposure
2007
2008
$ m
$ m
392.7
439.4
736.6
797.0
179.9
192.8
1,371.1
1,560.4
175.8
195.5
363.5
386.9
136.3
152.5
2,833.9
606.7
2,720.5
3,567.7
357.0
409.4
653.0
696.5
751.9
818.6
90.5
63.4
185.2
226.4
138.0
156.9
290.2
299.8
2,853.0
3,318.8
4,610.2
5,250.3
1,418.5
1,512.0
-
-
599.9
653.3
389.9
431.6
19,020.4
23,963.1
exposure
2007
$ m
399.2
744.0
183.9
1,410.2
180.9
377.4
138.1
461.6
2,720.8
370.3
667.1
770.1
90.5
186.3
164.6
298.5
2,823.9
4,694.2
1,439.7
-
610.8
398.4
19,130.5
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty.
Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:
•
•
For commercial lending, charges over real estate properties, inventory and trade receivables
For retail lending, mortgages over residential properties
Management monitors the market value of collateral, requests additional collateral in accordance with the underlying
agreement, and monitors the market value of collateral obtained during the review of the adequacy of the allowance
for impairment losses.
It is the group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce
or repay the outstanding claim. The group does not occupy repossessed properties for business use.
143
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RISK MANAGEMENT (continued)
Credit quality
The credit quality of financial assets is managed by the group using internal credit ratings. The table below shows the
credit quality by class of asset for loan-related balance sheet lines, based on the group’s credit rating system.
Consolidated
2008
Neither past due or impaired
High
Grade
Standard
Grade
Sub-standard
Grade
Unrated
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets held for trading
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 - investment
Loans and other receivables
Other assets
2007
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets held for trading
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 - investment
Loans and other receivables
Other assets
$ m
-
412.7
-
1,414.8
422.0
-
-
1,414.6
-
2,636.9
-
6,301.0
-
71.5
75.4
-
428.8
-
-
1,614.4
-
94.0
-
2,284.1
$ m
-
-
-
-
-
-
-
-
-
6,824.3
-
6,824.3
-
-
-
-
-
-
-
-
-
3,942.0
-
3,942.0
$ m
-
-
-
-
-
-
-
-
-
428.4
-
428.4
-
-
-
-
-
-
-
-
-
318.0
-
318.0
$ m
1,195.9
-
311.8
-
-
84.6
-
-
517.6
1,290.5
468.2
3,868.6
257.6
-
-
-
-
130.4
-
-
-
388.1
178.5
954.6
Parent
2008
Neither past due or impaired
High
Grade
Standard
Grade
Sub-standard
Grade
Unrated
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 received from controlled entities
Other assets
2007
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 received from controlled entities
Other assets
$ m
-
237.6
128.1
611.5
-
-
1,673.4
105.0
-
-
2,755.6
-
71.1
75.4
428.8
-
-
1,530.5
82.7
-
-
2,188.5
$ m
-
-
-
-
-
-
-
4,616.0
-
-
4,616.0
-
-
-
-
-
-
-
3,847.0
-
-
3,847.0
$ m
-
-
-
-
-
-
-
369.0
-
-
369.0
-
-
-
-
-
-
-
286.1
-
-
286.1
$ m
440.5
-
-
-
77.2
2,272.5
-
435.0
164.2
450.7
3,840.1
203.5
-
-
-
127.9
134.8
-
182.1
101.0
304.8
1,054.1
* Consumer loans are predominantly mortgage secured residential loans not rated on an individual basis.
144
Loans *
$ m
-
-
-
-
-
-
-
-
-
Consumer Past Due or
Impaired
$ m
-
-
-
-
-
-
-
-
-
704.0
-
704.0
-
27,991.1
27,991.1
-
-
-
-
-
-
-
-
-
8,492.0
-
8,492.0
-
-
-
-
-
-
-
-
-
610.0
-
610.0
Consumer Past Due or
Impaired
$ m
-
-
-
-
-
-
-
579.0
-
-
579.0
Loans *
$ m
-
-
-
-
-
-
-
8,994.2
-
-
8,994.2
-
-
-
-
-
-
-
8,491.9
-
-
8,491.9
-
-
-
-
-
-
-
598.1
-
-
598.1
Total
$ m
1,195.9
412.7
311.8
1,414.8
422.0
84.6
-
1,414.6
517.6
39,875.2
468.2
46,117.4
257.6
71.5
75.4
-
428.8
130.4
-
1,614.4
-
13,844.1
178.5
16,600.7
Total
$ m
440.5
237.6
128.1
611.5
77.2
2,272.5
1,673.4
15,098.2
164.2
450.7
21,153.9
203.5
71.1
75.4
428.8
127.9
134.8
1,530.5
13,487.9
101.0
304.8
16,465.7
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Ageing
Ageing analysis of past due but not impaired loans and other receivables
Consolidated
2008
2007
Parent
2008
2007
Renegotiated terms
Less than
30 days
$ m
31 to
60 days
$ m
61 to
90 days
$ m
More than
91 days
$ m
Fair value of
collateral
$m
Total
$ m
584.6
422.4
407.5
417.3
262.6
56.2
64.6
54.9
137.7
231.3
1,216.2
2,536.5
42.9
65.6
587.1
1,745.8
32.9
42.9
61.0
64.8
566.0
579.9
1,861.9
1,744.7
Generally, the terms of loans are only renegotiated on a temporary basis in the event of customer hardship. In these
cases the term of the loan is extended, but no longer than the maximum term entitlement for the product. Original
terms are typically re-instated within a 3 to 6 month period. The majority of retail customers proactively contact the
bank prior to the loan becoming past due or impaired. Therefore, the carrying value of financial assets that would
otherwise be past due or impaired whose terms have been renegotiated is considered immaterial.
Impairment assessment
The main considerations for the loan impairment assessment include whether any payments of principal or interest
are overdue by more than 90 days or there are any known difficulties in the cash flows of counterparties, credit rating
downgrades, or infringement of the original terms of the contract. The group addresses impairment assessment in
three areas: individually assessed allowances (specific provisions), collectively assessed allowances (collective
provisions) and a prudential reserve (general reserve for credit losses).
Individually assessed provisions (specific provisions)
The group determines the impairment provision appropriate for each individually significant loan or advance on an
individual basis. Items considered when determining provision amounts include the sustainability of the counterparty’s
business plan, its ability to improve performance once a financial difficulty has arisen, projected receipts and the
expected dividend payout should bankruptcy ensue, the availability of other financial support and the realisable value
of collateral, and the timing of expected cash flows. The impairment losses are evaluated on a continuous basis.
Allowances are assessed on a portfolio basis for losses on loans and receivables that are not individually significant
(including unsecured credit cards, personal loans, overdrafts, unsecured mortgage loans) and where specific
identification is impractical. Provisions are calculated for these portfolios based on historical loss experience.
Collectively assessed provisions (collective provisions)
Where individual loans are found not to be specifically 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. The collective provisions are
re-assessed at each balance date.
Prudential reserve (general reserve for credit losses)
A general reserve for credit losses is maintained to cover risks inherent in the loan portfolios.
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. The bank maintained a GLCL at 0.51% as at 30 June 2008 (2007:55%).
Liquidity Risk
Liquidity risk is the risk that the group will be unable to meet its payment obligations when they fall due under normal
and stress circumstances.
Group Treasury is responsible for implementing liquidity risk management strategies in accordance with approved
policies and adherence is monitored by the Asset Liability Management Committee and Board Risk Committee. This
includes maintaining prudent levels of liquid reserves and a diverse range of funding options to meet daily, short-term
and long-term liquidity requirements.
Liquidity scenarios are calculated under stressed and normal operating conditions to assist in anticipating cash flow
needs and providing adequate reserves.
The group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of
an unforeseen interruption of cash flow. The group also has committed lines of credit that it can access to meet
liquidity needs. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration
to stress factors relating to both the market in general and specifically to the group. The most important of these is to
maintain limits on the ratio of net liquid assets to customer liabilities, set to reflect market conditions. Net liquid assets
consist of cash, short term bank deposits and liquid debt securities available for immediate sale, less deposits for
banks and other issued securities and borrowings due to mature within the next month.
145
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RISK MANAGEMENT (continued)
The liquidity ratio during the financial year was as follows:
30 June
Average during the financial year
Highest
Lowest
2008
%
13.53
14.59
17.02
12.67
2007
%
14.24
14.47
16.22
12.88
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the group’s financial liabilities at 30 June 2008 based on contractual
undiscounted cash flows. Cash flows which are subject to notice are treated as if notice were to be given immediately.
However, the group expects that many customers will not request repayment on the earliest date the group could be
required to pay and the table does not reflect the expected cash flows indicated by the group’s deposit retention history.
Consolidated
2008
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
2007
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
Parent
2008
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
2007
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Reset preference shares
Subordinated debt - at amortised cost
At call Not longer
than 3 mths
$ m
$ m
3 to 12
months
$ m
1 to 5
years
$ m
Longer
than
5 years
$ m
269.7
5,825.0
-
-
768.9
11.1
-
-
6,874.7
184.0
6,360.2
-
-
235.3
13.6
-
-
6,793.1
151.7
5,338.8
-
-
282.5
11.1
-
-
5,784.1
184.0
6,369.0
-
-
207.1
13.6
-
-
6,773.7
-
17,939.5
321.5
575.7
-
-
-
11.6
18,848.3
-
4,658.9
-
62.1
-
2.7
-
4.3
4,728.0
-
7,976.9
-
93.7
-
-
-
5.1
8,075.7
-
4,581.7
-
62.1
-
2.7
-
4.3
4,650.8
-
5,638.5
121.7
691.8
-
-
5.4
100.1
6,557.5
-
2,631.2
-
222.9
-
-
-
72.2
2,926.3
-
2,990.0
-
238.1
-
-
5.4
49.0
3,282.5
-
2,557.5
-
222.9
-
-
-
72.2
2,852.6
-
2,296.3
10,977.0
1,313.2
-
-
18.9
568.5
15,173.9
-
1,321.4
261.6
883.6
-
-
-
289.9
2,756.5
-
775.7
-
554.6
-
-
18.9
311.6
1,660.8
-
1,314.1
-
883.6
-
-
-
289.9
2,487.6
-
17.4
-
74.2
-
-
89.5
75.0
256.1
-
0.3
-
56.8
-
-
-
-
57.1
-
0.1
-
197.3
-
-
89.5
-
286.9
-
0.3
-
56.8
-
-
-
-
57.1
Total
$ m
269.7
31,716.7
11,420.2
2,654.9
768.9
11.1
113.8
755.2
47,710.5
184.0
14,972.0
261.6
1,225.4
235.3
16.3
-
366.4
17,261.0
151.7
17,081.5
-
1,083.7
282.5
11.1
113.8
365.7
19,090.0
184.0
14,822.6
-
1,225.4
207.1
16.3
-
366.4
16,821.8
Excluded from the table above the undiscounted contractual maturities arising from $75m of floating rate capital notes.
These are perpetual notes with no fixed maturity.
146
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
The table below shows the contractual expiry by maturity of the group’s contingent liabilities and commitments.
Consolidated
2008
Contingent liabilities
Commitments
Total
2007
Contingent liabilities
Commitments
Total
Parent
2008
Contingent liabilities
Commitments
Total
2007
Contingent liabilities
Commitments
Total
Not longer
than 3 mths
$ m
3 to 12
months
$ m
At call
$ m
179.4
3,627.1
3,806.5
-
-
-
135.9
1,668.5
1,804.4
-
419.0
419.0
137.5
2,355.5
2,493.0
135.9
2,112.6
2,248.5
-
-
-
-
-
-
1 to 5
years
$ m
-
132.4
132.4
-
114.5
114.5
-
127.1
127.1
-
112.2
112.2
Longer
than
5 years
$ m
-
137.8
137.8
Total
$ m
179.4
3,954.2
4,133.6
-
141.2
141.2
135.9
2,393.9
2,529.8
-
137.9
137.9
-
141.2
141.2
137.5
2,671.7
2,809.2
135.9
2,418.8
2,554.7
-
56.9
56.9
-
50.7
50.7
-
51.2
51.2
-
52.8
52.8
Market Risk (including interest rate and currency risk)
Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in
market variables such as interest rates, foreign exchange rates, and equity prices.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of
financial instruments. The Board has established limits on the interest rate gaps for stipulated periods. Positions are
monitored on a daily basis and hedging strategies are used to ensure positions are maintained within the established
limits.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables
held constant, on the group’s income statement and equity.
The sensitivity of the income statement is the effect of assumed changes in interest rates on the net interest for one year,
based on the floating rate financial assets and financial liabilities held at 30 June 2008, including the effect of hedging
instruments. The sensitivity of equity is calculated by revaluing fixed rate available for sale financial assets (including the
effect of any associated hedges), and swaps designated as cash flow hedges, at 30 June 2008 for the effects of the
assumed changes in interest rates. The sensitivity of equity is analysed by maturity of the asset or swap. With sensitivity
based on the assumption that there are parallel shifts in the yield curve.
Monitoring of adherence to policies, limits and procedures is controlled through the Asset Liability Management
Committee and the Board Risk Committee.
147
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
RISK MANAGEMENT (continued)
Reasonably possible movements in interest rates
Consolidated
Net interest income before cash flow hedge ineffectiveness
Cash flow hedge ineffectiveness
Net interest income
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Available for sale reserve
Cash flow hedge reserve
Income tax effect on reserves at 30%
Effect on equity
Parent
Net interest income
Cash flow hedge - controlled entity
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Available for sale reserve
Cash flow hedge reserve
Income tax effect on reserves at 30%
Effect on equity
+100 basis
points
2008
$ m
-100 basis
points
2008
$ m
+100 basis
points
2007
$ m
-100 basis
points
2007
$ m
(29.8)
0.3
(29.5)
8.9
(20.6)
(20.6)
(0.8)
176.8
(52.9)
102.5
16.1
(57.7)
12.5
(29.1)
(29.1)
(0.8)
91.6
(27.2)
34.5
29.8
(43.3)
(13.5)
4.1
(9.4)
(9.4)
0.8
(133.8)
39.9
(102.5)
(16.1)
57.7
(12.5)
29.1
29.1
0.8
(91.6)
27.2
(34.5)
14.0
-
14.0
(4.2)
9.8
9.8
(0.3)
64.5
(19.3)
54.7
13.3
-
(4.0)
9.3
9.3
(0.3)
64.5
(19.3)
54.2
(14.0)
-
(14.0)
4.2
(9.8)
(9.8)
0.3
(64.5)
19.3
(54.7)
(13.3)
-
4.0
(9.3)
(9.3)
0.3
(64.5)
19.3
(54.2)
The movements in profit are due to higher/lower interest costs from variable rate debt and cash balances. The movement
in equity is also affected by the increase/decrease in the fair value of derivative instruments designated as cash flow
hedges. The sensitivity is greater in 2008 than 2007 predominantly due to the merger with Adelaide Bank on 30 November
2007, thereby increasing the value of debt, cash and derivative instruments held by the Group. This analysis reflects a
scenario where no management actions are taken to counter movements in rates.
Foreign currency risk
The Group does not have any significant exposure to foreign currency risk, except for borrowings through a Euro medium
term note program (EMTN) and a Euro commercial paper program (ECP). At balance date the principal of borrowings
under these programs was AUD $1,730.2 million (2007: AUD 1,234.2 million). The borrowings are fully hedged through the
utilisation of cross currency swaps, thereby mitigating any exposure to foreign currency risk.
It is the current policy of the Group that it does not trade in derivatives or foreign currencies (i.e. the risk is managed rather
than actively sought).
Equity price risk
The Group’s exposure to equity securities at 30 June 2008 is $84.6m (2007:$130.4m) with $79.7m (2007:$124.5m) of
these listed on a recognised stock exchange. The fair value of listed investments is affected by movements in market
prices, whilst unlisted investment fair values are determined using other valuation methods.
Equity securities price risk arises from investments in equity securities and is the risk that the fair values of equities
decrease as the result of changes in the levels of equity indices and the value of individual stocks. The majority of the
value of equity investments held are of a high quality and are publicly traded on either the ASX or NSX.
The Groups’ equity investments represent less than 0.2% of total Group assets and are predominately long term strategic
holdings, therefore short term volatility in fair values is not considered significant and a sensitivity analysis has not been
completed.
148
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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 that are not already covered by other regulatory capital charges (i.e. credit and
market risks).
The Board Risk Committee is responsible for the oversight of the operational risk management policies and
effectiveness of implementation across the Group.
The Executive Committee and each individual Executive member has day to day responsibility and accountability for
the management of operational risk in their business/support line including, but not limited to ensuring operational risk
management strategies are in place and operating effectively.
Management and staff in each business are responsible for identifying operational risks and determining,
implementing, monitoring and reporting on policies and practices to manage operational risks to which their business
is exposed.
In managing operational risks, the Group is cognisant of its correlation with strategic, reputation and contagion risk.
The Group considers both the internal and external environment as well emerging risks when monitoring and
assessing operational risk.
Inherent in our industry the following factors can also impact the Group’s operations and outcomes:
•
•
•
•
•
•
Globalisation & global impacts e.g. market liquidity, investor sentiment
Economy e.g. changes in economic growth, interest rates
Changes in Government policy and regulation
Demographic trends
Technological dependency, advancements and speed to market
Financial convergence and competitive landscape
Group Operational Risk, has a role to assist and support the Executive Committee and Business Units to develop,
implement, monitor and report on the effectiveness of implementation of the Group’s Operational Risk Management
framework. It reports to the Board Risk Committee on the status of the implementation of the framework and
implications of significant risks and risk events at the Group level.
Sustainability and climate change
Sustainability and climate change risk is defined as the risk to the business and our stakeholders of meeting
objectives due to changes in climate and environment.
In recognition of the importance of managing this risk (both downside and opportunity) the Group’s risk and business
functions consider the broader environment, social responsibility and resilience in its decision making.
Integration Risk
Integration risk is defined as the risk associated with merging the operations of Bendigo and Adelaide Bank Group
and Adelaide Bank Group. It is the risk of not meeting the strategic objectives and success criteria outlined for the
merger in the “Scheme Book”.
In recognition of this specific short term risk a Merger Integration Steering Committee comprising the CEO, the Chief
Executive Retail Bank and the Chief Executive Wholesale Bank meets regularly. This Committee has approved a set
of guiding principles for the merger which includes disciplines such as monthly reporting on synergy tracking and
issues and risks identified. A Merger Integration Office has also been established to provide the reporting to the
Committee and other merger working groups.
149
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
43.
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 is
disclosed under “Derivative financial instruments”.
Financial assets – held for trading (Securities)
These financial assets include floating rate notes and discounted short term securities. The carrying value of
these assets is based on a mark to market value. Therefore the carrying value represents fair value.
Financial assets - available for sale
Available for sale financial assets (securities) are predominantly short-term bank accepted bills of exchange and
negotiable certificates of deposit and are carried at fair value.
Financial assets - held to maturity (Securities)
The fair value of financial assets 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. Carrying value of these assets approximates fair 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. As the listed share investments are carried at market value, carrying value
represents fair value.
Loans and other receivables
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 utilising 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
represent the rate the market is willing to offer these loans at arms-length.
The net fair value of impaired loans is calculated by discounting expected cash flows using these rates.
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 and Notes payable
The carrying value of call, variable rate and fixed rate deposits repricing within six months approximates the fair
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. The discount rates applied represent the rate the market is
willing to offer these loans at arms-length.
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.
Reset preference shares
The closing share price of the reset preference shares on 30 June is used to calculate the fair value of these
financial liabilities.
150
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
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.
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 held for trading
Financial assets available for sale - securities
Financial assets available for sale - share investments
Financial assets held to maturity
Loans and other receivables - investment
Net 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
Notes Payable
Derivatives
Other payables
Reset preference shares
Subordinated debt
PARENT
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
Net loans and other receivables
Amounts receivable from controlled entities
Other assets
Financial Liabilities
Due to other financial institutions
Deposits
Derivatives
Other payables
Reset preference shares
Subordinated debt
C a rrying v a lue
N e t f a ir v a lue
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
1,195.9
412.7
311.8
1,414.8
422.0
84.6
1,414.6
517.6
39,721.9
185.2
468.2
269.7
31,425.1
11,356.1
72.4
680.9
89.5
681.8
440.5
237.6
128.1
611.5
77.2
2,272.5
1,673.4
15,018.4
164.2
450.7
151.7
16,948.2
173.2
282.5
89.5
301.3
257.6
71.5
75.4
-
428.8
130.4
1,614.4
-
13,773.3
156.3
178.5
184.0
14,887.5
259.1
35.0
235.3
-
307.2
203.5
71.1
75.4
428.8
127.9
134.8
1,530.5
13,418.1
101.0
304.8
184.0
14,740.6
35.8
207.1
-
307.2
1,195.9
412.7
311.8
1,414.8
422.0
84.6
1,414.6
519.7
40,007.9
185.2
468.2
269.7
31,423.8
11,354.9
72.4
680.9
78.7
659.9
440.5
237.6
128.1
611.5
77.2
2,272.5
1,673.4
15,535.6
164.2
450.7
151.7
16,546.9
173.2
282.5
78.7
301.3
257.6
71.5
75.4
-
428.8
130.4
1,614.4
-
14,193.2
156.3
178.5
184.0
14,665.8
259.1
35.0
235.3
-
307.2
203.5
71.1
75.4
428.8
127.9
134.8
1,530.5
13,459.7
101.0
304.8
184.0
14,495.6
35.8
207.1
-
307.2
151
Derivatives
Total financial assets
Liabilities
Due to other financial instituions
Deposits
Notes payable
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
AS AT 30 JUNE 2007
Consolidated
Assets
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The economic entity's exposure to interest rate risks of financial assets and liabilities 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 2008
Consolidated
Assets
Floating
interest
rate
$ m
Fixed interest rate repricing :
Less than
3 months
Between
3 months
Between
6 months
Between
1 year
After
5 years
Non-interest
Total
bearing
carrying value
per
Weighted
average
effective
& 6 months
& 12 months
& 5 years
Balance sheet
interest rate
$ m
$ m
$ m
$ m
$ m
$ m
$ m
%
Cash and cash equivalents
Due from other financial institutions
Financial assets held for trading
Financial assets available for sale
Financial assets held to maturity
901.6
161.0
1,414.8
-
56.8
158.3
-
-
353.0
614.8
Loans and other receivables
21,391.9
2,785.6
-
-
-
-
-
69.1
733.0
1,432.0
-
-
-
-
-
9.9
-
-
-
(0.0)
-
3,358.2
11,358.7
-
-
23,926.1
3,911.8
2,234.1
3,368.1
11,358.7
-
8,452.4
11,181.1
-
-
-
13,078.0
175.0
-
-
380.5
20,014.0
155.6
13,408.6
145.7
5,273.1
-
-
5,127.4
4,744.1
-
-
-
-
-
-
-
4,744.1
-
23.1
-
-
89.5
-
112.6
-
-
-
-
-
46.4
-
46.4
-
-
-
-
-
-
136.0
251.7
-
-
-
(133.3)
311.8
566.1
269.7
-
-
72.4
-
-
1,195.9
412.7
1,414.8
422.0
1,414.6
40,239.5
311.8
45,411.3
269.7
31,425.1
11,356.1
72.4
89.5
681.8
0.0
342.1
43,894.6
6.73
3.17
7.08
7.78
7.77
8.71
-
-
-
6.85
7.73
-
6.16
8.18
-
Floating
interest
rate
$ m
Fixed interest rate repricing :
Less than
3 months
Between
3 months
Between
6 months
Between
1 year
After
5 years
Non-interest
Total
bearing
carrying value
per
Weighted
average
effective
& 6 months
& 12 months
& 5 years
Balance sheet
interest rate
$ m
$ m
$ m
$ m
$ m
$ m
$ m
%
-
-
-
-
25.8
-
25.8
-
-
-
-
-
112.5
71.5
130.4
-
(27.1)
74.9
362.2
184.0
84.4
75.4
-
343.8
257.6
71.5
559.2
1,614.4
13,773.3
74.9
16,350.9
184.0
15,231.0
75.4
307.2
15,797.6
3.31
-
6.24
6.46
7.69
-
-
-
4.90
-
7.23
-
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
-
Total financial assets
6,789.6
2,429.3
-
-
-
659.4
384.7
-
1,044.1
-
-
-
161.0
704.9
-
865.9
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
-
-
-
-
-
-
4,834.0
-
4,834.0
-
93.8
-
-
2,950.6
93.8
152
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Interest rate risk (continued)
AS AT 30 JUNE 2008
P arent
Assets
Floating
interest
rate
$ m
Fixed interest rate repricing :
Less than
3 months
Between
3 months
Between
6 months
Between
1 year
After
5 years
Non-interest
Total
bearing
carrying value
per
Weighted
average
effective
& 6 months
& 12 months
& 5 years
Balance sheet
interest rate
$ m
$ m
$ m
$ m
$ m
$ m
$ m
%
Cash and cash equivalents
Due from other financial institutions
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Derivatives
73.2
-
-
-
0.5
6,323.3
-
263.3
-
453.0
-
590.5
1,475.3
-
-
-
69.1
-
1,072.6
788.6
-
-
-
-
-
9.8
1,225.6
-
-
-
89.5
-
-
5,191.7
-
Total financial assets
6,397.0
2,782.1
1,930.3
1,235.4
5,281.2
Liabilities
Due to other financial institutions
-
-
-
-
4,903.7
4,800.4
3,853.0
3,370.2
-
-
-
4,903.7
-
-
155.7
4,956.1
-
-
145.6
3,998.6
-
-
-
3,370.2
-
-
-
-
-
29.9
-
29.9
-
-
-
-
-
-
104.0
237.6
77.2
2,272.5
-
(16.0)
128.1
2,803.4
151.7
-
173.2
-
-
440.5
237.6
688.7
2,272.5
1,673.4
15,018.4
128.1
20,459.3
151.7
16,948.2
173.2
89.5
301.3
324.9
17,663.9
6.34
-
7.58
-
7.84
8.70
-
-
-
6.04
-
6.16
8.59
-
Floating
interest
Less than
Between
Between
Between
Fixed interest rate repricing :
rate
3 months
3 months
6 months
1 year
After
5 years
Non-interest
Total
bearing
carrying value
per
Weighted
average
effective
& 6 months
& 12 months
& 5 years
Balance sheet
interest rate
$ m
$ m
$ m
$ m
$ m
$ m
$ m
$ m
%
Cash and cash equivalents
Due from other financial institutions
Financial assets available for sale
Shares in controlled entities
Financial assets held to maturity
Loans and other receivables
Derivatives
118.4
-
-
-
0.7
6,334.1
-
-
-
428.8
-
724.2
1,209.7
-
Total financial assets
6,453.2
2,362.7
-
-
-
-
644.6
379.6
-
1,024.2
-
-
-
-
161.0
698.1
-
859.1
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
-
-
-
-
-
-
-
25.8
-
25.8
-
-
-
-
-
85.1
71.1
127.9
134.8
-
(26.5)
75.4
467.8
184.0
-
35.8
-
219.8
203.5
71.1
556.7
134.8
1,530.5
13,418.1
75.4
15,990.1
184.0
14,740.6
35.8
307.2
15,267.6
3.42
0.00
6.24
-
6.46
7.82
0.00
-
-
4.87
-
7.23
-
Deposits
Derivatives
Reset preference shares
Subordinated debt
Total financial liabilities
AS AT 30 JUNE 2007
P arent
Assets
-
21.0
-
89.5
-
110.5
-
-
-
-
-
4,797.3
-
4,797.3
-
86.8
-
-
2,926.1
86.8
153
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
44. DERIVATIVE FINANCIAL INSTRUMENTS
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.
As at 30 June 2008 the fair value of outstanding derivatives designated as cashflow hedges by the parent entity was $10.9 million
negative value (2007: $40.5 million positive).
During the 2008 financial year the consolidated entity recognised a loss of $27.1 million (2007: loss $1.6 million) due to hedge
ineffectiveness.
Value of derivatives as at 30 June
Consolidated 2008
Consolidated 2007
Notional
Amount
Asset
Revaluation
Liability
Revaluation
Net Fair Value
Notional
Amount
$ m
$ m
$ m
$ m
$ m
Asset
$ m
Liability
Revaluation
Net Fair Value
$ m
$ m
Included in derivatives category
Derivitives held for trading
Interest Rate Swaps
Derivatives
17,455.0
17,455.0
Derivatives held as fair value hedges
Interest Rate Swaps
Embedded Derivatives
Derivatives
355.8
1.5
357.3
Derivatives held as cash flow hedges
0.9
0.9
6.1
-
6.1
(0.6)
(0.6)
(2.4)
(0.1)
(2.5)
0.3
0.3
3.7
(0.1)
3.6
-
-
-
-
-
Cross Currency
Swaps
Interest Rate Swaps
Foreign Exchange
Contracts
Derivatives
1,525.1
12.8
(11.6)
1.2
830.2
15,848.4
284.0
(33.1)
250.9
4,120.4
496.9
17,870.4
8.0
304.8
(24.6)
(69.3)
(16.6)
235.5
50.8
5,001.4
Derivatives
35,682.7
311.8
(72.4)
239.4
5,001.4
-
-
-
-
-
4.1
70.8
0.5
75.4
75.4
-
-
-
-
-
-
-
-
-
-
(5.6)
(1.5)
(29.1)
(0.3)
(35.0)
(35.0)
41.7
0.2
40.4
40.4
Included in deposits category
Cross Currency
Swaps
-
-
(12.9)
(12.9)
-
-
(72.1)
(72.1)
Total derivatives
35,682.7
311.8
(85.3)
226.5
5,001.4
75.4
(107.1)
(31.7)
154
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
As at 30 June 2008, hedged cash flows are expected to occur and they are expected to affect the income statement as follows:
Consolidated
2008
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
2007
Cash inflows (Assets)
Cash outflows (Liabilities)
Net cash inflow
Income statement
Net gain on cash flow hedges reclassified to the income statement:
Interest income
Interest expense
Other operating expenses
Taxation
Net gain on cash flow hedges reclassified to the income statement
Within 1 year
$ m
1 to 3 years
$ m
3 to 8 years Over 8 years
$ m
$ m
1,333.2
(1,230.8)
1,161.1
(1,079.1)
247.6
(234.9)
102.4
96.9
82.0
79.8
12.7
11.3
37.8
(37.6)
0.2
0.2
302.4
(275.8)
621.2
(555.0)
339.1
(317.0)
43.2
(42.7)
26.6
31.1
66.2
61.9
22.1
20.7
Consolidated
2008
$ m
14.3
(42.7)
0.3
(28.1)
8.4
(19.7)
2007
$ m
-
-
(0.5)
(0.5)
0.2
(0.3)
Parent
2008
$ m
-
-
0.3
0.3
(0.1)
0.2
0.5
0.5
2007
$ m
-
-
(0.5)
(0.5)
0.2
(0.4)
155
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
45. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The following are outstanding expenditure and credit related commitments as at 30 June 2008. Except where specified, all commitments are
payable withinone 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:
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
319.7
292.0
308.8
291.9
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
Capital expenditure commitments
Capital expenditure commitments not provided for in the financial statements
Other expenditure commitments
Sponsorship commitments not paid as at balance date, payable not later than
one year
2.2
6.0
2.8
2.1
2.8
12.7
6.0
12.7
1.4
1.7
1.4
1.6
Credit related commitments
Gross loans approved, but not advanced to borrowers
623.5
419.0
348.0
419.0
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
7,828.2
3,003.6
4,871.8
1,668.5
5,286.8
2,007.5
4,936.3
1,693.6
156
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
b) Superannuation Commitments
The Bendigo and Adelaide Bank Group has a legally enforceable obligation to contribute to a superannuation plan for employees
either on an accumulation basis (including the Superannuation Guarantee Charge) or on a defined benefits basis (Adelaide Bank
staff superannuation plan) which provides benefits on retirement, disability or death based on years of service and final average
salary. Employees contribute to the plan at a fixed percentage of remuneration.
The Group’s contribution to the defined benefit plan is determined by the Trustee after consideration of actuarial advice and an
actuarial review is carried out every three years. The last actuarial review was carried out as at 1 July 2006 by Kathryn Daniels
B.Sc, FIAA of Mercer Human Resource Consulting Pty Ltd. The value of accrued benefits from this Actuarial review was $62.5
million. At balance date, the Directors believe that funds available were adequate to satisfy all vested benefits under the plan.
Accounting Policy
Actuarial gains and losses are recognised in retained earnings.
Plan Information
Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit
section of the Plan is closed to new members. All new members are entitled to become members of the accumulation categories
of the fund.
Fair Value of Plan Assets
The fair value of Plan assets includes Bendigo and Adelaide Bank shares to the value of $2.5 million as at 30 June 2008.
Actual Return
Actual return on Plan assets
Principal Actuarial Assumptions
Discount rate
Expected rate of return on Plan assets
Expected salary increase rate
Reconciliation of the Present Value of the Defined Benefit Obligation
Present value of defined benefit obligations at 30 Nov 2007
Add Current service cost
Add Interest cost
Add contributions by plan participants
Add Actuarial gains/(losses)
Less Benefits paid
Less Taxes, premiums and expenses paid
Add Transfers in
Less Contributions to accumulation section
Present value of defined benefit obligations at end of the year
Reconciliation of the Fair Value of Plan Assets
Fair value of Plan assets at 30 Nov 2007
Add Expected return on plan assets
Add Actuarial gains/(losses)
Add Employer contributions
Add Contributions by plan participants
Less Benefits paid
Less Taxes, premiums and expenses paid
Add Transfers in
Less Contributions to accumulation section
Fair value of Plan assets at end of the year
157
2008
$ m
(0.4)
6.1% pa
7.2% pa
4.5% pa
$ m
13.0
0.5
0.4
0.3
-
1.9
0.1
0.2
0.2
12.2
21.4
0.8
(1.8)
-
0.3
1.9
0.1
0.2
0.2
18.7
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
COMMITMENTS AND CONTINGENCIES (continued)
Reconciliation of the Assets and Liabilities Recognised in the Balance Sheet
Defined Benefit Obligation ^
Less Fair value of Plan assets
(Surplus)
Net superannuation (asset) / liability
^ includes contributions tax provision
Movements in Liability / (Asset) Recognised in the Balance Sheet
Net superannuation (asset) at 30 Nov 2007
Add Expense recognised in income statement
Less Employer contributions
Net superannuation (asset) at 30 June 2008
Expense Recognised in Income Statement
Service cost
Interest cost
Expected return on assets
Superannuation expense
Gain recognised directly in Equity
Actuarial (gain) / loss
Cumulative Gain recognised directly in Equity
Actuarial (gain) / loss
Plan Assets
The percentage invested in each asset class at the balance sheet date:
Australian Equity
International Equity
Fixed Income
Property
Alternatives
Cash
12.2
18.7
(6.5)
(6.5)
(8.5)
2.0
-
(6.5)
2008
$ m
0.5
0.4
(0.8)
0.1
1.8
(0.3)
2008
40%
23%
9%
10%
8%
10%
Funding Arrangements for Employer Contributions
Surplus / (Deficit)
The following is a summary of the financial position of the Adelaide Bank Staff Superannuation Plan as at the date of the last
actuarial review conducted on 1 July 2006. Note that the figures below relate to the Plan as a whole, including the accumulation
section.
Accrued benefits
Net market value of Plan assets
Net surplus
1 July 2006
$ m
62.5
67.5
5.0
158
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Contribution Recommendations
The Bank is currently on a contribution holiday with respect to employer funding of the defined benefit section of the Plan. This
decision was made in accordance with recommendations from the Actuary. The next actuarial valuation will be at 1 July 2009. The
financial position of the defined benefits is reviewed regularly by the Bank, at least annually, to ensure that the contribution holiday
remains appropriate.
Funding Method
The method used to determine the employer contribution recommendations at the last actuarial review was the Attained Age
Normal method. The method adopted affects the timing of the cost to the Bank.
Under the Attained Age Normal method, a “normal cost” is calculated which is the estimated employer contribution rate required to
provide benefits in respect of future service after the review date. The “normal” cost is then adjusted to take into account any
surplus (or deficiency) of assets over the value of liabilities in respect of service prior to the review date. Any surplus or deficiency
can be used to reduce or increase the “normal” employer contribution rate over a suitable period of time.
Economic Assumptions
The long-term economic assumptions adopted for the last actuarial review of the Plan as at 1 July 2006 were:
Expected rate of return on assets (discount rate)
Expected salary increase rate
Nature of Asset
7.20% pa
4.50% pa
Bendigo and Adelaide Bank has recognised an asset in the Balance Sheet (under Other assets) in respect of its defined benefit
superannuation arrangements. If a surplus exists in the Plan, Bendigo and Adelaide Bank may be able to take advantage of it in
the form of a reduction in the required contribution rate, depending on the advice of the Plan’s actuary.
The Adelaide Bank Staff Superannuation Plan, a sub-plan of the Mercer Super Trust, does not impose a legal liability on Bendigo
and Adelaide Bank to cover any deficit that exists in the Plan. If the Plan were wound up, there would be no legal obligation on the
Bank to make good any shortfall. The rules of the Plan state that if the Plan winds up, the remaining assets are to be distributed
amongst the Members as determined by the Trustee of the Plan.
The Bank may at any time terminate its contributions by giving one month’s notice in writing to the Trustee.
Historical Information
Present value of defined benefit obligation
Fair value of Plan assets
(Surplus) / deficit in Plan
Experience adjustments (gain)/loss - Plan assets
Experience adjustments (gain)/loss - Plan liabilities
Expected Contributions
Financial year ending
Expected employer contributions
(b) Contingent liabilities and contingent assets
2008
$ m
12.2
18.7
(6.5)
1.8
0.3
2009
$m
-
Contingent liabilities
Guarantees
The economic entity has issued guarantees on behalf of clients
Other
Documentary letters of credit & performance related obligations
Consolidated
Parent
2008
$m
2007
$m
2008
$m
2007
$m
161.7
111.9
119.8
111.9
17.7
24.0
17.7
24.0
As 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 2008, the economic entity does not have any contingent assets.
159
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
46.
STANDBY ARRANGEMENTS AND UNCOMMITTED CREDIT FACILITIES
Amount available:
Offshore borrowing facility
Domestic note program
Amount utilised:
Offshore borrowing facility
Domestic note program
Amount not utilised:
Offshore borrowing facility
Domestic note program
C o ns o lida t e d
P a re nt
2 0 0 8
$ m
2 0 0 7
$ m
2 0 0 8
$ m
2 0 0 7
$ m
6,255.4
7,000.0
1,767.1
2,000.0
2,077.9
2,000.0
1,767.1
2,000.0
1,460.2
1,730.2
1,200.9
520.0
1,234.1
200.0
1,200.9
520.0
4,795.3
5,269.8
566.1
1,480.0
843.9
1,800.0
566.1
1,480.0
The Bank has a $US 4,000 million Euro Commerical Paper program of which $US 1208 million was drawn down as at 30 June 2008, and a
$US 2,000 million Euro Medium Term Note program of whch $EURO 300 million was drawn down. The Bank also has a $7,000 million
Domestic Note Program of which $1,730 million was issued as at 30 June 2008.
47.
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
C o ns o lida t e d
2 0 0 8
$ m
3,820.2
4,828.0
1,822.6
2 0 0 7
$ m
3,780.3
2,310.4
1,083.8
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 and
Adelaide Bank does not guarantee the performance or obligations of its subsidiaries.
48.
EVENTS AFTER BALANCE SHEET DATE
On 11 August 2008 the Bank declared a final dividend, details of which are disclosed in the directors' report and in Note 10.
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.
49.
BUSINESS COMBINATIONS
On 30 November 2007 Bendigo and Adelaide Bank Limited acquired all the ordinary shares in Adelaide Bank Limited (“Adelaide”)
for $1,994,311,136, satisfied by the issue of 117,687,891 ordinary shares in Bendigo and Adelaide Bank Limited at a fair value of
$16.80 per share, based on the volume weighted average price on the day of acquisition plus $17,154,567 in cash (transaction
costs). The cost of the acquisition includes directly attributable costs including consultancy, legal, accounting and other
professional fees.
The principal activities of Adelaide are the provision of wholesale mortgages, business lending, wealth management and retail
banking services.
160
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
The acquisition had the following effect on the Group’s assets and liabilities:
Assets
Cash and cash equivalents
Due from other financial institutions
Derivatives
Financial assets held for trading
Financial assets held to maturity - securities
Financial assets available for sale - share investments
Loans and other receivables
Property, plant & equipment
Intangible assets
Intangible software
Goodwill
Deferred tax assets
Other assets
Total Assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Other payables
Income tax payable
Provisions
Deferred tax liabilities
Reset preference shares
Subordinated debt - at amortised cost
Total Liabilities
P ro v is io na l
P re - a c quis it io n
re c o gnis e d
c a rrying a m o unt
v a lue s o n
$ m
483.7
120.3
210.7
1,934.5
64.8
3.0
27,483.7
28.7
3.9
33.9
42.0
34.2
30,443.4
112.4
15,740.9
13,038.3
30.9
96.6
(13.2)
17.0
68.4
89.5
380.5
29,561.3
a c quis it io n
$ m
483.7
120.3
210.7
1,934.5
64.8
0.3
27,335.2
45.7
3.9
-
71.0
34.2
30,304.3
112.4
15,740.9
13,038.3
30.9
103.5
0.9
17.0
65.4
89.5
380.5
29,579.3
Net identifiable assets and liabilities attributable to Bendigo Bank Limited
882.1
725.0
Consideration paid in cash (transaction costs)
Cash acquired
Net cash inflow
Total consideration
Provisional fair value of identifiable assets and liabilities
Provisional goodwill on acquisition
Goodwill
(17.2)
491.6
474.4
2,094.3
(725.0)
1,369.3
Goodwill arose in the business combination as the consideration paid for the combination effectively included amounts in relation
to the skills and talent of the acquired business workforce, the benefit of expected head office and operational synergies, revenue
growth and future market development. These benefits are not recognised separately from goodwill as the future economic
benefits arising from them cannot be measured reliably or they are not capable of being separated from the Group and sold,
transferred, licensed, rented or exchanged either individually or together with any related contracts.
Due to the complexity and timing of this acquisition, the fair values currently established are provisional and are subject to further
review during the 12 month period following acquisition. This will alter assets and liabilities as currently disclosed for 31 December
2007 and 30 June 2008.
During the period 30 November 2007 to 30 June 2008, Adelaide contributed net profit of $76.9 million to the consolidated net profit
for the financial year (excluding net significant income items after tax of $96.1 million).
If the acquisition had occurred on 1 July 2007, group revenue would have been $988.6 million for the financial year and net profit
would have been $241.0 million. This pro-forma financial information uses Adelaide Bank Limited data for the 12 months ended
30 June 2008 and represents the historical operation results of Adelaide Bank Limited, reported in accordance with their pre-
acquisition accounting policies. It excludes transaction and net significant expense items of $62.1 million after tax.
161
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Bendigo and Adelaide 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
2008 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 2008.
On behalf of the Board
R N Johanson
Chairman
9 September 2008
R G Hunt AM
Managing Director
162
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Independent auditor’s report to the members of Bendigo and Adelaide Bank Limited
Scope
We have audited the accompanying financial report of Bendigo and Adelaide Bank Limited, which
comprises the balance sheet as at 30 June 2008, and the income statement, statement of recognised
income and expense and cash flow statement for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the
financial report in accordance with the Australian Accounting Standards (including the Australian
Accounting 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 that the financial report, comprising the
financial statements and notes, complies with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards
require that we comply with relevant ethical requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on our judgment, 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.
Liability limited by a scheme approved under
the Professional Standards Legislation.
163
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Independence
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,
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 and Adelaide Bank Limited is in accordance with the
Corporations Act 2001, including:
i giving a true and fair view of the financial position of Bendigo and Adelaide Bank
Limited and the consolidated entity at 30 June 2008 and of their performance for the
year ended on that date; and
ii complying with Australian Accounting Standards (including
Accounting Interpretations) and the Corporations Regulations 2001; and
the Australian
2. the financial report also complies with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 39 to 63 of the directors’ report for
the year ended 30 June 2008. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Bendigo and Adelaide Bank Limited for the year ended
30 June 2008, complies with section 300A of the Corporations Act 2001.
Brett Kallio
Partner
Melbourne
9 September 2008
Ernst & Young
164
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
ADDITIONAL INFORMATION
1. MATERIAL DIFFERENCES
There are no material differences between the information supplied in this report and the information in the preliminary
final report supplied by Bendigo and Adelaide Bank Limited to the Australian Securities Exchange on 11 August 2008.
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 and Adelaide Bank Limited are detailed in the Corporate
Governance section of this report.
4.
SUBSTANTIAL SHAREHOLDERS
As at 18 August 2008 there were no substantial shareholders in Bendigo and Adelaide Bank Limited as disclosed in
substantial holding notices given to the company.
5.
DISTRIBUTION OF SHAREHOLDERS
Range of Securities as at 18 August 2008 in the following categories:
C a t e go ry
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
F ully P a id
O rdina ry
S ha re s
F ully P a id
E m plo ye e
S ha re s
B P S
P re f e re nc e
S ha re s
R P S
R e s e t P re f
S ha re s
S P S
S t e p Up P re f
S ha re s
35,987
35,639
5,344
2,920
104
79,994
2,057
871
106
31
3
3,068
3,333
43
1
3
1
3,381
3,527
73
5
3
0
3,608
3,170
72
3
5
0
3,250
269,576,082
5,102,301
900,000
894,574
1,000,000
Based on the closing price of $11.94 on 18 August 2008 the number of holders with less than a marketable parcel of the
Company’s main class of securities (Ordinary Shares), as at 18 August 2008 was 2,311.
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.
165
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
8. MAJOR SHAREHOLDERS
Names of the 20 largest holders of Fully Paid Ordinary Shares, including the number of shares each holds and the
percentage of issued ordinary share capital that number represents as at 18 August 2008 are:
FULLY PAID ORDINARY SHARES
R a nk N a m e
N um be r o f f ully pa id
O rdina ry S ha re s
P e rc e nt a ge he ld o f
Is s ue d O rdina ry C a pit a l
1 HSBC Custody Nominees (Australia) Limited
2 J P Morgan Nominees Australia Limited
3 National Nominees Limited
4 Milton Corporation Limited
5 ANZ Nominees Limited (Cash Income a/c)
6 UBS Nominees Pty Ltd
7 Argo Investments Limited
8 Cogent Nominees Pty Limited (SMP Accounts)
9 AMP Life Limited
10 Cogent Nominees Pty Limited
11 Citicorp Nominees Pty Limited
12 Leesville Equity Pty Ltd
13 Choiseul Investments Limited
14 Queensland Investment Corporation
15 Carlton Hotel Limited
16 Merrill Lynch (Australia) Nominees Pty Limited
17 HSBC Custody Nominees (Australia) Limited - a/c 2
18 Yarabie Estates Pty Ltd (Yarabie Super Fund a/c)
19 Invia Custodian Pty Limited (Wilson Invmt Fund Ltd a/c)
20 Anthony Detata Nominees Pty Ltd
19,993,115
11,808,862
8,275,550
4,421,366
4,354,402
2,321,644
2,044,700
1,766,324
1,721,113
1,636,852
1,550,487
1,019,093
1,009,750
923,131
752,500
717,789
532,686
508,670
495,763
473,600
66,327,397
7.28%
4.30%
3.01%
1.61%
1.59%
0.85%
0.74%
0.64%
0.63%
0.60%
0.56%
0.37%
0.37%
0.34%
0.27%
0.26%
0.19%
0.19%
0.18%
0.17%
24.15%
BBS Nominees Pty Ltd, trustee for the Bendigo and Adelaide employee share ownership plan, held 5,102,301 unquoted
shares as at the date of this report. These shares have not been included in the above table, but are included in total
issued ordinary share capital.
Names of the 20 largest holders of Bendigo and Adelaide Preference Shares, including the number of shares each holds
and the percentage of preference share capital that number represents as at 18 August 2008 are:
FULLY PAID PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
P re f e re nc e S ha re s
P e rc e nt a ge he ld o f is s ue d
P re f e re nc e C a pit a l
1 J P Morgan Nominees Australia Limited
2 Citicorp Nominees Pty Limited
3 ANZ Nominees Limited (Cash Income a/c)
4 M F Custodians Ltd
5 Cogent Nominees Pty Limited
6 Cambooya Pty Ltd
7 Bruttown Pty Limited
8 Dylac Pty Ltd
9 Leesville Equity Pty Ltd
10 The Trustees of the Diocese of Tasmania
11 Edwards, JF & JR
12 Green Super Pty Ltd (Ross Knowles Super Fund a/c)
13 Uniting Church in Australia Property Trust (WA) (UCIF a/c)
14 Cambooya Pty Ltd (Foundation a/c)
15 Bostock J & Taylor H & RSL Custodian Pty Ltd (Blacktown RSL S/B Cap a/c)
16 Rome Pty Ltd
17 Fedton Pty Ltd (S/F No 1 a/c)
18 World Wide Fund for Nature Australia
19 Buckingham GE & EM (Buckingham S/F a/c)
20 Andre, RM
189,233
15,481
12,988
11,070
10,000
4,655
4,000
4,000
4,000
3,000
2,794
2,531
2,500
2,500
2,474
2,428
2,200
2,075
2,046
2,000
281,975
21.03%
1.72%
1.44%
1.23%
1.11%
0.52%
0.44%
0.44%
0.44%
0.33%
0.31%
0.28%
0.28%
0.28%
0.27%
0.27%
0.24%
0.23%
0.23%
0.22%
31.31%
166
BENDIGO AND ADELAIDE BANK LIMITED
ABN 11 068 049 178
Full Financial Report
Period ending 30 June 2008
Names of the 20 largest holders of Bendigo and Adelaide Reset Preference shares, including the number of shares each
holds and the percentage of reset preference share capital that number represents as at 18 August 2008 are:
FULLY PAID RESET PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
R e s e t P re f e re nc e S ha re s
P e rc e nt a ge he ld o f is s ue d
R e s e t P re f e re nc e S ha re s
1 M F Custodians Ltd
2 ANZ Nominees Limited (Cash Income a/c)
3 Bayeux Capital Pty Ltd
4 MLEQ Nominees Pty Limited (Unpaid 1 a/c)
5 Questor Financial Services Limited (TPS RF a/c)
6 Cogent Nominees Pty Limited
7 Merrill Lynch (Australia) Nominees Pty Limited
8 Citicorp Nominees Pty Limited (CFSIL CFS WS ENH Yield a/c)
9 Bailey IW & GJ (Bailey Family Super Fund a/c)
10 Malvern Development Co Pty Ltd
11 Reece Superannuation Pty Ltd (Reece Super Fund a/c)
12 Baker Custodian Corporation
13 Synod of the Diocese of Adelaide of the Anglican Church of Australia Inc
14 Dowling AM
15 Comil Australia Pty Ltd (Forbes Family a/c)
16 The Loreto Property Association
17 Salteri S
18 A & V Taylor Pty Ltd (Alan & Vivien Taylor S/F a/c)
19 The Invergowrie Foundation
20 Secure Investment Consultants Pty Ltd
19,616
19,447
15,300
10,000
9,353
8,131
7,973
6,382
4,000
4,000
3,694
3,390
3,000
2,700
2,500
2,500
2,500
2,476
2,400
2,390
131,752
2.19%
2.17%
1.71%
1.12%
1.05%
0.91%
0.89%
0.71%
0.45%
0.45%
0.41%
0.38%
0.34%
0.30%
0.28%
0.28%
0.28%
0.28%
0.27%
0.27%
14.74%
Names of the 20 largest holders of Bendigo and Adelaide Step Up Preference Shares, including the number of shares each
holds and the percentage of step up preference share capital that number represents as at 18 August 2008 are:
FULLY PAID STEP UP PREFERENCE SHARES
R a nk N a m e
N um be r o f f ully pa id
S t e p up P re f e re nc e S ha re s
P e rc e nt a ge he ld o f is s ue d
S t e p up P re f e re nc e S ha re s
1 J P Morgan Nominees Australia Limited
2 National Nominees Limited
3 RBC Dexia Investor Services Australia Nominees Pty Limited (MLCI a/c)
4 ANZ Nominees Limited (Cash Income a/c)
5 Argo Investments Limited
6 Returned Services League of Australia (Queensland Branch)
7 Questor Financial Services Limited (TPS RF a/c)
8 Laidlaw Family Investment Pty Ltd (Laidlaw Family Inv No 1 a/c)
9 Laidlaw Family Investment Pty Ltd (Laidlaw Family Invest a/c)
10 Rogand Pty Ltd (Rogand Unit a/c)
11 Aileendonan Investments Pty Ltd
12 Baker Custodian Corporation
13 Moladi Pty Ltd (Kahrisky Super Fund a/c)
14 Peroda Nominees Pty Limited (Berman Super Fund a/c)
15 Reece Superannuation Pty Ltd (Reece Super Fund a/c)
16 Richard Oppen Investments Pty Ltd
17 Acland Street Investments Pty Ltd (Acland Investments S/F a/c)
18 Shore Nominees Limited
19 Synod of the Diocese of Adelaide of the Anglican Church of Australia Inc
20 Tulloch B M
51,020
50,000
23,989
18,229
17,000
10,000
7,819
5,428
4,865
4,220
4,000
3,893
3,526
3,504
3,270
3,031
3,000
3,000
3,000
3,000
225,794
5.10%
5.00%
2.40%
1.82%
1.70%
1.00%
0.78%
0.54%
0.49%
0.42%
0.40%
0.39%
0.35%
0.35%
0.33%
0.30%
0.30%
0.30%
0.30%
0.30%
22.57%
9.
VOTING RIGHTS
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.
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