Annual Financial
Report 2021
Contact Us
Bendigo and Adelaide Bank Limited
ABN 11 068 049 178
Registered head office
The Bendigo Centre,
Bendigo VIC Australia 3550
Telephone: 1300 236 344
+61 3 5445 0666 (if calling from overseas)
Shareholder Enquiries
Share Registry 1300 032 762 (within Australia)
Email: BEN@boardroomlimited.com.au
B A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
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Table of
contents
Section 1
2
3
4
6
Message from our Chair
Message from our Managing Director
Year in review highlights
Directors’ Report
16
Operating and Financial Review
28
Remuneration Report
Section 2
52
Financial Statements
131 Directors’ Declaration
132
Independent Auditor’s Report
Section 3
140 Additional Information
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1
Message from
our Chair
We are proud to have supported our customers
and their communities throughout the last
financial year. As Australia’s better big bank,
we will continue to walk side by side with
them. Over this time, we have witnessed the
resilience of our stakeholders and our business,
which have combined with a renewed sense of
optimism as we look towards a pathway out of
the challenges of the last eighteen months.
Our multi-year strategy to reduce complexity, increase
capability and tell our story is well progressed. We have
been busy reshaping our business for the future - making
lasting changes - to deliver on our vision in these times
of economic challenge and lay the right foundations for
further growth. We have and will continue to adapt to
the evolving needs of our customers and the changing
economic environment. Ultimately, these changes will see
us become a bigger, better, faster and stronger business.
It’s important to state that regardless of any change we
make to our business, our purpose, values, strategy and
customer commitment will remain at the centre of every
decision we make. We are firmly committed to supporting
the success of all stakeholders by strengthening what we
offer them, improving the productivity and efficiency of our
business and carefully managing our costs.
The economic outlook presents both ongoing challenges
and opportunities for our Bank. Whilst a historic low
interest rate environment continues to place pressure
on our margins, fewer customers than expected are
experiencing financial hardship from COVID-19 and we
continue to see strong demand for lending across our
consumer, business, and agribusiness customers. At the
same time, we are encouraged by the various stimulus
measures that will aid Australia’s economic recovery.
The ongoing support and loyalty of our shareholders is
not something we take for granted. After a year of strong
performance, I am pleased to join the board in announcing
a full year, fully franked dividend of 26.5 cents per share.
We are pleased that you, our shareholders, can share in
the success of our company’s strategy.
Since our founding years, we have operated with a
belief that the long-term sustainability of our business is
tied to much more than the health of our balance sheet
or financial performance. I don’t make this statement
lightly as it is evidenced in our more than 160-year-old
purpose to feed into customer and community prosperity,
not off it. As more investors have come to value the
holistic performance of businesses across important
environmental, social and governance (ESG) measures,
we too have made some changes to reflect our proven
leadership in this space. That’s why this year, we are
proud to introduce our first sustainability report. Released
annually, this report will document our ESG progress,
providing a greater level of transparency, measurement
and accountability to our various stakeholders.
The way in which we deliver on our purpose takes many
forms and one very practical example of the Bank feeding
into prosperity is through our highly regarded scholarship
program. This year, we proudly achieved an impressive
milestone. Since the program commence in 2007, over
$10 million in scholarship assistance has been provided to
more than 1,140 regional and rural students. Our program
is one of the largest privately funded and best targeted
scholarship programs in Australia - an initiative that will
continue to nurture significant intellectual capital across
the community.
We know investing in capability has important multiplier
effects for our business, our customers and our
communities. Fostering a culture of excellence, trust and
transparency empowers us to support customers, manage
risk and develop talent. We are proud to have made
important progress on our diversity and inclusion strategy,
our staff development programs and continue to focus
on our gender targets. This reflects our commitment to
reflecting the diversity of the communities in which we
operate.
Our advantages and market opportunities lie in our point
of difference, the strength of our purpose, and commitment
to our customers. These are core to our very being - as
we remain steadfast in our vision to be Australia’s bank of
choice.
Jacqueline Hey
Chair, Bendigo and Adelaide Bank
2 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Message from our
Managing Director
Earlier this year I attended the inaugural
Business Council of Australia Biggies Awards
which recognised the positive contributions
Australian businesses made to the
community in 2020 through bushfire, drought,
COVID-19 and economic uncertainty.
Scott Hart and his team at Community Bank Braidwood
& Districts were named finalists in the Awards, for their
unwavering and selfless support of their community
during the Black Summer Bushfire response and recovery.
As each of the finalists’ stories were shared, I reflected on
the resilience of businesses and communities nationwide,
amidst what were unforeseen conditions. I felt an
enormous sense of pride at how the values of our people
shone through in their actions. In times of adversity,
strong values become the compass that guides our
actions and ensure we remain true to our purpose.
I am always proud to say that this is where our Bank
excels. COVID-19 has now been a part of our lives for
some 18 months and despite this, our business has
delivered strong financial results whilst delivering lasting
social and economic impact. We have made tangible
progress against our growth and transformation
strategy, all while centring the experience of our
customers and their communities and staying true to our
history, values and identity. This progress has positioned
the Bank well to continue to deliver value for all the
stakeholders in our business as we further strengthen our
capability and productivity.
Our results clearly demonstrate our strategy is making
us a bigger, better and stronger business. Our cash
earnings after tax increased 51.5 percent from last
year to $457.2 million. We have delivered total income
on a cash basis of $1,702.5 million, up 4.5 percent
on the prior corresponding period, while sustaining
above system lending and strong residential growth -
which was 2.8 times above system. Given our strong
performance, the board was pleased to announce a
total, fully franked dividend payment of 50 cents per
share in acknowledgment of the loyalty and support
our shareholders have shown for our vision and multi-
year strategy.. On behalf of my team, I thank you, our
shareholders, for your ongoing support.
Over the last year we have strengthened our operations
and improved how we engage customers. Brand,
technology and process simplification continue to drive
efficiency and importantly, strengthen the experience
our customers receive when they bank with us. We have
also enhanced our people and culture functions to help
identify and manage talent, nurture our values-led culture,
and equip our people with the skills, wellbeing support
and knowledge they need to continue delivering great
outcomes for our customers.
We continue to be ahead of our major competitors in
leading corporate reputation indices. Our investment
in innovation, which when combined with our deeply
human-approach, high trust and positive net promoter
scores - 29.8 points higher than the average of the
major banks - will allow us to become even more agile in
responding to our customers’ ever-changing needs, and
further grow market share.
Unique to us, and our greatest opportunity to create
value for our stakeholders, is where our community focus
and customer connection and experience overlaps with
our strong digital capabilities. Our proven leadership in
innovation puts us in good stead. Our recent partnership
with Tyro is providing our merchant customers with
simpler, flexible payment solutions, while our investment in
Tic:Toc continues to see fast growing, direct-to-customer
digital offerings provided to customers when and how
they want it. Our recent acquisition of Melbourne-based
fintech company, Ferocia will allow our Bank to further
accelerate our digital strategy and shape the future of
banking for a new generation of customers.
Strongly aligned to our purpose to feed into prosperity,
not off it, is our commitment to strengthening
communities. To date, through our unique Community
Bank model, more than $270 million has been returned
to communities, providing infrastructure, invigorating local
activity, and strengthening for the long term the social
and economic fabric of the places we call home.
Steering through periods of significant, unforeseen
change and upheaval would challenge any organisation
that doesn’t have a strong understanding of who they
are and what they stand for. I want to personally thank
my team for their tireless efforts. As we look ahead,
I would like to restate our continued commitment
of support to you, our shareholders, as well as our
customers, communities and many partners as we all
play our own important part in Australia’s economic
recovery.
Marnie Baker
Chief Executive Officer and Managing Director,
Bendigo and Adelaide Bank
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3
Year in review highlights
Bendigo and Adelaide Bank is committed to operating sustainably from an economic,
social and environmental standpoint, considering the needs and expectations of our stakeholders
over the long-term. While our expertise is in delivering best in class financial services, our purpose
underpins everything we do. Below are some of our financial and non-financial highlights, as well as
milestones we have reached in the 2020/2021 financial year. You can read more about these figures
in our Sustainability Report and our Annual Report.
Cash earnings
after tax
$457.2
million
Statutory
net profit
$524
million
Total fully
franked dividend
50 cents
per share
Residential
lending up
2.8x
system
Financial performance
This year, the Bank announced a statutory net profit of $524 million,
up 172 percent for the 12 months ending 30 June 2021.
Cash earnings after tax were $457.2 million, a 51.5 percent increase on the prior financial
year. Cash earnings per share were 85.6 cents per share, up 43.4 percent from the 2020
financial year.
We delivered total income on a cash basis of $1,702.5 million, up 4.5 percent on the prior
year. Lending grew overall, with upticks in residential, agribusiness and business lending. Our
capital position further strengthened with Common Equity Tier 1 up 32 bps to 9.57 percent,
reflecting a well-managed balance sheet and strong risk management, whilst supporting
continued lending growth and future investment in transformation. We announced a fully
franked final dividend of 26.5 cents per share, taking the full year dividend to 50 cents per
share continuing our history of rewarding shareholders with high yield and long-term returns.
NPS
+27.3
Customer growth
9.6%
Number of
customers
2 million+
Top 20
Most trusted
brands
Customers
Customers are at the heart of what we do. We’re proud that more and more Australians
are choosing to do their banking with us.
Our competitive range of banking products, unique relationship model and friendly
customer service are just some of the reasons why our Net Promoter Score continues
to sit well above the industry average at 27.3. Our trust rankings also reflect the esteem
we are held in by our customers - Roy Morgan ranks us as one of Australia’s top 20 most
trusted brands.
Women in
leadership roles
43.2%
Culture index
74%
(March 2021)
Employee
engagement
score
73%
(June 2021)
~1,250
people leaders
introduced to
Lead BEN
People
We know that when our people are supported and performing at their best, our
customers and community benefit. Investing in capability is critical to the success of our
strategy. Since 2015, 89 women have completed our Women in Leadership program.
Over the past year, we have made progress in all 10 focus areas of the Australian
Network on Disability’s Access and Inclusion Index, supported 150 leaders through phase
1 of our Lead BEN deep dive and hosted 101 live webinars designed to up skill our people
leaders to manage high performing teams. Our focus on people has contributed to an
employee engagement score of 73%.
4 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Carbon neutrality
achieved
June 2021
Reduction in
travel related
emissions
67%
Reduction
in absolute
greenhouse gas
emissions
20%
Branches with
rooftop solar
30
“Speaking Up”
resource launched
with over 3,300
individual page
views
93%
small business
suppliers paid
within
30 days of
invoicing
Established
relationships with
Supply Nation and
Social Traders
Lodged our first
Modern Slavery
statement
Donations
received to
support natural
disaster recovery
$47million
since Jan 2020
Scholarships
funded
274
Community Bank
contributions
$21.3
million+
$7.4 million
in grants
on behalf of
community
partners
Environment
We recognise climate change has far-reaching risks for the environment, the
economy, society, our customers and their communities. We support the Paris
Agreement objectives and the required transition to a low carbon economy. Since
launching our Climate Change Action Plan, we have reduced our travel related
greenhouse emissions by 67%, our absolute emissions by 20% and reached 30 of
our branches now fitted with rooftop solar systems. We achieved carbon neutral
status in June 2021.
Governance
Robust governance is essential to strong and sustainable growth and success. Not
only do we adhere to what is required of us from both a legislative and regulatory
standpoint, as a values-based organisation we also seek to do what is right in
the eyes of our customers and all of our stakeholders. Our Speak Up resource,
encouraging staff to speak up when they see something wrong, has experienced
strong take up. Our team is also working through more than 140 compliance and
regulatory matters to ensure our offering remains aligned to our longstanding
practice of being relevant and fair for customers.
Community
Our Bank is known across Australia for its commitment to community. In 2020-
21 we built on this commitment, returning over $270 million to communities
through our Community Bank network since 1998. 274 students have been
supported through tertiary education with scholarships totalling over $1 million.
Our charitable arm, the Community Enterprise FoundationTM continues to support
communities affected by natural disasters distributing more than $15.3 million in
donations over the past year. This money is part of the staggering $47 million
raised in the wake of the Black Summer bushfires.
In 2021, we have grown market share, customer numbers, total lending
and deposits. Importantly, we have not achieved this at the expense of our
commitment to community, our people and our environment, recording strong
results against our non-financial targets. More about our progress over the past
year is contained within our reporting suite outlined below.
Reporting on our performance
Building on our prior Annual Review, in 2021, we commenced reporting on our material environmental, social and governance
issues in a separate Sustainability Report. Our reporting suite is now made up of the following documents, all available on our
website via our Investor centre: Reports | Bendigo and Adelaide Bank (bendigoadelaide.com.au)
Annual Financial
Report
Our statutory
financial reporting
Tax Report
Corporate Governance
Statement
Annual Review
Sustainability
Report
Additional
disclosures:
Summary highlights
of our performance
over the past year
Our first report on
our material ESG
topics
Climate-related
Financial Disclosures
Modern Slavery
Statement
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5
Directors’
Report
The Directors of Bendigo and Adelaide Bank Limited present their report together with the financial report
of Bendigo and Adelaide Bank Limited (the “Bank”) and its controlled entities (the “Group”) for the year
ended 30 June 2021.
Directors’ information
The names and details of the Directors in office during the financial year and as at the date of this report are as follows:
Jacqueline Hey,
Chair, Independent
BCom, Graduate Certificate in Management,
GAICD, 55 years
Jacquie joined the Board in July 2011 and was appointed Chair on October 2019, becoming
the Bank’s first female Chair and one of only 21 ASX 200 female chairs.
Jacquie offers a depth of international experience in business and technology systems and
enjoyed a highly successful executive career prior to becoming a full-time company director in
2011.
After majoring in economics at the University of Melbourne, Jacquie took up a graduate
position with Ericsson - the Swedish telecommunications company - where she held a variety
of leadership roles across more than two decades, eventually rising to become MD & CEO of
Ericsson in the UK/Ireland and Australia/NZ.
Jacquie brings to the Board an extensive array of skills including executive leadership,
corporate and business acumen, technology and innovation, financial acumen and corporate
governance.
Jacquie is a member of the Governance & Human Resources and Technology Committees.
Other director and memberships (including directorships of other listed companies for the
previous three years): Director of Qantas Airways Limited (ASX Listed, period: August 2013 to
present), AGL Energy Limited (ASX listed, period: March 2016 to present). Member of Brighton
Grammar School Council. Former Director, Australian Foundation Investment Company (ASX
listed period: July 2013 – January 2019).
“
There were 20 kids when
I started in my primary
school in Wallington on the
Bellarine Peninsula, just
down the road from Geelong.
Everyone knew everyone
and community was really
important. When the
opportunity to join the board
of the Bank came along, one
thing that really appealed
to me was its focus on
communities. As Chair, I’m
passionate about talking
about and representing the
Bank, as well as working in
the long-term best interests
of our shareholders, staff,
customers, communities and
other stakeholders.”
6 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
“
I'm passionate about
and strongly advocate
for the important role
communities play in the
social and economic fabric
of Australia. As a purpose-
led organisation we believe
in putting our customers and
communities at the centre
of our business, feeding into
their prosperity, not off it."
Directors’ information continued
Marnie Baker,
Chief Executive Officer and Managing Director, Non-independent
BBus, ASA, MAICD and SFFin, 53 years
Marnie Baker was appointed Managing Director and Chief Executive Officer commencing
July 2018.
Marnie has over 30 years’ experience in the financial services industry, across Banking, Trustee
and Custodial Services, Financial Planning, Insurance and Funds Management.
Marnie has been with the Bendigo and Adelaide Bank Group since 1989, and an Executive
of the Bank since 2000. Her most recent positions include Chief Customer Officer which had
responsibility for all the customer facing and direct customer support businesses across the
Group, Executive Corporate Resources with responsibility for human resources, information
technology, legal, assurance, property & security, procurement and corporate services, as well
as previous positions of Chief Information Officer, Group Treasurer and Chief Executive Officer
Sandhurst Trustees.
Marnie holds a Bachelor of Business (Accounting) from Latrobe University and is a member of
the Australian Society of Certified Practicing Accountants, member of the Australian Institute
of Company Directors and a Senior Fellow of the Financial Services Institute of Australasia.
Marnie brings to the Board a strong understanding and connection to regional Australia as
well as an extensive array of skills, knowledge and experience from over 30 years in financial
services, two thirds of which has been in Executive positions.
Marnie is not a member of any Board Committees.
Other director and memberships (including directorships of other listed companies for the
previous three years): Deputy Chair of the Australian Banking Association, member of
Business Council of Australia, Mastercard (Asia Pacific) Advisory Board, Corporate Executive
Women and La Trobe University’s Bendigo Regional Advisory Board.
Vicki Carter,
Independent
BA (Social Sciences), Dip Mgt, Certificate in Executive Coaching,
GAICD, 57 years
Vicki joined the Board in September 2018.
Vicki has over 30 years’ experience in the financial services and telecommunications
sectors with executive roles in distribution, strategy and operations, human resources and
transformation. Her extensive skills in large scale people leadership, product and sales
management, transformation delivery and risk management have been, and continue to be,
valuable and contemporary contributions to the Board and the Bank.
Vicki recently concluded her role as Executive Director, Transformation Delivery at Telstra, and
prior to that, held a number of executive roles at NAB including Executive General Manager
- Retail Bank, Executive General Manager - Business Operations and General Manager -
People and Culture, as well as senior leadership roles at MLC, ING and Prudential Assurance
Co Ltd.
Vicki is Chair of the Technology Committee and is a member of the Financial Risk and
Governance and Human Resources Committees.
Other director and memberships (including directorships of other listed companies for the
previous three years): Executive of Telstra Corporation Limited (ASX Listed, period: August
2015 to October 2021).
“
The organisation’s purpose
and values hold strong
resonance for me. Bendigo
and Adelaide Bank actively
demonstrates respect for
its people, customers and
shareholders, and honours
the important role it has
with community. Having
worked across large and
complex organisations, I am
well placed to navigate the
contemporary challenges
and opportunities businesses
face to modernise and
simplify, while at the same
time ensuring stakeholder
interests and high standards
are met.”
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7
Directors’ information continued
David Foster,
Independent
B.AppSci, MBA, SFFin, FAIM, GAICD, 52 years
David joined the Board in September 2019.
David is an experienced and highly skilled non-executive director, with a diverse portfolio of
directorships and advisory roles across a range of listed and government organisations.
David’s executive career - primarily in financial services - has spanned more than 25 years,
most recently as CEO of Suncorp Bank from 2008 to 2013. He also held a number of senior
roles with Westpac Banking Corporation in Sydney and Queensland across a 14-year period.
David brings to the Board an extensive array of skills including strategy, M&A, operational
leadership, finance and risk management, product management and marketing, and change
management.
David is a member of the Risk Committee and transitioned from a member of the Financial
Risk Committee to Chair in August 2020.
Other director and memberships (including directorships of other listed companies for the
previous three years): Chair, Motorcycle Holdings Limited (ASX Listed, period: March 2016
to present) Director, G8 Education Limited (ASX Listed, period: February 2016 to present),
Genworth Mortgage Insurance Australia Limited (ASX Listed, period: May 2016 to present),
Director, Youi Holdings Pty Ltd, Peak Services Pty Ltd, Former Director, Thorn Group Limited
(ASX Listed, period: December 2014 to October 2019) Member of the University of the
Sunshine Coast Council.
Jan Harris,
Independent
BEc (Hons), 62 years
Jan joined the Board in February 2016.
Jan’s exceptional experience and understanding of the regulatory and government landscape
brings additional breadth and balance to the Board. Jan has had a distinguished career in the
Australian public service with broad experience in public and regulatory policy development,
economics and governance. Jan has held senior roles in the Department of the Treasury and
the Department of the Prime Minister and Cabinet, including as Deputy Secretary of the
Treasury.
As well as her depth and understanding of public policy, Jan brings an array of skills including
finance, regulatory risk, compliance and risk management.
Jan is Chair of the Risk Committee and is a member of the Audit Committee.
Other director and memberships (including directorships of other listed companies for the
previous three years): Member, Australian Office of Financial Management Audit Committee.
“
Bendigo and Adelaide
Bank is a leading Australian
regional bank with strong
community and customer-
based values and a strong
financial position, which
provides a sound base for
differentiation and growth
opportunities within the
sector. With my deep
experience in banking
and financial services and
broader board experience,
I hope to assist the
organisation through its
current change and growth
agenda, and deliver superior
outcomes over time for its
stakeholders.”
“
While still working at
the Treasury, I had the
opportunity to meet Mike
Hirst, the then CEO of
Bendigo. I subsequently
met him after I had stepped
down from a 30-year career
at the Treasury. I was taken
by Bendigo and Adelaide
Bank’s unique approach
to supporting community
prosperity as part of its core
business strategy. I'm proud
to be part of that continuing
story”
8 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Directors’ information continued
Jim Hazel,
Independent
BEc, SFFin, FAICD, 70 years
Jim joined the Board in March 2010.
Jim is a professional public company director who has had an extensive career in banking,
finance and risk management, including in the regional banking industry. Jim brings to the
Board more than 40 years of experience in the financial services sector along with a deep
understanding of regional and rural interests, valuable insights into the challenges faced by
Australia’s ageing population, and the retirement housing sector. Jim has led government
initiatives to lower the occurrence of motor vehicle accidents, reduce the impact of road
trauma and oversee programs to change behaviours and encourage safer driving.
Jim is a member of the Risk Committee and transitioned from Chair of the Financial Risk
Committee to a member in August 2020.
Other director and memberships (including directorships of other listed companies for the
previous three years): Chair, Ingenia Communities Group Limited (ASX listed, period: March
2012 to present), Precision Group, Adelaide Festival Centre Trust
Director, Coopers Brewery Limited, Inheritance Capital Management Pty Ltd, Omega
Communities Pty Ltd, Chapman Capital Partners
Pro-Chancellor, University of South Australia
Former Director, Centrex Metals Limited (ASX listed, period: July 2010 to September 2019).
Robert Hubbard,
Independent
BEc (Hons), 62 years
Rob joined the Board in April 2013.
Rob is based in Queensland and was a partner of PricewaterhouseCoopers for 22 years
before commencing his career as a non-executive director in 2013.
Rob’s skills and experience make him well suited to being Chair of the Audit Committee
and as a member of the both Risk and Technology Committees. Rob has highly developed
financial skills which he applies to the transactional, operational, risk management and
assurance aspects of Bendigo and Adelaide Bank’s strategy implementation. His more recent
experience as a non-executive director has broadened this to many aspects of business and
governance.
Rob is particularly active in encouraging the Bendigo and Adelaide Bank sustainability
agenda including a sound understanding of the role the Bank can play in reducing its carbon
footprint while encouraging others to do the same.
Other director and memberships (including directorships of other listed companies for the
previous three years): Chair, Orocobre Limited (ASX and TSX listed, period: November 2012 to
present), Chair, Healius Limited (ASX listed, period: December 2014 to present). Director, L&R
Foundation Pty Ltd.
“
To contribute at board level
to an organisation with
the values of Bendigo and
Adelaide Bank is a privilege.
During my time on the Board,
Bendigo and Adelaide Bank
has kept true to its purpose,
continuing to invest in strong
communities and award
winning offerings."
“
I believe that Bendigo
symbolises the value
that companies with real
purpose can bring to all
their stakeholders and the
communities in which they
operate. For more than 160
years, Bendigo and Adelaide
Bank has stayed true to this
tradition."
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9
Directors’ information continued
David Matthews,
Independent
Dip BIT, GAICD, 63 years
David joined the Board in March 2010.
David chaired the first Community Bank company in Australia, which began in Rupanyup
and Minyip in Victoria. He retains a keen interest in the sustainability of the Community
Bank network, and its value and importance to hundreds of communities across Australia.
David also brings to the Board, a sound understanding of the importance and resilience of
the Australian agricultural sector – both to the economy and to our future - and continues
to operate a farm and an agricultural import/export business based in the Wimmera region
of Victoria. David continues to maintain a close involvement in several agricultural industry
bodies.
David brings to the Board an extensive array of skills including broad experience in
agribusiness from production to international trade, deep community connections and an
understanding of the critical role the ‘human’ piece plays in business success.
David is a member of the Financial Risk, Audit and Governance & Human Resources
Committees. David is also a member of the Community Bank National Council and Chair of
the Agribusiness Advisory Committee.
Other director and memberships (including directorships of other listed companies for the
previous three years): Director, Australian Grain Technologies Pty Limited, Farm Trade Australia
Pty Limited, Rupanyup/Minyip Finance Group Limited.
Tony Robinson,
Independent
BCom, ASA, MBA (Melb), 63 years
Tony joined the Board in April 2006.
Tony brings many years’ experience in the Australian financial services sector to the Bendigo
and Adelaide Bank Board, including strategic business development and extensive experience
in the wealth management, insurance and stockbroking sectors. Tony's previous roles include
having served as CFO at Link Communications and CEO of Centrepoint Alliance Limited,
IOOF Holdings Limited and OAMPS Limited.
Tony brings to the Board an extensive array of skills and expertise including executive and
management skill, acquisition assessment and strategy, and a deep understanding of the
broad Australian financial markets.
Tony is Chair of the Governance & Human Resources Committee and is a member of the
Audit and Technology Committees.
Other director and memberships (including directorships of other listed companies for the
previous three years): Chair, Pacific Current Group Limited (ASX listed, period: August 2015
to present), Director, PSC Insurance Group Limited (ASX listed, period: September 2015 to
present), River Capital Pty Ltd, Former Director, Longtable Group Limited (ASX listed, period:
November 2015 to November 2019).
“
I believe you can't run a
successful bank unless your
customers succeed and
live in strong, prosperous
communities. As a farmer
and agribusiness owner, I
enjoy bringing first-hand
knowledge of the sector
to the Board and consider
myself fortunate to have
been given the opportunity
to assist in the development
and success of communities
across Australia through our
Community Bank model."
“
I joined the Board of Bendigo
and Adelaide Bank with
the goal and belief that I
could help the Bank prosper
and grow while remaining
committed to its desire to
feed into the prosperity of
the communities it serves. I
believe that my experience
as a senior executive in
a number of industries,
including as Managing
Director of a number of ASX
listed companies, particularly
in the financial services
sector, contributes to the
overall skills, experience and
guidance the Board brings to
its role.”
10 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Review of operations
An analysis of the Group’s operations for the financial year and
the results of those operations, including the financial position,
business priorities and prospects, is presented in the Operating
and Financial Review section of this report.
State of affairs
On 27 August 2021, it was announced that current non-
executive directors Robert Hubbard and Tony Robinson will
retire from the Board at the Annual General Meeting to be
held on 9 November 2021. It was also announced that Richard
Deutsch has been appointed as a non-executive director
effective 20 September 2021.
In the opinion of the Directors there have been no other
significant changes in the state of affairs of the Group during
the financial year. Further information on events and matters
that affected the Group’s state of affairs is presented in the
Chair’s and Chief Executive Officer and Managing Director’s
Messages and the Operating and Financial Review section of
this report.
Events after reporting date
On 15 August 2021, Bendigo and Adelaide Bank Limited entered
into a Share Sale Agreement to acquire 100% of the shares
in Ferocia Pty Ltd, a Melbourne-based fintech company, for
consideration of up to $116.0 million, with the transaction being
completed on 1 September 2021. The consideration has been
paid in cash and shares, with a portion of the consideration
being contingent on future performance.
The Directors are not aware of any other matter or
circumstance which arose since the end of the financial year
to the date of this report that has significantly affected or may
significantly affect the operations of the Group, the results
of those operations, or the state of affairs of the Group in
subsequent financial years.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191, amounts in the Directors’
Report and Financial Report have been rounded to the nearest
million Australian dollars unless otherwise indicated.
Principal activities
The principal activities of the Group during the financial year
were the provision of a broad range of banking and other
financial services including consumer, residential, business
and rural lending, deposit-taking, payments services, wealth
management and superannuation, treasury and foreign
exchange services.
There have been no other significant changes in the nature of
the Group's principal activities during the financial year.
Operating and financial review
The Group’s statutory profit after tax for the financial year
ended 30 June 2021 increased by 171.8% to $524.0 million
(FY20 $192.8 million). This was impacted by:
• An increase in net interest income due to growth in the
lending portfolios, offset by a reduction in net interest margin.
• A reduction in other operating income primarily driven by a
reduction in trading book income.
•
Increased investment in transformation totalling
$87.2 million before tax (FY20 $56.9 million before tax)
included investments to improve customer experience and
productivity, modernise technology platforms to deliver
process and technology simplification and automation, and
deliver on key regulatory obligations.
• A reduction in operating costs (excluding transformation
costs) of $24.6m or 2.5%.
• A decrease in credit expenses due to the overlay added to
the balance of the collectively assessed provision for the
potential future impacts of the COVID-19 pandemic which
was recorded in the previous financial year and was not
repeated in the current year, as well as a $19.4m release of
the collectively assessed provision recorded in the current
financial year.
Further information on the Group’s operating results for the
financial year are contained in the Operating and Financial
Review section of this report.
Dividends and distributions
The Directors announced on 16 August 2021 a fully franked
dividend of 26.5 cents per fully paid ordinary share. The final
dividend is payable on 30 September 2021. The proposed
payment is expected to total $142.5 million.
The following fully franked dividends were paid by the Bank
during the year on fully paid ordinary shares:
• A final dividend for the 2020 financial year of 4.5 cents per
share, paid on 31 March 2021 (amount paid:
$23.5 million); and
• An interim dividend for the 2021 financial year of 23.5 cents
per share, paid on 31 March 2021 (amount paid:
$122.8 million).
Further details on dividends provided for or paid during the
2021 financial year on the Bank’s ordinary and preference
shares are provided at Note 7 Dividends of the Financial
Report.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1
Meetings of Directors
Information on Board and committee meeting attendance for the year is presented in the following table:
Director
Board
Audit
Financial Risk*
Risk
Governance
& HR
Technology
Committees
Meetings during the year
Jacqueline Hey
Marnie Baker
Vicki Carter
David Foster
Jan Harris
Jim Hazel
Robert Hubbard
David Matthews
Tony Robinson
A
18
17
18
18
18
18
18
18
18
B
18
17
18
18
18
18
17
18
18
A
B
A
B
A
B
11
11
11
11
11
10
11
11
11
11
11
11
11
11
10
11
11
11
11
11
11
11
11
11
A
6
6
B
6
6
6
6
A
5
5
5
5
B
5
5
5
5
A = Number eligible to attend
B = Number attended
*Committee renamed to Financial Risk Committee effective 1 July 2021 from Board Risk Committee
Directors’ interests in Equity
The relevant interest of each Director in shares in the Bank and in units of registered schemes made available by a related body corporate at
the date of this report are as follows:
Director
Jacqueline Hey
Marnie Baker
Vicki Carter
David Foster
Jan Harris
Jim Hazel
Robert Hubbard
David Matthews
Tony Robinson
Ordinary
Shares
Preference
Shares
Performance
Rights
Rights to Shares 1
Sandhurst
Common Fund $ 2
50,368
942,327
17,858
9,014
12,622
38,885
34,965
38,371
43,140
250
100
-
136,376
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,565
-
-
-
3,006
-
-
-
-
-
44,004
-
-
-
-
-
-
-
1 Rights to shares have been issued under the BEN Omnibus Plan Rules for the FY2021 Non-Executive Directors Fee Share Plan. Each participant has
elected to sacrifice a portion of the base fee, to which a number of rights has been allocated by dividing the fee sacrifice amount by the five day volume
weighted average share price prior to the allocation date of 24 August 2020. The rights to shares vest in two equal tranches after 6 and 12 months, with
the first tranche vesting in February 2021. Upon vesting, the converted shares must be retained for the duration of their service as a Director or for up to
15 years, whichever occurs earlier, and will form part of the fulfilment of the Minimum Shareholding Policy introduced from FY2021.
2 Being a relevant interest in a managed investment scheme made available by Sandhurst Trustees Limited, a subsidiary of the Bank.
12 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Share Options and Rights
There were no options over unissued ordinary shares at the
start of the financial year and no options to acquire ordinary
shares in the Bank were issued during or since the end of the
financial year.
Performance rights (“rights”) to ordinary shares in the Bank
are issued by the Bank under the Employee Salary Sacrifice,
Deferred Share and Performance Share Plan and the BEN
Omnibus Equity Plan (“Plans”). Each right represents an
entitlement to one fully paid ordinary share in the Bank, subject
to certain conditions.
During or since the end of the financial year the Bank granted
177,525 rights (2020: 320,009). This included 152,741 rights
granted to key management personnel.
As at the date of this report there are 516,081 rights that are
exercisable or may become exercisable at a future date under
the Plans. The last date for the exercise of the rights ranges
between 30 June 2022 and 30 June 2024.
During or since the end of the financial year 108,744 rights
vested (2020: 59,550) and no new fully paid ordinary shares
have been issued by the Bank during or since the end of the
financial year as a result of rights being exercised.
For the period 1 July 2020 to the date of this report,
290,738 rights have lapsed.
Further details of Key Management Personnel equity holdings
during the financial year are detailed in the 2021 Remuneration
Report.
Corporate Governance
An overview of the Bank’s corporate governance structures
and practices is presented in the 2021 Corporate Governance
Statement available from the Bank’s website at
https://www.bendigoadelaide.com.au/esg/governance
The Bank confirms it has followed the ASX Corporate
Governance Principles and Recommendations (4th edition)
during the 2021 financial year.
Environmental Regulation
The Bank endeavours to conduct its operations in a manner
that minimises its impact on the environment. Information on
the Bank’s environmental performance including its Climate
Change Policy Statement and focus areas to manage its
environmental impact are provided in the 2021 Annual Review
and the 2021 Sustainability Report which are available from
the Bank’s website
https://www.bendigoadelaide.com.au/esg/environment
The Bank’s operations are not subject to any significant
environmental regulations under either Commonwealth or
State legislation. However, the Board believes that the Bank
has adequate systems in place for the management of its
environmental requirements and is not aware of any breach
of any environmental requirement. The Bank is not subject
to the Federal Government’s National Greenhouse and
Energy Reporting (NGER) Scheme which requires controlling
corporations to report annually on greenhouse gas emissions,
energy production and energy consumption, if they exceed
certain threshold levels. Whilst not required to report under the
Scheme, the Bank does measure and monitor its greenhouse
gas emissions and has voluntarily reported these emissions
since 2011 to the CDP.
Indemnification of Officers
The Bank’s Constitution provides that the Bank is to indemnify,
to the extent permitted by law, each officer of the Bank against
liabilities (including costs, charges, losses, damages, expenses,
penalties and liabilities of any kind including, in particular, legal
costs incurred in defending any proceedings or appearing
before any court, tribunal, government authority or other body)
incurred by an officer in or arising out of the conduct of the
business of the Bank or arising out of the discharge of the
officer's duties.
As provided under the Bank’s Constitution, the Bank has entered
into deeds providing for indemnity, insurance and access to
documents for each of its Directors. The Bank has also entered
into deeds providing for indemnity and insurance for each
Executive Committee member and the Company Secretary as
well as deeds providing for indemnity, insurance and access to
documents for each Director of a subsidiary.
The deeds require the Bank to indemnify, to the extent permitted
by law, the officers for all liabilities (including costs, charges,
losses, damages, expenses, penalties and liabilities of any kind)
incurred in their capacity as an officer of the relevant company.
Indemnification of Auditor
To the extent permitted by law and professional regulations,
the Bank has agreed to indemnify its auditors, Ernst & Young,
as part of the terms of its audit engagement agreement
against all claims by third parties and resulting liabilities, losses,
damages, costs and expenses (including reasonable external
legal costs) arising from the audit engagement including any
negligent, wrongful or wilful act or omission by the Bank.
The indemnity does not apply to any loss resulting from Ernst
& Young’s negligent, wrongful or wilful acts or omissions. No
payment has been made under this indemnity to Ernst & Young
during or since the financial year end.
Insurance of Directors and Officers
During or since the financial year end, the Bank has paid
premiums to insure certain officers of the Bank and its related
bodies corporate. The officers of the Bank covered by the
insurance policy include the Directors, the Company Secretary
and Directors and Company Secretaries of controlled
entities who are not Directors or Company Secretaries of the
Bank. The policy also covers officers who accept external
directorships as part of their responsibilities with the Bank. The
insurance does not provide cover for the external auditor of
the Bank or related bodies corporate of the Bank. Disclosure
of the nature of the liability and the amount of the premium
is prohibited by the confidentiality clause of the contract of
insurance.
Company Secretary
Ms Carmen Lunderstedt (BCom, GradCertFinPlan, FGIA, FCIS)
was appointed as Company Secretary of the Bank on
14 October 2019. Ms Lunderstedt is a Chartered Secretary
with more than nineteen years’ experience in governance, risk
and compliance, with eleven of these years in banking and
financial services.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3
The Board Audit Committee has reviewed the nature and
scope of the above non-audit services provided by Ernst &
Young. 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. The Board Audit Committee has
confirmed that the provision of those services is consistent
with the Group’s External Audit Independence Policy and
compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. This
confirmation was provided to, and accepted by, the full Board.
Details of the fees paid or payable to Ernst & Young for audit,
review, assurance and non-audit services provided during the
year are contained in Note 34 Remuneration of Auditor of the
Financial Report.
External Audit Tender Process
During the financial year, the Board Audit Committee
conducted an external audit tender process with the intent of
ensuring the Group receives external audit services that are
fit for purpose and that provide value. A single-stage Request
for Proposal (RFP) process was undertaken with various
accounting firms invited to participate. While the Board Audit
Committee acknowledged the long-standing appointment
of EY, the partners have always been rotated in line with
regulatory requirements, hence EY were not excluded from the
RFP process.
The RFP process was overseen by an External Audit Tender
Steering Committee which included the Chair of the Board
Audit Committee and representatives from the Executive
Committee. Each of the firms were provided with equitable
access to information and management. Written proposals
and various presentations formed the basis of the evaluation
process, with EY successful retaining their role as the external
auditors of the Group.
Declaration by Chief Executive Officer and
Chief Financial Officer
The Chief Executive Officer and Managing Director and Chief
Financial Officer have provided the required declarations to the
Board in accordance with section 295A of the Corporations
Act 2001 and recommendation 4.2 of the ASX Corporate
Governance Principles and Recommendations in relation to the
financial records and financial statements for the year ended
30 June 2021.
The Chief Executive Officer and Managing Director and Chief
Financial Officer also provided declarations to the Board,
consistent with the declarations under section 295A of the
Corporations Act 2001 and recommendation 4.2 of the ASX
Corporate Governance Principles and Recommendations, in
relation to the financial statements for the half year ended
31 December 2020.
To support the declaration, formal risk management and
financial statement due diligence and verification processes,
including attestations from senior management, were
undertaken. This assurance is provided every six months in
conjunction with the Bank’s 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.
Non-audit Services
The Board Audit Committee has assessed the independence
of the Group’s external auditor, Ernst & Young, for the year
ended 30 June 2021. The assessment was conducted in
accordance with the Group’s External 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 2021.
Non-audit services are those services paid or payable to
Ernst & Young which do not relate to Group statutory audit
engagements. In its capacity as the Group’s external auditor,
Ernst & Young is 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.
14 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Ernst & Young
8 Exhibit ion Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Audit or’s independence declarat ion t o t he direct ors of Bendigo and Adelaide
Bank Limit ed
As lead auditor for the audit of the financial report of Bendigo and Adelaide Bank Limited for the
financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bendigo and Adelaide Bank Limited and the entities it controlled
during the financial year.
Ernst & Young
T M Dring
Partner
2 September 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislat ion
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 5
Operating and
Financial Review
Our strategy
Our strategy continues to drive strong growth and a
resolute and considered focus on transformation and
productivity in our business. Over the past year we
have done more than we said we would do, growing
market share in both lending and deposits. We achieved
strong customer and revenue growth, which combined
with a measured risk culture and our human, digital and
community strengths, is creating the future of banking.
Our results illustrate that we are a bigger, better and
stronger business by delivering on our strategy and our
unique purpose to feed into prosperity, not off it.
We act with care, customers and community in mind,
building on the capability and experiences we offer our
customers. Our transformation continues to improve our
productivity, efficiency, speed to market and customer
experience. Our underlying business, balance sheet, brand
proposition, risk profile and transformation have made our
business stronger for the future.
As we build on our purpose, we continue to reduce
complexity, invest in capability and tell our unique story,
with an eye to the future as we strive to be Australia’s
bank of choice.
Vision
Australia’s bank of choice
for customers, employees, partners and shareholders
Purpose
To feed into prosperity, not off it
Imperatives
Reduce
complexity
Invest in
capability
Tell our
story
Our focus
Customer Centric
Operating Model
Digital by design, human
when it matters
Strengths
Customer Value
Proposition
Based on trust, authenticity,
knowledge, expertise,
connection and personalised
relationships
Growth &
Transformation
Strategy
Propelled by human,
digital and community
connections
Genuine and
authentic human
connections,
grounded in
purpose
Partnering to
enhance capability
and increase
customer
connection
Geographic
reach and
strength of
customer
deposit base
Trusted brand and
history of resilience,
adaptability and
innovation
Community and
regional/rural
advocacy and
connection
Bigger, better and stronger business underpinned by a purpose driven culture,
guiding the right behaviours and risk profile.
16 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Our Business
performance
Our strategy to reduce complexity, invest in capability and
tell our story is delivering stronger financial performance.
This year we recorded an after-tax statutory
profit of $524.0 million and cash earnings of
$457.2 million, a 51.5% increase from the prior
financial year. Cash earnings per share was up
43.4% to 85.6 cents.
We continued our strong customer growth, with
our total number of customers increasing 9.6% to
2.06 million customers. Customer deposits grew
$7.2 billion or 14.2% and total lending increased
by $6.9 billion or 10.6%.
Strong net interest income growth and our focus
on making sustainable changes to our cost
base means our Cost to Income ratio improved
over the financial year, reducing to 60.3%. We
continued to accelerate our digital and customer
experience transformation, to further simplify our
business and support our growth strategy.
We announced a fully franked final dividend of
26.5 cents per share, taking the full year fully
franked dividend to 50 cents per share.
These results clearly demonstrate that our
strategy is making us a bigger, better, and
stronger business.
CASH EARNINGS ($M)
NET PROFIT AFTER TAX ($M)
COST TO INCOME (%) 1
FY21
FY20
FY19
FY18
FY17
3 0 1 . 7
4 5 7. 2
4 1 5 . 7
4 4 5 . 1
4 1 8 . 3
FY21
FY20
FY19
F Y 1 8
FY17
5 2 4 . 0
1 9 2 . 8
3 76 . 8
4 3 4 . 5
4 2 9. 6
FY21
FY20
FY19
FY18
FY17
6 0 . 3
6 2 . 7
5 9. 2
5 5 . 6
5 6 .1
CASH EARNINGS PER SHARE (C)
DIVIDEND PER SHARE (C)
RETURN ON TANGIBLE EQUITY (%) 1
FY21
FY20
FY19
FY18
FY17
5 9. 7
8 5 . 6
8 5 . 0
9 2 .1
8 8 . 5
FY21
FY20
FY19
FY18
FY17
5 0 . 0
3 5 . 5
FY21
FY20
FY19
FY18
FY17
70 . 0
70 . 0
6 8 . 0
1 0 .1 7
7. 4 2
1 0 . 73
1 1 . 5 2
1 1 . 61
1 Calculated using cash earnings
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 7
Earnings after tax
STATUTORY EARNINGS (AFTER TAX)
CASH EARNINGS (AFTER TAX)
$524.0m
FY20 $192.8m
$457.2m
FY20 $301.7m
Statutory profit after income tax increased 171.8% to $524.0
million (FY20: $192.8 million) and cash earnings after tax
increased 51.5% to $457.2 million (FY20: $301.7 million).
Both statutory profit after tax and cash earnings after tax were
impacted by:
•
An increase in net interest income relating to growth in
the lending portfolios, partially offset by a reduction in net
interest margin.
Increased investment in transformation totalling $87.2
million or $61.0 million after tax (FY20: $56.9 million or
$39.8 million after tax) recorded in operating expenses,
with this investment focused on improving customer
experience and productivity, modernising our technology
platforms to deliver process and technology simplification
and automation, as well as delivering on key regulatory
obligations.
A decrease in credit expenses largely due to the recognition
of an overlay for the potential impacts of the COVID-19
•
•
pandemic of $127.7 million in the previous financial year
which was not repeated in the current financial year. In the
current financial year we also released $19.4 million of the
collectively assessed provision.
Statutory profit was also impacted by Homesafe revaluation
gains of $137.7 million (FY20: $36.0 million), with significant
growth in both the Sydney and Melbourne property markets
during the financial year. During the previous financial year
software impairments and software accelerated amortisation
charges totalling $140.9 million ($98.7 million after tax) were
recorded which were not repeated in the current year.
Cash earnings is considered by management to be a key indicator
of the underlying performance of our core business activities. It
is defined as statutory net profit after tax adjusted for specific
items and non-cash items. Specific items are those deemed to
be outside of the core activities of the business. Refer below for a
reconciliation of statutory net profit to cash earnings.
Income
INCOME (CASH BASIS)
$1,684.5m
FY20 $1,614.2m
NET INTEREST MARGIN
2.26%
FY20 2.33%
Net interest income (cash basis) increased by 6.3% to $1,431.2
million (FY20: $1,346.4 million). Net interest margin (before
revenue share arrangements) decreased from the prior year to
2.26% (FY20: 2.33%), however, this contraction in net interest
margin was more than offset by an increase in lending activity
with total lending up 10.6% over the last 12 months.
Other operating income (cash basis) decreased by 5.4% to
$253.3 million (FY20: $267.8 million) predominantly due to lower
trading book gains with trading activity impacted by the actions
taken by the Reserve Bank of Australia during the financial year.
This included the lowering of the cash rate, yield curve control
and quantitative easing.
Total fee income was stronger with increased lending fees
through higher residential mortgage growth and revenue
from Agribusiness’ Government services business. However,
transaction and ATM fee income was lower predominantly due
to the impacts of the COVID-19 pandemic, which saw overseas
travel restrictions and reduced cash usage. Foreign exchange
income was also impacted by the restrictions on international
travel and fees on managed funds were lower.
Net interest margin represents the return on average interest
earning assets less the costs of funding these assets. Net interest
margin (before revenue share arrangement) is calculated excluding
any revenue share arrangements with partners.
18 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Operating expenses
OPERATING EXPENSES (CASH BASIS)
COST TO INCOME RATIO
$1,027.4m
FY20 $1,021.5m
60.3%
FY20 62.7%
Operating expenses (cash basis) increased by 0.6% to $1,027.4
million (FY20: $1,021.5 million) mainly due to increased investment
in transformation. Transformation costs totalling $87.2 million
(FY20: $56.9 million) were expensed during the financial year, with
this investment focused on improving customer experience and
productivity, modernising our technology platforms to deliver
process and technology simplification and automation, as well
as delivering on key regulatory obligations such as Open Banking.
Excluding transformation costs, operating expenses (cash basis)
decreased by 2.5%, reflecting the progress we have made
towards making sustainable changes to our cost base.
The cost to income ratio decreased to 60.3% (FY20: 62.7%), a
result driven by a combination of our strong revenue growth and
our focus on cost reduction.
Credit expense and provisions
CREDIT EXPENSES
TOTAL PROVISIONS
IMPAIRED LOANS
$18.0m
FY20 $168.5m
$445.7m
FY20 $428.2m
$208.8m
FY20 $240.5m
There was a significant decrease in credit expenses during the
year, with total credit expenses recognised being $18.0 million
(FY20: $168.5 million). This decrease was largely attributable
to the recognition of an overlay of $127.7 million in the prior
financial year for the potential future impacts of the COVID-19
pandemic, which was not repeated in the current financial year.
Also, in the current financial year, we released $19.4 million of the
collectively assessed provision.
We have seen an improvement in credit performance, with low
levels of arrears, a reduction in impaired assets of 13.2% to
$208.8 million (FY20: $240.5 million) and improving economic
conditions from 12 months ago.
Notwithstanding the improved economic conditions, our
provision levels remain conservative given the continuing
uncertainties resulting from the COVID-19 pandemic. The total
of provisions and general reserve for credit losses increased
during the year by 17.5% to $445.7 million (FY20: $428.2 million).
Dividends
DIVIDENDS
50.0c
FY20 35.5c
The Board declared a final fully franked dividend of 26.5 cents per share, taking the
total fully franked dividend for the year to 50.0 cents per share (FY20: 35.5 cents per
share).
The Bank has in place a Dividend Reinvestment Plan and a Bonus Share Scheme. The
Dividend Reinvestment Plan provides shareholders with the opportunity of converting
their entitlement to a dividend into new shares. 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.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 9
Divisional performance
Consumer
CASH EARNINGS (AFTER TAX)
$454.9m
FY20 $417.2m
The Consumer division focuses on engaging with
and servicing our consumer customers and includes
the branch network (including Community Banks and
Alliance Banks), mobile relationship managers, third
party banking channels, wealth services, Homesafe,
and customer support functions.
Business
CASH EARNINGS (AFTER TAX)
$175.0m
FY20 $135.7m
The Business division is focused on servicing
business customers, particularly small and medium
businesses who are seeking a relationship banking
experience and includes Portfolio Funding and
Delphi Bank.
Agribusiness
CASH EARNINGS (AFTER TAX)
$90.6m
FY20 $70.6m
Cash earnings increased to $454.9 million (FY20: $417.2 million), with the key
drivers of this result including:
•
Improvement in net interest income following continued strong growth in
the residential mortgage portfolio and effective margin management.
• A decline in other income with changing customer behaviour due to
the COVID-19 pandemic and lower Wealth management fees. This
was partially offset by increased lending fees through higher residential
mortgage growth.
• A decline in operating expenses, reflecting the benefits of transformation in
the Corporate branch network and other cost management initiatives.
• Higher credit expenses due to the release of non-COVID-19 collectively
assessed provisions in the prior financial year.
Cash earnings increased to $175.0 million (FY20: $135.7 million), with the key
drivers for this performance being:
• Higher net interest income reflects the positive asset growth achieved by
the division, strong deposit growth and effective margin management.
• Other income reduced primarily due to impacts of the COVID-19
pandemic on foreign exchange income.
• Operating expenses decreased due to active cost management and cost
recoveries associated with the disposal of assets under management.
• Credit expenses decreased with lower levels of arrears across all areas of
the business lending portfolio.
Cash earnings increased to $90.6 million (FY20: $70.6 million), with the key
drivers for this performance being:
• Net interest income increased due to strong margin management.
• Other income increased mainly due to higher revenue from Government
Services.
• Lower operating expenses reflect structural simplification and active cost
management.
The Agribusiness division includes all banking
services provided to agribusiness, rural and regional
Australian communities through our Rural Bank
brand, with a focus on the family corporate segment
of Australian farm businesses.
• Credit expenses decreased with underlying credit quality remaining
strong. This reflects improved seasonal conditions, rising farmland values,
drought recovery, strong commodity prices, customer debt deleveraging
and disciplined credit underwriting by our experienced and specialised
Agribusiness team.
Corporate
CASH EARNINGS (AFTER TAX)
($263.3m)
FY20 ($321.8m)
Corporate includes the results of the Group’s support
functions including treasury, technology, property
services, strategy, finance, risk, compliance, legal,
human resources, and investor relations.
Cash earnings for the current financial year totalled ($263.3 million) (FY20:
($321.8 million)) with the key drivers for this performance being:
• A decrease in credit expenses largely due to the recognition of an overlay
for the potential impacts of the COVID-19 pandemic of $127.7 million
in prior financial year which was not repeated in the current year. In the
current financial year, we also released $19.4 million of the collectively
assessed provision.
• A reduction in other operating income (cash basis) predominantly due to
lower trading book gains.
• An increase in operating expenses driven from an increased investment in
transformation.
20 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Capital
COMMON EQUITY TIER 1 RATIO
TOTAL CAPITAL RATIO
RETURN ON TANGIBLE EQUITY (CASH BASIS)
9.57%
FY20 9.25%
13.81%
FY20 13.61%
10.17%
FY20 7.42%
The Bank has a strong capital position with a Common
Equity Tier 1 (CET1) ratio of 9.57% (FY20: 9.25%), which is
above APRA’s ‘unquestionably strong’ benchmark target for
standardised banks. Our continued strong capital position
reflects a well-managed balance sheet and strong risk
management.
The Bank is regulated by APRA due to its status as an Authorised
Deposit-taking Institution (“ADI”). APRA is the prudential regulator
of the Australian financial services industry which includes ADIs.
APRA’s Prudential Standards aim to ensure that ADIs remain
adequately capitalised to support the risks associated with their
activities and to generally protect Australian depositors. The Bank
is on the standardised approach for calculating its regulatory
capital requirements under Basel II and targets a CET1 ratio in the
range of 9.0% to 9.5%.
The Group’s return on tangible equity (cash basis) increased to
10.17% (FY20: 7.42%) due to the strong improvement in cash
earnings after tax.
APRA measures regulatory capital using three regulatory
measures, being Common Equity Tier 1 Capital, Tier 1 Capital and
Total Capital.
Common Equity Tier 1 Capital comprises the highest quality
components of capital that consists of paid-up share capital,
retained profits and certain reserves, less the deduction of
certain intangible assets, capitalised expenses and software,
and investments and retained profits in insurance and funds
management subsidiaries that are not consolidated for capital
adequacy purposes and certain other adjustments.
Funding and Liquidity
DEPOSITS
Customer
74.3%
FY20 74.9%
Wholesale
21.1%
FY20 19.9%
Securitisation
4.6%
FY20 5.2%
LIQUIDITY COVERAGE RATIO
142.0%
FY20 117.3%
NET STABLE FUNDING RATIO
125.9%
FY20 113.2%
The Bank’s principal source of funding is its stable retail deposit
base, with customer deposits representing 74.3% (FY20: 74.9%)
of the Bank’s total deposits. The Bank’s retail deposits are
traditional term and savings deposits and transaction accounts,
sourced predominantly through the retail network.
Wholesale funding activities support the core retail deposit
funding strategy and provide additional diversification and
benefits from longer term borrowings. Wholesale deposits were
increased to 21.1% (FY20: 19.9%) during the year and include
the drawdown of the Term Funding Facility. Securitisation funding
comprises 4.6% (FY20: 5.2%).
Our funding position continues to be a strength for the
organisation. It provides flexibility to fund asset growth through
our retail customer base as well as being able to access demand
from wholesale markets to senior unsecured or securitisation
transactions.
Our Liquidity Coverage Ratio (LCR) for the financial year was
142.0% (FY20: 117.3%). The LCR was maintained within internal
targets throughout the year and always exceeded the minimum
prudential requirement of 100%. The increase in LCR during the
year is attributed to the growth in deposits as well as the Term
Funding Facility introduced by the Reserve Bank of Australia as
part of the COVID-19 stimulus package to promote lending to
businesses.
The Net Stable Funding Ratio (NSFR) for the financial year was
125.9% (FY20: 113.2%), exceeding the regulatory minimum of
100%.
Customer deposits represents the sum of interest bearing, non-
interest bearing and term deposits from retail and corporate
customers.
The Liquidity Coverage Ratio represents the proportion of
high-quality liquid assets held by the Bank to meet short-term
obligations. The LCRs quoted above represent the average daily
LCRs over the respective 12-month periods.
The Net Stable Funding Ratio measures the extent to which
long-term assets are covered by stable sources of funding. The
NSFRs quoted above represent the average daily NSFRs over the
respective 12-month periods.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 2 1
Lending
GROSS LOAN BALANCES BY PURPOSE
Residential
$51.9b
FY20 $45.2b
Consumer
$2.4b
FY20 $2.8b
Margin Loans
$1.5b
FY20 $1.3b
Business
$16.5b
FY20 $16.0b
Total gross loans increased 10.6% during the financial year to
$72,232.6 million (FY20: $65,321.7 million), which was above system
lending growth.
We also saw a significant increase in customers choosing to lock
in fixed rate lending as many customers seek to take advantage of
record low interest rates.
Residential lending grew 14.7% or $6.7 billion during the financial
year, reflecting strong customer demand and the investment made
in our retail and third-party businesses. This lending growth was
delivered in our core segments of owner occupied and principal
and interest lending, weighted towards principal and interest loans.
During the financial year total business lending increased by 0.5%1.
We increased our share in the small to medium enterprise (SME)
market during the year as we saw deleveraging of our customers
who benefited from government stimulus and the unwinding of
working capital needs.
1 APRA Monthly Banking Statistics June 2021. Growth rate is based on a 12-month period (30/06/2020 – 30/06/2021).
Business lending is lending to non-financial corporations as defined by APRA.
Reconciliation statutory net profit to cash earnings
Statutory Profit after tax
Fair value adjustments
Homesafe unrealised adjustments
Revaluation of economic hedges
Sale of Merchant Services business
Impairment charge
Software impairment
Software accelerated amortisation
Operating expenses1
Amortisation of acquired intangibles
Cash earnings after tax (sub-total)2
Homesafe net realised income after tax
Cash earnings after tax
FY21
($m)
FY20
($m)
524.0
192.8
-
0.1
(90.4)
(16.4)
5.7
3.1
-
-
-
-
2.1
2.2
-
2.8
85.5
13.2
8.3
2.2
444.5
290.7
12.7
11.0
457.2
301.7
1 Operating expenses include legal and restructuring costs.
2 Cash earnings after tax (sub-total) is equal to cash earnings before Homesafe realised income.
Homesafe unrealised adjustments represent unrealised funding
costs (calculated as the interest expense incurred to fund existing
contracts during the year) and valuation movements of the
investment properties held.
Sales of Merchant Services business represents the loss realised
due to the sale of the Merchant Services business to Tyro
Payments Limited, calculated as sale proceeds less costs of
disposal.
Revaluation of economic hedges reflects movements from
changes in the fair value of economic hedges. These movements
represent timing differences that will reverse through earnings in
the future.
Homesafe net realised income after tax represents funds received
on completion, being the difference between the cash received
on completion less the initial funds advanced, and realised funding
costs representing accumulated interest expense on completed
contracts since initiation.
22 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Risk Management Framework, Material Risks and Business Uncertainties
Risk Management Framework and Risk Appetite
The Board is responsible for the risk management strategy
which includes establishing and overseeing the risk management
framework and risk appetite within which the business is
expected to operate.
The Group has in place a Group Risk Management Framework,
approved by the Board, which forms part of the detailed
description of the Risk Management Strategy for the Group.
The Group Risk Management Framework (Summary) in
combination with the following individual Risk Management
Frameworks, details the Group’s management approach for
each of its material risks:
•
•
•
•
•
•
Group Credit Risk Management Framework.
Group Operational Risk Management Framework –
encompassing Data Risk, Technology Risk, Compliance
Risk, Financial Crime Risk, Third-party Supplier Risk and
Conduct Risk.
Group Interest Rate Risk Management Framework.
Group Traded Market Risk Management Framework.
Group Liquidity Risk Management Framework and
Strategic and Other Risks - incorporated in the Group Risk
Management Framework (Summary).
All material risks are managed within a defined risk appetite
which is aligned with the Group strategy and business
objectives. The Board’s risk appetite for its material risks are
documented in the Group’s Risk Appetite Statement (RAS). The
Group’s RAS is reviewed, updated and approved annually by the
Board. The Group’s adherence to the risk appetite is reported
regularly to the Board.
Risk Culture
The Group’s risk culture (being a subset of broader enterprise
culture) plays a key role in managing risk. An effective risk culture
is critical for the Group to deliver its strategic objectives and
operate within its risk appetite. The Board, Executive and Senior
Management play a pivotal role in establishing the target risk
culture state which guides and prioritises risk culture specific
initiatives and assists the Board and Executive to form an
aligned view of risk culture and its drivers.
Lines of Defence
The Group adopts a Three Lines of Defence model which
includes ownership (First Line), challenge and oversight (Second
Line) and independent assurance (Third Line). The First Line
is the business itself. The day-to-day responsibility for risk
management rests with the Executive management team and
business divisions. The Second Line is Group Risk. Group Risk
provides oversight and challenge to the First Line. The Third Line
is the Group Assurance function (internal audit) which conducts
independent testing and verification of the effectiveness
of internal controls and provides assurance that the risk
management process is functioning as designed.
Further information on our risk management framework,
governance and appetite is presented in the 2021 Corporate
Governance Statement.
Emerging Risks
The Group conducts a formal process for the identification,
consideration and assessment of emerging risks and their
integration into the Group Risk Management Frameworks. In
addition, new and emerging risks are also considered in risk
assessments and risk profiling activities.
Material Risks
Our business is exposed to a broad range of financial and non-
financial risks arising from our operations.
The COVID-19 pandemic has resulted in a changing operating
environment and risk landscape with the community facing
unprecedented challenges which has required both a health
and economic response. Government and banks have worked
together to support Australians. The economy has severely
contracted, and the economic uncertainty and disruption
has required decisive and collaborative action by the Group.
The Group has seen increases in risk across the organisation,
including Credit Risk, Operational Risk, and Financial Crime.
In managing these risks, our commitment to supporting our
customers, communities and employees remain at our core.
The Group has responded by implementing a number of
measures to aid the monitoring and management of these
increased risks. Board and Management have had ongoing
oversight and are actively managing the situation. The Group
introduced additional governance processes established based
on the escalating stress. The ongoing uncertainty created by
the COVID-19 pandemic will continue to pose a risk to the
Group in the future. The Group continues to actively monitor the
operating environment, risk landscape and challenges presented
by the ever-evolving conditions. This includes reviewing the
effectiveness and adequacy of the measures to monitor
and manage the increased risks to ensure they adapt to the
changing conditions. Ongoing stress testing and reassessment
of the economic outlook will continue and assist in the ongoing
management of our balance sheet strength, capital position and
provisioning levels.
The most material risks that the Group faces have been
assessed as ‘material risks’ which are considered to be those
risks that may affect the Group’s ability to meet its obligations to
shareholders and depositors. The Group’s risk categorises have
been split between financial and non-financial and are detailed in
the diagram below.
Overarching
Frameworks:
Group Risk Management
Framework (Summary)
Risk Appetite
Statement (RAS)
Material Risks Categories
Financial Risks
Non-Financial Risks
Credit Risk
Strategic Risk
Traded Market Risk
Operational Risk
Data Risk
Interest Rate Risk
Liquidity Risk
Technology Risk
Compliance Risk
Financial Crime Risk
Third-party
Supplier Risk
Conduct Risk
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 2 3
Financial Risks
The Group has identified the following material financial risks:
Material Risks Categories
Financial Risks
Credit Risk
Traded Market Risk
Interest Rate Risk
Liquidity Risk
Other Risks Categories
Financial Risks
Climate Change Risk
These material financial risks each have an individual risk
management framework, and are supported by an established
network of systems, policies, standards and procedures which
are overseen by the Board and Board Committees, with
support from Management committees and our independent
risk management functions. These material financial risks are
considered within the Group’s Risk Appetite Statement, with
both Primary and Secondary Appetite Settings.
In addition, climate change financial risks include physical risks
which cause direct damage to assets and property as a result
of rising global temperatures, as well as transition risks which
arise from the transition to a low-carbon economy.
The definition and management of these financial risks are outlined
in further detail in Note 19 to the 2021 Annual Financial Report.
Non-Financial Risks
The material non-financial risks each have or are incorporated
within a risk management framework, and are supported by
an established network of systems, policies, standards and
procedures which are overseen by the Board and Board
Committees, with support from Management committees and
our independent risk management functions. The material non-
financial risks are considered within the Group’s Risk Appetite
Statement, with both Primary and Secondary Appetite Settings.
The Group has identified the following material non-financial risks.
Material Risks Categories
Non-Financial Risks
Strategic Risk
Strategic Risk is defined as the risk that adverse business
decisions, ineffective or inappropriate business plans, or failure
to respond to changes in the environment will impact our ability
to meet our objectives.
The Group has an integrated strategic planning process
to ensure alignment between the Group’s strategy and risk
management process. The Group sets strategic imperatives
and outcomes which are documented in a three-year rolling
strategic plan, that is approved by the Board. Performance
against the strategy is reviewed on an ongoing basis.
The Group also regularly examines new initiatives and market
opportunities, including acquisitions and disposals, with a
24 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
view to growing shareholder value. The Group actively scans
the environment to identify emerging risks and assesses the
adequacy of the Group’s risk framework to monitor and manage.
The Group seeks to maintain an engaged workforce with
appropriate culture, conduct and capability to execute the
strategy. Failure to recruit and retain key executives, employees
and Directors may have an adverse effect on our business.
Material Risks Categories
Non-Financial Risks
Operational Risk
Operational Risk is defined as the risk of impact on objectives
or the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external
events. Operational Risk may lead to a range of potential
consequences including financial, business disruption, customer/
partner, regulatory/legal, people and reputation.
Operational Risk is managed via a comprehensive risk
management framework, and is supported by an established
network of systems, policies, standards and procedures. The
Operational Risk Management Framework assist the Group in
integrating risk management into significant activities and functions.
An operational risk event may also result in an adverse
outcome for customers that the Group would need to
remediate. Where this occurs, activities are instigated to ensure
affected parties are remediated in a timely and fair manner.
These events could require the Group to incur significant
remediation costs (which may include compensation payments
to customers, legal fees and costs associated with correcting
the underlying issue). The Group has established remediation
governance, frameworks and compensation methods which
are managed within the specific business divisions.
Reputational damage is considered as a consequence of an
operational risk event. Reputational damage may arise as a
result of an external event, our own actions or the actions of
a partner, and adversely affect perceptions about us held by
the public. Reputational damage may occur through traditional
media or via social media platforms with the velocity of this
impact elevated through the rising use of social media.
Operational Risk is wide in scope and incorporates many
different sub-risk components and categories that may occur
as a result of a common set of cause factors. This includes the
risks detailed in the diagram below.
Material Risks Categories
Non-Financial Risks
Operational Risk
Data Risk
Technology Risk
Compliance Risk
Financial Crime Risk
Third-party
Supplier Risk
Conduct Risk
Data Risk
Data Risk is defined as the risk of loss resulting from
inadequate or failed internal processes, people and systems
or from external events impacting on data that is either in soft
copy or hard copy form. Data Risk encompasses the risk of
loss, corruption, incomplete collection, theft and disclosure of
data resulting from inadequate or failed internal processes,
people and systems or from external events impacting on data.
Data Risk could adversely affect the Group and result in
failure to meet these objectives, including regulatory and legal
requirements. The range of data assets the Group administers
is extensive and includes commercially sensitive information
which is collected and maintained on behalf of its customers
and partners.
Data Risk is a subset of Operational Risk and managed with
policies, processes and practices aligned to the Operational
Risk Management Framework. The Group seeks to minimise
Data Risk through maintaining a dedicated Data Risk
Management Framework to ensure Data Risk are identified,
managed and measured for the Group. The Group actively
scans the internal and external environment to identify and
monitor for current, evolving and emerging data related threats
and vulnerabilities.
Technology Risk
Technology Risk is defined as the governance, people, process
or technology risks which result in loss or negative impact to
the confidentiality, availability and/or integrity of the Group’s
information technology environment or parts of the information
technology environment, including infrastructure, systems and
applications.
Most of our daily operations are highly dependent on
information technology and there is a risk that these systems
or technologies might fail or not be available. The exposure to
systems risks includes information security threats and risks,
the complete or partial failure of information technology or
data centre infrastructure, and using internal or third-party
information technology systems that do not adequately
support the requirements of the business.
Technology Risk is a subset of Operational Risk and
managed with policies, processes and practices aligned to
the Operational Risk Management Framework. The Group
seeks to minimise Technology Risk through maintaining a
dedicated Technology Risk Management Framework to ensure
Technology Risk is identified, managed and measured for the
Group. The Group actively scans the internal and external
environment to identify and monitor for current, evolving
and emerging technology and information security related
threats and vulnerabilities, as well as other digital devices used
to transmit and communicate data and conduct financial
transactions.
Compliance Risk
Compliance Risk is defined as the risk associated with failure
to comply with any legal or regulatory obligations. The Group’s
operations are highly regulated and subject to various laws,
regulations, policies, standards and industry codes. In addition,
at times there are regulatory changes which can affect the
Group in substantial and unpredictable ways which includes
the need to significantly increase investment in staff, systems
and procedures to comply with the regulatory requirements.
A failure to comply could result in financial losses and/or a
range of actions against the Group including fines, penalties,
sanctions being imposed by regulatory authorities, the exercise
of discretionary powers by regulatory authorities, or other
compensatory action by affected persons.
Compliance Risk is a subset of Operational Risk and
managed with policies, processes and practices aligned
to the Operational Risk Management Framework. The
Regulatory Compliance function provides independent advice
and oversight on regulatory compliance as well as providing
advice to individual business divisions to assist with the
implementation of regulatory change.
Financial Crime Risk
The Group is exposed to the risk of financial crime, including
both internal and external fraud. Financial Crime Risk is defined
as the risk of money laundering, terrorism financing, sanctions,
bribery and corruption, and Fraud (internal and external).
Financial crime is an inherent risk within financial services,
given the ability for employees and external parties to obtain
advantage for themselves or others. An inherent risk also exists
due to systems and internal controls failing to prevent or detect
all instances of financial crime.
Financial Crime Risk (include internal and external fraud) is
a subset of Operational Risk and managed with policies,
processes and practices aligned to the Operational Risk
Management Framework. The Financial Crime Risk function
is responsible for establishing programs, policies, procedures
and tools as independent challenge, oversight, monitoring and
reporting of financial crime risks. The Group has established
robust techniques and capabilities to detect and prevent
financial crime and comply with legislation.
Third-party Supplier Risk
Third-party Supplier Risk is defined as the risk of failing to
manage third party relationships and risks appropriately, for
example: not taking reasonable steps to identify and mitigate
additional Operational Risks resulting from the outsourcing of
services or functions.
The Group sources a number of key services from external
suppliers and service providers. The failure of a key service
provider, or the inability of a key service provider to meet their
contractual obligations, including key service standards, could
disrupt our operations and ability to comply with regulatory
requirements.
Third-party Supplier Risk is a subset of Operational Risk and
managed with policies, processes and practices aligned to
Operational Risk. The Group has a Procurement Policy which
provides the required steps to undertake sourcing activities
and the assessment and treatment of supplier risk. In addition,
the Group has an Outsourcing Policy which outlines the
principles and practices to effectively manage risks arising
from the outsourcing of its business activities and functions.
The Enterprise Procurement function provides advice, support
and oversight throughout the procurement process as well as
manage policies, procedures and tools.
Conduct Risk
Conduct Risk is the risk of delivering unfair customer outcomes or
market integrity resulting from deliberately or unintentionally acting
unfairly, inappropriately or unethically. Poor conduct is a cause of
Operational Risk. The Group is exposed to both intentional and
unintentional misconduct risks.
Conduct risk is managed with policies, processes and practices
aligned to the Operational Risk Management Framework. The
Group seeks to minimise conduct risk through maintaining a
dedicated Conduct Risk Management Framework incorporating
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 2 5
a set of Good Conduct Principles and by promoting an
appropriate organisational culture.
supports the business to make informed decisions, manage
and assess risk and comply with legal obligations.
Other Non-Financial Risks
The Group is exposed to other non-financial risks, which are
detailed in the diagram below:
Other Risks Categories
Non-Financial Risks
Contagion Risk
Pandemic Risk
Model Risk
Legal Risk
Transformation /
Change Risk
Employment Practices and
Workplace Safety Risk
Taxation Risk
Contagion Risk
Contagion Risk is the possibility that problems arising in
other Group members may compromise the financial and
operational position of the ADI. This may include related
entities, incorporating subsidiaries, partnerships, Community
Bank and our Alliance Bank network.
The Board oversees the business activities conducted by
subsidiary entities and is cognisant of specific legal and
regulatory requirements applicable to subsidiary business
activities. The Board approved Related Entity Policy sets out
the key risks that may arise from dealings between Bendigo
and Adelaide Bank and its related entities and the associated
policies and limits designed to manage those risks.
Model Risk
Model Risk is the risk of financial or operational losses arising
from the use of a model. Model Risk can be inherent in a model
due to incorrect assumptions, flawed data or incorrectly coded
algorithms. Model Risk includes ensuring a model and its output
is only used for its designed purpose. Breakdown in the use of
the model may occur due to control weakness surrounding
the model, incorrect or misleading interpretation of results,
inappropriate underlying theory, assumptions or inputs, or errors
in outputs not being identified.
The Group seeks to minimise Model Risk through maintaining
a Risk Model Management Policy and associated Risk Model
Standards which ensure consistency across Risk Models in
relation to their development, management, governance and
validation.
Legal Risk
Legal Risk is the risk of an event occurring that results in the
Group failing to meet a legal obligation. This can include
any legal obligation that the Group may have to regulators,
customers and counterparties. Legal risk includes, but is not
limited to, exposure to fines, penalties or punitive damages
resulting from supervisory actions, as well as ordinary damages
in civil litigation, related legal costs and private settlements.
From time to time, the Group may be subject to material
litigation, regulatory actions, legal or arbitration proceedings
and other contingent liabilities which, if they crystallise, may
adversely affect the Group’s results.
Legal risk is a subset of Operational Risk and managed with
policies, processes and practices aligned to the Operational
Risk Management Framework. The Group Legal function
Pandemic Risk
Pandemic Risk is the risk that the Group may be adversely
impacted by an epidemic of an infectious disease that has
spread across a large region, affecting a substantial number of
people. The Group is vulnerable to the impacts of epidemics or
pandemics. The COVID-19 pandemic has had and is expected
to continue to negatively impact our customers, shareholders,
employees and financial performance.
Pandemic Risk is a subset of Operational Risk and managed
with policies, processes and practices aligned to the
Operational Risk Management Framework. Business Continuity
Management (BCM) is a dedicated enterprise control function
that includes policies, standards and procedures for ensuring
that in the event of a disruption critical business operations can
be maintained or recovered in a timely fashion. BCM provide
the platform for building resilience and the capability for an
effective response that safeguards the Group and the interest
of our key stakeholders. The BCM function assists with the
Group’s management response to Pandemic Risk through a
dedicated Pandemic Plan and related crisis management tools
including the Contingency Funding Plan and Major Incident
Plan.
Transformation/Change Risk
Transformation/Change Risk are those risks that may impact
on the successful delivery of an initiative or are introduced to
the Group upon implementation of an initiative. Transformation/
Change Risk is a subset of both Strategic and Operational Risk
and managed with policies, processes and practices aligned
to the Operational Risk Management Framework. The Group
continues to execute its transformation and growth strategy
and an Enterprise Delivery Framework has been developed
which outlines the process of how the Group delivers
transformation and programs of work including consideration
of resourcing, risk, issues and interdependencies.
Employment Practices and Workplace Safety Risk
Employment Practices and Workplace Safety Risk is the risk of
losses arising from acts that are inconsistent with employment,
health or safety laws or agreements, from payment of
personal injury claims or from diversity/discrimination events.
Employment Practices and Workplace Safety Risk is a subset
of Operational Risk and managed with policies, processes and
practices aligned to Operational Risk. The Group has a Code
of Conduct which provides a framework and sets expectations
for all employees, executives and directors. The Group is
committed to promoting a culture of integrity and ethical
behaviour, where all of our decisions, actions and behaviours
reinforce our corporate values and code of conduct.
Taxation Risk
Taxation Risk is the risk that changes or non-compliance with
the tax system could affect the Group’s expected profitability.
Tax laws are highly complex and open to interpretation. The
Group is required to comply with statutory obligations and
make tax payments in accordance with relevant tax rules
and legislation. Taxation risk is a subset of Operational Risk
and managed with policies, processes and practices aligned
to Operational Risk. The Group has a Taxation Policy which
supports effective management of the Group’s Taxation Risk.
26 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Business uncertainties
The financial prospects of any company are sensitive to
the underlying characteristics of its business. The external
operating environment can at times be dynamic, volatile and
unpredictable. The external environment and emerging trends
are considered as part of the strategic planning process.
Uncertainties remain and risks arising from the external
environment need to be managed and remain a focal point.
A summary of the significant uncertainties are presented below.
Dependence on prevailing macroeconomic and
financial market conditions
The business is highly dependent on the general state of
the domestic economy and global financial markets. Our
performance can be significantly impacted by economic and
political events, both domestic and international, as well as
by natural disasters and pandemics. This includes the level of
economic activity and demand for financial services by our
customers. In particular, lending is dependent on customer
and investor confidence, the overall state of the economy
including employment levels, the residential lending market and
the prevailing interest rate environment. The Group’s Economic
Oversight Committee is responsible for the approval of
forecast macroeconomic scenarios.
Geopolitical tensions/events
Geopolitical tensions/events arise due to differing global
political agendas which may result in international trade wars
and a general loss of business confidence. The global economy
may then experience a slowdown which reduces global
appetite for Australian exports. The Group may be significantly
affected by geopolitical tensions/events which may impact our
ability to deliver our strategy and business objectives.
Ongoing COVID-19 intervention measures
The ongoing intervention measures such as the lockdowns
implemented across Australia, state border closures, travel
and trade restrictions which have been taken to contain the
spread of COVID-19 variants has had an adverse effect on
our customers, communities and the economy. There are a
number of uncertainties in relation to the extent and duration
of intervention measures which impacts on household demand,
business activity and slows economic recovery. The impact of
prolonged lockdown restrictions causes large scale economic
and financial disruption and may have significant long term
effects on our customers and businesses across a wide
range of industry sectors. The Group continues to support its
customers with assistance measures.
Climate change and other environmental factors
The Group and its customers and external suppliers are
based in, and operate across, a diverse range of geographical
locations. Physical drivers such as climate change including
increases in temperatures and sea levels and the frequency
and severity of adverse climate events, has the potential to
disrupt business activities, impact on our operations, damage
property, impact on our customers and affect the value of
assets held in affected locations, and our ability to recover
amounts owing to us.
Market Competition
The markets in which we operate are highly competitive
and may become even more so. Factors that contribute
to competition include mergers and acquisitions, changes
in customer behaviour, entry of new participants, the
development of new sales methods and regulatory change.
Increasing competition could potentially lead to reduced
business volumes and revenue, a compression in our net interest
margins, as well as additional costs to retain market share.
The Group is also dependent on its ability to offer products
and services that meet changing customer preferences.
A weakening in the Australian real estate market
Residential, commercial and rural lending, together with
property finance, constitute important businesses to us. A
significant slowdown in Australian property markets, including
a decrease in Australian property valuations, could decrease
the amount of new lending the Group is able to write and/or
increase the amount of credit losses from existing loans, as well
as impact the valuation of the Homesafe portfolio.
Changes in monetary policy
The Reserve Bank of Australia (RBA) sets official interest rates
so as to affect the demand for money and credit in Australia.
The cash rate influences other interest rates in the economy
which then affects the level of economic activity.
Movements in the cash rate impact our cost of funds for
lending and investing and the return earned on these loans and
investments which can impact our net interest margin.
Changes in monetary policy can also affect the behaviour of
borrowers and depositors, such as potentially increasing the
risk that borrowers may fail to repay their loans, or repay their
loans in advance, and in the case of depositors, potentially
increasing the risk that they may seek returns in other asset
classes.
Credit Ratings
External credit ratings have a significant impact on both
our access to, and the cost of, capital and wholesale
funding. Credit ratings may be withdrawn, made subject
to qualifications, revised, or suspended by a credit rating
agency at any time. Also, the methodologies by which they
are determined may be revised. A downgrade or potential
downgrade to our rating may reduce access to capital and
wholesale debt markets, potentially leading to an increase
in funding costs, as well as affecting the willingness of
counterparties to transact with the Group.
Capital Base
The capital base is critical to the management of our
businesses and our ability to access funding. We are required to
maintain a level of capital by APRA and other key stakeholders
to support our business operations and risk appetite. There can
be no certainty that additional capital required in the future will
be available or able to be raised on acceptable terms.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 2 7
Remuneration
Report
Contents
Section 1: Remuneration Overview
Section 4:
Executive statutory remuneration
Section 2: Remuneration Framework in detail
Section 5: Non-executive Director remuneration
Section 3: Variable reward outcomes for FY2021
Section 6:
Loans and other transactions
This Remuneration Report is for the financial year ended 30 June 2021. The Report has been prepared
in accordance with section 300A of the Corporations Act 2001 and the Corporations Regulations 2001
and has been audited. The Remuneration Report sets out our remuneration framework, the remuneration
arrangements applicable to the Key Management Personnel (KMP), and the link between performance
and remuneration outcomes for the year.
From the Governance and HR Committee Chair
The Board of Bendigo and Adelaide Bank are pleased to
present the following Remuneration Report to shareholders.
It provides both details of the remuneration outcomes for the
year and some indication of how we approach remuneration
matters.
Our goal is to establish remuneration structures that reward
appropriate behaviours, discourage poor behaviour and
decisions, align the interests of the individuals with the
agendas of a broad group of stakeholders and allows us to
attract talented and dedicated people to the Bank. We hope
the following report provides you with an understanding of how
we go about pursuing these goals and the outcomes of the
decisions we have made to achieve them.
Some key highlights from the report are:
Details of the new executive remuneration framework can be
found in section 2. The executive remuneration arrangements
were restructured at the start of FY2021 with key impacts on
executives summarised. The value of the prior year deferred
base grant was transitioned to cash salary for executives,
except for the Chief Executive Officer and Managing Director
whose structure had been partly locked in until the end
of FY2023. This has seen an increase in cash salary, but
no change in Total Aggregate Reward. Under the revised
remuneration structure, executives received grants of Loan
Funded Shares and Performance Rights in November, following
the 2020 Annual General Meeting and the approval of the
Chief Executive Officer and Managing Director's grants.
The FY2021 financial results show that our strategy is
delivering for customers and shareholders. While a bonus pool
for salaried staff was established, cash short-term incentives
were removed from the executive reward structure, and no
cash incentives were paid to executives.
Following the end of the prior financial year deferred base
pay for the executives, including the Chief Executive Officer
and Managing Director, vested. For executives, this was
the final tranche of deferred base pay under the previous
reward framework. The long-term incentive grant made to
management KMP in FY2019, excluding our Chief Executive
Officer and Managing Director, was tested and the tranche
with the relative Total Shareholder Return measure did not vest.
However, the Bank has continued to maintain our customer
advocacy advantage over our peers, which resulted in
performance rights with a ‘Customer Hurdle’ vesting.
We hope you find the following report helpful and informative.
Tony Robinson
Chair – Governance and HR Committee
28 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Executive remuneration outcomes for FY2021
Remuneration
component
Remuneration
outcomes
Fixed Base
Deferred base
remuneration
Short-term
incentive (STI)
Long-term
incentive (LTI)
Non-executive
director fees
There were no increases in fixed base for executives in FY2021, however there was a change
to the remuneration structure and the split between cash and equity. In the new executive
remuneration structure implemented this year, the reward value of the previous year’s deferred
base remuneration was transitioned to cash salary for all management KMP except the Chief
Executive Officer and Managing Director.
The Chief Executive Officer and Managing Director elected to take a 10% reduction in fixed
remuneration for the six-month period 1 November 2020 through to 30 April 2021. She also
contributes $5,000 to our scholarship program.
No grants of deferred shares were made, and this element has been removed from our
executive remuneration structure.
As approved by shareholders at the 2018 AGM, a grant of 200,000 deferred shares was
made in 2018 to the Chief Executive Officer and Managing Director and 50,000 of these
deferred shares are considered part of the Chief Executive Officer and Managing Director’s
remuneration for the year ending 30 June 2021.
The vesting criteria for the deferred base pay grants made in FY2020 were satisfied and the
Board approved the vesting of the shares without adjustment.
The STI plan was removed from the executive remuneration structure in FY2021. No STI nor
other cash incentive payment was made to executive KMP for the year,
The Bank’s salaried employees participated in a group-wide Value Creation Dividend plan
which yielded a pool of $10 million made available for payment and will be distributed to
over 2,500 employees in late September 2021.
The Chief Executive Officer and Managing Director eceived a grant of loan funded shares and
performance rights in accordance with the terms approved by shareholders at the 2020 AGM.
The grant is subject to a four-year performance period.
Loan funded shares and performance right grants were made to other executives in
accordance with their remuneration mix. The grants are subject to a four-year performance
period in total.
The long-term incentive grant made in FY2019 to executives, excluding the current Chief
Executive Officer and Managing Director, was tested at the end of the FY2021 year.
The relative TSR performance measure for performance rights granted fell below the median of
the peer group. As a result, the sleeves of the grants that were linked to the relative TSR were
forfeited.
The sleeve of grant that was linked to the Customer Hurdle vested in full. This was in recognition
of the Bank’s relative NPS being 26.7 points above the industry average for the 3-year
performance period finishing 30 June 2021.
The results of performance right testing are provided at Section 3 of this report. Note the
FY2019 Chief Executive Officer and Managing Director grant was a 4-year grant, and will be
tested at the end of FY2022.
There was no change in the annual fee payment for non-executive directors for the FY2021
year, and the non-executive directors continue to contribute $5,000 each to the Bank’s
scholarship program.
The Board elected to take a 10% reduction in fees for the six-month period 1 November 2020
through to 30 April 2021.
The aggregate non-executive director fees paid for the year was $1.821 million which
represents 72.9 percent of the $2.5 million fee cap approved by shareholders. No additional
fees were paid to the non-executive directors for their committee memberships.
The annual base fee has not been increased over the last 12 months.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 2 9
Section 1: Remuneration overview
Executive remuneration framework FY2021
Our values
Teamwork
We are one team
with one vision
Integrity
We build a
culture of trust
Performance
We strive for
sustainable success
Engagement
We listen,
understand –
then deliver
Leadership
We all lead
by example
Passion
We believe in
what we do
Remuneration Principles
Simplicity
The link between
performance, value
created, and reward
should be clear and the
framework easy for all
employees to understand
so that it effectively
attracts, retains and
motivates the talent
the organisation needs
to deliver long term
sustainable success.
Transparency
The Bank commits to
providing employees with
visibility wherever possible
of the considerations made
in making reward decisions
and fairly undertaking all
performance and reward
processes to support the
objective of fair remuneration.
This includes addressing,
when necessary, gender pay
equity.
Alignment with Values
Remuneration should
reinforce the corporate
values of teamwork,
integrity, performance,
engagement,
leadership and
passion. Individual
reward outcomes are
first dependent on the
success of the Bank,
Division and team.
Appropriate Risk
Behaviour
Remuneration should
encourage innovation
and prudent risk
taking that supports
the achievement of
superior long-term
results for shareholders
and customers
and supports the
risk management
framework of the Bank.
Good customer
Outcomes
Reward structures
and practices will be
designed to minimise
the risk of incentivising
behaviours that may
lead to poor customer
outcomes whilst
encouraging the right
behaviours, at the
right time for great
customer experiences.
Fixed Reward
Variable Reward - Equity
Remuneration Framework
Fixed Base - Cash
Deferred Base - Equity
Comprise base salary and
superannuation contributions.
Set by reference to the
size, complexity of role and
individual responsibilities.
External market benchmarking
includes comparable roles
in the banking sector and
companies of a similar size,
complexity and performance
outlook.
Recognises an individual’s
experience, skills,
competencies and value.
* MD only, with final tranche
from FY2019 grant vesting in
FY2023.
Deferred shares (fully paid
ordinary shares) issued at
no cost and beneficially
owned by the executive from
grant date. They cannot
be received as cash unless
Board decides otherwise.
Grants are subject to
continued employment
(“service condition”) over the
deferral period.
Long Term Incentive (LTI)
Loan Funded Share Plan
Performance Rights
Annual grants of Performance
Rights. Each right represents
an entitlement to one ordinary
share in the Bank.
Rights are granted at no cost
and have no exercise price.
Vesting is subject to relative
Total Shareholder Return (rTSR)
performance measures, risk and
service condition tested over 4
years.
Shares granted with a non-
recourse interest free loan subject
to performance criteria. Dividends
received pay off the loan for the
duration of the grant. Plan operates
over 6 years.
At 2 years, performance is measured
against Cost to Income ratio
(50%), relative Net Promoter Score
(25%) and Market Share (25%) to
determine vesting.
Any vested shares are subject to a
further 2 year deferral period. Any
unvested shares are forfeited.
At year 4 participants have another
2 years to settle the loan.
All equity grants are subject to ongoing risk adjustment & the Clawback and Malus Policy
Minimum Shareholding Policy (MSP)
In FY2021, the Bank introduced a Minimum Shareholding Policy (MSP) for its Executives and Non-executive Directors.
The MD must accumulate BEN shares equal to 150% of Fixed Base and other Executives must accumulate 75% of Fixed Base over a
5-year period from the later of, the date of the introduction of the policy or their date of appointment.
For Non-Executive Directors, including the Chair must accumulate 100% of their base fee over a 5-year period. For more details, please
refer to page 33.
30 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Group financial performance
The level of variable remuneration outcomes reflects the Bank’s performance as presented in this five-year snapshot of key
measures and metrics.
Group Performance Measures
Cash Earnings1 ($m)
FY Closing Share Price ($)
Relative TSR Percentile2
445.1
418.3
415.7
457.2
11.08
10.84
11.58
10.49
60
301.7
7.01
41
41
47
23
Annual relative NPS
compared with industry
average3
30.7
28.1
28.3
27.5
25.8
2017 2018 2019 2020 2021
2017 2018 2019 2020 2021
2017 2018 2019 2020 2021
2017 2018 2019 2020 2021
1.
2.
3.
Cash earnings is an unaudited, non-IFRS financial measure
Relative TSR percentile rank versus ASX comparator group over the performance period tested at the end of each corresponding financial year
Annual relative NPS sourced from Roy Morgan Research and represents the average of the 6 month rolling scores as at December and June compared with the industry average.
Variable Reward Outcomes for Executives
Average STI awarded as a % of maximum
opportunity
Financial year ending
2017
2018
2019
2020
20211
55.4%
63%
0%
0%
n/a
Percentage of LTI which vested
0%
0%
83%
30%
35%
1.
STI is no longer part of the Executive reward framework from 2021
Below is a summary of other key performance metrics for the previous five years, including FY2021.
Company performance measure
Statutory net profit after tax ($m)
Statutory earnings per share (cents)
Cash earnings per share (cents)
Dividends paid and payable (cents per share)
Financial year ending
2017
429.6
90.9
88.5
68.0
2018
434.5
89.9
92.1
70.0
2019
376.8
77.1
85.0
70.0
2020
192.8
38.1
59.7
35.5
2021
524.0
98.1
85.6
50.0
Total shareholder return (annual)
22.5%
4.2%
14.2%
36.0%
55.5%
Annual relative NPS compared with
industry average 1,2
+30.7
+28.1
+28.3
+27.5
+25.8
1.
2.
Annual relative NPS sourced from Roy Morgan Research and represents the average of the 6 month rolling scores as at December and June compared with the industry average.
Roy Morgan data provided for FY2020 has been adjusted due to a reporting issue that occurred during FY2020, however this did not result in any adjustments to LTI outcomes
relating to FY2020.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3 1
Risk and remuneration consequences
Hedging and margin loan restrictions
The Bank is committed to effective remuneration practices
that reward performance in a manner that is appropriate and
consistent with shareholder and regulatory expectations,
including the requirements under Prudential Standard CPS 510
Governance and the Banking Executive Accountability Regime
(BEAR).
The Clawback and Malus Policy sets out some of the
circumstances in which the Board may seek to reduce or
recoup “at risk” remuneration (whether vested or unvested)
or take other actions to ensure remuneration outcomes are
appropriate in light of all the circumstances, including those
which arise or come to light after “at risk” remuneration has
been granted or delivered. The policy applies to all employees
of any Group Company who receive “at risk” remuneration,
meaning the portion of an employee’s remuneration that is
subject to performance conditions, vesting conditions or a real
risk of forfeiture. It includes all variable remuneration, one-off
or special incentive arrangements in place, provided in cash or
equity.
Taking into account the provisions of the Clawback and
Malus Policy, the Board has discretion, having regard to the
recommendations of the Governance and HR Committee, to
adjust variable remuneration (including Annual Variable Reward
and LTI) to reflect the following:
a. The outcomes of business activities.
b. The risks, including non-financial risks, related to the
business activities taking into account, where relevant, the
cost of the associated capital.
c. The time necessary for the outcomes of those business
activities to be reliably measured.
This includes adjusting performance-based components of
remuneration downwards, to zero if appropriate, in relation to
particular persons or classes of persons, if such adjustments
are necessary to:
a. Protect the financial soundness of the regulated institution;
or
b. Respond to significant unexpected or unintended
consequences that were not foreseen by the Board.
In these circumstances, this may involve the Board deciding,
having regard to the recommendation of the Governance and
HR Committee, to clawback the deferred component of an
Annual Variable Reward award or LTI grant during the deferral
period. This may include the deferred component and the
awarded or granted component.
The Board also has discretion to adjust positively in cases
where the organisation has mitigated high-risk events and
demonstrated a successful risk culture.
The accountability obligations for accountable persons are
outlined in the Bank’s BEAR policy. As outlined in the BEAR
Policy, the Board may determine that the accountable person
has breached their accountability obligations. If the Board
makes such a determination, the Bank may not pay some or
all of the accountable person’s variable remuneration, including
deferred remuneration, as it sees fit.
32 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
The remuneration policy mandates that executives, and
their closely related parties, may not enter into a transaction
designed to remove the at-risk element of equity-based pay
before it has vested, or while it is subject to a trading restriction.
The restriction is contained in the Remuneration Policy. The
Bank treats compliance with the requirement as important and
at the end of each year requires the individuals to confirm they
have complied with the restriction. If the restriction is breached
the individual will forfeit all equity-based remuneration that is
subject to the prohibition at the time of the breach.
The Bank’s Trading Policy also prohibits KMPs from using the
Bank’s securities as collateral in any margin loan arrangements.
Minimum Shareholding Policy
The Bank has adopted a Minimum Shareholding Policy (MSP)
in order to further strengthen the alignment between the
interests of Directors and executives, and BEN’s shareholders.
The MSP supports a focus on long term shareholder value by
requiring Directors and senior executives to build a minimum
shareholding in BEN and maintain it during their tenure.
Under the MSP, the requirements are:
•
Chief Executive Officer and Managing Director: 1.5 x Fixed
Base including the notional annual value of her deferred
base pay
Other Executives: 0.75 x Fixed Base
Chair: 1 x annual Chair base fee
Non-executive Directors: 1 x annual Director base fee
The shares that are considered to contribute towards the MSP
level are:
•
shares which are held directly, indirectly or beneficially by
an Executive or Non-executive Directors;
shares which are held by a close family member of the
Executive or Non-executive Directors;
shares which are held by an entity over which the
Executive or Non-executive Directors has, directly or
indirectly, control, joint control or significant influence;
any vested shares from incentive plans which are retained
by the Executive; and
any unvested shares from incentive plans which are
subject only to service conditions and risk adjustment that
are held by Executive.
•
•
•
•
•
•
•
For Executives, shares granted under the Loan Funded Share
Plan will be included once these have been performance
tested and still subject to a service condition.
In assessing whether the minimum shareholding level has
been achieved, the value of the shares will be calculated as
the acquisition cost of the relevant shares. In the case where
shares were granted under equity incentives or salary/fee
sacrifice plans the allocation price has been used.
Once the minimum shareholding level has been assessed as
met for the first time, the Executive or Non-executive Directors
will be deemed to have met the policy requirements. The
Executive or Non-executive Directors has five years from the
latter of the date of the policy or date of appointment to meet
the policy requirements. The policy was introduced on 25
August 2020.
The Board may, at any time and in its sole discretion, amend
the minimum shareholding levels and/or timing requirements set
out above.
Remuneration governance
The Governance & HR Committee assists the Board in relation
to the Group’s remuneration arrangements. The Board makes
all final decisions in relation to those arrangements. The current
members of the Committee are all independent Non-executive
Directors:
a. Tony Robinson (Chair)
b.
Jacqueline Hey
c. Vicki Carter
d. David Matthews
A summary of the Committee’s remuneration responsibilities
is presented below and the Committee Charter is available
from the Corporate Governance section of the Bank’s website
at http//www.bendigoadelaide.com.au/public/corporate_
governance/index.asp.
The Committee’s remuneration responsibilities include
conducting regular reviews of, and making recommendations
to the Board on, the remuneration strategy and policy
taking into account the Group’s objectives, risk profile,
shareholder interests, regulatory requirements and market
developments. The Committee is also responsible for making
recommendations to the Board on:
a.
the remuneration arrangements for executives, including
the terms on which performance-based remuneration will
be provided;
the performance-based remuneration outcomes for the
executives; and
the annual bonus pool.
b.
c.
The Committee makes recommendations to the Board on
the exercise of the Board’s discretion to adjust incentive and
performance-based remuneration to reflect the outcomes of
business activities and the risks relating to those activities.
The Committee is also responsible for recommending to the
Board the remuneration matters specified by the Australian
Prudential Regulation Authority under Prudential Standard
CPS 510 Governance relating to other designated responsible
persons, risk and financial control personnel and material risk
takers.
The Committee also has responsibility for providing input
into the Group’s risk management framework in relation to
remuneration risk, in particular, recommending to the Board the
remuneration arrangements for the Executives.
The 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. During
FY2021, the Governance and Human Resources Committee
engaged KPMG to provide support as part of the Bank’s
review of the executive remuneration framework and NED Fee
structures. KPMG provided market practice, remuneration data,
trends and assistance with other ad-hoc tax and legal matters.
KPMG did not provide any remuneration recommendations as
defined in the Corporations Act 2001 (Cth) to the Committee
during FY2021.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3 3
Key Management Personnel
KMPs are the persons with authority and responsibility for planning, directing and controlling the activities of the Group. The KMP
for the financial year comprise the Directors and Executives listed below.
Name
Position
Non-executive directors
Jacqueline Hey
Chair
Vicki Carter
David Foster
Jan Harris
Jim Hazel
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Rob Hubbard
Non-executive Director
David Matthews
Non-executive Director
Tony Robinson
Non-executive Director
Term as
KMP
Current
Shareholding
Progress against
Minimum
Shareholding Policy 1
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
93%
83%
27%
44%
> 100%
> 100%
> 100%
> 100%
On track
On track
On track
On track
Meets
Meets
Meets
Meets
Executives
Marnie Baker
Managing Director &
Chief Executive Officer
Full Year
> 150%
Meets
Ryan Brosnahan
Chief Transformation Officer
Taso Corolis
Travis Crouch
Chief Risk Officer
Chief Financial Officer
Richard Fennell
Executive, Consumer Banking
Full Year
Full Year
Full Year
Full Year
13%
> 75%
38%
> 75%
Alexandra Gartmann
Executive, Rural Bank, Partnerships,
Public and Corporate Affairs
Full Year
> 75%
Bruce Speirs
Executive, Business Banking
Full Year
35%
On track
Meets
On track
Meets
Meets
On track
1.
The Minimum Shareholding Policy (MSP) was introduced on 25 August 2020, refer to Page 33 for more details. The MSP requires Non-executive Directors and the Executive to
meet the minimum shareholding requirements within 5 years of the policy introduction or within 5 years of appointment, whichever is later. For all current KMP, the MSP must be
met by 25 August 2025.
34 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Executive remuneration mix
The total target reward for executives is set by the Board at the
start of each year and represents the potential target maximum
reward. The arrangements are reviewed by the Governance & HR
Committee to ensure the mix and total target reward continues to
be fair and balances the interests of stakeholders.
•
at the end of year 4.
Performance Rights issued under a new Omnibus Equity Plan
– a new long term equity incentive plan with the performance
rights subject to a 4 year relative total shareholder return
performance measure.
As described in last year’s report, a revised executive remuneration
framework was introduced in FY2021. The key objectives of the
remuneration framework are:
1. Closely align executive reward with the Bank’s strategic
imperatives to drive performance in areas that will create
sustainable long term shareholder value - the Bank has a
significant transformation agenda that will require the Bank to
reduce its cost base, while continuing to grow market share
and maintaining our customer advocacy advantage.
2. Support the Bank’s culture of sharing in collective success –
outcomes under the framework are directly linked with the
shareholder experience so that executives are encouraged to
think and act like owners.
3. Address evolving regulatory change and to support the Bank’s
existing strong risk culture and provide for longer deferrals and
clawback in line with the Banking Executive Accountability
Regime (BEAR) and APRA’s evolving requirements.
To meet these objectives, the framework consists entirely of long
term equity grants, made up of two components, each vesting over
4 years, as follows:
•
Loan funded shares issued under a new Loan Funded Share
Plan – a new equity incentive plan with the shares subject to 2
year performance measures that are linked to delivery of the
Bank's strategy, a 4 year service condition and a risk gateway
The new framework has facilitated a realignment of deferred
base pay grants being incorporated into executive’s cash salary.
Under the BEAR remuneration requirements deferred base pay
was considered variable remuneration, and subject to additional
restrictions. This changed the grants from their original intent, which
was to align a portion of an executives fixed remuneration with
the shareholder. Therefore, the Bank chose to implement the loan
funded share plan to create the alignment with shareholders.
The transition to the new framework was done in a way to ensure
there is no material change to the in executives' overall incentive
opportunities, which remain modest compared to our peers. The
new framework is consistent with the Bank’s long held view that
remuneration structures which are weighted towards short-term
and individually focussed performance are incompatible with our
strategy and may encourage risk, poor culture and behaviour.
By removing the cash short-term incentive, the new executive
framework is focussed on long term, sustainable, shareholder
returns.
The below table sets out the target remuneration mix, and
split between cash and equity, for each executive. The actual
remuneration mix will vary depending on performance outcomes.
The percentages also represent the maximum opportunity for each
component.
KMP
Position
M Baker
Chief Executive Officer and
Managing Director
R Fennell
Executive, Consumer Banking
Other executives (average)
Fixed
base
46%
65%
70%
Deferred
Base
Shares
Loan
Funded
Share Plan 1
Performance
Rights
Awarded
as Cash
Awarded
as Equity
19%
n/a
n/a
25%
25%
20%
10%
10%
10%
46%
65%
70%
54%
35%
30%
1.
The grant value of the Loan Funded Share Plan is equal to 3.9x the reward value. The multiple reflects that the economic outcome of the Loan Funded Share is similar to that of a
share option. The multiple was determined as part of the transition.
This chart illustrates the reward mix elements and compares the Chief Executive Officer and Managing Director with other executives.
Chief Executive Officer and
Managing Director
Executive, Consumer Banking
Other Executives
46%
19%
25%
10%
65%
70%
25%
10%
20%
10%
Fixed Base
Deferred Base
Shares
LTI - Loan Funded
Share Plan
LTI - Performance
Rights
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3 5
Remuneration time horizon
The following provides an illustration of how FY2021 remuneration will be delivered to the Chief Executive Officer and Managing Director
and other Executive KMP.
Vesting date
Fixed
Base
FY2019 MD
Deferred Base
Shares
Tranche 3
2-year performance period
2-year vesting period
2-years
Loan funded
share plan
Three separate tranches:
• Cost To Income
• Market Growth
• Customer Advocacy
Vesting period with risk
assessment at end of 2-years
2 additional years
to pay off the loan
4 year performance period
Long term
incentive
Relative Total Shareholder Return
FY21
FY22
FY23
FY24
FY25
FY26
With the introduction of the new Executive Remuneration
Framework in FY2021, the reward mix was realigned. This
resulted in the value of the prior year’s Deferred Base Shares
component being delivered as part of the cash salary. The
Chief Executive Officer and Managing Director was granted
Deferred Base Shares in 2018 that vest on a staggered
timeline and will expire in 2023.
Therefore, the Board determined that this element of the
reward mix realignment did not apply to the Chief Executive
Officer and Managing Director at this time.
The reward mix realignment did not result in any material
changes to the overall total aggregate reward for our
Executives as illustrated in the following chart.
$000's
2,500
2,000
1,500
1,000
500
0
LTI - Performance
Rights
LTI - Loan Funded
Share Plan
STI
Deferred Base
Shares
Fixed Base
M Baker
FY2020
Reward Mix
FY2021
Reward
Realigned
Other
Executives
(Average)
FY2020
Reward Mix
FY2021
Reward
Realigned
Remuneration received by current Executives
The following table is a voluntary, non-statutory summary of
the remuneration paid or which vested to the executives for
the 2021 and 2020 financial years. Not all amounts have been
prepared in accordance with Australian Accounting Standards
and this information differs to the statutory remuneration
disclosures presented at Section 4 which has been prepared in
accordance with Australian Accounting Standards.
36 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
The disclosures include prior year equity grants that vested to
individual executives. The value for the vested grants has been
calculated by multiplying the number of equity instruments
by the closing share price at the end of the deferral or
performance period.
Name
Fixed Annual Remuneration1
Cash salary
Realigned
deferred base to
cash salary 2
Prior years’
deferred
base
vested 3
Cash STI 4
Prior years’
deferred STI
vested
Prior years’
LTI
vested 5
Total
remuneration
realised
M Baker
2021
$1,188,826
2020
$1,222,535
n/a
-
$583,810
$376,788
R Brosnahan 6
2021
$661,753
$100,000
$90,508
2020
$468,377
-
-
T Corolis
T Crouch
R Fennell
2021
$572,131
$100,000
$90,508
2020
$594,322
-
$65,025
2021
$506,642
$100,000
$90,508
n/a
2020
$538,304
-
$65,025
2021
$723,010
$165,000
$149,336
2020
$761,510
-
$107,295
A Gartmann
B Speirs
2021
$520,566
$100,000
$90,508
2020
$541,768
-
$52,021
2021
$532,202
$100,000
$90,508
2020
$515,371
-
$65,025
n/a
$0
n/a
$0
n/a
$0
$0
n/a
$0
n/a
$0
n/a
$0
-
-
$1,772,636
$32,421
$47,878
$1,679,622
-
-
-
-
-
-
-
-
-
$54,496
$28,727
$54,496
$852,261
$468,377
$817,135
$688,074
$751,646
$9,569
$612,898
$95,365
$1,132,711
$36,017
$47,878
$952,700
-
-
-
-
$51,086
$19,151
$51,086
$19,151
$762,160
$612,940
$773,796
$599,547
1.
2.
3.
4.
5.
6.
Fixed base includes cash salary, non-monetary benefits, superannuation, and movements in accrued annual and long service leave consistent with the statutory remuneration
table presented at Section 4.
With the exception of the Chief Executive Officer and Managing Director the realignment of the reward mix for Executives from FY2021 resulted in the notional contractual value
of the deferred base pay shares component being incorporated to the Fixed Base as cash.
The prior years deferred base amounts represent the grant made on 19 December 2018 for Ms Baker and 17 December 2019 for other executives of which completed the two-
year deferral period and vested. No new grants of deferred base pay shares will be made to Executives as this reward element has been removed.
From FY2021, Executives are not eligible to participate in a STI awards
The prior years’ LTI amounts represent the grant made on 17 December 2018 for all participants. These grants partially met their respective performance measures and
accordingly partially vested with the remainder of the grant forfeited. The LTI grants made in subsequent financial years will be tested in future periods and have therefore been
excluded from the table.
Mr Brosnahan commenced as KMP on 4 November 2019, therefore data presented for FY2020 is for a part year.
Section 2: Remuneration framework in detail
Fixed Base
Fixed base comprises cash salary, salary sacrifice and employer superannuation contributions.
Deferred Base Pay Shares
For Chief Executive Officer and Managing Director Only
Deferred base is represented by a grant of deferred shares that are held in trust for a deferral period, and forms part of
her total Fixed Base. Deferred shares are fully paid ordinary shares granted at no cost and are beneficially owned by the
recipient from grant date. The grants are subject to a service condition and risk adjustment at the discretion of the Board. If
the service condition is not met the deferred shares will not vest and are forfeited, unless the Board decides otherwise.
The Chief Executive Officer and Managing Director received a grant of 200,000 deferred base shares in FY2019 made
in four equal tranches of 50,000 shares and each tranche had a deferral period of 2-years, 3-years, 4-years, and 5-years
respectively. Tranche 1 vested in FY2020, Tranche 2 in FY2021 with Tranche 3 and 4 to be tested for vesting in FY2022 and
FY2023.
The deferred base pay shares are no longer part of the executive remuneration framework for executives.
The following tables describe the Long Term Incentive which is in two parts, the Loan Funded Share Plan and Performance Rights plan. The
Board believes that equity based long-term incentives are important to ensure an appropriate part of the executive’s reward is linked to
generating long-term returns for shareholders.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3 7
Long Term Incentive – Loan Funded Share Plan
Features
Approach
Instrument
Loan Funded Shares
Loan Funded Shares are ordinary shares (Shares) provided via an interest free, non-recourse loan.
Participants
Executives
Opportunity
Reward package value is 25% to 40% of Fixed Base.
In determining the reward package value, the previous remuneration framework’s Short Term Incentive
maximum value and half of the old Long Term Incentive value were realigned into this component.
The loan value was determined by multiplying the reward package value by a multiple which is the
inverse of the fair value of the instrument. The fair value uses the same methodology as that of an
option. The Board determined that a multiple of 3.9X was aligned with market practice and would
facilitate the appropriate levels of reward outcomes in line with the intended reward package value.
The loan value then becomes 100-150% of the Fixed Base Reward.
Number of shares granted is determined using the face value method. This is determined by dividing
the loan value by the arithmetic average of the daily volume weighted average price of fully paid
ordinary BEN shares sold on the ASX in the ordinary course of trading for the 5 trading days prior to
allocation.
Measure
How
Weighting
Cost to Income ratio
Substantive progress in the Bank's CTI Ratio,
consistent with the Bank's stated objective of
lowering its CTI to 50% over the medium term.
Performance
Hurdles
Market Growth
Grow its deposits and loans faster than system and
increase its market share.
Customer Advocacy
(relative NPS)
Bank’s Net Promoter Score over the performance
period (measured using a six-month rolling average)
must be 20 points greater than the average
performance of a peer group of Australian Banks.
50%
25%
25%
Performance targets for the Cost to Income ratio and Market Growth measures will be disclosed
following assessment in the FY2022 Remuneration Report.
Performance
Period
Duration to access
reward post grant
Vesting
Measured over 2 years + 2 further years of restriction period
4 years with 2 years to settle any outstanding loan balance
Cliff vesting
•
•
If the performance hurdle is met or exceeded, that proportion of the incentive will vest.
If the performance hurdle is not met, that proportion of the incentive will lapse. Shares and loan
balance will be forfeited.
How the Loan
works
Any dividends or other distributions paid on the Shares while the Shares are restricted, are applied (on
a notional after-tax basis) towards repaying the loan.
Any vested shares will be used to settle the loan balance owing.
Risk Assessment
& Risk Behaviour
Gateway
In accordance with the Bank's clawback policy, the Board has broad discretion to ensure that,
amongst other things, no unfair benefit is derived by any participant in the case of a material
misstatement of financial results or serious misconduct by a participant. Reputation and conduct
matters are also considered under the policy.
This includes discretion to reduce or forfeit unvested awards, reset or alter the performance conditions
applying to the applicable award or require the repayment of any vested awards.
Cessation of
Employment
Shares will be forfeited in the event of resignation, or the Bank terminates employment due to fraud,
dishonesty, breach of legal duties or serious misconduct.
Where a participant ceases employment due to death, disablement, bona fide redundancy or by
agreement with the Bank, shares will remain on-foot to be tested against the applicable performance
conditions at the same time as continuing participants and will have 1 year to settle the loan.
38 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Long Term Incentive – Performance Rights
Features
Approach
Instrument
Performance Rights
A performance right is a promise to an ordinary share subject to performance conditions.
Participants
Executives
Opportunity
15% of Fixed Base
In determining the reward package value, the remaining half of the old Long Term Incentive value the
previous remuneration framework was realigned into this component.
Number of performance rights granted is determined using the face value method. This is determined
by dividing the loan value by the arithmetic average of the daily volume weighted average price of
fully paid ordinary BEN shares sold on the ASX in the ordinary course of trading for the 5 trading days’
prior to 1 July of the financial year of issue.
Performance
Hurdles
Relative TSR
Total Shareholder Return is measured over the 4 year performance period against a peer group
consisting of the ASX100 Companies (excluding property trusts and resources companies)
Performance
Period
4 years
Duration to access
reward post grant
4 years
The vesting scale is as follows:
TSR performance against peer group
Percentage of performance rights that vest
At or below the 50th percentile
Vesting
At 50.1th percentile
0%
60%
Between the 50.1th and 75th percentiles
Straight-line vesting:
•
•
starting at 60%; and
reaching 100% at the 75th percentile.
At or above the 75th percentile
100%
Risk Assessment
& Risk Behaviour
Gateway
In accordance with the Bank's clawback policy, the Board has broad discretion to ensure that,
amongst other things, no unfair benefit is derived by any participant in the case of a material
misstatement of financial results or serious misconduct by a participant. Reputation and conduct
matters are also considered under the policy.
This includes discretion to reduce or forfeit unvested awards, reset or alter the performance conditions
applying to the applicable award or require the repayment of any vested awards.
Cessation of
Employment
Performance rights will be forfeited in the event of resignation, or the Bank terminates employment
due to fraud, dishonesty, breach of legal duties or serious misconduct.
Where a participant ceases employment due to death, disablement, bona fide redundancy or by
agreement with the Bank, performance shares will remain on-foot to be tested against the applicable
performance conditions at the same time as continuing participants.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 3 9
Section 3: Variable reward outcomes for FY2021
Deferred Base Pay
Performance Rights
As at 30 June 2021 the service condition for the deferred
base pay grants made to executive KMP on 17 December
2019 and the second tranche of deferred base pay shares
granted to the Chief Executive Officer and Managing Director
on 19 December 2018 was met. The Board considered their
vesting with regard to the financial soundness and risk profile
of the organisation, it was determined by the Board to vest the
deferred shares in full.
Senior Executive LTI grant was tested at 30 June 2021, the LTI
grant that was made to executives in FY2019. The LTI grant
made to executives in 2018 had a 3-year performance period
for the TSR and Customer Hurdle (NPS). The FY2018 Chief
Executive Officer and Managing Director LTI granted on 12
December 2017 to the previous Managing Director was also
tested. This LTI had a 4-year performance period for TSR and
the Customer Hurdle (NPS).
The number of deferred shares granted to each executive are
presented in the table headed ‘Executive equity instrument
grants’ at Section 4.
The results for the FY2019 LTI Senior Executive grant are
summarised below.
Grant
Hurdle
Weighting Grant Date
Test Date
Outcome
2019 LTI Senior
Executives
TSR
NPS
65%
35%
17.12.2018 30.06.2021
47th percentile
17.12.2018 30.06.2021
+26.7
Vested
2021
Lapsed
2021
0%
100%
100%
0%
Group-wide Value Created Dividend pool
Executives were not eligible to participate in any short-term
incentive in FY2021 as this reward component had been
removed from the executive reward framework. However, a
group-wide value created dividend remains as an element of
reward for salaried employees.
The Board determined that the criteria to establish a bonus
pool had been met as our target cash earnings target was
exceeded. The Board considered the following bonus pool
scorecard and performance outcomes for the financial year in
defining the quantum of the value created dividend pool.
Approximately 2,500 salaried employees were eligible to
participate in the group wide value created dividend in
FY2021. A pool of $10 million was approved for distribution
amongst this cohort.
The actual quantum of incentive allocated to participants
is linked to individual role and business unit performance
and is moderated on the personal achievement of the risk
and compliance gateway. Payments will be made in late
September 2021.
Outcomes
Measures
Performance
Seamless
Experience
Efficiency
Growth
Customer NPS
Employee Experience
Return on Tangible Equity
Cost to Income
Lending Asset Growth
Market Share (Portfolio)
Cash earnings per share
Financial Risk &
Performance
Common Equity Tier 1 Equity
Liquidity Coverage Ratio (LCR)
Risk Weight Assets / Total Assets
Risk Adjusted Return on Capital (RAROC)
Strategic projects
Consolidate momentum for the transformation strategy through implementing the three-
year road map and embedding the operating rhythm
Gateway
Measures
The level of risk associated with the Group’s performance is within the Group’s risk appetite
Risk and
Compliance
An effective risk culture is promoted and there is evidence of enhanced risk practice
across the organisation
✔
Performance
✔
At or above target
Partially met
Below target
✔ Met
40 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Section 4: Executive statutory remuneration
4.1 Senior Executive statutory remuneration details
The following table sets out the statutory executive remuneration disclosures which have been prepared in accordance with the
Corporations Act 2001 and the Australian Accounting Standards.
Executive
Short-term employee benefits
Cash
salary 1
STI 2
Non-
monetary 3
Super
annuation
benefits 4
Other
long-
term
benefits
5
Termin-
ation
Pay-
ments
Share-based payments 6
Perform-
ance
rights 7
Deferred
Shares 8
Loan
Funded
Shares 9
Total
Perfor-
mance
Related
14
M Baker10
2021
$1,174,871
n/a
$7,980
$22,529
($16,554)
2020
$1,214,846
$0
$14,962
$21,003
($28,276)
R Brosnahan11 2021
$717,825
n/a
$10,049
$21,694
$12,185
2020
(part
year)
$433,567
$0
$14,143
$13,732
$6,935
T Corolis
2021
$633,583
n/a
2020
$559,741
$0
-
-
$22,529
$16,019
$21,003
$13,579
T Crouch12
2021
$581,652
n/a
$30,741
$28,136
($33,887)
2020
$481,833
$0
$30,488
$21,003
$4,981
R Fennell
2021
$873,350
n/a
$9,727
$22,529
($17,596)
2020
$682,955
$0
$40,615
$21,003
$16,937
A Gartmann
2021
$588,361
n/a
2020
$512,721
$0
-
-
$22,529
$9,676
$21,003
$8,044
B Speirs
2021
$594,196
n/a
$6,525
$22,529
$8,953
2020
$475,752
$0
$6,550
$21,003
$12,067
Former Executives
S Thredgold13 2021
-
-
-
-
2020
(part
year)
$124,898
$0
$1,923
$11,074
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$155,747 $405,767 $176,611 $1,926,951
17%
$189,669 $759,667
-
$2,171,871
9%
$102,151 $51,199
$51,944
$967,047
16%
$34,949
$34,132
-
$537,458
7%
$55,761
$42,665
$50,282
$820,839
13%
$73,337
$90,483
-
$758,143
10%
$55,410
$42,665
$47,996
$752,713
14%
$58,795
$90,483
-
$687,583
9%
$94,186
$70,397
$89,864 $1,142,457
16%
$137,891 $175,786
-
$1,075,187
13%
$52,055
$42,665
$45,711
$760,997
13%
$66,563
$80,921
-
$689,252
10%
$52,055
$42,665
$45,711
$772,634
13%
$66,563
$90,483
-
-
-
-
-
$672,418
10%
-
-
$1,026,065
2%
$809,733
$21,536
$56,901
Totals
2021
$5,163,838 n/a
$65,022
$162,475 ($21,204)
-
$567,365 $698,023 $508,119 $7,143,638
2020
$4,486,313 $0 $108,681 $150,824 $34,267 $809,733 $649,303 $1,378,856
n/a
$7,617,977
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cash salary amounts include the net movement in the executive’s annual leave accrual for the year.
These amounts represent STI cash awards to Executives for the respective financial year. No STI was awarded in FY2021.
“Non-monetary” relates to sacrifice components of executive salary such as motor vehicle costs.
Company superannuation contributions form part of the executive’s fixed remuneration and are paid up to the statutory maximum contributions base.
The amounts disclosed relate to movements in long service leave accruals.
In accordance with the requirements of Australian 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 is calculated 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 executives may ultimately realise should the equity instruments vest. The fair value of performance rights as at the grant date has been calculated under AASB 2 Share-based
Payments applying a Black-Scholes-Merton valuation method incorporating a Monte Carlo simulation option pricing model to estimate the probability of achieving the Total Shareholder Return hurdle
and the number of performance rights that vest. The assumptions underpinning these valuations are set out in Section 4.4
The amounts included in the performance rights column represent the fair value of performance right grants to executives amortised over the applicable vesting period. The current year amount for
Marnie Baker represents the amortised fair value allocation for the performance right grants made during the 2019, 2020 and 2021 financial years. The comparative amount represents the final
amortised fair value allocation for the previous performance right grant made in the 2018, 2019 and 2020 financial years. The current year amounts for other executives represent the amortised fair
value allocation for the 2019, 2020 and 2021 performance right grants. The comparative amounts represent the amortised fair value allocation for the 2018, 2019 and 2020 performance right grants.
The amounts included in the deferred share column comprise the fair value of the deferred base pay grants amortised over a two-year deferral period. The deferred base pay amounts for the 2021
financial year comprise the amortised fair value of the deferred base pay grants made in the 2020 financial years. The comparative amounts represent the amortised fair value of the deferred base
pay grants made in the 2019 and 2020 financial years.
The amounts included in the loan funded shares comprise the fair value of the loan funded share grants amortised over a four-year deferral period. The loan funded share amounts for the 2021
financial year comprise the amortised fair value of the loan funded share made in the 2021 financial year.
10. Ms Baker elected to take a 10% reduction in fixed remuneration for the six-month period 1 November 2020 through to 30 April 2021 and also contributes $5,000 to our scholarship program.
11. Mr Brosnahan commenced as KMP on 4 November 2019.
12.
13. Ms Thredgold ceased being a KMP on 1 November 2019 and subsequently ceased employment with the Bank on 19 December 2019. The termination payment represents a redundancy payment
The superannuation figure for Mr Crouch includes the staff Income Protection, Death, Temporary and Permanent Disablement default fund insurance benefit.
under the terms of the Bank’s Redundancy policy.
The performance related percentage comprises of STI, the amortised fair value of performance right grants and the amortised fair value of loan funded share grants.
14.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 4 1
Loan Funded Shares 04.11.2020 377,777
706,443
Performance Rights 04.11.2020
36,376
79,663
R Brosnahan
Deferred Shares
17.12.2019
-
-
8,628
85,331
4.2 Executive equity instrument grants
Executive
Equity Instrument
Grant
Date
Granted Granted
M Baker 7
Deferred Shares
19.12.2018
Deferred Shares
08.04.2019
Deferred Shares
03.10.2019
Deferred Shares
03.04.2020
Units1
-
-
-
-
Deferred Shares
08.04.2021
3,493
2
$
-
-
-
-
-
Loan Funded Shares 04.11.2020 111,111
207,778
Performance Rights 04.11.2020
16,048
35,145
Performance Rights
- Transformation
04.11.2020
28,530
163,762
T Corolis
Deferred Shares
17.12.2019
Performance Rights 17.12.2018
-
-
-
-
Loan Funded Shares 04.11.2020 107,555
201,128
Performance Rights 04.11.2020
14,122
30,927
T Crouch
Deferred Shares
17.12.2019
Performance Rights 17.12.2018
-
-
-
-
Loan Funded Shares 04.11.2020 102,666
191,985
Performance Rights 04.11.2020
13,480
29,521
R Fennell
Deferred Shares
17.12.2019
Performance Rights 17.12.2018
-
-
-
-
Loan Funded Shares 04.11.2020 192,222
359,455
Performance Rights 04.11.2020
18,509
40,535
A Gartmann
Deferred Shares
17.12.2019
Performance Rights 17.12.2018
-
-
-
-
Loan Funded Shares 04.11.2020
97,777
182,843
Performance Rights 04.11.2020
12,838
28,115
B Speirs
Deferred Shares
17.12.2019
Performance Rights 17.12.2018
-
-
-
-
Loan Funded Shares 04.11.2020
97,777
182,843
Performance Rights 04.11.2020
12,838
28,115
Prior
years’
awards
vested 3
Prior years’
awards
vested 4, 7
Forfeited
/ Lapsed
2, 6
Forfeited
/ Lapsed
5, 6
Units
$
Units
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
518,000
1,362
1,194
1,933
1,165
-
-
-
-
-
-
-
-
-
-
-
85,331
-
-
-
8,628
5,195
-
-
8,628
5,195
-
-
44,677
9,647
53,734
-
-
85,331
-
-
-
-
-
-
44,677
9,647
53,734
-
-
-
-
-
-
-
-
14,236
140,794
9,091
78,183
16,883
94,038
-
-
8,628
4,870
-
-
8,628
4,870
-
-
-
-
85,331
-
-
-
-
-
-
41,882
9,044
50,375
-
-
85,331
-
-
-
-
-
-
41,882
9,044
50,375
-
-
-
-
-
-
1.
2.
3.
4.
5.
6.
The grants to executives in FY2021 constituted 100% of the grants available for the year and were made on the terms described at Section 2.
The value of the performance right grants and deferred share grants is the fair value (refer Section 4.4). The minimum total value of the grants, if the applicable performance and
service conditions are not met, is nil. The future value of the rights is dependent on the achievement of the performance hurdles and the share price at the time the performance
rights vest. As the actual value that may be derived by the executives is dependent upon the Bank’s share price at the time the rights vest, an estimate of the maximum possible
total value in future financial years is the fair value shown above.
The percentage of performance rights that vested in FY2021 was 35% for the FY2019 LTI Plan where the first sleeve vested at 100% when measured on NPS performance and
the remaining sleeve lapsed when measured on relative TSR performance. The percentage of base pay deferred share grants made in prior years that vested during FY2020 was
100%.
The value of vested deferred shares is measured using the fair values applicable to the grant of deferred shares that vested. The applicable fair values are presented at Section
4.4. As each deferred share represents one ordinary share in the Bank, the number of ordinary shares that will vest is the same as the number of deferred shares that were
granted.
The value of each instrument on the date it lapses or is forfeited is calculated using the fair value of the instrument. Performance rights and deferred shares lapse where the
applicable performance and service conditions are not satisfied.
The performance rights vest subject to performance, continued service and risk assessment over the applicable performance period. If performance rights do not vest at the end
of the performance period, they are forfeited and lapse.
42 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
7.
Ms Baker was granted 200,000 of deferred base pay shares in 2019, in four tranches of 50,000, each with a varying deferral period with the first tranche vesting in 2020. The
dividends received on these grants were reinvested into ordinary shares and allocated in tranches alongside each of the original unvested tranches. The dividend reinvested
deferred base pay shares allocated to the second tranche on 08.04.2019, 03.10,2019, 03.04.2020 and 08.04.2021 therefore also vest in 2021.
4.3 Movements in Senior Executive equity holdings
Executive
Equity Instrument 1
Number
at start of
year
Granted
during the
year
Vested or
released
Lapsed or
expired
Net
change
other
Number
at end of
year 1, 2
M Baker
Deferred shares
163,465
3,493
(55,654)
Loan Funded Shares
-
377,777
-
Ordinary shares
552,456
Preference shares
800
-
-
Performance rights
100,000
36,376
55,654
-
-
R Brosnahan
Deferred shares
8,628
-
(8,628)
Loan Funded Shares
Ordinary shares
-
-
111,111
-
-
8,628
Performance rights
31,061
44,578
-
T Corolis
Deferred shares
8,628
-
(8,628)
Loan Funded Shares
-
107,555
-
Ordinary shares
43,896
-
13,823
-
-
-
-
-
-
-
-
-
-
-
Performance rights
28,647
14,122
(5,195)
(9,647)
T Crouch
Deferred shares
8,628
-
(8,628)
Loan Funded Shares
-
102,666
-
Ordinary shares
19,588
-
13,823
-
-
-
Performance rights
18,730
13,480
(5,195)
(9,647)
R Fennell
Deferred shares
14,236
-
(14,236)
Loan Funded Shares
-
192,222
-
Ordinary shares
80,963
-
23,327
-
-
-
Performance rights
50,132
18,509
(9,091)
(16,883)
A Gartmann
Deferred shares
8,628
-
(8,628)
Loan Funded Shares
-
97,777
-
Ordinary shares
42,666
-
13,498
-
-
-
Performance rights
26,856
12,838
(4,870)
(9,044)
B Speirs
Deferred shares
8,628
-
(8,628)
Loan Funded Shares
-
97,777
-
Ordinary shares
12,004
-
13,498
-
-
-
Performance rights
26,856
12,838
(4,870)
(9,044)
1.
2.
None of the equity holdings are held nominally.
None of the deferred shares or performance rights held at year end had vested and were exercisable.
-
-
111,304
377,777
14,953
623,063
(700)
100
-
-
-
-
-
-
136,376
-
111,111
8,628
75,639
-
107,555
1,329
59,048
-
-
-
13
-
-
-
27,927
-
102,666
33,424
17,368
-
192,222
(1,815)
102,475
-
-
-
-
-
-
-
-
-
42,667
-
97,777
56,164
25,780
-
97,777
25,502
25,780
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 4 3
4.4 Equity plan valuation inputs
Performance rights
Terms & Conditions for each Grant
Equity Instrument
Grant date
Fair
value 1
Share
price $
Exer-
cise
price
Risk
free
interest
rate
Divi-
dend
yield
Ex-
pected
volatility
Ex-
pected
life
Perfor-
mance
period end
/ expiry
date 2
Performance Rights – Sleeve 1
17.12.2018 $8.60
$10.37 -
1.89% 6.73% 23.40% 3 years 30.06.2021
Performance Rights – Sleeve 2
17.12.2018 $5.57
$10.37 -
1.89% 6.73% 23.40% 3 years 30.06.2021
Performance Rights – Sleeve 1 (MD)
19.12.2018 $8.06
$10.40 -
1.99% 6.73% 23.40% 4 years 30.06.2022
Performance Rights – Sleeve 2 (MD)
19.12.2018 $5.36
$10.40 -
1.99% 6.73% 23.40% 4 years 30.06.2022
Performance Rights - Sleeve 1
17.12.2019 $7.61
$9.89
Performance Rights - Sleeve 2
17.12.2019 $7.61
$9.89
Performance Rights - Sleeve 3
17.12.2019 $2.46
$9.89
Performance Rights - Sleeve 4
17.12.2019 $2.92
$9.89
Performance Rights – Sleeve 1 (MD)
17.12.2019 $7.61
$9.89
Performance Rights – Sleeve 2 (MD)
17.12.2019 $2.92
$9.89
Performance Rights - Transformation 17.12.2019 $7.61
$9.89
Performance Rights
04.11.2020 $2.19
$6.83
Performance Rights - Transformation 04.11.2020 $5.74
$6.83
-
-
-
-
-
-
-
-
-
0.88% 7.08% 21.23% 4 years 30.06.2022
0.88% 7.08% 21.23% 4 years 30.06.2023
0.88% 7.08% 21.23% 4 years 30.06.2022
0.88% 7.08% 21.23% 4 years 30.06.2023
0.88% 7.08% 21.23% 4 years 30.06.2023
0.88% 7.08% 21.23% 4 years 30.06.2023
0.88% 7.08% 21.23% 4 years 30.06.2023
0.19% 4.54% 29.21% 4 years 30.06.2024
0.19% 4.54% 29.21% 4 years 30.06.2024
1.
2.
The fair value is calculated as at grant date in accordance with AASB 2 Share-based Payments using an independent valuation.
The Board will test the performance condition as soon as practical after year end. Any performance rights that do not vest will lapse at 5.00pm on the date the Board makes its
decision on what performance rights vest or lapse.
Performance rights
Terms & Conditions for each Grant
Equity Instrument
Grant date
Issue price /
Fair value 1
Share price at
grant date
Restriction
period end /
test date
Vest /
Expiry date
Deferred Shares Base Pay (MD)
19.12.2018
$10.36
$10.40
30.06.2021
30.06.2021
Deferred Shares Base Pay
17.12.2019
$9.89
$9.89
30.06.2021
30.06.2021
1.
The fair value of deferred share grants are calculated using the volume weighted average closing price of the Bank’s shares for the five-day period ending on the grant date.
Loan Funded Share Plan
Equity
Instrument
Grant date
Fair
value 1
Share
price $
Exercise
price
Risk free
interest
rate
Dividend
yield
Expected
volatility
Expected
life
Performance period end
/ expiry date 2
Terms & Conditions for each Grant
Loan Funded
Share Plan
04.11.2020 $1.87
$6.83
$6.75
0.26%
0.00%
27.92%
4 – 6
years
30.06.2022
(performance)
30.06.2024 (vesting)
30.06.2026 (expiry)
44 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
4.5 Details of unvested and untested grants
The following summary details the current LTI plans that remain on-foot, are untested and are not eligible for vesting. All plans are
subject to a risk and compliance gateway and the Clawback and Malus policy.
Grant
Date
Measures Weighting
Performance
Period
Vesting Schedule
Performance Rights
2019 MD LTI
19.12.2018
2020 LTI Senior
Executives
19.12.2019
2020 MD LTI
17.12.2019
NPS
TSR
NPS
TSR
NPS
TSR
NPS
TSR
35%
65%
17.5%
32.5%
17.5%
32.5%
35%
65%
2021 LTI Senior
Executives
04.11.2020
TSR
100%
2020 - Transformation
19.12.2019
Service
100%
2021 - Transformation
04.11.2020
Service
100%
Loan Funded Shares
CTI
50%
01.07.2018 –
30.06.2022
01.07.2019 –
30.06.2022 plus 1
year holding lock
01.07.2019 –
30.06.2023
01.07.2019 –
30.06.2023
01.07.2020 –
30.06.2024
04.11.2019 –
04.11.2023
01.07.2020 –
30.06.2024
2021 Loan Funded
Shares
04.11.2020
Market
Growth
25%
01.07.2020 –
30.06.2022 plus 2
year holding lock
NPS
25%
If target met 100%
If not met 0%
NPS: 20 points above industry
average over performance period
•
•
TSR: Compared to peer group
of ASX100 companies (excluding
property trust and resources) over
performance period
•
If less than or equal to 50th
percentile: 0%
If between 50.1th & 75th
percentile: straight line
vesting starting at 60% up
to 100%
If greater than 75th
percentile: 100%
•
•
100% subject to:
•
•
Individual performance; and
Risk and compliance
gateway
CTI: substantive progress to
medium term target of 50%
Market Growth: deposits and
lending above system; and market
growth
NPS: 20 points above industry
average over performance period
If target met or exceeded
•
100%
If target not met 0%
•
Deferred share and performance rights grants have been
previously made in accordance with the rules of the Bank’s
Employee Salary Sacrifice, Deferred Share and Performance
Right Plan.
In FY2020, the Board approved a new set of rules, the BEN
Omnibus Equity Plan. The terms of the two set of plan rules
are similar, with the key difference being the BEN Omnibus
Equity Plan provides for grants to be settled in equity or cash
at the Board’s discretion. This was included to provide the
Board with greater flexibility in settling equity incentive grants.
Future grants will be made under the new set of BEN Omnibus
Equity Plan rules. For the Loan Funded Share Plan, the Board
approved a new set of rules, namely the BEN Loan Funded
Shares Plan rules.
Deferred shares and Loan Funded Shares are beneficially
owned by the executive from grant date and the executive is
entitled to vote, receive notices issued to ordinary shareholders
and receive dividends during the deferral period. The recipients
are not entitled to deal in the deferred shares until they vest,
and the Board may treat deferred shares as forfeited before
vesting.
Performance rights do not carry any dividend or other
shareholder rights such as voting. The executives are prohibited
from dealing in the performance rights until they have been
advised that the performance rights have vested.
If an executive ends their employment or their employment
ends because of an act which constitutes serious misconduct,
the deferred shares or performance rights will be forfeited on
the executive’s last day of employment unless, in the case of
resignation, exceptional circumstances apply, and the Board
decides to vest some or all the shares or rights.
If an executive’s employment ends because of death, disability,
redundancy, or any other reason approved by the Board, the
deferred shares or performance rights will continue to be
held as if the executive’s employment has not ended, and the
service condition will be treated as waived, unless the Board
decides otherwise. If the Board does decide otherwise, it may
determine that some or all of the shares or rights are forfeited,
which would occur on the last day of employment.
The Board has discretion under the Plan rules to vest all or a
specified number of deferred shares or performance rights
if there is a takeover, compromise, scheme of arrangement
or merger. Matters the Board may take into account include
the Group’s pro-rata performance against the performance
conditions and the individual’s performance.
Under the rules of the Plan the Board has discretion to satisfy
deferred share grants and vested performance right grants by
either issuing new shares or acquiring shares on-market. The
shares are typically acquired on-market.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 4 5
4.6 Executive employment arrangements
The remuneration and other terms of employment for executives are contained in formal employment contracts. The material terms of
the executive contracts at the date of this report are set out below.
Issue
Description
Applies to
What is the duration of the
contracts?
On-going until notice is given by either party.
All executives
What notice must be provided by
an Executive to end the contract
without cause? 2
Between 6 and 12 months’ notice. No notice
period required if material change in duties or
responsibilities.
All executives
What notice must be provided by
the Bank to end the contract without
cause? 1
6 months’ notice or payment in lieu.2
M Baker, T Corolis,
T Crouch, R Brosnahan
12 months’ notice or payment in lieu.
All other executives
What payments must be made by
the Bank for ending the contract
without cause? 1
Payment of gross salary in lieu of period of notice
(including payment of accrued / unused leave
entitlements calculated to end of relevant notice
period).
What are notice and payment
requirements if the Bank ends the
contract for cause?
Termination for cause does not require a notice
period. Payment of pro-rata gross salary
and benefits (including payment of accrued /
unused leave entitlements) is required to date of
termination.
All executives
All executives
Are there any post-employment
restraints?
12-month non-competition and non-solicitation
(employees, customers and suppliers) restriction.
Chief Executive Officer and
Managing Director
12-month non-solicitation (employees, customers
and suppliers) restriction.
Other executives
1.
2.
In certain circumstances, such as a material diminution of responsibility, the Bank may be deemed to have ended the employment of an executive and will be liable to pay a
termination benefit as outlined at the row titled “What payments must be made by the Bank for ending the contract without cause”.
A review of the executive employment contract was completed in 2019 having regard to market practice. Changes to the contract included reducing the relevant notice period
from 12 months to 6 months. The 12-month notice period for existing KMP’s has been grandfathered.
46 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A review of the Non-executive Director fees was completed;
however, the Committee has not recommended to change
fees for the last 12 months. The Committee will consider a fee
re-structure including amending the base fee for Non-executive
Directors and the introduction of Committee fees in line with
market practice. This will occur in the new calendar year to
coincide with the annual salary review timeframe for salaried
staff.
5.2 Non-executive Director MSP
From FY2021 the Board has introduced a minimum
shareholding requirement of 1x base fees for all Non-executive
Directors. Directors will have 5-years from the introduction of
the policy to meet the shareholding requirements. Once the
minimum shareholding level has been assessed as met for the
first time, the Executive or NED will be deemed to have met the
policy requirements. The policy was introduced on 25 August
2020.
5.3 Rights to Shares plan
A fee sacrifice Rights to Shares plan was introduced in
FY2021 for Non-Executive Directors, to be offered yearly, on
an opt-in basis under the terms of the BEN Omnibus Equity
Plan. Participants can nominate to sacrifice a minimum of
$10,000 of fees up to a maximum of 100% to be issued as
Rights to Shares. The Rights to Shares are allocated after the
announcement of year end results, Appendix 4E. The number
of Rights to Shares is allocated on a face value methodology,
with the nominated fee sacrificed amount divided by the 5-day
volume weighted average closing price from the date of the
Appendix 4E announcement for that plan year.
The Rights to Shares are allocated in two tranches, with
the first tranche vesting after that plan year’s Appendix 4D
announcement and the second tranche vesting post the
Appendix 4E announcement for the following financial year.
Vested shares must be held for the earlier of 15 years or the
non-executive director’s retirement from the Board.
Section 5: Non-executive Director remuneration
5.1 Non-executive Director fees
The remuneration of Non-executive Directors is based on the
following principles and arrangements. There is no direct link
between Non-executive Director fees and the annual results of
the Group. Non-executive Directors do not receive bonuses or
incentive payments, nor receive equity-based pay.
Shareholders approved an aggregate fee pool for Non-
executive Directors of $2,500,000 at the 2011 Annual
General Meeting. This fee pool covers payments (including
superannuation) for the main Board and payments to the
Bank’s Non-executive Directors appointed to subsidiary boards
and the Community Bank National Council.
The Governance & HR Committee (the “Committee”)
recommends to the Board the remuneration arrangements for
Non-executive Directors. The base fee is reviewed annually by
the Committee and the following considerations are taken into
account in setting the base fee:
a. The scope of responsibilities of Non-executive Directors
and time commitments. This includes consideration
of significant changes to the Group’s operations and
industry developments which impact workloads and
responsibilities at the Board and committee level.
Fees paid by peer companies and companies of similar
market capitalisation and complexity, including survey
data and peer analysis to understand the level of Director
fees paid in the market, particularly in the banking and
finance sector.
b.
Non-executive Directors receive a fixed annual fee inclusive
of superannuation contributions at 9.5 percent. In relation
to the superannuation contributions, Non-executive
Directors can elect to receive amounts above the maximum
contributions limit as cash. The Chair receives a higher base
fee in recognition of the additional time commitment and
responsibilities.
There was no change to the base fee for Non-executive
Directors for FY2021. The base fee in effect for FY2021 was:
a. $201,780 for Directors (inclusive of company
b.
superannuation contributions); and
$479,230 (previously $504,450) for the Chair (inclusive of
company superannuation contributions).
No additional fees are paid for serving on Board Committees.
Additional fees were paid to Non-executive Directors
appointed to the Community Bank National Council.
The Directors contribute $5,000 each to the Bank’s
scholarship program. The program was established to assist
disadvantaged students from regional areas meet tertiary
education accommodation and direct study costs. The
contributions are deducted from base fee payments.
From 1 July 2020 the Chair elected to an ongoing reduction
in her fee of 5% to $479,230, inclusive of superannuation. In
addition, the Non-executive Directors nominated to reduce
base fees by 10% for the period 1 November 2020 though
to 30 April 2021 inclusive, in recognition of the economic
environment post the onset of Covid-19 in 2020.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 4 7
5.4 Non-executive Director statutory remuneration
Non-executive Director
J Hey (Chair)
V Carter
D Foster
J Harris
J Hazel
R Hubbard
D Matthews 4
T Robinson
Short-term benefits
Post-employment
benefits
Fees 1
Non-monetary
benefits 2
Superannuation
contributions 3
Total
2021
2020
2021
2020
2021
$389,718
$386,413
$175,820
$184,274
$175,820
2020 (part year)
$151,963
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
$145,823
$184,274
$175,820
$184,274
$130,543
$193,027
$184,333
$192,755
$175,870
$186,476
$45,748
$21,694
$457,160
-
-
-
-
-
$29,997
-
-
-
$49,999
-
$5,696
$5,674
-
-
$19,911
$16,838
$17,506
$16,838
$14,436
$16,838
$17,506
$16,838
$17,506
$12,115
$406,324
$192,658
$201,780
$192,658
$166,399
$192,658
$201,780
$192,658
$201,780
$192,657
$8,753
$201,780
$18,198
$18,851
$16,842
$17,715
$208,227
$217,280
$192,712
$204,191
Former Non-executive Directors
R Johanson
(Chair – retired)
Totals
2021
-
-
-
-
2020 (part year)
$157,456
$1,575
$15,108
$174,139
2021
2020
$1,553,747
$131,440
$136,201
$1,821,388
$1,820,912
$7,249
$147,292
$1,975,453
Footnotes to table 5.4 Non-executive Director statutory remuneration.
1.
2.
3.
4.
Fee amounts include the $5,000 Director contribution to the Board scholarship program.
Includes fee sacrifice component of the base Director fee paid as superannuation or fee sacrificed as part of the FY2021 NED Fee Rights to Shares plan.
Represents company superannuation contributions. Mr Hubbard elected for a superannuation guarantee contribution exemption for the period of 1 April to 30 June 2020.
The fees paid to Mr Matthews include $15,500 inclusive of company superannuation as a member of the Community Bank National Council.
48 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
5.5 Shares and other securities held by Non-executive Directors
Non-Executive
Director
Equity Instrument
Number
at start of
year
Granted
during the
year 1
Vested or
released 2
Lapsed or
expired
Net
change
other
Number
at end of
year
J Hey
Ordinary shares
34,606
Preference Shares
Rights to Shares
250
-
-
-
3,525
-
7,049
(3,525)
V Carter
Ordinary shares
13,225
Preference Shares
Rights to Shares
-
-
D Foster
Ordinary shares
2,733
Preference Shares
Rights to Shares
-
-
J Harris
Ordinary shares
8,000
Preference Shares
Rights to Shares
-
-
J Hazel
Ordinary shares
37,992
Preference Shares
Rights to Shares
-
-
R Hubbard
Ordinary shares
26,498
Preference Shares
Rights to Shares
-
-
D Matthews
Ordinary shares
37,297
Preference Shares
Rights to Shares
-
-
T Robinson
Ordinary shares
43,140
Preference Shares
Rights to Shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,311
-
4,622
(2,311)
-
-
-
-
-
-
-
-
3,852
-
7,704
(3,852)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,713
46,844
-
-
250
3,524
4,633
17,858
-
-
-
-
4,793
7,526
-
-
-
-
-
893
-
-
-
-
10,311
-
2,311
38,885
-
-
763
31,113
-
-
-
3,852
1,074
38,371
-
-
-
-
-
-
-
43,140
-
-
1.
2.
J Hey, J Harris and R Hubbard elected to participate in the FY2021 NED Fee Rights to Shares Plan. Rights to Shares were allocated on 24 August 2020 using a volume weighted
average closing price of $6.49 in two tranches.
The FY2021 Rights to Shares first tranche vested on 16 February 2021 coinciding with the Bank’s half yearly results Appendix 4D announcement.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 4 9
Section 6: Loans and other transactions
Details on the aggregate loans provided to KMP and their related parties are as follows. The loans occur within a normal
employee, customer or supplier relationship on terms and conditions no more favourable than those that it is reasonable to
expect the Bank would have adopted if dealing at arms-length with an unrelated person.
Balance at
start of year
Interest
charged 1
Interest not
charged
Write-off
Balance at
end of year Number at
year end
$’000
$’000
$’000
$’000
Non-executive Directors
2021
Executives
Total Directors and
Executives
2021
2021
5,340
4,222
9,562
172
97
269
-
-
-
-
-
-
$’000
6,451
4,879
8
7
11,330
15
Details of KMP (including their related parties) with an aggregate of loans above $100,000 in the reporting period are as follows:
2021
Balance at
start of year
Interest
charged 1
Interest not
charged
Write-off
Balance at
end of year
Highest owing
in period 2
$’000
$’000
$’000
$’000
$’000
$’000
Non-executive Directors
D Matthews
T Robinson
Executives
M Baker
T Crouch
R Fennell
A Gartmann
4,031
1,303
1,321
5
1,537
1,359
119
54
27
4
36
30
-
-
-
-
-
-
-
-
-
-
-
-
3,945
2,503
754
524
2,328
1,274
4,031
0
0
538
2,458
1,359
1.
2.
Interest charged may include the impact of interest off-set facility
Represents aggregate highest indebtedness of the KMP during the financial year. All other items in this table relate to the KMP and their related parties.
This Directors’ Report is signed in accordance with a resolution of the Board of Directors.
Jacqueline Hey
Chair
2 September 2021
Marnie Baker
Chief Executive Officer and Managing Director
50 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Financial highlights
The following table provides a summary of the last five
years' key metrics. Note some of the key indicators in the
table below are non-IFRS measures and are unaudited.
Financial performance
Net interest income
Other revenue
Operating expenses
Credit expenses
Income tax expense
Net profit attributable to owners of the parent
Add back: total specific items attributable to the
Group 2
Cash earnings after income tax 3
Financial position
Total assets
Net loans and other receivables
Total equity
Deposits and notes payable
Risk weighted assets
Additional tier 1 capital ratio
Common equity tier 1 capital ratio
Tier 2 capital ratio
Share information (per ordinary share)
Net tangible assets
Earnings (statutory basis)
Earnings (cash basis) 3
Interim dividend - fully franked
Final dividend - fully franked
Total fully franked dividend
Shareholder ratios
Return on average tangible equity (cash basis) 3
Return on average assets (cash basis) 3
Return on average ordinary equity (cash basis) 3
Return on average ordinary equity (statutory basis)
Key trading indicators
Number of staff (excluding Community Banks)
Assets per staff member
Asset quality
Impaired loans
Individually assessed provisions
Net impaired loans
Net impaired loans % of gross loans
Individually assessed provision for impairment
Individually assessed provision % of gross loans
Collectively assessed provision
General reserve for credit losses (GRCL)
Collectively assessed provision & GRCL % of
risk-weighted assets
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
(%)
(%)
(%)
($)
(¢)
(¢)
(¢)
(¢)
(¢)
(%)
(%)
(%)
(%)
(FTE)
($m)
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
June 2021 June 2020 June 20191 June 2018 June 2017
Group
1,422.5
1,333.8
1,289.6
1,305.2
1,213.6
382.9
300.6
277.9
338.3
395.9
(1,033.7)
(1,179.8)
(18.0)
(229.7)
(168.5)
(93.3)
(965.2)
(50.3)
(175.2)
(938.4)
(70.6)
(200.0)
(909.4)
(71.8)
(198.7)
524.0
192.8
376.8
434.5
429.6
(66.8)
108.9
38.9
10.6
(11.3)
457.2
301.7
415.7
445.1
418.3
86,577.2
76,008.9
72,435.3
71,439.8
71,415.5
71,920.6
64,980.4
61,822.2
61,601.8
60,776.6
6,353.5
5,798.2
5,631.6
5,620.3
5,425.6
77,953.3
67,686.1
64,061.3
63,074.3
63,252.5
40,469.3
38,215.2
37,483.1
38,256.4
38,062.3
2.04
9.57
2.20
8.81
98.1
85.6
23.5
26.5
50.0
10.17
0.60
7.67
8.79
4,483
19.3
208.8
(93.0)
115.8
0.16
94.3
0.13
246.7
104.7
2.34
9.25
2.02
7.98
38.1
59.7
31.0
4.5
35.5
7.42
0.42
5.36
3.43
4,776
15.9
240.5
(77.5)
163.0
0.25
78.4
0.12
263.2
86.6
2.39
8.92
1.83
8.03
77.1
85.0
35.0
35.0
70.0
2.34
8.62
1.89
8.16
89.9
92.1
35.0
35.0
70.0
2.22
8.27
1.97
7.85
90.9
88.5
34.0
34.0
68.0
10.73
11.52
11.61
0.61
7.55
6.84
0.65
8.23
8.03
4,540
16.0
4,426
16.1
310.9
(127.6)
183.3
0.29
128.5
0.21
157.0
77.3
335.8
(118.3)
217.5
0.35
119.3
0.20
48.2
0.61
8.10
8.32
4,413
16.2
282.6
(88.5)
194.1
0.32
89.5
0.16
52.7
0.87
0.92
0.63
0.49
0.51
140.3
140.3
1 The Group applied AASB 9 Financial Instruments from 1 July 2018. Further information can be found in the Group's 2019 Annual Financial Report.
2 Specific items are those items that are deemed to be outside of the Group's core activities and hence these items are not considered to be
representative of the Group's ongoing financial performance.
3 Cash earnings is an unaudited, non-IFRS financial measure. It is considered by management to be a key indicator of the underlying performance of the
core business activities of the Group. The basis for determining cash earnings is net profit after tax, adjusted for specific items, amortisation on acquired
intangibles and Homesafe net realised income. All adjustments are net of tax.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 1
Financial Statements
Primary Statements
Income statement
Funding and Capital Management
20 Share capital
Statement of comprehensive income
21 Retained earnings and reserves
Balance sheet
Statement of changes in equity
Cash flow statement
Basis of Preparation
1 Corporate information
Other Assets and Liabilities
22 Investment property
23 Goodwill and other intangible assets
24 Other assets
25 Other payables
2 Summary of significant accounting policies
26 Provisions
Results for the Year
3 Profit
4
Income tax expense
5 Segment results
Other Disclosure Matters
27 Cash flow statement reconciliation
28 Subsidiaries and other controlled entities
29 Related party disclosures
6 Earnings per ordinary share
30 Involvement with unconsolidated entities
7 Dividends
Financial Instruments
31 Fiduciary activities
32 Share based payment plans
33 Commitments and contingencies
8 Cash and cash equivalents
34 Remuneration of Auditor
9 Loans and other receivables
35 Leases
10 Impairment of loans and advances
36 Events after balance sheet date
11 Financial assets at fair value through profit or loss
Directors’ declaration
Independent Auditor's Report
Additional information
12 Financial assets at amortised cost
13 Financial assets at fair value
through other comprehensive income
14 Deposits and notes payable
15 Loan capital
16 Securitisation and transferred assets
17 Derivative financial instruments
18 Financial instruments
19 Risk management
52 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 2
Primary Statements
Income statement
For the year ended 30 June 2021
Net interest income
Interest income
Interest expense
Total net interest income
Other revenue
Fees
Commissions and management fees
Other income
Total other revenue
Total income
Credit expenses
Credit expenses
Bad and doubtful debts recovered
Total credit expenses
Operating expenses
Staff and related costs
Occupancy costs
Amortisation and depreciation costs
Fees and commissions
Other operating expenses
Total other expenses
Profit before income tax expense
Income tax expense
Net profit attributable to owners of the parent
Earnings per share (cents)
Basic
Diluted
Group
Bank
June 2021
June 2020
June 2021
June 2020
Note
$m
$m
$m
$m
1,867.3
(444.8)
2,274.3
(940.5)
1,846.0
(400.1)
2,212.5
(866.5)
1,422.5
1,333.8
1,445.9
1,346.0
158.7
53.5
170.7
382.9
155.5
56.6
88.5
300.6
144.2
16.1
56.2
216.5
144.5
15.8
169.0
329.3
1,805.4
1,634.4
1,662.4
1,675.3
(20.7)
2.7
(18.0)
(589.8)
(35.9)
(92.0)
(20.2)
(295.8)
(173.3)
4.8
(168.5)
(567.1)
(36.3)
(117.7)
(20.3)
(438.4)
(16.9)
2.2
(14.7)
(573.8)
(35.6)
(90.9)
(8.6)
(319.4)
(170.9)
3.1
(167.8)
(547.8)
(36.0)
(115.7)
(7.2)
(455.8)
(1,033.7)
(1,179.8)
(1,028.3)
(1,162.5)
753.7
(229.7)
524.0
286.1
(93.3)
192.8
619.4
(191.7)
427.7
345.0
(82.2)
262.8
98.1
82.6
38.1
35.2
3
3
3
3
4
6
6
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 3
Statement of comprehensive income
For the year ended 30 June 2021
Profit for the year
Group
Bank
June 2021
June 2020
June 2021
June 2020
Note
$m
524.0
$m
192.8
$m
427.7
$m
262.8
Items which may be reclassified subsequently to profit or loss:
Revaluation gain/(loss) on debt securities at fair value
through OCI with recycling
Transfer from asset revaluation reserve to income
Net gain/(loss) on cash flow hedges taken to equity
Tax effect on items taken directly to or transferred from
equity
21
21
21
21
(0.5)
-
1.4
0.1
304.0
(45.6)
-
-
32.5
(20.3)
32.5
(20.3)
(9.6)
5.6
(101.0)
19.8
Total items that may be reclassified to profit or loss
22.4
(13.2)
235.5
(46.1)
Items which will not be reclassified subsequently to profit or loss:
Revaluation loss on land and buildings
Revaluation gain/(loss) on equity investments at fair value
through OCI
Actuarial loss on superannuation defined benefits plan
Tax effect on items taken directly to or transferred from
equity
21
21
21
21
Total items that will not be reclassified to profit or loss
-
13.5
(0.9)
(3.9)
8.7
(0.7)
(0.3)
(1.3)
0.9
(1.4)
-
12.7
(0.9)
(3.7)
8.1
-
-
(1.3)
0.4
(0.9)
Total comprehensive income for the year
555.1
178.2
671.3
215.8
Total comprehensive income for the year attributable to:
Owners of the Company
555.1
178.2
671.3
215.8
54 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Balance sheet
As at 30 June 2021
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other comprehensive
income (FVOCI)
Income tax receivable
Derivatives
Net loans and other receivables
Investments accounted for using the equity method
Shares in controlled entities
Property, plant and equipment
Deferred tax assets
Investment property
Goodwill and other intangible assets
Other assets
Total Assets
Liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Amounts payable to controlled entities
Loans payable to securitisation trusts
Income tax payable
Provisions
Other payables
Loan capital
Total Liabilities
Net Assets
Equity
Share capital
Reserves
Retained earnings
Total Equity
Group
Bank
June 2021
June 2020
June 2021
June 2020
Note
$m
$m
$m
$m
8
8
11
12
13
4
17
9
4
22
23
24
8
14
14
17
16
4
26
25
15
20
21
21
7,086.3
173.4
1,678.7
351.5
1,189.6
137.0
5,411.1
325.3
6,631.6
173.4
1,678.7
135.5
826.0
137.0
5,411.1
135.0
2,186.1
814.8
15,060.7
13,220.6
-
59.1
17.6
106.4
-
59.1
17.6
106.4
71,920.6
64,980.4
71,304.1
64,476.8
9.7
-
205.9
42.2
901.7
1,549.4
412.6
10.2
-
252.3
88.3
779.8
1,564.6
331.5
9.7
103.7
205.2
81.1
-
1,482.3
1,452.3
10.2
134.5
251.4
183.1
-
1,490.7
1,399.5
86,577.2
76,008.9
98,377.4
87,799.9
175.4
145.1
175.4
145.1
74,355.6
64,182.6
74,367.8
64,180.0
3,597.7
45.3
-
-
44.2
120.5
501.8
3,503.5
100.2
-
-
-
114.4
603.4
-
45.3
394.3
-
100.2
561.7
15,303.7
15,158.0
44.2
120.4
481.4
-
114.4
579.8
1,383.2
1,561.5
1,383.2
1,561.5
80,223.7
70,210.7
92,315.7
82,400.7
6,353.5
5,798.2
6,061.7
5,399.2
5,049.5
138.0
1,166.0
4,905.0
5,049.5
4,905.0
87.3
805.9
329.8
682.4
66.6
427.6
6,353.5
5,798.2
6,061.7
5,399.2
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 5
Statement of changes in equity
For the year ended 30 June 2021
Opening balance at 1 July 2020
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Shares issued
Purchase of Treasury shares
Share issue expenses
Movement in Executive Share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in general reserve for credit losses (GRCL)
Share based payment
Equity dividends
Group
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued
ordinary
capital
$m
4,909.3
Other
issued
capital 1
$m
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
(4.3)
805.9
87.3
5,798.2
-
-
-
155.4
(11.8)
-
0.2
-
-
-
-
-
-
-
-
-
-
-
0.7
-
-
-
524.0
(0.8)
523.2
-
-
-
-
-
(18.1)
1.3
(146.3)
-
31.9
31.9
-
-
-
-
-
18.1
0.7
-
524.0
31.1
555.1
155.4
(11.8)
-
0.2
0.7
-
2.0
(146.3)
Closing balance at 30 June 2021
5,053.1
(3.6)
1,166.0
138.0
6,353.5
For the year ended 30 June 2020
Attributable to owners of Bendigo and Adelaide Bank Limited
Group
Opening balance at 1 July 2019
Impact of adoption of new accounting standards 3
Rural Bank consolidation 4
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Shares issued
Share issue expenses
Movement in Executive Share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in general reserve for credit losses (GRCL)
Movement in operational risk reserve
Share based payment
Transfer from asset revaluation reserve
Equity dividends
Closing balance at 30 June 2020
Issued
ordinary
capital
$m
4,575.9
Other
issued
capital 1
$m
(5.4)
-
-
-
-
-
337.7
(3.0)
(1.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.1
-
-
-
-
-
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
987.3
(24.7)
(20.4)
192.8
(0.9)
191.9
-
-
-
-
(9.3)
(0.4)
1.0
0.8
(320.3)
73.8
5,631.6
-
(24.7)
20.4
-
-
(13.7)
(13.7)
-
-
-
-
9.3
0.4
(2.1)
(0.8)
-
192.8
(14.6)
178.2
337.7
(3.0)
(1.3)
1.1
-
-
(1.1)
-
(320.3)
4,909.3
(4.3)
805.9
87.3
5,798.2
1 Refer to Note 20 for further details.
2 Refer to Note 21 for further details.
3 The Group applied AASB 16 Leases from 1 July 2019.
4 Relates to Rural Bank consolidation adjustments recorded in FY20 following the transfer of business that occurred between Rural Bank Limited and Bendigo and Adelaide Bank
Limited when Rural Bank Limited handed back its ADI licence on 31 May 2019.
56 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Statement of changes in equity (continued)
For the year ended 30 June 2021
Attributable to owners of Bendigo and Adelaide Bank Limited
Bank
Opening balance at 1 July 2020
De-registered subsidiary companies
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Shares issued
Purchase of Treasury shares
Movement in Executive Share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in general reserve for credit losses (GRCL)
Share based payment
Equity dividends
Issued
ordinary
capital
$m
4,909.3
Other
issued
capital 1
$m
(4.3)
-
-
-
-
155.4
(11.8)
0.2
-
-
-
-
-
-
-
-
-
-
-
0.7
-
-
-
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
427.6
(9.0)
427.7
(0.8)
426.9
-
-
-
-
(18.1)
1.3
(146.3)
66.6
5,399.2
-
(9.0)
-
244.4
244.4
-
-
-
-
18.1
0.7
-
427.7
243.6
671.3
155.4
(11.8)
0.2
0.7
-
2.0
(146.3)
Closing balance at 30 June 2021
5,053.1
(3.6)
682.4
329.8
6,061.7
For the year ended 30 June 2020
Attributable to owners of Bendigo and Adelaide Bank Limited
Bank
Opening balance at 1 July 2019
Impact of adoption of new accounting standards 3
Rural Bank consolidation 4
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Shares issued
Share issue expenses
Movement in Executive Share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in general reserve for credit losses (GRCL)
Share based payment
Equity dividends
Issued
ordinary
capital
$m
4,575.9
Other
issued
capital 1
$m
(5.4)
-
-
-
-
-
337.7
(3.0)
(1.3)
-
-
-
-
-
-
-
-
-
-
-
-
1.1
-
-
-
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
562.9
(24.7)
(43.9)
262.8
(0.9)
261.9
-
-
-
-
(9.3)
1.0
(320.3)
105.5
5,238.9
-
-
(24.7)
(43.9)
-
(46.1)
(46.1)
-
-
-
-
9.3
(2.1)
-
262.8
(47.0)
215.8
337.7
(3.0)
(1.3)
1.1
-
(1.1)
(320.3)
Closing balance at 30 June 2020
4,909.3
(4.3)
427.6
66.6
5,399.2
1 Refer to Note 20 for further details.
2 Refer to Note 21 for further details.
3 The Group applied AASB 16 Leases from 1 July 2019.
4 Relates to Rural Bank consolidation adjustments recorded in FY20 following the transfer of business that occurred between Rural Bank Limited and
Bendigo and Adelaide Bank Limited when Rural Bank Limited handed back its ADI licence on 31 May 2019.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 7
Cash flow statement
For the year ended 30 June 2021
Group
Bank
June 2021
June 2020
June 2021
June 2020
Note
$m
$m
$m
$m
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
Cash flows from operating activities before changes in
operating assets and liabilities
(Increase)/decrease in operating assets
1,927.8
(503.7)
250.4
(1,043.1)
0.5
2,323.5
(1,005.9)
257.0
(956.7)
1.6
(134.0)
(183.0)
1,819.1
(462.5)
206.0
(786.9)
25.9
(134.0)
2,218.9
(928.4)
212.3
(1,032.2)
1.3
(175.7)
497.9
436.5
667.6
296.2
Net (increase)/decrease in balance of loans and other receivables
(6,960.9)
(3,319.9)
(6,984.6)
2,991.1
Net decrease/(increase) in balance of investment securities
2,330.4
(384.0)
2,191.2
(6,671.0)
Increase/(decrease) in operating liabilities
Net increase in balance of deposits
10,173.0
3,585.7
10,187.8
3,578.5
Net increase/(decrease) in balance of notes payable
94.2
39.1
-
Net cash flows from operating activities
27
6,134.6
357.4
6,062.0
(14.9)
(32.8)
(23.1)
171.7
(26.8)
0.5
-
-
(2.0)
(4.5)
294.8
-
(4.3)
-
-
-
(10.5)
(277.4)
(54.9)
1.1
(51.2)
87.7
730.2
817.9
Cash flows related to investing activities
Cash paid for purchases of property, plant and equipment
Cash proceeds from sale of property, plant and equipment
Cash paid for purchases of investment property
Cash proceeds from sale of investment property
Cash paid for purchases of intangible assets
Cash paid for purchases of equity investments
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Repayment of preference shares
Payment of share issue costs
Proceeds from issuance of capital notes
Payment of loan capital issue costs
Proceeds from issuance of subordinated debt
Repayment of subordinated debt
Equity dividends paid
Repayment of lease liabilities
Repayment of ESOP shares
(21.0)
7.5
(31.6)
48.7
-
-
3.6
102.8
(574.3)
(0.2)
502.4
(7.4)
146.9
(250.0)
(105.3)
(51.0)
0.7
(29.9)
4.2
(59.1)
50.0
(7.4)
(4.5)
(46.7)
294.8
-
(4.3)
-
-
-
(10.5)
(277.4)
(54.9)
1.1
(21.0)
6.1
-
-
-
-
102.8
(574.3)
(0.2)
502.4
(7.4)
146.9
(250.0)
(105.3)
(51.0)
0.7
Net cash flows used in financing activities
(235.4)
(51.2)
(235.4)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
5,902.8
1,181.5
259.5
922.0
5,811.7
817.9
Cash and cash equivalents at the end of period
8
7,084.3
1,181.5
6,629.6
58 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Basis of preparation
This section describes the Group's significant accounting policies that relate to the financial statements and
notes of the accounts. If an accounting policy relates to a particular note, the applicable policy is contained
within the relevant note.
This section also details new accounting standards, amendments and interpretations, and whether they are
effective in FY21 or later years. We explain how these changes are expected to impact the financial position
and performance of the Group.
1 Corporate information
The financial report of Bendigo and Adelaide Bank Limited
('the Bank') and its controlled entities ('the Group') for the year
ended 30 June 2021 was authorised for issue in accordance
with a resolution of the Board of Directors on 2 September
2021. The Directors have the power to amend and reissue the
financial statements.
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.
Significant accounting judgements,
estimates and assumptions
In preparing these consolidated financial statements,
management has made judgements, estimates and
assumptions that affect the application of the Group’s
accounting policies and the reported amounts of assets,
liabilities, revenues, expenses and the accompanying
disclosures, as well as the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities in future periods.
Estimates and underlying assumptions are reviewed on an
ongoing basis.
The registered office of the company is:
The Bendigo Centre, 22 – 44 Bath Lane Bendigo,
Victoria, Australia.
2 Summary of significant accounting policies
Basis of preparation
The financial report of Bendigo and Adelaide Bank Limited:
•
•
is a general purpose financial report;
has been prepared in accordance with Australian
Accounting Standards along with interpretations issued
by the Australian Accounting Standards Board (AASB)
and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board
(IASB);
has been prepared in accordance with the requirements
of the Corporations Act 2001;
has been prepared in accordance with the requirements
for an authorised deposit-taking institution under the
Banking Act 1959 (as amended);
has been presented in Australian dollars, which is the
functional presentation currency of the Bank and each
of its subsidiaries, with all values rounded to the nearest
hundred thousand dollar ($'00,000) in accordance with
ASIC Corporations (rounding in Financial/Directors'
Reports) instrument 2016-191, unless otherwise stated;
includes foreign currency transactions that are translated
into the functional currency using exchange rates at the
date of the transaction; and
where necessary, presents reclassified comparatives for
consistency with current year disclosures.
•
•
•
•
•
Basis of measurement
The consolidated financial statements have been prepared on
a historical cost basis except for the following material items
that are measured at fair value in the Balance Sheet:
•
Financial assets and liabilities at fair value through profit or
loss (FVTPL)
Derivative financial instruments
Debt and equity instruments measured at fair value
through other comprehensive income (FVOCI)
•
•
Coronavirus (COVID-19) pandemic
The COVID-19 pandemic continues to create uncertainty
about future economic and market conditions. In preparing
the financial statements for the year ended 30 June 2021, the
Group has carefully considered the impact of COVID-19 on
critical judgements, estimates and assumptions.
Further information on these judgements, estimates and
assumptions that are considered material to the financial
statements have been included within the following notes:
•
•
•
Note 10 Impairment of loans and advances
Note 22 Investment property
Note 23 Goodwill and other intangible assets
Events subsequent to reporting date
On 15 August 2021, Bendigo and Adelaide Bank Limited
entered into a Share Sale Agreement to acquire 100% of the
shares in Ferocia Pty Ltd, a Melbourne-based fintech company,
for consideration of up to $116.0 million, with the transaction
being completed on 1 September 2021. The consideration
has been paid in cash and shares, with a portion of the
consideration being contingent on future performance.
The acquisition will help to accelerate the Group’s
transformation and digital strategy and drive better outcomes
and experiences for all customers.
We are currently in the process of finalising the acquisition
accounting for this transaction. It is expected that this will
include recognition of an amount of goodwill.
No other matters or circumstances have arisen since the end of
the financial year to the date of this report which significantly
affected or may significantly affect the operations of the
Group, the results of those operations, or the state of affairs of
the Group in subsequent financial periods.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 5 9
2 Summary of significant accounting policies (continued)
Changes in accounting policies
New and amended standards and interpretations
The IFRS Interpretations Committee recently issued an agenda
decision on the treatment of costs incurred in implementing
software-as-a-service (SaaS) arrangements under the
International equivalent of AASB 138 Intangible Assets. As
a result of this agenda decision, the Group has revised its
accounting policy in relation to SaaS arrangements, which
is outlined in Note 23. The Group has reviewed the existing
capitalised software balances in light of the accounting policy
change, and noted no material changes to existing balances or
prior period statements.
Recently issued or amended standards not yet effective
The following amendments to existing standards are not
expected to result in significant changes to the Group’s
accounting policies:
•
•
•
•
•
•
•
•
•
•
•
•
Interest Rate Benchmark Reform - Phase 2 (Amendments
to AASB 9, IAS 39, AASB 7, AASB 4, and AASB 16);
AASB 17 Insurance Contracts;
Classification of liabilities as current or non-current
(Amendments to AASB 101);
Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to AASB 137);
Annual Improvements to IFRS Standards 2018-2020;
Property, Plant and Equipment: Proceeds before Intended
Use (Amendments to AASB 16);
Reference to the Conceptual Framework (Amendments to
AASB 3);
Amendments to AASB 17;
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to AASB 10 and
IAS 28);
Disclosure of Accounting Policy (Amendments to AASB
101 and IFRS Practice Statement 2);
Definition of Accounting Estimate (Amendments to AASB
108);
Deferred Tax Related to Assets and Liabilities Arising from
a Single Transaction (Amendments to AASB 112 Income
Taxes).
60 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Results for the year
This section outlines the performance of the Group in more detail. Further analysis has been provided for the
following key areas: revenue and expenses, income tax, segment results, earnings per share and dividends.
3 Profit
Interest income
Effective interest income
Cash and cash equivalents
Assets held at FVTPL
Assets held at FVOCI
Assets held at amortised cost
Reverse repurchase agreements
Loans and other receivables
Total interest income
Interest expense
Deposits
Customer
Wholesale - domestic
Other borrowings
Notes payable
Repurchase agreements
Lease liability - interest expense
Loan capital
Total interest expense
Total net interest income
Other revenue
Fee income
Assets
Liabilities and other products
Trustee, management and other services
Total fee income
Commissions and management fees
Revenue from contracts with customers
Other income
Foreign exchange income
Factoring products income
Trading book income
Homesafe revaluation income
Dividend income
Other
Total other income
Total other revenue
Group
2021
$m
Note
-
18.6
1.7
0.3
1.2
1,845.5
1,867.3
(305.8)
(35.0)
(44.7)
(5.0)
(5.9)
(48.4)
2020
$m
0.5
58.5
1.0
1.1
11.5
2,201.7
2,274.3
(668.7)
(126.0)
(73.8)
(4.0)
(7.4)
(60.6)
(444.8)
1,422.5
(940.5)
1,333.8
85.0
70.0
3.7
158.7
53.5
212.2
19.1
1.0
1.7
137.7
0.4
10.8
170.7
382.9
22
76.0
76.1
3.4
155.5
56.6
212.1
22.6
1.4
11.2
36.0
1.3
16.0
88.5
Bank
2021
$m
-
18.6
159.6
0.3
1.2
1,666.3
1,846.0
(305.8)
(35.0)
-
(5.0)
(5.9)
(48.4)
(400.1)
1,445.9
73.7
69.9
0.6
144.2
16.1
160.3
19.1
1.0
1.7
-
25.9
8.5
56.2
2020
$m
0.4
58.5
148.8
1.1
11.5
1,992.2
2,212.5
(668.7)
(125.9)
0.1
(4.0)
(7.4)
(60.6)
(866.5)
1,346.0
67.8
76.0
0.7
144.5
15.8
160.3
22.6
1.4
11.2
-
120.5
13.3
169.0
329.3
300.6
216.5
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 61
3 Profit (continued)
Recognition and measurement
Interest income or expense on financial instruments that are
recognised at amortised cost or fair value through other
comprehensive income are measured using the effective
interest rate method.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments through the
expected life of the financial instrument or, when appropriate,
a shorter period, to the gross carrying amount of the financial
instrument. Calculation of the effective interest rate takes into
account fees receivable (i.e. origination and application fees)
or payable that are an integral part of the instrument's yield,
premiums or discounts on acquisition or issue, early redemption
fees and transaction costs. All contractual terms of a financial
instrument are considered when estimating future cash flows.
Where the Group acts as a lessee, and a lease liability has
been recognised, the interest expense associated with the
lease liability is recognised as an interest expense.
Trading book income represents the fair value adjustments for
financial assets measured at FVTPL.
Note
10
Expenses
Credit expenses
Individually assessed provision
Collectively assessed provision
Bad debts written off
Bad debts recovered
Total credit expenses
Operating expenses
Staff and related costs
Salaries, wages and incentives
Superannuation contributions
Other staff related costs
Total staff and related costs
Occupancy costs
Operating lease rentals
Depreciation of leasehold improvements
Other
Total occupancy costs
Amortisation and depreciation
Amortisation of acquired intangibles
Amortisation of software intangibles1
Depreciation of property, plant and equipment
Total amortisation and depreciation costs
Fees and commission expense
Other operating expenses
Communications, postage and stationery
Computer systems and software costs
Advertising and promotion
Other product and services delivery costs
Consultancy fees
Other expenses 2
Total other operating expenses
Total other expenses
Commissions and management fees are earned by the
Group from a diverse range of financial services provided
to customers. Fees, commissions and management fees are
recognised at an amount that reflects the consideration
to which the Group expects to be entitled in exchange for
providing the services. The performance obligations, as well as
the timing of their satisfaction, are identified, and determined,
at the inception of the contract. When the Group provides a
service to its customers, consideration is invoiced and generally
due immediately upon satisfaction of a service provided at a
point in time or over the contract period for a service provided
over time.
Dividend income is recognised by the Group when the right to
receive a payment is established.
Homesafe revaluation gain/(loss) reflects the gains or losses
arising from changes in the fair value of investment property
and are recognised in the year in which they arise. Refer to
Note 22 for further information.
Group
Bank
2021
$m
(34.2)
16.5
(3.0)
2.7
(18.0)
(510.5)
(44.6)
(34.7)
(589.8)
(5.8)
(8.2)
(21.9)
(35.9)
(3.0)
(27.9)
(61.1)
(92.0)
(20.2)
(33.4)
(79.4)
(28.3)
(22.8)
(59.9)
(72.0)
(295.8)
2020
$m
(56.4)
(106.2)
(10.7)
4.8
(168.5)
(481.0)
(50.1)
(36.0)
(567.1)
(5.5)
(7.8)
(23.0)
(36.3)
(3.2)
(50.1)
(64.4)
(117.7)
(20.3)
(35.8)
(70.9)
(31.6)
(24.3)
(58.5)
(217.3)
(438.4)
2021
$m
(34.2)
16.6
0.7
2.2
(14.7)
(496.7)
(43.2)
(33.9)
(573.8)
(5.8)
(8.2)
(21.6)
(35.6)
(1.9)
(27.9)
(61.1)
(90.9)
(8.6)
(35.5)
(76.5)
(27.5)
(22.8)
(59.4)
(97.7)
(319.4)
2020
$m
(56.3)
(106.3)
(8.3)
3.1
(167.8)
(464.4)
(48.5)
(34.9)
(547.8)
(5.5)
(7.8)
(22.7)
(36.0)
(1.8)
(49.6)
(64.3)
(115.7)
(7.2)
(38.0)
(67.9)
(30.9)
(24.3)
(58.2)
(236.5)
(455.8)
(1,033.7)
(1,179.8)
(1,028.3)
(1,162.5)
1 FY20 includes software accelerated amortisation expenses (Group: $19.0m and Bank: $18.5m).
2 FY20 includes software impairment charges (Group: $121.9m and Bank: $121.9m).
62 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
3 Profit (continued)
Recognition and measurement
Operating expenses are recognised as the relevant service is
rendered, or once a liability is incurred.
Credit expenses are measured as the difference between the
carrying amount and the value of the estimated future cash
flows, discounted at the financial instrument's original effective
interest rate. Refer to Note 10 for more information on the
impairment of loans and advances.
Staff and related costs
Wage and salary costs are recognised over the period in which
the employees provide the service.
Refer to Note 26 for more information relating to provisions for
employee entitlements.
Incentive payments are recognised to the extent that the
Group has a present obligation.
•
Depreciation of Property, Plant and Equipment
Includes depreciation expenses associated with operating
leases, which are recognised as Right of Use Assets (ROUA).
Refer to Note 35 for further information on the depreciation of
leased assets.
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.
Refer to Note 32 for further information on share based
payments.
Superannuation contributions are made to an employee
accumulation fund and are expensed when they become
payable.
Occupancy costs
Includes operating lease expenses relating to low value assets
and short-term leases, being leases with a term of 12 months
or less.
Amortisation
Refer to Note 23 for information on the amortisation of
intangibles.
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.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 6 3
4 Income tax expense
Major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge
Franking credits
Adjustments in respect of current income tax of previous years
Deferred income tax
Adjustments in respect of deferred income tax of previous years
Relating to origination and reversal of temporary differences
Group
2021
$m
2020
$m
Bank
2021
$m
2020
$m
(200.1)
(163.1)
(197.5)
(157.5)
0.8
3.6
(1.8)
(32.2)
1.0
2.5
(1.4)
67.7
0.8
3.8
(2.0)
3.2
1.0
2.6
(1.6)
73.3
Income tax expense reported in the Income Statement
(229.7)
(93.3)
(191.7)
(82.2)
Statement of changes in equity
$m
$m
$m
$m
Deferred income tax related to items charged or credited
directly in equity
Net gain on cash flow hedges
Net gain on financial assets fair value through other
comprehensive income (FVOCI)
Net gain on revaluation of land and buildings
Actuarial gain on superannuation defined benefits plan
Income tax charged or credited in equity
(9.8)
(3.8)
-
0.1
(13.5)
6.1
(9.8)
(0.4)
(95.0)
0.4
0.4
6.5
-
0.1
(104.7)
6.1
13.7
-
0.4
20.2
A reconciliation between income tax expense and the product of accounting profit before income tax multiplied by the
Group's applicable income tax rate is as follows:
Accounting profit before income tax
Income tax expense comprises amounts set aside as:
Provision attributable to current year at statutory rate, being:
$m
$m
$m
$m
753.7
286.1
619.4
345.0
Prima facie tax on accounting profit before tax
(226.1)
(85.8)
(185.8)
(103.5)
Under provision in prior years
Tax credits and adjustments
Expenditure not allowable for income tax purposes
Other non assessable income
Tax effect of tax credits and adjustments
Dividends received
Other
1.8
0.8
(9.3)
3.5
(0.2)
-
(0.2)
1.1
1.0
1.8
0.8
1.0
1.0
(11.3)
(16.5)
(18.4)
0.2
(0.3)
-
1.8
0.8
(0.2)
7.6
(0.2)
0.2
(0.3)
35.8
2.0
Income tax expense reported in the Income Statement
(229.7)
(93.3)
(191.7)
(82.2)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred income tax at 30 June relates to the following:
Gross deferred tax assets
Derivatives
Employee benefits
Provisions
Lease liability
Other
Gross deferred tax assets
Set-off of deferred tax assets and deferred tax liabilities
Net deferred tax assets
Group
Bank
2021
$m
13.8
31.2
106.5
54.1
24.9
230.5
(188.3)
42.2
2020
$m
35.0
29.4
106.5
66.4
14.6
251.9
(163.6)
88.3
2021
$m
13.8
31.2
106.4
53.9
24.4
229.7
(148.6)
81.1
2020
$m
35.0
29.5
107.0
66.3
19.1
256.9
(73.8)
183.1
64 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
4 Income tax expense (continued)
Deferred income tax (continued)
Gross deferred tax liabilities
Net gain on financial assets fair value through other
comprehensive income (FVOCI)
Derivatives
Intangible assets
Investment property
Property, plant and equipment
Other
Gross deferred tax liability
Group
Bank
2021
2020
$m
4.5
17.8
5.5
122.2
26.8
11.5
188.3
$m
0.6
31.7
1.6
88.3
32.6
8.8
2021
$m
88.4
17.8
5.0
-
26.6
10.8
163.6
148.6
2020
$m
-
31.7
0.8
-
32.5
8.8
73.8
Set-off of deferred tax assets and deferred tax liabilities
(188.3)
(163.6)
(148.6)
(73.8)
Net deferred tax liabilities
-
-
-
-
Income tax payable/(current tax asset)
Tax (refundable)/payable attributable to members of the
tax consolidated group
$m
44.2
44.2
$m
(17.6)
(17.6)
$m
44.2
44.2
$m
(17.6)
(17.6)
At 30 June 2021, there is no unrecognised deferred income
tax liability (2020: Nil) for taxes that would be payable on the
unremitted earnings of certain subsidiaries or joint ventures of
the Group, as the Group has no liability for additional taxation
should such amounts be remitted.
Recognition and measurement
Current taxes
The income tax for the period is the tax payable on the
current period's taxable income based on the national tax rate,
adjusted for changes in deferred tax assets and liabilities and
unused tax losses.
Deferred taxes
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.
For amounts directly recognised in equity, the associated
current and deferred tax balances are also recognised directly
in equity.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax credits 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 credits 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.
Tax consolidation
Bendigo and Adelaide Bank Limited and its 100% owned
subsidiaries form the tax consolidated Group. Members of the
Group entered into a tax sharing agreement to allocate income
tax liabilities to the wholly-owned subsidiaries 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.
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 group allocation method based
on a notional stand alone calculation, while deferred taxes
are calculated by members of the tax consolidated Group in
accordance with AASB 112 Income Taxes.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 6 5
5 Segment results
Segment reporting
An operating segment is a component of the Group that
engages in business activities from which it earns revenues
and incurs expenses. Segment reporting reflects the
information that is used by the Chief Executive Officer and
Managing Director for the purposes of resource allocation
and performance assessment, hence it is consistent with the
internal reporting provided to the Chief Executive Officer and
Managing Director and the Executive Team.
Changes to the management structure of the Group can
cause the Group's operating segments to change. Where this
occurs, prior period segment results are restated. A description
of each of the Group's segments has been provided below.
The Group has the following reportable segments: Consumer,
Business and Agribusiness.
Consumer
Consumer focuses on engaging with and servicing consumer
customers and includes the branch network (including
Community Banks and Alliance Banks), mobile relationship
managers, third party banking channels, wealth services,
Homesafe, call centres, and consumer support functions such
as the processing centres.
Business
Business focuses on servicing business customers and includes
business banking, Portfolio Funding and Delphi Bank.
Corporate
Corporate includes the results of the Group's support functions
including treasury, technology, property services, strategy,
finance, risk, compliance, legal, human resources, and investor
relations.
Accounting policies and inter-segment
transactions
Measurement of segmental assets, liabilities, income and
expenses is in accordance with the Group's accounting
policies. Segment results are determined by including all
revenue and expenses associated with each business.
Transactions between business segments are conducted at
arm's length, and are eliminated on consolidation.
Segment net interest income is recognised based on an
internally set funds transfer pricing policy, based on pre-
determined market rates of return on the assets and liabilities
of the segment.
Major customers
Revenues from no individual customer amount to greater than
10% of the Group's revenue.
Geographic Information
Agribusiness
Agribusiness includes all banking services provided to
agribusiness, rural and regional Australian communities through
Rural Bank.
The allocation of revenue and assets is based on the
geographic location of the customer. The Group operates in
all Australian states and territories, providing banking and other
financial services.
For the year ended 30 June 2021
For the year ended 30 June 2021
Operating segments
Consumer
Business Agribusiness
Net interest income
Other income
Total segment income
Operating expenses
Credit (expenses)/reversals 1
$m
902.5
316.8
1,219.3
(451.0)
(8.3)
$m
314.4
39.2
353.6
(85.1)
(17.7)
Total
operating
segments
$m
1,388.8
382.6
$m
171.9
26.6
198.5
1,771.4
(61.5)
(7.5)
(597.6)
(33.5)
Corporate
$m
33.7
0.3
34.0
Total
$m
1,422.5
382.9
1,805.4
(436.1)
(1,033.7)
15.5
(18.0)
753.7
Segment result (before tax expense)
760.0
250.8
129.5
1,140.3
(386.6)
Tax (expense)/benefit
Segment result (statutory basis)
(231.7)
528.3
(76.4)
174.4
(39.5)
(347.6)
117.9
(229.7)
90.0
792.7
(268.7)
524.0
Cash basis adjustments:
Specific income and expense items
(after tax)
Homesafe net realised income (after tax)
Amortisation of acquired intangibles
(after tax)
(87.3)
12.7
1.2
0.2
-
0.4
0.1
-
0.5
(87.0)
5.4
(81.6)
12.7
2.1
-
-
12.7
2.1
Segment result (cash basis) 2
454.9
175.0
90.6
720.5
(263.3)
457.2
1 Overlays added to the collectively assessed provisions are included in the Corporate segment results.
2 This balance excludes non-cash and specific items. Specific items are those deemed to be outside of the Group's core activities and hence are not
considered to be representative of the Group's ongoing financial performance.
66 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
5 Segment results (continued)
For the year ended 30 June 2020
For the year ended 30 June 2020
Net interest income
Other income
Total segment income
Operating expenses
Credit (expenses)/reversals 1
Operating segments
Consumer
Business Agribusiness
Total
operating
segments Corporate
$m
856.2
224.1
1,080.3
(459.5)
3.9
$m
288.1
42.5
330.6
(96.4)
(35.0)
$m
155.3
18.3
$m
1,299.6
284.9
$m
34.2
15.7
Total
$m
1,333.8
300.6
173.6
1,584.5
49.9
1,634.4
(63.6)
(6.1)
(619.5)
(37.2)
(560.3)
(1,179.8)
(131.3)
(168.5)
Segment result (before tax expense)
624.7
199.2
103.9
927.8
(641.7)
286.1
Tax (expense)/benefit
Segment result (statutory basis)
Cash basis adjustments:
(203.7)
421.0
(65.0)
134.2
(33.9)
(302.6)
209.3
(93.3)
70.0
625.2
(432.4)
192.8
Specific income and expense items (after tax)
Homesafe net realised income (after tax)
Amortisation of acquired intangibles (after tax)
(16.4)
11.0
1.6
1.4
-
0.1
0.1
-
0.5
(14.9)
110.6
11.0
2.2
-
-
95.7
11.0
2.2
Segment result (cash basis) 2
417.2
135.7
70.6
623.5
(321.8)
301.7
1 The COVID-19 overlay of $127.7m has been included in the Corporate segment results.
2 This balance excludes non-cash and specific items. Specific items are those deemed to be outside of the Group's core activities and hence
are not considered to be representative of the Group's ongoing financial performance.
Reportable segment assets
Reportable segment assets
and liabilities
and liabilities
For the year ended 30 June 2021
Reportable segment assets
Reportable segment liabilities
For the year ended 30 June 2020
Reportable segment assets
Reportable segment liabilities
Reconciliation of reportable segments to
consolidated assets and liabilities
Total assets for operating segments
Total assets
Total liabilities for operating segments
Notes payable 1
Total liabilities
1 Refer to Note 14 for further details.
Operating segments
Consumer
Business Agribusiness
Total
operating
segments Corporate
$m
$m
$m
$m
$m
Total
$m
52,456.6
13,500.6
6,229.5
72,186.7
14,390.5
86,577.2
47,053.4
13,602.3
2,753.4
63,409.1
13,216.9
76,626.0
45,884.6
13,348.8
6,073.5
65,306.9
10,702.0
76,008.9
41,281.0
11,503.7
3,107.8
55,892.5
10,814.7
66,707.2
As at
June 2021
$m
As at
June 2020
$m
86,577.2
76,008.9
86,577.2
76,008.9
76,626.0
66,707.2
3,597.7
3,503.5
80,223.7
70,210.7
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 67
6 Earnings per ordinary share
Basic
Diluted
Group
2021
2020
Cents per share Cents per share
98.1
82.6
38.1
35.2
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share (EPS) are
as follows:
Reconciliation of earnings used in calculation of earnings per ordinary share
Net profit after tax
Total basic earnings
Earnings used in calculating basic earnings per ordinary share
Add back: dividends accrued and/or paid on dilutive loan capital
Total diluted earnings
Reconciliation of weighted average number of ordinary shares (WANOS)
used in earnings per share calculations
WANOS used in the calculation of basic earnings per share
Effect of dilution - executive performance rights
Effect of dilution - loan capital
WANOS used in the calculation of diluted earnings per share
$m
524.0
524.0
524.0
19.1
543.1
$m
192.8
192.8
192.8
20.9
213.7
No. of shares
2021
2020
534,373,747
505,527,450
1,619,192
894,188
121,148,692
101,288,644
657,141,631
607,710,282
Potentially dilutive instruments
The following instruments are potentially dilutive during the reporting period:
Dilutive
2021
2020
Yes
No
Yes
No
Yes
No
Yes
No
Loan capital instruments
Executive share options
Executive performance rights
Subordinated note (with non viability clause)
Recognition and measurement
Basic earnings per share (EPS) is calculated as net profit after
tax, divided by the weighted average number of ordinary
shares.
Diluted EPS is calculated as net profit after tax, add back
dividends on dilutive loan capital instruments, divided by the
weighted average number of ordinary shares and potential
dilutive ordinary shares, including loan capital instruments.
Executive performance rights - classification of securities
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.
68 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
7 Dividends
Ordinary shares (ASX: BEN)
Group
Bank
Dividends
paid
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
¢
$m
¢
$m
¢
$m
¢
$m
June 2020 final dividend
June 2019 final dividend
June 2020 final dividend
June 2019 final dividend
Mar 2021
4.5
23.5 Sep 2019
35.0
169.5 Mar 2021
4.5
23.5 Sep 2019
35.0
169.5
December 2020
interim dividend
December 2019
interim dividend
December 2020
interim dividend
December 2019
interim dividend
Mar 2021
23.5
122.8 Mar 2020
31.0
150.8 Mar 2021
23.5 122.8 Mar 2020
31.0 150.8
28.0 146.3
66.0 320.3
28.0 146.3
66.0 320.3
Final dividend June 2021
Dividends proposed since the reporting date, but not recognised as a liability:
Sep 2021
¢
26.5
$m
142.5
Sep 2021
¢
26.5
$m
142.5
All dividends paid were fully franked at 30% either from existing franking credits or from franking credits arising from payment of
income tax provided for in the financial statements for the year ended 30 June 2021.
Preference shares and capital notes
Group
Bank
2021
2020
2021
2020
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
Date
paid
Cents
per
share
Total
amount
¢
$m
¢
$m
¢
$m
¢
$m
Convertible preference shares (CPS2) (recorded as debt instruments) (ASX: BENPE) 1
Nov 2020 117.28
3.4 Nov 2019 164.71
4.8 Nov 2020 117.28
3.4 Nov 2019 164.71
May 2020 144.57
117.28
3.4
309.28
4.2
9.0
May 2020 144.57
117.28
3.4
309.28
Convertible preference shares (CPS3) (recorded as debt instruments) (ASX: BENPF) 2
Dec 2020 146.35
4.1 Dec 2019 184.60
5.2 Dec 2020 146.35
4.1 Dec 2019 184.60
Jun 2021 140.31
4.0 Jun 2020 174.03
4.9 Jun 2021 140.31
4.0 Jun 2020 174.03
4.8
4.2
9.0
5.2
4.9
286.66
8.1
358.63
10.1
286.66
8.1
358.63
10.1
Converting preference shares (CPS4) (recorded as debt instruments) (ASX: BENPG)
Sep 2020 67.19
2.2 Sep 2019 89.91
2.9 Sep 2020 67.19
2.2 Sep 2019 89.91
Dec 2020 67.02
2.2 Dec 2019 83.43
2.7 Dec 2020 67.02
2.2 Dec 2019 83.43
Mar 2021 65.80
2.1 Mar 2020 81.08
2.6 Mar 2021 65.80
2.1 Mar 2020 81.08
Jun 2021 66.81
2.1 Jun 2020 78.78
2.5 Jun 2021 66.81
2.1 Jun 2020 78.78
2.9
2.7
2.6
2.5
266.82
8.6
333.20
10.7
266.82
8.6
333.20
10.7
Capital notes (recorded as debt instruments) (ASX: BENPH) 3
Mar 2021 76.92
Jun 2021 67.70
3.9
3.4
144.62
7.3
Mar 2021 76.92
Jun 2021 67.70
3.9
3.4
144.62
7.3
1 Convertible preference shares (CPS2, ASX: BENPE) were redeemed in November 2020. Final dividend payment was made in November 2020.
2 Convertible preference shares (CPS3, ASX: BENPF) were redeemed in June 2021. Final dividend payment was made in June 2021.
3 Capital notes (ASX: BENPH) were issued in November 2020. First dividend payment was made in March 2021.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 6 9
7 Dividends (continued)
Dividend franking account
Balance of franking account as at the end of the 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
Closing balance
Ordinary share dividends paid
Group
June 2021
June 2020
$m
561.2
44.2
$m
499.0
(17.6)
(144.6)
(0.6)
460.8
480.8
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 1
Satisfied by issue of shares 2
Group
Bank
June 2021
June 2020
June 2021
June 2020
$m
105.3
41.0
146.3
$m
277.4
42.9
320.3
$m
105.3
41.0
146.3
$m
277.4
42.9
320.3
1 Refers to cash paid to shareholders who did not elect to participate in the Dividend Reinvestment Plan.
2 Represents the value of shares issued to participating shareholders under the Dividend Reinvestment Plan.
Dividend Reinvestment Plan
Bonus Share Scheme
The Dividend Reinvestment Plan provides shareholders with
the opportunity of converting all or part of 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 (ASX) over the seven trading days commencing 8
September 2021 at a discount of 1.5%. Shares issued under
this Plan rank equally with all other ordinary shares.
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 share price of Bendigo and Adelaide Bank shares
traded on the Australian Securities Exchange (ASX) over the
seven trading days commencing 8 September 2021 at a
discount of 1.5%.
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 2021 final dividend is 7 September
2021.
70 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Financial Instruments
This section covers the financial instruments held by the Group including: loans and advances, derivatives and
deposits and notes payable. This section outlines how the fair value of financial instruments is determined and
the associated methodology.
Initial recognition and measurement
Financial assets and liabilities are initially recognised on the
date on which the Group becomes a party to the contractual
provisions of the instrument, or, in the case of loans and
advances, when funds are transferred to the customers'
account.
At initial recognition, the Group measures a financial instrument
at its fair value plus or minus transaction costs that are
incremental and directly attributable to the acquisition or issue
of the financial instrument, such as fees and commissions.
Transaction costs of financial instruments carried at FVTPL are
expensed in profit or loss.
Classification of financial assets
Subsequent to initial recognition, the measurement of the
Group’s financial assets is dependent on the business
model in which it is managed and the contractual cash flow
characteristics. There are four measurement classifications,
being:
•
•
amortised cost;
fair value through other comprehensive income (FVOCI)
with recycling;
fair value through other comprehensive income (FVOCI)
without recycling; and
fair value through profit or loss (FVTPL).
•
•
The Group measures financial assets at amortised cost if
the financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows, and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal
amount outstanding, unless the financial asset has been
designated as FVTPL. The details of these conditions are
outlined below.
Financial assets with contractual terms that meet the SPPI
test and that are held within a business model where the
objective is to both collect contractual cashflows and sell
the financial assets are measured at FVOCI with subsequent
reclassification to the Income Statement, unless the financial
asset has been designated as FVTPL. Non-traded equity
instruments have been designated at FVOCI with no
subsequent reclassification to the Income Statement. All other
assets are measured at FVTPL.
Business model assessment
The Group determines its business model at the level that best
reflects how it manages groups of financial assets to achieve
its business objectives.
While judgement is used in determining the business model,
consideration is given to relevant, objective evidence including:
•
•
The business purpose of the portfolio;
The risks that affect the performance and the way those
risks are managed;
The basis on which the performance of the portfolio is
evaluated; and
The frequency and significance of sales activity.
•
•
If cash flows after initial recognition are realised in a way
that is different from the Group’s original expectations, the
Group does not change the classification of the remaining
financial assets held in that business model, but incorporates
such information when assessing newly originated or newly
purchased financial assets going forward.
The SPPI test
The Group assesses financial assets to evaluate if their
contractual cashflows are comprised of solely payments
of principal and interest (the SPPI test). ‘Principal’ for the
purpose of this test is defined as the fair value of the financial
asset at initial recognition and may change over the life of
the financial asset (for example, if there are repayments of
principal or amortisation of the premium/discount). “Interest”
for the purpose of this test is defined as the consideration for
the time value of money and credit risk, which are the most
significant elements of interest within a lending arrangement.
Principal amounts include repayments of lending and financing
arrangements, and interest primarily relates to basic lending
returns, including compensation for credit risk and the
time value of money associated with the principal amount
outstanding. In contrast, contractual terms that introduce
a more than de minimis exposure to risks or volatility in the
contractual cash flows that are unrelated to a basic lending
arrangement do not give rise to contractual cash flows that
are solely payments of principal and interest on the amount
outstanding.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7 1
8 Cash and cash equivalents
Notes and coins
Cash at bank
Reverse repurchase agreements
Total cash and cash equivalents
Group
Bank
2021
$m
137.1
5,211.1
1,738.1
2020
$m
129.7
960.0
99.9
2021
$m
137.1
4,756.4
1,738.1
7,086.3
1,189.6
6,631.6
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
Recognition and measurement
$m
7,086.3
173.4
(175.4)
$m
1,189.6
137.0
(145.1)
$m
6,631.6
173.4
(175.4)
7,084.3
1,181.5
6,629.6
2020
$m
129.8
596.3
99.9
826.0
$m
826.0
137.0
(145.1)
817.9
Cash and cash equivalents include notes and coins at branches, unrestricted balances held with other financial institutions, reverse
repurchase agreements and highly liquid financial assets with original maturities of three months or less and are subject to an
insignificant risk of changes in their fair value.
These assets are generally used by the Group in managing its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the Balance Sheet.
Cash at bank earns interest at variable rates based on daily bank and short-term deposit rates. Interest is recognised in the
Income Statement using the effective interest method.
72 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
9 Loans and other receivables
Overdrafts
Credit cards
Term loans
Margin lending
Lease receivables
Factoring receivables
Other
Note
Group
Bank
2021
$m
1,573.5
313.3
2020
$m
1,985.8
307.2
2021
$m
1,573.3
313.3
2020
$m
1,985.2
307.2
67,951.7
60,911.2
68,815.6
61,703.1
1,480.6
1,294.9
695.8
45.2
172.5
626.2
33.3
163.1
-
695.3
45.2
172.5
-
625.2
33.3
163.1
Gross loans and other receivables
72,232.6
65,321.7
71,615.2
64,817.1
Individually assessed provision
Collectively assessed provision
Unearned income
Total provisions and unearned income
Deferred costs paid
Net loans and other receivables
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
10
10
(94.3)
(246.7)
(82.4)
(423.4)
(78.4)
(263.2)
(81.1)
(422.7)
111.4
81.4
(94.3)
(245.8)
(82.4)
(422.5)
111.4
(78.2)
(262.4)
(81.0)
(421.6)
81.3
71,920.6
64,980.4
71,304.1
64,476.8
$m
4,337.8
1,134.8
3,034.9
10,145.6
53,579.5
$m
4,699.1
941.5
2,430.7
10,383.1
46,867.3
$m
2,857.1
1,134.8
3,034.9
10,145.2
54,443.2
$m
3,404.2
941.4
2,430.5
10,379.8
47,661.2
Gross loans and other receivables
72,232.6
65,321.7
71,615.2
64,817.1
1 Balances exclude specific and collective provisions, unearned revenue, and deferred costs and are categorised by the contracted
maturity date of each loan facility.
Comparative information in the maturity analysis table above has been restated to align to the presentation in the current financial year.
Current financial year disclosures reconcile to definitions applied for regulatory reporting purposes.
Recognition and measurement
Loans and other receivables are debt instruments recognised
initially at fair value, which represent the cash advanced to
the borrower plus direct and incremental transaction costs on
settlement date, when funding is advanced to the customer.
Loans are subsequently measured in accordance with the
Group’s Classification of financial assets policy. Most loans are
carried at amortised cost, which represents the gross carrying
amount less allowances for credit losses. Interest on loans is
recognised using the effective interest method. The estimated
future cash flows used in the calculation of the effective
interest rate include those determined by the contractual term
of the asset, and includes all fees, transaction costs and all
other premiums or discounts.
For loans carried at amortised cost, impairment losses are
recognised in accordance with the three-stage expected
credit loss (ECL) impairment model outlined in Note 10.
Finance leases, where the Group acts as lessor, are included in
loans and other receivables. Finance leases are those where
substantially all the risks and rewards of ownership of the asset
have been transferred to the lessee. Lease receivables are
recognised at an amount equal to the net investment in the
lease.
Deferred costs include costs associated with the acquisition,
origination or securitisation of loan portfolios. These costs are
amortised through the Income Statement over the average life
of the loans in these portfolios.
All loans are subject to continuous management review to
assess whether there is any objective evidence of impairment.
For further details regarding impairment of loans refer to Note
10.
Unearned income on the Group's personal lending and leasing
portfolios is brought to account over the life of the contracts
on an actuarial basis.
Some of the Group's customers have been provided with
COVID-19 support measures which allow for the deferral of
loan payments during the deferral period. These packages
have been offered to customers to provide short-term cash
flow support. During the deferral period, interest has been
capitalised.
It is expected that the loan balance along with the capitalised
interest will be repaid in full.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7 3
10 Impairment of loans and advances
Summary of impaired financial assets
Impaired loans
Loans - without provisions
Loans - with provisions
Restructured loans
Less: individually assessed provisions
Net impaired loans
Group
Bank
2021
$m
40.6
168.0
0.2
(93.0)
2020
$m
52.4
187.1
1.0
(77.5)
2021
$m
40.6
168.0
0.2
(93.0)
2020
$m
52.4
187.0
1.0
(77.3)
115.8
163.0
115.8
163.1
Net impaired loans % of net loans and other receivables
0.16%
0.25%
0.16%
0.25%
Portfolio facilities - past due 90 days, not well secured
Less: individually assessed provisions
Net portfolio facilities
Loans past due 90 days
Accruing loans past due 90 days, with adequate security balance
Net fair value of properties acquired through the enforcement of security
Recognition and measurement
2.9
(1.3)
1.6
$m
362.7
35.3
4.9
(0.9)
4.0
$m
399.2
96.4
2.9
(1.3)
1.6
$m
362.7
35.3
4.9
(0.9)
4.0
$m
399.2
94.7
A facility is classified as impaired regardless of whether it is
90 days or more past due (arrears) when there is doubt as to
whether the full amounts due (interest and principal) will be
received in a timely manner. This is the case even if the full
extent of the loss cannot be clearly determined.
Impairment losses are calculated by discounting the expected
future cash flows of a loan, which includes expected future
receipts of contractual interest, at the loan's original effective
interest rate, and comparing the resultant present value with
the loan's current carrying amount.
Losses for impaired loans are recognised when there is
objective evidence that impairment of a loan, or portfolio of
loans, has occurred. Impairment losses that are calculated on
individual loans, or on groups of loans assessed collectively, are
recorded in the Income Statement.
Restructured loans
Restructured loans are facilities in which the original
contractual terms have been modified for reasons related to
the financial difficulties of the customer.
Restructuring may consist of reduction of interest, principal or
other payments legally due, or an extension in maturity.
Stage 1 Stage 2
Stage 3
12
month
ECL
Lifetime
ECL
Collectively
assessed -
Lifetime ECL
Individually
assessed -
Lifetime ECL
General
reserve for
credit losses
Group
Movements in provisions and reserve
Balance as at 1 July 2020
Transfers during the period to:
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New/increased provisions
$m
$m
76.3
153.0
1.7
(1.6)
(18.6)
20.8
(5.0)
(7.0)
-
(0.3)
12.6
2.6
Write-back of provisions no longer required
(5.7)
(4.6)
Change in balances
10.7
(19.0)
$m
33.9
(0.1)
(2.2)
12.0
(0.9)
0.4
(6.2)
(6.1)
$m
78.4
-
-
-
1.2
33.0
-
-
Total
$m
$m
86.6
428.2
-
-
-
-
-
-
-
-
-
-
48.6
(16.5)
18.1
3.7
Bad debts written off previously provided for
-
-
-
(18.3)
-
(18.3)
Total provision for doubtful debts as at 30 June 2021
72.0
143.9
30.8
94.3
104.7
445.7
74 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
10 Impairment of loans
and advances (continued)
Group
Balance as at 1 July 2019
Transfers during the period to:
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New/increased provisions
Write-back of provisions no longer required
Change in balances
Bad debts written off previously provided for
0.7
(17.3)
(6.4)
(0.7)
18.3
(6.4)
(0.1)
(1.2)
11.6
(5.2)
56.1
-
3.7
(8.4)
71.8
-
Total provision for doubtful debts as at 30 June 2020
76.3
153.0
Bank
Movements in provisions and reserve
Balance as at 1 July 2020
Transfers during the period to:
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New/increased provisions
Write-back of provisions no longer required
Change in balances
Bad debts written off previously provided for
$m
$m
74.9
153.6
1.7
(18.6)
(5.0)
(1.6)
20.8
(7.0)
-
(0.3)
12.6
(5.7)
10.8
-
2.6
(4.6)
(19.2)
-
Total provision for doubtful debts as at 30 June 2021
70.7
144.3
Balance as at 1 July 2019
Transfers during the period to:
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New/increased provisions
Write-back of provisions no longer required
Change in balances
Bad debts written off previously provided for
$m
$m
36.0
75.9
0.7
(17.3)
(6.4)
(0.7)
18.3
(6.4)
(0.1)
(1.2)
11.6
(5.2)
55.6
-
3.7
(8.4)
72.4
-
Total provision for doubtful debts as at 30 June 2020
74.9
153.6
Stage 1 Stage 2
Stage 3
12
month
ECL
$m
Lifetime
ECL
$m
Collectively
assessed -
Lifetime ECL
$m
Individually
assessed -
Lifetime ECL
$m
General
reserve for
credit losses
$m
Total
$m
36.9
75.9
44.2
128.5
77.3
362.8
-
(1.0)
12.8
(6.5)
1.0
(3.3)
(13.3)
-
33.9
$m
33.9
(0.1)
(2.2)
12.0
(0.9)
0.4
(6.2)
(6.1)
-
30.8
$m
44.2
-
(1.0)
12.8
(6.5)
1.0
(3.3)
(13.3)
-
33.9
-
-
-
7.8
48.6
-
-
(106.5)
-
-
-
-
-
-
-
-
20.6
-
(11.3)
-
85.5
(16.9)
103.3
(106.5)
78.4
86.6
428.2
$m
78.2
$m
86.6
$m
427.2
-
-
-
1.2
33.0
-
-
(18.1)
-
-
-
-
-
-
18.1
-
-
-
-
-
48.6
(16.5)
3.6
(18.1)
94.3
104.7
444.8
$m
128.2
$m
77.3
$m
361.6
-
-
-
7.8
48.5
-
-
(106.3)
-
-
-
-
-
-
-
-
20.6
-
(11.3)
-
85.4
(16.9)
103.4
(106.3)
78.2
86.6
427.2
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7 5
10 Impairment of loans
and advances (continued)
Summary of provisions and reserve
Individually assessed provision
Opening balance
Bad debts written off previously provided for
Charged to Income Statement
Closing balance
Collectively assessed provision
Opening balance
Charged/(Released) to Income Statement
Closing balance
General reserve for credit losses (GRCL)
Opening balance
Increase in GRCL
Closing balance
Total provisions and reserve
Ratios
Individually assessed provision to gross loans
Total provisions and GRCL to gross loans
Collectively assessed provision and GRCL
to risk-weighted assets
Provision coverage 1
Group
Bank
2021
$m
78.2
(18.1)
34.2
94.3
262.4
(16.6)
245.8
86.6
18.1
104.7
444.8
2020
$m
128.2
(106.3)
56.3
78.2
156.1
106.3
262.4
77.3
9.3
86.6
427.2
2021
$m
78.4
(18.3)
34.2
94.3
263.2
(16.5)
246.7
86.6
18.1
104.7
445.7
0.13%
0.62%
0.87%
2020
$m
128.5
(106.5)
56.4
78.4
157.0
106.2
263.2
77.3
9.3
86.6
428.2
0.12%
0.66%
0.92%
213.46%
178.05%
1 Provision coverage is calculated as total provisions and reserve divided by total gross impaired assets.
Recognition and measurement
Scope
The Group applies a three-stage approach to measure
the allowance for expected credit losses for the following
categories of financial assets that are not measured at
FVTPL:
•
•
• Off-Balance Sheet loan commitments; and
•
Amortised cost financial assets;
Debt securities at FVOCI;
Financial guarantee contracts.
Expected credit loss impairment model
The Group's allowance for credit losses calculations are
outputs of actuarial models with a number of underlying
assumptions regarding the choice of variable inputs and
their interdependencies. The expected credit loss impairment
model reflects the present value of all cash shortfalls related
to default events either (i) over the following twelve months
or (ii) over the expected life of a financial asset depending on
credit deterioration from inception.
The allowance for credit losses reflects an unbiased,
probability-weighted outcome which considers multiple
economic scenarios based on reasonable and supportable
forecasts.
76 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
This impairment model measures credit loss allowances
using a three-stage approach based on the extent of credit
deterioration since origination:
•
•
•
Stage 1 – Where there has not been a significant
increase in credit risk (SICR) since initial recognition of a
financial asset, an amount equal to 12 months expected
credit loss is recorded. The expected credit loss is
computed using a probability of default occurring over
the next 12 months. For those assets with a remaining
maturity of less than 12 months, a probability of default
corresponding to remaining term to maturity is used.
Stage 2 – When a financial asset experiences a SICR
subsequent to origination but is not considered to be
in default, it is included in Stage 2. This requires the
computation of expected credit loss based on the
probability of default over the remaining estimated life of
the financial asset.
Stage 3 – Financial assets that are considered to be
in default are included in this stage. Similar to Stage 2,
the allowance for credit losses captures the lifetime
expected credit losses.
10 Impairment of loans and advances (continued)
Recognition and measurement (continued)
Expected credit loss impairment model (continued)
Interest income is recognised on gross carrying amounts for
financial assets in Stage 1 and Stage 2, and gross carrying
value net of provisions for financial assets in Stage 3.
Financial assets in Stage 1 and Stage 2 are assessed for
impairment collectively, whilst those in Stage 3 are subjected
to either collective or individual impairment assessment. The
Group uses the following collective provisioning models for the
purpose of calculating expected credit loss:
•
Retail lending: residential mortgages model, personal
loans model, credit cards model, retail small and medium
enterprise (SME) model;
Non-retail lending: corporate model, commercial real
estate model, and agribusiness model.
•
Measurement of expected credit loss
The probability of default (PD), exposure at default (EAD), and
loss given default (LGD) inputs used to estimate expected
credit losses are modelled based on macroeconomic variables
that are most closely related with credit losses in the relevant
portfolio.
•
Details of these statistical parameters/inputs are as follows:
PD – The probability of default is an estimate of the
•
likelihood of default over a given time horizon. A default
may only happen at a certain time over the remaining
estimated life, if the facility has not been previously
derecognised and is still in the portfolio.
EAD – The exposure at default is an estimate of the
exposure at a future default date, taking into account
expected changes in the exposure after the reporting
date, including repayments of principal and interest,
whether scheduled by contract or otherwise, expected
drawdowns on committed facilities, and accrued interest
from missed payments.
LGD – The loss given default is an estimate of the loss
arising in the case where a default occurs at a given time.
It is based on the difference between the contractual
cash flows due and those that the lender would expect to
receive, including from the realisation of any collateral. It is
usually expressed as a percentage of the EAD.
•
Forward-looking information
The estimation of expected credit losses for each stage and
the assessment of significant increases in credit risk consider
information about past events and current conditions as well
as reasonable and supportable forecasts of future events
and economic conditions. The estimation and application
of forward-looking information may require significant
judgement, particularly during periods of economic uncertainty.
In assessing the forward-looking information, the Group has
considered the potential impacts of the COVID-19 pandemic
and the mitigation measures put in place by governments,
regulators and the Reserve Bank of Australia. The Group's
expectations of future events have been based on a range
of plausible scenarios and are believed to be reasonable and
supportable. Under the circumstances, however, it is recognised
that uncertainty still exists and actual results may differ from
these estimates.
Macroeconomic factors
In its models, the Group relies on a broad range of forward-
looking economic information as inputs, such as: Gross
Domestic Product (GDP) growth, unemployment rates,
central-bank interest rates, and house-price indices. The inputs
and models used for calculating expected credit losses may
not always capture all characteristics and available data of
the market at the date of the financial statements. To reflect
this, qualitative adjustments or overlays may be made as
adjustments using expert credit judgement.
The Group’s Economic Outlook Committee is responsible
for reviewing and approving the methodology, and any
adjustments and assumptions. Forecast economic scenarios
and the associated probability weights are discussed and
approved by the Economic Outlook Committee, along with any
management overlays or adjustments required to account for
expected risks that have not been considered in the modelling
process. At each reporting period any key areas of judgement
are reported to the Group’s Board Audit Committee and the
Board Financial Risk Committee.
Multiple forward-looking scenarios
The Group determines its allowance for credit losses using five
probability-weighted forward-looking scenarios. The Group
considers both internal and external sources of information
and data in order to achieve unbiased projections and
forecasts. The Group prepares the scenarios using forecasts
generated by the Economic Oversight Committee (EOC). The
forecasts are created using consensus forecasts and internal
models to formulate a ‘base case’ view of the most probable
future direction of relevant economic variables as well as a
representative range of other possible forecast scenarios. The
process involves the development of four additional economic
scenarios and consideration of the relative probabilities of
each outcome.
The ‘base case’ represents the most likely outcome and is
aligned with information used by the Group for other purposes
such as strategic planning and budgeting. The other scenarios
represent more optimistic and more pessimistic outcomes. The
Group has identified and documented key drivers of credit risk
and credit losses for each portfolio of financial instruments and,
using an analysis of historical data, has estimated relationships
between macroeconomic variables, credit risk, and credit
losses.
The assessment and determination of forward-looking
assumptions in the current environment is challenging given the
inherent uncertainties surrounding COVID-19, including current
lockdowns and the risk of further lockdowns.
The Group’s base case economic forecast scenario used in
the calculation of the collectively assessed provision as at 30
June 2021, reflects a strong recovery in economic conditions.
Unemployment, under the base case scenario, peaks at 5.3%
in September 2021. Quarterly growth in GDP is expected to
be negative during the September 2021 quarter with subdued
positive growth commencing from 2022. House prices are
expected to grow by more then 11.0% p.a. up to September
2021, before returning to normal growth rates of around 5.0%
to 6.0% p.a. Commercial property prices are expected to fall
more than 16.0% by December 2021 with office and retail
space in the CBD primarily impacted.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7 7
10 Impairment of loans and advances (continued)
Recognition and measurement (continued)
Multiple forward-looking scenarios (continued)
The Group’s significant deterioration scenario was mostly
aligned to the APRA stress test scenario (adjusted in line with
the new base scenario) at the end of 2020 and assumes
unemployment peaks at 10.5% in September 2022, and
improves slightly to 9.2% by March 2024. Gross Domestic
Product is expected to contract by 6.0% in December 2021
and substantially recover by September 2023. House prices are
projected to fall by 16.9% and commercial property prices by
12.2% on average towards the end of 2021, with CBD retail
space projected to fall by 26.0% and CBD office space by
28.4%.
The Group’s approach to formulating the macroeconomic
factors used in the upside and downside scenarios has
been revised. Implied values derived from the base scenario
were used in the other scenarios for 30 June 2020, whereas
for 30 June 2021 discrete macroeconomic forecasts for
each scenario were determined by the EOC. The change in
probabilities assigned to the downside scenarios for 30 June
2021 are largely due to the change in underlying scenarios
rather than a significant change in the Group’s economic
outlook.
The table below illustrates the weightings applied to the
forecast scenarios for the purpose of calculation the collective.
Weightings
Base scenario
Significant improvement
Mild improvement
Mild deterioration
Significant deterioration
30 June 2021
30 June 2020
50.0%
0.0%
5.0%
27.5%
17.5%
50.0%
0.0%
15.0%
30.0%
5.0%
The above probability weightings have been applied to
all portfolios with the exception of the agricultural lending
portfolio. The weightings applied to this portfolio for 30 June
2021 were 53% base scenario, 25% mild deterioration, 20%
mild improvement, and 1% each for the remaining two
scenarios (2020: 53.3% base scenario, 22.2% mild
deterioration, 22.2% mild improvement, 1.1% for each of the
remaining two scenarios).
The table below discloses the collectively assessed provision
outcomes assuming a 100% weighting is applied to the
relevant scenario, all other assumptions held constant.
30 June 2021
30 June 2020
Scenario Outcomes
100% Base scenario
100% Significant
improvement
100% Mild improvement
100% Mild deterioration
100% Significant
deterioration
1 These outcomes exclude the GRCL.
($m) 1
217.0
203.0
207.2
247.5
347.6
($m) 1
232.2
114.9
207.0
307.7
475.1
Assessment of significant increase in credit risk (SICR)
At each reporting date, the Group assesses whether there
has been a SICR for exposures since initial recognition by
comparing the risk of default occurring over the remaining
expected life from the reporting date and the date of
initial recognition. The assessment considers borrower-
specific quantitative and qualitative information without
consideration of collateral, and the impact of forward-looking
macroeconomic factors.
The common assessments for SICR on retail and non-retail
portfolios include macroeconomic outlook, management
judgement, and delinquency and monitoring. Forward-
looking macroeconomic factors are a key component of the
macroeconomic outlook. The importance and relevance of
each specific macroeconomic factor depends on the type
of product, characteristics of the financial instruments and
the borrower and the geographical region. Quantitative
models may not always be able to capture all reasonable and
supportable information that may indicate a SICR.
Qualitative factors may be assessed to supplement the
gap. Examples of situations include changes in adjudication
criteria for a particular group of borrowers; changes in
portfolio composition; and natural disasters impacting certain
portfolios. With regards to delinquency and monitoring, there
is a rebuttable presumption that the credit risk of the financial
instrument has increased since initial recognition when
contractual payments are more than 30 days overdue.
Retail portfolio – For retail exposures, a SICR cannot be
assessed using forward looking information at an individual
account level. Therefore, the assessment must be done at the
portfolio level. Portfolio movement thresholds exist for each PD
model by product which considers the proportionate change in
PD as well as the absolute change in PD.
For retail portfolios, a 50 basis point increase in PDs combined
with a doubling of the PD since origination will result in a loan
transitioning to Stage 2.
The thresholds used for PD migration are reviewed and
assessed at least annually, unless there is a significant change
in credit risk management practices in which case the review is
brought forward.
Non-retail portfolio – The Group uses an internal rating system
for its non-retail exposures. All non-retail exposures have a
rating assigned that reflects the probability of default of the
borrower. Both borrower specific and non-borrower specific
(i.e. macroeconomic) forward looking information is considered
and reflected in the rating. SICR is evaluated based on the
movement of the exposures between ratings i.e. a two notch
downgrade in the internal rating since origination will trigger a
transfer to Stage 2.
While the deferral of loan payments by customers would
normally be treated as an indication of a SICR, the deferral
arrangements granted to the Group's customers in relation
to COVID-19 support packages have not, in isolation, been
treated as an indication of a SICR. This is consistent with
APRA guidance. Other information available to the Group in
relation to the COVID-19 deferral arrangements has been
assessed for evidence of a SICR.
78 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
10 Impairment of loans and advances (continued)
Recognition and measurement (continued)
Expected life
When measuring expected credit loss, the Group considers the
maximum contractual period over which the Group is exposed to
credit risk. All contractual terms are considered when determining
the expected life, including prepayment, and extension and rollover
options. For certain revolving credit facilities, such as credit cards,
the expected life is estimated based on the period over which
the Group is exposed to credit risk and how the credit losses are
mitigated by management actions.
•
Presentation of allowance for credit losses in the Balance Sheet
Financial assets measured at amortised cost: as a deduction
•
from the gross carrying amount of the financial assets;
Debt instruments measured at fair value through other
comprehensive income: no allowance is recognised in the
Balance Sheet because the carrying value of these assets
is their fair value. However, the allowance determined is
presented in the accumulated other comprehensive income;
Off-Balance Sheet credit risks include undrawn lending
commitments, letters of credit and letters of guarantee: as a
provision in other liabilities.
•
Definition of default
The definition of default used in measuring ECL is aligned to
the definition used for internal credit risk management and
regulatory purposes.
The Group considers a financial instrument to be in default as
a result of one or more loss events that occurred after the date
of initial recognition of the instrument and the loss event has
a negative impact on the estimated future cash flows of the
instrument that can be reliably estimated. This includes events
that indicate:
•
•
•
significant financial difficulty of the borrower;
default or delinquency in interest or principal payments;
high probability of the borrower entering a phase of
bankruptcy or a financial reorganisation;
measurable decrease in the estimated future cash flows
from the loan or the underlying assets that back the loan.
•
The Group considers that default has occurred when
a financial asset is more than 90 days past due, unless
reasonable and supportable information demonstrates that
a more lagging default criterion is appropriate. Impairment
is recognised when it is determined that all principal and
interest amounts which are due are unlikely to actually be fully
recovered.
Write-off policy
The Group writes off an impaired financial asset (and the
related impairment allowance), either partially or in full, when
there is no realistic prospect of recovery. Where financial assets
are secured, write-off is generally after receipt of any proceeds
from the realisation of security. In circumstances where the
net realisable value of any collateral has been determined and
there is no reasonable expectation of further recovery, write-
off may be earlier. In subsequent periods, any recoveries of
amounts previously written off are credited to the provision for
credit losses in the Income Statement.
Modified financial assets
If the terms of a financial asset are modified or an existing
financial asset is replaced with a new one, an assessment
is made to determine if the existing financial asset should
be derecognised. Where a modification does not result in
derecognition, the date of origination continues to be used to
determine SICR. Where a modification results in derecognition,
the new financial asset is recognised at its fair value on the
modification date. The modification date is also the date of
origination for this new asset.
The Group may modify the contractual terms of loans for
either commercial or credit reasons. The terms of a loan in
good standing may be modified for commercial reasons
to provide competitive pricing to borrowers. Loans are also
modified for credit reasons where the contractual terms are
modified to grant a concession to a borrower that may be
experiencing financial difficulty.
For all financial assets modifications of the contractual terms
may result in derecognition of the original asset when the
changes to the terms of the loans are considered substantial.
These terms include interest rate, authorised amount, term, or
type of underlying collateral. The original loan is derecognised
and the new loan is recognised at its fair value. The difference
between the carrying value of the derecognised asset and
the fair value of the new asset is recognised in the Income
Statement.
For all loans, performing and credit-impaired, where the
modification of terms did not result in the derecognition of
the loan, the gross carrying amount of the modified loan is
recalculated based on the present value of the modified cash
flows discounted at the original effective interest rate, and any
gain or loss from the modification is recorded in the provision
for credit losses line in the Income Statement.
Purchased loans
All purchased loans are initially measured at fair value on
the date of acquisition. As a result no allowance for credit
losses would be recorded in the Balance Sheet on the date
of acquisition. Purchased loans may fit into either of the two
categories: Performing loans or Purchased Credit Impaired
(PCI) loans.
Purchased performing loans follow the same accounting as
originated performing loans and are reflected in Stage 1 on the
date of the acquisition.
They will be subject to a 12-month allowance for credit losses
which is recorded as a provision for credit losses in the Income
Statement. The fair value adjustment set up for these loans on
the date of acquisition is amortised into interest income over
the life of these loans.
PCI loans are reflected in Stage 3 and are always subject
to lifetime allowance for credit losses. Any changes in the
expected cash flows since the date of acquisition are recorded
as a charge/recovery in the provision for credit losses in
the Income Statement at the end of all reporting periods
subsequent to the date of acquisition.
General reserve for credit losses (GRCL)
The Australian Prudential Regulation Authority (APRA) requires
that banks maintain a GRCL to cover risks inherent in loan
portfolios. In certain circumstances the collective provision can
be included in this assessment. Movements in the GRCL are
recognised as an appropriation from retained earnings.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 7 9
11 Financial assets at fair value
through profit or loss
Discount securities
Floating rate notes
Government securities
Group
Bank
2021
$m
-
320.5
1,358.2
2020
$m
996.7
170.0
4,244.4
2021
$m
-
320.5
1,358.2
2020
$m
996.7
170.0
4,244.4
Total financial assets at fair value through profit or loss
1,678.7
5,411.1
1,678.7
5,411.1
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
$m
1,171.0
137.6
182.9
187.2
$m
733.7
1,767.7
2,320.6
589.1
$m
1,171.0
137.6
182.9
187.2
$m
733.7
1,767.7
2,320.6
589.1
1,678.7
5,411.1
1,678.7
5,411.1
Recognition and measurement
Financial assets that do not meet the criteria for amortised
cost or fair value through other comprehensive income are
measured at fair value through profit or loss.
In addition, on initial recognition, the Group may irrevocably
designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at fair value
through other comprehensive income as at fair value through
profit or loss if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
These financial instruments are recorded in the Balance Sheet
at fair value with revaluation gains or losses being recognised
in the Income Statement. Interest earned is accrued in interest
income using the effective interest rate method, taking into
account any discount or premium and qualifying transaction
costs being an integral part of the instrument.
Fair value measurement is outlined in Note 18.
12 Financial assets at amortised cost
Group
Bank
2021
$m
325.4
7.0
19.1
351.5
$m
33.5
0.1
317.9
351.5
2020
$m
289.3
6.8
29.2
325.3
$m
-
-
325.3
325.3
2021
$m
116.3
0.1
19.1
135.5
$m
33.5
0.1
101.9
135.5
2020
$m
105.7
0.1
29.2
135.0
$m
-
-
135.0
135.0
The carrying amount of these assets is adjusted by any
expected credit loss allowance recognised and measured as
described in Note 10.
Interest income from these financial assets is included in
interest income using the effective interest rate method.
Collateral and security deposits
Other deposits
Bonds
Total financial assets at amortised cost
Maturity analysis
Not longer than 3 months
Longer than 1 and not longer than 5 years
Over 5 years
Classification and measurement
A financial asset is measured at amortised cost only if both of
the following conditions are met:
•
the asset is held within a business model whose objective
is to hold assets in order to collect contractual cash flows;
and
the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
•
80 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
13 Financial assets at fair value through other
comprehensive income
Debt securities
Discount securities
Mortgage backed securities
Floating rate notes
Government securities
Other debt securities
Total debt securities
Managed Fund investments
Unlisted Managed Fund investments
Total Managed Fund investments
Equity investments
Listed share investments
Unlisted share investments
Total equity investments
Total financial assets at fair value
through other comprehensive income
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
Non-maturing
Recognition and measurement
A financial asset will be measured at fair value through other
comprehensive income if:
•
the Group's intent is to hold the asset in order to collect
contractual cash flows and/or to sell the asset; and
the cash flows solely represent principal and interest.
•
These assets are initially recognised at fair value including
directly attributable transaction costs. Subsequent
measurement is at fair value with any revaluation gains or
losses being included in other comprehensive income. Upon
disposal, the cumulative gain or loss previously recognised
in other comprehensive income is transferred to the Income
Statement.
Group
2021
$m
300.0
13.6
229.3
1,602.0
0.5
2,145.4
9.4
9.4
0.1
31.2
31.3
Bank
2021
$m
2020
$m
300.0
-
12,897.6
12,431.5
229.3
1,602.0
0.5
253.1
516.8
0.5
2020
$m
-
17.0
253.1
516.8
0.5
787.4
15,029.4
13,201.9
8.7
8.7
0.1
18.6
18.7
-
-
0.1
31.2
31.3
-
-
0.1
18.6
18.7
2,186.1
814.8
15,060.7
13,220.6
$m
205.3
824.4
1,125.1
-
31.3
$m
150.6
383.7
253.1
$m
480.7
824.4
1,396.8
$m
429.4
384.0
253.6
-
12,327.5
12,134.9
27.4
31.3
18.7
2,186.1
814.8
15,060.7
13,220.6
Equity instruments
The Group has irrevocably elected to measure all equity
investments that are not held for trading at fair value through
other comprehensive income.
Subsequent changes to the fair value are recognised in
other comprehensive income and are not transferred to the
Income Statement, including upon disposal. Dividend income
is recognised in the Income Statement unless the dividend
represents a recovery of part of the cost of the investment.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 8 1
Financial liabilities
Classification and measurement of financial liabilities
Financial liabilities are classified into one of the following
measurement categories:
•
•
•
Fair value through profit or loss (FVTPL);
Amortised cost; or
Designated at FVTPL.
Financial liabilities designated at FVTPL
Financial liabilities classified in this category are those that
have been designated by the Group upon initial recognition,
and once designated, the designation is irrevocable. The
FVTPL designation is available only for those financial liabilities
for which a reliable estimate of fair value can be obtained.
Financial liabilities measured at FVTPL
Financial liabilities measured at FVTPL are held principally for
the purpose of repurchasing in the near term, or form part of a
portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual
pattern of short-term profit-taking. Financial liabilities are
recognised on a trade date basis and are accounted for at
fair value, with changes in fair value and any gains or losses
recognised in the Income Statement as part of the non-interest
income. Transaction costs are expensed as incurred.
Financial liabilities measured at amortised cost
Deposits, subordinated notes and debentures are accounted
for at amortised cost. Interest on deposits, calculated using
the effective interest rate method, is recognised as interest
expense. Interest on subordinated notes and debentures,
including capitalised transaction costs, is recognised using the
effective interest rate method as interest expense.
Financial liabilities are designated at FVTPL when one of the
following criteria is met:
•
The designation eliminates or significantly reduces an
accounting mismatch which would otherwise arise; or
A group of financial liabilities are managed and their
performance is evaluated on a fair value basis, in
accordance with a documented risk management
strategy; or
The financial liability contains one or more embedded
derivatives which significantly modify the cash flows
otherwise required.
•
•
Financial liabilities designated at FVTPL are recorded in the
Balance Sheet at fair value. Any changes in fair value are
recognised in non-interest income in the Income Statement,
except for changes in fair value arising from changes in
the Group's own credit risk which are recognised in other
comprehensive income. Changes in fair value due to changes in
the Group’s own credit risk are not subsequently reclassified to
the Income Statement upon derecognition/extinguishment of
the liabilities.
14 Deposits and notes payable
Deposits
Customer 1
At call
Term
Group
2021
$m
2020
$m
Bank
2021
$m
2020
$m
38,103.1
19,812.6
29,025.0
21,691.6
38,115.3
19,812.6
29,022.4
21,691.6
Total customer deposits
57,915.7
50,716.6
57,927.9
50,714.0
Wholesale
Domestic 2
Total deposits
16,439.9
13,466.0
16,439.9
13,466.0
74,355.6
64,182.6
74,367.8
64,180.0
1 Customer deposits represent the sum of interest bearing, non-interest bearing and term deposits from retail and corporate customers.
2 Includes Term Funding Facility.
82 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
14 Deposits and notes payable (continued)
Group
Bank
Deposits by geographic location
Victoria
New South Wales
Queensland
South Australia/Northern Territory
Western Australia
Australian Capital Territory
Tasmania
Overseas
Total deposits
2021
$m
43,327.9
10,255.6
7,119.5
6,009.2
4,352.8
1,169.9
1,490.3
630.4
2020
$m
36,535.4
9,090.3
6,149.6
5,591.2
4,004.7
927.9
1,263.4
620.1
2021
$m
43,366.9
10,242.8
7,113.4
6,008.0
4,347.6
1,169.8
1,490.2
629.1
2020
$m
36,569.4
9,067.9
6,143.1
5,588.2
4,002.5
927.8
1,263.3
617.8
74,355.6
64,182.6
74,367.8
64,180.0
Total notes payable
3,597.7
3,503.5
-
-
Comparative information in the table above has been restated to align to the presentation in the current financial year. Current financial year disclosures reconcile to definitions applied
for regulatory reporting purposes.
Notes payable
The Group conducts an asset securitisation program through
which it packages and sells asset-backed securities to
investors. Notes payable are predominately interest-bearing
financial instruments issued through these securitisation
programs. The notes are initially recognised at fair value less
directly attributable transaction costs and subsequently
measured at amortised cost using the effective interest
method. Interest is recognised in the Income Statement.
Recognition and measurement
Deposits
All deposits are initially recognised at cost, being the fair value
of the consideration received net of issue costs. Subsequent to
initial recognition, interest-bearing borrowings are measured at
amortised cost using the effective interest method. Amortised
cost includes any issue costs and any discount or premium on
settlement.
For liabilities carried at amortised cost, gains and losses are
recognised in the Income Statement when the liabilities are
de-recognised.
Term Funding Facility
Wholesale domestic deposits include $4,718.3 million (2020:
$725.0 million) of funds drawn down under the Reserve Bank
of Australia's Term Funding Facility (TFF). The TFF was part of
a package of measures put in place by the Reserve Bank of
Australia in March 2020 to support the Australian economy.
The TFF is a three year facility. Prior to 4 November 2020,
funding provided under the TFF was at a fixed interest rate of
0.25% per annum. From 4 November 2020, the fixed interest
rate was changed to 0.1% per annum.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 8 3
15 Loan capital
Tier 1 loan capital
Tier 2 loan capital
Total Loan capital
Tier 1 loan capital
CPS2 (ASX Code: BENPE) 1
Oct 2014: 2,921,188 fully paid
$100 Convertible preference shares
Unamortised issue costs
Closing balance CPS2
CPS3 (ASX Code: BENPF) 2
June 2015: 2,822,108 fully paid
$100 Convertible preference shares
Unamortised issue costs
Closing balance CPS3
CPS4 (ASX Code: BENPG)
December 2017: 3,216,145 fully paid
$100 Converting preference shares
Unamortised issue costs
Closing balance CPS4
Total Preference shares
Capital notes (ASX Code: BENPH) 3
November 2020: 5,024,446 fully paid $100 Capital notes
Unamortised issue costs
Closing balance capital notes
Group
Bank
2021
$m
813.8
569.4
2020
$m
890.2
671.3
2021
$m
813.8
569.4
2020
$m
890.2
671.3
1,383.2
1,561.5
1,383.2
1,561.5
$m
$m
$m
$m
-
-
-
-
-
-
321.6
(2.8)
318.8
318.8
502.4
(7.4)
495.0
292.1
(0.6)
291.5
282.2
(1.4)
280.8
321.6
(3.7)
317.9
890.2
-
-
-
-
-
-
-
-
-
321.6
(2.8)
318.8
318.8
502.4
(7.4)
495.0
292.1
(0.6)
291.5
282.2
(1.4)
280.8
321.6
(3.7)
317.9
890.2
-
-
-
Total Tier 1 capital
813.8
890.2
813.8
890.2
1 Convertible preference shares (CPS2, ASX: BENPE) were redeemed in November 2020.
2 Convertible preference shares (CPS3, ASX: BENPF) were redeemed in June 2021.
3 Capital notes (ASX Code: BENPH) were issued in November 2020.
Tier 1 capital instruments
Recognition and measurement
In accordance with Australian Prudential Regulation Authority's
Basel III capital adequacy framework, these instruments form
part of the Group's Additional Tier 1 capital.
Tier 1 loan capital instruments are classified as debt within
the Balance Sheet and dividends/distributions are treated as
interest expense in the Income Statement.
Nature of Tier 1 capital instruments
Tier 1 loan capital instruments are long term in nature and are
perpetual, hence they do not have a fixed maturity date. The
instruments may be redeemed at the discretion of the Group
for a price per security on the redemption date. Any securities
not already converted will be converted into ordinary shares
on the mandatory conversion date specified in the issue's
prospectus located at https://www.bendigoadelaide.com.au/
investor-centre/prospectus/
If the Group is unable to pay a dividend/distribution because of
insufficient profits, the dividend/distribution is non-cumulative.
The securities rank ahead of ordinary shares in the event
of liquidation. Under certain circumstances, ranking may be
affected resulting in shares being converted or written off.
These instruments are initially recognised at fair value less
charges associated with the issue of the instrument. They are
subsequently measured at amortised cost using the effective
interest rate method.
The preference shares carry a dividend which will be
determined semi-annually or quarterly and payable half yearly
or quarterly in arrears. The dividend rate will be the floating
Bank Bill Rate plus the initial fixed margin, adjusted for franking
credits.
The capital notes carry a discretionary distribution which will
be determined and payable quarterly in arrears. The distribution
rate will be based on the floating Bank Bill Swap Rate.
84 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
15 Loan capital (continued)
Tier 2 loan capital
Tier 2 capital notes
Other subordinated debt
Total Tier 2 loan capital
Tier 2 capital instruments
Group
Bank
2021
$m
21.1
548.3
569.4
2020
$m
21.1
650.2
671.3
2021
$m
21.1
548.3
569.4
2020
$m
21.1
650.2
671.3
In accordance with Australian Prudential Regulation Authority's
Basel III capital adequacy framework, these instruments form
part of the Group's Tier 2 capital. Tier 2 capital instruments
rank ahead of Additional Tier 1 capital instruments.
Tier 2 loan capital instruments are initially recognised at fair
value less charges associated with the issue of the instrument.
They are subsequently measured at amortised cost using the
effective interest rate method.
Recognition and measurement
These instruments are classified as debt within the Balance
Sheet and the interest expense is recorded in the Income
Statement.
Amortised cost is calculated by taking into account any
discount or premium on acquisition over the period to maturity.
Gains and losses are recognised in the Income Statement
when the liabilities are derecognised.
Transactions that are in currencies other than in AUD are
restated to AUD equivalents each month with adjustments
taken directly to income.
Loan capital
Maturity analysis 1
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Over 5 years
No maturity date (instruments in perpetuity)
$m
-
444.0
918.1
21.1
$m
250.4
890.3
399.7
21.1
$m
-
444.0
918.1
21.1
$m
250.4
890.3
399.7
21.1
1,383.2
1,561.5
1,383.2
1,561.5
1 Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).
Capital management
Bendigo and Adelaide Bank Limited's key capital management
objectives are to:
• 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;
Optimise the level and use of capital resources to
enhance shareholder value through maximising financial
performance; and
Ensure that capital management is closely aligned with
the Group's business and strategic objectives.
•
•
The Group manages capital adequacy according to the
framework provided by the Australian Prudential Regulation
Authority (APRA) Standards.
Capital adequacy is measured at two levels:
•
Level 1 includes Bendigo and Adelaide Bank Limited 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 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 and Adelaide Bank Limited is required
to maintain a minimum prudential capital ratio at both Level
1 and Level 2 as determined by APRA. As part of the Group's
capital management process, the Board considers the Group's
strategy, financial performance objectives, 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 the Group's
Internal Capital Adequacy Assessment Process (ICAAP).
Regulatory capital is divided into Common Equity Tier 1, Tier 1
and Tier 2 capital.
Common Equity Tier 1 capital primarily consists of
shareholders equity less goodwill and other prescribed
adjustments.
Tier 1 capital is comprised of Common Equity Tier 1 plus other
highly ranked capital instruments acceptable to APRA.
Tier 2 capital is comprised primarily of subordinated debt
instruments acceptable to APRA.
Total capital is the aggregate of Tier 1 and Tier 2 capital.
The Group determines its regulatory capital requirements in
relation to credit risk, operational risk and market risk using the
Standardised Approach set by APRA. The Group satisfied its
minimum capital requirements at both Level 1 and 2 throughout
the financial year.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 8 5
16 Securitisation and transferred assets
Repurchase agreements
Securitisation
Group
Carrying amount of transferred assets 1
Carrying amount of associated liabilities 2
Fair value of transferred assets
Fair value of associated liabilities
Net position
Bank
Carrying amount of transferred assets
Carrying amount of associated liabilities 3
Fair value of transferred assets
Fair value of associated liabilities
Net position
2021
$m
5,222.9
5,222.9
2020
$m
1,976.9
1,976.9
2021
$m
3,564.0
3,597.7
3,556.4
3,633.2
2020
$m
3,488.2
3,503.5
3,478.4
3,494.5
(76.8)
(16.1)
Repurchase agreements
Securitisation
2021
$m
5,222.9
5,222.9
2020
$m
1,976.9
1,976.9
2021
$m
2020
$m
15,303.7
15,158.0
15,871.0
15,595.9
15,273.4
15,111.7
16,184.2
15,563.0
(910.8)
(451.3)
1 Represents the carrying value of the loans transferred to the trust.
2 Securitisation liabilities of the Group include RMBS notes issued by the SPEs and held by external parties.
3 Securitisation liabilities of the Bank include borrowings from SPEs including the SPEs that issue internally held notes for repurchase with central
banks, recognised on transfer of residential mortgages by the Bank.
Securitisation programs
The Group uses special purpose entities (SPEs) to securitise
customer loans and advances that it has originated, in order to
source funding, and/or for capital efficiency purposes. The loans
are transferred by the Group to the SPE's, which in turn issue
debt to investors. This transfer does not give rise to the
de-recognition of those financial assets for the Group.
The Group holds income and capital units in the trusts which
entitle the Group to any residual income of the SPE after all
payments to investors and costs of the entity have been met.
Trust investors have no recourse against the Group if cash flows
from the securitised loans are inadequate to service the trust
obligations. Liabilities associated with the SPE's are accounted
for on an amortised basis using the effective interest rate
method.
Repurchase agreements
Securities sold under agreement to repurchase are retained
in the Balance Sheet when the majority of the risks and
rewards of ownership remain with the Group. The counterparty
liability is included separately in the Balance Sheet when cash
consideration is received.
Consolidation
SPEs are consolidated by the Group where the Group has the
power to govern directly or indirectly decision making in relation
to financial and operational policies and receives the majority of
the residual income or is exposed to the majority of the residual
risks associated with the SPEs. The Group enters into interest
rate swaps and liquidity facilities with the trusts which are all at
arm's length to the SPEs.
Securitised and sold loans
The Group securitised loans totalling $3,963.7 million (2020:
$8,847.3 million) during the financial year. The Group invests in
some of its own securitisation programs by holding A and B
class notes equivalent to $12,602.9 million as at 30 June 2021
(2020: $12,437.8 million).
86 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
17 Derivative financial instruments
The Group uses derivative financial instruments primarily to
manage risk, including interest rate risk and foreign currency
rate risk. Note 19 outlines the risk management framework that
the Group applies.
Derivative instruments are contracts whose value is derived
from interest rates, foreign exchange rates, commodities, equity
prices or other financial variables. Most derivative instruments
can be characterised as interest rate contracts, foreign
exchange contracts, commodity contracts, equity contracts or
credit contracts. Derivative instruments are either exchange-
traded contracts or negotiated over-the-counter contracts.
Negotiated over-the-counter contracts include swaps,
forwards and options.
The Group enters into these derivative contracts for trading
purposes, as well as to manage its risk exposures (i.e. to
manage the Group's non-trading interest rate, foreign currency
and other exposures). Trading activities are undertaken to meet
the needs of the Group's customers, as well as for the Group’s
own account to generate income from trading operations.
All derivatives are recorded at fair value in the Balance Sheet.
The determination of the fair value of derivatives includes
consideration of credit risk, estimated funding costs and
ongoing direct costs over the life of the instruments. Inception
gains or losses on derivatives are only recognised where
the valuation is dependent only on observable market data,
otherwise, they are deferred and amortised over the life of
the related contract, or until the valuation inputs become
observable. Derivative financial instruments are valued in
accordance with Level 2 of the fair value hierarchy, as outlined
in Note 18.
The gains or losses resulting from changes in fair values of
trading derivatives and non-trading derivatives that do not
qualify for hedge accounting are included in the Income
Statement in Other revenue. Changes in the fair value of
derivatives that qualify for hedge accounting are recorded in
the Income Statement in Other revenue for fair value hedges
and are recorded in the Statement of Comprehensive Income
in Other comprehensive income for cash flow hedges.
Fair value hedges principally consist of interest rate swaps
that are used to protect against changes in the fair value of
fixed rate long term financial instruments due to movements in
interest rates and exchange rates.
Cash flow hedges consist principally of interest rate swaps
that are used to protect against exposures to movements in
future interest cash flows on assets and liabilities which bear
interest at variable rates.
The following table describes the fair values and notional
values of derivatives held for trading purposes and for risk
management purposes by type of instrument:
Group 2021
Group 2020
Notional
amount
Fair value
assets
Fair value
liabilities
Net fair
value
Notional
amount
Fair value
assets
Fair value
liabilities
Net fair
value
Derivative category
$m
$m
$m
$m
$m
$m
$m
$m
Derivatives held
for trading
Futures
159.0
Interest rate swaps
5,778.0
Foreign exchange
contracts
474.0
-
11.0
5.0
-
(10.5)
(0.8)
-
0.5
4.2
2,862.5
10,415.1
101.9
-
25.1
0.7
-
(10.0)
(0.6)
-
15.1
0.1
6,411.0
16.0
(11.3)
4.7
13,379.5
25.8
(10.6)
15.2
Derivatives held as
fair value hedges
Interest rate swaps
Derivatives held as
cash flow hedges
0.6
0.6
-
-
-
-
-
-
1.3
1.3
-
-
(0.2)
(0.2)
Interest rate swaps
17,935.5
17,935.5
43.1
43.1
(34.0)
(34.0)
9.1
9.1
34,120.6
34,120.6
80.6
80.6
(89.4)
(89.4)
(0.2)
(0.2)
(8.8)
(8.8)
Total derivatives
24,347.1
59.1
(45.3)
13.8
47,501.4
106.4
(100.2)
6.2
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 8 7
17 Derivative financial instruments (continued)
Bank 2021
Bank 2020
Notional
amount
Fair value
assets
Fair value
liabilities
Net fair
value
Notional
amount
Fair value
assets
Fair value
liabilities
Net fair
value
$m
$m
$m
$m
$m
$m
$m
$m
Derivative category
Derivatives held
for trading
Futures
159.0
Interest rate swaps
5,778.0
Foreign exchange
contracts
474.0
-
11.0
5.0
-
(10.5)
(0.8)
-
2,862.5
0.5
10,415.1
4.2
101.9
-
25.1
0.7
-
(10.0)
(0.6)
-
15.1
0.1
6,411.0
16.0
(11.3)
4.7
13,379.5
25.8
(10.6)
15.2
Derivatives held as
fair value hedges
Interest rate swaps
0.6
0.6
-
-
-
-
-
-
1.3
1.3
-
-
(0.2)
(0.2)
Derivatives held as
cash flow hedges
Interest rate swaps
17,935.5
17,935.5
43.1
43.1
(34.0)
(34.0)
9.1
9.1
34,120.6
34,120.6
80.6
80.6
(89.4)
(89.4)
(0.2)
(0.2)
(8.8)
(8.8)
Total derivatives
24,347.1
59.1
(45.3)
13.8
47,501.4
106.4
(100.2)
6.2
The interest rate swaps that are settled through the central
clearing body London Clearing House have a Nil fair value
as variation margin is paid or received on the daily mark to
market movement. The market valuation for the centrally
cleared derivates amounted to $5.3 million and $5.4 million
was received as variation margin receipts as at 30 June 2021.
The difference represented variable margin payable to London
Clearing House as at 30 June 2021, which is classified as due
to other financial institutions in the Balance Sheet. The total
notional value of the centrally cleared derivatives as at 30 June
2021 is $2.25 billion, which is included in Derivatives held as
cash flow hedges - Interest rate swaps in the tables above for
the Group and the Bank.
As at 30 June 2021 hedged cash flows are expected to occur
and affect the Income Statement as follows:
Group
2021
Forecast cash inflows
Forecast cash outflows
Forecast net cash inflows/(outflows)
2020
Forecast cash inflows
Forecast cash outflows
Forecast net cash inflows/(outflows)
Bank
2021
Forecast cash inflows
Forecast cash outflows
Forecast net cash inflows/(outflows)
2020
Forecast cash inflows
Forecast cash outflows
Forecast net cash inflows/(outflows)
Within 1 year
$m
43.4
(54.1)
(10.7)
$m
159.2
(147.6)
11.6
$m
43.4
(54.1)
(10.7)
$m
159.2
(147.6)
11.6
1 to 2
years
$m
46.0
(38.6)
7.4
$m
40.4
(47.9)
(7.5)
$m
46.0
(38.6)
7.4
$m
40.4
(47.9)
(7.5)
2 to 3
years
$m
41.0
(24.2)
16.8
$m
22.1
(22.3)
(0.2)
$m
41.0
(24.2)
16.8
$m
22.1
(22.3)
(0.2)
3 to 4
years
$m
18.6
(10.8)
7.8
$m
14.0
(12.7)
1.3
$m
18.6
(10.8)
7.8
$m
14.0
(12.7)
1.3
4 to 5
years
Greater
than 5 years
$m
4.5
(5.1)
(0.6)
$m
6.2
(5.1)
1.1
$m
4.5
(5.1)
(0.6)
$m
6.2
(5.1)
1.1
$m
0.2
(0.2)
-
$m
4.5
(4.5)
-
$m
0.2
(0.2)
-
$m
4.5
(4.5)
-
88 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
17 Derivative financial instruments (continued)
Revaluation movements arising from economic hedges
Revaluation movements arise from fair value hedges as well as derivatives that are not in a hedge relationship. The table below
summarises the amounts that were recognised in non-interest income - other revenue as a result of both fair value hedges and
economic derivatives that are not in a hedge relationship.
Revaluation gains /(losses) arising from economic hedges
Revaluation gains /(losses) arising from fair value hedges
Gains on hedging instruments
Loses on the hedged items attributable to the hedged risk
Revaluation losses arising from economic
derivatives that are not in a hedge relationship
Losses on derivatives
Group
Bank
2021
$m
0.1
(0.1)
2020
$m
-
-
2021
$m
0.1
(0.1)
2020
$m
-
-
(8.1)
(8.1)
(3.2)
(3.2)
(8.1)
(8.1)
(3.2)
(3.2)
Average price/rate of hedged instruments
The following table sets out the maturity profile and average price/rate of the hedging instruments used in the Group's non-dynamic
hedging strategies:
2021
Maturity
Less than
1 month
1 to 3
months
3 to 12
months
Cash flow hedges - interest rate swaps
Notional principal
Average fixed rate (%)
$m
-
-
$m
$m
1 to 5
years
$m
Over 5
years
$m
Total
$m
2,000.0
6,785.0
9,150.5
-
17,935.5
0.75%
0.52%
0.53%
2020
Maturity
Cash flow hedges - interest rate swaps
$m
$m
$m
Less than
1 month
1 to 3
months
3 to 12
months
1 to 5
years
$m
Over 5
years
$m
Total
$m
Notional principal
Average fixed rate (%)
3,825.0
4,650.0
6,850.0
7,935.6
-
23,260.6
2.48%
1.96%
2.04%
0.95%
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 8 9
17 Derivative financial instruments (continued)
Offsetting financial assets and financial liabilities
The Group presents its derivative assets and liabilities on a
gross basis.
Derivative financial instruments entered into by the Group are
subject to International Swaps and Derivatives Association
(ISDA) master netting agreements and other similar master
netting arrangements. These arrangements do not meet the
criteria for offsetting in the Balance Sheet. This is because
the right of set-off is only enforceable by the parties to
Amounts subject to enforceable master netting
or similar agreements
Amounts offset in the Balance Sheet
- Gross amounts recognised in the Balance Sheet
- Variation margin received
Reported in the Balance Sheet
Related amounts not set-off in the Balance Sheet
- Financial collateral (received)/pledged
Net amount
Financial assets not subject to enforceable
master netting or similar agreements
Total financial assets/(liabilities)
recognised in the Balance Sheet
Amounts subject to enforceable master netting
or similar agreements
Amounts offset in the Balance Sheet
- Gross amounts recognised in the Balance Sheet
- Variation margin received
Reported in the Balance Sheet
Related amounts not set-off in the Balance Sheet
- Financial collateral (received)/pledged
Net amount
Financial assets not subject to enforceable
master netting or similar agreements
Total financial assets/(liabilities)
recognised in the Balance Sheet
the agreement following an event of default, insolvency or
bankruptcy of the Group, or the counterparties, or following
other predetermined events. In addition, the Group and its
counterparties do not intend to settle on a net basis or to
realise the assets and settle the liabilities simultaneously.
The following table sets out the effect of netting arrangements
on derivative financial assets and derivative financial liabilities if
they were to be applied:
Group
Derivative
assets
Derivative
liabilities
Derivative
assets
Derivative
liabilities
2021
$m
$m
2020
$m
$m
62.6
(5.3)
57.3
(23.9)
33.4
1.8
(45.3)
-
(45.3)
33.5
(11.8)
102.0
(100.2)
-
-
102.0
(100.2)
(49.5)
52.5
69.7
(30.5)
-
4.4
-
59.1
(45.3)
106.4
(100.2)
$m
62.6
(5.3)
57.3
(23.9)
33.4
1.8
Bank
$m
$m
$m
(45.3)
-
(45.3)
33.5
(11.8)
102.0
(100.2)
102.0
(100.2)
(49.5)
52.5
69.7
(30.5)
-
4.4
-
59.1
(45.3)
106.4
(100.2)
For the purpose of this disclosure, financial collateral not set off in the Balance Sheet have been capped by relevant netting
agreements so as not to exceed the net amounts of financial assets/(liabilities) reported in the Balance Sheet (ie over-
collateralisation, where it exists, is not reflected in the tables).
90 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
18 Financial instruments
All financial instruments are initially recognised at fair value on the date of initial recognition depending on the classification of the
asset and liability.
a) Measurement basis of financial assets and liabilities
The following table details the carrying amount of the financial assets and liabilities by classification in the Balance Sheet.
Fair value through
profit or loss
Fair value
through other
comprehensive
income
Amortised cost
$m
$m
-
-
-
-
7,086.3
173.4
-
351.5
Total
$m
7,086.3
173.4
1,678.7
351.5
2,186.1
-
2,186.1
-
43.1
71,920.6
71,920.6
-
59.1
1,694.7
2,229.2
79,531.8
83,455.7
Group
2021
Financial assets
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or
loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other com-
prehensive income (FVOCI)
Net loans and other receivables
Derivatives
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Loan capital
Total financial liabilities
2020
Financial assets
Cash and cash equivalents
Due from other financial institutions
$m
-
-
1,678.7
-
-
-
16.0
-
-
-
11.3
-
11.3
$m
-
-
Financial assets fair value through profit or
loss (FVTPL)
5,411.1
Financial assets amortised cost
Financial assets fair value through other
comprehensive income (FVOCI)
Net Loans and other receivables
Derivatives
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Notes payable
Derivatives
Loan capital
Total financial liabilities
-
-
-
25.8
5,436.9
-
-
-
10.8
-
10.8
-
-
-
34.0
-
34.0
$m
-
-
-
-
814.8
-
80.6
175.4
74,355.6
3,597.7
-
1,383.2
175.4
74,355.6
3,597.7
45.3
1,383.2
79,511.9
79,557.2
$m
$m
1,189.6
137.0
-
325.3
-
64,980.4
-
1,189.6
137.0
5,411.1
325.3
814.8
64,980.4
106.4
895.4
66,632.3
72,964.6
-
-
-
89.4
-
89.4
145.1
64,182.6
3,503.5
-
1,561.5
145.1
64,182.6
3,503.5
100.2
1,561.5
69,392.7
69,492.9
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9 1
18 Financial instruments (continued)
a) Measurement basis of financial assets and liabilities (continued)
Fair value through
profit or loss
Fair value
through other
comprehensive
income
Amortised cost
$m
$m
-
-
-
-
6,631.6
173.4
-
135.5
Total
$m
6,631.6
173.4
1,678.7
135.5
$m
-
-
1,678.7
-
-
-
16.0
15,060.7
-
15,060.7
-
43.1
71,304.1
71,304.1
-
59.1
1,694.7
15,103.8
78,244.6
95,043.1
-
-
11.3
-
11.3
$m
-
-
5,411.1
-
-
-
25.8
-
-
34.0
-
34.0
$m
-
-
-
-
175.4
74,367.8
-
1,383.2
175.4
74,367.8
45.3
1,383.2
75,926.4
75,971.7
$m
$m
826.0
137.0
826.0
137.0
-
5,411.1
135.0
135.0
13,220.6
-
13,220.6
-
80.6
64,476.8
-
64,476.8
106.4
5,436.9
13,301.2
65,574.8
84,312.9
-
-
10.8
-
10.8
-
-
89.4
-
89.4
145.1
64,180.0
-
1,561.5
145.1
64,180.0
100.2
1,561.5
65,886.6
65,986.8
Bank
2021
Financial assets
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or
loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other com-
prehensive income (FVOCI)
Net loans and other receivables
Derivatives
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Derivatives
Loan capital
Total financial liabilities
2020
Financial assets
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or
loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other com-
prehensive income (FVOCI)
Net Loans and other receivables
Derivatives
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Derivatives
Loan capital
Total financial liabilities
92 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
18 Financial instruments (continued)
b) Fair value measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
Wherever possible, fair values have been calculated using
unadjusted quoted market prices in active markets for identical
instruments. A quoted market price in an active market
provides the most reliable evidence of fair value. For all other
financial instruments, the fair value is determined by using other
valuation techniques.
Valuation of financial assets and liabilities
Various valuation techniques are used to measure the fair value
of financial instruments. The technique adopted is dependent
upon the inputs available.
As part of the fair value measurement, the Group classifies its
assets and liabilities according to a hierarchy that reflects the
observability of significant market inputs. The three levels of the
hierarchy are defined as follows:
Level 1 - Quoted market prices
Financial instruments that have been valued by reference to
unadjusted quoted prices for identical financial assets in active
markets. Government bonds issued by the Commonwealth of
Australia have been included in this category.
Level 2 - Valuation technique using observable inputs
The fair value is determined using models whose inputs are
observable in an active market.
Level 3 - Valuation technique using significant unobservable
inputs
The fair value is calculated using significant inputs that are not
based on observable market data but that are most reflective
of the market conditions at the measurement date.
Financial assets and liabilities carried at fair value
The table below details financial instruments carried at fair
value, by Balance Sheet classification and hierarchy level:
Group
2021
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
2020
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
Bank
2021
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
2020
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
Level 1
Level 2
Level 3
$m
$m
187.2
561.4
-
-
$m
2,870.0
0.1
-
1,491.5
1,593.5
59.1
45.3
$m
2,541.1
796.1
106.4
$m
-
31.2
-
-
$m
-
18.6
-
Total
fair value
Total
carrying value
$m
$m
1,678.7
2,186.1
59.1
45.3
$m
5,411.1
814.8
106.4
1,678.7
2,186.1
59.1
45.3
$m
5,411.1
814.8
106.4
-
100.2
-
100.2
100.2
$m
$m
187.2
561.4
-
-
$m
1,491.5
14,468.1
59.1
45.3
$m
2,870.0
0.1
-
2,541.1
13,201.9
106.4
$m
-
31.2
-
-
$m
-
18.6
-
$m
$m
1,678.7
15,060.7
59.1
1,678.7
15,060.7
59.1
45.3
$m
45.3
$m
5,411.1
13,220.6
106.4
5,411.1
13,220.6
106.4
-
100.2
-
100.2
100.2
Transfers between levels are deemed to have occurred at the beginning of the reporting period in which instruments are
transferred. There were no transfers between levels during the year for the Group or Bank.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9 3
18 Financial instruments (continued)
Valuation methodology
Financial instruments - debt securities
Each month, independent valuations are determined by the
Group's Financial Risk & Modelling function. This involves an
analysis of independently sourced data that is deemed most
representative of the market. From this independent data which
is made available by other financial institutions, market average
valuations are calculated, and the value of debt securities are
updated.
Financial instruments - equity investments
Level 1 - Listed investments relates to equities held that are on
listed exchanges.
Level 3 - Unlisted investments are equity holdings in small
unlisted entities. Given there are no quoted market prices and no
observable inputs, assumptions reflective of market conditions
at the measurement date are used to approximate fair value.
Derivatives
Where the Group's derivative assets and liabilities are not traded
on an exchange, they are valued using valuation methodologies,
including discounted cash flow and option pricing models as
appropriate. The most significant inputs into the valuations are
interest rate yields which are developed from publicly quoted
rates.
Level 2 - Unlisted investments are equity holdings in unlisted
managed investment schemes. For managed scheme
investments the most recent prices provided by the fund
manager are used.
Movements in Level 3 portfolio
The following table provides a reconciliation from the beginning
balances to the ending balances for financial instruments which
are classified as Level 3:
Financial assets - equity investments
Opening balance
Valuations
Purchases
Transfers out
Closing balance
Group
Bank
2021
$m
18.6
12.6
-
-
2020
$m
19.0
(0.4)
-
-
2021
$m
18.6
12.6
-
-
2020
$m
19.0
(0.4)
-
-
31.2
18.6
31.2
18.6
Financial assets and liabilities carried at amortised cost
Valuation hierarchy
The table below details financial instruments carried at amortised cost, by Balance Sheet classification and hierarchy level:
Group
2021
Financial assets
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Financial liabilities
Due to other financial institutions
Deposits
Notes payable
Loan capital
Level 1
Level 2
Level 3
Total
fair value
Total carrying
amount
$m
$m
$m
$m
$m
-
-
-
-
-
-
-
850.3
6,949.2
173.4
351.5
-
-
-
6,949.2
6,949.2
173.4
351.5
173.4
351.5
-
71,985.9
71,985.9
71,920.6
175.4
74,375.3
3,631.5
568.1
-
-
-
-
175.4
175.4
74,375.3
74,355.6
3,631.5
1,418.4
3,597.7
1,383.2
1 Cash and cash equivalents excludes the balance of Notes and Coins.
94 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
18 Financial instruments (continued)
Financial assets and liabilities carried at amortised cost (continued)
Valuation hierarchy (continued)
Group
2020
Financial assets
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Financial liabilities
Due to other financial institutions
Deposits
Notes Payable
Loan capital
Bank
2021
Financial assets
Cash and cash equivalents 1
Due from other financial institutions
Financial assets - amortised cost
Net loans and other receivables
Financial liabilities
Due to other financial institutions
Deposits
Loan capital
2020
Financial assets
Cash and cash equivalents 1
Due from other financial institutions
Financial assets held to maturity
Net loans and other receivables
Financial liabilities
Due to other financial institutions
Deposits
Loan capital
Level 1
Level 2
Level 3
Total
fair value
Total carrying
amount
$m
$m
$m
$m
$m
-
-
-
-
-
-
-
885.7
1,059.9
137.0
325.3
-
-
-
1,059.9
137.0
325.3
1,059.9
137.0
325.3
-
65,145.4
65,145.4
64,980.4
145.1
64,285.9
3,494.2
666.6
-
-
-
-
145.1
64,285.9
3,494.2
1,552.3
145.1
64,182.6
3,503.5
1,561.5
$m
$m
$m
$m
$m
6,494.5
173.4
135.5
-
-
-
6,494.5
173.4
135.5
6,494.5
173.4
135.5
-
71,369.4
71,369.4
71,369.4
175.4
74,387.5
850.3
568.1
-
-
-
175.4
74,387.5
1,418.4
175.4
74,367.8
1,383.2
$m
$m
$m
$m
$m
696.2
137.0
135.0
-
-
-
696.2
137.0
135.0
696.2
137.0
135.0
-
64,641.8
64,641.8
64,476.8
145.1
64,283.3
885.7
666.6
-
-
-
145.1
64,283.3
1,552.3
145.1
64,180.0
1,561.5
-
-
-
-
-
-
-
-
-
-
-
-
1 Cash and cash equivalents excludes the balance of Notes and Coins.
Transfers between levels are deemed to have occurred at the beginning of the reporting period in which instruments are
transferred. There were no significant transfers between levels during the year for the Group or Bank.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9 5
18 Financial instruments (continued)
Valuation methodology
Cash and cash equivalents, due from/to other financial
institutions
The carrying value for these assets and liabilities are a
reasonable approximation of fair value.
Financial assets amortised cost
The fair values of financial assets held to maturity are
measured at amortised cost which approximates their fair
value given they are predominantly short-term in nature or have
interest rates which reprice frequently.
Net loans and other receivables
The carrying value of loans and other receivables is net of
specific and collective provisions. For variable rate loans,
excluding impaired loans, the carrying amount is a reasonable
estimate of fair value.
The fair value for fixed loans is calculated by utilising
discounted cash flow models, based on the maturity of the
loans. The discount rates used represent the rate the market
is willing to offer at arm's length for customers of similar credit
quality. The net fair value of impaired loans is calculated by
discounting expected cash flows using these rates.
Deposits
The carrying value of deposits at call is considered to represent
fair value given they are short-term in nature. The fair value for
all term deposits is calculated using a discounted cash flow
model applying market rates, or current rates for deposits of
similar maturities.
Notes payable
The fair value for all notes payable is calculated using a
discounted cash flow model applying independent market
rates and margins for similar financial instruments.
Loan capital
The fair value of preference shares and capital notes is based
on quoted market rates for the issue concerned as at year end.
The fair value of subordinated debt is calculated based on
quoted market prices. 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.
96 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management
Nature of risk
Our business is exposed to a broad range of financial and non-
financial risks.
The Group has identified the following material financial
risks that have the potential to adversely impact its financial
performance and financial position:
•
• Market Risk (Traded & Non-Traded); and
•
Liquidity Risk
Credit Risk;
Non-Financial Risks, including Operational Risk, are outlined
in the Risk Management Framework, Material Risks,
Business Risks and Uncertainties section of the 2021 Annual
Financial Report. The Board is ultimately responsible for
the management of risk which is achieved by establishing,
reviewing and overseeing the Group's Risk Management
Framework including its risk profile, risk appetite and risk
strategy. The framework provides a high-level description of
the material risks faced by the Group together with the policies
and procedures implemented to measure, monitor and manage
those risks.
The Board's role is supported by Board Committees; Board
Risk Committee (BRC) and Board Financial Risk Committee
(BFRC) and Management Committees; Asset and Liability
Management Committee (ALMAC), Operational Risk
Committee (ORC), Management Credit Committee (MCC)
and Rural Bank Management Credit Committee (RB MCC).
Further details regarding the Group's material risks including
our strategic approach to their management is contained
within the Directors' Report and the Corporate Governance
statement. Our Board committee charters are available on our
website.
Financial risk management
The Group's exposure to financial risks are considered
significant given financial instruments held by the Group
constitute the core contributors of financial performance
and position. An overview of the Group's key financial risks is
presented below.
Changes to the Group's external and internal operating
environments, such as those related to the COVID-19
pandemic, may impact one or more of the Group's material
financial risks. The Group continues to actively monitor the
impacts of the COVID-19 pandemic and take actions to
address the associated risks.
Credit risk
The Group is predominantly exposed to credit risk as a result
of its lending activities. Credit risk is defined as the risk of loss
of principal, interest and/or fees and charges resulting from a
borrower failing to meet a scheduled repayment or otherwise
failing to repay a loan.
The Group is also exposed to Counterparty Credit Risk, which
is the risk that a counterparty may default before the final
settlement of the transaction's cash flows. This risk is primarily
related to derivative instruments. Derivatives that are cleared
through a central clearing counterparty or an exchange have
less credit risk than over-the-counter derivatives and are
subject to relevant netting and collateral agreements.
At an operational level, business unit managers are responsible
for managing credit risks accepted in their business and for
maximising risk adjusted returns from their portfolios within the
approved Credit Risk Management Framework, risk appetite
and policies.
Authority to officers to approve credit risk exposures for
customers, is granted by the Chief Credit Officer in line with
the Delegated Lending Authority Policy. The Credit Risk
Management function is responsible for establishing policies,
monitoring trends impacting credit quality, setting credit limits
and authorising delegated lending authorities and where
required approving credit exposures. Financial Risk & Modelling
is responsible for monitoring Treasury counterparty credit limits
in line with the Group’s Counterparty Credit Limit Framework.
The Group utilises models to support the management of
Credit Risk. Governance of Risk Models is overseen by the Risk
Models Committee (RMC) and models are approved by the
Group’s MCC.
The Board has set a risk appetite for the maximum amount
of Credit Risk that it is willing to take, based on a percentage
of the Group’s capital that has been allocated to Credit Risk.
The BFRC has articulated additional secondary risk appetite
settings that support this primary risk appetite setting through
a number of selected Credit Risk measures. Credit Risk
appetite is reviewed and recommended by the MCC and or
RB MCC, and ultimately approved by the BFRC and Board.
The Group maintains a Credit Risk Management Framework
and supporting policies to ensure and facilitate effective
management of Credit Risk and maintains acceptable asset
quality. Stress testing is also undertaken on key portfolios to
support prudent management of Credit Risk.
Regular reporting provides confirmation of the effectiveness
of processes and highlights any trends or deterioration which
require attention. This enables portfolio monitoring by all levels
of management and the Board. Regular reporting is provided
to the Group’s MCC, RB MCC and BFRC.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9 7
19 Risk management (continued)
Credit risk (continued)
Maximum exposure to credit risk
The table below presents the maximum exposure to credit risk arising from Balance Sheet and off-Balance Sheet financial instruments.
The exposure is shown gross before taking into account any master netting, collateral agreements or other credit enhancements.
Group
Gross maximum exposure
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other comprehensive
income (FVOCI)
Other assets
Derivative assets
30 June 2021
Stage 1
Stage 2
Stage 3
$m
6,949.2
173.4
1,678.7
351.5
2,186.1
255.8
59.1
$m
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$m
6,949.2
173.4
1,678.7
351.5
2,186.1
255.8
59.1
Gross loans and other receivables
64,894.5
6,479.5
858.6
72,232.6
Commitments and contingent liabilities
Total credit risk exposure
76,548.3
6,479.5
858.6
83,886.4
10,701.3
87,249.6
-
-
10,701.3
6,479.5
858.6
94,587.7
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other comprehensive
income (FVOCI)
Other assets
Derivative assets
30 June 2020
Stage 1
Stage 2
Stage 3
$m
1,059.9
137.0
5,411.1
325.3
814.8
226.2
106.4
$m
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$m
1,059.9
137.0
5,411.1
325.3
814.8
226.2
106.4
Gross loans and other receivables
57,428.0
6,794.5
1,099.2
65,321.7
Commitments and contingent liabilities
Total credit risk exposure
65,508.7
6,794.5
1,099.2
73,402.4
10,012.7
75,521.4
-
-
10,012.7
6,794.5
1,099.2
83.415.1
98 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management (continued)
Credit risk (continued)
Maximum exposure to credit risk (continued)
Bank
Gross maximum exposure
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other comprehensive
income (FVOCI)
Other assets
Derivative assets
Shares in controlled entities
Gross loans and other receivables
Commitments and contingent liabilities
Total credit risk exposure
Cash and cash equivalents
Due from other financial institutions
Financial assets fair value through profit or loss (FVTPL)
Financial assets amortised cost
Financial assets fair value through other comprehensive
income (FVOCI)
Other assets
Derivative assets
Shares in controlled entities
Gross loans and other receivables
30 June 2021
Stage 1
Stage 2
Stage 3
$m
6,494.5
173.4
1,678.7
135.5
15,060.7
1,301.9
59.1
103.7
$m
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$m
6,494.5
173.4
1,678.7
135.5
15,060.7
1,301.9
59.1
103.7
64,036.5
6,479.5
1,099.2
71,615.2
89,044.0
6,479.5
1,099.2
96,622.7
10,701.3
99,745.3
-
-
10,701.3
6,479.5
1,099.2
107,324.0
30 June 2020
Stage 1
Stage 2
Stage 3
$m
696.2
137.0
5,411.1
135.0
13,220.6
1,297.3
106.4
134.5
$m
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$m
696.2
137.0
5,411.1
135.0
13,220.6
1,297.3
106.4
134.5
56,924.6
6,794.5
1,098.0
64,817.1
78,062.7
6,794.5
1,098.0
85,955.2
Commitments and contingent liabilities
10,012.7
-
-
10,012.7
Total credit risk exposure
88,075.4
6,794.5
1,098.0
95,967.9
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.
For contingent liabilities including financial guarantees granted,
it is the maximum amount that the Group would have to pay
if the guarantees were called upon. For loan commitments and
other credit-related commitments, it is generally the full amount
of the committed facilities.
For financial assets recognised in the Balance Sheet, the
maximum exposure to credit risk equals their carrying amount.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 9 9
19 Risk management (continued)
Credit risk (continued)
Concentration of credit risk
Concentration risk is managed by client or counterparty,
by geographical region and by industry sector. The Group
implements certain exposure and concentration limits in order to
mitigate the risk.
The maximum credit exposure to any client or counterparty as
at 30 June 2021 was $524.0 million (2020: $339.0 million) before
taking into account collateral or other credit enhancements and
$524.0 million (2020: $339.0 million) net of such protection.
Geographic concentration
Victoria
New South Wales
Queensland
South Australia/Northern Territory
Western Australia
Australian Capital Territory
Tasmania
Overseas/other
Total credit risk exposure
Geographic - based on the location of the counterparty or
customer.
The table below presents the maximum exposure to credit risk
categorised by geographical region. The exposures are shown
gross before taking into account any collateral held or other
credit enhancements.
Group
Bank
2021
$m
36,314.6
24,929.6
11,685.9
8,113.2
7,646.4
3,497.7
1,847.0
553.3
2020
$m
32,478.4
18,031.2
10,298.6
7,573.6
7,541.0
5,266.7
1,680.3
545.3
2021
$m
38,234.1
28,972.4
11,416.9
15,381.7
7,479.4
3,471.1
1,829.0
539.4
2020
$m
34,101.7
23,713.4
10,067.9
13,262.7
7,385.0
5,240.5
1,664.8
531.9
94,587.7
83,415.1
107,324.0
95,967.9
Industry Sector - is based on the industry in which the customer or counterparty are engaged.
The table below presents the maximum exposure to credit risk categorised by industry sector. The exposures are shown gross
before taking into account any collateral held or other credit enhancements.
Industry concentration
Accommodation and food services
Administrative and support services
Agriculture, forestry and fishing
Arts and recreation services
Construction
Education and training
Electricity, gas, water and waste services
Financial and insurance services
Health care and social assistance
Information media and telecommunications
Manufacturing
Margin lending
Mining
Other
Other services
Professional, scientific and technical services
Public administration and safety
Rental, hiring and real estate services
Residential/consumer
Retail trade
Transport, postal and warehousing
Wholesale trade
Total credit risk exposure
$m
383.6
53.7
$m
418.7
456.5
$m
396.3
53.7
$m
417.8
456.5
7,856.9
7,619.4
7,858.9
7,620.4
111.4
904.6
72.0
35.7
113.3
931.6
75.9
34.2
111.4
902.7
72.0
35.7
113.3
927.9
48.9
34.2
12,301.8
6,351.0
26,526.8
20,259.0
702.9
28.9
276.2
707.3
35.1
272.7
1,480.6
1,294.9
23.2
286.4
258.0
290.3
2,111.9
4,293.9
26.7
238.8
251.3
299.4
4,075.0
3,953.5
704.5
28.9
276.1
-
23.2
288.9
257.9
290.3
712.6
42.8
269.4
-
88.7
165.0
251.1
299.3
2,111.5
4,293.9
4,075.0
4,054.8
62,351.0
55,459.4
62,326.6
55,332.8
426.6
159.6
178.5
454.8
167.2
178.4
426.6
159.6
178.5
454.7
163.4
180.3
94,587.7
83,415.1
107,324.0
95,967.9
Comparative information in the two tables above has been restated to align to the presentation in the current financial year.
Current financial year disclosures reconcile to definitions applied for regulatory reporting purposes.
100 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management (continued)
Credit risk (continued)
Credit quality
The table below discloses the effect of movements in the gross carrying value of loans and other receivables, other financial assets held
at amortised cost and contingent liabilities issued by the Group on behalf of customers, to the different stages of the ECL model:
Group
Gross carrying amount as at 1 July 2020
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Stage 3
Collectively
assessed
provisions
$m
$m
59,337.4
2,376.4
(2,991.5)
(142.6)
6,794.5
(2,295.0)
3,150.5
(231.0)
$m
866.5
(81.4)
(159.0)
373.6
Individually
assessed
provisions
$m
232.7
-
-
-
Transfer from collectively assessed to individually
assessed provisions
(3.3)
(11.4)
(42.0)
56.7
Total
$m
67,231.1
-
-
-
-
New financial assets originated or purchased
18,813.6
364.6
11.9
Financial assets derecognised or repaid
(9,629.0)
(1,045.4)
(256.8)
Change in balances
Amounts written off against provisions
4,992.7
-
(247.3)
-
Gross carrying amount as at 30 June 2021
72,753.7
6,479.5
Gross carrying amount as at 1 July 2019
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New financial assets originated or purchased
Financial assets derecognised or repaid
Change in balances
Amounts written off against provisions
$m
$m
55,543.7
2,242.5
(3,229.5)
(245.6)
7,287.9
(2,183.2)
3,375.7
(294.7)
15,229.4
400.3
(8,651.3)
(1,537.6)
(1,528.4)
-
(219.3)
-
Gross carrying amount as at 30 June 2020
59,337.4
6,794.5
Bank
Gross carrying amount as at 1 July 2020
Stage 1
Stage 2
Stage 3
$m
$m
58,280.0
2,376.4
(2,991.5)
(142.6)
6,794.5
(2,295.0)
3,150.5
(231.0)
(23.4)
(34.6)
(68.7)
126.7
Transfer from collectively assessed to individually
assessed provisions
(3.3)
(11.4)
(42.0)
56.7
New financial assets originated or purchased
18,813.6
364.6
11.9
Financial assets derecognised or repaid
(9,629.0)
(1,045.4)
(256.8)
Change in balances
Amounts written off against provisions
4,763.2
-
(247.3)
-
Gross carrying amount as at 30 June 2021
71,466.8
6,479.5
Gross carrying amount as at 1 July 2019
Stage 1
Stage 2
Stage 3
Transfer from collectively assessed to individually
assessed provisions
New financial assets originated or purchased
Financial assets derecognised or repaid
Change in balances
Amounts written off against provisions
$m
$m
54,352.2
2,242.5
(3,229.5)
(245.6)
7,287.9
(2,183.2)
3,375.7
(294.7)
15,229.4
400.3
(8,651.3)
(1,537.6)
(1,394.2)
-
(219.3)
-
Gross carrying amount as at 30 June 2020
58,280.1
6,794.5
(23.4)
(34.6)
(68.7)
126.7
166.7
(384.0)
(83.6)
-
866.5
-
-
15,796.4
(10,572.9)
(68.9)
(106.6)
(1,766.0)
(106.6)
231.5
66,172.6
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 0 1
(60.0)
-
652.8
$m
901.3
(59.3)
(146.2)
540.3
166.7
(384.0)
(83.6)
-
866.5
$m
866.5
(81.4)
(159.0)
373.6
(60.0)
-
652.8
$m
901.3
(59.3)
(146.2)
540.3
-
-
19,190.1
(10,931.2)
(65.4)
(18.2)
4,620.0
(18.2)
205.8
80,091.8
$m
281.5
-
-
-
$m
64,014.4
-
-
-
-
-
-
15,796.4
(10,572.9)
(68.9)
(106.6)
(1,900.2)
(106.6)
232.7
67,231.1
$m
231.5
-
-
-
$m
66,172.5
-
-
-
-
-
-
19,190.1
(10,931.2)
(65.4)
(18.2)
4,390.5
(18.2)
204.6
78,803.7
$m
280.3
-
-
-
$m
62,821.7
-
-
-
-
19 Risk management (continued)
Credit risk (continued)
Credit quality (continued)
The table below discloses information about the credit quality of financial assets measured at amortised cost without taking into account
collateral or other credit enhancement. Unless specifically indicated, the amounts in the table represent gross carrying amounts.
Group
Neither past due or impaired
> High grade
> Standard grade
> Sub-standard grade
> Unrated
Past due or impaired
Stage 1
Stage 2
Stage 3
Stage 3
Collectively
assessed
provisions
Individually
assessed
provisions
$m
$m
$m
$m
Total
$m
51,974.8
28,923.0
1,035.8
4,863.8
452.2
361.5
3,476.1
1,647.3
135.6
859.0
-
-
-
-
652.8
652.8
-
-
-
-
(18.2)
52,336.3
32,399.1
2,683.1
4,999.4
2,169.8
205.8
94,587.7
Gross carrying amount as at 30 June 2021
87,249.6
6,479.5
$m
$m
$m
$m
$m
Neither past due or impaired
> High grade
> Standard grade
> Sub-standard grade
> Unrated
Past due or impaired
40,468.2
26,921.7
1,496.0
6,287.0
348.5
463.7
3,516.0
1,961.8
166.5
686.5
Gross carrying amount as at 30 June 2020
75,521.4
6,794.5
4.7
34.8
119.1
21.1
686.8
866.5
-
-
-
-
232.7
40,936.6
30,472.5
3,576.9
6,474.6
1,954.5
232.7
83,415.1
Bank
Neither past due or impaired
> High grade
> Standard grade
> Sub-standard grade
> Unrated
Past due or impaired
$m
$m
$m
$m
$m
64,757.6
28,876.5
1,035.8
4,790.9
525.1
361.5
3,476.1
1,647.3
135.6
859.0
-
-
-
-
652.8
652.8
-
-
-
-
205.8
65,119.1
32,352.6
2,683.1
4,926.5
2,242.7
205.8
107,324.0
Gross carrying amount as at 30 June 2021
99,985.9
6,479.5
$m
$m
$m
$m
$m
Neither past due or impaired
> High grade
> Standard grade
> Sub-standard grade
> Unrated
Past due or impaired
53,367.5
26,587.4
1,496.0
6,287.0
348.5
463.7
3,506.6
1,961.8
166.5
686.5
Gross carrying amount as at 30 June 2020
88,086.4
6,785.1
4.7
34.8
119.1
21.1
724.2
903.9
-
-
-
-
192.5
53,835.9
30,128.8
3,576.9
6,474.6
1,951.7
192.5
95,967.9
102 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management (continued)
Credit risk (continued)
Credit quality (continued)
The credit ratings range from high grade where there is a
very high likelihood of the asset being recovered in full to sub-
standard grade where there is concern over the obligor's ability
to make payments when due.
Credit risk stress testing is regularly performed to assess the
likelihood of loan default, to examine the financial strength of
borrowers and counterparties including their ability to meet
commitments under changing scenarios and to assess the
exposure and extent of loss should default actually occur.
Ageing
The following table presents the ageing analysis of past due
but not impaired loans and other receivables.
Loans and receivables which are 90 or more days past due
are not classified as impaired assets where the estimated net
realisable value of the collateral/security is sufficient to cover
the repayment of all principal and interest amounts due.
The exposures are shown net after taking into account any
collateral held or other credit enhancements.
Less than
30 days
31 to
60 days
61 to
90 days
More than
91 days
Group
Bank
2021
2020
2021
2020
$m
953.9
832.3
953.9
832.3
$m
274.6
268.5
274.6
268.5
$m
167.6
179.2
167.6
179.2
Total
$m
Fair value of
collateral
$m
$m
565.3
1,961.4
3,902.1
589.3
1,869.3
4,805.9
565.3
1,961.4
3,902.1
589.3
1,869.3
4,805.9
Climate change risk
Climate change risk includes the physical risks which cause
direct damage to assets, property and/or customers’ cashflows
as a result of rising global temperatures, as well as transition
risks which arise from the transition to a low-carbon economy.
The Group is predominantly exposed to climate change
risk through our lending activities whilst noting there is also
exposure through our supply chains and built assets such as
branches and offices. The Group is currently one year into a
three year climate change action plan and our understanding
of climate change risks and its management is being enhanced
as we execute the plan. For further information refer to the
Group’s 2021 Sustainability Report.
Liquidity risk
Liquidity Risk is defined as the risk that the Group is unable
to access funds, both anticipated and unforeseen, which
may lead to the Group being unable to meet its obligations
in an orderly manner as they arise or for going investment
opportunities. The principal objectives are to ensure that
all cash flow commitments are met in a timely manner and
prudential requirements are satisfied. In accordance with APRA
Prudential Standard 210, the Group manages a portfolio of
High Quality Liquid Assets (HQLA) and Alternative Liquidity
Assets (ALA) to cover defined projected net cash outflows over
a 30 day period, using the scenario based Liquidity Coverage
Ratio (LCR). APRA requires LCR ADIs to maintain a minimum
100%LCR. The Group monitors the stability and composition
of funding, including the calculation of the Net Stable Funding
Ratio (NSFR), which APRA also requires LCR ADIs to maintain
at a minimum of 100%.
At an operational level, Liquidity Risk is managed by Group
Treasury, which is responsible for ensuring compliance with
policy in executing its daily operations for managing cash
inflows and outflows to meet the Group’s obligations as and
when they fall due.
The Financial Risk & Modelling function provides independent
oversight of liquidity risk practices, calculation of LCR and
NSFR and preparing liquidity stress tests/scenarios.
The Group continues to manage the liquidity holdings in line
with the Board approved Funding Strategy, ensuring adequate
levels of HQLA, ALA and diversified sources of funding. In
meeting our liquidity requirement, the Group makes use of the
Reserve Bank of Australia (RBA) provided Committed Liquidity
Facility (CLF), and the RBA Term Funding Facility (TFF). Both
the CLF and the TFF contribute to the Groups LCR calculated
position.
The Group also maintains contingent liquidity in the form of
internal securitisation whereby the collateral can be presented
to the Reserve Bank of Australia for cash in extraordinary
circumstances such as systemic liquidity issues.
Liquidity Risk is managed in line with the Board approved
Risk Appetite and Framework. The Group Liquidity Risk
Management Framework is also supported by the Group
Liquidity Risk Management Policy and Standard, which are
regularly reviewed and updated to reflect prevailing market
conditions, changes in operational requirements and regulatory
obligations.
The Group has established a trigger framework to support
the Liquidity Risk management process, in particular, to alert
management of emerging or increased risk or vulnerability
in its liquidity position. This framework incorporates limits,
early warning indicators, triggers, monitoring and escalation
processes to ensure sufficient liquidity is maintained.
The Group undertakes scenario analysis to examine liquidity
under both “business as usual” and stressed scenarios. In
addition, the Group’s Contingency Funding Plan (CFP) outlines
the specific actions to deal with a liquidity related event.
Regular reporting is provided to ALMAC and BFRC.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 0 3
19 Risk management (continued)
Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual
maturities
The table below categorises the Group's financial liabilities
into relevant maturity periods based on the remaining period
at the reporting date to the contractual maturity date. The
amounts disclosed in the table represent all cash flows, on an
undiscounted basis, including all future coupon payments, both
principal and interest, and therefore may not reconcile with the
amounts disclosed in the Balance Sheet.
For foreign exchange derivatives and cross currency interest
rate swaps, the amounts disclosed are the gross contractual
cash flows to be paid. For interest rate swaps, the cash flows
are the net amounts to be paid, and have been estimated
using forward interest rates applicable at the reporting date.
Group
2021
Due to other financial institutions
Deposits
Notes payable
Derivatives - net settled
Other payables
Loan capital
At call
$m
175.4
Not longer
than 3
months
3 to 12
months
1 to 5
years
$m
-
$m
-
$m
-
Longer
than 5
years
$m
-
Total
$m
175.4
39,300.6
13,030.7
14,420.2
7,654.9
0.4
74,406.8
-
-
270.4
-
32.2
11.9
19.0
8.9
55.7
21.8
25.9
26.6
575.8
27.1
135.3
456.8
2,934.0
3,597.7
-
-
1,117.9
60.8
450.6
1,610.2
Total financial liabilities
39,746.4
13,102.7
14,550.2
8,849.9
4,052.3
80,301.5
Commitments and contingent liabilities
Total contingent liabilities and commitments
2020
Due to other financial institutions
Deposits
Notes payable
Derivatives - net settled
Other payables
Loan capital
10,701.3
10,701.3
$m
145.1
-
-
$m
-
-
-
$m
-
-
-
$m
-
-
-
10,701.3
10,701.3
$m
-
$m
145.1
31,842.4
17,565.9
11,296.5
3,582.5
1.2
64,288.5
-
-
276.2
-
105.6
22.6
18.0
7.4
42.0
50.1
20.8
286.5
574.9
53.5
162.6
679.4
2,781.0
3,503.5
2.8
20.0
807.5
129.0
497.6
1,780.8
Total financial liabilities
32,263.7
17,719.5
11,695.9
5,052.9
3,612.5
70,344.5
Commitments and contingent liabilities
10,012.7
Total contingent liabilities and commitments
10,012.7
Bank
2021
Due to other financial institutions
Deposits
Derivatives - net settled
Other payables
Loans payable to securitisation trusts
Loan capital
Total financial liabilities
-
-
$m
-
-
-
$m
-
-
-
$m
-
-
-
10,012.7
10,012.7
$m
-
$m
175.4
$m
175.4
39,312.7
13,030.7
14,420.2
7,654.9
0.4
74,418.9
-
249.8
-
-
11.9
19.0
-
8.9
21.8
25.9
-
27.1
135.3
-
-
60.8
430.0
-
15,303.7
15,303.7
26.6
456.8
1,117.9
1,610.2
39,737.9
13,070.5
14,494.5
8,274.1
16,422.0
91,999.0
Commitments and contingent liabilities
Total contingent liabilities and commitments
10,701.3
10,701.3
-
-
-
-
-
-
-
-
10,701.3
10,701.3
104 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management (continued)
Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual maturities (continued)
Bank
2020
Due to other financial institutions
Deposits
Derivatives - net settled
Other payables
Loans payable to securitisation trusts
Loan capital
Total financial liabilities
At call
$m
145.1
Not longer
than 3
months
3 to 12
months
1 to 5
years
$m
-
$m
-
$m
-
Longer
than 5
years
$m
-
Total
$m
145.1
31,839.8
17,565.9
11,296.5
3,582.5
1.2
64,285.9
-
253.2
-
-
22.6
18.0
-
7.4
50.1
20.7
-
53.5
162.2
2.8
20.0
129.0
474.1
-
15,158.0
15,158.0
286.5
679.4
807.5
1,780.8
32,238.1
17,613.9
11,653.8
4,477.6
15,989.5
81,972.9
Commitments and contingent liabilities
Total contingent liabilities and commitments
10,012.7
10,012.7
-
-
-
-
-
-
-
-
10,012.7
10,012.7
Market risk (including interest rate and currency risk)
Market risk is the risk that changes in market variables such
as interest rates, foreign exchange rates and equity prices will
impact the Group’s fair value or future cash flows of financial
instruments. The Group classifies its exposures to market risk
as either traded (the Trading Book) or non-traded (the Banking
Book).
The Board Financial Risk Committee (BFRC) has set additional
secondary risk appetite settings that support this primary risk
appetite setting. Traded market risk and IRRBB risk appetite
and limits are reviewed and endorsed by the Group’s Asset &
Liability Management Committee (ALMAC) and are ultimately
approved by the BFRC and Board.
Traded Market Risk is defined as the risk of loss owing to
changes in the general level of market prices or interest rates.
It arises from positions in interest rate instruments, equities,
foreign exchange and commodities. Traded Market Risk
arises from positions held in the Trading Book which consists
of securities held for both trading and liquidity purposes.
The Group conducts discretionary interest rate and foreign
exchange trading. This trading forms part of the trading book
activity within the liquidity management function. The trading
book positions include approved financial instruments, both
physical and derivative.
Non-traded market risk primarily represents Interest Rate
Risk in the Banking Book (IRRBB). IRRBB is the risk of loss in
earnings or in the economic value in the banking book as
a consequence of movements in interest rates. Non-traded
market risk arises predominantly from the Group’s general
lending activities as well as balance sheet funding activities.
At an operational level, market risk is primarily managed by
Group Treasury, which is responsible for ensuring that the
Group’s exposures are in compliance with market risk limits.
Group Treasury monitors significant developments in market
structure and pricing as part of their established market risk
management process. The Financial Risk & Modelling function
provides independent oversight of market risk practices and
owns the IRRBB model.
The Board has set a risk appetite for the maximum amount of
traded market risk and interest rate risk (IRR) that it is willing to
take, based on a percentage of the Group’s capital that has
been allocated to traded market risk and IRRBB.
The Trading Book portfolio consists of securities held for
trading and liquidity purposes and is an integral part of the
liquidity risk management function. Traded Market Risk is
managed in line with the Risk Appetite Statement, Board
approved Group Traded Market Risk Management Framework
and is supported by the Group Trading Book Policy. Market
risk for the Trading Book portfolio is managed and monitored
against market sensitivity limits as well as exposure limits.
ALMAC provides endorsement and approvals for the
positioning of the Trading Book taking into account current
interest rate movements, market credit conditions and Liquidity
Coverage Ratio (LCR) considerations.
Foreign currency trading (which forms part of the Trading Book)
is governed by a series of limits and its primary function is for
the purpose of providing the Group’s customers with access
to foreign exchange markets. Foreign exchange activities are
limited and are governed by conservative spot and forward
limits approved by BFRC.
Interest Rate Risk (IRR) is the risk that earnings (Net Interest
Income - NII) and/or Economic Value - EV) of the Group may
be adversely affected by movements in interest rates in current
or future periods. The Group’s approach to IRR management
focuses on the prudent management of IRR inherent in the
Balance Sheet, whilst balancing NII and EV within the Risk
Appetite, limits and tolerances set by the Board. The aim is
to manage the Group’s exposure to movements in interest
rates and reduce volatility in current and future earnings.
ALMAC provides endorsements and approvals relating to IRR
management, taking into account current market conditions,
forecast interest rate movements and balance sheet forecasts.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 0 5
19 Risk management (continued)
Market risk (including interest rate and currency risk) (continued)
IRRBB is managed in line with the Risk Appetite Statement,
Board approved Group Interest Rate Risk Management
Framework, and is supported by the Group Interest Rate Risk
in the Banking Book Policy and Standard. For IRRBB, the Group
considers the following risks:
•
•
•
•
•
Repricing Risk
Yield Curve Risk
Basis Risk
Optionality Risk
Net Interest Income (NII) Risk
The Group utilises Value at Risk (VaR) as a key measure of
IRRBB. VaR measures the potential loss in the value of an
asset or portfolio to a 99% confidence level over a 12 month
timeframe due to interest rate changes.
The Group also models a variety of scenarios to analyse the
Group’s exposure to IRRBB and project the potential impact.
This includes scenarios that would potentially have an extreme/
catastrophic impact on earnings. Modelling, scenario analysis
and methodologies are continuing to be actively developed.
Regular reporting is provided to ALMAC and the BFRC for both
traded and non-traded market risk.
The following table outlines the key measure for Traded Market
Risk. EV Sensitivity is based on the impact of a 50 basis point
parallel movement in rates.
VaR
Economic Value (EV) Sensitivity
Exposure at
year end
Average
during the
year
Exposure at
year end
Average
during the
year
30 June 2021
30 June 2020
$m
(1.0)
$m
(4.9)
$m
(3.5)
$m
(4.3)
The following table outlines the key measures for Non-Traded Market Risk (IRRBB). EV and NII Sensitivity are based on a static
representation of the Balance Sheet and the impact of instantaneous 200 basis point parallel and non-parallel shifts in rates.
VaR
VaR
Economic Value (EV) Sensitivity
Net Interest Income (NII) Sensitivity
Exposure at
year end
Average
during the
year
Exposure at
year end
Average
during the
year
30 June 2021
30 June 2020
$m
60.2
(69.0)
(62.5)
$m
75.3
(116.6)
(67.5)
$m
20.9
(102.4)
(49.5)
$m
16.5
(52.4)
(51.3)
106 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
19 Risk management (continued)
Market risk (including interest rate and currency risk) (continued)
Interest Rate risk
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.
for the effects of the assumed changes in interest rates. The
sensitivity of equity is analysed by the maturity of the asset or
swap, with sensitivity based on the assumption that there are
parallel shifts in the yield curve.
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 2021, including the effect of hedging instruments. The
sensitivity of equity is calculated by revaluing fixed rate financial
assets (including the effect of any associated hedges), and
swaps designated as cash flow hedges, at 30 June 2021
Taking into account the fact that the official cash rate in
Australia was 0.10% as at 30 June 2021, the table below
represents the change to the Group's profit for the relevant
financial year from a 25 basis point parallel rate shock. Where a
25 basis point parallel rate shock would result in an interest rate
which is below zero, the interest rate has been assumed to be
zero, that is, no negative interest rates have been used.
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
Group
Net interest income
Revaluation (losses)/gains arising on economic
hedges that are not in a hedge relationship
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Cash flow hedge reserve
Income tax effect on reserves at 30%
Effect on equity
Bank
Net interest income
Revaluation (losses)/gains arising on economic
hedges that are not in a hedge relationship
Income tax effect at 30%
Effect on profit
Effect on profit (per above)
Cash flow hedge reserve
Income tax effect on reserves at 30%
Effect on equity
2021
$m
28.1
(2.0)
(7.8)
18.3
18.3
1.5
(0.4)
19.4
28.1
(2.0)
(7.8)
18.3
18.3
1.5
(0.4)
19.4
2021
$m
(18.3)
0.2
5.4
(12.7)
(12.7)
(1.5)
0.4
(13.8)
(18.3)
0.2
5.4
(12.7)
(12.7)
(1.5)
0.4
(13.8)
2020
$m
7.7
(6.1)
(0.5)
1.1
1.1
(29.7)
8.9
(19.7)
7.7
(6.1)
(0.5)
1.1
1.1
(29.7)
8.9
(19.7)
2020
$m
(12.8)
3.2
2.9
(6.7)
(6.7)
29.7
(8.9)
14.1
(12.8)
3.2
2.9
(6.7)
(6.7)
29.7
(8.9)
14.1
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, where these derivatives are deemed effective.
Retail and business banking FX transactions are managed
by the Group's Financial Markets unit, with resulting risk
constrained by Board approved spot and forward limits.
Adherence to limits is independently monitored by the Financial
Risk & Modelling function.
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, as all borrowings through the Group's Euro
Medium Term Note program (EMTN) and Euro Commercial
Paper program (ECP) are fully hedged. At balance date the
principal of foreign currency denominated borrowings under
these programs was AUD $nil (2021: AUD $nil).
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 0 7
Funding and Capital Management
20 Share capital
Group
2021
Bank
2021
Issued and paid up capital
No. of shares
$m No. of shares
$m
Ordinary shares fully paid (ASX Code: BEN)
545,510,378
5,053.1 545,510,378
5,053.1
Employee Share Ownership Plan shares
-
(3.6)
-
(3.6)
Total issued and paid up capital
545,510,378
5,049.5 545,510,378
5,049.5
Movements in ordinary shares on issue
No. of shares
$m No. of shares
$m
Opening balance 1 July 2020
Bonus share scheme 1
Dividend reinvestment plan 2
Institutional placement
Underwriting issue 3
Shares issued for Loan Share Plan
Executive performance rights
530,779,195
4,909.3 530,779,195
4,909.3
232,760
-
232,760
4,213,290
41.0
4,213,290
71
-
71
-
41.0
-
10,624,730
105.7
10,624,730
105.7
1,297,625
-
8.7
0.2
1,297,625
-
8.7
0.2
Closing balance (includes Treasury shares) 30 June 2021
547,147,671
5,064.9 547,147,671
5,064.9
Less: Treasury shares
Opening balance 1 July 2020
No. of shares
$m No. of shares
-
-
-
$m
-
Net acquisitions during the period
(1,637,293)
(11.8)
(1,637,293)
(11.8)
Closing balance (excludes Treasury shares) 30 June 2021
545,510,378
5,053.1 545,510,378
5,053.1
Movements in Employee Share Ownership Plan
No. of shares
$m No. of shares
Opening balance 1 July 2020
Reduction in Employee Share Ownership Plan
Closing balance 30 June 2021
-
-
-
(4.3)
0.7
(3.6)
-
-
-
$m
(4.3)
0.7
(3.6)
Total issued and paid up capital
545,510,378
5,049.5 545,510,378
5,049.5
1 The Group issued 232,760 shares @ $9.72 as part of the December 2020 interim dividend under the Bonus Share Scheme.
2 The Group issued 4,213,290 shares @ $9.72 as part of the December 2020 interim dividend under the Dividend Reinvestment Plan.
3 The Group issued 10,624,730 shares @ $9.95 as part of the June 2021 final dividend.
108 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
20 Share capital (continued)
Group
2020
Bank
2020
Issued and paid up capital
No. of shares
$m No. of shares
$m
Ordinary shares fully paid (ASX Code: BEN)
530,779,195
4,909.3 530,779,195
4,909.3
Employee Share Ownership Plan shares
-
(4.3)
-
(4.3)
530,779,195
4,905.0 530,779,195
4,905.0
Movements in ordinary shares on issue
No. of shares
$m No. of shares
$m
Opening balance 1 July 2019
Bonus share scheme 1
Dividend reinvestment plan 2
Institutional placement
Share purchase plan
Share issue costs
Executive performance rights
491,575,157
4,575.9 491,575,157
4,575.9
585,341
-
585,341
5,191,883
42.9
5,191,883
26,766,596
250.0
26,766,596
6,660,218
44.8
6,660,218
-
-
(3.0)
(1.3)
-
-
-
42.9
250.0
44.8
(3.0)
(1.3)
Closing balance 30 June 2020
530,779,195
4,909.3 530,779,195
4,909.3
Movements in Employee Share Ownership Plan
No. of shares
$m No. of shares
Opening balance
Reduction in Employee Share Ownership Plan
Closing balance 30 June 2020
-
-
-
(5.4)
1.1
(4.3)
-
-
-
$m
(5.4)
1.1
(4.3)
Total issued and paid up capital
530,779,195
4,905.0 530,779,195
4,905.0
1 The Group issued 230,071 shares @ $11.14 for the June 2019 final dividend, and 355,270 shares were issued @ $6.40 December 2019 interim
dividend under the Bonus Share Scheme.
2 The Group issued 2,037,832 shares @ $11.14 for the June 2019 final dividend, and 3,154,051 shares were issued @ $6.40 December 2020 interim
dividend under the Dividend Reinvestment Plan.
Nature of issued capital
Recognition and measurement
Ordinary shares (ASX code: BEN)
The Group does not have authorised capital. Ordinary shares
are fully-paid and have no par value. Each ordinary share
entitles the holder to one vote, either in person or by proxy, at
a shareholder meeting. Ordinary shares entitle the holder to
participate in dividends and, in the event of the Group winding
up, to a share of the proceeds in proportion to the number of
and amounts paid on the shares held.
Ordinary shares are classified as equity. Issued ordinary capital
is recognised at the fair value of the consideration received
net of transaction costs (net of any tax benefit). Dividends are
recognised as a distribution from equity in the year that they are
declared.
Employee Share Ownership Plan 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.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 0 9
21 Retained earnings and reserves
Group
Bank
Retained earnings movements
Opening balance
Impact of adoption of new accounting standards 1
Restated opening balance
Profit for the year
Share based payment
Operational risk reserve
Movements in general reserve for credit losses
Rural Bank consolidation adjustments
Transfer from asset revaluation reserve
Dividends
Deregistration of subsidiary companies
Defined benefits actuarial adjustment (after tax)
Closing balance
Reserve movements
Employee benefits reserve
Opening balance
Net increase/(decrease) in reserve
Closing balance
Asset revaluation reserve - property
Opening balance
Transfer asset revaluation reserve to retained earnings
Net revaluation decrements
Tax effect of net revaluation decrements
Closing balance
Revaluation reserve - Equity Investments at FVOCI
Opening balance
Net unrealised gains/(losses)
Tax effect of net unrealised (losses)/gains
Closing balance
Revaluation reserve - Debt Securities at FVOCI
Opening balance
Transfer from asset revaluation reserve to income
Net unrealised (losses)/gains
Tax effect of revaluations
Closing balance
2021
$m
805.9
-
805.9
524.0
1.3
-
(18.1)
-
-
2020
$m
987.3
(24.7)
962.6
192.8
1.0
(0.4)
(9.3)
(20.4)
0.8
2021
$m
427.6
-
427.6
427.7
1.3
-
(18.1)
-
-
2020
$m
562.9
(24.7)
538.2
262.8
1.0
-
(9.3)
(43.9)
-
(146.3)
(320.3)
(146.3)
(320.3)
-
(0.8)
-
(0.9)
(9.0)
(0.8)
-
(0.9)
1,166.0
805.9
682.4
427.6
$m
8.9
0.7
9.6
$m
-
-
-
-
-
$m
0.2
13.5
(4.0)
9.7
$m
1.0
-
(0.5)
0.2
0.7
$m
11.0
(2.1)
8.9
$m
1.1
(0.8)
(0.7)
0.4
-
$m
0.4
(0.3)
0.1
0.2
$m
-
0.1
1.4
(0.5)
1.0
$m
8.9
0.7
9.6
$m
-
-
-
-
-
$m
-
12.7
(3.8)
8.9
$m
(15.3)
-
304.0
(91.2)
197.5
$m
11.0
(2.1)
8.9
$m
-
-
-
-
-
$m
-
-
-
-
$m
16.6
-
(45.6)
13.7
(15.3)
1 The Group applied AASB 16 Leases from 1 July 2019. Prior periods have not been restated.
110 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
21 Retained earnings and reserves (continued)
Reserve movements (continued)
Operational risk reserve
Opening balance
Movement operational risk reserve
Closing balance
Cash flow hedge reserve
Opening balance
Mark-to-market movements
Tax effect of mark-to-market movements
Closing balance
General reserve for credit losses (GRCL)
Opening balance
Increase in GRCL
Closing balance
Acquisition reserve
Opening balance
Rural Bank consolidation adjustments
Closing balance
Total reserves
Nature and purpose of reserves
Employee benefits reserve
The reserve records the value of equities issued to non-
executive employees under the Employee Share Ownership
Plan and the value of deferred shares and rights granted to
Executive employees under the Employee Salary Sacrifice,
Deferred Share and Performance Share Plan. Further details
regarding these employee equity plans are disclosed within
Note 32.
Asset revaluation reserve - property
The reserve records revaluation adjustments to the Group's
property assets.
Revaluation reserve - Equity Investments at FVOCI
The reserve records fair value changes in relation to equity
investments held at FVOCI.
Revaluation reserve - Debt Securities at FVOCI
The reserve records fair value changes in assets classified as
debt securities.
Group
2021
2020
$m
4.2
-
4.2
$m
(13.6)
32.5
(9.8)
9.1
$m
86.6
18.1
104.7
$m
-
-
-
$m
3.8
0.4
4.2
$m
0.6
(20.3)
6.1
(13.6)
$m
77.3
9.3
86.6
$m
(20.4)
20.4
-
Bank
2021
$m
-
-
-
$m
(13.6)
32.5
(9.8)
9.1
$m
86.6
18.1
104.7
$m
-
-
-
2020
$m
-
-
-
$m
0.6
(20.3)
6.1
(13.6)
$m
77.3
9.3
86.6
$m
-
-
-
138.0
87.3
329.8
66.6
Operational risk reserve
The reserve is required to meet Sandhurst Trustees Limited
licence requirements.
Cash flow hedge reserve
The reserve records mark-to-market movements in relation to
derivatives that are determined to be in an effective cash flow
hedge relationship.
General reserve for credit losses
APRA Prudential standard, APS 220 Credit Quality, requires a
reserve to be held to recognise estimated future credit losses
which may arise over the life of the Group's lending portfolio.
Acquisition reserve
The reserve records the difference between the carrying value
of the non-controlling interest and the consideration paid to
acquire the remaining interest of the non-controlling interest.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1 1
Other Assets and Liabilities
22 Investment property
Investment property values reflect the Group's investment in residential real estate through the Homesafe Trust. The investments
represent shared equity interest alongside the original home owners in Sydney and Melbourne residential properties.
Opening balance
Additions
Disposals
Homesafe revaluation gain 1
Total investment property
Group
2021
$m
779.8
31.6
(43.5)
133.8
901.7
2020
$m
734.5
59.1
(46.8)
33.0
779.8
Bank
2021
$m
-
-
-
-
-
2020
$m
-
-
-
-
-
1 Homesafe revaluation income in Note 3 of $137.7m (2020: $36.0m), includes Homesafe revaluation gain and the profit/(loss) recognised on each
contracts' completion.
Recognition and measurement
Investment properties are measured initially at cost, including
transaction costs and are then stated at fair value. Gains or
losses arising from changes in the fair values of investment
properties are recognised in the Income Statement in the year
in which they arise.
Valuation methodology
Subsequent to initial recognition, fair value is determined by
discounting the expected future cash flows of the portfolio,
taking into account the restrictions on the ability to realise the
investment property due to contractual obligations.
Assumptions used in the modelling of future cashflows are
sourced from market indices of property values (Residex) and
long term growth/discount rates appropriate to residential
property and historical experience of contracts that have been
closed out. The discounted cash flow model is prepared on a
monthly basis. Inputs that form part of the discounted cash
flow model include rates of property appreciation, discount
rates, selling costs, mortality rates and future CPI increases.
The Group has revised the assumptions upon which the
Homesafe valuation is calculated to ensure consistency with
the Group’s forecasts for the property market as determined
by the Economic Outlook Committee, taking into account
the specific characteristics of the portfolio. The Group has
applied a discount rate of 5.75% (2020: 5.75%) and property
appreciation rates of 3.0% for the first year, 3.0% for the
second year, and 4.0% per annum thereafter (2020: -4.0% for
the first year, 3.0% for the second year, and 4.0% per annum
thereafter).
Fair value measurement
There are different levels of fair value measurement. When
fair value is calculated using inputs that are not based on
observable market data, then assets will be considered as
Level 3 fair value. Investment property has been categorised as
a Level 3 fair value based on the inputs outlined above.
Sensitivity of Level 3 fair value measurements to reasonably possible alternative assumptions
Valuation
technique
Significant
unobservable inputs
Range of estimates
(weighted -average)
for unobservable
inputs
Fair value
measurement
sensitivity to
unobservable inputs
Effect of reasonably
possible alternative assumptions
Favourable
change
Unfavourable
change
Discounted
cash flow
Rates of property
appreciation ~ long-
term growth rate 4%
$901.7m
3% ~ 5%
Discount rates
~ 5.75%
$901.7m
4.75% ~ 6.75%
Significant increases
in these inputs would
result in higher fair
values.
Significant increases
in these inputs would
result in lower fair
values.
$81.2m
($71.5m)
$100.9m
($86.3m)
Where valuation techniques use non-observable inputs that are
significant to a fair value measurement in its entirety, changing
these inputs will change the resultant fair value measurement.
The most significant inputs impacting the carrying value of
the investment property are the long-term growth rates and
the discount rates. There are interdependencies between a
number of the assumptions made which mean that no single
factor is likely to move independent of others, however, the
sensitivities disclosed above assume all other assumptions
remain unchanged.
112 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
23 Goodwill and other intangible assets
Group
Goodwill
Software
Customer
relationship
Other acquired
intangibles1
Trustee
licence
Carrying amount as at 1 July 2020
Additions
Write off on disposal
Amortisation charge
$m
1,440.3
-
(2.8)
-
Closing balance as at 30 June 2021
1,437.5
Carrying amount as at 1 July 2019
Additions
Impairment charge
Accelerated amortisation charge
Amortisation charge
$m
1,440.3
-
-
-
-
Closing balance as at 30 June 2020
1,440.3
Bank
$m
Carrying amount as at 1 July 2020
1,377.5
Additions
Write off on disposal
Amortisation charge
5.7
(2.8)
-
Closing balance as at 30 June 2021
1,380.4
Carrying amount as at 1 July 2019
Additions
Impairment charge
Accelerated amortisation charge
Amortisation charge
1,360.8
16.7
-
-
-
Closing balance as at 30 June 2020
1,377.5
$m
104.8
18.5
-
(27.9)
95.4
$m
228.1
40.2
(113.4)
(19.0)
(31.1)
104.8
$m
104.7
18.5
-
(27.9)
95.3
227.6
40.1
(113.4)
(18.5)
(31.1)
104.7
$m
5.5
-
-
(0.9)
4.6
$m
1.1
5.5
-
-
(1.1)
5.5
$m
5.2
-
-
(0.6)
4.6
0.2
5.5
-
-
(0.5)
5.2
$m
5.6
-
-
(2.1)
3.5
$m
7.7
-
-
-
(2.1)
5.6
$m
3.3
-
-
(1.3)
2.0
4.6
-
-
-
(1.3)
3.3
Total
$m
1,564.6
18.5
(2.8)
(30.9)
$m
8.4
-
-
-
8.4
1,549.4
$m
8.4
-
-
-
-
$m
1,685.6
45.7
(113.4)
(19.0)
(34.3)
8.4
1,564.6
$m
$m
-
-
-
-
-
-
-
-
-
-
-
1,490.7
24.2
(2.8)
(29.8)
1,482.3
1,593.2
62.3
(113.4)
(18.5)
(32.9)
1,490.7
1 These assets include customer lists, management rights and trade names.
Intangible assets (other than goodwill)
Recognition and measurement
Intangible assets acquired separately are measured at cost
on initial recognition. Intangible assets acquired in a business
combination are measured at fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost
less accumulated amortisation and impairment losses. Intangible
assets with a finite life are amortised over their useful life on a
straight line basis or in line with the expected benefit realisation
and are tested at least annually for impairment or when there
is an indicator that impairment may exist. Intangible assets with
indefinite useful lives are tested for impairment in the same way
as goodwill. The amortisation period and method are reviewed at
each financial year end for all intangible assets.
Software includes both purchased and internally generated
software. The cost of internally generated software comprises
all directly attributable costs necessary to create, produce
and prepare the software to be capable of operating in the
manner intended by management. Costs incurred in the ongoing
maintenance of software are expensed as incurred.
Gains or losses arising from the disposal of an intangible asset
are measured as the difference between the sale proceeds and
the carrying amount of the asset and are included in the Income
Statement in the year of disposal.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1 3
23 Goodwill and other intangible assets (continued)
Intangible assets (other than goodwill) (continued)
Recognition and measurement (continued)
Software-as-a-Service (SaaS) arrangements
The Group enters into arrangements with software providers
which provide the Group with the right to access the suppliers'
cloud-based software over a contracted period. The Group
incurs ongoing access fees for use of the software, in addition
to costs in implementing the service. Ongoing access fees are
expensed over the contract period. Where implementation
costs relate to the development of software or code for
on-premise systems that the Group controls; the Group may
capitalise these costs to the extent they meet the recognition
criteria for an intangible asset. To the extent implementation
costs relate to configuring or customising a SaaS providers'
software, the Group will make an assessment of whether
to expense the costs over the contract period or as the
configuration and customisation services are performed based
on:
1. Who performs the configuration and customisation
services; and (if applicable)
2. Whether the performance obligations in the contract are
distinct.
In completing the impairment tests for the Group’s intangibles,
management is required to make judgements, estimates
and assumptions that affect the recoverable amount of the
asset. Management make these judgements, estimates and
assumptions on information available when the financial
statements are prepared. Changes to these judgements,
estimates and assumptions may occur in the future which
are beyond the control of the Group. Such changes will be
reflected in the assumptions when they occur.
A summary of the policies applied to the Group's intangible
assets (excluding goodwill) are as follows:
Useful lives
Method used
Internally generated/
acquired
Trustee Licence
Software/
development costs
Intangible assets acquired
in a business combination
Indefinite
Finite
Finite
Not amortised or
revalued
Acquired
Straight line or in line with
expected benefit realisation
over 2.5 to 10 years
Straight line over
life of asset (2 - 15yrs)
Internally generated
or acquired
Acquired
Impairment test/recover-
able amount testing
Annually and when an indicator
of impairment exists
Annually and when an indicator
of impairment exists
Annually and when an indicator
of impairment exists
Key assumptions and estimates
Cash flows
The recoverable amount of each CGU is determined using
a value in use calculation. In determining value in use, the
estimated future cash flows for each CGU are discounted to
their present value using a post-tax discount rate. The basis
for estimated future cash flows is the Group's target which is
developed annually and approved by management and the
Board, and the Group's Five-Year Strategic Plan. A terminal
growth rate is applied to extrapolate cash flows beyond
the initial five year period for each CGU. The value in use
calculations are compared against both internal and external
valuations prepared using various approaches to calculate the
Group's fair value less cost to sell.
Goodwill
Recognition and measurement
Goodwill acquired in a business combination is initially
measured at cost. Cost is measured as the consideration
paid for the business minus the fair value of the identifiable
net assets acquired. Following initial recognition, goodwill is
measured at cost less accumulated impairment losses. Where
a business is divested, goodwill attributable to the sale is
measured on the basis of the relative value of the operation
disposed of and the portion of the CGU retained.
Impairment of goodwill
Goodwill is allocated to cash generating units (CGUs) for
the purposes of impairment testing, which is undertaken at
the lowest level at which goodwill is monitored for internal
management purposes. Impairment testing is performed at
least annually, and whenever there is an indication of
impairment, by comparing the recoverable amount of a CGU
with its carrying amount. The carrying amount of a CGU is
based on its assets, liabilities and allocated goodwill. The
recoverable amount of a CGU is the higher of its fair value less
cost to sell and its value in use. If the recoverable amount is less
than the carrying value, an impairment loss is charged to the
Income Statement.
The Group has three CGUs which are aligned to the Group's
segments, namely; Consumer, Business and Agribusiness.
114 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
23 Goodwill and other intangible assets (continued)
Goodwill (continued)
Key assumptions and estimates (continued)
The assumptions made in determining value in use have been
based on reasonable and supportable information as at 30
June 2021 and include the following:
•
Cash flows are aligned to the Group's FY22 target and
Five-Year Strategic Plan, with specific adjustments as
required by accounting standards or for non-cash items.
Cash flows are based on past performance, established
divisional strategies and management's expectations of
future conditions (including the expected tangible benefits
from the Board approved transformation initiatives).
Terminal growth rate of 2.5% (June 2020: 2.5%), as a
representation of long-term growth rates, including
inflation, in Australia.
•
•
Post-tax discount rate
The post-tax discount rate used is based on the weighted
average cost of capital for each CGU and reflects current
market assessments of the risks specific to the CGU for which
future estimates of cash flows have not been adjusted. At
30 June 2021, management revised the post-tax discount
rate and removed the risk premium that was included at
30 June 2020. The risk premium was included due to the
increased estimation uncertainty at that time as a result of the
COVID-19 pandemic.
The table below contains the carrying value of goodwill
and other indefinite useful life intangible assets for each
CGU, together with the post-tax discount rates used in the
calculation of the recoverable amount.
Goodwill
Other intangible assets 1
Post-tax discount rate
Consumer
Business
Agribusiness
2021
$m
2020
$m
1,194.8
1,197.6
152.1
90.6
152.1
90.6
2021
2020
$m
8.4
-
-
$m
8.4
-
-
1 Refers to intangible assets with an indefinite useful life.
2021
$m
10.15%
10.15%
10.45%
2020
$m
10.33%
10.33%
10.63%
Management has determined that there is no impairment of goodwill for the year ended 30 June 2021.
24 Other assets
Accrued income
Prepayments
Sundry debtors
Accrued interest
Deferred expenditure
Total other assets
Group
Bank
2021
$m
28.1
41.3
132.8
123.0
87.4
412.6
2020
$m
27.8
40.4
91.0
135.2
37.1
331.5
2021
$m
21.7
41.3
2020
$m
24.8
40.3
1,203.7
1,193.2
98.2
87.4
104.1
37.1
1,452.3
1,399.5
Recognition and measurement
Prepayments and sundry debtors
Prepayments and sundry debtors are recognised initially at
fair value and then subsequently measured at amortised cost
using the effective interest rate method. Collectability of sundry
debtors is reviewed on an ongoing basis. Debts that are known
to be uncollectable are written off when identified.
Accrued interest
Accrued interest is interest that has been recognised as income
on an accrual basis using the effective interest rate method, but
is yet to be charged to the loan or receivable.
Deferred expenditure
Deferred expenditure relating to projects is capitalised to the
Balance Sheet when it is probable the future economic benefits
attributable to the asset will flow to the Group. The cost model
is applied which requires the asset to be carried at cost less any
impairment losses. When the project has been completed these
items are transferred to software intangible assets. Refer to Note
23 for further information.
The carrying value of deferred expenditure is reviewed for
impairment every six months when the asset is not yet available
for use, or more frequently when an indicator of impairment
arises.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1 5
25 Other payables
Lease liability
Accrued expenses and outstanding claims
Accrued interest
Prepaid interest
Total other payables
Group
Bank
2021
$m
180.3
254.0
51.1
16.4
501.8
2020
$m
221.4
260.0
105.9
16.1
603.4
2021
$m
179.6
250.7
51.1
-
481.4
2020
$m
220.9
253.0
105.9
-
579.8
Recognition and measurement
Lease liability
AASB 16 Leases requires that a lease liability is recorded in the
Balance Sheet at the inception of a lease contract. The lease
liability is initially measured at the present value of the lease
payments that have not been paid at the commencement
date, discounted using the Group’s incremental borrowing rate.
The lease liability is subsequently measured at amortised cost
using the effective interest method. It is remeasured when there
is a lease modification that is not accounted for as a separate
lease, a change in index or rate applicable, a change in the
amount payable under a residual value guarantee, or if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option.
Accrued expenses
Accrued expenses are carried at amortised cost, which is the
fair value of the consideration to be paid in the future for goods
and services received.
Accrued interest
Accrued interest is the interest that is recognised as an
expense in the Income Statement but has yet to be paid to the
customers' liability account.
Interest is recognised using the effective interest rate method.
Prepaid interest
Prepaid interest is the interest received from customers in
advance. This interest is recognised in the Income Statement
using the effective interest rate method.
116 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
26 Provisions
Employee entitlements
Make good provision
Other 1
Closing balance
Group
Bank
2021
$m
104.1
12.9
3.5
120.5
2020
$m
98.2
13.5
2.7
114.4
2021
$m
104.1
12.9
3.4
120.4
2020
$m
98.2
13.5
2.7
114.4
1 Other provisions comprises of various other provisions including reward programs and dividends.
Movements in provisions (excluding employee entitlements)
Group
Opening balance
Additional provision
recognised
Impact of adoption of new
accounting standard 1
Amounts utilised
during the year
Closing balance
Bank
Opening balance
Additional provision
recognised
Impact of adoption of new
accounting standard 1
Amounts utilised
during the year
Closing balance
Property Rent
Make Good Provision
Other
Total
2021
$m
-
-
-
-
-
$m
-
-
-
-
-
2020
2021
2020
2021
2020
2021
2020
$m
19.0
-
$m
13.5
0.2
$m
-
0.1
$m
2.7
$m
4.9
$m
16.2
$m
23.9
147.8
320.5
148.0
320.6
(19.0)
-
14.4
-
-
-
(4.6)
-
-
$m
19.0
-
(0.8)
(1.0)
(147.0)
(322.7)
(147.8)
(323.7)
12.9
13.5
$m
13.5
0.2
$m
-
0.1
3.5
$m
2.7
2.7
$m
4.8
16.4
16.2
$m
16.2
$m
23.8
147.8
320.5
148.0
320.6
(19.0)
-
14.4
-
-
-
(4.6)
-
-
(0.8)
(1.0)
(147.1)
(322.6)
(147.9)
(323.6)
12.9
13.5
3.4
2.7
16.3
16.2
1
The Group applied AASB 16 Leases from 1 July 2019.
Employee benefits
The table below shows the individual balances for employee benefits:
Annual leave
Long service leave
Long service leave
Sick leave bonus
Closing balance
Group
Bank
2021
2020
2021
2020
$m
36.0
10.0
52.1
6.0
104.1
$m
36.8
-
54.9
6.5
98.2
$m
36.0
10.0
52.1
6.0
104.1
$m
36.8
-
54.9
6.5
98.2
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1 7
Make good provision
Upon initial recognition of a lease contract, to which the Group
acts as a lessee, a provision is recorded in the Balance Sheet.
The provision is to recognise the present value of the estimated
expenditure required to remove any leasehold improvements.
These costs have been capitalised as part of the cost of
leasehold improvements and are amortised over the shorter of
the term of the lease and the useful life of the assets.
Other
A provision for dividends payable is not recognised as a
liability unless the dividend is declared, determined or publicly
recommended on or before the reporting date.
The provision of rewards program is to recognise the liability
to customers in relation to points earned by them under the
program. Reward points expire after three years. The balance
will be utilised or forfeited during that period.
26 Provisions (continued)
Recognition and measurement
Provisions are recognised when the Group 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.
Employee entitlements
Annual leave and long service leave provisions are measured
as the present value of expected future payments for the
services provided by employees up to the reporting date. The
provision is measured at the amounts that are expected to be
paid when the liabilities are settled.
Expected future payments are discounted using corporate
bond rates.
Annual leave is accrued on the basis of full pro-rata entitlement
and amounts are estimated to apply when the leave is paid.
It is anticipated that annual leave will be paid in the ensuing
twelve months.
Long service leave has been assessed at full pro-rata
entitlement in respect of all employees with more than one
year of service. The assessment considers the likely number of
employees that will ultimately be entitled to long service leave,
estimated future salary rates and on-costs. Sick leave bonus
provides an entitlement dependent on an employee's years of
service and unused sick leave and is paid on termination. Other
employee payments include short-term incentives and are
expected to be paid in the ensuing twelve months.
118 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Other Disclosure Matters
27 Cash flow statement reconciliation
Group
Bank
Profit after tax
Non-cash items
Credit expenses
Amortisation
Depreciation (including leasehold improvements)
Revaluation increment/(decrement)
Equity settled transactions
Share of net profit from joint arrangements and associates
Dividends received
Impairment write down
Fair value acquisition adjustments
Revaluation gains on derivatives
Changes in assets and liabilities
Increase/(decrease) in tax provision
Decrease/(increase) in deferred tax assets and liabilities
Decrease/(increase) in derivatives
Decrease in accrued interest
Increase in accrued employee entitlements
(Increase)/decrease in other accruals, receivables
and provisions
Cash flows from operating activities before changes
in operating assets and liabilities
Net increase in operating assets
2021
$m
524.0
20.7
30.9
69.3
(122.6)
3.0
(1.1)
(0.5)
2.8
9.8
8.1
44.2
46.1
(7.6)
(42.3)
5.9
(92.8)
2020
$m
192.8
173.3
53.3
72.2
7.9
3.3
(1.6)
(1.6)
4.0
7.0
3.2
(6.4)
(83.0)
9.4
(43.8)
2.5
44.0
2021
$m
427.7
16.9
29.8
69.3
6.0
3.0
(1.1)
(25.9)
2.8
9.8
8.1
44.2
102.0
(7.6)
(48.9)
5.9
25.6
2020
$m
262.8
170.9
51.4
72.1
19.4
3.3
(1.6)
(120.5)
4.0
7.0
3.2
(6.4)
(101.2)
9.5
(27.0)
4.0
(54.7)
497.9
436.5
667.6
296.2
Net (increase)/decrease of loans to other entities
(6,960.9)
(3,319.9)
(6,984.6)
2,991.0
Net (increase)/ decrease of investment securities
2,330.4
(384.0)
2,191.2
(6,671.0)
Net increase in operating liabilities
Net increase in balance of deposits
Net increase/(decrease) in balance of notes payable
Net cash flows from operating activities
10,173.0
3,585.7
10,187.8
3,578.6
94.2
6,134.6
39.1
357.4
-
6,062.0
(23.1)
171.7
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 other receivables, investment securities, retail deposits and wholesale deposits.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 1 9
28 Subsidiaries and other controlled entities
Subsidiaries
Bendigo and Adelaide Bank Limited consolidates a subsidiary
(including structured entities) when it controls it. Control is
achieved when the Bank is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity.
When assessing whether the Bank has power over an
entity, and therefore, control over the variability of its returns,
consideration is given to all relevant facts and circumstances,
including:
•
•
•
voting rights currently exercisable;
the purpose and design of the entity;
the relevant activities and how decisions about those
activities are made and whether the Bank can direct
those activities;
contractual arrangements such as call rights, put rights
and liquidation rights.
•
Subsidiaries prepare financial reports for consolidation in
accordance with the Group's accounting policies. When
necessary, adjustments are made to bring their accounting
policies in line with the Group's accounting policies.
All inter-group assets, liabilities, equity, income, expenses and
cashflows relating to transactions between members of the
Group have been eliminated in full on consolidation. Where a
controlled entity has been sold or acquired during the year
its operating results have been included to the date control
ceased or from the date control was obtained.
The following table presents the material subsidiaries of the
Group. A subsidiary has been considered to be material if it has
more than 0.5% of the total Group assets.
Chief entity and Ultimate parent
Bendigo and Adelaide Bank Limited
Other entities
Homesafe Trust
Leveraged Equities Ltd
Principal activities
Banking
Principal activities
Homesafe product financier
Margin lending
All entities are 100% owned and incorporated in Australia.
Investments in controlled entities
At cost 1
Group
Bank
2021
2020
$m
-
-
$m
-
-
2021
$m
103.7
103.7
2020
$m
134.5
134.5
1 During the period, the Group voluntarily deregistered a number of non-trading entities. As a result of this, any remaining assets and liabilities of these entities
were transferred to Bendigo and Adelaide Bank Limited. In order to deregister these entities, a final dividend and return of capital payment was made to Bendigo
and Adelaide Bank Limited.
Significant restrictions
Special Purpose Entities (SPE's)
The Group does not have any significant restrictions on its
ability to access or use its assets and settle its liabilities other
than those resulting from the supervisory frameworks within
which banking subsidiaries operate. The supervisory framework
requires banking subsidiaries to keep certain levels of regulatory
capital and liquid assets, limit their exposure to other parts of the
Group and comply with other ratios.
Recognition and measurement
The Group classify all entities where it owns 100% of the
shares and in which it controls as subsidiaries. The basis of
consolidation is presented in Note 2. Investments in subsidiaries
are stated at cost.
The following table presents a list of the material SPEs. A SPE
has been considered to be material where the assets are more
than 0.5% of total group assets. For further information relating
to SPEs refer to Note 16.
Entity
Principal activities
Torrens Series 2008-1 Trust
Securitisation
Torrens Series 2008-4 Trust
Securitisation
Torrens Series 2021-1 Trust
Securitisation
Torrens Series 2019-1 Trust
Securitisation
Torrens Series 2019-2 Trust
Securitisation
120 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
29 Related party disclosures
Subsidiary transactions
Transactions undertaken with subsidiaries are eliminated in the
Group's financial reports. Transactions between the parent and
the subsidiary are funded through intercompany loans with no
fixed repayment date and are repayable upon demand.
A summary of material transactions (excluding dividends)
between the Bank and its subsidiaries during the period were:
Opening balance at beginning of
financial year
Net receipts and fees (paid to)/
received from subsidiaries
2021
$m
2020
$m
1,587.1
1,342.8
(39.6)
290.3
Supplies, fixed assets and services
charged to subsidiaries
(66.9)
(46.0)
Net amount owing to subsidiaries
1,480.6
1,587.1
Bendigo and Adelaide Bank provides funding and guarantee
facilities to several subsidiary companies.
These facilities are provided on normal commercial terms and
conditions.
Subsidiary
Facility
Sandhurst
Trustees Limited
Guarantee
Limit
Dividends paid by the subsidiaries
Rural Bank Limited
Adelaide Managed Funds
Bank Of Cyprus Australia
Drawn/
issued at
30 June
2021
$m
-
Limit
$m
0.5
2021
$m
2020
$m
-
119.2
0.6
24.8
-
-
Other related party transactions
Joint arrangement entities and associates
Bendigo and Adelaide Bank Limited has investments in joint
arrangement entities and associates which are accounted for
using the equity method.
The investments are initially recorded at cost, and are
subsequently adjusted by the Group's share of the entity's profit
or loss. Dividends received reduce the carrying value of the
investment.
Transactions entered into with these related entities principally
include commissions received and paid, services and supplies
procured and fees charged in relation to the provision of banking,
administrative and corporate services. These revenue and
expense items are included in the Group's Income Statement.
The transactions are conducted on the same terms as other
third party transactions.
A summary of material transactions excluding dividends
between the Group and joint arrangements and associates
during the period were:
Commissions and fees paid to
joint arrangements and associates
Supplies and services provided to
joint arrangements and associates
Amount owing to/(from) joint
arrangements and associates
2021
2020
$m
$m
21.6
32.9
0.6
(3.2)
5.6
5.1
Bendigo and Adelaide Bank Limited provides loans, guarantees
and/or overdraft facilities to joint arrangements and associates.
The loans have agreed repayment terms which vary according
to the nature of the facility. These loans are included in the net
amount owing from joint arrangements and associates in the
above table.
Key management personnel
Key management personnel (KMP) are those persons with
authority and responsibility for planning, directing and controlling
the activities of the Group, directly or indirectly.
The Group's KMP are those members of the Bendigo and
Adelaide Bank Group Executive Committee together with its
Non-executive Directors.
Further details relating to KMP are located in the Remuneration
Report.
The table below details, on an aggregated basis, KMP
compensation:
Compensation
Salaries and other short-term
benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share based payments
Total
2021
2020
$'000's
$'000's
6,788.3
6,307.2
298.7
(21.2)
-
298.1
41.5
809.7
1,889.3
2,028.2
8,965.1
9,484.7
The table below details, on an aggregate basis, KMP equity
holdings. The holdings comprise ordinary shares, preference
shares, performance shares and deferred shares:
Equity holdings
Ordinary shares (includes
deferred shares)
2021
2020
No.
No.
1,253,656 1,465,883
Preference shares
350
1,050
Performance shares
351,537
282,282
Loan funded shares
Rights to shares
Closing balance
1,086,885
9,687
-
-
2,702,115 1,749,215
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 2 1
29 Related party disclosures (continued)
Other related party transactions (continued)
The table below details, on an aggregated basis, loan balances outstanding at the end of the year between the Group and its KMP:
Loans 1,2,3
Loans outstanding at the beginning of the year 2
Loans outstanding at the end of the year
Interest paid or payable
Interest not charged
2021
$'000's
9,562.0
11,330.0
269.0
-
2020
$'000's
12,387.6
12,136.2
394.7
-
1 The balance of loans outstanding includes the provision of a guarantee to the value of $20,000 which was provided to a KMP in the ordinary course of the
Group's business and on an arm's length basis.
2 The balance of loans outstanding excludes the value of loans provided to Executives under the Employee Share Ownership Plan.
3 The balance of loans outstanding relate to KMP who were in office at the start of, or appointed during, the financial year.
Loans to directors and senior executives are made in the ordinary course of the Group's business and on an arm's length basis. The
loans are processed and approved in accordance with the Bank's standard lending terms and conditions.
30 Involvement with unconsolidated entities
The table below describes the types of structured entities that the Group does not consolidate but in which it holds an interest.
Type of structured entity
Nature and purpose
Interest held by the Group
Securitisation vehicles -
for loans and advances
originated by third parties
To generate:
• external funding for third parties; and
•
These vehicles are financed through the issue of notes to
investors.
investment opportunities for the Group.
•
Investments in notes
issued by the vehicles
Managed investment
funds
To generate:
• a range of investment opportunities for external investors; and
•
fees from managing assets on behalf of third party investors for
the Group.
•
Investment in units
issued by the funds
• Management fees
Risks associated with unconsolidated structured entities
The following table summarises the carrying values recognised in the Balance Sheet in relation to unconsolidated structured entities:
Managed
investment
funds
2021
$m
0.1
-
9.4
-
9.5
-
9.5
Securitisation
vehicles
2021
$m
-
19.1
13.6
1,646.0
1,678.7
22.4
1,701.1
Managed
investment
funds
2020
$m
0.1
-
8.7
-
8.8
-
8.8
Securitisation
vehicles
2020
$m
-
29.2
17.1
1,385.2
1,431.5
262.8
1,694.3
Cash and cash equivalents
Financial assets - amortised cost
Financial assets fair value through other
comprehensive income
Loans and other receivables
Total on-balance sheet exposures
Total off-balance sheet exposures 1
Total maximum exposure to loss
1 Relates to undrawn funding limits.
122 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
30 Involvement with unconsolidated entities (continued)
Maximum exposure to loss
For loans and other receivables, the maximum exposure to loss is the current carrying value of these interests representing the
amortised cost at reporting date, in addition to any undrawn funding limits.
The following table summarises the Group's maximum exposure to loss from its involvement with unconsolidated structured entities.
Carrying
amount
Maximum
loss exposure
Carrying
amount
Maximum
loss exposure
2021
$m
0.1
2021
$m
0.1
2020
$m
0.1
2020
$m
0.1
1,678.7
1,701.1
1,431.4
1,694.2
9.4
9.4
8.7
8.7
1,688.2
1,710.6
1,440.2
1,703.0
Managed Investment funds
Sandhurst Trustees Limited (STL), a subsidiary of the Group,
acts as a responsible entity for certain managed investment
funds. The decision-making rights of the fund are restricted to
the Product Disclosure Statements. The fees received by STL
are not variable, are commensurate with the services provided
and are consistent with similar funds in the market. Where
STL holds investments in the funds, an assessment of the
Group's power over the relevant activities of the Fund and the
significance of its exposure to variable returns is completed to
determine whether the Fund should be consolidated.
Community Banks
Community Banks are not consolidated by the Group as
the Group does not have power to govern decision making.
While the Group's returns are variable they are calculated
as a percentage of the gross margin. In some cases the
Group holds shares in Community Bank branches and has
representation on the Board. These shares are held as
investments and are accounted for using the equity method.
Consolidation of a Community Bank Branch would occur when
the Group has power to affect returns through the majority
representation on the Board.
Alliance partners
Alliance partners are not consolidated by the Group as the
Group does not have power to govern decision making.
While the Group's returns are variable they are calculated
as a percentage of the gross margin. The Group has no
representation on the Board of these entities.
Cash and cash equivalents
Senior notes
Investment
Significant restrictions
There are no significant restrictions imposed by any
unconsolidated structured entity on the Group's ability to
access or use its assets or settle its liabilities.
Recognition and measurement
A structured entity is an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding
who controls the entity.
Involvement with structured entities varies and includes debt
financing of these entities as well as other relationships.
A review is undertaken to determine the involvement the Group
has and whether the involvement with these entities results in
significant influence, joint control or control over the structured
entity. The structured entities over which control can be
exercised are consolidated. These entities are outlined in Note
28.
The Group has no contractual arrangements that would require
it to provide financial or other support to an unconsolidated
entity. The Group has not previously provided financial support,
and has no intention to provide such support to these entities.
Securitisation vehicles
The Group has exposure to a number of securitisation vehicles
through Residential Mortgage Backed Securities (RMBS).
Securitisations involve transferring assets into an entity
that sells interests to investors through the issue of debt or
equity notes. The notes are secured by the underlying assets
transferred to the vehicles, and generally hold a number of
levels of subordination, with the residual income paid to the
most subordinated investor. The Group does not hold any
mezzanine notes in the unconsolidated structured entities it
invests in, and does not receive any residual income. The Group
does not act as the primary trust manager or servicer of any of
its unconsolidated structured entities.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 2 3
31 Fiduciary activities
The Group conducts investment management and other fiduciary activities as responsible entity, trustee, custodian or manager
for a number of funds and trusts, including superannuation, unit trusts and mortgage pools.
The amounts of the funds concerned are:
Funds under trusteeship
Assets under management
Funds under management
Recognition and measurement
Group
2021
$m
6,872.2
2,809.7
4,062.5
2020
$m
6,179.4
2,472.4
3,707.0
The assets and liabilities of these trusts and funds are not
included in the consolidated financial statements as the Group
does not have direct or indirect control of the trusts and funds.
Commissions and fees earned in respect of the activities are
included in the Income Statement of the Group.
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 Group acts in more than one capacity in relation to those
funds (e.g. manager and trustee). Where controlled entities, as
trustees, custodian or manager incur liabilities in the normal
course of their duties, 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
will be required to settle them, the liabilities are not included in
the financial statements.
32 Share based payment plans
The Group provides benefits to employees by offering share
based compensation whereby employees render services in
exchange for shares or rights over shares.
These share based incentive plans form an integral part of the
Group's remuneration framework with the objective of aligning
the interests of executives and general employees to the
interests of shareholders.
Further detailed information including terms and conditions
associated with each plan are included in the Remuneration
Report.
Details of current plans
Performance rights
The Plan provides for grants of performance rights to the Chief
Executive Officer and Managing Director, Senior Executives and
key senior management (the Participants) as determined by the
Board. Participants are invited to receive grants of performance
rights that are subject to performance conditions set by the
Board.
The performance right grant made during the current financial
year is subject to the following performance conditions:
•
a 'customer hurdle' that requires the Bank's Net Promoter
Score over the performance period to be better than the
performance of a peer group of Australian banks.
a total shareholder return (TSR) performance hurdle;
continuing service with the Group; and
risk conditions.
•
•
•
The previous performance right grants are subject to the
following performance conditions:
124 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
The number of performance rights granted to Participants is
determined by dividing the remuneration value of the proposed
grant by the volume weighted average closing price of the
Company's shares for the last five trading days of the financial
year prior to the year of grant.
The Participants are entitled to vote and to receive any dividend,
bonus issue, return of capital or distribution made in respect
of shares they are allocated on vesting and exercise of their
performance rights.
Deferred shares
Under the Plan, Participants are granted deferred shares as part
of their base remuneration and short-term incentive payments.
The deferred shares are beneficially owned by the Participant
from the grant date and are held on trust for a two year period.
The deferred shares are fully-paid ordinary shares in the
Company and are granted subject to certain Board imposed
conditions being satisfied:
•
•
two year continued service condition; and
risk conditions
If the service condition is satisfied, the deferred shares will vest
subject to any risk conditions.
The number of shares awarded as part of the plan are
calculated by dividing the deferred remuneration value by the
volume weighted average closing price of the Company's
shares for the last five trading days of the financial year prior to
the year of grant. The Participants are entitled to vote and to
receive any dividend, bonus issue, return of capital or distribution
made in respect of shares they are allocated on vesting and
exercise of their deferred shares.
32 Share based payment plans (continued)
Employee Share Grant Scheme (ESGS)
The Company has established a share based incentive plan
for full time and permanent part time employees of the Group
(excluding Directors and Senior Executives).
The shares will be held in trust for a period of three years after
which time they will be transferred to the employee. During the
restricted period employees will be entitled to receive dividends
and to vote at general meetings. The shares under this plan
were released on 10 March 2020.
Employee Share Plan
The Company established a loan based limited recourse
Employee Share plan in 2006. The Plan is only available to full
time and part time employees of the Group (excluding Senior
Executives and the Chief Executive Officer and Managing
Director).
The Plan provides employees with a limited recourse interest
free loan for the sole purpose of acquiring fully paid ordinary
shares in the Company. Dividends payable in relation to the
shares must be applied to pay down the outstanding loan.
Employees cannot exercise, dispose or transfer the shares until
the loan has been fully repaid.
The first issue to staff under this Plan was completed in
September 2006 with a further grant made in December 2007.
There have been no further issues under this Plan.
Loan Share Plan
The Company established a Loan Share Plan (LSP) in
November 2020. Under the LSP, eligible executives are provided
with a non-recourse loan for the sole purpose of acquiring
shares in the Bank. The full loan term is six years.
The LSP facilitates immediate share ownership by the senior
managers and links a significant proportion of their ‘at-risk’
remuneration to Bendigo and Adelaide Bank Limited’s ongoing
share price and returns to shareholders over the performance
period. It is designed to encourage senior managers to focus
on the key performance drivers that underpin sustainable
growth in shareholder value.
The shares must be paid for by the senior managers with cash
dividends after personal income tax being applied to repay
the loans. Eligible senior managers cannot exercise, dispose or
transfer the shares until the loan has been fully repaid.
The shares are fully-paid ordinary shares in the Company and
are granted subject to the following performance measures
being achieved within a 2 year period:
•
• Market Growth (loans / deposits / footings) – 25% of LSP
•
CTI (Cost to Income Ratio) – 50% of LSP
Customer Hurdle – 25% of LSP
Following the performance measures being satisfied the
following conditions will apply prior to the shares vesting:
•
•
a continued service condition; and
risk conditions
Employee Share Ownership Plan (discontinued)
In 2006 the Company discontinued the existing loan based
Employee Share Ownership Plan that was open to all
employees of the Group.
Refer to the 2015 Annual Financial Report or prior years for
more detailed information regarding this Plan.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 2 5
32 Share based payment plans (continued)
Summary of details under the various plans
The following table details the number (No.) and movements in the various plans during the year. The rights and share are granted
at no cost and have no exercise price.
Performance rights
Deferred shares
Share Grant Scheme
2021
2020
2021
2020
2021
2020
No. 1
No. 1
No. 1
No. 1
No. 2
No. 2
Outstanding at beginning of year
678,310
649,842
251,371
301,721
- 167,079
Granted
Forfeited/lapsed
Vested/exercised
Outstanding at year end
Exercisable at year end
177,525
300,634
3,493
91,452
(286,424)
(212,616)
-
-
-
-
-
-
(108,744)
(59,550)
(142,820)
(141,802)
- (167,079)
460,667
678,310
112,044
251,371
-
-
-
-
-
-
-
-
Employee Share Plan
Employee Share Plan
2021
2021
2020
2020
2021
2021
2020
2020
No. 3 WAEP ($)
No. WAEP ($)
No. 2 WAEP ($)
No. WAEP ($)
Outstanding at beginning of year
815,524
5.31
949,734
5.72
-
Granted
Forfeited/lapsed
Vested/exercised
-
-
-
-
-
-
- 1,646,981
-
(11,454)
(110,470)
5.12 (134,560)
4.96
-
-
-
-
-
Outstanding at year end
705,054
5.12
815,174
5.31 1,635,527
6.95
Exercisable at year end
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 Closing balance of deferred shares and performance rights are exercisable upon meeting the required conditions and until 30 June 2023 and 30
June 2024 respectively.
2 The Share Grant Scheme was discontinued in March 2020.
3 The outstanding balance as at 30 June 2021 is represented by 705,054 (2020: 815,174) ordinary shares with a market value of $7,396,016
(2020: $5,714,370), exercisable upon repayment of the employee loan.
Recognition and measurement
The cost of the employee services received in respect of
shares or rights granted is recognised in the income statement
over the period the employee provides the services, generally
the period between the grant date and the vesting date of
the shares or rights. The overall cost of the award is calculated
using the number of shares or rights expected to vest and the
fair value of the shares or rights at the grant date.
Fair value methodology
The fair value of shares or rights granted under the various
Plans takes into account the terms and conditions upon which
the shares or rights were granted.
Performance rights and loan shares - The fair value is
determined using a Black Scholes Merton valuation method
incorporating a Monte Carlo Simulation option pricing model
taking into account the terms and conditions upon which the
rights were granted.
The following inputs are used in the models:
Performance Rights Loan Shares - Executives
Loan Shares - Senior Leaders
4- Nov 2020
4- Nov 2020
26-Nov-2020
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of performance rights (years)
Exercise price ($)
4.54%
29.21%
0.19%
4 years
nil
-
27.92%
0.26%
4-6 years
6.75
-
28.26%
0.30%
4-6 years
8.73
The expected life of the performance rights are based on
historical data, and are 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 fair value is determined by an independent valuation.
Deferred shares - The fair value is measured as at the date of
the grant using the volume weighted average closing price of
the Company's shares traded on the ASX for five trading days
ending on the grant date.
126 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
33 Commitments and contingencies
(a) Commitments and contingent liabilities
The following are outstanding expenditure and credit related commitments as at 30 June 2021.
Group
2021
$m
2020
$m
Bank
2021
$m
2020
$m
Commitment to provide credit
10,453.3
9,755.2
10,453.3
9,755.2
Guarantees
244.3
253.3
244.3
253.3
Documentary letters of credit and performance related
obligations
3.7
4.2
3.7
4.2
Recognition and measurement
Commitment to provide credit
The Group enters into arrangements with customers that
allows them to borrow money in line with specific terms and
conditions, these commitments are made for a fixed term or
subject to cancellation conditions. These arrangements expose
the Group to liquidity risk when they are called upon and/or
credit risk if the customer fails to repay the funds under the
terms of their agreement. The maximum exposure to credit
loss is the contractual or notional amount,which does not
reflect future cash requirements of the Group as It is expected
that a large portion of these values will not be drawn upon. All
commitments noted will expire within 12 months.
Guarantees, documentary letters of credit and performance
related obligations
Bank guarantees have been issued by the Group on behalf of
customers whereby the Group is required to make specified
payments to reimburse the holders for a loss they may incur
because the customer fails to make a payment.
Guarantees, documentary letters of credit and performance
related obligations are not recognised on the Balance Sheet.
The contractual term of the matches the underlying obligations
to which they relate.
The fair value of these contracts has been assessed using a
probability weighted discounted cash flow approach.
The guarantees issued by the Bank are fully secured and
the Bank has never incurred a loss in relation to the financial
guarantees it has provided.
As the probability and value of guarantees, documentary
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.
Legal claims
The Group is engaged in a range of litigation and court
proceedings at any point in time. However, no current
proceedings or claims are expected to have a material effect
on the business, financial condition or operating results of the
Group. For all litigation exposures where loss is probable and
can be reliably estimated an appropriate provision is made.
The Group has no provisions raised for any current legal
proceedings.
Remediation and compensation claims
The Group undertakes ongoing compliance activities, including
review of products, advice, conduct and services provided to
customers, as well as interest, fees and premiums charged.
Some of these investigations and reviews have resulted in
remediation programs and where required the Group consults
with the respective regulator on the proposed remediation
action. There is a risk that where a breach has occurred,
regulators may also impose fines and/or sanctions.
Provisions are recognised when it is probable an outflow will be
required to address a past event and where a reliable estimate
is available. There remains a contingent liability with respect to
these matters however, the aggregate potential liability of the
above matters cannot be reliably estimated.
(b) Contingent assets
As at 30 June 2021, the economic entity does not have any
contingent assets.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 2 7
34 Remuneration of Auditor
The Group's external auditor is Ernst & Young (EY). In addition to the audit and review of the Group's financial reports, EY has
provided other services throughout the year.
Group
2021
$
2020
$
Bank
2021
$
2020
$
Fees to Ernst & Young (Australia) 1
Category 1 - Fees to the group auditor for audit and review
of financial statements
1,983,100
1,913,300
1,885,300
1,906,300
Category 2 - Audit related services
57,600
51,700
57,600
51,700
Category 3 - Other assurance services
Consolidated entities
Non-consolidated entities
Category 4 - Non-audit (other) related fees
Consolidated entities
Non-consolidated entities
901,200
843,620
866,700
843,620
383,200
352,060
-
382,988
-
382,988
-
8,000
-
-
-
-
Total fees to Ernst & Young (Australia)
3,708,088
3,168,680
3,192,588
2,801,620
1.
Fees exclude goods and services tax (GST).
Category 1 - Fees to the Group's auditor for auditing the statutory financial reports of the Group and the Parent, and for auditing
the statutory financial reports of any controlled entities.
Category 2 - Fees for assurance services that are required by legislation to be provided by the external auditor. These services
include assurance of the Group's compliance with Australian Financial Services Licensing requirements.
Category 3 - Fees for other assurance and agreed-upon-procedures services under other legislation or contractual arrangements
where there is discretion as to whether the service is provided by the external auditor or another firm. These services include
regulatory compliance reviews, agreed-upon procedures, comfort letters, assurance of the Group's sustainability reporting,
systems assurance and controls reviews. This category also includes assurance services provided to non-consolidated trusts of
which a Group entity is trustee, manager, or responsible entity, and the non-consolidated Group superannuation fund.
Category 4 - Fees for other services.
The Group has processes in place to maintain the independence of the external auditor, including the nature of expenditure on
non-audit services.
EY also has specific internal processes in place to ensure auditor independence.
128 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
35 Leases
Recognition and measurement
A. Leases as lessee
As a lessee the Group leases many assets including property, IT equipment, ATMs and motor vehicles. The Group records right-of-
use assets (ROUA) and lease liabilities for most of its lease contracts, with the exception of short-term and or leases of low-value
whereby lease payments are expensed on a straight line basis over the lease term.
(i) Right-of-use assets relate to leased branch and office premises that are included in the balance of property, plant and equipment
in the Balance Sheet.
Properties
IT Equipment
Other
Right-of-use assets
Balance as at 1 July 2020
Depreciation charge
Additions
Remeasurements
Disposals
Balance as at 30 June 2021
Balance as at 1 July 2019
Depreciation charge
Additions
Remeasurements
Balance as at 30 June 2020
(ii) Amounts recognised in the Income Statement
Depreciation charge of Right-of-use assets
Buildings
Equipment
Other
Total depreciation expense ROUA
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets,
excluding short-term leases of low value assets
(iii) Amounts recognised in statement of cash flows
Total cash outflow for leases
Recognition and measurement
$m
167.0
(41.8)
2.8
5.3
0.3
$m
13.0
(5.8)
-
-
-
133.6
7.2
$m
202.4
(44.9)
3.9
5.6
167.0
$m
18.7
(6.4)
-
0.7
13.0
Group
2021
$m
37.9
1.0
2.0
40.9
5.9
1.3
0.1
Group
2021
$m
51.0
$m
3.2
(2.0)
2.7
-
-
3.9
$m
5.8
(2.6)
-
-
3.2
2020
$m
44.9
6.4
2.6
53.9
7.3
1.0
-
2020
$m
54.9
B. Leases as lessor
The Group sub-leases some of its properties. As of 1 July 2019, the Group accounts for its interests in the head lease and the sub-
lease separately and assesses the lease classification of a sub-lease with reference to the ROUA arising from the head lease, rather
than the underlying asset. The Group has defined the sub-leases to be operating leases and as a consequence recognises lease
income from the sub-lease in the Income Statement on a straight line basis over the lease term.
Rental income recognised by the Group during the year ended 30 June 2021 was $4.0m (2020: $3.8m).
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 2 9
35 Leases (continued)
Recognition and measurement (continued)
The following table sets out the maturity analysis of lease payments, showing the undiscounted lease payments to be received
after the reporting date.
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total
Group
Bank
2021
2020
2021
2020
$m
5.2
4.8
4.3
4.0
1.5
-
$m
4.6
4.7
4.3
3.9
3.8
1.4
$m
5.2
4.8
4.3
4.0
1.5
-
$m
4.6
4.7
4.3
3.9
3.8
1.4
19.8
22.7
19.8
22.7
36 Events after balance sheet date
On 15 August 2021, Bendigo and Adelaide Bank Limited entered into a Share Sale Agreement to acquire 100% of the shares
in Ferocia Pty Ltd, a Melbourne-based fintech company, for consideration of up to $116.0 million, with the transaction being
completed on 1 September 2021. The consideration has been paid in cash and shares, with a portion of the consideration being
contingent on future performance.
The acquisition will help to accelerate the Group’s transformation and digital strategy and drive better outcomes and experiences
for all customers.
We are currently in the process of finalising the acquisition accounting for this transaction. It is expected that this will include
recognition of an amount of goodwill.
No other matters or circumstances have arisen since the end of the financial year to the date of this report which significantly
affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the
Group in subsequent financial periods.
130 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
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 and notes of the Company and the Bendigo and Adelaide Bank Group are in accordance
with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and the Bendigo and Adelaide Bank Group’s financial position as at
30 June 2021 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
Corporations Regulations 2001; and
b)
c)
d)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note
2; and
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 2021.
On behalf of the Board
Jacqueline Hey
Chair
2 September 2021
Marnie Baker
Chief Executive Officer and Managing Director
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3 1
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Page 2
Allowance for credit losses
How our audit addressed the key audit matter
As described in Notes 3 Profit, 10 Impairment
Our audit of the collective provision for credit
of loans and advances and 20 Risk
losses required actuarial expertise to assist in
management, the allowance for credit losses
the testing of the mechanics of the underlying
is determined in accordance with Australian
models and model assumptions. Accordingly, we
Accounting Standard - AASB 9 Financial
involved our actuarial specialists to test the
This was a key audit matter due to the size of
mathematical accuracy of the model and key
assumptions, including probability of default,
exposure at default and loss given default
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Why significant
Report on the Audit of the Financial Report
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
Opinion
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
Instruments (AASB 9).
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
the provision (specific provision 30 June
2021: $94.3 million, collective provision 30
assumptions.
statements of changes in equity and cash flow statements for the year then ended;
statements of changes in equity and cash flow statements for the year then ended;
June 2021: $246.7 million), and the degree
In addressing the adequacy of allowance for
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
associated with the calculations.
of judgment and estimation uncertainty
credit losses for exposures assessed on a
collective basis, our audit procedures included
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
Key areas of judgment included:
•
the application of the impairment
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
requirements within AASB 9, which is
and of their financial performance for the year ended on that date; and
and of their financial performance for the year ended on that date; and
reflected in the Group’s expected credit
AASB 9.
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
loss model;
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
loss model (for exposures assessed on an
individual or collective basis) such as the
financial condition of the counterparty,
expected future cash flows, and forward-
looking macroeconomic factors (e.g. GDP
• assumptions used in the expected credit
•
the identification of exposures with a
significant deterioration in credit quality;
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
the following:
• Assessed the Group’s calculation
methodology against the requirements of
• Assessed the significant modelling and
macroeconomic assumptions, including the
reasonableness of forward-looking
information and scenarios, with reference to
relevant publicly-available macro-economic
information and the sensitivity of the
collective provision to changes in such
assumptions.
• Assessed, through testing a sample, the
operating effectiveness of relevant controls
used to manage the flow of information
between systems and models related to the
determination of the allowance for credit
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
information to reflect current or future
external factors, specifically judgments
related to the expected ongoing impact of
COVID-19, both in the multiple forward-
looking scenarios and the weighting
determined for each of these scenarios as
We assessed the basis for, and assumptions
used in, overlays recognised to capture current
and future market characteristics resulting from
the continuing impacts of COVID-19, with
reference to market data and
industry/geographic concentrations.
growth, unemployment rates, central-
bank interest rates, and house-price
indices) as disclosed in Note 10; and
•
the incorporation of forward-looking
losses.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
disclosed in Note 10.
132 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 2
Allowance for credit losses
Why significant
As described in Notes 3 Profit, 10 Impairment
of loans and advances and 20 Risk
management, the allowance for credit losses
is determined in accordance with Australian
Accounting Standard - AASB 9 Financial
Instruments (AASB 9).
This was a key audit matter due to the size of
the provision (specific provision 30 June
2021: $94.3 million, collective provision 30
June 2021: $246.7 million), and the degree
of judgment and estimation uncertainty
associated with the calculations.
Key areas of judgment included:
•
the application of the impairment
requirements within AASB 9, which is
reflected in the Group’s expected credit
loss model;
•
the identification of exposures with a
significant deterioration in credit quality;
• assumptions used in the expected credit
loss model (for exposures assessed on an
individual or collective basis) such as the
financial condition of the counterparty,
expected future cash flows, and forward-
looking macroeconomic factors (e.g. GDP
growth, unemployment rates, central-
bank interest rates, and house-price
indices) as disclosed in Note 10; and
•
the incorporation of forward-looking
information to reflect current or future
external factors, specifically judgments
related to the expected ongoing impact of
COVID-19, both in the multiple forward-
looking scenarios and the weighting
determined for each of these scenarios as
disclosed in Note 10.
How our audit addressed the key audit matter
Our audit of the collective provision for credit
losses required actuarial expertise to assist in
the testing of the mechanics of the underlying
models and model assumptions. Accordingly, we
involved our actuarial specialists to test the
mathematical accuracy of the model and key
assumptions, including probability of default,
exposure at default and loss given default
assumptions.
In addressing the adequacy of allowance for
credit losses for exposures assessed on a
collective basis, our audit procedures included
the following:
• Assessed the Group’s calculation
methodology against the requirements of
AASB 9.
• Assessed the significant modelling and
macroeconomic assumptions, including the
reasonableness of forward-looking
information and scenarios, with reference to
relevant publicly-available macro-economic
information and the sensitivity of the
collective provision to changes in such
assumptions.
• Assessed, through testing a sample, the
operating effectiveness of relevant controls
used to manage the flow of information
between systems and models related to the
determination of the allowance for credit
losses.
We assessed the basis for, and assumptions
used in, overlays recognised to capture current
and future market characteristics resulting from
the continuing impacts of COVID-19, with
reference to market data and
industry/geographic concentrations.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3 3
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
134 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 3 Why significant How our audit addressed the key audit matter Our audit procedures on the specific provision included the following on a sample basis: • Assessed the reasonableness of internal credit quality assessments based on the borrowers’ particular circumstances. • Evaluated the associated provisions by assessing the reasonableness of key inputs into the calculation, with particular focus on the impact of COVID-19 on high-risk industries, work out strategies, collateral values, and the value and timing of recoveries. We assessed the adequacy of the disclosures associated with the allowance for credit losses, including related key estimates and judgments, and sensitivity analysis. Allowance for credit losses (cont.) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 4 Impairment assessment of goodwill Why significant How our audit addressed the key audit matter The Group has recognised goodwill as part of historical acquisitions. Details on the methodology and assumptions used in the impairment assessment of goodwill and the consideration given to the potential impacts of COVID-19 are included in Note 26 Goodwill and other intangible assets. This was a key audit matter due to the size of the goodwill balance held on the balance sheet, and the degree of judgment and estimation uncertainty associated with the impairment assessment, particularly as a result of COVID-19. An impairment assessment is performed each year, comparing the carrying value of each cash generating unit (“CGU”), inclusive of goodwill balances, with its recoverable amount. The recoverable amount of each CGU was determined using a value in use calculation. This calculation incorporated a number of assumptions, including: • future cash flows; • discount rates; and • terminal growth rates. Our audit procedures included the following: • Assessed the appropriateness of the CGUs identified to which goodwill has been allocated. • Agreed the forecast cash flows to the most recent forecasts approved by management or the Board, considered the reasonableness of these forecasts based on the current economic environment, and assessed the accuracy of the Group’s previous forecasts by performing a comparison of historical forecasts to actual results. • Involved our valuation specialists to: • Assess the key assumptions used in the impairment assessment with reference to market rates and historical performance; • Assess the reasonableness of adjustments made to incorporate the expected impacts from COVID-19 within these assumptions; • Review supporting material to assess the market capitalisation of the business as at 30 June 2021 and recent trading history relative to net assets; and • Test the mathematical accuracy of the impairment models. • Benchmarked the implied valuations to comparable company trading and control valuation multiples. • Assessed the adequacy of the disclosures associated with the goodwill impairment assessment in the financial report.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Opinion
Report on the Audit of the Financial Report
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
including:
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
the Code.
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3 5
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 3 Why significant How our audit addressed the key audit matter Our audit procedures on the specific provision included the following on a sample basis: • Assessed the reasonableness of internal credit quality assessments based on the borrowers’ particular circumstances. • Evaluated the associated provisions by assessing the reasonableness of key inputs into the calculation, with particular focus on the impact of COVID-19 on high-risk industries, work out strategies, collateral values, and the value and timing of recoveries. We assessed the adequacy of the disclosures associated with the allowance for credit losses, including related key estimates and judgments, and sensitivity analysis. Allowance for credit losses (cont.) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 4 Impairment assessment of goodwill Why significant How our audit addressed the key audit matter The Group has recognised goodwill as part of historical acquisitions. Details on the methodology and assumptions used in the impairment assessment of goodwill and the consideration given to the potential impacts of COVID-19 are included in Note 26 Goodwill and other intangible assets. This was a key audit matter due to the size of the goodwill balance held on the balance sheet, and the degree of judgment and estimation uncertainty associated with the impairment assessment, particularly as a result of COVID-19. An impairment assessment is performed each year, comparing the carrying value of each cash generating unit (“CGU”), inclusive of goodwill balances, with its recoverable amount. The recoverable amount of each CGU was determined using a value in use calculation. This calculation incorporated a number of assumptions, including: • future cash flows; • discount rates; and • terminal growth rates. Our audit procedures included the following: • Assessed the appropriateness of the CGUs identified to which goodwill has been allocated. • Agreed the forecast cash flows to the most recent forecasts approved by management or the Board, considered the reasonableness of these forecasts based on the current economic environment, and assessed the accuracy of the Group’s previous forecasts by performing a comparison of historical forecasts to actual results. • Involved our valuation specialists to: • Assess the key assumptions used in the impairment assessment with reference to market rates and historical performance; • Assess the reasonableness of adjustments made to incorporate the expected impacts from COVID-19 within these assumptions; • Review supporting material to assess the market capitalisation of the business as at 30 June 2021 and recent trading history relative to net assets; and • Test the mathematical accuracy of the impairment models. • Benchmarked the implied valuations to comparable company trading and control valuation multiples. • Assessed the adequacy of the disclosures associated with the goodwill impairment assessment in the financial report.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
136 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 5 Investment property – Homesafe Why significant How our audit addressed the key audit matter The Group controls Homesafe Trust. Homesafe offers a Debt Free Equity Release product to allow customers to release the equity in their homes in exchange for a capped percentage share of the future sale proceeds of the property. The investment is accounted for as investment property. As at 30 June 2021 there continues to be significant valuation uncertainty arising from the COVID-19 pandemic and related Government response. This means that Level 3 asset values, such as investment properties, may change significantly and unexpectedly over a relatively short period of time. In this situation the disclosures in the financial report provide particularly important information about the assumptions made in the asset valuations and the market conditions at 30 June 2021. Details on the methodology and assumptions used in the calculation of the fair value of investment properties are included in Note 25 Investment property. This was a key audit matter due to the size of the Group’s investment in residential real estate recognised within the Homesafe Trust (30 June 2021: $901.7 million), the revaluation gain recognised in the current year from the Homesafe portfolio (30 June 2021: $137.7 million), and the degree of judgment and estimation uncertainty associated with the assumptions, particularly the expected rates of property appreciation assumption due to the impact of COVID-19. The Homesafe investment portfolio is measured at fair value using a discounted cash flow model. The valuation of the portfolio is subject to judgment in relation to key assumptions, including: • expected rates of property appreciation; • discount rates; • mortality rates; and • voluntary exit rates. Our audit procedures included the following: • Assessed the design and operating effectiveness of controls over new contracts, maintenance and settlement processes associated with this product. • Agreed data used in the discounted cash flow model for a sample of properties to signed contracts. • Performed cut-off procedures by agreeing new contracts and settlements around 30 June 2021 to supporting documentation to establish that the contracts were recorded in the correct period. • Involved real estate and actuarial specialists to assess the key assumptions used in the valuation model with reference to market rates, historical trends and settlements during the year, as well as the model mechanics and validation. • Assessed the adequacy of the disclosures in respect of the investment and associated revaluation gains within the financial report.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Opinion
Report on the Audit of the Financial Report
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
including:
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
the Code.
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3 7
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 5 Investment property – Homesafe Why significant How our audit addressed the key audit matter The Group controls Homesafe Trust. Homesafe offers a Debt Free Equity Release product to allow customers to release the equity in their homes in exchange for a capped percentage share of the future sale proceeds of the property. The investment is accounted for as investment property. As at 30 June 2021 there continues to be significant valuation uncertainty arising from the COVID-19 pandemic and related Government response. This means that Level 3 asset values, such as investment properties, may change significantly and unexpectedly over a relatively short period of time. In this situation the disclosures in the financial report provide particularly important information about the assumptions made in the asset valuations and the market conditions at 30 June 2021. Details on the methodology and assumptions used in the calculation of the fair value of investment properties are included in Note 25 Investment property. This was a key audit matter due to the size of the Group’s investment in residential real estate recognised within the Homesafe Trust (30 June 2021: $901.7 million), the revaluation gain recognised in the current year from the Homesafe portfolio (30 June 2021: $137.7 million), and the degree of judgment and estimation uncertainty associated with the assumptions, particularly the expected rates of property appreciation assumption due to the impact of COVID-19. The Homesafe investment portfolio is measured at fair value using a discounted cash flow model. The valuation of the portfolio is subject to judgment in relation to key assumptions, including: • expected rates of property appreciation; • discount rates; • mortality rates; and • voluntary exit rates. Our audit procedures included the following: • Assessed the design and operating effectiveness of controls over new contracts, maintenance and settlement processes associated with this product. • Agreed data used in the discounted cash flow model for a sample of properties to signed contracts. • Performed cut-off procedures by agreeing new contracts and settlements around 30 June 2021 to supporting documentation to establish that the contracts were recorded in the correct period. • Involved real estate and actuarial specialists to assess the key assumptions used in the valuation model with reference to market rates, historical trends and settlements during the year, as well as the model mechanics and validation. • Assessed the adequacy of the disclosures in respect of the investment and associated revaluation gains within the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 6 Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2021 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit 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 Company’s or the Group’s internal control.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
138 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 7 ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 8 Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 28 to 50 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Bendigo and Adelaide Bank Limited for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities 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. Ernst & Young T M Dring Clare Sporle Partner Partner Melbourne 2 September 2021
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor’s report to the Members of Bendigo and Adelaide Bank
Limited
Opinion
Report on the Audit of the Financial Report
We have audited the financial report of Bendigo and Adelaide Bank Limited (the Company) and its
subsidiaries (collectively the Group), which comprises:
► The Group consolidated and Company balance sheets as at 30 June 2021;
► The Group consolidated and Company income statements, statements of comprehensive income,
statements of changes in equity and cash flow statements for the year then ended;
► Notes to the financial statements, including a summary of significant accounting policies; and
► The Directors’ declaration.
including:
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2021
and of their financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
the Code.
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
financial report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 3 9
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 7 ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 8 Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 28 to 50 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Bendigo and Adelaide Bank Limited for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities 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. Ernst & Young T M Dring Clare Sporle Partner Partner Melbourne 2 September 2021
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 (“the Company”) to the Australian Securities Exchange on 16 August 2021.
2 Audit Committee
As at the date of the Directors’ Report the Group had an Audit Committee of the Board of Directors.
3 Corporate governance practices
The corporate governance practices adopted by the Company are as detailed in the 2021 Corporate Governance Statement.
For further details, please refer to our website at https://www.bendigoadelaide.com.au/esg/governance
4 Substantial shareholders
The following parties and their associates have notified the Company that they have a substantial relevant interest in the ordinary
shares of the Company, effective as at 6 August 2021:
Substantial holder
Number or ordinary shares held
% of total shares issued*
Date of last notice
Vanguard Group
30,269,146
6.048%
25/03/2020
* As at the date of the substantial shareholder’s last notice lodged with the ASX.
5. Distribution of shareholders
The range of securities as at 13 August 2021 were in the following categories:
Category
Fully Paid
Ordinary
Shares
(BEN)
% Fully Paid
Employee
Shares
(BENAK,
AA and
AB)
% Converting
Preference
Shares 4
(BENPG)
%
Capital
Notes
(BENPH)
%
Perfor-
mance
Rights
(BENAAA)
% Rights to
Shares
(BENAAB)
%
1 – 1,000
16,707,470
3.07
374,359 55.03 1,459,602 45.38 1,804,393 35.91
0
1,001 – 5,000
95,227,126 17.48
285,128 41.91
749,712 23.31 1,254,752 24.97
65,438
0.00
8.04
0
9,687
100
5,001 –
10,000
10,001 –
100,000
100,001 and
over
Number of
Holders
Securities
on Issue
66,890,389 12.28
5,815
0.85
172,114
5.35
346,299 6.890
139,638
17.16
113,520,843 20.84
15,000
2.20
834,717 25.95
644,682 12.83
472,069
58.03
252,497,468 46.34
0
0
0
0
974,320 19.39
136,376
16.76
95,565
1,006
5,688
6,405
53
0
0
0
3
544,843,296
680,302
3,216,145
5,024,446
813,521
9,687
6 Marketable parcel
Based on a closing price of $11.10 on 13 August 2021 the number of holders with less than a marketable parcel of the
Company’s main class of securities (Ordinary Shares), as at 13 August 2021 was 4,926.
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 (namely BENAK, BENAA and BENAB securities).
140 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
Additional information (continued)
8 Major shareholders
Fully paid ordinary shares (ASX: BEN)
Names of the 20 largest holders of Fully Paid Ordinary Shares in the Company, including the number of shares each holds and the
percentage of capital that number represents, as at 13 August 2021 are:
Rank Name
Number of shares
% of shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
CARLTON HOTEL LIMITED
NETWEALTH INVESTMENTS LIMITED
MARNIE ANN BAKER
AMP LIFE LIMITED
BOND STREET CUSTODIANS LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
LEESVILLE EQUITY PTY LTD
BNP PARIBAS NOMINEES PTY LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
TERMZ PTY LTD
JOHN PIERCE TOBIN
BNP PARIBAS NOMS (NZ) LTD
BNP PARIBAS NOMINEES PTY LTD
Total Securities of Top 20 Holdings
100,627,645
54,399,237
37,205,223
20,484,219
10,007,871
2,000,270
1,954,338
1,117,147
943,459
886,673
827,136
791,328
719,438
681,688
524,312
518,370
500,000
477,154
475,874
469,344
235,610,726
18.39
9.94
6.80
3.74
1.83
0.37
0.36
0.20
0.17
0.16
0.15
0.14
0.13
0.12
0.10
0.09
0.09
0.09
0.09
0.09
43.06
Equity Trustees Limited, trustee for the Bendigo and Adelaide Bank Employee Share Plan and the Employee Share Grant Scheme,
held a combined total of 680,302 unquoted shares. These shares have not been included in the above table but are included in
the total of issued ordinary share capital.
Fully paid Converting Preference Shares 4 (CPS4) (ASX: BENPG)
Names of the 20 largest holders of Converting Preference Shares 4, including the number of shares each holds and the
percentage of Converting Preference Share 4 capital that number represents, as at 13 August 2021 are:
Rank
Name
Number of shares
% of shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
18
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
MUTUAL TRUST PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
BOND STREET CUSTODIANS LIMITED
BNP PARIBAS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
IOOF INVESTMENT MANAGEMENT LIMITED
NAVIGATOR AUSTRALIA LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
BERNE NO 132 NOMINEES PTY LTD <684168 A/C>
BT PORTFOLIO SERVICES LIMITED
SOUTH BAY NOMINEES PTY LTD
PCI PTY LTD
INVIA CUSTODIAN PTY LIMITED < SALES SETTLE A/C >
NULIS NOMINEES (AUSTRALIA) LIMITED
SOUTH HONG NOMINEES PTY LTD
Total Securities of Top 20 Holdings
124,404
95,741
90,242
86,531
44,268
42,762
38,866
37,018
33,475
32,479
27,507
25,724
24,463
20,274
19,462
18,000
17,715
17,677
17,590
17,000
831,198
3.87
2.98
2.81
2.69
1.38
1.33
1.21
1.15
1.04
1.01
0.86
0.80
0.76
0.63
0.61
0.56
0.55
0.55
0.55
0.53
25.84
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 4 1
Additional information (continued)
8 Major shareholders (continued)
BEN Capital Notes (ASX: BENPH)
Names of the 20 largest holders of Capital Notes, including the number of notes each holds and the percentage of notes
outstanding that number represents, as at 13 August 2021 are:
Rank Name
Number of notes
% of notes
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
INVIA CUSTODIAN PTY LIMITED < SALES SETTLE A/C >
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
DIOCESE DEVELOPMENT FUND - CATHOLIC DIOCESE OF PARRAMATTA
NATIONAL NOMINEES LIMITED
MUTUAL TRUST PTY LTD
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
SANDHURST TRUSTEES LTD
MERCHANT FOUNDATION PTY LTD
BOND STREET CUSTODIANS LIMITED
BNP PARIBAS NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
MEYER TIMBER CONSOLIDATED PTY LTD
THE TRUST COMPANY (AUSTRALIA) LIMITED
ZW 2 PTY LTD
BERNE NO 132 NOMINEES PTY LTD <684168 A/C>
472,466
343,784
170,830
138,221
96,792
89,106
48,600
47,833
40,811
39,477
31,696
31,514
28,998
24,607
24,007
21,409
15,000
14,670
13,943
13,250
9.40
6.84
3.40
2.75
1.93
1.77
0.97
0.95
0.81
0.79
0.63
0.63
0.58
0.49
0.48
0.43
0.30
0.29
0.28
0.26
1,707,014
33.97
The Convertible Preference Shares 2 were removed from Official Quotation at the close of trading on Monday, 30 November
2020 following the resale and redemption of the Notes.
The Convertible Preference Shares 3 were removed from Official Quotation at the close of trading on Tuesday, 15 June 2021
following the resale and redemption of the Notes.
9 Voting rights
Under the Company’s Constitution, each person who is a voting Shareholder and who is present at a general meeting of the
Company in person or by proxy, attorney or official representative is entitled to one vote on a show of hands or, on a poll, one
vote for each fully paid ordinary share held. In the case of an equality of votes the Chair has, on both a show of hands and at a
poll, a casting vote in addition to the vote to which the Chair may be entitled as a shareholder, proxy, attorney or duly appointed
representative of a shareholder.
With respect to each person that is a holder of preference shares under the Company’s Constitution each holder is not entitled to
vote at any general meeting of the Company except:
a) on any resolution during a period in which a dividend or part of a dividend remains unpaid
b) on any resolution:
•
•
•
•
to reduce the share capital of the Company (other than a resolution to approve a redemption of the holder’s
class of preference shares)
that affects rights attached to the holder’s class of preference shares
to wind up the Company
for the disposal of the whole of the property, business and undertaking of the Company
c) on a resolution to approve the terms of a buy-back agreement (other than a resolution to approve a redemption of
the holder’s class of preference shares)
d) during a winding-up of the Company, in which case a holder will have the same rights as to manner of attendance and
voting as a holder of ordinary shares with one vote per preference share.
142 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 4 3
144 A N N UA L F I N A N C I A L R E P O R T 2 0 2 1
About our front cover
This year’s cover page is dedicated to the resilience,
professionalism, and dedication of our people. Without
their expertise and efforts, the results and achievements
outlined in this document would not have been possible,
and importantly, our Bank would not have been
able to support our customers, communities and all
stakeholders to the extent we have.
Jess Brawn is a Local Engagement Officer at our
Mitchell Street branch in Bendigo. Like many of
our frontline staff, Jess has been a friendly face for
customers – and a connection for our communities - as
they navigated the uncertainty of the last 18 months.
Jess and the team have ensured the highest levels of
safety and hygiene in their branch so that customers
can continue to access essential banking services.
Jess works in one of our reimagined branches that
brings together our customer, community and digital
strengths to reimagine banking for the future. Our
Mitchell Street branch includes space for retail pop-ups
where local businesses can showcase their products
and services.
As a purpose-led organisation, our business attracts
people who are passionate about community.
Throughout COVID-19, our people have been
experiencing the same challenges as the wider
community, but their adaptability and passion have
seen them prioritise the needs of our customers and
communities, ultimately contributing to Australia’s
economic recovery and ongoing resilience.
We know that when we support and invest in our
people, our customers, communities and stakeholders
benefit the most.
A N N UA L F I N A N C I A L R E P O R T 2 0 2 1 1 4 5
Australia’s Bank of Choice
Annual Financial Report 2020
Bendigo and Adelaide Bank Limited.
ABN 11 068 049 178