Annual Report 2023
The better big bank
connecting community
and country
Introduction
Community. Regional. Trust.
We are committed to our strategy and the qualities that
make Bendigo and Adelaide Bank unique, by staying true
to our connection with communities, our regional roots
and our position as Australia’s most trusted bank.
Message from our Chair
Message from our CEO & MD
Year in Review
Directors’ Report
Operating and Financial Review
Remuneration Report
Financial Highlights
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder information
Glossary
02
06
08
10
20
46
79
80
177
178
187
191
Reporting on our progress
In the past year, we have grown customer numbers and deposits while
improving our return on equity and increasing our dividends per share. Importantly,
we have not achieved this at the expense of our commitment to our customers,
people, community, or the environment, also recording strong results against our
non‑financial targets. More about our progress over the past year is contained
within our reporting suite outlined below.
Annual Financial Report
Our Statutory Financial Reporting
Corporate Governance Statement
Sustainability Report
Our report on our material ESG and
sustainability topics, Climate‑related
Disclosure and Tax Transparency
Disclosure
All reports are available on our website via our Investor Centre
Reports | Bendigo and Adelaide Bank
www.bendigoadelaide.com.au/investor-centre
Message from our ChairMessage from our CEO & MDYear in Review FY23 Achievements
Most trusted bank
(Roy Morgan)
2.4 million customers
A 9.9% increase
$576.9 million
Cash earnings after tax, up 15.3%
8.62%
Return on equity, up 90 basis points
$32.9 million in community
bank contributions
Taking total contributions
to $320 million since inception
Expanded
digital proposition
Digital Mortgages comprised
12% of residential mortgages
settled in 2H FY23
Reflect RAP
Our inaugural reconciliation action plan
Launched BEN Zero
Our pathway to net zero by 2040
Annual Report 2023 1
Acknowledgement
of Country
We respectfully acknowledge the
traditional owners of lands across
Australia and pay our respects
to their elders past and present.
Our head office is located on
Dja Dja Wurrung land.
Artw
ork b
y
Tr
o
y
F
i
r
e
b
r
a
c
e
,
Y
o
r
t
a
Y
o
r
t
a
a
n
d
D
j
a
D
j
a
W
u
rru
n
g artist and educator
Contact us
Bendigo and Adelaide Bank Limited
ABN 11 068 049 178
Registered head office
The Bendigo Centre,
22‑44 Bath Lane
Bendigo, VIC, Australia 3550
1300 236 344
If calling from overseas:
+61 3 5445 0666 (standard
international call charges apply)
Shareholder enquiries
https://www.bendigoadelaide.com.
au/investor‑centre/frequently‑asked‑
questions/
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder informationFinancial Report
2
Message from our Chair
Message from our Chair
Bendigo and Adelaide Bank has more than 165 years of experience in providing the
community with banking services and supporting customers who need our help.
The Bank has been through many economic cycles in that time and remains well
positioned to continue meeting the expectations of the community and our customers.
90%
of the actions in our
Climate Change Action Plan
have now been delivered
$700,000
awarded to 200 first time
students as part of our
expanded 2023
Scholarship Program
Jacqueline Hey
Chair, Bendigo and Adelaide Bank
Message from our CEO & MDYear in ReviewIntroduction Annual Report 2023 3
Common Equity
Tier 1 Ratio
11.25%
Up 157 basis points
Full year dividend
up 15.1%
61.0
cents
Our transformation program, which
began in financial year 2019, continues
with the Bank delivering a number of key
milestones which you can read about in
the letter from our CEO and Managing
Director, Marnie Baker, on the following
pages. The important foundational
work that has been completed by your
management team will pave the way
for our future growth.
The evolving economic environment
presents both opportunities and
challenges. We all hope that inflation
appears to have peaked, however
elements of it remain persistent. The
end of record low interest rates will
be welcomed by depositors while we
understand borrowers will need to
make some adjustments.
Rest assured the bank continues to
prioritise sustainable growth for the
benefit of all our stakeholders including
customers, people, partners, communities
and shareholders.
Given the uncertain outlook, it is pleasing
to note the continuing rise in the Bank’s
capital levels. They improved again over
FY23 with our Common Equity Tier 1 ratio
rising 157 basis points to 11.25 percent,
well above regulatory requirements and
APRA’s definition of ‘unquestionably
strong’ and reflecting our prudent and
conservative approach.
In August, the board declared a final fully
franked dividend of 32 cents per share,
taking the full year dividend to 61 cents
per share, representing a 15.1 percent rise
on the previous year. Your Board always
strives to balance the needs and interests
of all our stakeholders and trusts that you
view this as a fair return on your investment.
Rest assured that we continue to exercise
discipline and accountability in our
judicious use of your shareholder capital.
The Bank’s customer centric approach
continues to deliver both financial results
and public accolades. Bendigo and
Adelaide Bank’s home loan customers are
Australia’s most satisfied and we retained
our position as Australia’s most trusted
bank. The Board acknowledges the many,
many hours of hard work by our people
that go into securing and maintaining this
type of recognition for the Bank.
The good standing of the Bank can be
seen in the continued growth in customer
numbers as they increasingly recognise the
Bank as a genuine alternative to the major
banks. The multi‑channel experience we
offer both direct to customers and through
our partners continues to broaden in
response to our customer’s evolving needs
and it is pleasing to see this expertise
become more widely acknowledged.
In other measures undertaken this year,
your Board approved our ESG and
Sustainability Business Plan, as well as our
Climate and Nature Action Plan for 2024 to
2026, which continues to build on our ESG
framework. The new plan provides details
of our various ESG initiatives, how we will
implement them, and further clarifies how
we will both track and be accountable for
our performance.
This builds on the financial year just
passed, where we saw the delivery of the
final year of our inaugural Climate Change
Action Plan, with nearly 90 percent of
the actions in the plan now delivered.
The Bank has been able to nearly halve
its operational emissions since 2020
and made good progress on our target
to purchase 100 percent renewable
electricity by 2025.
The launch of the Bank’s inaugural
Reflect Reconciliation Action Plan was
another highlight as one of the first steps
in our reconciliation journey. The Bank’s
Executive and Board participated in
cultural immersion experiences hosted in
the Bendigo region by the Dja Dja Wurrung
and the Kaurna peoples in the Adelaide
region as part of this process, which left
lasting impressions.
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 4
Message from our Chair
Message from our Chair continued
Rest assured the bank continues to prioritise sustainable
growth for the benefit of all our stakeholders including
customers, people, partners, communities and shareholders.
Reflecting on my time at the Bank I am
proud to have worked closely with your
CEO and Managing Director Marnie Baker
and her talented Executive team during a
period of accelerated change for the bank,
its customers and the community.
David Foster, as an existing member of
the Board, is well qualified to continue
working with the Executive team and I am
pleased he will be your new Chair. Rest
assured your Bank is in good shape and
I will continue to take a keen interest in
its progress.
I want you to know there are many
talented and skilled people working hard
for you and all our stakeholders, right
across the organisation. I remain confident
we have the right mix of experience and
skills on our Board, Executive, within our
Senior Leadership team and across the
breadth of the company.
Their combined efforts will remain
important as our people continue to
execute on our vision to be Australia’s
bank of choice. We look forward to the
challenges and opportunities of the
coming year, and to continue delivering
on our longstanding purpose of feeding
into the prosperity of our customers and
the community.
Jacqueline Hey
Chair, Bendigo and Adelaide Bank
In conjunction with our Community Bank
partners, the Bank awarded 200 first time
students more than $700,000 as part of
our expanded 2023 Scholarship Program
which delivers on our commitment
to address jobs and skills challenges
in regional areas. The program has
now provided more than $12 million in
funding to more than 1,500 students
across Australia.
Established to empower and assist
students on their educational journey,
the program creates life changing
opportunities for students who might
otherwise miss out on further education,
especially those in regional and remote
areas. I am proud of what the program has
achieved, and I hope you are too.
A diverse mix of experiences and expertise
is crucial to the success of any Board. We
have been fortunate in this regard with no
shortage of attractive candidates.
The Bank appointed digital executive and
entrepreneur Alistair Muir in September
2022 and his constructive contributions to
our board discussions have been welcome.
We will also welcome Margaret Payn as
a Non‑Executive Director commencing
in September 2023. Margaret brings
a strong background in banking and
financial services. We have announced the
retirement of Jim Hazel as a Non‑Executive
Director effective from November. We
thank Jim for his many years of valuable
contribution to your Board.
As you may know, this is my final report as
your Chair and my last year as a Director,
with my time at Bendigo and Adelaide
Bank coming to an end. I have served as
Director of the Bank for more than 12 years
and as your Chair for the last four years,
which has been a highlight of my career.
Message from our CEO & MDYear in ReviewIntroduction Annual Report 2023 5
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 6
Message from our CEO & MD
Message from our CEO & MD
As the Bank continues with the important program of work that will help us deliver on our
vision to be Australia’s bank of choice, it’s important to consider the achievements we have
made on this journey and reflect on just how far we’ve come.
Over recent years, the Bank has
made good progress on our strategic
imperatives of reducing complexity in our
operations, investing in our capabilities and
telling our story in more ways than ever.
As the Bank and our customers face
into a new set of challenges with the
conclusion of the low interest rate cycle,
I’m proud of what we have achieved and
reminded once again of the important role
strong banks play in the community, and
particularly in regional Australia.
As a result of this hard work, the Bank has
never been better placed to offer support
to those who need it and to continue
delivering on our purpose of feeding into
the prosperity of our customers and their
communities, and not off them.
As you may know, the Bank has introduced
a strengthened focus on returns, execution
and sustainable growth. I’m pleased to
share the results of this work with you over
the following pages, which show improved
financial performance across the Bank’s
key metrics such as cash earnings, return
on equity and dividends per share.
The Bank delivered record cash earnings
and further improvements in our cost‑to‑
income ratio in financial year 2023 through
disciplined lending, continued growth
in deposits and a measured approach
to cost management in a period of
high inflation.
Cash earnings per share
102.1 cents
Up 13.7%
Marnie Baker
CEO & MD, Bendigo and Adelaide Bank
Message from our ChairYear in ReviewIntroduction Annual Report 2023 7
2.4 million
Customers
up 9.9%
$320 million
in profits to be returned
to the community by our unique
Community Bank model
8.62%
Return on Equity
up from 7.72%
Our transformation strategy is on track.
We continue to embed changes within the
Bank to meet the growing and changing
expectations of our customers and
other stakeholders, while also ensuring
the Bank is nimble enough to adapt to
changes in the environment that are yet
to present themselves.
Over the year, we reached a number
of key milestones for the Bank which
included reducing the number of core
banking systems from seven to four. The
percentage of home loan settlements
achieved through digital channels has
increased to 12 percent for the second half
and one third of the Bank’s applications
are now in the cloud.
Bendigo and Adelaide Bank continues to
maintain Australia’s fourth largest branch
network and has more branches per
customer than any other Australian bank.
Our physical network is very important
to us, and we value the personalised
interactions we have with our customers
every day.
Our customer numbers have continued to
grow over the year, increasing 9.9 percent
to 2.4 million. They are attracted to our
trusted brand because we continue to put
our customers at the centre of everything
we do. They are attracted to our quality
products, award‑winning service and
digital offerings which are all helping to
drive our Net Promoter Score which is
now 28.4 points higher than the industry
average, widening the gap against our
competitors by 2.1 points in the last
12 months alone.
These achievements are proof of our
unwavering commitment to become a
bigger, better and stronger bank.
Our people, who are the key to our
success, have embraced this change with
staff engagement levels remaining steady.
Importantly, we have retained our market
leading customer advocacy, trust and
reputation scores while doing so.
This year our unique Community Bank
model celebrated its 25th anniversary and
is on track to return $320 million in profits
to the community since inception. The
model is just one of the ways we continue
to deliver on our purpose, and we are
extremely proud of its success and of the
communities they have strengthened.
Looking ahead, the
opportunities for our Bank
has never been clearer.
A review of our business and agribusiness
division has identified target markets
that will support our focus on sustainable
returns. Our prudent approach to lending,
supported by our unique Community Bank
model, has paid off with a return to growth
in the final quarter of FY23. We expect
customer interest in our digital mortgage
products to continue to grow as they
embrace their convenience and utility.
There is a downside to the speed and
convenience of digital products as the
landscape for scams and fraud continues
to evolve. As part of our ongoing and
consistent focus on protecting our
customers, the Bank has tightened
transaction rules, removed hyperlinks from
our SMS messages and doubled the size
of our financial crime team.
We continue to work hard to proactively
detect and prevent the unauthorised use
of customer accounts. We advocate for a
whole of system approach to combatting
scams and fraud and remind customers
of the important role they play in keeping
their information secure.
The value of our transformation agenda
is evident in the improved returns we
have delivered for shareholders over
the last 12 months, with cash earnings
per share increasing from 89.8 cents to
102.1 cents, Return on Equity increasing
from 7.72 percent to 8.62 percent and our
Common Equity Tier 1 ratio increasing
from 9.68 percent to 11.25 percent.
We are committed to maintaining
momentum in returns for our shareholders
by managing our costs, generating
sustainable returns on our assets and
liabilities, and leveraging those qualities
that make Bendigo and Adelaide Bank
unique: our connection with communities,
our regional roots and our position as
Australia’s most trusted bank.
At this year’s Annual General Meeting, we
will say farewell to Jacquie Hey. Jacquie is
retiring from the Bank after 12 years as a
Director and four years as Chair. Jacquie
has been a valuable sounding board for
the organisation providing thoughtful
advice and guidance during a period of
intense change. I thank Jacquie for her
wise counsel and commitment to the
purpose and performance of the Bank.
I’d also like to welcome David Foster,
Jacquie’s successor as Chair. David has
a strong background in banking and
developed a deep understanding of our
Bank after being elected to your Board
in 2019. I look forward to working closely
with David and continuing to deliver on
our purpose of feeding into the prosperity
of our customers and the community and
executing on our vision to be Australia’s
Bank of choice.
Marnie Baker
CEO and Managing Director,
Bendigo and Adelaide Bank
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 8
Year in Review
2023 Year in review highlights
We are proud of our regional heritage and the positive impact we have in the communities in
which we operate. Our vision is to be Australia’s bank of choice – for those who bank with us,
work for us, partner with us and invest in us.
Our longstanding purpose of feeding into the prosperity of our customers continues to underpin everything we do. In FY23, we have
continued to develop and build on the strength of our trusted brand and our authentic connection to community and regional Australia
as our competitive advantage. The following is a snapshot of the financial and non‑financial milestones we achieved in FY23.
Customers and Trust
Customers
We are proud to be Australia’s most trusted
bank with Australia’s most satisfied home loan
customers. We have achieved and maintained
our high trust and satisfaction scores by putting
our customers at the centre of everything
we do. They recognise we are a genuine
alternative to the major banks, which has seen
our customer numbers rise almost 10 percent
to 2.4 million. We are committed to meeting
the evolving expectations of our customers by
offering products and services that are simple,
convenient, and personal.
Community
Our business activities deliver real value and
create a positive difference in our communities,
impacting the health and wellbeing of our
customers and the places they live, work and
play. Our commitment to community through
our Community Bank model, philanthropic
donations and the many social investments and
partnerships that occur across our business,
help bring our social purpose to life each day.
We have remained true to our regional roots; we
have worked hard to maintain and strengthen
our connection with communities, and we will
continue to do everything we can to earn and
keep our customers’ trust.
Transformation
We have continued to deliver on our
transformation agenda, with key milestones
being achieved across the year. Our digital
proposition expanded substantially with the
launch of Up Home and Qantas Money Home
Loans and in‑app digital term deposits. FY23
also saw a significant increase in our digital
home loan platform, BEN Express, which
has delivered over $270 million in home loan
settlements since inception, with more in
the second half of 2023 than in the previous
four years combined. These achievements
demonstrate our expertise in digital and the
value of our trusted brand.
FY23 Milestones
Most trusted bank
(Roy Morgan)
9.9% increase
in customer numbers
+23.2 NPS
(Net Promoter Score)
28.4 points
higher than industry
average
Celebrated
25 years
of the Community
Bank Model
$32.9 million
in Community Bank
Contributions in FY23
$54.1 million
in donations received
by the Community Enterprise
Foundation in FY23
$1.1 million
across 289 scholarships
in FY23
Reduced
core banking systems
from seven to four
90 fewer
IT applications
Launched
digital term deposits
72% of customers
are active ebanking users
Message from our ChairMessage from our CEO & MDIntroduction Annual Report 2023 9
Financial Performance
Over the last 12 months, the Bank has made
significant progress on our financial and
strategic objectives. Financially, we have
delivered on our key metrics. Cash earnings
increased 15.3 percent to $576.9 million,
Return on Equity increased 90 basis points to
8.62 percent and our Cost to Income ratio
improved by 420 basis points to 54.9 percent.
These results have been achieved through
managing our costs and reinvesting back into
value enhancing areas of our business and
demonstrate the progress we have made to
deliver on our strategy. Importantly, we have
continued to deliver on our busy agenda of
change without losing sight of who we are.
People
Empowered people create empowered
communities. At the Bank we consistently
promote teamwork, integrity, performance,
engagement, leadership, inclusion, and passion.
We pride ourselves on our commitment to
conduct business ethically and to the highest
possible standard. We believe diversity of
experience, mindset and background inspires
our best ideas, helps us challenge the status
quo and identify better ways of working.
Planet
The Bank is committed to playing our part
in the transition to net zero emissions and
continues to build climate mitigation and
adaption into our business and support our
customers and their communities to build
climate resilient futures. Our approach to how
we manage and respond to climate change
is shaped by our Board‑endorsed Climate
Change Action Plan and Climate Change
Policy Statement. Guided by these, we identify
opportunities to respond, mitigate and adapt
to climate change. With our customers and
communities at the centre of everything we
do, we support them with tools to take climate
change adaption and mitigation into their
own hands.
Cash earnings after tax
$576.9 million
Up 15.3%
Net interest margin
1.94%
Up 20 basis points
Return on equity
8.62%
Up 90 basis points
Cost to income
54.9%
an improvement of
420 basis points
Delivered our
Reflect Reconciliation
Action Plan
Achieved
Bronze status
through the Australian
Workplace Equality
Index (AWEI)
Female representation
increased from
33.7% to 37%
at the Other Executive/
General Manager level
Delivered the
first in-house
demographic
survey
Reduced
Scope 1 & 2
emissions by 46%
since 2020
Delivered close to
90% of the actions
identified in the Climate
Change Action Plan
Launched BENZero
our pathway to net
zero by 2040
CDP Score of
B (uplift from C)
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 10
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 2023.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Directors’ Report
Annual Report 2023 11
Directors’ Information
The names and details of the Directors in office as at the date of this report are as follows:
Jacqueline Hey
Chair, Independent
Marnie Baker
CEO and MD, Non-independent
Vicki Carter
Independent
BCom, Graduate Certificate
in Management, GAICD, 57 years
Jacquie lives on the land of
the Bunurong people of the
Kulin Nation.
Jacquie joined the Board as a
director in July 2011 and was
appointed Chair in October
2019, becoming the Bank’s
first female Chair.
Jacquie is a member of the
Board Audit Committee and
the Board People, Culture &
Transformation Committee.
Jacquie has international
executive experience in business
and technology systems
including as Managing Director
& CEO of Ericsson – the Swedish
telecommunications company ‑ in
the UK and Ireland and Australia/
NZ prior to becoming a full‑time
company director in 2011.
Jacquie Hey will retire from
the Board from the close of
the Annual General Meeting
on 24 October 2023.
Other director and memberships
(including directorships of other
listed companies for the previous
three years):
• Director of Qantas
Airways Limited (ASX listed
Aug 2013 to present)
• Director of Commonwealth
Superannuation Corporation
• Member of Brighton Grammar
School Council
• Former Director of AGEL
Energy Limited (ASX listed,
Mar 2016 to May 2022)
BBus, ASA, MAICD and SFFin, 55 years
Marnie Baker lives on the land of
the Dja Dja Wurrung people of
the Kulin Nation.
Marnie was appointed Chief
Executive Officer & Managing
Director in 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.
Other director and memberships
(including directorships of other
listed companies for the previous
three years):
• Deputy Chair of Australian
Banking Association Limited
• Member of Business Council
of Australia
• Member of La Trobe
University’s Bendigo Regional
Advisory Board
• Member of Mentally Healthy
Workplaces Advisory Group
BA (Social Sciences), Dip Mgt, Certificate
in Executive Coaching, GAICD, 59 years
Vicki lives on the land of
the Bunurong people of the
Kulin Nation.
Vicki joined the Board in
September 2018. Vicki is Chair
of the Board People, Culture
& Transformation Committee
and a member of the Board
Risk Committee.
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.
Vicki’s former roles include
Executive Director, Transformation
Delivery at Telstra, and prior to
that, she held several 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.
Other director and memberships
(including directorships of other
listed companies for the previous
three years):
• Director of ASX Limited (ASX
listed Feb 2023 to present)
• Director of IPH Limited (ASX
listed Oct 2022 to present)
• Chair of Sandhurst
Trustees Limited
Richard Deutsch
Independent
BE, FCA, 56 years
Richard lives on the land of the
Bidjigal and Gadigal people of
the Eora Nation.
Richard joined the Board in
September 2021. Richard is Chair
of the Board Audit Committee and
a member of the Board Financial
Risk Committee.
Richard most recently served as
CEO of Deloitte Australia, the
Managing Partner of the Audit &
Advisory Practice and a member
of the Global Audit & Advisory
Leadership Team. Richard’s
career also includes more than
25 years working with PwC,
including nine years on PwC’s
Australian executive.
His former directorships also
include serving as President
and Chairman of the Institute of
Chartered Accountants Australia
(now Chartered Accountants
Australia and New Zealand).
Richard has also been a
member of the Business Council
of Australia.
Other director and memberships
(including directorships of other
listed companies for the previous
three years):
• Chair Movember Foundation
• Director of AUB Group Limited
(ASX listed, Dec 2022 to present)
Operating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 12
Directors’ Report continued
David Foster
Independent
Jim Hazel
Independent
David Matthews
Independent
B.AppSci, MBA, SFFin, FAIM, GAICD, 54 years
BEc, SFFin, FAICD, 72 years
Dip BIT, GAICD, 65 years
David lives on the land of the Kabi Kabi people.
Jim lives on the land of the Kaurna people.
Jim joined the Board in March 2010. Jim is a
member of the Board Risk Committee and
the Board Financial Risk Committee.
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 has had more
than 40 years of experience in the financial
services sector.
As Chair of the Adelaide Festival Centre,
Jim played a pivotal role in the redevelopment
of Her Majesty’s Theatre in Adelaide and led
the Arts Community through the challenging
pandemic period.
Jim Hazel will retire from the Board from
the close of the Annual General Meeting
on 24 October 2023.
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Chair of Ingenia Communities Group Limited
(ASX listed, Mar 2012 to present)
• Chair of Precision Group
David lives on the land of the Wotjobaluk
people of the Kulin Nation.
David joined the Board in March 2010. David
is a member of the Board Audit Committee
and the Board Financial Risk Committee. David
is also a member of the Community Bank
National Council and Chair of the Agribusiness
Advisory Committee.
David has extensive connections and
experience with regional and rural Australia.
David played a fundamental role in the
creation of the Community Bank network and
chaired the first Community Bank company in
Australia which began in Rupanyup and Minyip
in Victoria.
David has broad experience in agribusiness
from production to international trade,
deep community connections and an
understanding of the critical role ‘people’ play
in business success.
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Director Rupanyup/Minyip Finance
Group Limited
• Chair of Barossa Hills Fleurieu Local
• Director of Farm Trade Australia Pty Ltd
Health Network
• Former Director of Australian Grain
• Director of Omega Communities Pty Ltd
Technologies Pty Ltd
• Director of Chapman Capital Partners
• Pro‑Chancellor of University of South Australia
David joined the Board in September 2019.
David is Chair of the Board Financial Risk
Committee and a member of the Board People,
Culture & Transformation Committee.
David’s executive career ‑ primarily in financial
services ‑ has spanned over 25 years, most
recently as CEO of Suncorp Bank from 2008
to 2013. He also held several senior roles with
Westpac Banking Corporation in Sydney
and Queensland across a 14‑year period.
David was previously the Chair of Motorcycle
Holdings Limited and is now the current Chair of
G8 Education Limited and Youi Holdings Group
Limited. In December 2022, he was appointed
director of Star Entertainment Group Limited
and in March 2023, David was announced
as the Star Entertainment Group Limited’s
new Chair.
David has experience in strategy, mergers and
acquisitions, operational leadership, finance and
risk management, product management and
marketing, and change management.
David will be appointed Chair from the
close of the Annual General Meeting on
24 October 2023.
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Chair of G8 Education Limited (ASX listed,
Feb 2016 to present)
• Chair of Youi Holdings Group Limited
(ASX listed, Sept 2022 to present,
chair since Jan 2023)
• Chair of Star Entertainment Group Limited
(ASX listed, Dec 2022 to present,
chair since March 2023)
• Former Director Helia Group Limited
(previously Genworth Mortgage
Insurance Australia Limited) (ASX listed,
May 2016 to Mar 2022)
• Former Director Motorcycle Holdings Ltd
(ASX listed, Mar 2016 to Dec 2022)
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Directors’ Report
Annual Report 2023 13
Alistair Muir
Independent
(Patricia) Margaret Payn
Independent
Victoria Weekes
Independent
Dip. Comp Sci, BSC (Hons), MAICD, 42 years
Alistair lives on the land of the of the Bidjigal
and Gadigal people of the Eora Nation.
Alistair joined the Board in September
2022. Alistair is a member of the Board Risk
Committee and the Board People, Culture
& Transformation Committee.
Alistair is an experienced digital executive and
entrepreneur with almost 20 years experience
working in Financial Services and in Technology
across a broad range of ASX 50 and Fortune
500 companies.
Alistair is currently the Managing Director of
advisory business Vanteum and has advised
several banks, insurers, and Fintech businesses
on Open Banking and the Consumer Data
Right (CDR) as well as advising several
government departments in Australia and
overseas on Fintech and digital innovation.
He was previously Director and Chair of
the Technology Board committee at Humm
Group Limited.
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Director of Helia Group Limited (formerly
Genworth) (ASX listed, Dec 2021 to present)
• Director of AFM Investments Pty Ltd
• Director of Davak Pty Ltd
• Member of ASIC’s Consultative Panel
B.A (Honors) French and Pure Mathematics,
ICAEW Fellow (FCA), 63 years
Margaret lives on the land of the Kaurna people.
Margaret will join the Board from 14 September
2023. Margaret will be a member of the Board
Financial Risk Committee and the Board
Risk Committee.
Margaret’s career has been mainly in finance,
risk and operational roles across financial
services including retail banking, institutional
banking and wealth management. She also has
significant non‑executive experience covering
publicly listed companies, subsidiaries of large,
listed companies and responsible entities for
investment schemes and trusts for both public
and private markets. She has extensive global
experience, having worked in Australia, Asia
and the UK.
Margaret’s most recent executive position was
AMP Capital’s Chief Financial Officer and Chief
Operating Officer; she has held roles as Group
Managing Director of Strategy and Marketing
at ANZ Banking Group and senior finance roles
across ANZ, Westpac and Citigroup Australia.
Prior to that, Margaret held senior finance
and operational roles at Schroders plc in Asia,
London and Australia. She was also the Group
Risk director during her time in London.
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Advisor to CSIRO on the commercialisation
of science and technology
• Former Director of Humm Group Limited
(ASX listed, Mar 2021 to Jun 2022)
• Director of Albion Technology
& General VCT plc
• Director of JP Morgan Mid Cap
Investment Trust plc
BCom (UNSW) LLB (UNSW), FAICD, 61 years
Victoria lives on the land of the Wangal people
of the Eora Nation.
Victoria joined the Board in February 2022.
Victoria is Chair of the Board Risk Committee
and member of the Board Audit Committee.
Victoria has over 35 years of experience in
financial services. Victoria has held executive
roles with major Australian listed companies
and multi‑nationals including Westpac, Citi,
Allens and Jarden Morgan (now CS First
Boston). Victoria is the Deputy Chair of
the ASIC Markets Disciplinary Panel and
former chair of NSW Treasury Audit and
Risk Committee.
Victoria has been a non‑executive director
and chair with experience across a range
of business sectors in the public, private,
government and not‑for‑profit organisations,
with expertise in risk management, regulation,
and compliance at both executive and
board level.
Victoria is a Senior Fellow and past president
of professional standards body FINSIA, a
Fellow of the Australian Institute of Company
Directors, a Chartered Banker and was
previously the chair of the Australian Gender
Equality Council. Victoria was a former director
of URB Investments Limited (ASX:URB).
Other director and memberships (including
directorships of other listed companies for
the previous three years):
• Director of Alcidion Group Limited
(2021 – current) (ASX listed, Sept 2001
to present)
• Director of Risk Compliance Solutions
Pty Ltd
• Member of State Library Council of NSW
• Member of ASIC’s Markets Disciplinary Panel
Operating and Financial ReviewRemuneration ReportShareholder informationFinancial Report 14
Directors’ Report continued
Company Secretary
Belinda Donaldson (BCom(Economics), LLB) was appointed as
Company Secretary of the Bank on 9 January 2023. She is an
experienced corporate lawyer and governance professional with
extensive experience assisting listed, non‑listed and not‑for‑profit
organisations, in mergers and acquisitions, commercial law,
corporate governance and advisory matters.
Dividends and Distributions
The Directors announced on 14 August 2023 a fully franked
dividend of 32 cents per fully paid ordinary share. The final
dividend is payable on 29 September 2023. The proposed
payment is expected to total $181.1 million.
The following fully franked dividends were paid by the Bank during
the year on fully paid ordinary shares:
Will Conlan, Chief of Staff and the former Company Secretary
of the Bank, was appointed Company Secretary effective
18 October 2022 on an interim basis until 9 January 2023.
• A final dividend for FY22 of 26.5 cents per share, paid on
29 September 2022 (amount paid: $147.4 million);
and
Carmen Lunderstedt was Company Secretary of the Bank until
her resignation effective 17 October 2022.
• An interim dividend for FY23 of 29.0 cents per share, paid on
31 March 2023 (amount paid: $162.1 million).
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, rural and
commercial lending, deposit‑taking, payments services, wealth
management, margin lending, and superannuation, treasury,
and foreign exchange services.
Operating and Financial Review
The Group’s statutory profit after tax for the financial year ended
30 June 2023 increased by 1.8 percent to $497.0 million (FY22:
$488.1 million). This was impacted by:
• An increase in net interest income due to an increase in
net interest margin, in addition to an increase in interest
earning assets.
• An increase in operating costs of $140.5 million or 13.8 percent,
due to an impairment of software intangible assets, along with
increased investment spend, information technology costs and
staff costs.
• An increase in credit expenses largely attributed to an increase
in collective provision charges driven by global economic
uncertainty, higher inflation and cost of living pressures.
Further information on the Group’s operating results for the
financial year are contained in the Operating and Financial
Review section of this report.
Further details on dividends provided for or paid during the FY23
on the Bank’s ordinary and preference shares are provided at
Note 8 Dividends of the Financial Report.
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
Changes in the principal activities of the Group have been
outlined above.
There were changes made to the composition of the Board and
the Executive team during the financial year, specifically:
Directors
1. Jan Harris resigned as a Non‑executive Director
12 September 2022.
2. Alistair Muir was appointed as a Non‑executive Director
commencing 12 September 2022.
3. Margaret Payn was appointed as a Non‑executive Director
commencing 14 September 2023 and will stand for election at
the AGM.
4. Jim Hazel will retire as a Non‑executive Director effective from
the AGM on 24 October 2023.
5. Jacqueline Hey will retire as Chair and Non‑executive Director
effective from the AGM on 24 October 2023.
6. David Foster will be appointed Chair from the AGM on
24 October 2023
Executives
1. Adam Rowse was appointed as Chief Customer Officer
Business and Agribusiness on 1 July 2022.
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 Managing
Director’s Messages and the Operating and Financial Review
section of this report.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Directors’ Report
Annual Report 2023 15
Events After Reporting Date
The Directors are not aware of any matter or circumstance which has arisen 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.
Meetings of Directors
The Board met 16 times (scheduled and unscheduled meetings) in the year ended 30 June 2023. The following table includes:
• names of the Directors holding office at any time during, or since the end of, the financial year;
•
•
the number of Board and Board Committee meetings for which each Director was eligible to attend; and
the number of meetings attended by each Director.
Meetings during the year
Board
Audit
Financial Risk
Risk
Meetings during the year
Jacqueline Hey
Marnie Baker
Vicki Carter
Jan Harris1
David Foster
David Matthews 2
Jim Hazel
Richard Deutsch
Victoria Weekes 3
Alistair Muir 4
Margaret Payn 5
A
16
16
16
5
16
16
16
16
16
11
B
16
16
16
2
16
16
16
16
15
11
A
8
2
8
8
6
B
8
0
8
8
6
A
B
A
B
10
7
10
10
3
10
7
10
8
3
7
1
7
7
5
7
1
5
7
4
A = Number eligible to attend B = Number attended
1. Jan Harris resigned as a non‑executive director 12 September 2022.
2. David Matthews resigned as a member of the Board People, Culture & Transformation Committee, last meeting attended was 17 August 2022.
3. Victoria Weekes resigned as a member of the Board Financial Risk Committee; last meeting attended was 14 September 2022.
4. Alistair Muir was appointed as a non‑executive director commencing 12 September 2022.
5. Margaret Payn was appointed as a non‑executive director commencing 14 September 2023.
People, Culture &
Transformation
A
5
5
5
2
B
5
5
5
2
3
3
Operating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 16
Directors’ Report continued
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:
Ordinary shares
Jacqueline Hey
Marnie Baker
Vicki Carter
Richard Deutsch
David Foster
Jim Hazel
David Matthews
Alistair Muir
Victoria Weekes
Ordinary
shares
57,437
1,422,635
24,850
8,183
13,170
42,835
47,625
1,043
9,693
Preference
Shares
Performance
Rights
Rights to
Shares 1
Sandhurst Cash
Common Fund ($) 2
250
100
—
—
—
—
—
—
—
—
130,384
—
—
—
—
—
—
—
—
—
—
4,415
—
—
—
—
4,415
—
14,470.90
—
—
—
—
—
—
—
1. Rights to shares have been issued under the BEN Omnibus Plan Rules for the FY24 Non‑executive Directors Fee Share Plan. Each participant has elected to sacrifice a
portion of the base fee, to which a number of rights have been allocated by dividing the fee sacrifice amount by the five day volume weighted average share price prior to the
allocation date of 16 August 2023. The rights to shares vest in two equal tranches after six and 12 months, with the first tranche vesting in February 2024. Upon vesting, the
Director must retain the converted shares 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 FY21.
2. Being a relevant interest in a managed investment scheme made available by Sandhurst Trustees Limited, a subsidiary of the Bank.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Directors’ Report
Annual Report 2023 17
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 any
liability 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 permitted by the Bank’s Constitution, the Bank has entered
into deeds providing for indemnity, insurance and access to
documents for each of its Directors.
The deeds require the Bank to indemnify, to the extent permitted
by law, the Directors for all liabilities incurred in their capacity
as Directors.
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 a
premium to insure certain Officers of the Bank and its related
corporate bodies. 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. Disclosure
of the nature of the liabilities covered and the amount of the
premium is prohibited by the confidentiality clause of the contract
of insurance.
Performance and Deferred
Share Rights
Rights to ordinary shares in the Bank (Rights) are issued by the
Bank to employees under the Performance Rights Plan and
Deferred Share Rights Plans and these plans are governed
by the BEN Omnibus Plan Rules. 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
1,204,047 rights (2022: 1,429,004). This included 287,276 rights
granted to key management personnel.
As at the date of this report there are 2,329,028 rights that
are exercisable or may become exercisable at a future date
under the Plans. The last date for the exercise of existing rights
awards that may vest is up to 30 September 2028.
During or since the end of the financial year 443,534 rights
vested (2022: 493,220) and no new fully paid ordinary shares
were awarded by the Bank during or since the end of the
financial year resulting from rights being exercised.
During or since the end of the financial year, 98,100 rights
have lapsed.
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.
Further details of Key Management Personnel equity
holdings during the financial year are detailed in the
Remuneration Report.
Corporate Governance
An overview of the Bank’s corporate governance structures
and practices is presented in the 2023 Corporate
Governance Statement available from the Bank’s website
at: bendigoadelaide.com.au/public/corporate_governance/
index.asp
The Bank confirms it has followed the ASX Corporate
Governance Principles and Recommendations (4th edition)
during FY23.
Environmental Regulation
The Bank’s operations are not subject to any significant
environmental regulations under a law of the Commonwealth
or of an Australian State or Territory.
For information about our approach to climate change,
greenhouse gas emissions and environmental footprint,
carbon neutral certification and progress against our
environmental targets, see our 2023 Sustainability Report.
Operating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 18
Directors’ Report continued
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 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 36 Remuneration of Auditor of the
Financial Report.
Declaration by Chief Executive Officer
and Chief Financial Officer
The Chief Executive Officer and Managing Director, and the 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 2023.
The Chief Executive Officer and Managing Director, and the
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 2022.
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
financial 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 2023. 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 2023.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Directors’ Report
Annual Report 2023 19
Auditor’s Independence declaration
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
Auditor’s Independence Declaration to the Directors of Bendigo and
Adelaide Bank Limited
As lead auditor for the audit of the financial report of Bendigo and Adelaide Bank Limited for the
financial year ended 30 June 2023, 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;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene 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
11 September 2023
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Operating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
20
Operating and Financial Review
Our Strategy
Our vision is to be Australia’s bank of choice – for those who bank with us, work for
us, partner with us and invest in us. Our purpose of feeding into prosperity, not off it,
is our anchor.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 21
As the only regionally‑headquartered listed bank, our heart and
soul and our values remain rooted in regional and rural Australia,
where relationships are built on trust, care and a strong sense
of community. We believe our success is driven by helping
our customers and the communities in which they operate to
be successful.
As Australia’s better big bank and a top 100 ASX listed company,
we aim to set an example of how banking should be: progressive,
sustainable, shared and trusted.
In the last year we have delivered continued growth in customers,
loans, and deposits; we have improved our cost to income ratio
and grown net profits while maintaining a strong balance sheet,
liquidity, and credit quality.
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.
While our strategy and vision remain the same, as we enter a
new financial year, we will continue to strengthen our focus on
returns, execution, sustainable growth and capital generation as
we drive the business forward to better support and enhance the
experience for our stakeholders.
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.
Our vision
Australia’s bank of choice
Our purpose
To feed into prosperity, not off it
Strategic Imperatives
Reduce complexity
Invest in capability
Tell our story
Customer Centric
Operating Model
Customer Value
Proposition
Growth and
Transformation Strategy
ESG & Sustainability
Business Plan
Digital by design, human
when it matters
Based on trust,
authenticity, knowledge,
expertise, connection
and personalised
relationships
Propelled by human,
digital and community
connections
Managing ESG and
Sustainability risks and
opportunities
For our customers, people, partners, communities and shareholders
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 22
Operating and Financial Review continued
Our Business Performance
Our momentum in delivering improvements in shareholder returns continues through
disciplined execution and our differentiated approach.
In FY23 we recorded cash earnings after
tax of $576.9 million, a 15.3 percent increase
on the prior year. Cash earnings per share
of 102.1 cents were up 13.7 percent on
the prior year. Our strengthened focus on
returns contributed to a 90 basis points
increase in return on equity to 8.62 percent,
and a 420 basis points decrease in the cost
to income ratio to 54.9 percent.
Net Interest Margin rose 20 basis points on
the previous year to 1.94 percent, reflecting
the impact of rising rates and our disciplined
management of volumes and margins.
Customer numbers have grown 9.9 percent
to 2.4 million and our leading Net Promoter
Score 1 of 23.2 is 28.4 points higher than the
industry average, with the gap widening
over the year, because we continue to put
the customer at the centre of everything
we do.
Our transformation agenda is on track with
the foundational work we have completed
paving the way for ongoing simplification
of our business. We have consolidated
our core banking systems from seven to
four, have 90 fewer IT applications and
have moved one third of applications to
the cloud.
Interest in our digital products, including
Up Home and BEN Express, continues
to grow with this channel accounting
for 12.0 percent of total settlements in
the second half. The proportion of our
customers who actively use e‑banking has
risen from 68 percent to 72 percent over
FY23 as they recognise the convenience
and utility of our platforms. We are digital by
design and human when it matters.
We announced a fully franked final dividend
of 32.0 cents per share, reflecting our desire
to maintain a strong capital position given
the uncertain business outlook, while
balancing our commitment to support our
shareholders with a reasonable return on
their investment.
Cash earnings
after tax ($m)
Statutory net profit
after tax ($m)
FY23
FY22
FY21
FY20
576.9
FY23
500.4
FY22
497.0
488.1
457.2
FY21
524.0
301.7
FY20
192.8
Cost to income
(%)2
Cash earnings per share
(cents)
FY23
FY22
FY21
FY20
54.9
FY23
102.1
59.1
FY22
60.3
FY21
89.8
85.6
62.7
FY20
59.7
Dividend per share
(cents)
Return on equity
(%)2
FY23
FY22
FY21
FY20
61.0
FY23
8.62
53.0
50.0
35.5
FY22
FY21
FY20
7.72
7.67
5.36
1. Roy Morgan Net Promoter Score Roy Morgan Research, 6 month rolling averages, comparing BEN to the industry average. Industry includes: ANZ, BOM, BOQ, Bank SA,
Bankwest, CBA, ING, NAB, St. George, Suncorp & WBC. Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS related emoticons are registered
trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
2. Calculated using cash earnings
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 23
Cash Earnings After Tax
Statutory Earnings After Tax
$576.9 million
FY22 $500.4 million
$497.0 million
FY22 $488.1 million
Up 15.3%
Up 1.8%
Income
Income (Cash Basis)
$1,932.8 million
FY22 $1,695.7 million
Net Interest Margin
1.94%
FY22 1.74%
Net interest income (cash basis)
increased 17.6 percent to $1,662.5 million
(FY22: $1,413.4 million). This was driven
by an increase in net interest margin of
20 basis points to 1.94 percent (FY22: 1.74
percent) in FY23, in addition to an increase
in average interest earning assets, up
$4.4 billion or 5.5 percent.
Net interest margin has increased due
to our disciplined approach to volume
and margin management in a rising rate
environment, as well as ongoing benefit
from the management of our replicating
portfolio. This was partially offset by
lending margins narrowing from front
book/back book pressure, and an increase
in revenue share payments to Community
Bank partners.
Other operating income (cash basis)
decreased 4.3 percent to $270.3 million
(FY22: $282.3 million). This was driven by
reduced Homesafe realised income, loan
fee income, income from joint ventures
and associates and other revenue. The
decline in other income is attributed to
income items, such as dividends and
contract payments, recorded in FY22
which have not recurred in FY23. This is
partially offset by increased management
fees, foreign exchange income and fee
income from non‑lending products.
Net interest margin represents the return
on average interest earning assets less
the costs of funding these assets Net
interest margin is calculated including
the impact of any revenue share
arrangements with partners.
Operating Expenses
Operating Expenses
(Cash Basis)
$1,061.2 million
FY22 $1,002.1 million
Cost to Income Ratio
54.9%
FY22 59.1%
Operating expenses (cash basis)
increased 5.9 percent to $1,061.2 million
(FY22: $1,002.1 million). Investment
spend increased, reflecting the Group’s
continued focus on reducing complexity
across the business through investment
in enabling technologies. Risk and
compliance investment spend has also
increased, with a focus on uplifting risk
capabilities and culture. Customer‑
related fraud losses have continued to
rise, with a $17.3 million increase from
FY22. Information technology and staff
costs have also increased, as the Group
continues to invest further in cyber and
data teams, and migrate services to
the cloud.
Business as usual expenses (excluding
investment spend and non‑lending
losses) contributed 2.4 percent of the
total expense growth which is well below
inflation and reflects ongoing prudent
expense management.
Cost to income ratio has decreased to
54.9 percent (FY22: 59.1 percent) with
operating expenses increasing at a slower
pace than income. The Group maintains
its commitment of reducing its cost to
income ratio toward 50 percent over the
medium term.
Directors’ ReportRemuneration ReportShareholder informationFinancial Report 24
Operating and Financial Review continued
Credit expenses and provisions
Credit Expenses/(Reversals)
$33.6 million
FY22 ($27.2 million)
Total Provisions
$381.5 million
FY22 $371.6 million
Total credit expenses reflected a net expense of $33.6 million (FY22: $27.2 million release).
This was largely attributed to an increase in collective provision charges from ($20.9)
million to $13.3 million, driven by global economic uncertainty, higher inflation and cost
of living pressures, with the impacts of the rapid interest rate increases expected to
be recognised during the year. In addition, there has also been an increase in specific
impairment charges from FY22 up $23.1 million to $21.3 million.
Credit performance remains resilient, with a reduction in impaired assets of 14.4 percent
to $113.9 million (FY22: $133.1 million). Provision levels remain appropriate given the
continuing uncertainties mentioned above. The total of provisions and equity reserve
for credit losses (ERCL) increased over FY23 to $381.5 million (FY22: $371.6 million)
which represents 0.48 percent of gross lending.
Total provisions and reserves for credit losses ($m)
2H23
47.8
238.5
95.2
1H23
46.5
2H22
58.1
Specific
Collective
ERCL
232.3
225.7
95.2
87.8
Dividends
Dividends
61.0 cents
FY22 53.0 cents
The Board declared a fully franked final dividend of 32.0 cents per share (FY22: final
dividend 26.5 cents per share). Dividend per share has increased 15.1 percent on the
prior year.
The Group has in place a Dividend Reinvestment Plan (DRP) which provides shareholders
with the opportunity of converting their entitlement to a dividend into new shares.
Dividend per share (cents)
FY23
29.0
59.7%
32.0
FY22
26.5
59.0%
26.5
FY21
23.5
58.4%
26.5
FY20
31.0
59.5%
4.5
FY19
35.0
82.4%
35.0
Interim
Final
Payout Ratio
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 25
Divisional Performance
The Consumer division
focuses on engaging with
and servicing our consumer
customers and includes the
branch network (including
Community Banks), Up digital
bank, mobile relationship
managers, third party banking
channels, wealth services,
Homesafe, and customer
support functions.
Consumer
Net Interest Income
Net interest income of $1.3 billion represented an increase of 42.9 percent on the prior
year. This was driven by an increase in net interest margin (NIM) of 57 basis points and
an increase in average asset balances.
• Average asset balances increased $3.3 billion, mainly in Third Party Banking,
Leveraged Equities and Up, offset by reductions in Retail.
• Average deposit balances have increased $4.1 billion on the prior year reflecting
strong growth in both term deposit and call accounts mainly through the
branch network.
• Net interest margin after revenue share increased 57 basis points, with the benefit
of rising rates on deposit margins being partially offset by reduced lending margins.
• Revenue share payments increased $181.4 million mainly reflecting higher
deposit NIMs.
Other Income
Other Income was $211.5 million, an increase of $1.0 million on FY22. There has been a
reduction in Homesafe realised income of $9.7 million, offset by increased fee income
from the wealth business due to improved margins and balances in funds. Deposit and
other fee income has increased with the introduction of new fees during the year, in
addition to an increase in net profits from joint ventures and associates.
Operating Expenses
Operating expenses were $445.7 million, an increase of $29.3 million on the prior
year. The increase is largely driven by a $12.9 million increase in non‑lending losses,
predominantly due to customer‑related fraud losses which increased by $17.3 million.
Management fee and commissions expense has increased, with increased fees paid
to Bendigo Superannuation and Homesafe. Depreciation and amortisation expenses
have reduced $1.8 million following the impairment of a number of software assets,
offset by increases due to lease incentive payments recorded in FY22.
Credit Expenses
Credit expenses have increased by $22.8 million to an $18.3 million expense in FY23.
The increase is largely driven by increased collective provision charges, with minimal
increases in specific impairments.
Directors’ ReportRemuneration ReportShareholder informationFinancial Report 26
Operating and Financial Review continued
Divisional Performance (continued)
Business and Agribusiness
focuses on servicing business
customers and includes
Business Banking and
Portfolio Funding, in addition
to all banking services
provided to agribusiness,
rural and regional Australian
communities through
Rural Bank.
Business and Agribusiness
Net Interest Income
Net interest income was $520.4 million, an increase of $37.5 million from the prior year.
• Average asset balances declined $329.0 million reflecting reductions to business and
residential lending partially offset by increases in agri lending.
• Average deposit balances grew by $909.0 million from the prior year reflecting strong
growth in term deposits partially offset by reduction in call accounts.
• Net interest margin after revenue share increased 24 basis points with the benefit of
higher rates on deposit margins partly offset by reduced lending margins.
Other Income
Other Income was $56.4 million, a reduction of $4.3 million from FY22. There has been
a reduction in fee income, predominantly in the Government Services division. This is
offset by a $3.6 million increase in foreign exchange income to $27.2 million in FY23, due
to stronger deal flows and customer activity.
Operating Expenses
Operating expenses were $124.1 million, a reduction of $13.1 million from the prior year.
Staff and related costs have reduced as a result of business consolidation initiatives,
in addition to reduced staffing levels in the Government Services division in line with
reduced volumes. Other operating costs, including occupancy costs have reduced, in
part due to the consolidation of the Delphi brand and operations.
Credit Expenses
Credit expenses were $25.0 million in FY23 (FY22: $14.5 million net release). FY23 credit
expenses include a $19.0 million specific impairment charge and a $6.7 million collective
provision charge.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 27
Divisional Performance (continued)
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.
Corporate
Net Interest Income
Net Interest Income reduced by $178.3 million from FY22, driven by interest rate
mismatch methodology (largely offset by higher net interest income in Consumer and
Business & Agribusiness Divisions).
Other Income
Other Income was $2.4 million, a reduction of $8.7 million from FY22. This was
predominantly driven by non‑recurring dividends and contract payments received in
FY22, in addition to an increase in share of net losses from associates accounted for
under the equity method.
Operating Expenses
Investment spend increased $18.0 million on the prior year with a focus on uplifting risk
capabilities and culture. Other operating expenses have increased by $24.9 million.
Information technology and staff costs have also increased, as the Group continues to
invest further in cyber and data teams, and migrate services to the cloud.
Full time equivalent staff (FTE) increase was primarily in the area of Risk and Technology
to support our strategic investment priorities and uplift to our cyber security capabilities.
Credit Expenses
Credit expenses were $9.7 million in FY23 (FY22: $8.2 million), an increase of $1.5 million
from FY22, with a $1.6m increase in collective provision charges.
Directors’ ReportRemuneration ReportShareholder informationFinancial Report 28
Operating and Financial Review continued
Under APRA’s new Basel III capital
framework, the Board has revised the
CET1 ratio target range to 10.0 percent to
10.5 percent.
The Net Stable Funding ratio measures the
amount of available stable funding (ASF)
to the amount of required stable funding
(RSF) as defined by APRA.
Capital
Common Equity Tier 1 Ratio
11.25%
FY22 9.68%
Liquidity
Liquidity Cover Ratio
136.6%
FY22 142.2%
Net Stable Funding Ratio
121.5%
FY22 129.2%
The Group’s CET1 ratio increased by
157 basis points to 11.25 percent (FY22:
9.68 percent). This was largely driven by
the introduction of the Basel III capital
frameworks. These came into effect from
1 January 2023, increasing the reported
31 December 2022 CET1 position by 111
basis points. Across the year, the Group
generated a further 53 basis points of
net capital after payment of dividends,
reflecting a disciplined focus on returns.
The Group 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 Liquidity Coverage Ratio (LCR) for
the financial year was 136.6 percent
(FY22: 142.2 percent), exceeding the
regulatory minimum of 100 percent. The
10 percent add‑on imposed by APRA on
21 October 2020 to the net cash outflow
component of the Liquidity Coverage
Ratio calculation has been removed,
effective from 9 August 2023.
The Net Stable Funding Ratio for the
financial year was 121.5 percent (FY22:
129.2 percent), exceeding the regulatory
minimum of 100 percent.
The Liquidity Coverage Ratio represents
the proportion of high quality liquid assets
held by the Bank to meet short term
obligations. The LCRs quoted represent
the average daily LCRs over the respective
12‑month period.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 29
Lending
Gross Loan Balances by purpose
Residential
Commercial
Agribusiness
Consumer
Margin Loans
$58.6 billion
FY22 $57.6 billion
$10.3 billion
FY22 $16.6 billion
$6.3 billion
FY22 $6.1 billion
$1.7 billion
FY22 $2.2 billion
$1.9 billion
FY22 $1.4 billion
Up 1.8%
Down 2.9%
Up 4.5%
Down 23.5%
Up 30.8%
Total gross loans increased 1.2 percent to $78.7 billion over the
year (FY22: $77.8 billion).
Residential lending increased from FY22, up 1.8 percent or
$1.0 billion during FY23. The Group took a measured approach
to managing margin and volume during a competitive market
environment in the first half. In the last quarter of FY23, lending
volumes improved as the Group grew at or above system with
a disciplined approach to sustainable returns.
Business lending reduced over the year by 2.9 percent or
$305.5 million, with significant competition from major peers.
Agribusiness lending has increased 8.8 percent in the last
six months, following the introduction of a strong broker
proposition that has resonated well with the market. The Group
has commenced a foundational rebuild of the Business and
Agribusiness proposition that will occur over the next few years.
The increase of 30.8 percent or $442.1 million in margin loans
is mainly due to the acquisition of the ANZ Investment Lending
portfolio which was completed on 3 April 2023 and resulted in the
addition of $558.5 million of margin loans.
Funding (including deposits)
Customer Deposits
Wholesale Deposits
Other Wholesale borrowings 1
Loan Capital 2
$66.1 billion
FY22 $64.3 billion
$11.2 billion
FY22 $10.3 billion
$11.8 billion
FY22 $11.7 billion
Up 2.8%
Up 8.7%
Up 1.2%
$1.4 billion
FY22 $1.4 billion
Up 0.4%
Total funding including deposits increased by 3.3 percent
to $90.5 billion (FY22: $87.7 billion).
Funding Composition
The Group’s principal source of funding is customer deposits,
which represented 73.0 percent (FY22: 73.3 percent) of the
Group’s total funding. Customer deposits include deposits
sourced from retail, small business and corporate customers,
predominantly through the retail network.
Wholesale funding activities support the funding strategy providing
additional diversification benefits from longer term borrowings.
Wholesale funding (including the TFF and securitisation) increased
to 27.0 percent of total funding (FY22: 26.7 percent) during FY23.
Securitisation funding represented 3.2 percent of total funding
(FY22: 4.4 percent). The Group launched its inaugural Covered
Bond Programme in October 2022 to continue to diversify its
funding sources, and completed this issuance during the year.
1. Other wholesale borrowings include the RBA Term Funding Facility (TFF), securitisation and medium‑term notes.
2. Loan Capital includes subordinated debt, converting preference shares and capital notes.
References to ‘wholesale funding’ include deposits from wholesale customers, loan capital and other wholesale borrowings.
Customer Deposits
73.0%
Wholesale Deposits
12.4%
Term Funding Facility
(TFF)
Wholesale Borrowings
(excl TFF)
Loan Capital
4.4%
8.7%
1.5%
Directors’ ReportRemuneration ReportShareholder informationFinancial Report 30
Operating and Financial Review continued
FY23
($m)
576.9
(1.5)
11.2
(1.6)
—
—
—
(2.0)
(37.2)
(27.4)
(4.5)
(16.9)
497.0
FY22
($m)
500.4
—
19.3
—
3.3
1.7
(2.9)
—
—
(6.8)
(4.2)
(22.7)
488.1
Restructure costs represent business restructuring costs
incurred as a result of structure changes within the Business and
Agribusiness division, costs associated with the implementation
of various cost and productivity initiatives through business
simplification and restructuring activities, as well as costs
associated with the conversion of the Alliance Partner model to
the Community Bank model and operating structure.
Amortisation of acquired intangibles represents the amortisation
of intangible assets acquired by the Group including brand names,
customer lists, management rights, and acquired software.
Homesafe realised income 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
the completed contracts since initiation.
Reconciliation cash earnings to statutory net profit
Cash earnings after tax
Fair value adjustments
Homesafe unrealised adjustments
Revaluation losses on economic hedges
Sale of Insurance Broker business
Sale of Debtor Finance business
Ferocia acquisition costs
ANZ Investment Lending acquisition costs
Impairment charges
Restructure costs
Amortisation of acquired intangibles
Homesafe realised income
Statutory net profit after tax
Fair value adjustments relate to the acquisition of the ANZ
Investment Lending portfolio which was completed in April 2023
and resulted in the recognition of fair value adjustments on the
loans acquired. These fair value adjustments are amortised over
the behavioural term of the underlying loans.
Homesafe unrealised adjustments represent unrealised funding
costs (calculated as the interest expense incurred to fund existing
contracts for the current year) and valuation movements of the
investment properties held.
Revaluation losses on economic hedges represents unrealised
losses from changes in the fair value of economic hedges. These
movements represent timing differences that will reverse through
earnings in the future.
ANZ Investment Lending acquisition costs represent costs
associated with the acquisition of the ANZ Investment Lending
portfolio, including legal and consultancy costs.
Impairment charges include an impairment of the Group’s
investment in Bendigo Telco Limited, an impairment relating to the
Group’s Right of Use Assets (ROUAs) and impairments relating
to the Group’s software intangible assets. A detailed review of
the Group’s software intangible assets and projects has been
conducted during the past six months. This review has resulted in
impairments to certain assets recorded where the asset has been
decommissioned or abandoned.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 31
Risk Management Framework,
Material Risks and Business
Uncertainties
The Group operates in a complex and challenging external
environment. Our Risk Management Strategy (RMS), framework,
and practices support the Group to navigate such challenges and
achieve its vision of being Australia’s bank of choice.
The Risk Management Framework (RMF) comprises the systems,
structures, policies, processes, and people within the Group that
identify, measure, evaluate, monitor, report, and control or mitigate
all internal and external sources of material risk. The Board is
ultimately responsible for the Group’s RMF and is responsible for
the oversight of its operation by the Executive and management
of the Group.
There are several key items approved by the Board and/or Board
Committees which form part of the RMF. The Group undertakes
an annual cycle to set the strategy and appetite for the Group
and assess capital adequacy.
k M a n a g e m ent
i o n
r a t
c l a
0 R i s
e
D
2
C P S 2
Em
ergin
g
R
is
n
gic Pla
e
t
a
r
t
S
p
u
o
r
G
r
a
e
Y
3
Annual
Risk Cycle
e n t
m
y
e
g
g
e
a
R i s k M a n
r a t
S t
S
R
is
t
a
k
t
e
A
m
p
p
e
etite
nt
k
s
A
s
I
s
n
e
s
s
t
e
r
l
n
a
m
e
n
t
P
r
o
c
e
s
C
a
p
i
t
a
l
A
s (IC
d
e
q
u
a
cy
A
A
P)
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 is 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. The RAS defines the level and types of risk that the Group
is willing to take.
Risk Culture
Risk Culture refers to the shared attitudes, values, and
behaviours that characterise how our people consider risk in their
day‑to‑day activities.
A strong risk culture ensures that risk management is embedded
in the Group’s culture, strategy, risk appetite, and decision‑
making processes, and that everyone understands their role in
managing risk. A positive risk culture also promotes transparency,
accountability, and a willingness to speak up about risks and
issues to prevent or mitigate these before they materialise.
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. This
is accomplished using the Group’s culture model.
Risk Capabilities, Skills & Behavioural Expectations
To enable and support a strong Risk Culture, it is important that
our people model expected organisational behaviours and
continually develop their risk capabilities and skills.
Group frameworks set out the behavioural expectations of our
people whilst our Values and Critical Few Behaviours provide
a simple and clear set of actions to help accelerate the way
we execute on our strategy whilst managing risk. Adherence
to these behaviours is reviewed as part of the performance
management cycle.
Capabilities are behaviours and attributes that are demonstrated
independent of context. They are broad, generic, and transferable
and therefore have value and applicability across different roles,
function, and divisions. Risk Acumen has its own category across
the People Capability Framework to reflect that risk management
should be foundational and everybody’s responsibility across the
Group. Risk Acumen is a key pillar in both recruitment processes
and in ongoing performance management of our people.
Skills are the knowledge and expertise which relate to a particular
function, tool, or outcome. Skills are required to achieve work
outcomes within a specific context and therefore could become
obsolete over time. The Group develops risk skill matrices to
align learning roadmaps and enterprise learning strategies to
our people.
Directors’ ReportRemuneration ReportShareholder informationFinancial Report
32
Operating and Financial Review continued
Lines of Defence
The Group adopts a Three Lines of Defence model across most of its operations, which allocates responsibility and accountability
for risk across the three lines.
Each area has a distinct role and specific accountabilities. The model includes accountability (First Line), independent challenge
(Second Line), and assurance & review (Third Line).
Three lines of defence is important because:
•
•
•
It helps us define who is responsible for what across the organisation;
It avoids gaps in our risk management, and unnecessary duplication; and
It helps us deliver strong, integrated, Group‑wide assurance activities.
The table below provides a definition:
Line of Defence
Line of Defence
Definition
Definition
Ownership
Ownership
First Line of Defense (1LoD)
Accountability
Second Line of Defense (2LoD)
Independent Challenge
Third Line of Defense (3LoD)
Assurance and Review
Ownership of the business outcomes,
risk and compliance obligations, risks,
and controls.
1LoD includes most front facing and
operations‑based staff.
This includes Executives and all staff
of those divisions, staff members with
delegated authority to make decisions
(including sales staff), including any staff
conducting risk management activities
as part of operational teams.
2LoD is made up of specialised risk,
compliance, and subject matter expert
resources, who are responsible for the
development of risk frameworks and
policies and providing independent
oversight and challenge.
2LoD includes any specialist areas
responsible for setting and monitoring
adherence with enterprise‑wide standards.
Ownership of the design and operation
of the risk management framework and
the extent to which it is fit‑for‑purpose to
enable the business to manage risk.
Setting the rules which are to be applied
consistently across the organisation and
are designed to ensure compliance or
manage/reduce risk.
3LoD is made up of Group Internal Audit
(GIA) and the co‑sourced internal audit
provider (PwC).
Ownership of the execution of the
Board Audit Committee‑approved
assurance program.
3LoD is independent of management with
a direct reporting line to the Board Audit
Committee. The GIA team have unfettered
access to the 1LoD and 2LoD people,
systems, and processes which allows
for objective, transparent, and credible
assessment and reporting of the internal
risk and control environment.
External audit fulfils a 3LoD role but is
independent to GIA.
Further information on our Risk Management Framework, Governance and Appetite is presented
in the 2023 Corporate Governance Statement.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 33
Emerging Risks
The Group has a process to identify key emerging risks that are
either currently or likely to impact the Group in the near future.
Financial Risks
Financial risks arise from the Group’s risk‑taking activities that are
reflected in the Group’s financial position and balance sheet.
The objective of the emerging risks review is to identify the Group’s
key emerging risks, and review how the Group is managing these
risks, to ensure:
• Sufficient management attention and resources are being
allocated; and
Credit Risk
• An appropriate governance structure exists to enable Executive
and Board to have sufficient oversight of the risks.
Traded Market Risk
For any risk identified as not being sufficiently managed,
consideration will be given as to how this risk might be better
assessed, managed, or controlled. An action plan will be required
and may consider integrating the emerging risk into an existing
material risk framework, or if it should be considered as a material
risk in its own right.
Material Risks
Our business is exposed to a broad range of financial and
non‑financial risks arising from our operations.
The most material risks that the Group faces have been assessed
as ‘material risks’ which are considered to be those risks that could
have a significant adverse impact, financial and/or non‑financial,
on the Group and its ability to do any of the following:
• Meet its obligations to customers, staff, shareholders,
community and/or regulators;
• Maintain a sound financial position;
• Meet its strategic objectives and business plan;
• Maintain critical operations; or
• Maintain its reputation and level of trust.
The Group’s material risk categories have been split between
financial and non‑financial and are detailed in the next column.
Liquidity Risk
Interest Rate Risk in
the Banking Book
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 RAS.
The definition and management of these financial risks
are outlined in further detail in Note 21 to the 2023 Annual
Financial Report.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 34
Operating and Financial Review continued
Non-Financial Risks
Non‑financial risks arise from our staff, operations, processes, systems, and external environment. These are classified as Operational
and Strategic 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. These 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 RAS.
Operational
Risk
Strategic
Risk
Information
Security Risk
Regulatory
Compliance Risk
Financial
Crime Risk
Conduct
Risk
Third Party
Supplier Risk
Data
Risk
Technology
Risk
Environmental, Social
& Governance Risk
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 35
The details of the management of Non‑financial Material risks are provided below.
Definition
Definition
How we manage risk
How we manage risk
Consequence
Consequence
Failing to manage strategic risk may
Failing to manage Strategic Risk may
impact on the ability to deliver expected
impact on the ability to deliver expected
outcomes for all stakeholders and harm the
outcomes for all stakeholders and harm the
organisations ability to grow and prosper
organisations ability to grow and prosper.
Failing to identify and manage ESG
risks can lead to a range of damaging
A failure to identify and manage ESG
consequences at an enterprise level and
risks can lead to a range of damaging
across all stakeholder groups and has the
consequences at an enterprise level and
potential to cause material financial and/or
across all stakeholder groups and has the
reputational damage.
potential to cause material financial or
reputational damage.
Strategic Risk
Strategic Risk
Strategic Risk is the risk that adverse
Strategic Risk is the risk that adverse
business decisions, ineffective
business decisions, ineffective
or inappropriate business plans,
or inappropriate business plans,
failure to respond to changes in the
failure to respond to changes in the
environment, or failure to appropriately
environment, or failure to appropriately
execute on strategic initiatives
execute on strategic initiatives
will impact our ability to meet
will impact our ability to meet
our objectives.
our objectives.
The organisational strategic planning processes are the
The organisational strategic planning processes are the
responsibility of the Managing Director and facilitated
responsibility of the Managing Director and facilitated
by Corporate Strategy. This process considers industry
by Corporate Strategy. This process considers industry
and regulatory factors, emerging risks considering both
and regulatory factors, emerging risks considering both
threats and opportunities, organisation risk profile, and risk
threats and opportunities, organisation risk profile, and risk
appetite. The governance structure in place manages the
appetite. The governance structure in place manages the
execution of strategic objectives which includes approval
execution of strategic objectives which includes approval
of the investment slate, consideration of prioritisation and
of the investment, consideration of prioritisation and
sequencing of initiatives, and monitoring portfolio health
sequencing of initiatives, and monitoring delivery against
against financial and non‑financial metrics and including
financial and non‑financial metrics.
key risks and issues.
Environmental, Social & Governance Risk
Environmental, Social & Governace Risk
Environmental, Social and Governance
(ESG) Risk is defined as the risk of
Environmental, Social and Governance
failure to appropriately identify and
Risk is defined as the risk of failure to
manage material environmental,
appropriately identify and manage
social, and governance risks and
material environmental, social, and
opportunities.
governance risks and opportunities.
The Group has adopted an approach to assess its most
material ESG issues. This approach assesses a range
The Group has adopted a dynamic materiality approach
of factors which validate our approach on an ongoing
to assess its most material ESG issues. This approach
basis including the regulatory environment; monitoring
assesses a range of factors which validate our approach
external ESG and sustainability assessments of the
on an ongoing basis including the regulatory environment;
Group; monitoring developments in relevant international
monitoring external ESG and sustainability assessments
frameworks and national industry bodies; reviewing
of the Group; monitoring developments in relevant
customer complaints; updating the Group’s Social Issues
international frameworks and national industry bodies;
Register and reviewing ESG and sustainability themes
reviewing customer complaints; updating the Group’s
emerging from banking sector Annual General Meetings;
Social Issues Register and reviewing ESG; reviewing ESG
and conducting Group’s annual materiality process.
and sustainability themes emerging from banking sector
Annual General Meetings; and conducting Group’s annual
The dynamic materiality approach has informed the
materiality process.
transition of the Group’s inaugural ESG Framework to
an enterprise wide ESG & Sustainability Business Plan.
The dynamic materiality approach has informed the
This Business Plan provides detail on ESG initiatives,
transition of the Group’s inaugural ESG Framework to
provides clarity on accountability and includes the public
an enterprise wide ESG & Sustainability Business Plan.
commitments to help us measure our performance.
This Business Plan provides detail on ESG initiatives,
provides clarity on accountability and includes the public
The Business Plan demonstrates alignment to Group’s
commitments to help us measure our performance.
vision, purpose, and strategic imperatives, but also
identifies how ESG and sustainability risks are managed,
The Business Plan demonstrates alignment to Group’s
and which policies and positions guide our approach.
vision, purpose, and strategic imperatives, but also
identifies how ESG and sustainability risks are managed,
The Business Plan reflects that climate change and
and which policies and positions guide our approach.
its impacts will increasingly play a role across our
environment, social, and governance programs and
The Business Plan reflects that climate change and
therefore identifies a climate change approach as a point
its impacts will increasingly play a role across our
of opportunity for Group. It also identifies programs of
environment, social, and governance programs and
work to manage our environment, social, and governance
therefore identifies a climate change approach as a point
approach which is how we maintain our social licence to
of opportunity for Group. It also identifies programs of
operate and ensures that the Group remains a responsible
work to manage our environment, social, and governance
and ethical business.
approach which is how we maintain our social license to
operate and ensures that the Group remains a responsible
The Business Plan helps to identify ESG gaps and
and ethical business.
opportunities and is underpinned by detailed programs of
work underway to ensure successful management of ESG
The Business Plan helps to identify ESG gaps and
risks and opportunities for our business.
opportunities and is underpinned by detailed programs of
work underway to ensure successful management of ESG
The dynamic materiality approach is further leveraged
risks and opportunities for our business.
to test and assess the focus of the ESG & Sustainability
Business Plan on an ongoing basis.
The dynamic materiality approach is further leveraged
to test and assess the focus of the ESG & Sustainability
The Group’s approach to governance, strategy, risk
Business Plan on an ongoing basis.
management and metrics & targets of climate is provided
separately within this report.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 36
Operating and Financial Review continued
Non-Financial Risks (continued)
Definition
Definition
How we manage risk
How we manage risk
Consequence
Consequence
Strategic Risk
Operational Risk
Strategic Risk is the risk that adverse
Operational Risk is the risk of impact
business decisions, ineffective
on objectives or the risk of loss
or inappropriate business plans,
resulting from inadequate or failed
failure to respond to changes in the
internal processes, people, and
environment, or failure to appropriately
systems or from external events.
execute on strategic initiatives
It covers a broad range of risks
will impact our ability to meet
including, but not limited to, material
our objectives.
risks such as Regulatory Compliance,
Financial Crime, Conduct, Third Party
Supplier, Data, Technology, and
Information Security Risks
Operational Risk is managed in accordance with the
The organisational strategic planning processes are the
Operational Risk Framework which outlines important
responsibility of the Managing Director and facilitated
activities to ensure we manage and minimise our
by Corporate Strategy. This process considers industry
risks, including:
and regulatory factors, emerging risks considering both
threats and opportunities, organisation risk profile, and risk
• Evaluating our environment for threats and challenges,
appetite. The governance structure in place manages the
execution of strategic objectives which includes approval
•
Identifying different types of Operational Risks we are
of the investment slate, consideration of prioritisation and
exposed to, or what can go wrong with our products
sequencing of initiatives, and monitoring portfolio health
and processes.
against financial and non‑financial metrics and including
• Assessing the potential impact to our customers, staff,
key risks and issues.
as we strive to achieve our strategic objectives.
shareholders, and community if risks materialise.
Failing to manage Operational Risk can
Failing to manage strategic risk may
result in significant adverse outcomes for our
impact on the ability to deliver expected
customers, staff, shareholders, or community.
outcomes for all stakeholders and harm the
Operational Risk events due to ineffective
organisations ability to grow and prosper
processes or insufficient controls can
significantly impact the Group’s reputation
and directly impact the Group’s ability to
achieve its strategy. Operational Risk events
can result in significant financial losses,
regulatory intervention, fines and penalties,
and, depending on the nature of the failure,
result in lengthy litigation or class action.
Environmental, Social & Governace Risk
•
Introducing controls or processes to prevent risks from
occurring or reduce the impact if they do occur.
Environmental, Social and Governance
Risk is defined as the risk of failure to
appropriately identify and manage
material environmental, social, and
governance risks and opportunities.
Regulatory Compliance Risk
Regulatory Compliance Risk is
the failure to comply with legal or
regulatory obligations.
A failure to identify and manage ESG
risks can lead to a range of damaging
consequences at an enterprise level and
across all stakeholder groups and has the
potential to cause material financial or
reputational damage.
As with many Operational Risks, failing to
effectively manage our compliance risks
can result in significant damage to our
reputation, increased regulatory scrutiny,
fines and penalties, or restrictions on our
licences, and can result in significant financial
losses in legal fees, customer restitution, or
class action.
there are changes to regulations.
• Proactively improving our products and processes when
The Group has adopted a dynamic materiality approach
to assess its most material ESG issues. This approach
assesses a range of factors which validate our approach
• When things do go wrong, investigating what
on an ongoing basis including the regulatory environment;
happened to understand why errors occurred, and how
monitoring external ESG and sustainability assessments
our customers, staff, shareholders and community are
of the Group; monitoring developments in relevant
impacted so that we can learn from our mistakes and
international frameworks and national industry bodies;
prevent recurrences.
reviewing customer complaints; updating the Group’s
• Monitoring and reporting risk information to Executive
Social Issues Register and reviewing ESG; reviewing ESG
management and the Group’s Board, to enable
and sustainability themes emerging from banking sector
them to make risk informed decisions, and ensure we
Annual General Meetings; and conducting Group’s annual
remain optimally capitalised and can safely absorb
materiality process.
unexpected losses.
The dynamic materiality approach has informed the
All staff in the Group have a role in managing
transition of the Group’s inaugural ESG Framework to
Operational Risk.
an enterprise wide ESG & Sustainability Business Plan.
This Business Plan provides detail on ESG initiatives,
provides clarity on accountability and includes the public
commitments to help us measure our performance.
Regulatory Compliance Risk is managed in accordance
The Business Plan demonstrates alignment to Group’s
with the Group Regulatory Compliance Risk
vision, purpose, and strategic imperatives, but also
Management Framework.
identifies how ESG and sustainability risks are managed,
Regulatory Compliance Risk is a subset of Operational
and which policies and positions guide our approach.
Risk and utilises the core Operational Risk management
process and procedures.
The Business Plan reflects that climate change and
its impacts will increasingly play a role across our
environment, social, and governance programs and
therefore identifies a climate change approach as a point
of opportunity for Group. It also identifies programs of
work to manage our environment, social, and governance
approach which is how we maintain our social license to
operate and ensures that the Group remains a responsible
and ethical business.
The Business Plan helps to identify ESG gaps and
opportunities and is underpinned by detailed programs of
work underway to ensure successful management of ESG
risks and opportunities for our business.
The dynamic materiality approach is further leveraged
to test and assess the focus of the ESG & Sustainability
Business Plan on an ongoing basis.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 37
Definition
Definition
How we manage risk
How we manage risk
Consequence
Consequence
Strategic Risk
Financial Crime Risk
Strategic Risk is the risk that adverse
The risk of facilitation of money
business decisions, ineffective
laundering, sanctions violations,
or inappropriate business plans,
bribery and corruption, or Know
failure to respond to changes in the
Your Customer (KYC) failure.
environment, or failure to appropriately
execute on strategic initiatives
will impact our ability to meet
our objectives.
The organisational strategic planning processes are the
Financial Crime related risks are a subset of Operational
responsibility of the Managing Director and facilitated
Risk and managed with policies, processes, and practices
by Corporate Strategy. This process considers industry
aligned to the Operational Risk Management Framework.
and regulatory factors, emerging risks considering both
Financial Crime Risk is an inherent risk within financial
threats and opportunities, organisation risk profile, and risk
services, given the ability for staff and external parties to
appetite. The governance structure in place manages the
obtain advantage for themselves or others. An inherent risk
execution of strategic objectives which includes approval
also exists due to systems and internal controls failing to
of the investment slate, consideration of prioritisation and
prevent or detect all instances of financial crime.
sequencing of initiatives, and monitoring portfolio health
The Group has established robust techniques and
against financial and non‑financial metrics and including
capabilities to detect and prevent financial crime and
key risks and issues.
comply with legislation.
Failing to manage financial crime can result
Failing to manage strategic risk may
in significant regulatory fines and penalties
impact on the ability to deliver expected
impacting our customers, staff, shareholders,
outcomes for all stakeholders and harm the
and the broader community. Inadvertently
organisations ability to grow and prosper
facilitating financial crime by failing to
identify it and prevent it can also result in
significant damage to our reputation as our
customers and community lose trust in us.
Environmental, Social & Governace Risk
Environmental, Social and Governance
Risk is defined as the risk of failure to
appropriately identify and manage
material environmental, social, and
governance risks and opportunities.
Conduct Risk
The risk of delivering unfair outcomes
for our customers, staff, shareholders,
community, the Group and/or
markets in which we operate from
inappropriate, unethical, or unlawful
behaviour, action or omission by
management or staff which may be
deliberate or inadvertent.
Third Party Supplier Risk
The risk of failing to manage
third party relationships and risks
appropriately, for example, not taking
appropriate steps to identify and
mitigate additional Operational Risks
resulting from the outsourcing of
services or functions.
A specialist Financial Crime Risk function is responsible
for establishing programs and policies to detect, prevent,
and mitigate the risks financial crime and fraud, which
The Group has adopted a dynamic materiality approach
includes an independent challenge, oversight, and
to assess its most material ESG issues. This approach
monitoring function.
assesses a range of factors which validate our approach
on an ongoing basis including the regulatory environment;
monitoring external ESG and sustainability assessments
of the Group; monitoring developments in relevant
Conduct risk is managed in accordance with the Conduct
international frameworks and national industry bodies;
Risk Framework.
reviewing customer complaints; updating the Group’s
Social Issues Register and reviewing ESG; reviewing ESG
Conduct Risk is a subset of Operational Risk and utilises
and sustainability themes emerging from banking sector
the core Operational Risk management process and
Annual General Meetings; and conducting Group’s annual
procedures to identify and assess key Conduct Risks,
materiality process.
undertake monitoring and consider underlying contributing
behaviours as part of root cause processes. In addition,
The dynamic materiality approach has informed the
the following specialty management elements are specific
transition of the Group’s inaugural ESG Framework to
and/or related to Conduct Risk:
an enterprise wide ESG & Sustainability Business Plan.
This Business Plan provides detail on ESG initiatives,
• Code of Conduct;
provides clarity on accountability and includes the public
• Good Conduct Principles; and
commitments to help us measure our performance.
• Consequence Management Policy.
The Business Plan demonstrates alignment to Group’s
vision, purpose, and strategic imperatives, but also
identifies how ESG and sustainability risks are managed,
and which policies and positions guide our approach.
Third‑party Supplier Risk is a subset of Operational Risk
The Business Plan reflects that climate change and
and managed with policies, processes and practices
its impacts will increasingly play a role across our
aligned to Operational Risk.
environment, social, and governance programs and
The Group has a Sourcing Policy which provides the
therefore identifies a climate change approach as a point
required steps to undertake sourcing activities and the
of opportunity for Group. It also identifies programs of
assessment and treatment of supplier risk. In addition,
work to manage our environment, social, and governance
the Group has an Outsourcing Policy which outlines
approach which is how we maintain our social license to
the principles and practices to effectively manage risks
operate and ensures that the Group remains a responsible
arising from the outsourcing of its business activities
and ethical business.
and functions.
The Business Plan helps to identify ESG gaps and
The Enterprise Procurement function provides advice,
opportunities and is underpinned by detailed programs of
support, and oversight throughout the procurement
work underway to ensure successful management of ESG
process as well as manage policies, procedures, and tools.
risks and opportunities for our business.
The dynamic materiality approach is further leveraged
to test and assess the focus of the ESG & Sustainability
Business Plan on an ongoing basis.
A failure to identify and manage ESG
risks can lead to a range of damaging
consequences at an enterprise level and
across all stakeholder groups and has the
potential to cause material financial or
reputational damage.
Failure to manage Conduct Risk may impact
stakeholders of the Group and expose the
Group to regulatory actions, restrictions,
or conditions on banking licences,
financial implications, and/or reputational
consequences that may adversely affect
the Group’s business, operations, and
financial position.
Depending on the service provided by our
suppliers, failing to manage Third‑party
supplier risks can have significant
consequences resulting in financial losses,
regulatory impacts, and/or damage to our
reputation. Third‑party failures can result in
various operational risk events materialising,
including Business Disruption.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 38
Operating and Financial Review continued
Non-Financial Risks (continued)
Definition
Definition
How we manage risk
How we manage risk
Consequence
Consequence
Strategic Risk
Data Risk
Strategic Risk is the risk that adverse
The risk of failing to appropriately
business decisions, ineffective
manage and maintain data, including
or inappropriate business plans,
all types of data, for example,
failure to respond to changes in the
client data, staff data, and the
environment, or failure to appropriately
organisation’s proprietary data.
execute on strategic initiatives
will impact our ability to meet
our objectives.
The organisational strategic planning processes are the
Data Risk is a subset of Operational Risk. There are
responsibility of the Managing Director and facilitated
specific Data Risk policies, standards, processes, and
by Corporate Strategy. This process considers industry
practices that provide specific information on our
and regulatory factors, emerging risks considering both
management of Data Risks.
threats and opportunities, organisation risk profile, and risk
The Group seeks to minimise Data Risk through maintaining
appetite. The governance structure in place manages the
a dedicated Data Risk Management Framework to ensure
execution of strategic objectives which includes approval
Data Risk is effectively identified, measured, treated, and
of the investment slate, consideration of prioritisation and
monitored for the Group. The Group proactively scans its
sequencing of initiatives, and monitoring portfolio health
internal and external environment to identify and monitor
against financial and non‑financial metrics and including
for current, evolving, and emerging Data Risks.
key risks and issues.
Failing to manage strategic risk may
Data Risk could potentially directly affect
impact on the ability to deliver expected
the Group’s ability to meet its strategic
outcomes for all stakeholders and harm the
objectives. Failing to manage the Group’s
organisations ability to grow and prosper
data can result in significant Operational
Risk failures and poor customer outcomes,
particularly where data is inaccurate,
or where data is used or transformed
inappropriately. It can also result in
significant regulatory fines and penalties
and affect the Group’s our ability to meet
our its contractual and legal obligations.
Environmental, Social & Governace Risk
Technology Risk
Environmental, Social and Governance
The risk associated with the failure or
Risk is defined as the risk of failure to
outage of systems, including hardware,
appropriately identify and manage
software, and networks.
material environmental, social, and
governance risks and opportunities.
Information Security Risk
The risk of information security
incidents, including the loss, theft, or
misuse of data/information; this covers
all types of data, e.g., client data,
staff data, and the organisation’s
proprietary data, and can include the
failure to comply to rules concerning
information security.
A failure to identify and manage ESG
The use of Technology is pervasive across
risks can lead to a range of damaging
all our products, processes, and services.
consequences at an enterprise level and
Technology failure can result in significant
across all stakeholder groups and has the
disruption of our business processes,
potential to cause material financial or
negative customer outcomes and significant
reputational damage.
breach of regulatory and legal requirements.
Failing to manage information security can
directly impact our customers particularly
in cases where their private identity or
business information is compromised. It can
also significantly impact our shareholders
particularly where commercially sensitive
information is compromised. Our failure to
manage information security would result
in significant financial and reputational
consequences, as well as significant fines
and penalties as our result of breaching our
regulatory or legal obligations.
The Group has adopted a dynamic materiality approach
Technology Risk is a subset of Operational Risk. There
to assess its most material ESG issues. This approach
are specific Technology Risk related policies, processes
assesses a range of factors which validate our approach
and practices that provide specific information on
on an ongoing basis including the regulatory environment;
our management of Technology Risks. Monitoring and
monitoring external ESG and sustainability assessments
reporting on the health of our Technology assets and
of the Group; monitoring developments in relevant
associated risks is incorporated in our Governance
international frameworks and national industry bodies;
processes, including specific Risk Appetite statements
reviewing customer complaints; updating the Group’s
and measures for Technology Risk.
Social Issues Register and reviewing ESG; reviewing ESG
The Group seeks to minimise Technology Risk through
and sustainability themes emerging from banking sector
maintaining a dedicated Technology Risk Management
Annual General Meetings; and conducting Group’s annual
Framework to ensure Technology is effectively identified,
materiality process.
measured, treated, and monitored for the Group. The
The dynamic materiality approach has informed the
Group actively scans the internal and external environment
transition of the Group’s inaugural ESG Framework to
to identify and monitor for current, evolving, and emerging
an enterprise wide ESG & Sustainability Business Plan.
Technology Risks.
This Business Plan provides detail on ESG initiatives,
provides clarity on accountability and includes the public
commitments to help us measure our performance.
The Business Plan demonstrates alignment to Group’s
Information Security Risk is a subset of Operational Risk.
vision, purpose, and strategic imperatives, but also
There are specific policies, processes and practices
identifies how ESG and sustainability risks are managed,
that provide specific information on our management
and which policies and positions guide our approach.
of Information Security. Information Security Risks,
including events where our data and/or associated
The Business Plan reflects that climate change and
assets are compromised, are monitored and reported
its impacts will increasingly play a role across our
in order to inform our decision making and associated
environment, social, and governance programs and
governance processes.
therefore identifies a climate change approach as a point
of opportunity for Group. It also identifies programs of
The Group seeks to minimise Information Security Risk
work to manage our environment, social, and governance
through maintaining a dedicated framework, policies and
approach which is how we maintain our social license to
standards where Information Security Risks are identified,
operate and ensures that the Group remains a responsible
managed, and measured for the Group. The Group
and ethical business.
actively scans the internal and external environment to
identify and monitor for current, evolving, and emerging
The Business Plan helps to identify ESG gaps and
information security related threats and vulnerabilities.
opportunities and is underpinned by detailed programs of
work underway to ensure successful management of ESG
risks and opportunities for our business.
The dynamic materiality approach is further leveraged
to test and assess the focus of the ESG & Sustainability
Business Plan on an ongoing basis.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 39
Business Uncertainties
The financial prospects of any company are sensitive to the
underlying characteristics of its business and the interaction with
the internal and/or external environments. This section explores
some of the more significant uncertainties and risks managed by
the Group based on these derivations.
Risk derived from Business characteristics:
Real estate risk
Residential, commercial, and rural property lending, together
with property finance, including real estate development and
investment property finance, constitute important businesses
to the Group. There is also exposure to Australian real estate
through the investment in Homesafe. A significant reduction in
Australian property prices could significantly impact the Group’s
financial performance and operations.
Extreme cyber or critical infrastructure events
Cyber‑attacks are becoming more frequent and severe
globally, with increasing online adoption, reliance on digital
services and supply chain risks also leading to greater
sophistication and complexity. The Group monitors internal and
external cyber‑security threats and risks that could impact the
organisation and its customers, staff, shareholders, community,
partners, and the broader industry. The Group operates a range
of controls and protection methods to manage and mitigate
cyber risk. Monitoring, contingency planning and control testing is
also regularly performed to minimise the potential of a disruption
to critical systems or infrastructure and to maintain a resilient
technology environment.
Capital base
The capital base of the Group is critical to the management of
our businesses and our ability to access funding. We are required
to maintain a minimum level of capital based on the regulatory
capital framework set by APRA. The Group also assesses future
capital requirements to ensure support of 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 and economic terms.
Changes in accounting policies & critical estimate
The Group is required to adhere to accounting standards which
set out how the financial performance and position of the Group
is recorded and reported. These financial reports, along with the
associated processes, are audited annually.
The Group needs to make assumptions and judgements when
executing accounting processes, particularly when determining
valuations and computing accounting provisions. These
assumptions and judgements could change based on new
information, new interpretations, or change in circumstances,
which could lead to the Group incurring higher losses or needing
to take higher provisions than previously forecasted.
The Group is also exposed to the risk of the introduction or
amendment of accounting standards or interpretations. New or
changed accounting requirements could result in higher losses
or higher provisions.
Fraud risk
The Group is exposed to the risk of fraud, both internal and
external (including fraudulent applications for loans, or from
incorrect or fraudulent payments and settlements). The Group also
runs the risk that staff, contractor and external service provider
misconduct could occur. For instance, fraudulent conduct can also
arise from external parties seeking to access the Group’s systems
or customer accounts. All actual or alleged fraud is investigated
under the authority of the Group’s financial crimes unit. It is
not always possible to deter or prevent misconduct and the
precautions taken by the staff to prevent and detect such activity
may not be effective in all cases, which could result in financial
losses, regulatory intervention, and reputational damage.
Risk derived from Internal environment:
The internal environment may lead to different risks for the
business in the event of deficient systems, lack of proper risk
management, inadequate internal controls or ineffective
decision making.
Partner risk
The Group has Community Bank branches operating in all
Australian states and territories and deals with intermediaries
through its Third Party Banking business. The Community Bank
branches are operated by companies that have entered into
franchise and management agreements with the Group to
manage and operate a Community Bank branch. Intermediary
agreements are also entered into for all Third Party Banking
intermediaries. The Group carefully assesses and monitors the
progress of the franchisees and intermediaries although there
can be no guarantee of their success. Whilst the Community Bank
branch network is relatively mature and the Group’s dealings with
intermediaries through its Third Party Banking model continue,
there are risks that may develop over time which may adversely
impact the Group’s financial results. These risks include the actions
of intermediaries adversely affecting the Group’s reputation,
loss of customers, and regulatory investigations, enforcement
actions, fines, penalties or litigation or other actions brought by
third parties (including class actions) all of which, individually
or in combination, could adversely affect the Group’s business,
financial performance, or financial condition. For instance, failure
by these intermediaries and third parties (including their authorised
representatives) to deliver services as required could disrupt the
ability of the Community Bank branches to provide their products
and services and adversely impact the Group’s operations,
financial performance, or reputation and result in enhanced
regulatory scrutiny, regulatory investigations, and actions resulting
in fines and sanctions for the Group. This may have an adverse
impact on the Group’s reputation and financial position.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 40
Operating and Financial Review continued
Litigation and contingent liabilities risk
Conduct risk
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 materialise, may adversely
affect the Group’s results. The Group may be exposed to risks
relating to the provision of advice, recommendations or guidance
about financial products and services, or behaviours which do not
appropriately consider the interests of consumers, the integrity of
the financial markets and the expectations of the community, in
the course of its business activities.
In recent years, there have been significant increases in the nature
and scale of regulatory investigations and reviews, enforcement
actions (whether by court action or otherwise) and the quantum of
fines issued by regulators, particularly against financial institutions
both in Australia and globally. The nature of those investigations,
reviews and enforcement actions can be wide ranging and, for
example, across the financial services industry currently include a
range of matters including responsible lending practices, product
suitability, wealth advice and conduct in financial markets and
capital markets transactions. Regulatory investigations, fines,
other penalties or regulator‑imposed conditions could adversely
affect the Group’s reputation, prospects, financial performance
and position and capital condition. There is a risk that these
contingent liabilities may be larger than anticipated or that
additional litigation or other contingent liabilities may arise.
Joint venture risk
Some of the Group’s activities are conducted through joint
ventures. These joint ventures are not controlled exclusively by the
Group and, while the Group may be represented on the board of
those entities, the day‑to‑day operations of those joint ventures
are not managed by the Group. The governing documents for
some of the Group’s joint ventures provide that key matters and
decisions require the agreement of the Group’s joint venture
partners. The Group may be unable to reach agreement with
its joint venture partners concerning these matters and any
disagreements may affect the ability of a joint venture to function
properly or distribute income to the Group. In some cases, the
Group’s arrangements with its joint venture partners may require
the Group to make an additional investment in the venture or to
provide additional financing. Overall, the nature and obligations of
the joint venture arrangements may adversely impact the Group’s
financial position and financial performance.
The Group is exposed to risks relating to product flaws,
processing and collection errors, and mis‑selling. These risks
can arise from product design or disclosure flaws or errors in
transaction processing. It can also include mis‑selling of products
to the Group’s customers in a manner that is not aligned to the
customer’s risk appetite, needs or objectives. Where issues are
identified, the Group has processes for customer review and
remediation and determines compensation amounts for affected
customers. Provisions are raised for the estimated compensation
due to customers (once sufficient information has been obtained),
but this is judgmental and the actual compensation may vary
significantly from the amounts provided for.
If conduct risk materialises, this may expose the Group to
regulatory actions, restrictions or conditions on banking licences
and/or reputational consequences that may adversely affect
the Group’s business, operations, and financial position. It is
possible that remediation programmes may not be implemented
appropriately or may lead to further remediation work being
required, resulting in litigation, regulatory action and/or increasing
cost to the Group, all of which may adversely affect the Group’s
business, operations and financial position.
Contagion risk
The Group includes a number of subsidiaries which are trading
entities and holders of Australian Financial Services Licences
and/or Australian Credit Licences. Dealings and exposures
between the Group and its subsidiaries principally arise from the
provision of administrative, corporate, distribution and general
banking services. The majority of subsidiary resourcing and
infrastructure is provided by the Group’s centralised back office
functions. Other dealings arise from the provision of funding and
equity contributions. The Group is exposed to risks through such
dealings, including risks relating to credit, liquidity and funding. The
Group has subsidiaries (whether partially or fully owned), which
through their normal dealings and exposures, may not be able to
meet financial obligations as and when they fall due, or become
subject to regulatory scrutiny or penalties. This in turn may have
an adverse impact on the Group’s reputation, business, growth
prospects, engagement with regulators, financial performance,
or financial condition.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 41
Strategic and acquisition risk
Risk of ineffective risk management
The Group regularly examines a range of corporate opportunities,
including material acquisitions, commercial partnerships and
disposals with a view to determining whether those opportunities
are aligned with the Group’s vision and strategy and would
enhance the Group’s financial performance and position. There
are risks associated with strategic and business decisions
made by the Group in the ordinary course of business, including
restructures, organic development initiatives or acquisitions
and other corporate opportunities. Any restructure, initiative,
acquisition, or decision made in relation to other corporate
opportunities could, for a variety of reasons, have a material
adverse effect on the Group’s current and future financial
position or performance.
The Group may seek to sell or dispose of certain businesses in
the future. This may result in a change in the operations of the
Group and cause it to face risks, including operations and financial
risks that could adversely affect the Group’s financial condition
and results of operations. The Group’s operating performance,
risk profile or capital structure may also be affected by these
corporate opportunities and there is a risk that any of the Group’s
credit ratings may be placed on credit watch or downgraded if
these opportunities are pursued.
The Group may seek to grow in the future by merging with
or acquiring other companies or businesses. There can be
no assurance that any merger or acquisition would have the
anticipated positive results, including results relating to the
total cost of integration, the time required to complete the
integration, the amount of longer‑term cost savings or the overall
performance of the combined entity or an improved price for the
Group’s securities. Integration of a merged or acquired business
can be complex and costly, sometimes including combining
relevant accounting and Information Technology systems and
management controls, as well as managing relevant relationships
with staff, clients, suppliers and other business partners. Integration
efforts could divert management attention and resources, which
could adversely affect the Group’s operations or results. A merger
or acquisition may also result in business disruptions that cause
the Group to lose customers or cause customers to remove their
business from the Group to competing financial institutions.
The RMF is designed to enable the management of risk from
identification through to measurement, management, reporting,
and maintaining a robust control framework. There is a risk that the
RMF may be inadequate due to changes in the risk environment,
inadequacy of design, or ineffectiveness of process, controls,
people, or technology. This could lead to higher risk exposure
than the intended risk appetite settings, which in turn could lead
to increased regulatory focus, breaches of obligations, losses, or
reputational damage.
Data quality risk
The Group maintains a large volume of data which is critical to
the Group’s business and the services provided to customers,
staff, shareholders, communities, and regulators. The data held
by the Group is also critical to its reporting and risk management
framework. Inadequate data, which could be either incomplete,
inaccurate, or lacking in sufficient detail can lead to suboptimal
outcomes for the services and processes supported by the
Group’s data. This can also impact the Group’s ability to make
decisions and have knock‑on impacts to the Group’s reputation
and performance.
Retention risk
The Group employs specialist staff in the operation of its business.
An inability to retain or recruit appropriately skilled and qualified
staff into specific roles could impact the Group’s performance,
reputation, and prospects. The Group is also dependent on the
Australia‑wide resourcing conditions at any given time.
Strategic risk
The Group determines strategic plans and objectives to achieve
desired strategic outcomes. These strategic plans are at risk of
the Group failing to execute appropriately and also the external
business environment changing which prevents strategic
objectives being achieved. The Group seeks to mitigate these risks
through proactive analysis of potential outcomes and emerging
risks, but this may not be effective.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 42
Operating and Financial Review continued
Risk derived from External environment:
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.
Dependence on prevailing macroeconomic and financial
market conditions
The business is dependent on the general state of the domestic
economy and global financial markets. Our performance can be
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 from 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
Asset and Liability Management Committee is responsible for
the approval of forecast macroeconomic scenarios, which the
Group uses to better understand the potential range of outcomes
for strategic planning, financial management and forecasting, the
assessment of provisions, and scenario analysis.
Geopolitical tensions/events
Geopolitical tensions/events arise due to differing political
agendas across the world which may result in disruptions to
international trade and a reduction in business confidence. This
can lead to a reduction in appetite for Australian exports and also
disrupt supply chains. The Group can be affected by geopolitical
tensions/events, which may impact our ability to deliver our
strategy and business objectives.
Climate change and other environmental factors
The Group, 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 as well as the frequency and severity
of adverse climate events have 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 can be competitive at times 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.
Changes in monetary policy
The RBA sets official interest rates 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.
Regulatory Compliance Risk
The Group’s businesses are highly regulated, and the Group could
be adversely affected by failing to comply with existing laws,
regulations or regulatory policy.
As a financial institution, the Group is subject to laws, regulations,
policies. In particular, the Group’s banking and funds management
activities are subject to extensive regulation, mainly relating to its
operational practices, liquidity levels, capital, solvency, provisioning
and licensing conditions.
Regulations generally are designed to protect depositors, insured
parties, customers with other products and the banking system as
a whole. The Group is currently operating in an environment where
there is increased scrutiny of the financial services sector and
specifically, increased scrutiny of financial services providers by
regulators. The Australian government and its agencies, including
APRA, RBA and other financial industry regulating bodies including
the Australian Securities and Investment Commission (ASIC) and
Australian Transaction Reports and Analysis Centre (AUSTRAC),
have supervisory oversight of the Group. In this environment, the
Group faces increasing supervision and regulation regarding its
operation. This environment has also served to increase the pace
and scope of regulatory change.
A failure to comply with any standards, laws, regulations or
policies could result in sanctions by these or other regulatory
agencies, the exercise of any discretionary powers that the
regulators hold or compensatory action by affected persons,
which may in turn cause substantial damage to the Group’s
reputation. To the extent that these regulatory requirements limit
the Group’s operations or flexibility, they could adversely impact
the Group’s financial performance.
A change to regulations or the manner in which they are
interpreted or implemented by Regulators can also have a
material impact on the operation and financial performance
of the Group.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 43
The Executive Committee is accountable for implementing the
Action Plan and each Executive has specific accountabilities for
delivering actions relevant to their area of responsibility. Overall,
the Executive Committee has direct operational accountability for
and oversight of the governance, strategy and risk management
activities across the business relating to climate change. Various
teams across the Group execute the Plan, including:
• ESG & Sustainability;
• Group Risk;
• Business and Agribusiness;
• Products & Analysis;
• Consumer Banking;
• People & Culture;
• Corporate & Public Affairs; and
• Procurement.
This delivery is supported by several forums where climate risks
and opportunities are considered, such as the Sustainability
Council, Climate Change Action Strategy Group, Sustainable
Procurement Working Group and Agribusiness Climate and
Nature Working Group.
This year, the Group introduced a ‘People and Planet’ category
to the Executive Reward Framework weighted at 10 percent of
variable reward remuneration. In relation to the climate change
targets, the Group achieved two of the three included targets:
1. Maintain a carbon neutral Group (achieved);
2. Maintain FY23 Scope 1, Scope 2, and Scope 3 operational
emissions below FY22 levels (achieved); and
3. Purchase 60 percent renewable electricity
(not achieved in FY23 1).
Approach to Climate‑related
Governance, Strategy & Risk
Management
The Bank’s purpose is to feed into the prosperity of our customers
and communities, not off it. Responding to climate change
presents an opportunity for the Group to further demonstrate
its purpose.
The Group has provided climate‑related disclosures based
on the recommendations of the Taskforce on Climate‑related
Financial Disclosures (TCFD) since 2021. We are proud to build
on these foundations in the 2023 Climate‑related Disclosure
which is included as a supplement in our Sustainability Report.
A summary of the Group’s approach to governance, strategy, risk
management and metrics and targets are provided below.
Governance
The Board has ultimate oversight of the Group’s management of
climate‑related risks and opportunities and how they are reflected
in the Group’s strategy. The Board is the ultimate decision‑making
and approval body for our ESG & Sustainability Business Plan, our
climate strategy and Group‑wide policy.
The Board is assisted by the Board Audit Committee in the
oversight, consideration, and approval of the Group’s ESG and
sustainability approach, which includes the Group’s strategic
approach to climate change. The BAC receives half yearly
updates on progress against the Climate Change Action Plan
(Action Plan), and the Board receives Action Plan updates
annually. Risk management, including climate risk, is managed
with oversight from the Board Financial Risk Committee,
Board Risk Committee, and Board People, Culture and
Transformation Committee.
The Bank’s Directors are required to have deep experience across
multiple skills identified in the Board Skills Matrix. Climate‑related
expertise is a skill referenced as part of the ‘Social & Environmental’
assessment in the Board Skills Matrix (please see our Corporate
Governance Statement 2023 for further details).
The Board delegates its responsibility of assessing and
managing climate risks and opportunities to the Group’s
Executive Committee, with the support of the Board
committees noted above.
1. The renewable electricity target was not achieved in FY23. However, renewable electricity contracts commenced on 1 July 2023 which are expected to increase overall
renewable electricity to more than 53% from the first day of FY24.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 44
Operating and Financial Review continued
Approach to Climate‑related
Governance, Strategy & Risk
Management (continued)
Strategy
Over the last three years, the Group has uplifted the management
of climate‑related risks and opportunities. Our climate strategy
is captured in our Climate Change Action Plan (CCAP) and it has
guided the Group’s focus to:
1. Reduce our footprint;
2. Support our customers;
3. Understand and manage risks; and
4. Be transparent.
This year we were proud to conclude the third and final year of
our inaugural CCAP. Between FY21‑FY23 we achieved nearly
90 percent of documented actions, meaning we have reduced
our Scope 1 and 2 emissions (market‑based 1) by 46 percent since
FY20 through deliberate reductions in the use of electricity, gas,
and fleet fuel. We have maintained the Group’s carbon‑neutral
status, become an active member in a suite of climate‑related
collaborative forums and improved our climate‑related risk
management and governance. Critically, the CCAP saw the
Group introduce BENZero – our Net Zero approach – as well as
our first climate‑related reporting based on the TCFD.
In this reporting year the Group has further reduced Scope 1 and
2 (location‑based) emissions by 13 percent, developed further
climate‑related shadow Risk Appetite Settings, included Action
Plan accountabilities into Executive and Senior Leader KPIs,
improved our CDP score from a C to a B, submitted our BENZero
targets for verification by the Science Based Targets initiative
(SBTi), and continued climate‑related stakeholder engagement.
The CCAP has prepared the foundations for the next three years
of Group’s climate action, captured in the Climate & Nature Action
Plan FY24‑FY26 (CNAP).
Please see the Climate‑related Disclosure in the 2023
Sustainability Report for further detail on the CNAP, climate‑
related risks and opportunities identified, how they impact
our business and strategy, and our strategic resilience under
future scenarios.
Risk Management
The process for identifying, assessing, and managing
climate‑related risks is integrated into our overall risk management
approach. Climate risk is embedded in our risk frameworks
and therefore managed by the Group’s three lines of defence.
Throughout the year the Group has continued to evolve and
improve climate risk management:
•
Improved scenario analysis capability through talent
acquisition and improved analytics;
•
Introduced two new climate risk metrics for quarterly reporting
relating to physical risk in residential mortgages and developed
further physical and transitional risk metrics to be introduced in
other parts of the Group’s portfolio;
• Approved the introduction of two new climate‑related shadow
risk appetite settings relating to (a) Scope 1 and 2 emissions and
(b) percentage of renewable electricity across the Group;
• Updated the Climate Risk Credit Policy and Equipment Finance
Policy to reflect our evolving climate risks and opportunities;
•
Identified and commenced engagement with the top 25 largest
lending customers in high emissions segments of the Business
Banking and Agricultural Business portfolios to deepen our
understanding of our customer’s awareness of the climate risks
their business may face and planned actions to mitigate them;
• Continued industry engagement, including active membership,
contributions and learning across several climate‑related
Australian Banking Association working groups as well as
several climate focused industry events;
• Undertook a climate risk assessment of material
supplier relationships;
• Conducted a green personal loan eligibility review;
• Deepened partnerships with Insurance providers to improve
data analytics; and
• Reviewed climate‑related risks and opportunities that were
identified in FY22.
Metrics & Targets
The Group has set targets and accompanying metrics to
direct action, manage climate risks and act on opportunities.
We continue to make progress against these targets and
transparently report on progress.
This year, the Group has made several updates to our target
setting to further drive strategic climate decisions.
We have introduced a new target to reduce Scope 1 and 2
(market‑based 1) operational emissions to 90 percent by FY25 and
92 percent by FY30. This target was introduced to better reflect
the Group’s climate ambition and our prioritisation of renewable
energy across the Group’s operations.
The Group has updated the baseline year for business travel
emissions from FY19 (4,151 tCO2‑e) to FY20 (2,311 tCO2‑e). The
updated baseline accounts for the reduced business travel in
FY20 due to COVID‑19 lockdowns. It is therefore a more ambitious
baseline which the Group will work to maintain 25 percent
below. The updated baseline has been validated by an external
third party.
This year we are reporting our Group and Community Bank
network’s electricity, noting that Community Banks make their
own electricity procurement decisions.
1. The market‑based method accounts for the Group’s deliberate procurement of renewable electricity, and reflects the emissions intensity of different electricity products,
markets and investments.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Operating and Financial Review
Annual Report 2023 45
Approach to Climate‑related Governance, Strategy & Risk Management
(continued)
Metrics & Targets continued
We have increased our focus on rigour and external validation of climate related data. We submitted the Group’s emissions targets
to the SBTi in December 2022, with verification expected in early 2024. We have also engaged an independent consultant to conduct
a pre‑assurance over the Group’s Scope 1, Scope 2, and Scope 3 operational and financed emissions during FY23.
Summarised targets and performance are included below, with more detail available in the Climate‑related Disclosure in the 2023
Sustainability Report.
Metric
Baseline
FY23 Update
Comment
FY25
Target
FY30
Target
FY40
Target
FY20
‑46%
In progress.
‑90%
‑92%
—
Scope 1 and
2 emissions
(market-based)
Bank
total
Absolute emissions
(incl. financed emissions) 1
FY20
—
Renewable
electricity
(market-based)
Bank
total
Bank
operations
Community
Bank
operations
FY20
33%
FY20
40%
FY20
21%
Business travel
emissions
FY20 2
‑67%
Significant further reductions expected due
to renewable electricity, EV uptake and
office improvements.
In progress, Scope 3 financed emissions is
planned to be externally assured and reported
in FY24. Pre‑assurance to assure readiness
assessment commenced in 2023.
On track to meet FY25 target for sites
where the Group has direct control of
electricity procurement.
From 1 July 2023 all sites where the Group
has direct control of electricity procurement
were powered by renewable electricity.
Note: We support the transition to renewable
electricity procurement in Community Banks
and sites where electricity procurement is
outside of the Group’s direct control, as part
of our CNAP.
While the Group will work to maintain
emissions reductions in line with our target,
we note that business travel emission
increases may occur over time.
Electronic statement
delivery
Maintain carbon
neutral status
No direct lending exposure to
coal, coal seam gas, crude
oil, natural gas, native forest
logging projects 5
FY20
67% 3
In progress.
— Achieved
— Achieved
Achieved and ongoing. Please refer to the
Climate Active Product Disclosure Statement 4
available on our website.
Achieved and ongoing. Please refer to
the Climate Change Position available
on our website.
In Progress
On Track
Complete
—
‑50%
‑95%
100%
—
—
Maintain travel emissions at 25%
below FY20 levels.
90%
—
—
—
—
—
—
—
—
1. Absolute emissions include all operational and financed emissions combined (Scope 1, Scope 2 and all Scope 3 categories).
2. The baseline year for travel emissions has been updated from FY19 (4,151 tCO2‑e) to FY20 (2,311 tCO2‑e). The emissions reduction target of ‑25% from baseline
remains consistent.
3. Reported data includes active Bendigo Bank customers and accounts.
4. Our most recent Climate Active Product Disclosure Statement (FY22) is available on our website. FY23 will be submitted and verified by Climate Active in October, after
publication of this report.
5. This applies to all employees and all other parties acting for or on behalf of the Group that prepare credit applications and undertake credit decisioning.
Directors’ ReportRemuneration ReportFinancial ReportShareholder information 46
Remuneration Report
Contents
Section 1: Key Management Personnel overview
Section 2: Performance and reward outcomes
Section 3: Executive remuneration strategy and framework
Section 4: Remuneration governance
Section 5: Minimum Shareholding Policy, contracts and Executive KMP loans
Section 6: Executive statutory remuneration
Section 7: Non‑executive Director arrangements
51
52
58
63
65
67
74
Sierra (left) and Amy (right), Strath Hill Branch
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 47
To our shareholders
On behalf of your Board, and as Chair of the People, Culture and Transformation
Committee, I am pleased to present the Bendigo and Adelaide Bank Remuneration
Report for the financial year ended 30 June 2023 (FY23).
The Board is committed to remaining focused on the strong connection amongst our
people to the Bank’s purpose and vision, continuing to improve the employee experience
and strong workplace culture through performance and reward, internal succession,
and leader capability to ensure we attract and retain the best talent.
Key messages from the People, Culture and Transformation Committee
Year in review
As reflected elsewhere in the Annual Report, the Bank has
delivered a strong financial performance during the year.
We are building more clarity on the cultural attributes that
underpin our transformation and developing leaders who
create meaning, embrace possibility and deliver what matters
for the community.
At the core of our strategy are people who are energised
and empowered to drive sustainable impact. We’re evolving
our strategies to build competitive advantage and accelerate
best‑in‑class capabilities for our customers, investing in skills
for the future as well as technical capabilities.
In the context of BEN’s broader transformation objectives,
we delivered strategically important outcomes that will
deliver long‑term sustainable outcomes. These include further
simplifying our core banking systems, investing in cloud
capabilities and increasing digital self service and sales while
continuing to deliver the personalised interactions our customers
value. Our customers will continue to benefit from our investment
in multi‑channel experiences in response to their evolving needs.
Community within and outside the organisation remains a
strong focus and we are listening to our people through network
groups such as BEN Pride and BENAbility. A significant event this
year was the launch of the Bank’s Reflect Reconciliation Action
Plan. This is an important first step for us, and will support our
understanding, exploration, and measurement of where and how
we can have a meaningful impact and lay firm foundations for
reconciliation across the Group in the years to come. Our people
are the key to our success and employee engagement remained
stable in FY23 at 77 percent. While this is a pleasing result,
we continue to aim higher for a score above 80 percent.
The Committee’s decision making during the year has
remained focused on overseeing fair outcomes for our people
while responding to the current inflationary environment and
cost of living pressures.
Executive changes
As announced last year, the Bank welcomed Adam Rowse
to the Executive team as Chief Customer Officer, Business
and Agribusiness. Adam commenced on 1 July 2022 and
his appointment is an important step in bringing the Business
and Agribusiness banking divisions together to better support
the Bank’s customers to grow their businesses.
Executive remuneration framework changes
As outlined in the FY22 Remuneration Report, we introduced
a new executive remuneration framework for the 2023
performance year.
As part of finalising the design, we consulted shareholders
and other stakeholders and received positive feedback.
This was reinforced with a “Yes” vote of 94.55% for the
2022 Remuneration Report.
The executive remuneration framework comprises fixed
remuneration, a short‑term incentive, and a long‑term incentive
plan. These plans are aligned to a range of balanced outcomes
including financial, risk, customers, community, people and planet.
Importantly these outcomes also consider the expectations of
our investors, regulators and the community.
Refer to Section 3.2 for further details.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 48
Remuneration Report continued
Performance during FY23
Variable reward outcomes
The Group’s record cash earnings for the full year of $576.9m
were driven by margin management through a disciplined
response to lending competition, continued growth in
deposits and a measured approach to cost management.
The disciplined approach to cost management resulted
in our Cost‑to‑Income ratio decreasing to 54.9% and
Return on Equity increasing to 8.62%.
These financial results allowed the Bank to increase the
full year dividend by 15.1% to 61 cents per share.
More broadly, our customer base grew, 9.9% over the year,
and our Net Promoter Score (measured by Roy Morgan)
of 23.2 is 28.4 points above the industry.
Performance outcomes are outlined in the Key highlights and
Section 2.1 of this report.
Alignment with Environment, Social and Governance
(ESG)
Bendigo and Adelaide Bank has a long and proud history
of prioritising ESG strategies and investment. The new
remuneration framework has further embedded this priority
in performance metrics, reinforcing accountability for
outcomes. The short‑term incentive plan includes metrics
supporting the implementation of our strategy: transitioning
to net zero, supporting gender diversity, growing social
impact through our community banks, and enhancing risk
and governance capability. Our long‑term incentive tracks
progress externally, including shareholder returns, customer
advocacy and reputation.
Remuneration outcomes in FY23
The Board approved fixed remuneration adjustments for
three of the Executive Committee effective 1 July 2022
including Ryan Brosnahan, Chief Transformation Officer,
Taso Corolis, Chief Risk Officer and Bruce Speirs,
Chief Operating Officer.
The Chief Executive Officer & Managing Director (CEO & MD)
remuneration arrangements were amended to align with the
new executive reward framework and to ensure compliance with
APRA Prudential Standard CPS 511 Remuneration (CPS 511).
Details on Executive salary adjustments and the CEO & MD’s
remuneration arrangements are provided in the Key highlights
table overleaf.
We have made meaningful progress on our strategic priorities
which were set four‑years ago and which form the basis of
this year’s Group performance outcomes.
Overall, the FY23 short‑term incentive scorecard achieved an
outcome of 110%. Three of the four FY22 Loan Funded Share
Plan performance objectives were achieved. With respect
to the FY20 long‑term incentive plan, the tranches linked to
customer advocacy vested, while those linked to relative
total shareholder return lapsed.
The People, Culture and Transformation Committee follows
a rigorous process to ensure remuneration recommendations
to the Board remain aligned to remuneration principles, broader
company performance, risk outcomes and shareholder experience.
This year specific consideration was given to the impact of
transitioning from the Loan Funded Share Plan with a two‑year
performance period, to a short‑term incentive plan, and the
duplication of metrics across the two plans.
The Committee considered the duplication of the Cost‑to‑Income
metric in both plans, and the potential for this to create
misalignment with shareholder outcomes. A thorough analysis
of the different timing, intent and design of the plans, supported
by an external review led the Committee to conclude that while
the Cost‑to‑Income metric was duplicated across the plans,
there was no doubling up of reward for the Executive. The
Committee recommended to the Board that no discretionary
adjustment be made and this was supported by the Board.
Refer to Section 2.5 for further details.
Looking ahead
For FY24, we are moving to a more consistent approach of
incentive opportunities for the KMP. Whilst there are no other
changes to the Executive Reward Framework, we will continue to
monitor remuneration arrangements to support future direction
and proactively respond to changes in regulatory requirements.
Refer to the Remuneration outcomes and highlights for FY23
section for further details.
To ensure we continue to build a diverse workforce, we have an
increased focus on closing our gender pay gap in coming years.
The Board remains committed to enabling our people to deliver
positive outcomes for our people, customers, shareholders and
broader stakeholders.
I hope you find this Remuneration Report informative. I encourage
you to read the report in full and welcome your feedback.
Vicki Carter
Chair, People, Culture and Transformation Committee
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 49
Remuneration outcomes and highlights for FY23
Key area of focus
Details
CEO & MD’s
remuneration structure
and changes for FY23
In FY23, the Board approved a revised remuneration structure for the CEO & MD. Key considerations
in the Board’s assessment included acknowledgement that there had been no change to the CEO
& MD’s fixed remuneration since commencing in the role in July 2018 and that the final tranche of
deferred base pay shares vested on 30 June 2023. Alignment to the new executive reward framework
and meeting deferral requirements introduced under CPS 511 was also considered.
Under the prior remuneration structure, the CEO & MD’s annual fixed remuneration consisted of
$1.2 million (salary and superannuation) and deferred base pay shares (which held a notional value
of $500,000 per annum), equivalent to $1.7 million total fixed remuneration.
Under the new remuneration structure, the CEO & MD’s annual remuneration consists of $1.6 million
(salary and superannuation) and variable reward (short‑term and long‑term incentive). While the cash
salary is higher than in prior years, it compensates for the removal of deferred base pay that had
previously been delivered in restricted shares and her total fixed remuneration has decreased.
Refer to Section 2.8 for further details.
FY23 fixed remuneration
adjustments
In addition to the broader executive remuneration framework review undertaken in 2022, the Board
approved fixed remuneration adjustments for select executives effective 1 July 2022. The Board
approved the following remuneration adjustments:
• Ryan Brosnahan, Chief Transformation Officer, received a fixed remuneration increase of
$20,000 to $770,000.
• Taso Corolis, Chief Risk Officer, received a fixed remuneration increase of $40,000 to $700,000.
• Bruce Speirs, Chief Operating Officer, received a fixed remuneration increase of $50,000 to $650,000.
FY23 Short-term
Incentive (STI) outcome
As part of our implementation of CPS 511, the Board revised the executive reward framework for FY23,
retired the Loan Funded Share Plan (LFSP) and introduced an STI component to the variable reward.
In making changes to the executive reward framework, the Board sought to ensure that outcomes
continue to reflect our core remuneration principles (see Section 3.1) while also supporting our strategy
and delivering value to our shareholders.
The Group scorecard outcome was 110%. This is a solid result reflecting strong financial and
business performance.
The individual modifier was applied which resulted in an outcome of 132% of target opportunity
(99% of maximum opportunity) for both the Chief Risk Officer and Chief Operating Officer.
Refer to Section 2.3 for further details.
Vesting outcome:
CEO & MD – Deferred
Base Pay Shares
At the 2018 Annual General Meeting (AGM), shareholders approved a grant of 200,000 deferred shares
to the CEO & MD. The remuneration comprised cash, superannuation and deferred base pay delivered
in restricted shares consisting of four equal tranches with deferral periods of 2,3,4 and 5 years.
Vesting of the fourth and final tranche of the deferred base pay shares was approved by the Board,
with the service condition having been met on 30 June 2023.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 50
Remuneration Report continued
Remuneration outcomes and highlights for FY23
Key area of focus
Details
FY20 vesting
outcomes:
Long-term Incentive
– Performance
Rights Plan
The FY20 LTI performance rights award granted to the CEO & MD (tranches 1 & 2) and the remaining tranches
(2 & 4) granted to the Executive were tested at the end of the performance period on 30 June 2023.
Relative TSR performance condition fell below the median of the peer group. As a result, the relative TSR
tranche was lapsed.
FY22 testing
outcomes:
Long-term Incentive
– Loan Funded
Share Plan (LFSP)
In recognition of the Bank’s relative NPS being +27.5 points above the industry average for the four‑year
performance period up to 30 June 2023, the Customer hurdle vested in full.
Tranche 1 of the FY20 performance rights grant that was tested in performance year FY22, has met the
additional one‑year service condition and vested.
The FY22 LFSP grant was awarded in November 2021 and tested on 30 June 2023. The grant has four
tranches and three of the four tranches met the performance condition:
• The Cost‑to‑Income ratio was 54.9% and cash earnings of $576.9 million meeting the target set by the Board.
• The Bank achieved market share of 2.35% at the end of FY23, which represented flat growth over the
period and did not meet the growth target set by the Board and was forfeited.
• The Bank achieved a relative NPS score of +28.4 compared to a peer group of retail banks, demonstrating
a continued focus on customer experience, meeting the target set by the Board. NPS was measured over
the two‑year performance period up to 30 June 2023.
Refer to Section 2.4 for further details.
The shares are subject to a further two‑year service condition and may vest to executives at the end of
FY25 following the risk assessment. As such, no remuneration was paid to executives relating to the Loan
Funded Share Plan in FY23.
The Loan Funded Share Plan was not reoffered under the new Executive Remuneration Framework
introduced in FY23.
FY23 Long-
term Incentive
– Performance
Rights Plan
In FY23 the CEO & MD received a grant of performance rights in accordance with the terms approved by
shareholders at the 2022 AGM. The FY23 performance rights grant has a four‑year performance period
and will be tested on 30 June 2026. Following testing, tranches 2 & 3 of the grant remain subject to further
conditions including a service period and risk gateway until 30 June 2027 and 30 June 2028.
In FY23 the Executive received a grant of performance rights with a four‑year performance period to be
tested on 30 June 2026. Following testing, tranche 2 will remain subject to further conditions including a
service period and risk gateway until 30 June 2027.
In FY23, Andrew Morgan, who commenced as Chief Financial Officer on 24 June 2022 and Adam Rowse
who commenced as Chief Customer Officer Business and Agribusiness on 1 July 2022, received a grant of
Alignment Rights. The award is subject to service and risk gateway conditions measured from 1 July 2022 and
the vesting date for tranche 1 is scheduled for 30 September 2026 and tranche 2, 30 September 2027.
Refer to Section 2.6 for further details.
FY24 remuneration
structure
Following a review of the CEO & MD’s total remuneration, the Board has agreed to a modest increase in
her variable reward opportunity. For FY24 the CEO & MD will have a maximum STI opportunity of 65% of
fixed remuneration (an increase from 60%) and an LTI grant of 65% of fixed remuneration (an increase from
40%). The Board believes that this appropriately balances the mix of short‑term and long‑term incentives,
is consistent with the Bank’s remuneration philosophy, and with market practice.
All executive KMP excluding the Chief Risk Officer (CRO) will have a maximum STI opportunity of 60%.
The CRO’s maximum STI opportunity will be 50%. The LTI opportunity for the CEO & MD will increase
to 65% and executive KMP will be 40%. These changes are consistent with market practice, and we will
continue to monitor remuneration arrangements to support future direction and proactively respond to
changes in regulatory requirements. Further details of the Executive KMP remuneration structure will be
provided in the FY24 Remuneration Report.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 51
Section 1: Key Management Personnel overview
This Remuneration Report is for the financial year ended 30 June 2023 (FY23). The Report has been prepared and audited in
accordance with section 300A of the Corporations Act 2001 and the Corporations Regulations 2001.
1.1 Key Management Personnel (KMP)
This report covers KMP of Bendigo and Adelaide Bank Limited who have the authority and responsibility for planning, directing, and
controlling the activities of the Group either directly or indirectly. This includes both Executive KMP and Non‑executive Directors.
The following Executive KMP and Non‑executive Directors are covered in this report.
Name
Position
Term as KMP
Executive KMP
Marnie Baker
Chief Executive Officer & Managing Director
Ryan Brosnahan
Chief Transformation Officer
Taso Corolis
Richard Fennell
Andrew Morgan
Adam Rowse
Bruce Speirs
Chief Risk Officer
Chief Customer Officer, Consumer Banking
Chief Financial Officer
Chief Customer Officer, Business and Agribusiness
Chief Operating Officer
Non-executive Directors
Jacqueline Hey
Vicki Carter
Chair
Non‑executive Director
Richard Deutsch
Non‑executive Director
David Foster
Jim Hazel
Non‑executive Director
Non‑executive Director
David Matthews
Non‑executive Director
Alistair Muir
Non‑executive Director
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Appointed to the Board
effective 12 September 2022
Victoria Weekes
Non‑executive Director
Full Year
Progress against
Minimum
Shareholding
Policy 1
Meets
Meets
Meets
Meets
Meets
On track
Meets
Meets
Meets
On track
On track
Meets
Meets
On track
On track
Former Non-executive Directors
Jan Harris 2
Non‑executive Director
12 September 2022
N/A
1. Details on the Minimum Shareholding Policy can be found in Section 5.
2. Non‑executive Director, Jan Harris, resigned from the Board on 12 September 2022.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
52
Remuneration Report continued
Section 2: Performance and reward outcomes
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)
Earnings per share (cents)
Relative TSR Percentile 2
Annual relative NPS 3
576.9
102.10
60.0
500.4
85.00
85.60
89.80
28.3
27.5
27.4
28.4
25.8
457.2
415.7
301.7
59.70
47.0
35.0
30.0
23.0
FY19
FY20
FY21
FY22
FY23
FY19
FY20
FY21
FY22
FY23
FY19
FY20
FY21
FY22
FY23
FY19
FY20
FY21
FY22
FY23
1. Cash earnings is an unaudited, non‑IFRS financial measure.
2. Relative TSR percentile rank versus ASX comparator group over the performance period tested at the end of each corresponding financial year.
3. 6 month rolling averages comparing BEN to the industry average.
Variable reward outcomes for executives
Average STI received as a % of maximum opportunity
Percentage of LTI which vested
2019
0%
83%
Financial year
2020
0%
30%
2021
n/a
35%
2022
2023 1
n/a
35%
83%
35%
1. Under the new executive reward framework, STI was reintroduced in FY23. STI was not part of the Executive reward framework for FY22 or FY21.
Below is a summary of other key performance metrics for the previous five years, including FY23.
Company performance measures
Statutory net profit after tax ($m)
Statutory earnings per share (cents)
Cash earnings per share (cents)
Dividends paid and payable (cents per share)
Total shareholder return (annual)
Annual relative NPS compared to industry average 1
2019
376.8
77.1
85.0
70.0
Financial year
2021
524.0
98.1
85.6
50.0
2020
192.8
38.1
59.7
31.0
2022
488.1
87.5
89.8
53.0
14.20%
+28.3
‑36.40%
+27.5
55.45%
+25.8
‑6.80%
+27.4
2023
497.0
87.9
102.1
61.0
0.77%
28.4 2
1. Roy Morgan data provided for FY20 has been adjusted due to reporting issue incurred during FY20, however this did not result in any adjustments to LTI outcomes relating
to FY20.
2. 6 month rolling averages comparing BEN to the industry average.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 53
Section 2: Performance and reward outcomes continued
2.2 FY23 STI Group scorecard outcomes
As part of the Board’s commitment to provide increased transparency regarding performance objectives and measures, detailed below
are the financial and non‑financial measures used to assess performance outcomes for the Executive KMP.
The scorecard is underpinned by key priorities that were set at the beginning of the performance year, 1 July 2022.
Based on the Board’s assessment, it was deemed the scorecard outcome to be a holistic reflection of performance during FY23 and
no upward discretion was applied to final outcomes. Achievement against these objectives was used by the Board as a key component
in determining the incentive pool for non executive staff.
Scorecard measures
FY23 outcome
Financial: Cost-to-Income ratio (20% weighting)
• Operating expenses divided
by Total Income
THRESHOLD
TARGET
MAXIMUM
Financial: Cash earnings (20% weighting)
• Cash earnings after tax,
excludes non‑cash items
THRESHOLD
TARGET
MAXIMUM
Financial: Profit after capital charge (10% weighting)
• Earnings minus the
estimated costs of capital
THRESHOLD
TARGET
MAXIMUM
Customer & Community (20% weighting)
• Customer experience
and satisfaction
• Social impact through our
Community Bank network
THRESHOLD
TARGET
MAXIMUM
People & Planet (10% weighting)
THRESHOLD
TARGET
MAXIMUM
• Employee experience
and diversity
•
Implementation of the
climate change action plan,
including our Net Zero and
renewable energy targets
Capability (20% weighting)
• Delivery of an organisational
wide capability and risk
culture uplift
Weighted
outcome
Further detail
27%
• The Cost‑to‑Income (CTI) outcome was strong for the
year, with a 420% basis point improvement from FY22
• Whilst absolute costs were not the measure, the Board
exercised downward discretion as actual costs were
higher than forecast. The outcome was adjusted from
Maximum to between Maximum and Target
29%
• The FY23 Cash Earnings was a record for the Bank and was
an increase of 15.3% from FY22
• This resulted in an outcome of just below Maximum
15%
• Disciplined capital management and pricing resulted in
a significant improvement in the Bank’s Profit After Capital
Charge (PACC)
• This resulted in an outcome of Maximum
10%
•
Internal customer metrics were broadly flat, with advocacy
increasing, but other measures flat or declining slightly
• The Community Banks delivered record contributions
to their Communities
• This resulted in an outcome at Threshold
8%
• Employee engagement remains strong at 77%, but is
below aspiration
• We continue to make progress toward our target of 40:40:20
across the Group.
•
In FY23 we tracked ahead of emission reduction target,
but missed renewable energy target
• This resulted in an outcome of between Threshold and Target
THRESHOLD
TARGET
MAXIMUM
21%
• Significant progress was made this year in uplifting our
systems and frameworks to create strong foundations
to build a better big bank
• This resulted in an outcome of just above Target
Scorecard outcome
(% of target)
(% of maximum)
110%
83%
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 54
Remuneration Report continued
Section 2: Performance and reward outcomes continued
2.3 FY23 STI outcomes
The table below provides the 2023 financial year STI outcomes for Executive KMP. The minimum potential outcome is zero.
STI
target
$’000
STI
maximum
$’000
Total
$’000
Cash 1
$’000
STI earned
Deferred
equity
$’000
STI actual
as a %
of target
opportunity
STI actual
as a %
of maximum
opportunity
720
231
158
389
389
338
195
960
308
210
519
519
450
260
792
254
208
428
428
371
257
396
127
104
214
214
186
129
396
110%
83%
127
104
214
214
186
129
110%
132%
110%
110%
110%
132%
83%
99%
83%
83%
83%
99%
CEO & MD
M Baker
Executive KMP
R Brosnahan
T Corolis 2
R Fennell
A Morgan
A Rowse
B Speirs 2
1. Cash amounts will be paid in September 2023.
2. The individual modifier was applied which resulted in an outcome of 132% of target opportunity (99% of maximum opportunity) for both the Chief Risk Officer and
Chief Operating Officer.
2.4 Loan Funded Share Plan outcomes
Loan Funded Share Plan
The FY22 Loan Funded Share Plan grant was tested on 30 June 2023 at the completion of the two‑year performance period.
Three of the four tranches met their performance conditions. The equity award is subject to a further two‑year service condition and
may vest to Executives at the end of FY25 following a risk assessment. As such, no remuneration was paid to Executives relating to
the Loan Funded Share Plan in FY23.
Performance results for each tranche are summarised below.
Measure
Weighting
Performance
Outcome
Performance commentary
Cost-to-Income
(CTI) ratio
25%
54.90%
Met
Cash earnings
25%
$576.9m
Met
Market Growth
25%
2.35%
Not met
Customer Advocacy
(relative NPS)
25%
+28.4
Met
The Bank has continued to focus on cost management
over the 2‑year period and achieved the CTI target.
FY23 saw a significant improvement in the Bank’s CTI.
The Bank’s FY22 and FY23 targets were set in line with our
growth agenda. It is measured as reported cash earnings.
The Bank saw a slight decline over the 2‑year period, with
total footings (deposits and lending) of 2.3% at the end of
the performance period. This was not sufficient to meet
the target.
The Bank achieved a relative NPS score of +28.4, compared
to a peer group of retail banks, demonstrating our continued
focus on customer experience.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 55
Section 2: Performance and reward outcomes continued
2.5 Short-term incentive transition considerations
As foreshadowed in the FY22 Remuneration Report, the Board proactively discussed the metric duplication of the FY22 Loan Funded
Share Plan and FY23 Short‑term Incentive (STI) outcomes and sought an external view to specifically address this. The transition from
a Loan Funded Share Plan (LFSP) with a 2‑year performance period, additional 2‑year service condition and risk assessment to an STI
with a one‑year performance period and one‑year deferral period is somewhat unusual. It was introduced to meet the requirements
of CPS 511. Therefore it was decided that a principles‑based approach would best support the review of the appropriateness of
outcomes under both plans.
The FY22 LFSP and FY23 STI plan have a different purpose, structure and payout profile. The LFSP is intended to reward for share
price outperformance, with measures that focus on maintaining business fundamentals and the STI is intended to reward Executives
for differentiation in performance outcomes assessed against several scorecard measures. Further, the LFSP has a 2‑year performance
period while the STI plan has a 1‑year performance period.
Lowering the Bank’s Cost‑to‑Income ratio is an important strategic objective and both plans were tested against the FY23 Cost‑to‑
Income (CTI) target. That is, the Board believed it would have been inappropriate to exclude this metric from the FY23 STI given it is
a strategic imperative.
The Board concluded that although the transition from the LFSP to the STI program resulted in the performance periods of both plans
finishing on 30 June 2023, it does not create a doubling up of reward. Changes in timing and performance conditions of variable reward
programs year‑on‑year are common, and this can impact the staggering of performance tests and payments. This may also result in
multiple plans being tested at the same time, or years where no plans are tested.
On this basis, the Board determined that both awards would vest, and that no downward adjustments would be applied. In determining
this outcome the Board also considered the experience of the Executive and our shareholders during the performance period.
2.6 FY23 LTI outcomes
Performance Rights Plan
The FY20 LTI grant (tranche 1 & 2) awarded to the CEO & MD and FY20 LTI grant (tranche 2 & 4) awarded to Executives were tested
on 30 June 2023. The FY20 LTI (CEO & MD) grant used a two ‘sleeve’ approach, with the first sleeve linked to a ‘Customer Hurdle’ (NPS)
and the second sleeve linked to the relative TSR measured over a four‑year performance period.
The FY20 LTI grant to Executives used the two ‘sleeve’ approach outlined above and the grant was then split into two sets, one set
had a three‑year performance period with an additional one‑year service condition and the other set had a four‑year performance
period. The first set of the grant had a three‑year performance period that was tested on 30 June 2022 and outcomes were provided
in the FY22 Remuneration Report. The second set of the grant was tested on 30 June 2023 following the completion of the four‑year
performance period.
Results for the FY20 LTI (MD) grant and FY20 LTI (Executives) grant is detailed below.
Grant
Grant Date
Test Date
Hurdle
Weighting
Performance
Outcome
FY20 CEO & MD
17.12.2019
30.06.2023
FY20 LTI
Executive KMP
17.12.2019
30.06.2023
17.12.2019
30.06.2023
17.12.2019
30.06.2023
TSR
NPS
TSR
NPS
65%
35%
65%
35%
30th percentile
Not met
+27.5
Met
30th percentile
Not met
+27.5
Met
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 56
Remuneration Report continued
Section 2: Performance and reward outcomes continued
2.7 Tested awards
The table below is intended to provide transparency on the potential value of awards that were tested noting that the realised value
to participants of the Loan Funded Share Plan (LFSP) awards remain subject to ongoing conditions and changes in share price over
the two‑year service period.
The table sets out the value of the Loan Funded Share Plan and Performance Rights that were subject to testing on 30 June 2023.
CEO & MD
M Baker
Group Executives
R Brosnahan
T Corolis
R Fennell
A Morgan
A Rowse
B Speirs
Test year
2023
2023
2023
2023
2023
2023
2023
Net loan funded
share plan value 1
$’000
Performance
rights value 2
$’000
Total value of
tested outcomes
$’000
Total tested award values
9
3
2
4
0
0
2
150
21
21
36
0
0
19
159
24
23
40
0
0
21
1. The value shown represents the Net value of the award which has been calculated as the value of the LFSP less the value of the loan that executive KMP are required to
repay as at 30 June 2023. Vesting outcomes will be provided in the FY25 remuneration report following an additional two‑year service condition and subject to a risk
assessment by the Board. For further details on testing outcomes, refer to Section 2.4.
2. The FY20 Performance Rights award was measured for the period 1 July 2019 – 30 June 2023 and resulted in 100% lapse of the TSR hurdle and 100% vest of the
NPS hurdle. The award has reached the four‑year performance period and the NPS component of the grant was released except for Ryan Brosnahan for whom the
award has a holding lock until November 2023. Values shown in the table above relate to the NPS component of the award and were calculated using the 30 June 2023
closing price. For further details on testing outcomes, refer to Section 2.6.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 57
Section 2: Performance and reward outcomes continued
2.8 FY23 realised remuneration
The table below sets out actual remuneration received by the Executive KMP for FY23 including the value of any equity awarded in
prior years which vested during this financial year. Equity awards that vested during FY23 based on meeting performance conditions,
but which are still subject to a further service condition have been excluded. The table below also shows the maximum value of
total remuneration forgone, including previous years’ equity awards that were due to vest but did not meet the relevant hurdles and
were lapsed.
The table includes the Executive KMP who held that position as at 30 June 2023.
Fixed remuneration is inclusive of superannuation and the increase in the superannuation guarantee rate of 0.5% to 10.5% from
1 July 2022 resulted in a small reduction to the Executive KMP cash salary.
The information presented differs from the statutory remuneration table which presents remuneration in accordance with Australian
Accounting Standards. Statutory disclosures are provided in Section 6.
Fixed
remuneration 1
$’000
Cash
STI 2
$’000
Deferred
base pay 3
$’000
Long-term
Incentive 4
$’000
Loan funded
Share Plan 5
Total realised
remuneration 6
$’000
$’000
Equity
forfeited/
lapsed 7
$’000
FY23 Total Realised
Remuneration
CEO & MD
M Baker
Executive KMP
R Brosnahan
T Corolis
R Fennell
A Morgan
A Rowse
B Speirs
1,593
396
523
150
758
712
865
915
743
673
127
104
214
214
186
129
—
—
—
—
—
—
—
41
73
—
—
39
—
—
—
—
—
—
—
2,662
282
885
857
1,152
1,129
929
841
68
66
118
—
—
61
1. Fixed Remuneration includes cash salary, non‑monetary benefits, superannuation, and movements in accrued annual and long service leave and reflects the time in role during
the year.
2. The cash STI awarded to executive KMP for the 2023 performance year is shown in the above table. Of the STI awarded, 50% is delivered in cash and 50% is delivered
in share rights that will be granted in September 2023.
3. Marnie Baker was granted 200,000 deferred base pay shares in FY19, in four equal tranches of 50,000 units. Each grant has a varying deferral period, vesting annually
from the time of grant. Any dividends received on these grants are reinvested into ordinary shares and allocated in tranches. The dividend reinvested shares also vested
and were released in FY23. This is the fourth and final tranche to vest. Deferred Base Pay Shares will not be reoffered.
4. Performance rights awarded to executive KMP in FY20 under the long‑term incentive plan were tested on 30 June 2023, measured for the period 1 July 2019 – 30 June 2023
and resulted in 100% lapse of the TSR hurdle and 100% vest of the NPS hurdle. The award has reached the four‑year performance period and the NPS component of the grant
was released except for Ryan Brosnahan for whom the award has a holding lock until November 2023. The value of the vested award was calculated using the 30 June 2023
closing price. For further details on testing outcomes, refer to Section 2.6.
FY20 Performance rights awarded to Executive KMP that were tested in FY22 have met the additional one‑year service condition and the grant was released except for Ryan
Brosnahan for whom the award has a holding lock until November 2023. The value of the vested award was calculated using the 30 June 2023 closing price. For further details
on testing outcomes, refer to the FY22 Remuneration Report.
5. The FY22 Loan Funded Share Plan grant was tested on 30 June 2023 at the completion of the two‑year performance period. Three of the four tranches met their
performance conditions. The award is subject to a further two‑year service condition and may vest at the end of FY25 following a risk assessment. As such, executives
did not receive any realised remuneration related to the Loan Funded Share Plan in FY23. For testing outcome details, refer to Section 2.4.
6. The realised remuneration amounts provided differ from the statutory remuneration table in Section 6 which is prepared according to Australian Accounting Standards.
7. Total remuneration forgone values are inclusive of prior year performance rights and Loan Funded Share Plan awards which were lapsed on 30 June 2023, performance
hurdles not achieved. Forgone amounts are calculated using the fair value on the date of grant. For further details on vesting outcomes refer to Section 2.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
58
Remuneration Report continued
Section 3: Executive remuneration strategy and framework
3.1 Remuneration strategy, design and structure
The remuneration policy adopted by the Bank provides the framework for the implementation, assessment and maintenance of the
Bank’s remuneration strategy and arrangements. The framework is structured to attract, retain, and motivate employees to achieve
the organisation’s objectives within the approved risk appetite.
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
Our Values
Remuneration Principles
Strategy led
reward
Reward balanced
outcomes
Recognise people
for their impact
Transparent and
simple metrics
Embedded risk
management
The reward framework
aligns outcomes with a
range of stakeholders –
including shareholders,
customer, community,
regulators, people,
and planet.
Financial performance
is not the dominant
driver of reward
outcomes. Non‑financial
objectives are used
to support achieving
balanced outcomes.
The types of
performance measures
and their respective
weightings meet
regulatory requirements
and intent.
The reward framework
supports the delivery
of BEN’s strategy
through the attraction,
motivation, and retention
of talented people.
The framework is
aligned to BEN’s
strategy of; reducing
complexity, investing in
capability, and telling
BEN’s story. With a focus
on customer connection
and investment in
the community.
Total remuneration is
competitive with the
market and structured
in a way that is
consistent with our
long‑held belief that
remuneration should be
weighted to fixed reward
(compared to market)
and focus on long‑term,
collective performance.
BEN’s performance is
the sum of its parts, and
when its people make a
meaningful impact, this
is recognised. Likewise,
when standards fall
short or individuals’
actions do not align
with BEN’s values,
there are appropriate
consequences.
The framework supports
meaningful differentiation
in outcomes based
on individual and
organisational
performance, as
well as supporting
effective consequence
management.
Variable reward plans
are tailored to the
objectives of the role
and the impact roles
can have on business
outcomes (which means
that pay‑mix and
scorecard design may
differ across cohorts).
People understand
the organisational and
individual objectives they
are expected to achieve
and (as much as possible)
how performance
is tracking against
those targets.
Simple and transparent
measures are
supported with ongoing
communication on
performance. Scorecards
may have explicit
weightings to provide
clarity on performance
assessments.
Remuneration
arrangements
encourage prudent risk
taking that supports
the achievement of
superior long‑term results
for shareholders and
customers by supporting
BEN’s risk management
framework.
This is achieved through
the use of various
levers, including: stand‑
alone risk measures,
the integration of risk
measures into gateways
and contra‑measures,
and a consequence
management process.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 59
Section 3: Executive remuneration strategy and framework continued
3.2 Executive remuneration framework
As discussed in the FY22 Remuneration Report, during 2022 the Board undertook a detailed review of its approach to executive
remuneration and the review resulted in a change to the executive remuneration framework. The new framework was introduced on
1 July 2022.
The new framework rewards Executives if they deliver on our strategy, creating value for all our stakeholders, across shareholders,
customers, community, people, planet and regulators. Three quarters of the variable reward is delivered in equity, creating strong
alignment with shareholders. We will continue to strengthen our approach to incorporating risk and conduct issues into remuneration
decisions, including through the recent adoption of a new Consequence Management Policy.
For FY23 the Executive reward framework consists of fixed remuneration, a short‑term incentive award and a long‑term incentive plan.
No further grants have been made under the Loan Funded Share Plan, and the FY21 and FY22 grants will continue as per their original
terms, reinforcing the alignment between the Executive and shareholders.
Remuneration Framework
Fixed Reward
Variable Reward
Fixed Remuneration – Cash
Short-term Incentive (STI)
Long-term Incentive (LTI)
• Comprises cash salary and
superannuation contributions
• Rewards the achievement of Bank, Divisional
• Rewards the creation of long-term
and individual performance
shareholder value
• 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
• Performance is assessed based on a
scorecard of; Financial Risk, Customer
& Community and People & Planet, and
Governance uplift
• Performance is assessed against;
Relative Total Shareholder Return, Return
on Equity, Relative Customer Advocacy,
Relative Reputation
• Delivered through a mix of cash (50%)
• Delivered as performance rights.
and deferred rights (50%)
• Recognises an individual’s experience, skills,
• One-year deferral period following
competencies and value
completion of the performance period,
adjusted to meet regulatory requirements
Performance is measured over four-years and
subject to an additional one-year restriction
for Executives, and one and two-year
restrictions for the Chief Executive Officer
& Managing Director plus ongoing service
conditions and risk assessment
Incentives are subject to downward adjustments through ongoing risk assessments and/or
consequence management process. All awards are subject to the Clawback and Malus Policy.
Minimum Shareholding Policy details of the Minimum Shareholding Policy (MSP) are provided in Section 5 of this report.
The following provides an illustration of how FY23 remuneration will be delivered to the CEO & MD and other executive KMP.
r
o
t
c
e
r
i
i
D
g
n
g
a
n
a
M
P
M
K
e
v
i
t
u
c
e
x
e
r
e
h
t
O
R
F
T
I
T
S
I
T
L
R
F
T
I
T
S
I
T
L
Base salary + super
50% is paid as cash at the end of year 1
Rights
50% is deferred into rights until the end of year 2
Annual grant of performance rights which are performance tested over 4 years
One-third vests
immediately
One-third subject
to a 1 year disposal
restriction
One-third subject to a
2 year disposal restriction
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
YEAR 6
Base salary + super
50% is paid as cash at the end of year 1
Rights
50% is deferred into rights until the end of year 2
Annual grant of performance rights which are performance tested over 4 years
50% vests
immediately
50% is subject to a
1 year disposal restriction
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
YEAR 6
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
60
Remuneration Report continued
Section 3: Executive remuneration strategy and framework continued
3.3 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 People, Culture and Transformation Committee to ensure the mix and total target
reward continues to be fair and balances the interests of stakeholders.
The chart below sets out the remuneration mix for each Executive who was in their position as at 30 June 2023. The actual
remuneration mix will vary depending on performance outcomes. The percentages represent the maximum opportunity for each
component, e.g. maximum short‑term incentive and the face‑value of the long‑term incentive grant.
The Chief Financial Officer and the Chief Customer Officer – Business & Agribusiness FY23 long‑term incentive grants consisted
of a grant of performance rights, equal to 30% of their respective fixed remuneration, and a grant of deferred share rights equal
to 20% of their fixed remuneration. This structure was specific to their first year’s remuneration and was designed to increase
shareholder alignment.
Chief Executive Officer
& Managing Director
Chief Transformation Officer
Chief Risk Officer
Chief Customer Officer,
Consumer Banking
Chief Financial Officer
Chief Customer Officer,
Business & Agribusiness
Chief Operating Officer
3.4 Other awards
50%
56%
59%
50%
48%
48%
56%
Fixed base
STI
LTI
30%
20%
22%
22%
18%
23%
30%
20%
29%
23%
29%
23%
22%
22%
The Chief Financial Officer and Chief Customer Officer, Business and Agribusiness were awarded one‑off alignment rights in respect
of their long‑term incentives forgone from their previous employers in FY23. The award is subject to continued service and a risk
assessment up to and including each relevant vesting date. Tranche 1 is scheduled to vest in FY27 (30 September 2026) and tranche
2 is scheduled to vest in FY28 (30 September 2027). For further details, refer to Sections 6.3 and 6.4.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 61
Section 3: Executive remuneration strategy and framework continued
3.5 FY23 Short-term Incentive (STI)
Features
STI
Delivered through
A mix of cash (50%) and deferred rights (50%)
Maximum Incentive opportunity
(% of fixed remuneration)
CEO & MD: 60%
Executives: 60% – 30%
Group STI scorecard
The scorecard is a mixture of financial and non‑financial measures.
Category
Financial
Measures
Customer
& Community
People
& Planet
Measure
Cost‑to‑Income ratio
Cash earnings
Profit after capital charge
Customer experience and satisfaction
Social impact through our Community Bank network
Employee experience and diversity
Implementation of the Climate Change Action Plan
Capability
Risk and Governance uplift
Weighting
20%
20%
10%
20%
10%
20%
Individual modifier
Outcomes can be adjusted based on individual performance. This is to allow for recognition of
exceptional individual contribution, as well as providing a mechanism for downward adjustment.
The assessment will consider:
• Individual performance and delivery of key strategic objectives
• Individual risk performance
• Broader cultural considerations
The range of the modifier is 0 – 120%, meaning that individual STI outcomes can be reduced to zero,
or increased to 120% of the scorecard outcome (capped at the maximum incentive opportunity).
Performance period
One year
Deferral period
Adjustments
One year following completion of performance period
Incentives are subject to downward adjustments through a risk assessment and / or consequence
management process and the Clawback and Malus Policy applies.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 62
Remuneration Report continued
Section 3: Executive remuneration strategy and framework continued
3.6 FY23 Long-term Incentive (LTI)
Features
LTI
Delivered through
Performance rights (100%)
Maximum Incentive
opportunity (% of fixed)
CEO & MD: 40%
Executives (including CRO): 40% – 30%
LTI scorecard
The scorecard is a mixture of financial and non‑financial measures. The performance targets and
assessment against those targets will be included when the grant is tested.
Measure
Relative TSR – against ASX S&P100 Financials
Target Return on Equity for the period
Relative customer NPS – measured against retail bank peers
RepTrak Reputation index – measured against financial services peers
Weighting
40%
25%
20%
15%
Performance period
Four years
Deferral period
Adjustments
One to two years following completion of performance period, depending on the executive.
Incentives are subject to downward adjustments through a risk assessment and / or consequence
management process and the Clawback and Malus Policy applies.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 63
Section 4: Remuneration Governance
4.1 Remuneration governance
Bendigo and Adelaide Bank Board
External advisors
Management
People, Culture and
Transformation Committee
Chairs of Board Risk Committee,
Financial Risk Committee and
Audit Committee
The People, Culture and Transformation Committee (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. Vicki Carter (Chair)
b. Jacqueline Hey
c. David Foster
d. Alistair Muir
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 511
Remuneration relating to other designated responsible persons,
risk and financial control personnel and material risk takers.
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
bendigoadelaide.com.au/public/corporate_governance/index.asp.
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’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:
• 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.
As part of the end‑of‑year process the Committee takes
advice from the Chairs of the Board Risk Committee, Board
Financial Risk Committee, and Audit Committee regarding
the need to apply risk adjustments to incentive outcomes
to individual executives, cohorts of employees or across the
Bank. Adjustments could include the reduction of in‑year cash
incentives, the reduction of future incentive awards, or through
the application of the Bank’s Malus and Clawback Policy.
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 the FY23 process,
the Committee considered remuneration data, trends and
assistance with other ad‑hoc tax, governance and legal matters
from experienced remuneration consultations. No remuneration
recommendations as defined in the Corporations Act 2001 (Cth)
were provided to the Committee during FY23.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 64
Remuneration Report continued
Section 4: Remuneration Governance continued
4.2 Risk and remuneration consequences
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 APRA Prudential Standard CPS
511 Remuneration 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.
Considering the provisions of the Clawback and Malus
Policy, the Board has discretion, having regard to the
recommendations of the Committee, to adjust variable
remuneration (including the short‑term incentive and equity
incentives) 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:
• Protect the financial soundness of the regulated institution; or
• 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 Committee, to
clawback a short‑term incentive award or equity incentives
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.
Hedging and margin loan restrictions
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 Executive KMP from
using the Bank’s securities as collateral in any margin loan
arrangements.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 65
Section 5: Minimum Shareholding Policy, contracts and Executive KMP loans
5.1 Minimum Shareholding Policy
The Minimum Shareholding Policy (MSP) aims to further align the interests of Executives and Non‑executive Directors with those of
shareholders. The MSP supports a focus on long‑term shareholder value by requiring Executives and Non‑executive Directors to build a
minimum shareholding in BEN shares and maintain it during their tenure.
With effect from 25 August 2020 the MSP requires the CEO & MD to accumulate shares equal to 150% of Fixed Remuneration
and executive KMP to accumulate shares equal to 75% of Fixed Remuneration and Non‑executive Directors to hold 100% of their
annual Base Board fee. The requirement must be met within a five‑year period (from the later of 25 August 2020 or the date of
their appointment).
Once the minimum shareholding level has been assessed as met for the first time, the KMP will be deemed to have met the policy
requirements. The Board may, at any time and in its sole discretion, amend the minimum shareholding levels and/or timing requirements.
Compliance with the minimum shareholding requirement is assessed at the end of each financial year. Based on their shareholding
at 30 June 2023, all Executives and Non‑executive Directors have either met the requirement, or are on track to meet this, within the
required timeframes. See Section 1.1 for the status of each executive.
5.2 Executive KMP 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
What is the duration of
the contracts?
What notice must be provided
by an Executive to end the
contract without cause? 1
What notice must be provided
by the Bank to end the
contract without cause? 2
On‑going until notice is given by either party.
Between 6 and 12 months’ notice. No notice period required if material
change in duties or responsibilities.
6 months’ notice or payment in lieu. 1
12 months’ notice or payment in lieu.
What payments must be made
by the Bank for ending the
contract without cause? 2
Payment of gross salary in lieu of period of notice (including payment
of accrued / unused leave entitlements calculated to end of relevant
notice period).
Applies to
All Executives
All Executives
Marnie Baker,
Taso Corolis,
Ryan Brosnahan,
Andrew Morgan,
Adam Rowse
Bruce Speirs,
Richard Fennell
All Executives
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
Are there any
post-employment restraints?
12‑month non‑competition and non‑solicitation (employees, customers
and suppliers) restriction.
CEO & MD
12‑month non‑solicitation (employees, customers and suppliers) restriction.
Other Executives
1. 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 the existing Executive KMP has been grandfathered.
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 66
Remuneration Report continued
Section 5: Minimum Shareholding Policy, contracts and Executive KMP loans
continued
5.3 Loans and other transactions
Details on the aggregate loans provided to Executive KMP and Non‑executive Directors 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.
2023
Non-executive Directors
Executive KMP
Total Directors and Executives
Balance on
1 July 2022
$’000
Interest
charged 1
$’000
Interest not
charged
$’000
Write-off
$’000
Balance on
30 June 2023
$’000
Number
at year end
5,245
3,029
8,274
222
92
314
—
—
—
—
—
—
4,319
2,830
7,149
9
11
20
Details of Executive KMP (including their related parties) with an aggregate of loans above $100,000 in the reporting period are
as follows:
2023
Non-executive Directors
J Hey
D Matthews
Executive KMP
M Baker
R Fennell
Balance on
1 July 2022
$’000
Interest
charged 1
$’000
Interest
not charged
$’000
Write-off
$’000
Balance on
1 July 2023
$’000
Highest owing
in period 2
$’000
1,556
3,689
830
2,199
44
178
35
57
—
—
—
—
—
—
—
—
686
3,633
815
2,015
1,563
3,766
0
2,206
1. Interest charged may include the impact of interest off‑set facility.
2. Represents aggregate highest indebtedness of the Executive KMP and Non‑executive Directors during the financial year. All other items in the table includes their related parties.
Therefore, highest owing in the period may be lower than other amounts disclosed.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 67
Section 6: Executive statutory remuneration
6.1 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.
Short-term benefits
Share-based payments 8
Non-
Super
annuation
Other
long-term
Other
remuner-
Cash STI 2
monetary 3
$’000
$’000
benefits 4
$’000
benefits 5
$’000
ation 6
$’000
Rights
$’000
Deferred
shares 7
$’000
Loan
Funded
Shares
$’000
Executive KMP
M Baker
2023
2022
R Brosnahan
2023
2022
T Corolis
2023
R Fennell
2022
2023
2022
A Morgan
2023
A Rowse
B Speirs
2022
2023
2022
2023
2022
Former executive KMP
T Crouch
2022
A Gartmann
2022
(part year)
Cash
salary 1
$’000
1,653
1,095
722
693
670
649
854
856
876
13
707
—
626
563
516
327
396
—
127
—
104
—
214
—
214
—
186
—
129
—
—
—
171
177
157
111
64
31
97
47
136
8
52
—
59
29
30
7
104
233
—
—
—
—
—
—
—
—
—
—
—
—
—
—
364
364
107
107
104
104
185
185
—
—
—
—
94
94
99
49
Total
$’000
2,628
1,919
1,149
959
984
824
1,361
1,123
1,264
22
981
—
956
734
674
842
8
6
—
13
—
—
—
—
—
—
—
—
7
7
29
—
15
55
27
24
24
23
25
24
25
24
24
1
25
—
25
24
29
41
175
190
(95)
20
12
12
17
16
(14)
11
14
—
11
—
16
17
(29)
10
(39)
57
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
408
—
408
Totals
2023
2022
6,108
4,712
1,370
—
736
440
104
233
854
9,323
1,002
7,097
1. Cash salary amounts include the net movement in the annual leave accrual for the year.
2. Cash STI for FY23 reflects the STI award outcome for the performance year for Executive KMP.
3. Non‑monetary relates to sacrifice components of salary such as motor vehicle costs.
4. Company superannuation contributions form part of fixed remuneration and are paid up to the statutory maximum contribution base.
5. The amounts relate to movements in long service leave accruals.
6. Other remuneration is disclosed to the extent that it relates to Alexandra Gartmann’s employment in the capacity as an executive, which ceased on 22 October 2022.
In accordance with contractual terms, Alexandra Gartmann did not receive a payment in lieu of a reduced notice period and all unvested equity awards lapsed.
7. Under the prior remuneration structure, the CEO & MD’s annual fixed remuneration consisted of cash salary, superannuation and deferred base pay shares. For further details
refer to the Remuneration outcomes and highlights for FY23 section of the report.
8. The values in the table reflect the current year expense for all awards outstanding at any point during the year. The expense is inclusive of adjustments that may be made
in the current period in relation to unvested awards. The fair value of the awards as at the grant date has been calculated under AASB 2 Share‑based Payment 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 securities that are expected to vest.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
68
Remuneration Report continued
Section 6: Executive statutory remuneration continued
6.2 Movements in Executive KMP equity holdings
Executive
KMP
Equity instrument
Balance on
1 July 2022
Granted
Vested/
released 1
Lapsed/
forfeited 2,3
Net change
other 4
Balance on
30 June 2023
59,889
836,525
M Baker 5
Ordinary shares
Preference shares
Deferred shares
Loan Funded Shares
Performance rights
R Brosnahan
Ordinary shares
Loan Funded Shares
Performance rights
T Corolis
Ordinary shares
Loan Funded Shares
Performance rights
R Fennell
Ordinary shares
Loan Funded Shares
Performance rights
A Morgan6
Performance rights
Alignment rights
698,221
100
57,969
655,554
110,895
8,628
192,810
81,969
64,801
186,639
32,959
101,364
333,561
47,290
—
—
Deferred Share rights
66,888
A Rowse 6
Performance rights
Alignment rights
B Speirs
Ordinary shares
Loan Funded Shares
Performance rights
—
—
25,507
169,672
30,226
—
—
2,946
—
69,489
—
—
33,514
—
—
30,467
—
—
37,649
28,237
18,824
—
24,483
16,322
—
—
28,291
78,415
—
(60,915)
—
(17,500)
—
—
—
4,831
—
(4,831)
8,455
—
(8,455)
—
—
—
—
—
4,529
—
(4,529)
—
—
—
(69,444)
(32,500)
—
(20,425)
(4,487)
—
(19,771)
(4,487)
—
—
—
—
—
—
—
4,074
—
—
—
3,418
(35,335)
(7,851)
—
—
—
—
—
—
(17,974)
(4,206)
—
—
—
—
—
—
—
—
—
—
100
—
586,110
130,384
8,628
172,385
110,996
73,706
166,868
54,108
113,237
298,226
68,633
28,237
18,824
66,888
24,483
16,322
30,036
151,698
49,782
1. Performance rights awarded to the Executive KMP in FY20 were tested on 30 June 2023, measured for the period 1 July 2019‑30 June 2023 and resulted in 100% lapse
of the TSR hurdle and 100% vest of the NPS hurdle. The award has reached the four‑year performance period and the NPS component of the grant was released except
for Ryan Brosnahan, for whom the award has a holding lock until November 2023. For further details on testing outcomes, refer to Section 2.6.
2. FY20 Performance rights that were tested in FY22 have met the additional one‑year restriction and were released. For further details on testing outcomes, refer to the
FY22 Remuneration Report.
3. The Loan Funded Share Plan grant awarded in FY22 was tested on 30 June 2023 and three of the four tranches met the performance condition. Vesting outcomes
will be provided in the FY25 remuneration report following an additional two‑year service condition and subject to a risk assessment by the Board. The lapsed amount
is shown in the above table. For further details on testing outcomes, refer to Section 2.4.
4. Net Change may include shares allocated under the Dividend Reinvestment Plan (DRP), an on market purchase or Related Party holdings.
5. Marnie Baker was granted 200,000 deferred base pay shares in FY19, in four equal tranches of 50,000 units. Each grant has a varying deferral period, vesting annually
from the time of grant. Any dividends received on these grants are reinvested into ordinary shares and allocated in tranches. The dividend reinvested shares also vested
and were released in FY23. This is the fourth and final tranche to vest. Deferred Base Pay Shares will not be reoffered.
6. Alignment rights were awarded to Andrew Morgan and Adam Rowse as part of their long‑term incentive arrangements in FY23.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 69
Section 6: Executive statutory remuneration continued
6.3 Details of awards granted, vested, lapsed
Executive KMP Equity Instrument
Grant date
M Baker
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
19.12.2018
08.04.2019
03.10.2019
06.04.2020
08.04.2021
06.10.2021
06.04.2022
07.10.2022
06.04.2023
Loan funded shares
16.11.2021
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
14.11.2022
Performance rights
14.11.2022
Performance rights
14.11.2022
R Brosnahan
Loan funded shares
16.11.2021
Performance rights
17.12.2019
Performance rights
14.11.2022
Performance rights
14.11.2022
T Corolis
Loan funded shares
04.11.2020
Loan funded shares
16.11.2021
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
17.12.2019
Units
granted
—
—
—
—
—
—
—
1,455
1,491
—
—
—
23,140
23,140
23,209
—
—
16,757
16,757
—
—
—
—
—
Value
at grant 1
$
—
—
—
—
—
—
—
—
—
—
—
—
84,230
77,288
72,876
—
—
60,995
55,968
—
—
—
—
—
Performance rights
14.11.2022
Performance rights
14.11.2022
15,234
15,233
55,452
50,878
R Fennell
Loan funded shares
16.11.2021
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
14.11.2022
Performance rights
14.11.2022
A Morgan
Performance rights
14.11.2022
Performance rights
14.11.2022
Alignment rights
14.11.2022
—
—
—
—
18,825
18,824
14,119
14,118
18,824
—
—
—
—
68,523
62,872
51,393
47,154
128,097
Units
vested/
released 2,3,4
Value
at vest 5
$
Units
forfeited/
lapsed 6
50,000
518,000
1,361
1,193
1,933
1,164
1,203
1,115
1,455
1,491
—
—
—
—
—
—
—
—
—
—
Forfeited/
lapse value 7
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
69,444
187,499
17,500
133,175
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
32,500
94,900
—
—
—
—
—
—
20,425
4,487
55,148
13,102
—
—
—
—
—
—
19,771
53,382
2,416
2,415
18,386
18,378
—
—
—
—
—
—
—
—
—
—
—
—
4,487
13,102
—
—
—
—
35,335
95,405
4,228
4,227
32,175
32,167
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,851
22,925
—
—
—
—
—
—
—
—
—
—
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
70
Remuneration Report continued
Section 6: Executive statutory remuneration continued
6.3 Details of awards granted, vested, lapsed continued
Executive KMP Equity Instrument
Grant date
A Rowse
Performance rights
14.11.2022
Performance rights
14.11.2022
Alignment rights
14.11.2022
B Speirs
Loan funded shares
16.11.2021
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
17.12.2019
Performance rights
14.11.2022
Performance rights
14.11.2022
Units
granted
12,242
12,241
16,322
—
—
—
—
Value
at grant 1
$
44,561
40,885
111,071
—
—
—
—
14,146
14,145
51,491
47,244
Units
vested/
released 2,3,4
Value
at vest 5
$
Units
forfeited/
lapsed 6
—
—
—
—
2,265
2,264
—
—
—
—
—
—
—
17,237
17,229
—
—
—
Forfeited/
lapse value 7
$
—
—
—
—
—
—
17,974
48,530
—
—
—
—
4,206
12,282
—
—
—
—
1. The price used to calculate the award value at the time of grant is the fair value on the date of grant. Refer to Section 6.4 for further details.
2. Marnie Baker was granted 200,000 deferred base pay shares in FY19, in four equal tranches of 50,000 units. Each grant has a varying deferral period, vesting annually
from the time of grant. Any dividends received on these grants are reinvested into ordinary shares and allocated in tranches. The dividend reinvested shares also vested
and were released in FY23. This is the fourth and final tranche to vest. Deferred Base Pay Shares will not be reoffered.
3. Performance rights awarded to the Executive KMP in FY20 were tested on 30 June 2023, measured for the period 1 July 2019‑30 June 2023 and resulted in 100% lapse of
the TSR hurdle and 100% vest of the NPS hurdle. The award has reached the four‑year performance period and the NPS component of the grant was released except for
Ryan Brosnahan, for whom the award has a holding lock until November 2023. For further details on testing outcomes, refer to Section 2.6.
4. FY20 Performance rights that were tested in FY22 have met the additional one‑year restriction and were released. For further details on testing outcomes, refer to the
FY22 Remuneration Report.
5. The value of each award on the date it vests is calculated using the fair value on the date of grant.
6. The Loan Funded Share Plan grant awarded in FY22 was tested on 30 June 2023 and three of the four tranches met the performance condition. Vesting outcomes will
be provided in the FY25 remuneration report following an additional two‑year service condition and subject to a risk assessment by the Board. The lapsed number of
units and value is shown in the above table. For further details on testing outcomes, refer to Section 2.4.
7. The value of lapsed awards is calculated using the fair value on the date of grant.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 71
Section 6: Executive statutory remuneration continued
6.4 Equity plan valuation inputs
Performance Rights
Equity
Instrument
Grant date
Fair value 1
Share price
Risk free
interest rate
Dividend
yield
Expected
volatility
Expected
life
Performance
period end 2 Vest date
Terms and Conditions for each Grant
Financial
Non-
financial
$
%
%
%
FY20 Performance
Rights MD (T1)
FY20 Performance
Rights MD (T2)
FY20 Performance
Rights (T2)
FY20 Performance
Rights (T4)
FY20 Performance
Rights
Transformation
FY21 Performance
Rights
Transformation
FY21 Performance
Rights
FY22 Performance
Rights
FY23 Performance
Rights MD &
Executive (T1)
FY23 Performance
Rights MD &
Executive (T2)
FY23 Performance
Rights MD (T3)
FY23 Alignment
Rights (T1)
FY23 Alignment
Rights (T2)
17.12.2019
$7.61
n/a
$9.89
0.88%
7.08%
21.23% 4 years
30.06.2023
30.09.2023
17.12.2019
$2.92
n/a
$9.89
0.88%
7.08%
21.23% 4 years
30.06.2023
30.09.2023
17.12.2019
$7.61
n/a
$9.89
0.88%
7.08%
21.23% 4 years
30.06.2023
30.09.2023
17.12.2019
$2.92
n/a
$9.89
0.88%
7.08%
21.23% 4 years
30.06.2023
30.09.2023
17.12.2019
$7.61
n/a
$9.89
0.88%
7.08%
21.23% 4 years
30.06.2023
30.09.2023
04.11.2020
$5.74
n/a
$6.83
0.19%
4.54%
29.21% 4 years
30.06.2024
30.09.2024
04.11.2020
$2.19
n/a
$6.83
0.19%
4.54%
29.21% 4 years
30.06.2024
30.09.2024
16.11.2021
$3.42
n/a
$9.18
1.23%
6.02%
30.85% 4 years
30.06.2025
30.09.2025
14.11.2022
$3.64
$7.01
$8.84
3.34%
6.00%
31.72% 4 years
30.06.2026
30.09.2026
14.11.2022
$3.34
$6.60
$8.84
3.42%
6.00%
29.65% 5 years
30.06.2026
30.09.2027
14.11.2022
$3.14
$6.21
$8.84
3.49%
6.00%
28.65% 6 years
30.06.2026
30.09.2028
14.11.2022
n/a
$7.01
$8.84
3.34%
6.00%
31.72% 4 years
30.09.2026
30.09.2026
14.11.2022
n/a
$6.60
$8.84
3.42%
6.00%
29.65% 5 years
30.09.2027
30.09.2027
1. The fair value is calculated as at grant date in accordance with AASB 2 Share-based Payment using an independent valuation.
2. The Board will test the performance condition as soon as practical after the performance period has been reached. Any performance rights that do not vest will lapse
at 5.00pm on the date the Board determines the vesting outcome of the grant.
All awards outlined in the table above do not have an exercise price at the time of reporting.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
72
Remuneration Report continued
Section 6: Executive statutory remuneration continued
6.4 Equity plan valuation inputs continued
Deferred Share Rights
Equity Instrument 1
Deferred Share Rights (T1)
Deferred Share Rights (T2)
Grant date
24.06.2022
24.06.2022
Issue price /
fair value 2
$
8.35
7.06
Share price at
grant date
$
Restriction
period end /
test date
Vest / expiry
date
8.97
8.97
30.09.2023
30.09.2023
30.09.2026
30.09.2026
1. Andrew Morgan received a sign‑on equity award delivered in deferred share rights, vesting in two tranches over four years to replace incentive arrangements that were
forgone with his previous employer.
2. The fair value is calculated on the grant date in accordance with AASB 2 Share-based Payment using an independent valuation.
Deferred Shares
Equity Instrument
Grant date
Deferred Shares Base Pay (MD)
19.12.2018
Issue price /
fair value 1
$
10.36
Share price at
grant date
$
Restriction
period end /
test date
Vest / expiry
date
10.40
30.06.2023
30.06.2023
1. The fair value is calculated on the grant date in accordance with AASB 2 Share-based Payment using an independent valuation.
Loan Funded Share Plan
Equity Instrument
Grant date
Fair value
$
Share
price
$
Exercise
price
$
Risk free
interest rate
Dividend
yield
Expected
volatility
Expected
life
Performance/
Vest schedule
FY21 Loan Funded
Share Plan
FY22 Loan Funded
Share Plan 1
04.11.2020
1.87
6.83
6.75
0.26%
0.00%
27.92% 4 – 6 years 30.06.2022 (perf.)
30.06.2024 (vesting)
30.06.2026 (expiry)
16.11.2021
2.70
9.18
9.18
1.44%
0.00%
28.93% 4 – 6 years 30.06.2023 (perf.)
30.06.2025 (vesting)
30.06.2027 (expiry)
1. The FY22 Loan Funded Share Plan grant was tested on 30 June 2023 at the completion of the two‑year performance period. Three of the four tranches met their
performance conditions. The award is subject to a further two‑year service condition and may vest at the end of FY25 following a risk assessment.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 73
Section 6: Executive statutory remuneration continued
6.5 Details of untested awards
The following summary details the current 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
Grant Date
Measures
Weighting
Performance
Period
Vesting
Condition
Performance Rights
2021 LTI
CEO & MD
2021 LTI
Executive
2022 LTI
CEO & MD
2022 LTI
Executive
2021
Transformation
rights 1
FY23
Alignment rights (T1) 2
FY23
Alignment rights (T2) 2
25.11.2020
NPS
TSR
35%
65%
01.07.2020 –
30.06.2024
25.11.2020
TSR
100%
16.11.2021
TSR
100%
16.11.2021
TSR
100%
01.07.2020 –
30.06.2024
01.07.2021 –
30.06.2025
01.07.2021 –
30.06.2025
NPS: 20 points above industry average over
performance period
• If target met 100%
• If not met 0%
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%
04.11.2020
Service
100%
01.07.2020 –
30.06.2024
100% subject to:
• Individual performance; and
14.11.2022
Service
100%
14.11.2022
Service
100%
01.07.2022 –
30.09.2026
01.07.2022 –
30.09.2027
• Risk and compliance gateway
100% subject to:
• Remaining employed by the Company for
the duration of the Service Period; and
• Risk gateway
Grant
Grant Date
Measures
Weighting
Performance Period
2023 LTI
CEO & MD & Executive
14.11.2022
rTSR
ROE
NPS
Reptrak
40%
25%
20%
15%
Relative TSR:
Compared to peer group of
ASX100 companies (excluding
resources and property trusts) over
performance period:
Absolute ROE:
Based on Company’s
Absolute ROE performance
in final year of
Performance Period:
• 50th percentile or less: 0%
• Below 10%: 0%
• At 50.1th percentile: 50%
• 10.1%: 50%
NPS:
20 points above the
Customer NPS Peer Group
over Performance Period:
• If target met: 100%
• If not met: 0%
• Between 50.11th percentile
• Between 10.1% and 10.43%:
and 75th percentile:
Straight‑line vesting
between 50% and 100%
• Above 75th percentile: 100%
Straight‑line vesting
between 50% and 100%
• 10.43%: 100%
01.07.2022 – 30.06.2026
Reptrak:
Measures the level of trust
towards the Company and
threshold to maintain an average
gap of 8 points over the period:
• Below Threshold: 0%
• At Threshold: 50%
• Between Threshold and
Stretch Performance:
Straight‑line vesting
between 50% and 100%
• At or above Stretch
Performance: 100%
1. Transformation rights granted in previous years were awarded to Ryan Brosnahan.
2. Alignment rights granted during the year were awarded to Andrew Morgan and Adam Rowse as part of their contracted long‑term incentive.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 74
Remuneration Report continued
Section 7: Non‑executive Director arrangements
7.1 Non-executive Director fees
The People, Culture and Transformation Committee
(Committee) is responsible for reviewing Non‑executive Director
(NED) fees for BEN and its main subsidiaries. In reviewing these
fees, the Committee has regard to a range of factors including:
The following table shows the annual fees in FY2023 for the
Board and committees (inclusive of company superannuation
contributions). Additional fees are paid to Non‑executive
Directors appointed to the Community Bank National Council.
Board/Committee
Board
Committees
Fee schedule
Chair 1
$
479,230
30,000
Member
$
165,000
20,000
1. Chair fees are all inclusive i.e. a separate committee member fee is not paid.
7.2 Rights to Shares Plan
A fee sacrifice Rights to Shares Plan was introduced in FY21
for Non‑executive Directors, to be offered annually, 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 the year‑end results and the filing of the
Appendix 4E announcement. The number of Rights to Shares
is allocated on a face value methodology, with the nominated
fee sacrificed amount divided by the five‑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.
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.
b. 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.
c. Attracting and retaining high calibre Non‑executive
Directors who are equipped with the diverse skills needed
to oversee all functions of the Bank in an increasingly
complex environment.
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 AGM. This fee pool
covers payments (including superannuation) for the main
Board and Committees (from FY2022) and payments to the
Bank’s Non‑executive Directors appointed to subsidiary boards
and the Community Bank National Council. The aggregate
Non‑executive Director fees paid for the year was $2,068,000
which represents 82.7% of the $2,500,000 fee cap approved
by shareholders.
Non‑executive Directors fees are inclusive of superannuation
contributions at 10.5%. In relation to the superannuation
contributions, Non‑executive Directors can elect to receive
amounts above the maximum contributions limit as cash.
The Directors contribute $5,000 per annum each to the
Bank’s scholarship program. The program was established to
assist disadvantaged students from rural and regional areas to
meet their tertiary education, accomodation, and direct study
costs. The contributions are deducted from Base Board fees.
To date this program has raised $2.18 million in scholarship
funds since it began in 2007.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 75
Section 7: Non‑executive Director arrangements continued
7.3 Non-executive Director statutory remuneration
Non-executive Director
J Hey (Chair)
V Carter 4
R Deutsch
D Foster
J Hazel
D Matthews 5
Year
2023
2022
2023
2022
2023
2022 (part year)
2023
2022
2023
2022
2023
2022
A Muir
2023 (part year)
V Weekes
2022
2023
2022 (part year)
Former Non-executive Director
J Harris
2023 (part year)
R Hubbard
A Robinson
Totals
2022
2022 (part year)
2022 (part year)
2023
2022
Short-term benefits
Post-
employment
benefits
Fees 1
$’000
Rights to
Shares Plan 2
$’000
Non-monetary
benefits 3
$’000
Superannuation
contributions
$’000
Total
$’000
456
412
284
190
155
150
195
190
186
186
199
198
144
—
155
70
38
160
66
66
1,812
1,688
—
46
—
—
40
—
—
—
—
—
—
—
—
—
40
—
—
30
—
—
80
76
—
—
—
—
—
—
—
—
—
—
6
6
—
—
—
—
—
—
—
—
6
6
25
23
25
19
21
15
21
19
20
19
21
20
15
—
20
7
4
19
7
7
481
481
309
209
216
165
216
209
206
205
226
224
159
—
215
77
42
209
73
73
172
155
2,070
1,925
1. Fee amounts include the $5,000 Director contribution to the Bank’s scholarship program.
2. Includes fee sacrifice component of the Base Board fee sacrificed as part of the FY23 NED Rights to Shares Plan. The values contained in the table above are calculated
using the grant price multiplied by the total units granted. For FY23 the grant price was $9.54.
3. Includes fee sacrifice component of the Base Board fee paid as superannuation.
4. Fees paid to Vicki Carter includes $93,925 as the Chair of Sandhurst Trustees Limited.
5. Fees paid to David Matthews include $15,500 as a member of the Community Bank National Council.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
76
Remuneration Report continued
Section 7: Non‑executive Director arrangements continued
7.4 Shares and other securities held by Non-executive Directors
Number at
start of year
Granted
during the
year 1
Vested or
released 2
Lapsed
or expired
Net change
other 3
Number at
end of year
Non-executive Director
J Hey
V Carter
R Deutsch
Equity Instrument
Ordinary shares
Preference Shares
Rights to Shares
Ordinary shares
Preference Shares
Rights to Shares
Ordinary shares
Preference Shares
Rights to Shares
55,077
250
2,282
24,850
—
—
3,000
—
—
D Foster
Ordinary shares
10,039
Preference Shares
Rights to Shares
—
—
J Hazel
Ordinary shares
40,670
Preference Shares
Rights to Shares
—
—
D Matthews
Ordinary shares
40,520
A Muir
V Weekes
Preference Shares
Rights to Shares
Ordinary shares
Preference Shares
Rights to Shares
Ordinary shares
Preference Shares
Rights to Shares
Former Non-executive Director
J Harris 4
Ordinary shares
Preference Shares
Rights to Shares
—
—
—
—
—
5,500
—
—
14,125
—
1,503
—
—
—
—
—
—
—
—
4,193
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,193
—
—
—
2,282
—
(2,282)
—
—
—
2,097
—
(2,097)
—
—
—
—
—
—
—
—
—
—
—
—
2,097
—
(2,097)
1,503
—
(1,503)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
78
—
—
—
—
—
990
—
—
57,437
250
—
24,850
—
—
6,087
—
2,096
1,542
11,581
—
—
—
—
2,165
42,835
—
—
—
—
7,105
47,625
—
—
—
—
1,043
1,043
—
—
—
—
—
—
—
—
—
—
7,597
—
2,096
15,628
—
—
1. Richard Deutsch and Victoria Weekes elected to participate in the FY23 Rights to Shares Plan. Rights to Shares were allocated in two tranches on 23 August 2022 using
a VWAP of $9.54.
2. The FY22 Rights to Shares Plan (tranche 2) granted to Jacqueline Hey vested on 18 August 2022, coinciding with the Bank’s full year results.
The FY23 Rights to Shares Plan (tranche 1) granted to Richard Deutsch and Victoria Weekes vested on 21 February 2023, coinciding with the Bank’s half year results.
3. Net Change may include shares allocated under the Dividend Reinvestment Plan (DRP), an on market purchase or Related Party holdings.
4. Jan Harris’ Shares were released from restriction upon her resignation from the Bank effective 12 September 2022.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 77
Financial Report
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 78
Financial contents
Financial highlights
Primary Statements
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Cash flow statement
Basis of Preparation
1 Corporate information
2 Summary of significant accounting policies
Results for the Year
3
Income
4 Operating expenses
5
Income tax expense
6 Segment reporting
7 Earnings per ordinary share
8 Dividends
Financial Instruments
9 Cash and cash equivalents
10 Loans and other receivables
11 Impairment of loans and advances
12 Financial assets at fair value through
profit or loss
13 Financial assets at amortised cost
14 Financial assets at fair value through
other comprehensive income
15 Deposits
16 Other Borrowings
17 Loan capital
18 Securitisation and transferred assets
19 Derivative financial instruments
20 Financial instruments
21 Risk management
79
80
80
81
82
83
85
86
86
86
88
88
90
92
95
97
98
100
101
102
103
111
112
113
115
116
117
121
122
127
135
Funding and Capital Management 148
148
22 Share capital
23 Retained earnings and reserves
Other Assets and Liabilities
24 Investment property
25 Goodwill and other intangible assets
26 Other assets
27 Other payables
28 Provisions
Other Disclosure Matters
29 Cash flow statement reconciliation
30 Subsidiaries and other controlled entities
31 Related party disclosures
32 Involvement with unconsolidated entities
33 Fiduciary activities
34 Share‑based payment plans
35 Commitments and contingencies
36 Remuneration of Auditor
37 Leases
38 Events after balance sheet date
Directors’ declaration
Independent Auditor’s Report
Shareholder Information
Glossary
150
152
152
154
157
157
158
160
160
161
163
165
167
168
173
174
175
176
177
178
187
191
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 79
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)/reversals
Income tax expense
Statutory earnings attributable to owners of the Bank
Add back: total non‑cash items and other adjustments 2
Cash earnings after income tax 3
Financial position
Net loans and other receivables
Total assets
Deposits
Total liabilities
Total equity
Risk‑weighted assets
Common Equity Tier 1 capital ratio
Total capital ratio
Share information (per ordinary share)
Net tangible assets
Earnings per share (statutory basis)
Earnings per share (cash basis) 3
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
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
($m)
(%)
(%)
($)
(¢)
(¢)
(¢)
(%)
(%)
(%)
(%)
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
Equity reserve for credit losses (ERCL)
Collectively assessed provision & ERCL %
of risk‑weighted assets
($m)
($m)
($m)
(%)
($m)
(%)
($m)
($m)
(%)
Group
June 2023
June 2022
June 2021
June 2020 June 2019 1
1,640.8
279.5
1,412.8
282.8
1,422.5
382.9
1,333.8
300.6
(1,161.9)
(1,021.4)
(1,033.7)
(1,179.8)
(33.6)
(227.8)
497.0
79.9
576.9
27.2
(213.3)
488.1
12.3
500.4
(18.0)
(229.7)
524.0
(66.8)
457.2
(168.5)
(93.3)
192.8
108.9
301.7
1,289.6
277.9
(965.2)
(50.3)
(175.2)
376.8
38.9
415.7
78,526.3
77,610.4
71,920.6
64,980.4
61,822.2
98,479.7
95,239.6
86,577.2
76,008.9
72,435.3
77,310.8
74,583.9
66,217.1
58,912.4
56,897.5
91,629.0
88,527.7
80,223.7
70,210.7
66,969.1
6,850.7
6,711.9
6,353.5
5,798.2
5,631.6
37,900.3
42,197.9
40,469.3
38,215.2
37,483.1
9.68
13.60
9.57
13.81
9.25
13.61
8.92
13.14
11.25
15.63
8.85
87.9
102.1
61.0
8.71
87.5
89.8
53.0
8.66
98.1
85.6
50.0
11.63
10.28
10.27
0.65
8.62
7.42
0.59
7.72
7.53
0.60
7.67
8.79
7.98
38.1
59.7
35.5
7.42
0.42
5.36
3.43
113.9
(46.2)
67.7
0.09
47.8
0.06
238.5
95.2
133.1
(57.1)
76.0
0.10
58.1
0.07
225.7
87.8
208.8
(93.0)
115.8
0.16
94.3
0.13
246.7
104.7
240.5
(77.5)
163.0
0.25
78.4
0.12
263.2
86.6
8.03
77.1
85.0
70.0
10.73
0.61
7.55
6.84
4,540
16.0
310.9
(127.6)
183.3
0.29
128.5
0.21
157.0
77.3
Number of staff (excluding Community Banks)
Assets per staff member
(FTE)
($m)
4,726
20.8
4,652
20.5
4,483
19.3
4,776
15.9
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. Non‑cash 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. For further details relating to non‑cash items refer to the Operating and Financial Review section of this report.
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 non‑cash items, amortisation on acquired intangibles and Homesafe net
realised income. All adjustments are net of tax.
0.88
0.74
0.87
0.92
0.63
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 80
Income statement
For the year ended 30 June 2023
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)/reversals
Bad and doubtful debts recovered
Total credit (expenses)/reversals
Operating expenses
Staff and related costs
Occupancy costs
Amortisation and depreciation costs
Fees and commissions
Other operating expenses
Total operating expenses
Profit before income tax expense
Income tax expense
Net profit attributable to owners of the Bank
Earnings per share
Basic
Diluted
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
3,406.8
(1,766.0)
1,745.3
(332.5)
3,316.8
(1,633.9)
1,727.2
(285.0)
3
1,640.8
1,412.8
1,682.9
1,442.2
129.7
64.0
85.8
279.5
130.8
57.8
94.2
282.8
115.2
16.3
46.3
177.8
115.8
18.2
138.1
272.1
1,920.3
1,695.6
1,860.7
1,714.3
(36.1)
2.5
(33.6)
23.4
3.8
27.2
(71.4)
2.5
(68.9)
24.6
3.8
28.4
(656.7)
(604.1)
(640.2)
(588.5)
(35.9)
(93.9)
(23.6)
(35.7)
(90.9)
(22.5)
(35.9)
(93.2)
(7.9)
(351.8)
(268.2)
(357.7)
(1,161.9)
(1,021.4)
(1,134.9)
656.9
(208.5)
448.4
724.8
(227.8)
497.0
cents
87.9
79.2
701.4
(213.3)
488.1
cents
87.5
77.6
(35.7)
(90.1)
(10.0)
(264.5)
(988.8)
753.9
(203.6)
550.3
3
11
4
5
7
7
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 81
Statement of comprehensive income
For the year ended 30 June 2023
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
Profit for the year
497.0
488.1
448.4
550.3
Items which may be reclassified subsequently to profit or loss:
Revaluation (loss)/gain on debt securities at FVOCI with recycling
Impairment of debt securities at FVOCI
Net (loss)/gain on cash flow hedges taken to equity
Tax effect on items taken directly to or transferred from equity
Total items that may be reclassified to profit or loss
Items which will not be reclassified subsequently to profit or loss:
Revaluation gain on equity investments at FVOCI
Tax effect on items taken directly to or transferred from equity
Total items that will not be reclassified to profit or loss
23
23
23
23
23
23
(17.0)
—
(75.6)
19.2
(73.4)
—
—
—
(84.8)
0.1
46.1
20.2
(18.4)
4.7
(1.4)
3.3
9.7
—
(75.6)
11.2
(54.7)
—
—
—
(420.6)
0.1
46.1
120.8
(253.6)
5.4
(1.6)
3.8
Total comprehensive income for the year
423.6
473.0
393.7
300.5
Total comprehensive income for the year attributable to:
Owners of the Bank
423.6
473.0
393.7
300.5
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 82
Balance sheet
As at 30 June 2023
Assets
Cash and cash equivalents
Due from other financial institutions
Financial assets at fair value through profit or loss (FVTPL)
Financial assets at amortised cost
Financial assets at fair value through other
comprehensive income (FVOCI)
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
Other borrowings
Derivatives
Amounts payable to controlled entities
Income tax payable
Provisions
Other payables
Loan capital
Total Liabilities
Net Assets
Equity
Share capital
Reserves
Retained earnings
Total Equity
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
9
9
12
13
14
19
10
30
5
24
25
26
9
15
16
19
5
28
27
17
22
23
23
8,384.2
3,541.0
7,953.9
3,082.3
123.9
18.5
864.6
188.0
30.5
861.7
123.9
9.2
3,830.1
188.0
30.5
603.9
6,917.5
9.2
9,618.1
59.9
17,458.9
23,300.4
9.2
59.9
78,526.3
77,610.4
77,616.7
77,118.4
13.8
—
166.2
71.2
957.8
1,841.9
584.6
14.5
—
179.6
48.6
920.3
1,808.3
358.7
13.8
101.8
166.2
203.4
—
1,776.3
1,593.6
14.5
112.8
179.5
184.6
—
1,741.9
1,393.8
98,479.7
95,239.6
110,857.0
108,010.5
190.3
77,310.8
11,838.2
178.8
74,583.9
11,698.9
17.4
—
40.8
126.3
734.2
34.8
—
50.6
122.2
492.4
1,371.0
1,366.1
190.3
178.8
77,316.2
74,589.7
8,945.7
17.4
7,859.0
34.8
15,829.0
17,095.0
40.8
96.5
693.5
1,371.0
50.6
122.2
466.5
1,366.1
91,629.0
88,527.7
104,500.4
101,762.7
6,850.7
6,711.9
6,356.6
6,247.8
5,240.5
42.9
1,567.3
6,850.7
5,219.5
105.9
1,386.5
6,711.9
5,240.5
23.2
1,092.9
6,356.6
5,219.5
67.2
961.1
6,247.8
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 83
Statement of changes in equity
For the year ended 30 June 2023
For the year ended 30 June 2023
Opening balance at 1 July 2022
Comprehensive income
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Shares issued
Movement in treasury shares
Movement in executive share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in equity reserve for credit losses (ERCL)
Share‑based payment
Transfer from reserves
Equity dividends
Group
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued
ordinary
capital
$m
5,222.5
Other
Issued
capital 1
$m
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
(3.0)
1,386.5
105.9
6,711.9
—
—
—
18.8
1.4
0.2
—
—
—
—
—
—
—
—
—
—
—
0.6
—
—
—
—
497.0
—
497.0
—
—
—
—
(7.4)
0.4
0.3
(309.5)
—
(73.4)
(73.4)
—
—
—
—
7.4
3.3
(0.3)
—
497.0
(73.4)
423.6
18.8
1.4
0.2
0.6
—
3.7
—
(309.5)
Closing balance at 30 June 2023
5,242.9
(2.4)
1,567.3
42.9
6,850.7
For the year ended 30 June 2022
Opening balance at 1 July 2021
Comprehensive income
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Shares issued
Movement in treasury shares
Movement in executive share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in equity reserve for credit losses (ERCL)
Movement in operational risk reserve
Share‑based payment
Equity dividends
Group
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued
ordinary
capital
$m
5,053.1
Other
Issued
capital 1
$m
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
(3.6)
1,166.0
138.0
6,353.5
—
—
—
178.1
(8.6)
(0.1)
—
—
—
—
—
—
—
—
—
—
—
0.6
—
—
—
—
488.1
—
488.1
—
—
—
—
16.9
4.2
0.9
(289.6)
—
(15.1)
(15.1)
—
—
—
—
(16.9)
(4.2)
4.1
—
488.1
(15.1)
473.0
178.1
(8.6)
(0.1)
0.6
—
—
5.0
(289.6)
Closing balance at 30 June 2022
5,222.5
(3.0)
1,386.5
105.9
6,711.9
1. Refer to Note 22 for further details.
2. Refer to Note 23 for further details.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
84
Statement of changes in equity
For the year ended 30 June 2023
For the year ended 30 June 2023
Opening balance at 1 July 2022
Comprehensive income
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Shares issued
Movement in treasury shares
Movement in executive share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in equity reserve for credit losses (ERCL)
Share‑based payment
Equity dividends
Bank
Attributable to owners of Bendigo and Adelaide Bank Limited
Issued
ordinary
capital
$m
5,222.5
Other
Issued
capital 1
$m
Retained
earnings 2
$m
(3.0)
961.1
Reserves 2
$m
67.2
Total
equity
$m
6,247.8
—
—
—
18.8
1.4
0.2
—
—
—
—
—
—
—
—
—
—
0.6
—
—
—
448.4
—
448.4
—
—
—
—
(7.4)
0.3
(309.5)
—
(54.7)
(54.7)
—
—
—
—
7.4
3.3
—
448.4
(54.7)
393.7
18.8
1.4
0.2
0.6
—
3.6
(309.5)
Closing balance at 30 June 2023
5,242.9
(2.4)
1,092.9
23.2
6,356.6
Attributable to owners of Bendigo and Adelaide Bank Limited
Bank
Issued
ordinary
capital
$m
5,053.1
—
—
—
—
178.1
(8.6)
(0.1)
—
—
—
—
5,222.5
Other
Issued
capital 1
$m
(3.6)
—
—
—
—
—
—
—
0.6
—
—
—
(3.0)
Retained
earnings 2
$m
Reserves 2
$m
Total
equity
$m
682.4
0.2
550.3
550.3
—
—
—
—
16.9
0.9
(289.6)
961.1
329.8
6,061.7
—
—
(249.8)
(249.8)
—
—
—
—
(16.9)
4.1
—
0.2
550.3
(249.8)
300.5
178.1
(8.6)
(0.1)
0.6
—
5.0
(289.6)
67.2
6,247.8
For the year ended 30 June 2022
Opening balance at 1 July 2021
De‑registered subsidiary companies
Comprehensive income
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Shares issued
Movement in treasury shares
Movement in executive share plans
Reduction in employee share ownership plan (ESOP) shares
Movement in equity reserve for credit losses (ERCL)
Share‑based payment
Equity dividends
Closing balance at 30 June 2022
1. Refer to Note 22 for further details.
2. Refer to Note 23 for further details.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 85
Cash flow statement
For the year ended 30 June 2023
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
Net increase in balance of loans and other receivables
Net decrease/(increase) in balance of investment securities
Increase/(decrease) in operating liabilities
Net increase in balance of deposits
Net increase/(decrease) in balance of other borrowings
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
3,124.1
(1,330.8)
251.5
1,812.5
(351.1)
257.6
2,984.6
(1,201.8)
211.1
1,568.0
(312.3)
199.7
(1,280.0)
(1,065.8)
(1,230.3)
(1,103.7)
1.4
(241.1)
525.1
5.2
(195.3)
463.1
8.7
(241.1)
531.2
89.5
(195.3)
245.9
(380.5)
2,694.9
(5,666.4)
(6,380.1)
(1,823.9)
2,648.6
(4,418.5)
(7,145.3)
2,726.9
139.3
8,366.8
(33.3)
2,726.5
1,086.7
8,360.4
(275.6)
Net cash flows from/(used in) operating activities
29
5,705.7
(3,249.9)
5,169.1
(3,233.1)
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 proceeds from sale of equity investments
Cash paid for purchases of equity investments
Cash proceeds from dividends from JV partners
Cash paid for purchase of ANZ investment lending portfolio
Net cash received on acquisition of a business
combination/acquisition
Net cash proceeds from sale of Insurance Broking and Debtor
Financing businesses
Net cash flows (used in)/from investing activities
Cash flows from financing activities
Cash paid for purchases of treasury shares
Repayment of loan capital
Payment of loan capital issue costs
Proceeds from issuance of subordinated debt
Repayment of subordinated debt
Equity dividends paid
Repayment of lease liabilities
Repayment from employees for ESOP shares
Net cash flows used in financing activities
8
37
(30.6)
0.1
(52.2)
58.8
—
(4.0)
1.9
(571.5)
—
—
(597.5)
—
—
—
—
—
(290.7)
(50.5)
0.6
(340.6)
(14.5)
2.9
(51.9)
71.0
0.8
(5.0)
1.9
—
0.5
4.0
9.7
(8.7)
(21.1)
(0.7)
125.0
(125.0)
(213.7)
(50.3)
0.6
(293.9)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
4,767.6
3,550.2
(3,534.1)
7,084.3
Cash and cash equivalents at the end of year
9
8,317.8
3,550.2
(30.5)
0.1
—
—
—
(4.0)
1.9
—
—
—
(14.4)
1.1
—
—
0.8
(5.0)
1.9
—
0.5
4.0
(32.5)
(11.1)
—
—
—
—
—
(290.7)
(50.5)
0.6
(340.6)
4,796.0
3,091.5
7,887.5
(8.7)
(21.1)
(0.7)
125.0
(125.0)
(213.7)
(50.3)
0.6
(293.9)
(3,538.1)
6,629.6
3,091.5
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 86
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
the 2023 financial year 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 2023 was authorised for issue in
accordance with a resolution of the Board of Directors
on 11 September 2023. 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.
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);
The domicile of Bendigo and Adelaide Bank Limited is Australia.
• has been prepared in accordance with the requirements
The registered office of the company is:
The Bendigo Centre,
22 – 44 Bath Lane Bendigo,
Victoria, Australia.
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)
• Investment Property
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction 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.
Further information on these judgements, estimates and
assumptions that are considered material to the financial
statements have been included within the following notes:
• Note 11 Impairment of loans and advances
• Note 24 Investment property
• Note 25 Goodwill and other intangible assets
Events subsequent to reporting date
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.
Annual Report 2023 87
Changes in accounting policies
New and amended standards and interpretations
The accounting policies applied by the Group in this consolidated
financial report are the same as those applied by the Group in
its consolidated financial report as at and for the year ended
30 June 2022.
The Group is yet to finalise its detailed assessment of the impact
of AASB 17 Insurance Contracts however, based on the Group’s
preliminary assessment, the Standard is not expected to have
a material impact on the transactions and balances recognised
in the financial statements when it is first adopted for the year
ending 30 June 2024.
Recently issued or amended standards not yet effective
The following recently issued or amendments to existing
standards are not expected to result in significant changes to
the Group’s accounting policies:
• AASB 17 Insurance Contracts (issued on 18 May 2017)
including Amendments to AASB 17 (issued on 25 June 2020);
• 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;
• Initial Application of AASB 17 and AASB 9 –
Comparative Information (Amendments to AASB 17)
(issued on 9 December 2021);
• International Tax Reform—Pillar Two Model Rules
(Amendments to AASB 112);
• Classification of liabilities as current or non‑current
(Amendments to AASB 101);
• Lease Liability in a Sale and Leaseback
(Amendments to AASB 16);
• Non‑current Liabilities with Covenants
(Amendments to AASB 101); and
• Supplier Finance Arrangements
(Amendments to IAS 7 and AASB 107).
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 88
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 Income
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
Wholesale borrowings
Wholesale borrowings – domestic
Notes payable
Repurchase agreements
Lease liability
Loan capital
Total interest expense
Total net interest income 1
Other revenue
Fee income
Assets
Liabilities and other products
Trustee, management and other services
Total fee income
Commissions and management fees
Total revenue from contracts with customers
Other income
Foreign exchange income
Homesafe revaluation gain
Dividend income
Other
Total other income
Total other revenue 1
Total income
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
170.7
0.4
237.0
15.1
17.9
2,965.7
3,406.8
1.7
0.9
16.0
1.9
0.7
1,724.1
1,745.3
152.7
0.4
724.3
54.5
17.9
2,367.0
3,316.8
(1,092.2)
(340.1)
(163.0)
(37.2)
(1,092.3)
(340.1)
(121.7)
(132.2)
(7.3)
(4.0)
(68.5)
(33.6)
(47.4)
(7.5)
(4.9)
(38.9)
(121.7)
—
(7.3)
(4.0)
(68.5)
(1,766.0)
(332.5)
(1,633.9)
1.3
0.9
199.9
1.9
0.7
1,522.5
1,727.2
(162.9)
(37.2)
(33.6)
—
(7.5)
(4.9)
(38.9)
(285.0)
1,640.8
1,412.8
1,682.9
1,442.2
69.5
54.7
5.5
129.7
64.0
193.7
27.9
44.3
1.2
12.4
85.8
75.4
50.6
4.8
130.8
57.8
188.6
24.3
38.5
4.9
26.5
94.2
279.5
282.8
58.7
54.5
2.0
115.2
16.3
131.5
27.9
—
8.7
9.7
46.3
177.8
63.8
50.4
1.6
115.8
18.2
134.0
24.3
—
89.5
24.3
138.1
272.1
1,920.3
1,695.6
1,860.7
1,714.3
24
1. During the financial year a detailed review of the application of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers was undertaken.
A number of reclassifications have been made, with these changes being applied retrospectively resulting in changes to comparative information. The restatements impact
Net Interest Income, Other Income and Operating Expenses.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 89
3 Income 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.
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 reflects the gains arising from
changes in the fair value of investment property and are
recognised in the year in which they arise.
Refer to Note 24 for further information.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 90
Results for the year
4 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 intangibles
Depreciation of property, plant and equipment
Total amortisation and depreciation costs
Fees and commission expense 1
Other operating expenses
Communications, postage and stationery
Computer systems and software costs
Advertising and promotion
Other product and services delivery costs
Consultancy fees
Non‑credit losses
Insurance costs
Impairment charges
Other expenses
Total other operating expenses 1
Total operating expenses
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
25
25
567.7
53.5
35.5
656.7
5.8
8.9
21.2
35.9
6.3
32.5
55.1
93.9
23.6
34.2
101.6
28.3
14.7
47.3
30.5
10.3
52.2
32.7
519.0
48.2
36.9
604.1
6.3
8.3
21.1
35.7
6.0
33.4
51.5
90.9
22.5
33.8
85.7
22.9
14.1
32.3
13.2
12.4
—
53.8
553.6
52.0
34.6
640.2
5.8
8.9
21.2
35.9
5.6
32.5
55.1
93.2
7.9
34.1
100.5
28.0
14.7
47.0
30.5
10.3
63.2
29.4
505.7
46.8
36.0
588.5
6.3
8.3
21.1
35.7
5.3
33.3
51.5
90.1
10.0
33.7
84.6
22.7
14.1
31.4
13.2
12.4
—
52.4
351.8
268.2
357.7
1,161.9
1,021.4
1,134.9
264.5
988.8
1. During the financial year a detailed review of the application of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers was undertaken.
A number of reclassifications have been made, with these changes being applied retrospectively resulting in changes to comparative information. The restatements impact
Net Interest Income, Other Income and Operating Expenses.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 91
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST except:
• where the GST incurred on a purchase of goods and services
is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from or payable to the
taxation authority is included as part of receivables or payables
in the Balance Sheet. Cash flows are included in the Cash
Flow Statement on a gross basis. The GST component of
cash flows arising from investing and financing activities, which
are recoverable from or payable to the taxation authority,
are classified as operating cash flows.
4 Operating expenses continued
Recognition and measurement
Operating expenses are recognised as the relevant service
is rendered, or once a liability is incurred.
Staff and related costs are recognised over the period in
which the employees provide service.
Refer to Note 28 for more information relating to provisions
for employee entitlements.
Incentive payments are recognised to the extent that the
Group has a present obligation. Refer to Note 34 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 include 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 25 for information on the amortisation
of intangibles.
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 37 for further information on the
depreciation of leased assets.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 92
Results for the year
5 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
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
(239.4)
(209.2)
(224.1)
(197.7)
1.3
6.6
(4.8)
8.5
2.8
5.7
(4.6)
(8.0)
1.3
6.6
(4.8)
12.5
2.8
7.0
(5.7)
(10.0)
Income tax expense reported in the Income Statement
(227.8)
(213.3)
(208.5)
(203.6)
Statement of changes in equity
$m
$m
$m
$m
Deferred income tax related to items charged or credited directly in equity
Net loss/(gain) on cash flow hedges
Net loss/(gain) on financial assets at FVOCI
Income tax charged or credited in equity
14.1
5.1
19.2
(5.3)
24.1
18.8
14.1
(2.9)
11.2
(5.3)
124.5
119.2
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
724.8
$m
701.4
$m
656.9
$m
753.9
Prima facie tax on accounting profit before tax
(217.5)
(210.4)
(197.1)
(226.2)
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
1.3
(12.4)
—
(0.3)
—
(0.7)
1.1
2.8
(7.5)
1.9
(0.8)
—
(0.4)
1.8
1.3
(15.7)
—
(0.3)
2.2
(0.7)
1.3
2.8
(7.5)
1.8
(0.8)
25.3
(0.3)
Income tax expense reported in the Income Statement
(227.8)
(213.3)
(208.5)
(203.6)
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction 5 Income tax expense continued
Deferred income tax
Deferred income tax at 30 June relates to the following:
Gross deferred tax assets
Derivatives
Employee benefits
Provisions
Lease liability
Financial assets at FVOCI
Other
Gross deferred tax assets
Set-off of deferred tax assets and deferred tax liabilities
Net deferred tax assets
Gross deferred tax liabilities
Deferred expenses
Derivatives
Intangible assets
Investment property
Property, plant and equipment
Other
Gross deferred tax liability
Annual Report 2023 93
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
50.4
33.1
89.9
34.7
24.5
23.7
44.4
31.6
89.4
44.7
19.5
34.9
256.3
264.5
(185.1)
(215.9)
71.2
48.6
50.4
24.2
99.4
34.7
33.2
22.7
264.6
(61.2)
203.4
44.4
31.6
89.1
44.7
36.1
33.9
279.8
(95.2)
184.6
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
3.0
22.2
13.4
123.9
15.5
7.1
185.1
—
53.6
15.0
120.6
19.1
7.6
215.9
3.0
22.2
13.4
—
15.5
7.1
61.2
(61.2)
—
$m
40.8
40.8
—
53.6
14.9
—
19.1
7.6
95.2
(95.2)
—
$m
50.6
50.6
Set-off of deferred tax assets and deferred tax liabilities
(185.1)
(215.9)
Net deferred tax liabilities
Income tax payable
Tax payable attributable to members of the tax consolidated group
—
—
$m
40.8
40.8
$m
50.6
50.6
As at 30 June 2023, there is no unrecognised deferred income tax liability (June 2022: 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.
As at 30 June 2023, the Group had unused capital losses of $9.3 million (June 2022: $9.3 million) that will be carried forward. Capital
losses can only be used to offset capital gains, and as such the associated deferred tax asset of $2.8m relating to the capital losses
has not been recognised on the basis that it is not probable of recovery.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 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.
94
Results for the year
5 Income tax expense continued
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 income 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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 95
6 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 Managing Director for the purposes of resource
allocation and performance assessment, hence it is consistent
with the internal reporting provided to the Managing Director
and the Executive Team.
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.
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.
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.
The Group’s reportable segments are as follows:
Major customers
Revenues from no individual customer amount to greater than
10% of the Group’s revenue.
Geographic Information
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.
Consumer
The Consumer division focuses on engaging with and servicing
our consumer customers and includes the branch network
(including Community Banks), Up digital bank, mobile relationship
managers, third party banking channels, wealth services,
Homesafe, and customer support functions.
Business and Agribusiness
The Business and Agribusiness division is focused on servicing
business customers, particularly small and medium businesses
who are seeking a relationship banking experience and includes
Portfolio Funding, in addition to all banking services provided to
agribusiness, rural and regional Australian communities through
the Rural Bank brand.
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 96
Results for the year
6 Segment reporting continued
Net interest income
Other income
Total segment income
Operating expenses
Credit (expenses)/reversals
Total segment expenses
30 June 2023
Consumer
$m
Business and
Agribusiness
$m
1,299.4
211.5
1,510.9
(445.7)
(18.3)
(464.0)
520.4
56.4
576.8
(124.1)
(25.0)
(149.1)
Corporate
$m
(157.3)
2.4
Total
$m
1,662.5
270.3
(154.9)
1,932.8
(491.4)
(1,061.2)
9.7
(33.6)
(481.7)
(1,094.8)
Net profit/(loss) before tax (cash basis)
1,046.9
427.7
(636.6)
838.0
Income tax (expense)/benefit
Net profit/(loss) after tax (cash basis)
Non‑cash net interest income items
Non‑cash other income items
Non‑cash operating expense items 1
(328.7)
(134.3)
718.2
293.4
(15.2)
8.0
(8.1)
—
0.5
(7.1)
201.9
(434.7)
—
(2.0)
(56.0)
(261.1)
576.9
(15.2)
6.5
(71.2)
Net profit/(loss) after tax (statutory basis)
702.9
286.8
(492.7)
497.0
Reportable segment assets
Reportable segment liabilities
Net interest income
Other income
Total segment income
Operating expenses
Credit reversals
Total segment expenses
$m
$m
$m
$m
60,182.9
55,798.2
19,221.9
17,909.5
19,074.9
17,921.3
98,479.7
91,629.0
30 June 2022
Consumer
$m
Business and
Agribusiness
$m
Corporate
$m
909.5
210.5
1,120.0
(416.4)
4.5
(411.9)
482.9
60.7
543.6
(137.2)
14.5
(122.7)
Total
$m
1,413.4
282.3
1,695.7
21.0
11.1
32.1
(448.5)
(1,002.1)
8.2
27.2
(440.3)
(974.9)
(408.2)
124.3
(283.9)
—
—
(3.1)
720.8
(220.4)
500.4
(0.5)
2.1
(13.9)
Net profit/(loss) before tax (cash basis)
708.1
420.9
Income tax (expense)/benefit
Net profit/(loss) after tax (cash basis)
Non‑cash net interest income items
Non‑cash other income items
Non‑cash operating expense items
(216.0)
492.1
(0.5)
0.4
(8.4)
(128.7)
292.2
—
1.7
(2.4)
Net profit/(loss) after tax (statutory basis)
483.6
291.5
(287.0)
488.1
Reportable segment assets
Reportable segment liabilities
$m
$m
$m
$m
58,724.3
52,957.3
19,743.8
18,075.8
16,771.5
17,494.6
95,239.6
88,527.7
1. In FY23, an impairment expense of $47.6m was recognised against the Group’s software intangible balances. This includes a $39.3m impairment against assets to be
replaced, and an $8.3m impairment of software under development. A majority of the impairment loss is recorded in the Corporate segment for the purposes of AASB 8
Operating Segments, with a small component of the impairment recorded in the Consumer segment.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction 7 Earnings per ordinary share
Earnings per ordinary share
Basic
Diluted
Annual Report 2023 97
Group
June 2023
cents
June 2022
cents
87.9
79.2
87.5
77.6
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 statutory earnings
Earnings used in calculating statutory earnings per ordinary share
Add back: dividends accrued and/or paid on dilutive loan capital instruments
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
$m
497.0
497.0
497.0
27.0
524.0
$m
488.1
488.1
488.1
15.9
504.0
No. of shares
No. of shares
565,153,125
557,537,515
Effect of dilutive instruments – executive share plans and convertible loan capital instruments
96,813,366
92,064,267
WANOS used in the calculation of diluted earnings per share
661,966,491
649,601,782
Recognition and measurement
Basic EPS is calculated as net profit after tax attributable to ordinary shareholders, divided by the weighted average number of
ordinary shares outstanding during the year excluding treasury shares held.
Diluted EPS is calculated as net profit after tax attributable to ordinary shareholders, adjusted for the effect of dividends on dilutive
loan capital instruments, divided by the weighted average number of ordinary shares outstanding during the year adjusted for the
effects of potentially dilutive ordinary shares, including loan capital instruments and shares issuable as part of Group’s share‑based
payment plans.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 98
Results for the year
8 Dividends
Ordinary shares (ASX:BEN)
Date
paid
Cents
per share
¢
Total
amount
$m
Group
Date
paid
Cents
per share
¢
Total
amount
$m
Date
paid
Cents
per share
¢
Total
amount
$m
Bank
Date
paid
Cents
per share
¢
Total
amount
$m
June 2022 final dividend
June 2021 final dividend
June 2022 final dividend
June 2021 final dividend
Sep 2022
26.5
147.4
Sep 2021
26.5
144.0
Sep 2022
26.5
147.4
Sep 2021
26.5
144.0
December 22 interim dividend
December 21 interim dividend
December 22 interim dividend
December 21 interim dividend
Mar 2023
29.0
55.5
162.1 Mar 2022
309.5
26.5
53.0
145.6 Mar 2023
289.6
29.0
55.5
162.1 Mar 2022
309.5
26.5
53.0
145.6
289.6
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 2023.
Final dividend June 2023
Dividends proposed since the reporting date, but not recognised as a liability:
Group
Date payable
Sep 2023
¢
32.0
$m Date payable
181.1
Sep 2023
Preference shares and Capital notes
Group
¢
32.0
$m
181.1
Bank
Bank
June 2023
June 2022
June 2023
June 2022
Date
paid
Cents
per share
¢
Total
amount
$m
Date
paid
Cents
per share
¢
Total
amount
$m
Date
paid
Cents
per share
¢
Total
amount
$m
Date
paid
Cents
per share
¢
Total
amount
$m
Converting preference shares (CPS4) (recorded as debt instruments) (ASX: BENPG) 1
Sep 2022
93.76
3.0
Sep 2021
Dec 2022
112.26
3.6 Dec 2021
Mar 2023
120.32
3.9 Mar 2022
Jun 2023
128.94
4.1
Jun 2022
455.28
14.6
65.15
65.65
67.25
68.14
266.19
2.1
Sep 2022
93.76
3.0
Sep 2021
2.1 Dec 2022
112.26
3.6 Dec 2021
2.2 Mar 2023
120.32
3.9 Mar 2022
2.2
8.6
Jun 2023
128.94
4.1
Jun 2022
455.28
14.6
65.15
65.65
67.25
68.14
266.19
Capital notes (recorded as debt instruments) (ASX: BENPH) 2
Sep 2022
97.13
4.9
Sep 2021
Dec 2022
114.37
5.7 Dec 2021
Mar 2023
120.25
6.0 Mar 2022
Jun 2023
131.59
6.6
Jun 2022
67.48
66.51
66.66
69.77
3.4
Sep 2022
97.13
4.9
Sep 2021
3.3 Dec 2022
114.37
5.7 Dec 2021
3.4 Mar 2023
120.25
6.0 Mar 2022
3.5
Jun 2023
131.59
6.6
Jun 2022
67.48
66.51
66.66
69.77
2.1
2.1
2.2
2.2
8.6
3.4
3.3
3.4
3.5
463.34
23.2
270.42
13.6
463.34
23.2
270.42
13.6
1. Converting preference shares (CPS 4, ASX:BENPG) were issued in December 2017.
2. Capital notes (ASX: BENPH) were issued in November 2020.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 99
8 Dividends continued
Dividend franking account
Group
June 2023
$m
June 2022
$m
Balance of franking account as at the end of the financial year
721.5
628.1
Franking credits that will arise from the payment of income tax
provided for in the financial report
40.8
50.6
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
(78.5)
683.8
(63.4)
615.3
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 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
290.7
18.8
309.5
213.7
75.9
289.6
290.7
18.8
309.5
213.7
75.9
289.6
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
The Dividend Reinvestment Plan provides shareholders with the opportunity of converting their entitlement to a dividend into new
shares. The issue price of the shares is equal to the volume weighted average share price of Bendigo and Adelaide Bank shares
traded on the Australian Securities Exchange over the ten trading days commencing 8 September 2023. Shares issued under this Plan
rank equally with all other ordinary shares.
The last date for the receipt of an election notice for participation in the Dividend Reinvestment Plan for the 2023 final dividend is
6 September 2023.
Bonus Share Scheme
The Bonus Share Scheme has been terminated effective as of 1 April 2023. The final offer under the Scheme occurred in
December 2022.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 100
Financial Instruments
This section covers the financial instruments held by the Group including: loans and advances, derivatives, deposits
and other borrowings. This section outlines how the fair value of financial instruments is determined and the
associated methodology.
Initial recognition and measurement
Business model assessment
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.
Financial assets
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;
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.
• fair value through other comprehensive income (FVOCI)
with recycling;
The SPPI test
• 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 cash flows 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.
The Group assesses financial assets to evaluate if their
contractual cash flows 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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 101
9 Cash and cash equivalents
Notes and coins
Cash at bank
Reverse repurchase agreements
Total cash and cash equivalents
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
131.0
6,429.0
1,824.2
8,384.2
133.4
2,836.4
571.2
3,541.0
130.9
5,998.8
1,824.2
7,953.9
133.4
2,377.7
571.2
3,082.3
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
$m
$m
$m
8,384.2
3,541.0
7,953.9
3,082.3
123.9
(190.3)
188.0
(178.8)
123.9
(190.3)
188.0
(178.8)
8,317.8
3,550.2
7,887.5
3,091.5
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 102
Financial Instruments
10 Loans and other receivables
Overdrafts
Credit cards
Term loans
Margin lending
Lease receivables
Other
Group
Bank
Note
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
1,102.0
318.7
1,290.7
314.7
1,102.0
318.7
1,290.5
314.7
74,592.4
73,952.9
75,613.0
74,893.2
1,875.3
1,433.2
710.6
140.3
693.7
136.1
—
710.5
140.3
—
693.5
136.1
Gross loans and other receivables
78,739.3
77,821.3
77,884.5
77,328.0
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
11
11
(47.8)
(238.5)
(90.4)
(376.7)
163.7
(58.1)
(225.7)
(71.3)
(355.1)
144.2
(80.2)
(237.4)
(90.4)
(408.0)
140.2
(57.8)
(224.8)
(71.2)
(353.8)
144.2
78,526.3
77,610.4
77,616.7
77,118.4
$m
$m
$m
$m
4,183.0
771.8
2,729.9
10,220.7
60,833.9
3,872.4
1,499.5
2,823.8
10,062.6
59,563.0
2,307.7
771.8
2,729.9
10,220.7
61,854.4
2,439.2
1,499.5
2,823.8
10,062.4
60,503.1
Gross loans and other receivables
78,739.3
77,821.3
77,884.5
77,328.0
1. Balances exclude individually assessed and collectively assessed provisions, unearned revenue, and deferred costs and are categorised by the contracted maturity date of
each loan facility.
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 11.
On 7 July 2022, the Group entered into an agreement to acquire
the ANZ Investment Lending portfolio. On 3 April 2023, the
transaction completed resulting in the addition of $558.5 million
of margin loans to Leveraged Equities Limited. In accordance
with AASB 9 Financial Instruments, the loans have been
recorded at fair value plus transaction costs. The margin loans
will subsequently be amortised through net interest income
in accordance with the effective interest rate method. The
amortisation of the fair value adjustment and the transaction
costs will be included in cash earnings adjustments.
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.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 103
11 Impairment of loans and advances
Credit expenses
Individually assessed provision
Collectively assessed provision
Bad debts written off
Bad debts recovered
Total credit expenses/(reversals)
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
21.8
12.8
1.5
(2.5)
33.6
(1.7)
(21.0)
(0.7)
(3.8)
(27.2)
54.2
12.6
4.6
(2.5)
68.9
(1.9)
(21.0)
(1.7)
(3.8)
(28.4)
Summary of impaired financial assets
$m
$m
$m
$m
Impaired loans
Loans – without individually assessed provisions
Loans – with individually assessed provisions
Restructured loans
Less: individually assessed provisions
Net impaired loans
25.1
85.7
3.1
(46.2)
67.7
19.7
110.6
2.8
(57.1)
76.0
25.1
1,106.8
3.1
(78.6)
1,056.4
19.7
110.6
2.8
(56.8)
76.3
Net impaired loans to gross loans
0.09%
0.10%
1.36%
0.10%
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
2.9
(1.6)
1.3
$m
331.1
10.5
2.0
(1.0)
1.0
$m
256.9
41.8
2.9
(1.6)
1.3
$m
331.1
10.5
2.0
(1.0)
1.0
$m
256.9
41.8
Recognition and measurement
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.
Impairment losses that are calculated on individual loans, or
on groups of loans assessed collectively, are recorded in the
Income Statement.
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 104
Financial Instruments
11 Impairment of loans and advances continued
Stage 1
Stage 2
Group
Stage 3
12 month
ECL
$m
Lifetime
ECL
$m
Collectively
assessed
– Lifetime
ECL
$m
Individually
assessed
– Lifetime
ECL
$m
Equity
reserve
for credit
losses
$m
Total
$m
Movements in provisions and reserves
Balance as at 1 July 2022
105.1
89.4
31.2
58.1
87.8
371.6
Transfers to/(from) during the year:
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
1.3
(24.6)
(13.5)
—
20.4
(7.1)
33.6
—
Total provision for doubtful debts as at 30 June 2023
115.2
(1.2)
25.6
(14.5)
(0.4)
5.6
(12.4)
(16.8)
—
75.3
(0.1)
(1.0)
28.0
(1.1)
1.4
(7.6)
(2.8)
—
48.0
—
—
—
1.5
19.8
—
—
(31.6)
47.8
—
—
—
—
—
—
7.4
—
—
—
—
—
47.2
(27.1)
21.4
(31.6)
95.2
381.5
Stage 1
Stage 2
Group
Stage 3
12 month
ECL
$m
Lifetime
ECL
$m
Collectively
assessed
– Lifetime
ECL
$m
Individually
assessed
– Lifetime
ECL
$m
Equity
reserve
for credit
losses
$m
Total
$m
Balance as at 1 July 2021
126.3
86.8
33.6
94.3
104.7
445.7
Transfers to/(from) during the year:
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
1.2
(18.6)
(8.7)
—
13.5
(2.8)
(5.8)
—
(1.2)
19.3
(5.4)
(0.4)
3.9
(9.9)
(3.7)
—
—
(0.7)
14.1
(1.4)
0.5
(8.3)
(6.6)
—
Total provision for doubtful debts as at 30 June 2022
105.1
89.4
31.2
—
—
—
1.8
(3.5)
—
—
(34.5)
58.1
—
—
—
—
—
—
(16.9)
—
87.8
—
—
—
—
14.4
(21.0)
(33.0)
(34.5)
371.6
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 105
11 Impairment of loans and advances continued
Movements in provisions and reserves
Stage 1
Stage 2
Bank
Stage 3
12 month
ECL
$m
Lifetime
ECL
$m
Collectively
assessed
– Lifetime
ECL
$m
Individually
assessed
– Lifetime
ECL
$m
Equity
reserve
for credit
losses
$m
Total
$m
Balance as at 1 July 2022
104.2
89.4
31.2
57.8
87.8
370.4
Transfers to/(from) during the year:
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
1.3
(24.6)
(13.5)
—
20.4
(7.1)
33.4
—
Total provision for doubtful debts as at 30 June 2023
114.1
(1.2)
25.6
(14.5)
(0.4)
5.6
(12.4)
(16.8)
—
75.3
(0.1)
(1.0)
28.0
(1.1)
1.4
(7.6)
(2.8)
—
48.0
—
—
—
1.5
52.5
—
—
(31.6)
80.2
—
—
—
—
—
—
7.4
—
—
—
—
—
79.9
(27.1)
21.2
(31.6)
95.2
412.8
Stage 1
Stage 2
Bank
Stage 3
12 month
ECL
$m
Lifetime
ECL
$m
Collectively
assessed
– Lifetime
ECL
$m
Individually
assessed
– Lifetime
ECL
$m
Equity
reserve
for credit
losses
$m
Total
$m
Balance as at 1 July 2021
125.5
86.7
33.6
94.3
104.7
444.8
Transfers to/(from) during the year:
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
1.2
(18.6)
(8.7)
—
13.5
(2.8)
(5.9)
—
(1.2)
19.3
(5.4)
(0.4)
3.9
(9.9)
(3.6)
—
—
(0.7)
14.1
(1.4)
0.5
(8.3)
(6.6)
—
Total provision for doubtful debts as at 30 June 2022
104.2
89.4
31.2
—
—
—
1.8
(3.7)
—
—
(34.6)
57.8
—
—
—
—
—
—
(16.9)
—
87.8
—
—
—
—
14.2
(21.0)
(33.0)
(34.6)
370.4
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 106
Financial Instruments
11 Impairment of loans and advances continued
Summary of provisions and reserves
Individually assessed provision
Opening balance
Bad debts written off previously provided for
Charged/(released) to Income Statement
Closing balance individually assessed provision
Collectively assessed provision
Opening balance
Charged/(released) to Income Statement
Closing balance collectively assessed provision
Equity reserve for credit losses (ERCL)
Opening balance
Increase/(decrease) in ERCL
Closing balance ERCL
Total provisions and reserves
Ratios
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
58.1
(31.6)
21.3
47.8
225.7
12.8
238.5
87.8
7.4
95.2
381.5
94.3
(34.5)
(1.7)
58.1
246.7
(21.0)
225.7
104.7
(16.9)
87.8
371.6
57.8
(31.6)
54.0
80.2
224.8
12.6
237.4
87.8
7.4
95.2
412.8
94.3
(34.6)
(1.9)
57.8
245.8
(21.0)
224.8
104.7
(16.9)
87.8
370.4
Individually assessed provision to gross loans
Total provisions and reserves to gross loans
Collectively assessed provision and ERCL to risk‑weighted assets
Provision coverage 1
0.06%
0.48%
0.88%
0.07%
0.48%
0.74%
334.94%
279.19%
1. Provision coverage is calculated as total provisions and reserves for doubtful debts 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:
• Amortised cost financial assets;
• Debt securities at FVOCI;
• Off‑Balance Sheet loan commitments; and
• Financial guarantee contracts.
Expected credit loss impairment model
The Group’s allowance for credit losses calculations are
outputs of credit risk 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.
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 the 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.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 107
11 Impairment of loans and advances continued
Financial assets in Stage 1 and Stage 2 are assessed for
impairment collectively, whilst those in Stage 3 are subjected
to either a 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 the point of default, 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. 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 conflict in Europe, escalating inflation
and increasing interest rates. 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 growth. 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 management overlays may be made using
expert credit judgement.
The Group’s Economic Outlook Workgroup (EOW) is responsible
for reviewing and formulating the macroeconomic forecasts. The
base economic scenario is discussed and approved by the Asset
and Liability Management Committee (ALMAC) while the upside
and downside scenarios are approved by the Management
Credit Committee (MCC). Any management overlays or
adjustments required to account for identified risks that have not
been considered in the modelling process are determined after
consultation with respective business representatives. At each
reporting period the modelled outcomes and 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 determine projections and forecasts.
The forecasts are based on consensus forecasts and expert
judgment 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. Two downside and
two upside scenarios are generated in addition to the base case.
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 Group’s base case economic forecast used for the
collective provision assessment as at 30 June 2023 reflects a
slowing of growth as the higher interest rates start to impact
mortgage owners and the expectation that interest rates will
further increase as a result of inflationary pressures. Annual GDP
growth is forecasted to slow to 0% for the December 2023 and
March 2024 quarters, with growth above 2% only returning by
June 2026.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 108
Financial Instruments
11 Impairment of loans and advances continued
Interest rates are forecasted to peak at 4.6% and remain at that level to June 2024 while the unemployment rate is expected to
gradually increase, peaking at 5.9% in June 2025 before declining to around 5.5%.
A modest reduction in house prices is projected until March 2024 before positive growth returns. Commercial property prices are
expected to remain under pressure. There is currently a low volume of transactions in this market which, along with other factors,
reduces price transparency.
The Group’s significant deterioration scenario is more severe than in previous assessments and is more aligned with a typical stress
test scenario. In the significant deterioration scenario, GDP growth is assumed to be negative for 10 quarters while the unemployment
rate peaks at 10% by December 2025. House prices are assumed to fall by 38% from December 2022 levels and commercial
property prices by 39%. The mild deterioration scenario is at a similar severity level as previous assessments, with GDP growth being
negative for 5 quarters, unemployment peaking at 8.3%, house prices falling by 21% from December 2022 levels and commercial
property prices by 20%.
The table below illustrates the weightings applied to the scenarios for the purpose of calculating the collectively assessed provisions.
These have been adjusted from June 2022 to reflect the more severe downside scenarios:
Weightings
Base scenario
Significant improvement
Mild improvement
Mild deterioration
Significant deterioration
30 June 2023
30 June 2022
55.0%
0.0%
5.0%
30.0%
10.0%
50.0%
0.0%
0.0%
27.5%
22.5%
The table below discloses the collectively assessed provision outcomes assuming a 100% weighting is applied to the relevant
scenario, with all other assumptions constant. Overlays were determined separately for each scenario for the June 2023 assessment
which materially increased the quantum of the downside scenarios and reduced the upside scenarios as compared with June 2022.
Scenario Outcomes 1
100% Base scenario
100% Significant improvement
100% Mild improvement
100% Mild deterioration
100% Significant deterioration
1. These outcomes exclude the equity reserve for credit losses (ERCL).
30 June 2023
30 June 2022
$177.3 m
$206.6 m
$151.9 m
$189.8 m
$165.5 m
$196.0 m
$271.0 m
$229.2 m
$514.4 m
$266.2 m
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 109
11 Impairment of loans and advances continued
Assessment of significant increase in credit risk (SICR)
Presentation of allowance for credit losses in the Balance Sheet
The Group assesses whether there has been a SICR for
exposures since initial recognition by comparing the current
probability of default (PD) and the PD at the date of initial
recognition. The assessment also considers borrower‑specific
quantitative and qualitative information including arrears
status and hardship arrangements.
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.
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 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. SICR is
evaluated based on the movement in the ratings of customers,
i.e. a two notch downgrade in the internal rating since
origination will trigger a transfer 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.
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.
• 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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 110
Financial Instruments
11 Impairment of loans and advances continued
Modified financial assets
Purchased loans
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.
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.
Equity reserve for credit losses
The equity reserve for credit losses was initially established
to meet the requirements of APRA Prudential Standard,
APS 220 Credit Quality, which required a reserve to be held
to recognise estimated future credit losses which may arise
over the life of the Group’s lending portfolio. This requirement
was removed from 1 January 2022, however, the Group has
prudently maintained this reserve pending further clarification.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 111
12 Financial assets at fair value through profit or loss
Government securities
Unlisted Managed Fund investments
Total financial assets at fair value through profit or loss
Maturity analysis
Longer than 5 years
Non‑maturing
Total financial assets at fair value through profit or loss
Recognition and measurement
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
9.2
9.3
18.5
$m
9.2
9.3
18.5
30.5
—
30.5
$m
30.5
—
30.5
9.2
—
9.2
$m
9.2
—
9.2
30.5
—
30.5
$m
30.5
—
30.5
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.
These financial instruments are recorded in the Balance Sheet at
fair value with revaluation gains or losses being recognised in the
Income Statement.
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.
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 20.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 112
Financial Instruments
13 Financial assets at amortised cost
Collateral and security deposits
Other deposits
Bonds
Loans receivable from controlled entities
Reverse repurchase agreements 1
Total financial assets at amortised cost
Maturity analysis
Not longer than 3 months 2
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Longer than 5 years
Total financial assets at amortised cost
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
518.5
7.5
186.4
—
152.2
864.6
$m
198.7
—
—
665.9
864.6
470.3
7.2
184.0
—
200.2
861.7
$m
42.1
200.2
0.1
619.3
861.7
260.0
—
186.4
3,231.5
152.2
3,830.1
$m
2,225.6
—
453.1
1,151.4
3,830.1
219.6
0.1
184.0
—
200.2
603.9
$m
42.1
200.2
0.1
361.5
603.9
1. Reverse repurchase agreements have an original maturity date of greater than 90 days.
2. Represents the demand component of loans receivable from controlled entities.
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.
The carrying amount of these assets is adjusted by any
expected credit loss allowance recognised and measured as
described in Note 11.
Interest income from these financial assets is included in interest
income using the effective interest rate method.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 113
14 Financial assets at fair value through other comprehensive income
Debt securities (with recycling)
Floating rate notes
Government securities
Mortgage backed securities
Other debt securities
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
975.3
5,902.7
3.3
0.5
974.6
8,589.9
8.7
0.5
975.3
5,902.7
974.6
8,589.9
10,544.7
13,699.7
0.5
0.5
Total debt securities (with recycling)
6,881.8
9,573.7
17,423.2
23,264.7
Managed Fund investments (without recycling)
Unlisted Managed Fund investments
Total managed fund investments (without recycling)
Equity investments (without recycling)
Listed share investments
Unlisted share investments
Total equity investments (without recycling)
—
—
0.1
35.6
35.7
8.7
8.7
0.1
35.6
35.7
—
—
0.1
35.6
35.7
—
—
0.1
35.6
35.7
Total financial assets at fair value through other comprehensive income
6,917.5
9,618.1
17,458.9
23,300.4
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
Longer than 5 years
Non‑maturing
Total financial assets at fair value through other comprehensive income
$m
$m
$m
$m
3,421.0
586.6
966.9
1,907.3
35.7
6,917.5
6,676.9
1,564.2
792.9
539.7
44.4
3,618.6
586.6
966.9
6,912.2
1,564.2
738.1
12,251.1
14,050.2
35.7
35.7
9,618.1
17,458.9
23,300.4
Recognition and measurement
Equity instruments
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 to sell the asset; and
• the cash flows solely represent principal and interest.
Debt instruments
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.
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 114
Financial Instruments
14 Financial assets at fair value through other comprehensive income continued
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 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 capital notes 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 capital notes, including
capitalised transaction costs, is recognised using the effective
interest rate method as interest expense.
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 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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction 15 Deposits
At call
Term
Certificates of Deposit
Total deposits
Concentration of deposits
Customer deposits 1
Wholesale deposits 2
Total deposits
Annual Report 2023 115
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
42,777.4
27,778.1
6,755.3
46,925.3
21,463.3
6,195.3
42,782.7
27,778.2
6,755.3
46,931.0
21,463.4
6,195.3
77,310.8
74,583.9
77,316.2
74,589.7
$m
$m
$m
$m
66,089.7
11,221.1
64,261.4
10,322.5
66,095.1
11,221.1
64,267.2
10,322.5
77,310.8
74,583.9
77,316.2
74,589.7
Deposits by geographic location
$m
$m
$m
$m
Victoria
New South Wales
Queensland
South Australia/Northern Territory
Western Australia
Australian Capital Territory
Tasmania
Overseas/other
Total deposits
40,109.5
12,707.5
38,954.8
12,228.8
40,145.5
12,697.4
38,996.7
12,215.7
9,051.3
6,392.0
5,443.1
1,405.5
1,595.6
606.3
8,315.7
6,427.2
4,998.7
1,406.6
1,607.8
644.3
9,044.3
6,390.3
5,434.5
1,405.2
1,595.4
603.6
8,304.7
6,424.7
4,990.8
1,406.5
1,607.5
643.1
77,310.8
74,583.9
77,316.2
74,589.7
1. Customer deposits represent the sum of interest bearing, non‑interest bearing and term deposits from retail and corporate customers.
2. Wholesale deposits represent the sum of interest bearing, non‑interest bearing and term deposits from Other Financial Institutions and certificates of deposit.
Recognition and measurement
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 116
Financial Instruments
16 Other Borrowings
Term Funding Facility
Covered Bonds
Medium‑term notes
Notes payable
Total other borrowings
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
4,007.2
1,201.3
3,737.2
2,892.5
4,730.4
—
3,128.6
3,839.9
4,007.2
1,201.3
3,737.2
—
4,730.4
—
3,128.6
—
11,838.2
11,698.9
8,945.7
7,859.0
Upon review of the Group’s application of AASB 9 Financial Instruments a reclassification has been made in relation to issue costs from
Other Assets to Other Borrowings. Prior period comparatives have been restated.
Term Funding Facility
Medium-term notes
Wholesale funding includes the Term Funding Facility (TFF).
On 19 March 2020, the Reserve Bank of Australia announced
the establishment of the TFF, a three‑year facility. The TFF was
established to provide ADIs with access to long‑term funding
to reinforce the benefits to the economy of a lower RBA cash
rate and to encourage ADIs to support businesses. The TFF
is collateralised by residential mortgage‑backed securities
issued by the Group.
As at 30 June 2023 the Group’s TTF drawdowns totalled
$4.0 billion (30 June 2022: $4.7 billion). The final tranche of the
TFF facility will mature in June 2024.
Covered Bonds
The Group established its inaugural Covered Bond Programme
(CBP) in October 2022. The covered bonds issued by the Bank
constitute wholesale debt instruments that offer investors dual
recourse to the issuing ADI, the Bank, and a bankruptcy‑remote
Special Purpose Entity (SPE) associated with the CBP.
The Group’s medium‑term notes include fixed and floating rate
notes issued under the $7.5 billion Debt Instrument Programme
(2020) and the $7.5 billion Debt Instrument Program (2018).
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. The associated interest expense is recognised
in the Income Statement.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 117
17 Loan capital
Tier 1 loan capital
Tier 2 loan capital
Total loan capital
Tier 1 loan capital instruments
CPS4 (ASX Code: BENPG)
December 2017: 3,216,145 fully paid $100 Converting preference shares
Closing balance CPS4
Capital notes (ASX Code: BENPH)
November 2020: 5,024,446 fully paid $100 Capital notes
Closing balance capital notes
Total Additional Tier 1 regulatory capital
Unamortised issue costs
Total Tier 1 loan capital
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
818.2
552.8
816.0
550.1
818.2
552.8
816.0
550.1
1,371.0
1,366.1
1,371.0
1,366.1
$m
$m
$m
$m
321.6
321.6
502.5
502.5
824.1
(5.9)
818.2
321.6
321.6
502.5
502.5
824.1
(8.1)
816.0
321.6
321.6
502.5
502.5
824.1
(5.9)
818.2
321.6
321.6
502.5
502.5
824.1
(8.1)
816.0
Nature of Tier 1 capital instruments
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 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 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, the ranking of the
securities may be affected resulting in the securities converting
to ordinary shares or the securities being written off.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 118
Financial Instruments
17 Loan capital continued
Recognition and measurement
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.
These instruments are initially recognised at fair value less costs 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 is determined semi‑annually or quarterly and payable half yearly or quarterly in arrears.
The dividend rate is the floating Bank Bill Rate plus the initial fixed margin, adjusted for franking credits.
The capital notes carry a discretionary distribution which is determined and payable quarterly in arrears. The distribution rate is based
on the floating Bank Bill Swap Rate.
Tier 2 loan capital instruments
Floating rate subordinated notes
Total Tier 2 capital instruments
Accrued interest
Unamortised issue costs
Total Tier 2 loan capital
Nature of Tier 2 capital instruments
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
550.0
550.0
4.0
(1.2)
550.0
550.0
1.9
(1.8)
550.0
550.0
4.0
(1.2)
550.0
550.0
1.9
(1.8)
552.8
550.1
552.8
550.1
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.
Recognition and measurement
These instruments are classified as debt within the Balance Sheet and the interest expense is recorded in the Income Statement.
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.
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 denominated in foreign currencies are translated into Australian dollars at the end of each month at the spot foreign
exchange rate at that date. Foreign exchange differences arising on translation are recognised in the Income Statement.
Maturity analysis 1
Longer than 3 and not longer than 12 months
Longer than 1 and not longer than 5 years
Over 5 years
Total loan capital
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
4.0
818.2
548.8
1.9
816.0
548.2
4.0
818.2
548.8
1.9
816.0
548.2
1,371.0
1,366.1
1,371.0
1,366.1
1. Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the optional exchange date (if any).
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 119
17 Loan capital continued
Capital management
Capital management strategy
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.
Regulatory Capital
As an Authorised Deposit‑taking Institution (ADI) in Australia, Bendigo and Adelaide Bank Limited is regulated by Australian Prudential
Regulation Authority (APRA) under the Banking Act 1959.
The Group manages capital adequacy in accordance with the framework provided by APRA. APRA’s new Basel III capital framework
came into effect from 1 January 2023, impacting the measurement of credit and operational risk‑weighted assets. The capital
requirements have been summarised below.
Regulatory Capital consists of:
Common Equity Tier 1 Capital
Tier 1 Capital
Tier 2 Capital
Total Capital
Shareholders’ equity
less goodwill and other
prescribed adjustments.
Common Equity Tier 1
plus other highly ranked
capital instruments
acceptable to APRA.
Subordinated debt
instruments acceptable
to APRA.
Tier 1 Capital plus
Tier 2 Capital.
Reporting Levels consist of:
Level 1
Level 2
Bendigo and Adelaide Bank Limited and certain controlled entities
that meet the APRA definition of extended licensed entities.
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).
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 120
Financial Instruments
17 Loan capital continued
Capital Adequacy
The following table provides details of the Group’s capital adequacy ratios:
Risk-weighted capital adequacy ratios
Tier 1
Tier 2
Total capital ratio
Common Equity Tier 1
Regulatory capital
Common Equity Tier 1
Contributed capital
Retained profits and reserves
Accumulated other comprehensive income (and other reserves)
Less: Deductions
Total Common Equity Tier 1 capital
Additional Tier 1 capital
Total Tier 1 capital
Total Tier 2 capital
Total regulatory capital
Total risk-weighted assets
June 2023 1
June 2022
13.43%
2.20%
15.63%
11.25%
11.63%
1.97%
13.60%
9.68%
$m
$m
5,242.9
1,233.0
(52.3)
5,222.5
1,078.2
17.6
(2,158.3)
(2,235.4)
4,265.3
824.1
5,089.4
835.7
5,925.1
4,082.9
824.1
4,907.0
832.3
5,739.3
37,900.3
42,197.9
1. APRA’s new Basel III capital framework came into effect from 1 January 2023 and resulted in an increase of 111 basis points to the Common Equity Tier 1 ratio. June 2022
ratios are as previously reported.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 121
18 Securitisation and transferred assets
In the normal course of business the Group enters into transactions by which it transfers financial assets to counterparties or directly
to Special Purpose Entities (SPE’s). These transfers do not give rise to derecognition of those financial assets for the Group.
At the Balance Sheet date, transferred financial assets that did not qualify for derecognition and their associated liabilities are as follows:
Group
Repurchase agreements
Covered Bonds
Securitisation
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
Carrying amount of transferred assets 1
Carrying amount of associated liabilities 2
4,007.2
4,007.2
4,730.4
4,730.4
3,155.5
1,201.3
—
—
Fair value of transferred assets
Fair value of associated liabilities
Net position
2,857.4
2,892.5
2,842.6
2,863.3
3,780.9
3,839.9
3,744.3
3,797.0
(20.7)
(52.7)
Bank
Repurchase agreements
Covered Bonds
Securitisation
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
Carrying amount of transferred assets 1,3
Carrying amount of associated liabilities 4
4,007.2
4,007.2
4,730.4
4,730.4
3,155.5
1,201.3
—
—
Fair value of transferred assets
Fair value of associated liabilities
Net position
12,668.0
16,686.7
13,264.3
17,350.5
12,584.3
16,468.6
13,207.1
17,252.9
(622.8)
(784.3)
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 assets include assets where the Bank holds all the issued instruments of the SPE.
4. 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.
Repurchase agreements
Securities sold under agreement to repurchase are retained
on 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.
Covered bonds
The Group established its inaugural Covered Bond Programme
(CBP) in October 2022. The Bank has established a special
purpose entity (SPE) to which a cover pool of specific residential
mortgages has been assigned. In the event the Bank is unable
to fulfil its obligations owing to the covered bond holders, the
SPE’s assets are available for distribution thereby providing
investors with a dual layer of protection. The Group is entitled
to any residual income after all payments due to covered bonds
investors have been met. The Group retains all of the risks and
rewards associated with the residential mortgages.
Securitisation programs
The Group uses 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 SPEs, 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
SPEs which entitles the Group to any residual income after all
payments to investors and costs 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 SPEs are accounted for at
amortised cost using the effective interest rate method.
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 SPEs which are all at arm’s length.
Securitised and sold loans
The Group securitised loans totalling $3,370.4 million (June 2022:
$6,436.4 million) during the financial year. The Group invests in
some of its own securitisation programs by holding A and B
class notes equivalent to $13,800.9 million as at 30 June 2023
(June 2022: $13,745.8 million).
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 122
Financial Instruments
19 Derivative financial instruments
The Group uses derivative financial instruments primarily to
manage risk, including interest rate risk and foreign currency rate
risk. Note 21 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, with the exception of future exchange contracts, are
valued in accordance with Level 2 of the fair value hierarchy, as
outlined in Note 20. Future contracts are valued in accordance
with Level 1 of the fair value hierarchy.
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 gains on cash flow hedge instruments.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 123
19 Derivative financial instruments continued
Cash flow hedges consist 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:
Derivative category
Derivatives held for trading
Futures
Interest rate swaps
Foreign exchange contracts
Derivatives held as cash flow hedges
Interest rate swaps
June 2023
June 2022
Group
Notional
amount
$m
Fair value
assets
$m
Fair value
liabilities
$m
Net
fair value
$m
Notional
amount
$m
Fair value
assets
$m
Fair value
liabilities
$m
Net
fair value
$m
9.0
572.5
390.6
972.1
15,965.3
15,965.3
—
8.1
1.1
9.2
—
—
—
(7.0)
(1.9)
(8.9)
(8.5)
(8.5)
—
1.1
(0.8)
0.3
31.5
338.0
977.2
1,346.7
(8.5)
13,625.4
(8.5)
13,625.4
—
5.5
10.5
16.0
43.9
43.9
—
(5.1)
(4.0)
(9.1)
(25.7)
(25.7)
—
0.4
6.5
6.9
18.2
18.2
Total derivatives
16,937.4
9.2
(17.4)
(8.2)
14,972.1
59.9
(34.8)
25.1
Derivative category
Derivatives held for trading
Futures
Interest rate swaps
Foreign exchange contracts
Derivatives held as cash flow hedges
Interest rate swaps
$m
9.0
572.5
390.6
972.1
15,965.3
15,965.3
$m
—
8.1
1.1
9.2
—
—
Bank
$m
$m
$m
$m
$m
$m
—
(7.0)
(1.9)
(8.9)
(8.5)
(8.5)
—
1.1
(0.8)
0.3
31.5
338.0
977.2
1,346.7
(8.5)
13,625.4
(8.5)
13,625.4
—
5.5
10.5
16.0
43.9
43.9
—
(5.1)
(4.0)
(9.1)
(25.7)
(25.7)
—
0.4
6.5
6.9
18.2
18.2
Total derivatives
16,937.4
9.2
(17.4)
(8.2)
14,972.1
59.9
(34.8)
25.1
Variation margin is paid or received on the daily mark to market movements on the interest rate swaps that are settled through the
central clearing body, London Clearing House, with this payment being offset against the fair value of the swap. The market valuation
for the centrally cleared derivatives totalled $67.2 million and $73.7 million was received as variation margin as at 30 June 2023.
The difference represented variable margin payable to London Clearing House as at 30 June 2023, 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 2023
is $15.77 billion (June 2022: $11.87 billion), which is included in Derivatives held as cash flow hedges – Interest rate swaps in the
tables above for the Group and the Bank.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
124
Financial Instruments
19 Derivative financial instruments continued
As at 30 June 2023 hedged cash flows are expected to occur and affect the Income Statement as follows:
June 2023
Forecast cash inflows
Forecast cash outflows
Forecast net cash (outflows)/inflows
June 2022
Forecast cash inflows
Forecast cash outflows
Forecast net cash (outflows)/inflows
June 2023
Forecast cash inflows
Forecast cash outflows
Forecast net cash (outflows)/inflows
June 2022
Forecast cash inflows
Forecast cash outflows
Forecast net cash (outflows)/inflows
Revaluation losses arising from derivatives
that are not in a hedge relationship
Loss on derivatives
Within
1 year
$m
25.4
(31.9)
(6.5)
$m
27.9
(28.1)
(0.2)
$m
25.4
(31.9)
(6.5)
$m
27.9
(28.1)
(0.2)
1 to 2
years
$m
21.3
(22.0)
(0.7)
$m
34.1
(28.8)
5.3
$m
21.3
(22.0)
(0.7)
$m
34.1
(28.8)
5.3
Group
2 to 3
years
$m
16.9
(16.8)
0.1
$m
23.1
(9.9)
13.2
Bank
$m
16.9
(16.8)
0.1
$m
23.1
(9.9)
13.2
3 to 4
years
$m
4 to 5
years
$m
Greater
than
5 years
$m
7.8
(7.7)
0.1
$m
5.3
(5.3)
—
$m
7.8
(7.7)
0.1
$m
5.3
(5.3)
—
0.7
(0.8)
(0.1)
$m
0.5
(0.5)
—
$m
0.7
(0.8)
(0.1)
$m
0.5
(0.5)
—
—
—
—
$m
—
—
—
$m
—
—
—
$m
—
—
—
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
2.2
2.2
—
—
2.2
2.2
—
—
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 125
19 Derivative financial instruments continued
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 hedging strategies:
Maturity
June 2023
Cash flow hedges – interest rate swaps
Notional principal
Average fixed rate (%)
Less than
1 month
$m
1,500.0
3.67%
1 to 3
months
$m
1,000.0
3.88%
3 to 12
months
$m
5,713.0
3.94%
1 to 5
years
$m
5,825.3
3.86%
Over
5 years
$m
1,927.0
4.52%
Total
$m
15,965.3
—
Notional principal
Average fixed rate (%)
June 2022
$m
—
—
$m
$m
$m
2,025.0
0.12%
4,625.0
0.33%
6,775.4
2.43%
$m
200.0
1.99%
$m
13,625.4
—
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 126
Financial Instruments
19 Derivative financial instruments continued
Offsetting financial assets and financial liabilities
Non-Centrally Cleared Derivatives
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 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.
Centrally Cleared Derivatives
Derivative amounts are only offset on the Balance Sheet where the Group has a legally enforceable right to offset in all circumstances
and there is an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously. The
Group has applied offsetting to centrally cleared derivatives and their associated collateral amounts which were deemed to satisfy
the AASB 132 Financial Instruments: Presentation requirements.
The following table identifies amounts that have been offset on the Balance Sheet and amounts covered by enforceable netting
arrangements or similar agreements that do not qualify for set off:
Subject to enforceable master netting or similar agreements
Amounts offset
on the Balance Sheet
Amounts not offset
on the Balance Sheet
Gross
Balance
Sheet
amount
$m
Net amounts
recognised
on the
Balance
Sheet
$m
Amount
offset 1
$m
Financial
collateral
(received)/
pledged 2
$m
Not
subject
to netting
agreements
$m
Total
Balance
Sheet
amount
$m
Net
amount
$m
Financial
instruments
$m
Group
June 2023
Derivative assets
Derivative liabilities
248.8
(185.4)
(239.7)
172.5
9.1
(12.9)
(5.0)
5.0
(1.4)
7.5
Derivative assets
Derivative liabilities
191.5
(142.1)
(131.7)
111.3
59.8
(30.8)
(19.6)
19.6
(32.2)
8.4
June 2022
Bank
June 2023
Derivative assets
Derivative liabilities
248.8
(185.4)
(239.7)
172.5
9.1
(12.9)
(5.0)
5.0
(1.4)
7.5
Derivative assets
Derivative liabilities
191.5
(142.1)
(131.7)
111.3
59.8
(30.8)
(19.6)
19.6
(32.2)
8.4
June 2022
2.7
(0.4)
8.0
(2.8)
2.7
(0.4)
8.0
(2.8)
0.1
(4.5)
0.1
(4.0)
0.1
(4.5)
0.1
(4.0)
9.2
(17.4)
59.9
(34.8)
9.2
(17.4)
59.9
(34.8)
1. The net offset balance of $67.2 million represents variation margin received $73.7 million less variation margin payable of $6.5 million (June 2022: variation margin received
$5.7 million plus variation margin receivable $14.7 million). The variation payable amount is reflected in Due to other financial institutions in the Balance Sheet.
2. For the purpose of this disclosure, financial collateral not set off in the Balance Sheet has been capped by relevant netting agreements so as not to exceed the net amounts
of financial assets/(liabilities) reported in the Balance Sheet (i.e. over‑collateralisation, where it exists, is not reflected in the tables).
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 127
20 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.
Group
June 2023
Fair value
through
profit or loss
Fair value through
other compre-
hensive income
Amortised
cost
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 comprehensive income (FVOCI)
Net loans and other receivables
Derivatives – not designated as hedging instruments
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Wholesale borrowings
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Loan capital
Total financial liabilities
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 comprehensive income (FVOCI)
Net Loans and other receivables
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Wholesale borrowings
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Loan capital
Total financial liabilities
$m
—
—
18.5
—
—
—
9.2
27.7
—
—
—
8.5
8.9
—
17.4
$m
—
—
30.5
—
—
—
43.9
16.0
90.4
—
—
—
25.7
9.1
—
34.8
$m
$m
Total
$m
—
—
—
—
8,384.2
8,384.2
123.9
—
864.6
123.9
18.5
864.6
6,917.5
—
6,917.5
—
—
78,526.3
78,526.3
—
9.2
6,917.5
87,899.0
94,844.2
—
—
—
—
—
—
—
190.3
190.3
77,310.8
77,310.8
11,838.2
11,838.2
—
—
8.5
8.9
1,371.0
1,371.0
90,710.3
90,727.7
June 2022
$m
$m
$m
—
—
—
—
3,541.0
188.0
—
861.7
3,541.0
188.0
30.5
861.7
9,618.1
—
9,618.1
—
—
—
77,610.4
77,610.4
—
—
43.9
16.0
9,618.1
82,201.1
91,909.6
—
—
—
—
—
—
—
178.8
178.8
74,583.9
74,583.9
11,698.9
11,698.9
—
—
25.7
9.1
1,366.1
1,366.1
87,827.7
87,862.5
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
128
Financial Instruments
20 Financial instruments continued
Bank
June 2023
Fair value
through
profit or loss
Fair value through
other compre-
hensive income
Amortised
cost
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 comprehensive income (FVOCI)
Net loans and other receivables
Derivatives – not designated as hedging instruments
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Wholesale borrowings
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Loan capital
Total financial liabilities
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 comprehensive income (FVOCI)
Net Loans and other receivables
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Total financial assets
Financial liabilities
Due to other financial institutions
Deposits
Wholesale borrowings
Derivatives – designated as hedging instruments
Derivatives – not designated as hedging instruments
Loan capital
Total financial liabilities
$m
—
—
9.2
—
—
—
9.2
18.4
—
—
—
8.5
8.9
—
17.4
$m
—
—
30.5
—
—
—
43.9
16.0
90.4
—
—
—
25.7
9.1
—
34.8
$m
$m
Total
$m
—
—
—
—
7,953.9
7,953.9
123.9
—
123.9
9.2
3,830.1
3,830.1
17,458.9
—
17,458.9
—
—
77,616.7
77,616.7
—
9.2
17,458.9
89,524.6
107,001.9
—
—
—
—
—
—
—
190.3
190.3
77,316.2
77,316.2
8,945.7
8,945.7
—
—
8.5
8.9
1,371.0
1,371.0
87,823.2
87,840.6
June 2022
$m
$m
$m
—
—
—
—
3,082.3
188.0
—
603.9
3,082.3
188.0
30.5
603.9
23,300.4
—
23,300.4
—
—
—
77,118.4
77,118.4
—
—
43.9
16.0
23,300.4
80,992.6
104,383.4
—
—
—
—
—
—
—
178.8
178.8
74,589.7
74,589.7
7,859.0
7,859.0
—
—
25.7
9.1
1,366.1
1,366.1
83,993.6
84,028.4
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 129
20 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:
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
Group
June 2023
Level 1
Level 2
Level 3
Total
fair value
Total
carrying
value
$m
9.2
0.1
—
—
$m
30.5
237.3
—
—
$m
9.3
6,881.8
9.2
$m
$m
$m
—
35.6
—
18.5
18.5
6,917.5
6,917.5
9.2
9.2
17.4
—
17.4
17.4
$m
—
9,345.2
59.9
June 2022
$m
$m
$m
—
35.6
—
30.5
9,618.1
59.9
30.5
9,618.1
59.9
34.8
—
34.8
34.8
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 130
Financial Instruments
20 Financial instruments continued
Bank
June 2023
Level 1
Level 2
Level 3
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
Financial assets
Financial assets FVTPL
Financial assets FVOCI
Derivatives
Financial liabilities
Derivatives
$m
9.2
0.1
—
—
$m
30.5
$m
—
17,423.2
9.2
$m
—
35.6
—
Total
fair value
$m
9.2
Total
carrying
value
$m
9.2
17,458.9
17,458.9
9.2
9.2
17.4
—
17.4
17.4
$m
—
June 2022
$m
$m
$m
—
35.6
—
30.5
30.5
23,300.4
23,300.4
59.9
59.9
—
34.8
34.8
5,224.7
18,040.1
—
—
59.9
34.8
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.
Valuation methodology
Financial instruments – debt securities
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.
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 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.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 131
20 Financial instruments continued
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
Revaluations
Sales
Closing balance
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
35.6
—
—
35.6
31.2
5.4
(1.0)
35.6
35.6
—
—
35.6
31.2
5.4
(1.0)
35.6
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
June 2023
Level 1
Level 2
Level 3
$m
$m
8,253.2
123.9
864.6
Total
fair value
Total
carrying
amount
$m
$m
8,253.2
8,253.2
123.9
864.6
123.9
864.6
$m
—
—
—
—
78,010.6
78,010.6
78,526.3
9,241.7
78,010.6
87,252.3
87,768.0
190.3
77,951.1
11,669.6
552.6
90,363.6
—
—
—
—
—
190.3
77,951.1
11,669.6
1,390.3
190.3
77,310.8
11,838.2
1,371.0
91,201.3
90,710.3
$m
$m
3,407.6
188.0
861.7
June 2022
$m
—
—
—
$m
$m
3,407.6
3,407.6
188.0
861.7
188.0
861.7
—
77,008.6
77,008.6
77,610.4
4,457.3
77,008.6
81,465.9
82,067.7
178.8
74,339.1
11,412.6
549.8
86,480.3
—
—
—
—
—
178.8
74,339.1
11,412.6
1,366.9
178.8
74,583.9
11,698.9
1,366.1
87,297.4
87,827.7
—
—
—
—
—
—
—
—
837.7
837.7
—
—
—
—
—
—
—
—
817.1
817.1
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Total financial assets at amortised cost
Due to other financial institutions
Deposits
Wholesale borrowings
Loan capital
Total financial liabilities at amortised cost
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Total financial assets at amortised cost
Due to other financial institutions
Deposits
Wholesale borrowings
Loan capital
Total financial liabilities at amortised cost
1. Cash and cash equivalents excludes the balance of Notes and Coins.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 132
Financial Instruments
20 Financial instruments continued
Bank
June 2023
Level 1
Level 2
Level 3
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Total financial assets at amortised cost
Due to other financial institutions
Deposits
Wholesale borrowings
Loan capital
Total financial liabilities at amortised cost
Cash and cash equivalents 1
Due from other financial institutions
Financial assets amortised cost
Net loans and other receivables
Total financial assets at amortised cost
Due to other financial institutions
Deposits
Wholesale borrowings
Loan capital
Total financial liabilities at amortised cost
$m
$m
7,823.0
123.9
3,278.2
$m
—
—
551.9
Total
fair value
Total
carrying
amount
$m
$m
7,823.0
123.9
3,830.1
7,823.0
123.9
3,830.1
—
77,100.9
77,100.9
77,616.7
11,225.1
77,652.8
88,877.9
89,393.7
190.3
77,956.5
8,806.3
552.6
87,505.7
—
—
—
—
—
190.3
190.3
77,956.5
77,316.2
8,806.3
1,390.3
8,945.7
1,371.0
88,343.4
87,823.2
$m
$m
2,948.9
188.0
603.9
June 2022
$m
—
—
—
$m
$m
2,948.9
2,948.9
188.0
603.9
188.0
603.9
—
76,514.3
76,514.3
77,118.4
3,740.8
76,514.3
80,255.1
80,859.2
178.8
74,344.9
7,615.5
549.8
82,689.0
—
—
—
—
—
178.8
178.8
74,344.9
74,589.7
7,615.5
1,366.9
7,859.0
1,366.1
83,506.1
83,993.6
—
—
—
—
—
—
—
—
837.7
837.7
—
—
—
—
—
—
—
—
817.1
817.1
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 133
20 Financial instruments continued
Valuation methodology
Cash and cash equivalents, due from/to other financial institutions
Deposits
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
individual 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.
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.
Wholesale borrowings
The fair value for all wholesale borrowings 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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 134
Financial Instruments
21 Risk management
Nature of risk
Credit Risk
Our business is exposed to a broad range of financial and
non‑financial risks.
The Group has identified the following material financial risks
those are reflected in the Group’s financial position and balance
sheet and result from the Group’s risk‑taking activities:
• Credit Risk;
• Market Risk (traded & non‑traded); and
• Liquidity Risk
Non‑financial risks, including operational risk and strategic
risk (including environmental, social and governance (ESG)
risk), are outlined in the Risk Management Framework,
Material Risks and Business Uncertainties section of the
2023 Annual Financial Report.
The Risk Management Framework (RMF) comprises the systems,
structures, policies, processes and people with the Group
that identify, measure, evaluate, monitor, report and control or
mitigate all internal and external sources of material risk.
The Board is ultimately responsible for the Group’s RMF
and is responsible for the oversight of its operation by the
Executive and management of the Group. The RMF is a
group of items that collectively form our RMF such as Risk
Appetite Statement, Risk Management Strategy, CPS 220 Risk
Management Declaration Report, 3‑Year Group Strategic Plan,
Internal Capital Adequacy Assessment Process (ICAAP) and
Emerging risks assessments.
The Board’s role is supported by Board Committees; Board Risk
Committee (BRC), Board People, Culture and Transformation
Committee (BPCTC) and Board Financial Risk Committee (BFRC)
and Management Committees; Asset and Liability Management
Committee (ALMAC), Risk Models Committee (RMC),
Operational Risk Committee (ORC) and Management Credit
Committee (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.
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 credit commitment. Losses can occur
where collateral held is insufficient to repay loans.
The Group maintains a Credit Risk Management Framework
and supporting policies to ensure and facilitate effective
management of credit risk and the maintenance of acceptable
asset quality. Stress testing is undertaken on key portfolios to
support the prudent management of credit risks.
Authority for officers to approve credit risk exposures for
customers, is delegated by the Board to the Group’s MCC
and 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.
The Group utilises models to support the management of
credit risk. Governance of risk models is overseen by the RMC
and credit risk models are approved by the Group’s MCC.
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 the Group’s derivative exposures. Counterparty
credit risk is mitigated using margining and central clearing.
Financial Risk & Modelling is responsible for monitoring Treasury
counterparty credit limits in line with the Group’s Counterparty
Credit Limit Framework.
The Group maintains a Credit Risk Management Framework
and supporting policies to ensure and facilitate effective
management of credit risk and the maintenance of acceptable
asset quality. Stress testing is also undertaken on key portfolios
to support prudent management of credit risks.
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 and BFRC.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 135
21 Risk management continued
Maximum exposure to credit risk
The table below presents the maximum exposure to credit risk arising from on‑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.
Gross maximum exposure
$m
$m
$m
$m
Group
June 2023
Stage 1
Stage 2
Stage 3
Total
Credit risk exposures relating to on Balance Sheet assets
Cash and cash equivalents 1
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
Gross loans and other receivables
Total financial assets
Credit risk exposures relating to off Balance Sheet assets
Commitments and contingencies
Total credit risk exposure
Credit risk exposures relating to on Balance Sheet assets
Cash and cash equivalents 1
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
Gross loans and other receivables
Total financial assets
Credit risk exposures relating to off Balance Sheet assets
Commitments and contingencies
Total credit risk exposure
1. Cash and cash equivalents excludes notes and coins as they do not give rise to credit risk.
8,253.2
123.9
18.5
864.6
6,917.5
469.5
9.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
70,923.6
7,052.1
87,580.0
7,052.1
763.6
763.6
8,253.2
123.9
18.5
864.6
6,917.5
469.5
9.2
78,739.3
95,395.7
12,821.2
—
—
12,821.2
100,401.2
7,052.1
763.6
108,216.9
June 2022
$m
$m
$m
$m
3,407.6
188.0
30.5
861.7
9,618.1
279.5
59.9
70,981.9
85,427.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,047.6
6,047.6
791.8
791.8
3,407.6
188.0
30.5
861.7
9,618.1
279.5
59.9
77,821.3
92,266.6
12,295.2
—
—
12,295.2
97,722.4
6,047.6
791.8
104,561.8
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
136
Financial Instruments
21 Risk management continued
Gross maximum exposure
Credit risk exposures relating to on Balance Sheet assets
Cash and cash equivalents 1
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
Bank
June 2023
Stage 1
Stage 2
Stage 3
$m
$m
$m
7,823.0
123.9
9.2
3,830.1
17,458.9
1,482.5
9.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
$m
7,823.0
123.9
9.2
3,830.1
17,458.9
1,482.5
9.2
Gross loans and other receivables
69,048.8
7,052.1
1,783.6
77,884.5
Total financial assets
99,785.6
7,052.1
1,783.6
108,621.3
Credit risk exposures relating to off Balance Sheet assets
Commitments and contingencies
Total credit risk exposure
Credit risk exposures relating to on Balance Sheet assets
Cash and cash equivalents 1
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
Gross loans and other receivables
Total financial assets
Credit risk exposures relating to off Balance Sheet assets
Commitments and contingencies
Total credit risk exposure
1. Cash and cash equivalents excludes notes and coins as they do not give rise to credit risk.
10,746.9
—
—
10,746.9
110,532.5
7,052.1
1,783.6
119,368.2
June 2022
$m
$m
$m
$m
2,948.9
188.0
30.5
603.9
23,300.4
1,318.0
59.9
70,489.7
98,939.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,948.9
188.0
30.5
603.9
23,300.4
1,318.0
59.9
6,047.6
6,047.6
790.7
77,328.0
790.7
105,777.6
10,811.7
—
—
10,811.7
109,751.0
6,047.6
790.7
116,589.3
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 financial assets recognised in the Balance Sheet, the maximum exposure to credit risk equals their carrying amount. 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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 137
21 Risk management continued
Concentration of credit risk
Concentration risk is managed by client or counterparty, by geographical region or by industry sector. The Group implements certain
exposure and concentration limits in order to mitigate the concentration risk.
The gross maximum credit exposure to any client or counterparty (excluding sovereign/ government exposures) as at 30 June 2023
was $418.7 million (June 2022: $397.1 million) before taking to account collateral or other credit enhancements.
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.
Geographic concentration 1
Victoria
New South Wales
Queensland
South Australia/Northern Territory
Western Australia
Australian Capital Territory
Tasmania
Overseas/other
Total credit risk exposure
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
39,687.5
30,759.7
13,040.5
9,051.9
8,354.5
4,969.4
1,783.0
570.4
39,360.5
24,606.1
13,071.7
9,534.9
8,206.8
6,994.3
2,140.7
646.8
40,335.8
32,151.6
12,338.3
16,197.9
8,019.8
4,829.6
1,732.0
3,763.2
40,185.3
27,142.2
12,626.5
19,055.4
7,959.7
6,912.1
2,080.4
627.7
108,216.9
104,561.8
119,368.2
116,589.3
1. Current financial year disclosures reconcile to definitions applied for regulatory reporting purposes.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 138
Financial Instruments
21 Risk management continued
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 1
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
Group
Bank
June 2023
$m
June 22
$m
June 2023
$m
281.9
48.4
7,717.3
68.6
782.8
65.1
32.1
441.3
93.4
8,069.9
187.8
1,154.6
157.6
67.9
276.4
47.5
7,566.5
67.3
767.7
63.9
31.5
June 22
$m
422.9
88.2
7,867.4
171.8
1,107.0
144.6
62.2
16,810.2
12,210.5
31,818.0
27,120.8
382.7
24.6
237.3
646.6
54.5
426.1
2,176.5
1,433.2
14.8
261.0
218.2
282.2
3,099.5
4,917.6
36.6
316.6
365.4
418.2
5,337.6
5,230.4
375.2
24.1
232.7
—
14.5
259.8
213.9
276.7
608.5
50.9
404.8
—
33.8
315.1
347.0
398.4
3,098.4
4,821.3
5,329.8
5,116.8
70,113.3
66,722.2
68,743.1
65,877.9
364.7
174.2
143.9
747.7
261.8
181.9
357.6
170.9
141.2
699.6
248.0
173.8
108,216.9
104,561.8
119,368.2
116,589.3
1. Current financial year disclosures reconcile to definitions applied for regulatory reporting purposes.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 139
21 Risk management 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:
Stage 1
Stage 2
Stage 3
Stage 3
Group
Collectively assessed provisions
Gross carrying amount as at 1 July 2022
87,867.9
6,047.6
$m
$m
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
1,726.7
(3,985.4)
(217.2)
(3.5)
(1,664.6)
4,124.5
(240.2)
(16.8)
15,175.1
509.6
(11,266.3)
(1,537.3)
3,820.2
(170.7)
—
—
Gross carrying amount as at 30 June 2023
93,117.5
7,052.1
Gross carrying amount as at 1 July 2021
84,788.5
6,479.5
$m
$m
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
1,947.7
(3,055.2)
(236.9)
(2.6)
20,337.7
(1,915.3)
3,146.5
(220.0)
(9.0)
441.0
(11,911.3)
(1,617.1)
(4,000.0)
(258.0)
—
—
$m
665.1
(62.1)
(139.1)
457.4
(10.6)
26.4
(304.8)
24.9
—
657.2
$m
652.8
(32.4)
(91.3)
456.9
(21.7)
9.2
(307.6)
(0.8)
—
Individually
assessed
provisions
$m
Total
$m
126.7
94,707.3
—
—
—
30.9
—
—
(19.6)
(31.6)
—
—
—
—
15,711.1
(13,108.4)
3,654.8
(31.6)
106.4
100,933.2
$m
$m
205.7
92,126.5
—
—
—
33.3
—
—
(77.8)
(34.5)
—
—
—
—
20,787.9
(13,836.0)
(4,336.6)
(34.5)
Gross carrying amount as at 30 June 2022
87,867.9
6,047.6
665.1
126.7
94,707.3
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 140
Financial Instruments
21 Risk management continued
Stage 1
Stage 2
Stage 3
Stage 3
Bank
Collectively assessed provisions
Gross carrying amount as at 1 July 2022
85,175.7
6,047.6
$m
$m
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
1,726.7
(3,985.4)
(217.2)
(1,664.6)
4,124.5
(240.2)
(1,024.6)
15,175.1
(16.8)
509.6
(11,266.3)
(1,537.3)
6,119.6
(170.7)
—
—
$m
665.1
(62.1)
(139.1)
457.4
(10.6)
26.4
(304.8)
24.9
—
Individually
assessed
provisions
$m
Total
$m
125.6
92,014.0
—
—
—
1,052.0
—
—
(19.6)
(31.6)
—
—
—
—
15,711.1
(13,108.4)
5,954.2
(31.6)
Gross carrying amount as at 30 June 2023
91,703.6
7,052.1
657.2
1,126.4
100,539.3
Gross carrying amount as at 1 July 2021
81,920.1
6,479.5
$m
$m
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
1,947.7
(3,055.2)
(236.9)
(2.6)
20,337.7
(1,915.3)
3,146.5
(220.0)
(9.0)
441.0
(11,911.3)
(1,617.1)
(3,823.8)
(258.0)
—
—
$m
652.8
(32.4)
(91.3)
456.9
(21.7)
9.2
(307.6)
(0.8)
—
$m
$m
204.5
89,256.9
—
—
—
33.3
—
—
(77.8)
(34.4)
—
—
—
—
20,787.9
(13,836.0)
(4,160.4)
(34.4)
Gross carrying amount as at 30 June 2022
85,175.7
6,047.6
665.1
125.6
92,014.0
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 141
21 Risk management continued
Credit quality
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.
Stage 1
Stage 2
Stage 3
Stage 3
Group
Collectively assessed provisions
Individually
assessed
provisions
$m
$m
$m
$m
Neither past due or impaired
• High grade
• Standard grade
• Sub‑standard grade
• Unrated
Past due or impaired
63,696.4
28,913.2
1,242.0
6,056.0
493.5
493.0
3,890.3
1,245.9
103.9
1,319.1
Gross carrying amount as at 30 June 2023
100,401.1
7,052.2
Neither past due or impaired
• High grade
• Standard grade
• Sub‑standard grade
• Unrated
Past due or impaired
$m
$m
60,561.8
28,970.9
806.7
6,997.6
539.4
298.1
3,445.4
1,434.3
78.8
626.1
Gross carrying amount as at 30 June 2022
97,876.4
5,882.7
0.8
13.5
36.8
1.8
604.3
657.2
$m
—
0.8
3.7
6.4
665.1
676.0
Bank
Neither past due or impaired
• High grade
• Standard grade
• Sub‑standard grade
• Unrated
Past due or impaired
74,847.7
28,913.2
1,242.0
6,056.0
493.6
493.0
3,890.3
1,245.9
103.9
1,319.0
Gross carrying amount as at 30 June 2023
111,552.5
7,052.1
Neither past due or impaired
• High grade
• Standard grade
• Sub‑standard grade
• Unrated
Past due or impaired
$m
$m
72,589.3
28,970.9
806.7
6,997.6
539.5
298.1
3,445.4
1,434.3
78.8
626.0
Gross carrying amount as at 30 June 2022
109,904.0
5,882.6
0.8
13.5
36.8
1.8
604.3
657.2
$m
—
0.8
3.7
6.4
665.1
676.0
Stage 1
Stage 2
Stage 3
Stage 3
Collectively assessed provisions
Individually
assessed
provisions
$m
$m
$m
$m
Total
$m
64,190.2
32,817.0
2,524.7
6,161.7
2,523.3
—
—
—
—
106.4
106.4
108,216.9
$m
$m
—
—
—
—
126.7
60,859.9
32,417.1
2,244.7
7,082.8
1,957.3
126.7
104,561.8
Total
$m
75,341.5
32,817.0
2,524.7
6,161.7
2,523.3
—
—
—
—
106.4
106.4
119,368.2
$m
$m
—
—
—
—
126.7
72,887.4
32,417.1
2,244.7
7,082.8
1,957.3
126.7
116,589.3
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 142
Financial Instruments
21 Risk management 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 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
June 2023
June 2022
June 2023
June 2022
$m
1,333.0
977.2
1,333.0
977.2
$m
332.2
240.3
332.2
240.3
$m
231.6
123.3
$m
520.1
489.8
Bank
231.6
123.3
520.1
489.8
2,416.9
6,510.5
1,830.6
5,248.0
Total
$m
Fair value of
collateral
$m
2,416.9
6,510.5
1,830.6
5,253.7
Comparative information in the above table has been restated to align to the methodology applied in current financial year.
Climate Change Risk
Climate Change Risk includes the physical risks which cause
direct damage to assets, property and/or customers’ cash flows
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 property assets such
as branches and offices.
The Group has delivered its inaugural Climate Change Action Plan
2021‑2023. The Action Plan has enhanced our understanding and
management of climate change risks, including through climate
scenario analysis. The risks and opportunities identified through
this process have informed the next iteration of the Group’s
climate planning, the Climate & Nature Action Plan 2024 – 2026.
It represents another step forward in the Group’s approach and
maturity toward climate risks and opportunities.
The processes for identifying, assessing, and managing
climate‑related risks is integrated into our overall risk
management. Specifically, it is included in the Group Risk
Management Framework (GRMF) and annual GRMF review
process with ultimate oversight from the Executive and Board.
For further information on how the Group identifies, assesses,
manages, and integrates climate risk, refer to the Group’s
TCFD‑aligned Climate‑related Disclosure in the 2023
Sustainability Report and the Operating and Financial
Review section of this Report.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 143
21 Risk management continued
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 forgoing investment opportunities.
Liquidity risk is managed in line with the Board approved Risk
Appetite Statement and the Group Liquidity Risk Management
Framework. The principal objective of the Group’s Liquidity
Risk Management Framework is to ensure that all cash flow
commitments are met in a timely manner and prudential
requirements are satisfied.
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 that 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 specific actions to deal with a liquidity related event.
Regular reporting is provided to ALMAC and BFRC.
The Group manages a portfolio of High Quality Liquid Assets
(HQLA) and Alternative Liquid Assets (ALA) to cover projected
net cash outflows over a 30 day period under the stress
scenario assumptions prescribed by the Liquidity Coverage
Ratio (LCR) in APRA Prudential Standard 210 Liquidity. APRA
requires LCR ADIs to maintain a minimum 100% LCR. The Group
also 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%.
Analysis of financial liabilities by remaining
contractual maturities
The following table 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.
The Group continues to manage 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 and NSFR positions.
The Group also maintains collateral in the form of internal
securitisation which could potentially be used to support funding
arrangements under the RBA Exceptional Liquidity Assistance
(ELA). The intent of ELA is to provide the RBA with a facility that
could be used to provide liquidity support to a solvent bank
experiencing acute liquidity difficulties where the RBA considers
it to be in the public interest to do so. The provision of liquidity
under ELA is at the absolute discretion of the RBA.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 144
Financial Instruments
21 Risk management continued
Group
June 2023
Not longer
than
3 months
$m
—
At call
$m
190.3
3 to 12
months
$m
—
42,823.6
15,610.3
18,577.7
—
—
331.4
—
1,113.1
2,957.5
4.4
1.8
19.9
4.4
6.7
59.6
1 to 5
years
$m
—
586.0
6,368.1
4.4
112.4
1,067.0
Longer
than
5 years
$m
—
0.4
1,399.8
—
—
Total
$m
190.3
77,598.0
11,838.5
13.2
452.3
599.6
1,746.1
Due to other financial institutions
Deposits
Other borrowings
Derivatives – net settled
Other payables
Loan capital
Total financial liabilities
43,345.3
16,749.5
21,605.9
8,137.9
1,999.8
91,838.4
Commitments and contingent liabilities
12,821.2
Total contingent liabilities and commitments
12,821.2
—
—
—
—
—
—
—
—
12,821.2
12,821.2
June 2022
Due to other financial institutions
Deposits
Other borrowings
Derivatives – net settled
Other payables
Loan capital
Not longer
than
3 months
$m
—
At call
$m
178.8
3 to 12
months
$m
—
46,930.6
12,751.4
14,520.8
—
—
312.2
—
500.6
1,288.3
3.8
2.3
12.1
21.0
8.2
36.2
Total financial liabilities
47,421.6
13,270.2
15,874.5
Commitments and contingent liabilities
12,295.2
Total contingent liabilities and commitments
12,295.2
—
—
—
—
1 to 5
years
$m
—
411.9
7,413.3
10.9
137.0
1,006.9
8,980.0
—
—
Longer
than
5 years
$m
—
0.5
2,500.8
—
8.9
Total
$m
178.8
74,615.2
11,703.0
35.7
468.6
550.0
1,605.2
3,060.2
88,606.5
—
—
12,295.2
12,295.2
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 145
21 Risk management continued
Bank
June 2023
Due to other financial institutions
Deposits
Other borrowings
Derivatives – net settled
Other payables
Loans payable to securitisation trusts
Loan capital
Not longer
than
3 months
$m
—
At call
$m
190.3
3 to 12
months
$m
—
42,829.0
15,610.3
18,577.7
1,113.1
2,885.0
—
—
290.7
—
—
4.4
1.8
—
19.9
4.4
6.7
—
1 to 5
years
$m
—
586.0
4,947.9
4.4
112.4
Longer
than
5 years
$m
—
0.4
—
—
—
Total
$m
190.3
77,603.4
8,946.0
13.2
411.6
—
15,823.5
15,823.5
59.6
1,067.0
599.6
1,746.1
Total financial liabilities
43,310.0
16,749.5
21,533.4
6,717.7
16,423.5
104,734.1
Commitments and contingent liabilities
10,746.9
Total contingent liabilities and commitments
10,746.9
—
—
—
—
—
—
—
—
10,746.9
10,746.9
June 2022
Not longer
than
3 months
$m
—
At call
$m
178.8
3 to 12
months
$m
—
46,936.4
12,751.4
14,520.8
—
—
286.4
—
—
500.6
1,232.0
3.8
2.3
—
12.1
21.0
8.2
—
36.2
1 to 5
years
$m
—
411.9
6,130.4
10.9
137.0
Longer
than
5 years
$m
—
0.5
—
—
8.9
Total
$m
178.8
74,621.0
7,863.0
35.7
442.8
—
16,686.7
16,686.7
1,006.9
550.0
1,605.2
Due to other financial institutions
Deposits
Other borrowings
Derivatives – net settled
Other payables
Loans payable to securitisation trusts
Loan capital
Total financial liabilities
47,401.6
13,270.2
15,818.2
7,697.1
17,246.1
101,433.2
Commitments and contingent liabilities
10,811.7
Total contingent liabilities and commitments
10,811.7
—
—
—
—
—
—
—
—
10,811.7
10,811.7
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 146
Financial Instruments
21 Risk management continued
Market Risk (including Interest Rate Risk 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).
Traded Market Risk is defined as the risk of loss owing to changes in the general level of market prices or interest rates. Traded market
risk arises from positions held in the Group’s Trading Book, which consists of securities held for both trading and liquidity purposes, and
discretionary interest rate and foreign exchange trading. Foreign currency trading is undertaken primarily for the purpose of providing
the Group’s customers with access to foreign exchange markets. Trading Book positions include approved financial instruments, both
physical and derivative. Traded Market Risk is managed in line with the Board‑approved Risk Appetite Statement and, Group Trading
Book Policy.
Non‑traded Market Risk comprises 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 due to movements in interest rates. IRRBB arises predominantly from the Group’s general balance
sheet funding and lending activities. The Group takes a prudent approach to the management of IRRBB, balancing NII and Economic
Value (EV) and aiming to minimise volatility in current and future earnings.
IRRBB is managed in line with the Board‑approved Risk Appetite Statement, and Group Interest Rate Risk in the Banking Book Policy.
Market Risk is primarily managed by Group Treasury, which is responsible for ensuring that the Group’s exposures remain compliant
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.
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 impact on earnings.
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
Avg during
the year
Exposure at
year end
Avg during
the year
June 2023
June 2022
$m
—
$m
(0.1)
$m
(0.5)
$m
(0.5)
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
Avg during
the year
Exposure at
year end
Avg during
the year
June 2023
June 2022
$m
123.1
(117.1)
(115.2)
$m
106.9
(85.8)
(93.5)
$m
45.1
(57.3)
(85.7)
$m
53.6
(73.7)
(96.5)
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 147
21 Risk management continued
Interest Rate Risk
The following table demonstrates the sensitivity of the Group’s Income Statement and equity to a plausible change in interest rates,
with all other variables held constant.
The sensitivity of the Income Statement is the effect of assumed changes in interest rates on the net interest income including revenue
share arrangements for one year, based on the floating rate financial assets and financial liabilities held at 30 June 2023, 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 2023 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 table below represents the change to the Group’s profit for the relevant financial year from a 50 basis point up and 25 basis point
down rate shock.
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
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
Group
June 2023
June 2022
+50 bps
$m
-25 bps
$m
+50 bps
$m
-25 bps
$m
46.1
(21.6)
29.0
(17.1)
(3.1)
(12.9)
30.1
30.1
(47.6)
14.3
(3.2)
1.6
6.0
(14.0)
(14.0)
23.8
(7.1)
2.7
—
(8.7)
20.3
20.3
(44.9)
13.5
(11.1)
—
5.1
(12.0)
(12.0)
22.4
(6.7)
3.7
Bank
June 2023
June 2022
46.1
(21.6)
29.0
(17.1)
(3.1)
(12.9)
30.1
30.1
(47.6)
14.3
(3.2)
1.6
6.0
(14.0)
(14.0)
23.8
(7.1)
2.7
—
(8.7)
20.3
20.3
(44.9)
13.5
(11.1)
—
5.1
(12.0)
(12.0)
22.4
(6.7)
3.7
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.
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 there are no non‑AUD outstandings under the Euro
Medium‑Term Note program (EMTN), Euro Commercial Paper program (ECP) or Covered bond programme (CBP). At balance date the
principal of foreign currency denominated borrowings under these programs was AUD $nil (June 2022: AUD $nil).
Retail and business banking foreign exchange transactions are managed by the Group’s Financial Markets business unit within, spot
and forward limits. Adherence to limits is independently monitored by the Financial Risk & Modelling function.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 148
Funding and Capital Management
22 Share capital
Group
June 2023
Bank
June 2023
Issued and paid up capital
No. of shares
$m
No. of shares
$m
Ordinary shares fully paid (ASX Code: BEN)
565,895,510
5,242.9
565,895,510
5,242.9
Employee Share Ownership Plan shares
—
(2.4)
—
(2.4)
Total issued and paid up capital
565,895,510
5,240.5
565,895,510
5,240.5
Movements in ordinary shares on issue
No. of shares
$m
No. of shares
$m
Opening balance 1 July 2022
Bonus share scheme 1
Dividend reinvestment plan 2, 3
Executive performance rights
565,655,652
5,242.9
565,655,652
5,242.9
434,164
2,202,982
—
—
18.8
0.2
434,164
2,202,982
—
—
18.8
0.2
Closing balance (including treasury shares) 30 June 2023
568,292,798
5,261.9
568,292,798
5,261.9
Less: treasury shares
Opening balance 1 July 2022
Net movement during the period
No. of shares
$m
No. of shares
(2,578,207)
180,919
(20.4)
1.4
(2,578,207)
180,919
$m
(20.4)
1.4
Closing balance (excluding treasury shares) 30 June 2023
565,895,510
5,242.9
565,895,510
5,242.9
Movements in Employee Share Ownership Plan
No. of shares
$m
No. of shares
Opening balance 1 July 2022
Reduction in Employee Share Ownership Plan
Closing balance 30 June 2023
Total issued and paid up capital
—
—
—
(3.0)
0.6
(2.4)
—
—
—
$m
(3.0)
0.6
(2.4)
565,895,510
5,240.5
565,895,510
5,240.5
1. The Group issued 217,141 shares @ $8.98 as part of the December 2022 interim dividend and issued 217,023 shares @ $8.55 as part of the June 2022 final dividend under
the Bonus Share Scheme.
2. The Group issued 2,202,982 shares @ $8.55 as part of the June 2022 final dividend under the Dividend Reinvestment Plan.
3. The Dividend Reinvestment Plan in respect of the 31 December 2022 interim dividend was satisfied in full by the on‑market purchase and transfer of 2,496,726 shares at
$8.98 to participating shareholders.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 149
22 Share capital continued
Group
June 2022
Bank
June 2022
Issued and paid up capital
No. of shares
$m
No. of shares
$m
Ordinary shares fully paid (ASX Code: BEN)
Employee Share Ownership Plan shares
563,077,445
5,222.5
563,077,445
—
(3.0)
—
Total issued and paid up capital
563,077,445
5,219.5
563,077,445
5,222.5
(3.0)
5,219.5
Movements in ordinary shares on issue
No. of shares
$m
No. of shares
$m
Opening balance 1 July 2021
Bonus share scheme 1
Dividend reinvestment plan 2
Shares issued for business acquisition 3
Executive performance rights
547,147,671
5,064.9
547,147,671
5,064.9
601,774
7,903,601
10,002,606
—
—
75.9
102.2
(0.1)
601,774
7,903,601
10,002,606
—
—
75.9
102.2
(0.1)
Closing balance (including treasury shares) 30 June 2022
565,655,652
5,242.9
565,655,652
5,242.9
Less: treasury shares
Opening balance 1 July 2021
Net movement during the period
No. of shares
$m
No. of shares
(1,637,293)
(940,914)
(11.8)
(8.6)
(1,637,293)
(940,914)
$m
(11.8)
(8.6)
Closing balance (excluding treasury shares) 30 June 2022
563,077,445
5,222.5
563,077,445
5,222.5
Movements in Employee Share Ownership Plan
No. of shares
$m
No. of shares
Opening balance 1 July 2021
Reduction in Employee Share Ownership Plan
Closing balance 30 June 2022
Total issued and paid up capital
—
—
—
(3.6)
0.6
(3.0)
—
—
—
$m
(3.6)
0.6
(3.0)
563,077,445
5,219.5
563,077,445
5,219.5
1. The Group issued 262,546 shares @ $9.70 as part of the December 2021 interim dividend and issued 339,228 shares @ $9.49 as part of the June 2021 final dividend under
the Bonus Share Scheme.
2. The Group issued 3,914,039 shares @ $9.70 as part of the December 2021 interim dividend and issued 3,989,562 shares @ $9.49 as part of the June 2021 final dividend
under the Dividend Reinvestment Scheme.
3. The Group issued 10,002,606 shares @ $10.22 as part of the Ferocia acquisition.
Nature of issued capital
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.
Recognition and measurement
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 150
Funding and Capital Management
23 Retained earnings and reserves
Retained earnings movements
Opening balance
Profit for the year
Share‑based payment
Operational risk reserve
(Increase)/decrease in equity reserve for credit losses
Transfer from reserves
Dividends
Deregistration of subsidiary companies
Closing balance
Reserve movements
Employee benefits reserve
Opening balance
Share based payment expense
Lapsed/forfeited awards
Vested awards
Closing balance
Revaluation reserve – Equity Investments at FVOCI without recycling
Opening balance
Net unrealised gains
Transfer from reserves
Tax effect of net unrealised gains
Closing balance
Revaluation reserve – Debt Securities at FVOCI with recycling
Opening balance
Impairment
Net unrealised (losses)/gains
Tax effect of revaluations
Closing balance
Operational risk reserve
Opening balance
Movement operational risk reserve
Closing balance
Group
Bank
June 2023
June 2022
June 2023
June 2022
$m
$m
1,386.5
497.0
1,166.0
488.1
0.4
—
(7.4)
0.3
0.9
4.2
16.9
—
(309.5)
(289.6)
—
—
$m
961.1
448.4
0.3
—
(7.4)
—
(309.5)
—
1,567.3
1,386.5
1,092.9
$m
13.7
9.4
(0.5)
(5.6)
17.0
$m
13.0
—
(0.3)
—
12.7
$m
(58.5)
—
(17.0)
5.1
(70.4)
$m
—
—
—
$m
9.6
7.7
(1.3)
(2.3)
13.7
$m
9.7
4.7
—
(1.4)
13.0
$m
0.7
0.1
(84.8)
25.5
(58.5)
$m
4.2
(4.2)
—
$m
13.7
9.4
(0.5)
(5.6)
17.0
$m
12.7
—
—
—
12.7
$m
(96.9)
—
9.7
(2.9)
(90.1)
$m
—
—
—
$m
682.4
550.3
0.9
—
16.9
—
(289.6)
0.2
961.1
$m
9.6
7.7
(1.3)
(2.3)
13.7
$m
8.9
5.4
—
(1.6)
12.7
$m
197.5
0.1
(420.6)
126.1
(96.9)
$m
—
—
—
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction 23 Retained earnings and reserves continued
Cash flow hedge reserve
Opening balance
Mark‑to‑market movements
Tax effect of mark‑to‑market movements
Closing balance
Equity reserve for credit losses (ERCL)
Opening balance
Increase/(decrease) in ERCL
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 34.
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.
Annual Report 2023 151
$m
49.9
(75.6)
14.1
(11.6)
$m
87.8
7.4
95.2
42.9
$m
9.1
46.1
(5.3)
49.9
$m
104.7
(16.9)
87.8
105.9
$m
49.9
(75.6)
14.1
(11.6)
$m
87.8
7.4
95.2
23.2
$m
9.1
46.1
(5.3)
49.9
$m
104.7
(16.9)
87.8
67.2
Operational risk reserve
The reserve is required to meet Bendigo Superannuation Pty Ltd
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.
Equity reserve for credit losses
The equity reserve for credit losses was initially established to
meet the requirements of APRA Prudential Standard, APS 220
Credit Quality, which required a reserve to be held to recognise
estimated future credit losses which may arise over the life of
the Group’s lending portfolio. This requirement was removed from
1 January 2022, however, the Group has prudently maintained
this reserve pending further clarification.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 152
Other assets and liabilities
24 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
Bank
June 2023
June 2022
June 2023
June 2022
$m
920.3
52.2
(51.5)
36.8
957.8
$m
901.7
51.9
(63.1)
29.8
920.3
$m
$m
—
—
—
—
—
—
—
—
—
—
1. Homesafe revaluation income in Note 3 of $44.3m (June 2022: $38.5m), includes Homesafe revaluation gain and the profit/(loss) recognised on each contracts’ completion.
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 Workgroup, taking into account the specific
characteristics of the portfolio. The Group has applied a discount
rate of 6.75% (June 2022: 5.75%) and property appreciation
rates of ‑1.0% for the first year, 2.0% for the second year, and
5.0% per annum thereafter (June 2022: ‑5.0% for the first year,
‑2.0% for the second year, and 4.0% per annum thereafter).
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 cash flows are
sourced from market indices of property values (CoreLogic
regional property indices) and long‑term growth/discount rates
appropriate to residential property and historical performance
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/(depreciation), discount rates, selling costs, mortality
rates and future CPI increases.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 153
24 Investment property continued
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
Rates of property appreciation
~ short‑term growth rates:
Year 1: (1%)
Year 2: 2%
Range of estimates
for unobservable inputs
Favourable
change
Unfavourable
change
Year 1: 0%
Year 2: 3%
Year 1: (2%)
Year 2: 1%
Discounted
cash flow
Rates of property appreciation
~ long‑term growth rate 5%
6%
4%
Discount rates
~ 6.75%
5.75%
7.75%
Fair value measurement
sensitivity to
unobservable inputs
Significant increases in
these inputs would result
in higher fair values.
Significant increases in
these inputs would result
in higher fair values.
Significant increases in
these inputs would result
in lower fair values.
Effect of reasonably possible
alternative assumptions
Favourable
change
Unfavourable
change
$17.6m
($17.3)m
$78.9m
($69.7)m
$99.0m
($85.2)m
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 154
Other assets and liabilities
25 Goodwill and other intangible assets
Group
Software
under
development
$m
Customer
relationship
$m
Goodwill
$m
Software
$m
Carrying amount as at 1 July 2022
1,527.5
157.0
Additions
Impairment charge 1
Transfer to software
Amortisation of acquired intangibles
Amortisation of internally
developed intangibles
—
—
—
—
—
Closing balance as at 30 June 2023
1,527.5
$m
Carrying amount as at 1 July 2021
1,437.5
Additions 2
Transfer to software
Write off on disposal
Amortisation of acquired intangibles
Amortisation of internally
developed intangibles
91.3
—
(1.3)
—
—
Closing balance as at 30 June 2022
1,527.5
—
(39.3)
34.2
(4.4)
(32.5)
115.0
$m
95.4
22.0
76.3
—
(3.3)
(33.4)
157.0
110.0
120.0
(8.3)
(34.2)
—
—
187.5
$m
82.5
103.8
(76.3)
—
—
—
110.0
$m
$m
$m
Carrying amount as at 1 July 2022
1,470.4
157.0
Additions
Impairment charge 1
Transfer to software
Amortisation of acquired intangibles
Amortisation of internally
developed intangibles
—
—
—
—
—
Closing balance as at 30 June 2023
1,470.4
$m
Carrying amount as at 1 July 2021
1,380.4
Additions 2
Transfer to software
Write off on disposal
Amortisation of acquired intangibles
Amortisation of internally
developed intangibles
91.3
—
(1.3)
—
—
Closing balance as at 30 June 2022
1,470.4
—
(39.3)
34.2
(4.4)
(32.5)
115.0
$m
95.3
22.0
76.3
—
(3.3)
(33.3)
157.0
109.9
120.0
(8.2)
(34.2)
—
—
187.5
$m
82.5
103.7
(76.3)
—
—
—
109.9
Other
acquired
intangibles 3
$m
1.4
—
—
—
4.0
—
—
—
(0.6)
(1.3)
—
3.4
$m
4.6
—
—
—
—
0.1
$m
3.5
—
—
—
(0.6)
(2.1)
—
4.0
Bank
$m
4.0
—
—
—
—
1.4
$m
0.6
—
—
—
(0.6)
(0.6)
—
3.4
$m
4.6
—
—
—
—
—
$m
2.0
—
—
—
(0.6)
(1.4)
—
4.0
—
0.6
Trustee
licence
$m
Total
$m
8.4
1,808.3
—
—
—
—
—
8.4
$m
8.4
—
—
—
—
—
120.0
(47.6)
—
(6.3)
(32.5)
1841.9
$m
1,631.9
217.1
—
(1.3)
(6.0)
(33.4)
8.4
1808.3
$m
$m
—
—
—
—
—
—
—
1,741.9
120.0
(47.5)
—
(5.6)
(32.5)
1,776.3
$m
$m
—
—
—
—
—
—
—
1,564.8
217.0
—
(1.3)
(5.3)
(33.3)
1,741.9
1. In FY23, an impairment expense of $47.6m was recognised against the Group’s software intangible balances. This includes a $39.3m impairment against assets in use, and an
$8.3m impairment of software under development. As the Group continues to invest in new capabilities and technologies, legacy assets will necessarily be retired. In accordance
with AASB 136 Impairment of Assets, an impairment of such assets is recorded where the carrying value exceeds the recoverable amount. A majority of the impairment loss is
recorded in the Corporate segment for the purposes of AASB 8 Operating Segments, with a small component of the impairment recorded in the Consumer segment.
2. Goodwill and software additions in FY22 relate to the acquisition of Ferocia Pty Ltd. Goodwill disposals include disposals as part of the sale of Community Insurance
Solutions Pty Ltd and the debtor finance business.
3. These assets include customer lists, management rights and trade names.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 155
25 Goodwill and other intangible assets continued
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, not yet available for use or not capable of generating largely independent cash flows 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.
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
Trustee Licence
Indefinite
Software
Finite
Intangible assets acquired
in a business combination
Finite
Not amortised or revalued
Straight line over 2.5 – 10 yrs
Straight line over 2 – 15 yrs
Internally generated/acquired
Acquired
Internally generated or acquired
Acquired
Impairment test/recoverable
amount testing
Annually and when an
indicator of impairment exists
When an indicator
of impairment exists
When an indicator of
impairment exists
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
156
Other assets and liabilities
25 Goodwill and other intangible assets continued
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, or when there is
an indicator 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 impairment loss will be recorded initially against any goodwill allocated to the CGU, followed by other assets of the CGU on a
pro‑rata basis, subject to the requirements in AASB 136 Impairment of Assets.
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 other valuations prepared using various approaches to calculate the Group’s fair value less cost to sell.
The assumptions made in determining value in use have been based on reasonable and supportable information as at 30 June 2023
and include the following:
• Cash flows are based on the Group’s FY24 target and five‑year strategic plan, with specific adjustments as required by accounting
standards, for non‑cash items and to account for inherent uncertainties in longer‑term forecasting.
• 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 2022: 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. Management has included a 75bps
risk premium in the post‑tax discount rate to reflect the inherent uncertainties in forecasting cash flows in the current environment.
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 indefinite
useful life assets
Post-tax discount rate
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
June 2023
%
June 2022
%
Consumer
Business & Agribusiness
1,285.1
242.4
1,285.1
242.4
8.4
—
8.4
—
11.01%
11.13%
10.15%
10.27%
Sensitivity to changes in assumptions
The measurement of the CGUs recoverable amount is most sensitive to changes in net interest income and expenses. As a result, if
the Group experiences a significant reduction in assumed asset growth or net interest margin, or a significant increase in assumed
expenses, this may impact the assessment of the Group’s goodwill balances.
The table below details the movements in net interest income and operating expense growth rates, and post‑tax discount rates
that would result in an impairment. These sensitivities assume the specific assumption moves in isolation, with all other assumptions
held constant. Growth rate sensitivities are cumulative and adjust the growth rates applied to FY25‑FY28 within the cash flow.
Management believes that any reasonably possible change in other key assumptions would not result in an impairment.
Consumer
Business & Agribusiness
Growth rates
Headroom
Post tax
discount rate
Net interest
income
Operating
expenses
$m
478.3
154.9
bps
+90
+106
bps
‑137
‑123
bps
+243
+198
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 157
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
44.0
62.7
252.0
217.6
8.3
584.6
24.5
50.0
154.4
125.1
4.7
358.7
40.5
62.6
1,265.0
217.5
8.0
21.3
49.8
1,192.9
125.1
4.7
1,593.6
1,393.8
26 Other assets
Accrued income
Prepayments
Sundry debtors
Accrued interest
Deferred expenditure
Total other assets
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.
27 Other payables
Lease liability
Accrued expenses and outstanding claims
Accrued interest
Prepaid interest
Total other payables
Recognition and measurement
Lease liability
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
115.8
294.8
287.2
36.4
734.2
148.9
290.7
31.3
21.5
492.4
115.8
290.5
287.2
—
693.5
148.9
286.3
31.3
—
466.5
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 158
Other assets and liabilities
28 Provisions
Employee entitlements
Make good provision
Other 1
Closing balance
1. Other provisions comprises of various other provisions including reward programs and dividends.
Movements in provisions (excluding employee entitlements)
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
110.4
12.2
3.7
126.3
105.4
13.0
3.8
122.2
80.6
12.2
3.7
96.5
105.4
13.0
3.8
122.2
Make good provision
Group
Other
Total
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
13.0
0.8
(1.6)
12.2
$m
13.0
0.8
(1.6)
12.2
12.9
0.8
(0.7)
13.0
$m
12.9
0.8
(0.7)
13.0
3.8
319.5
(319.6)
3.7
Bank
$m
3.8
319.5
(319.6)
3.7
3.5
289.1
(288.8)
3.8
$m
3.4
289.1
(288.7)
3.8
16.8
320.3
(321.2)
15.9
$m
16.8
320.3
(321.2)
15.9
16.4
289.9
(289.5)
16.8
$m
16.3
289.9
(289.4)
16.8
Opening balance
Additional provision recognised
Amounts utilised during the year
Closing balance
Opening balance
Additional provision recognised
Amounts utilised during the year
Closing balance
Employee benefits
The table below shows the individual balances for employee benefits:
Annual leave
Other employee payments
Long service leave
Sick leave bonus
Closing balance
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
35.9
17.2
51.0
6.3
37.5
10.0
52.2
5.7
110.4
105.4
24.5
17.2
32.6
6.3
80.6
37.5
10.0
52.2
5.7
105.4
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 159
28 Provisions continued
Recognition and measurement
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.
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 160
Other disclosure matters
29 Cash flow statement reconciliation
Profit after tax
Non-cash items
Credit expenses/(reversals)
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 loss on derivatives
Changes in assets and liabilities
(Decrease)/increase in tax provision
Increase in deferred tax assets and liabilities
Decrease/(increase) in derivatives
Increase/(decrease) in accrued interest
Increase/(decrease) in accrued employee entitlements
Increase in other accruals, receivables and provisions
Cash flows from operating activities before changes
in operating assets and liabilities
(Increase)/decrease in operating assets
Net increase in balance of loans and other receivables
Net decrease/(increase) of investment securities
Increase/(decrease) in operating liabilities
Net increase in balance of deposits
Net increase/(decrease) in balance of other borrowings
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
497.0
488.1
448.4
550.3
36.1
38.8
64.0
5.3
7.0
0.5
(1.2)
52.2
13.4
2.2
(9.8)
(22.6)
33.3
178.3
5.0
(374.4)
(23.4)
39.4
59.8
10.1
4.5
(1.4)
(4.9)
—
11.3
—
6.4
(6.4)
(11.3)
(16.8)
1.3
(93.6)
71.4
38.1
64.0
(2.6)
7.0
0.5
(8.7)
63.2
11.3
2.2
(9.8)
(18.8)
33.3
163.5
(24.8)
(307.0)
(24.6)
38.6
59.8
5.9
4.5
(1.4)
(89.5)
—
11.3
—
6.4
(103.5)
(11.3)
(21.9)
1.3
(180.0)
525.1
463.1
531.2
245.9
(380.5)
2,694.9
(5,666.4)
(6,380.1)
(1,823.9)
2,648.6
(4,418.5)
(7,145.3)
2,726.9
139.3
8,366.8
(33.3)
2,726.5
1,086.7
8,360.4
(275.6)
Net cash flows from/(used in) operating activities
5,705.7
(3,249.9)
5,169.1
(3,233.1)
Cash flows presented on a net basis
Cash flows arising from the following activities are presented on a net basis in the Cash Flow Statement:
Loans and other receivables, investment securities, deposits and other borrowings.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 161
30 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 cash flows 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 where the assets
are more than 0.5% of total Group assets.
Chief entity and Ultimate parent
Bendigo and Adelaide Bank Limited
Principal activities
Banking
Other entities
Homesafe Trust
Leveraged Equities Ltd
Principal activities
Homesafe product financier
Margin lending
All entities are 100% owned and incorporated in Australia.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 162
Other disclosure matters
30 Subsidiaries and other controlled entities continued
Investments in controlled entities
The Bank’s investment in controlled entities are disclosed in the table below.
At cost
Total investments in controlled entities
Significant restrictions
Bank
June 2023
$m
June 2022
$m
101.8
101.8
112.8
112.8
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 classifies all entities where it owns 100% of the shares and in which it controls as subsidiaries. Investments in subsidiaries
are stated at cost.
Special Purpose Entities (SPE’s)
The following table presents a list of the material SPEs. An 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 18.
Entity
Bendigo Covered Bond Trust 1
Torrens Series 2008‑1 Trust
Torrens Series 2008‑4 Trust
Torrens Series 2021‑1 Trust
Torrens Series 2021‑2 Trust
Principal activities
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
1. The Group established its inaugural Covered Bond Programme (CBP) in October 2022. Refer to Note 18 for further details.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 163
31 Related party disclosures
Subsidiary and controlled entity transactions
Transactions undertaken with subsidiaries (including controlled Special Purpose Entities) are eliminated in the Group’s financial statements.
Transactions between the Bank and the subsidiary are primarily 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 year were:
Opening balance at beginning of financial year
Net receipts and fees received from/(paid to) subsidiaries
Supplies, fixed assets and services charged to subsidiaries
Net amount owing to subsidiaries
June 2023
$m
June 2022
$m
3,731.4
(1,414.7)
(48.1)
2,268.6
2,575.1
1,198.2
(41.9)
3,731.4
Bendigo and Adelaide Bank Limited provides funding and guarantee facilities to several subsidiary companies.
These facilities are provided on normal commercial terms and conditions.
Subsidiary
Sandhurst Trustees Limited
Dividends paid by subsidiaries
Sandhurst Trustees Limited
Other related party transactions
Joint arrangement entities and associates
Facility
Guarantee
Drawn/issued at
30 June 2023
$m
—
Limit
$m
0.5
June 2023
$m
June 2022
$m
7.5
84.6
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
June 2023
$m
June 2022
$m
29.0
0.5
19.5
23.7
0.3
15.3
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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 164
Other disclosure matters
31 Related party disclosures continued
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
Share‑based payments
Total compensation
June 2023
$’000’s
June 2022
$’000’s
9,308.8
6,868.8
346.4
(38.8)
1,773.9
11,390.3
342.2
55.8
1,751.7
9,018.5
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)
Preference shares
Performance Rights
Alignment Rights
Deferred Share Rights
Loan Funded Shares
NED Rights to Shares
Closing balance of equity holdings
June 2023
No.
June 2022
No.
1,276,815
1,317,053
350
350
466,623
325,306
35,146
66,888
—
66,888
1,375,287
1,716,392
4,192
3,785
3,225,301
3,429,774
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
Loans outstanding at the beginning of the year 2
Loans outstanding at the end of the year
Interest paid or payable 3
Interest not charged
June 2023
$’000’s
June 2022
$’000’s
8,274.0
7,149.0
314.0
—
11,330.0
12,493.0
235.0
—
1. For details related to loans held by Executive KMP and Non‑executive Directors, refer to Section 5 of the Remuneration Report section of the Annual Financial Report.
2. The balance of loans outstanding relate to Executive KMP and Non‑executive Directors who were in office at the start of, or appointed during, the financial year. Loan
balances exclude the value of loans provided to Executives under the Loan Funded Share Plan or Employee Share Ownership Plan.
3. Interest charged may include the impact of an interest off‑set facility.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 165
32 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
Securitisation vehicles – for
loans and advances originated
by third parties
To generate:
• external funding for third parties; and
• investment opportunities for the Group.
Interest held by the Group
Investments in notes or bonds
issued by the vehicles
These vehicles are financed through the issue of notes or bonds
to investors.
Managed investment funds
To generate:
• a range of investment opportunities for external investors; and
Investment in units issued by
the funds
• fees from managing assets on behalf of third party investors
Management fees
for the Group.
Risks associated with unconsolidated structured entities
The following table summarises the carrying values recognised in the Balance Sheet in relation to unconsolidated structured entities,
together with the maximum exposure to loss that could arise from those interests.
Balance Sheet
Cash and cash equivalents
Financial assets – amortised cost
Financial assets fair value through other comprehensive income
Financial assets fair value through profit and loss
Net Loans and other receivables
Other assets
Total on-balance sheet exposures
Total off‑balance sheet exposures 1
Total maximum exposure to loss
1. Relates to undrawn funding limits.
Managed
investment
funds
Securitisation
vehicles
Managed
investment
funds
Securitisation
vehicles
June 2023
$m
June 2023
$m
June 2022
$m
June 2022
$m
0.1
—
—
9.4
—
9.5
—
9.5
—
186.4
3.2
—
2,279.9
4.6
2,474.1
197.4
2,671.5
0.1
—
8.7
—
—
—
8.8
—
8.8
—
184.0
8.7
—
2,104.9
2.0
2,299.6
29.6
2,329.2
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 166
Other disclosure matters
32 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.
Cash and cash equivalents
Senior notes
Investment
Carrying
amount
Maximum
loss
exposure
Carrying
amount
Maximum
loss
exposure
June 2023
$m
June 2023
$m
June 2022
$m
June 2022
$m
0.1
0.1
0.1
0.1
2,474.1
2,671.5
2,299.6
2,329.2
9.4
9.4
8.7
8.7
2,483.6
2,681.0
2,308.4
2,338.0
Significant restrictions
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 a majority representation on the Board.
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 30.
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 167
33 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
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.
Group
June 2023
$m
June 2022
$m
6,665.2
3,090.4
3,574.8
6,680.0
2,928.5
3,751.5
As an obligation arises under each type of duty, the amount
of funds has been included where that duty arises. This may
lead to the same funds being shown more than once where
the 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.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 168
Other disclosure matters
34 Share‑based payment plans
Bendigo and Adelaide Bank has multiple employee share‑based payment plans. The share‑based payment plans form an integral
part of the Group’s remuneration framework and help create alignment between employees participating in those plans (participants)
and shareholders.
Information on the plans currently offered is provided below and further details are outlined in the Remuneration Report. The following
table shows the expense recorded for share‑based payment plans during the year:
June 2023
$m
June 2022
$m
5.4
1.5
0.1
7.0
3.2
1.1
0.2
4.5
Where the terms of an equity‑settled share‑based payment
are modified and the expense increases as a result of the
modification, the increase is recognised over the remaining
vesting period. When a modification reduces the expense, there
is no adjustment, and the pre‑modification cost continues to
be recognised.
Where an equity‑settled award does not ultimately vest,
expenses are not reversed; except for awards where vesting
is conditional upon a non‑market condition, in which case all
expenses are reversed in the period in which the award lapses.
Cash-settled share-based payments
Cash‑settled share‑based payments are recognised when the
terms of the arrangement provide the Bank with the discretion to
settle in cash or by issuing equity instruments and it has a present
obligation to settle the arrangement in cash. A present obligation
may occur where the past practice has set a precedent for
future settlements in cash.
Cash‑settled share‑based payments are recognised, over
the vesting period of the award, in the Consolidated income
statement, together with a corresponding liability. The fair
value is measured on initial recognition and re‑measured at
each reporting date up to and including the settlement date,
with any changes in fair value recognised in the Consolidated
income statement. Similar to equity‑settled awards, numbers of
instruments expected to vest are reviewed at each reporting
date and any changes are recognised in the Consolidated
income statement and corresponding liability. The fair value is
determined using appropriate valuation techniques at grant date
and subsequent reporting dates.
Plans
Performance and Share Rights
Loan Funded Shares
Deferred Shares
Total share-based payments expense
Accounting Policy
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.
Recognition and Measurement
The shares or rights are recognised at fair value at the grant
date and expensed to staff expenses over the vesting period,
with a corresponding increase in reserves. If the shares do
not vest because of market conditions, the Employee Benefits
Reserve is cleared to Retained Earnings. If the shares do not vest
because of service or performance conditions not being met, the
Employee Benefits Reserve is cleared to Profit or Loss.
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.
Equity-settled share-based payments
The cost of equity‑settled share‑based payments is measured
using their fair value at the date on which they are granted.
The fair value calculation takes into consideration a number of
factors, including the likelihood of achieving market‑based vesting
conditions such as total shareholder return (market conditions).
The cost of equity‑settled share‑based payments is recognised
in the Consolidated income statement, together with a
corresponding increase in the share‑based payment reserve
(SBP reserve) in equity, over the vesting period of the instrument.
At each reporting date, the Bank reviews its estimates of
the number of instruments that are expected to vest and
any changes to the cost are recognised in the Consolidated
income statement and the SBP reserve, over the remaining
vesting period.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 169
34 Share‑based payment plans continued
Plan overview
Performance rights
The Managing Director and Executive KMP receive their long‑term incentive in performance rights. Incentives are subject to downward
adjustments through ongoing risk assessments and/or consequence management process. All awards are subject to the Clawback
and Malus Policy.
These arrangements are summarised below:
Long-term Incentive
Managing Director & CEO
Executive KMP
Performance rights give the participant
the right to acquire one fully paid
ordinary share in Bendigo and Adelaide
Bank upon meeting specific hurdles.
They are granted at no cost to the
participant and carry no dividend or
voting rights until they vest.
Performance is assessed against;
Relative Total Shareholder Return, Return
on Equity, Relative Customer Advocacy,
Relative Reputation.
In FY23 the Managing Director received a grant of
performance rights in accordance with the terms
approved by shareholders at the 2022 AGM.
The FY23 performance rights grant has a four‑
year performance period and will be tested on
30 June 2026.
Following testing, tranches 2 & 3 of the grant
remain subject to further conditions including a
service period and risk gateway until 30 June
2027 and 30 June 2028 respectively.
In FY23 the Executive received a
grant of performance rights with a
four‑year performance period and
will be tested on 30 June 2026.
Following testing, tranche 2 will
remain subject to further conditions
including a service period and risk
gateway until 30 June 2027.
Performance rights valuation
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 valuations are based on the 5‑day volume
weighted average share price measured over the 5‑day trading period prior to the start of the award’s valuation period. Assumptions
regarding the dividend yield and volatility have been estimated based on dividend yield and volatility over the relevant period.
The following table shows the factors considered in determining the value of the performance rights granted during the period.
No awards are exercisable at exercisable at year end.
CEO & Managing Director
Grant date
14/11/2022
14/11/2022
14/11/2022
Executive KMP
Grant date
14/11/2022
14/11/2022
Share price
Contractual
life (years)
Dividend
yield
$8.84
3.88 years
$8.84
4.88 years
$8.84
5.88 years
6.00%
6.00%
6.00%
Share price
Contractual
life (years)
Dividend
yield
$8.84
3.88 years
$8.84
4.88 years
6.00%
6.00%
Risk-free
interest rate
Fair value
of rTSR
Fair value of
ROE, NPS,
Reputation
3.34%
3.42%
3.49%
$3.64
$3.34
$3.14
$7.01
$6.60
$6.21
Risk-free
interest rate
Fair value
of rTSR
Fair value of
ROE, NPS,
Reputation
3.34%
3.42%
$3.64
$3.34
$7.01
$6.60
Volatility
31.72%
29.65%
28.65%
Volatility
31.72%
29.65%
The following table shows the movement in number of performance rights outstanding during the period:
Performance rights
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Closing balance
June 2023
June 2022
352,763
310,127
(77,619)
460,667
100,428
(95,932)
(51,467)
(112,400)
533,804
352,763
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
170
Other disclosure matters
34 Share‑based payment plans continued
Share Rights
The Managing Director, Executive KMP, executives and employees may receive share rights as part of their remuneration
arrangements. Share rights give the participant the right to acquire one fully paid ordinary share in Bendigo and Adelaide Bank after a
specific service period. They are granted at no cost to the participant and carry no dividend or voting rights until they vest. All awards
are subject to ongoing employment, compliance with the Clawback and Malus Policy and the Board’s discretion.
These arrangements are summarised below.
Long-term
Incentive Plan
Short-term Incentive Plan
Managing Director and Executive KMP
Alignment Rights and Transformation
Incentive awards are subject to
continued service and risk gateway
conditions and may be awarded to
certain employees as part of their
overall LTI award.
STI rewards the achievement of Bank, Divisional
and individual performance.
Performance is assessed based on a scorecard
of; Financial, Customer & Community, People
& Planet, and Risk and Governance uplift.
Delivered through a mix of cash (50% and
deferred rights (50%).
One‑year deferral period following completion
of the performance period, adjusted to meet
regulatory requirements.
Deferred Share Rights
Deferred bonus equity and sign‑on
awards are subject to continued
service and risk gateway conditions.
Deferred bonus equity grants are
made whereby a portion of the
employee’s annual STI outcome is
delivered in share rights.
Sign‑on awards are made to select
employees to replace STI forgone from
their previous employer strategy.
Share rights valuation
The number of share rights granted to Participants was determined by dividing the value of the proposed grant by the volume
weighted average price of the Company’s shares for the five trading days preceding the allocation date.
The service conditions and risk gateways attached to the Share Rights granted are not considered market‑based conditions under
AASB 2. Accordingly, a Black‑Scholes‑Merton model to estimate the fair value.
As soon as reasonably practicable at the end of the vesting period, the Board will make an assessment against the Company’s
overall Risk Gateway to determine whether, and the extent to which, the Share Rights which have not otherwise been forfeited will
vest. The Board may in its discretion make adjustments to the award to reflect risk outcomes.
The following table shows the factors considered in determining the value of the share rights granted during the period:
Grant date
1/7/2022
Grant date
14/10/2022
11/4/2023
8/5/2023
Grant date
14/11/2022
14/11/2022
Share price
Contractual
life (years)
Dividend
yield
Volatility
Risk-free
interest rate
Fair value
$9.13
1/9/2024
5.81%
31.67%
3.20%
$8.05
Share price
Contractual
life (years)
Dividend
yield
$8.58
$8.79
$8.62
1/9/2024
11/4/2025
8/5/2025
6.18%
6.31%
6.44%
Share price
Contractual
life (years)
Dividend
yield
$8.84
$8.84
30/9/2026
30/9/2027
6.00%
6.00%
Volatility
27.60%
25.48%
25.37%
Volatility
31.72%
29.65%
Risk-free
interest rate
Fair value
3.62%
2.87%
3.07%
$7.64
$8.52
$8.34
Risk-free
interest rate
3.34%
3.42%
Fair value
$7.01
$6.60
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 171
34 Share‑based payment plans continued
The following table shows the movement in number of share rights outstanding during the period. No awards are exercisable at
exercisable at year end.
Share rights
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Closing balance
Restricted Shares
June 2023
June 2022
1,313,852
—
893,920
1,328,576
(20,481)
(14,724)
(392,067)
—
1,795,224
1,313,852
The Managing Director, Executive KMP, executives and employees may receive restricted shares.
These arrangements are summarised below:
Loan Funded Share Plan
Employee Share Plan
Deferred Shares
The Bank established a Loan Funded
Share Plan (LFSP) in 2020. Under the LFSP,
eligible employees 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 LFSP 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.
There have been no further issues under
this plan since 2021.
The Bank 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 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 Bank.
The shares must be paid for by the
employee with cash dividends after
personal income tax being applied to
repay the loans. Employees cannot
exercise, dispose of or transfer the
shares until the loan has been fully repaid.
There have been no further issues under
this plan since 2008.
Under the Plan, Participants were
granted deferred shares as part of
their base remuneration and short‑
term incentive payments.
The number of deferred shares
granted to Participants is calculated
by dividing the deferred remuneration
value by the volume weighted average
closing price of the Bank’s shares
for the last five trading days of the
financial year prior to the year of grant.
There have been no further issues
under this plan since 2018.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 172
Other disclosure matters
34 Share‑based payment plans continued
Restricted share valuation
The fair value is measured 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.
The following table shows the factors considered in determining the value of the restricted shares granted in prior years. No awards
are exercisable at year end.
Contractual
Share price
life (years) Dividend yield
Volatility
Risk-free
interest rate
$6.83
$9.18
4‑6 years
4‑6 years
0.00%
0.00%
27.92%
28.93%
0.26%
1.44%
Fair value
$1.87
$2.70
Grant date
25/11/2020
16/11/2021
Loan Funded Share Plan 1
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Closing balance
1. There have been no further issues under this plan since 2021.
Employee Share Plan 1
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Closing balance 2
June 2023
June 2022
No.
WAEP $
No.
WAEP $
2,408,535
$7.45
1,635,527
$6.95
—
(300,085)
—
—
—
—
954,134
(181,126)
—
—
—
—
2,108,450
$6.82
2,408,535
$7.45
June 2023
June 2022
No.
WAEP $
No.
WAEP $
630,883
$4.74
705,054
$5.12
—
—
(70,584)
560,299
—
—
$4.58
$4.31
—
—
(74,171)
630,883
—
—
$4.76
$4.74
1. There have been no further issues under this plan since 2008.
2. The closing balance of the Employee Share Plan on 30 June 2023 is represented by 560,299 (2022: 630,883) ordinary shares with a market value of $4,812,968
(2022 : $5,722,109), exercisable upon repayment of the employee loan.
Deferred Share Pay Plan 1
Opening balance
Granted during the year
Lapsed during the year
Exercised during the year
Closing balance
1. There have been no further issues under this plan since 2018.
June 2023
June 2022
57,969
111,304
2,946
4,636
—
—
(60,915)
(57,971)
—
57,969
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 173
35 Commitments and contingencies
a)
Commitments and contingent liabilities
The following are outstanding expenditure and credit related commitments as at 30 June 2023.
Commitment to provide credit
Guarantees
Documentary letters of credit and performance related obligations
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
12,577.4
12,039.9
10,503.1
10,556.4
243.3
0.5
253.2
2.1
243.3
0.5
253.2
2.1
Comparative information in the above Commitments and contingent liabilities table has been restated to align to methodology
applied in current financial year.
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 guarantee matches the underlying obligations to which they relate.
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 material 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.
b)
Contingent assets
As at 30 June 2023, the economic entity does not have any contingent assets.
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
174
Other disclosure matters
36 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
Bank
June 2023
$
June 2022
$
June 2023
$
June 2022
$
Fees to Ernst & Young (Australia) 1
Category 1 – Fees to the group auditor for audit and review of financial statements
1,929,542
1,818,400
1,836,322
1,725,700
Category 2 – Audit related services
464,000
382,000
464,000
382,000
Category 3 – Other assurance services
• Consolidated entities
• Non‑consolidated entities
Category 4 – Non‑audit (other) related fees
• Consolidated entities
560,967
437,769
523,000
377,722
560,967
523,000
—
—
449,675
400,000
449,675
400,000
Total fees to Ernst & Young (Australia)
3,841,953
3,501,122
3,310,964
3,030,700
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 175
37 Leases
A)
Leases as lessee
Recognition and measurement
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 leases of low‑value whereby
lease payments are expensed on a straight line basis over the lease term.
i) Right-of-use assets (ROUA) relate to leased branch and office premises that are
included in the balance of property, plant and equipment in the Balance Sheet.
ROUA
Opening balance as at 1 July
Depreciation charge
Additions
Remeasurements
Disposals
Impairments 1
Closing balance as at 30 June
Properties
Other
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
114.1
(39.5)
10.2
7.4
—
(2.4)
89.8
133.6
(40.1)
13.8
6.8
—
—
114.1
5.9
(3.8)
0.8
—
—
—
2.9
11.1
(5.1)
0.8
(0.8)
(0.1)
—
5.9
1. During the year the Group considered the utilisation of head office workspaces due to staff engaging in a hybrid working model. As a result, there was a decision to mothball
some head office spaces, resulting in an impairment for the affected Right of Use Assets.
ii) Amounts recognised in the Income Statement:
Depreciation charge of ROUA
Properties
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
Expenses relating to impairment of leases
iii) Amounts recognised in the Cash Flow Statement:
Total cash outflow for leases
Group
June 2023
$m
June 2022
$m
39.5
3.8
43.3
4.0
1.4
0.1
2.4
36.9
5.1
42.0
4.9
1.7
0.2
—
Group
June 2023
$m
June 2022
$m
50.5
50.3
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 176
Other disclosure matters
37 Leases continued
Leases as lessor
B)
Recognition and measurement
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 2023 was $4.6 million (30 June 2022: $4.4 million).
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
Total
Group
Bank
June 2023
$m
June 2022
$m
June 2023
$m
June 2022
$m
4.7
4.3
1.7
—
5.1
4.1
4.0
1.5
4.7
4.3
1.7
—
5.1
4.1
4.0
1.5
10.7
14.7
10.7
14.7
38 Events after balance sheet date
No matters or circumstances have arisen since the end of the half 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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Annual Report 2023 177
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 2023
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) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2; and
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
d) 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 2023.
On behalf of the Board,
Jacqueline Hey
Chair
11 September 2023
Marnie Baker
Chief Executive Officer and Managing Director
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information 178
Independent Auditor’s 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 2023;
► 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 2023
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 179
Page 2
Allowance for credit losses
Why significant
At 30 June 2023 the allowance for credit
losses includes individually assessed credit
provision of $47.8 million and collectively
assessed credit provisions of $238.5 million
as disclosed in Notes 11 Impairment of loans
and advances and 21 Risk management.
The allowance for expected credit losses is
determined in accordance with Australian
Accounting Standards and is subject to a
number of significant judgements, such as:
•
the identification of exposures with a
significant increase in credit risk;
• 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, such as
gross domestic product growth,
unemployment rates, central-bank
interest rates and house price indices as
disclosed in Note 11;
•
the incorporation of forward-looking
information to reflect current or future
external factors, specifically judgments
related to current economic uncertainty,
both in the multiple forward-looking
scenarios and the probability weighting
determined for each of these scenarios as
disclosed in Note 11; and
• assumptions used in the calculation of
overlays, which are used to capture
known model shortcomings or current
and future market characteristics that
are not are not currently captured by the
Group’s expected credit loss models.
This was a key audit matter due to the value
of the provisions and the degree of judgment
and estimation uncertainty associated with
the calculations.
How our audit addressed the key audit matter
In addressing the adequacy of the 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
Australian Accounting Standards.
•
•
Involved our actuarial specialists to test the
mathematical accuracy of the Group’s models
and key modelling assumptions, including
probability of default, exposure at default
and loss given default assumptions.
Involved our Economics specialists to assess
significant macroeconomic assumptions
incorporated into the Group’s models,
including the reasonableness of forward-
looking information and scenarios, with
reference to relevant publicly-available
macro-economic information and the
sensitivity of the collectively assessed credit
provision to changes in such assumptions.
• On a sample basis, assessed 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.
• On a sample basis, agreed the key loan
attributes that are used in the models to
calculate the expected credit loss, through to
relevant source documentation.
• We assessed the basis for, and assumptions
used in, overlays recognised to capture
current and future market characteristics
resulting from current market uncertainty,
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
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
180
Independent Auditor’s Report
Page 3
Allowance for credit losses (cont.)
Why significant
How our audit addressed the key audit matter
Our audit procedures on the individually
assessed credit 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
emerging trends within high-risk industries,
work out strategies, collateral values and the
value and timing of recoveries.
We assessed the adequacy and appropriateness
of the disclosures associated with credit
impairment included in the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 181
Page 4
Impairment assessment of goodwill
Why significant
At 30 June 2023, goodwill associated with
historical acquisitions amounts to $1,527.5
million.
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:
• forecast future cash flows;
• discount rates; and
• terminal growth rates.
Details on the methodology and assumptions
used in the impairment assessment of
goodwill are included in Note 25 Goodwill and
other intangible assets.
This was a key audit matter due to the value
of the goodwill balance and the degree of
judgment and estimation uncertainty
associated with the impairment assessment.
How our audit addressed the key audit matter
Our audit procedures included the following:
• Assessed whether the models used by the
Group in the impairment testing of goodwill
met the requirements of Australian
Accounting Standards.
• 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;
• Consider the relationship between
market capitalisation of the Group as at
30 June 2023 and recent trading history
relative to net assets;
• Test the mathematical accuracy of the
impairment models; and
• Benchmark the implied valuations to
comparable company trading and control
valuation multiples.
• Assessed the adequacy of the disclosures
associated with the impairment assessment
of goodwill included in the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
182
Independent Auditor’s Report
Page 5
How our audit addressed the key audit matter
Our audit procedures included the following:
• Assessed the 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.
• Assessed whether a sample of new contracts
and settlements around 30 June 2023 were
recorded within the correct period.
•
Involved our 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
mathematical accuracy of the model.
• Considered the disclosures in respect of the
investment property and associated
revaluation gains included in the financial
report.
Valuation of investment property
Why significant
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 product is
accounted for as investment property.
The Group’s investment property balance as at
30 June 2023 was $957.8 million and the
revaluation gain recognised in the current
year from the Homesafe portfolio was $44.3
million. The Homesafe investment property
portfolio is measured at fair value using a
discounted cash flow model which is
categorised as level 3 in the fair value
hierarchy. 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.
Details on the methodology and assumptions
used in the calculation of the fair value of
investment properties are disclosed in Note
24 Investment property.
This was a key audit matter due to the value
of the Group’s investment property portfolio
and the degree of judgment and estimation
uncertainty associated with the assumptions,
particularly the expected rates of property
appreciation assumption.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 183
Page 6
Information Technology (IT) systems and controls over financial reporting
Why significant
The Group’s financial reporting process is
significantly reliant on IT systems with
automated processes and controls relating to
the capture, storage and extraction of
information.
A fundamental component of these IT controls
is ensuring that risks relating to inappropriate
user access management, unauthorised
program changes and IT operating protocols
are addressed.
How our audit addressed the key audit matter
Our audit procedures in this area were
conducted with the involvement of our IT
specialists and included the following:
• We assessed the effectiveness of the Group’s
IT controls significant to the financial
reporting processes, including those related
to user access, change management and
data integrity.
• Where we identified design and/or operating
deficiencies in the IT control environment,
our procedures included the following:
• Assessed the potential impact of the
deficiencies on the integrity and
reliability of the systems and data
related to financial reporting; and
• Where automated procedures were
supported by systems with identified
deficiencies, performed alternative audit
procedures.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
184
Independent Auditor’s Report
Page 7
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 2023 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Annual Report 2023 185
Page 8
► 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
Directors’ ReportOperating and Financial ReviewRemuneration ReportFinancial ReportShareholder information
186
Independent Auditor’s Report
Page 9
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 46 to 76 of the directors’ report for the
year ended 30 June 2023.
In our opinion, the Remuneration Report of Bendigo and Adelaide Bank Limited for the year ended 30
June 2023, 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
Partner
Melbourne
11 September 2023
Clare Sporle
Partner
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction
Financial Report
Shareholder information
Annual Report 2023 187
Shareholder information
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 ASX on 14 August 2023.
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 2023 Corporate Governance Statement.
For further details, please refer to our website at 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 30 August 2023:
Substantial holder
Vanguard Group
State Street Corporation
Number of
ordinary shares held
28,298,593
29,816,863
1. 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 30 August 2023 were in the following categories:
Fully Paid
Ordinary Shares
Fully Paid
Employee
Shares
(BENAK, AA
and AB)
%
Convertible
Preference
Shares 4
(BEN PG)
%
Capital
Notes
(BEN PH)
%
16,773,337
2.97
305,474
55.66 1,444,555
44.92 2,020,054
Category
1 – 1,000
222,520
40.55
770,055
23.94 1,272,756
1,001 – 5,000
5,001 – 10,000
96,795,991
70,792,589
10,001 – 100,000
128,977,548
100,001 and over
252,296,074
17.11
12.52
22.80
44.60
Number of Holders
98,232
100
5,815
15,000
0
823
1.06
2.73
0.00
100
% of total
shares issued 1
Date of
last notice
5.003%
07/07/2022
5.25%
07/03/2023
Performance
and Share
Rights
(BENAAA,
and BENAC)
Rights to
Shares
(BENAAD)
%
%
342,069
284,233
288,710
985,369
546,428
13.98
11.62
11.80
40.27
22.33
0
0.00
8,830 100.00
0
0
0
2
0.00
0.00
0.00
100
%
40.20
25.60
6.59
7.46
199,775
6.21
331,241
452,818
14.08
374,883
348,942
10.85 1,025,512
20.41
5,167
100
6,695
100
53
100
Securities on Issue
565,635,539 100.00
548,809 100.00 3,216,145 100.00 5,024,446 100.00
2,446,809 100.00
8,830 100.00
6 Marketable parcel
Based on a closing price of $9.53 on 30 August 2023 the number of holders with less than a marketable parcel of the Company’s
main class of securities (Ordinary Shares) as at 30 August 2023 was 5637.
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).
Directors’ ReportOperating and Financial ReviewRemuneration Report
188
Shareholder information
Additional Information continued
8 Major shareholders
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 30 August 2023 are:
Fully paid ordinary shares
Rank Name
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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NETWEALTH INVESTMENTS LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
CARLTON HOTEL LIMITED
BNP PARIBAS NOMS (NZ) LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
MARNIE ANN BAKER
LEESVILLE EQUITY PTY LTD
NAVIGATOR AUSTRALIA LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
JOHN PIERCE TOBIN
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Number
of shares
91,481,703
57,847,827
34,864,294
18,288,273
8,268,339
4,464,117
3,658,331
2,514,532
1,845,815
1,378,304
1,117,147
771,296
714,146
697,960
681,688
634,080
622,718
536,272
522,255
517,094
%
of shares
16.173%
10.227%
6.164%
3.233%
1.462%
0.789%
0.647%
0.445%
0.326%
0.244%
0.198%
0.136%
0.126%
0.123%
0.121%
0.112%
0.110%
0.095%
0.092%
0.091%
Total Securities of Top 20 Holdings
231,426,191
40.914%
Equity Trustees Limited, trustee for the Bendigo and Adelaide Bank Limited Employee Share Plan, held a combined total of
548,809 unquoted shares. These shares have not been included in the above table but are included in the total of issued ordinary
share capital.
Names of the 20 largest holders of Convertible Preference Shares 4, including the number of shares each holds and the percentage of
Convertible Preference Share 4 capital that number represents, as at 30 August 2023 are:
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Financial Report
Shareholder information
Annual Report 2023 189
Additional Information continued
Fully paid Convertible Preference Shares 4 (CPS4) (ASX: BENPG)
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
MUTUAL TRUST PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
VISION AUSTRALIA FOUNDATION
NETWEALTH INVESTMENTS LIMITED
INVIA CUSTODIAN PTY LIMITED
SOUTH BAY NOMINEES PTY LTD
SOUTH HONG NOMINEES PTY LTD
CORP OF THE TSTEES OF THE ROMAN CATH ARC
TRUSTEES OF CHURCH PROPERTY FOR THE DIOCESE OF NEWCASTLE
NULIS NOMINEES (AUSTRALIA) LIMITED
MR MICHAEL KENNETH HARVEY & MR BRUCE WILLIAM NEILL & MS BROOKE ELIZABETH
SLATTERY
IOOF INVESTMENT SERVICES LIMITED
T & A CAPITAL MANAGEMENT PTY LTD
Number
of shares
137,774
108,666
102,502
53,683
50,415
46,398
40,208
33,852
30,088
25,000
19,598
18,600
18,000
18,000
14,000
13,605
13,495
12,375
11,947
11,520
%
of shares
4.284%
3.379%
3.187%
1.669%
1.568%
1.443%
1.250%
1.053%
0.936%
0.777%
0.609%
0.578%
0.560%
0.560%
0.435%
0.423%
0.420%
0.385%
0.371%
0.358%
Total Securities of Top 20 Holdings
779,726
24.244%
Directors’ ReportOperating and Financial ReviewRemuneration Report 190
Financial Report
Further information
Shareholder information
Additional Information continued
BEN Capital Notes (ASX: BEN PH)
Rank Name
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
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
NETWEALTH INVESTMENTS LIMITED
DIOCESE DEVELOPMENT FUND ‑ CATHOLIC DIOCESE OF PARRAMATTA
BNP PARIBAS NOMINEES PTY LTD
NAVIGATOR AUSTRALIA LTD
NETWEALTH INVESTMENTS LIMITED
NAVIGATOR AUSTRALIA LTD
IOOF INVESTMENT SERVICES LIMITED
MUTUAL TRUST PTY LTD
NATIONAL NOMINEES LIMITED
SANDHURST TRUSTEES LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
IOOF INVESTMENT SERVICES LIMITED
MEYER TIMBER CONSOLIDATED PTY LTD
CITICORP NOMINEES PTY LIMITED
TRUSTEES OF CHURCH PROPERTY FOR THE DIOCESE OF NEWCASTLE
Number
of Notes
277,336
271,060
145,427
116,113
114,823
100,753
48,600
39,118
38,847
31,059
30,204
29,863
20,460
17,896
17,524
16,879
15,195
15,000
14,751
14,500
%
of Notes
5.520%
5.395%
2.894%
2.311%
2.285%
2.005%
0.967%
0.779%
0.773%
0.618%
0.601%
0.594%
0.407%
0.356%
0.349%
0.336%
0.302%
0.299%
0.294%
0.289%
Total Securities of Top 20 Holdings
1,375,408
27.374%
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.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Financial Report
Shareholder information
Annual Report 2023 191
Glossary
Australian Accounting
Standards (AAS)
Refers to the Australian Accounting Standards issued by the AASB. An accounting standard is a
technical pronouncement that sets out the required accounting, including measurement and recognition
requirements, for particular types of transactions and events. The accounting requirements affect the
preparation and presentation of an entity’s financial statements.
Australian Accounting
Standards Board (AASB)
The Australian Accounting Standards Board (AASB) is the Australian Government agency responsible
for developing, issuing and maintaining accounting standards that apply under Corporations Act 2001.
Australian Prudential
Regulation Authority (APRA)
Is the prudential regulator of the Australian financial services industry. APRA is an independent statutory
authority that supervises institutions across banking, insurance and superannuation and promotes
financial system stability in Australia.
Australian Prudential
Standards (APS)
Refers to the Prudential and Regulatory Standards issued by APRA.
Authorised deposit-taking
institution (ADI)
A body corporate which is authorised under the Banking Act 1959, to carry on banking business
“in Australia. It includes banks, building societies and credit unions.”
Bonus Share Scheme
The Bonus Share Scheme was terminated in April 2023. The final offering occurred in December 2022.
Cash earnings
Cash earnings is not a statutory financial measure, is not presented in accordance with Australian
Accounting Standards, and is not audited or reviewed in accordance with Australian Auditing Standards.
It is considered by management to be a key indicator of the underlying performance of the core
business activities of the Group. Cash earnings is defined as statutory net profit after tax adjusted for
non‑cash items and other adjustments. Non‑cash items are those 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.
Committed Liquidity Facility
(CLF)
The RBA makes available to Australian Authorised Deposit‑taking institutions a CLF that, subject to
qualifying conditions set and approved by APRA, can be accessed to meet LCR requirements under
APS 210 Liquidity.
Common Equity Tier 1
Capital (CET1)
The highest quality of capital available to the Group reflecting the permanent and unrestricted
commitment of funds that are freely available to absorb losses. It comprises ordinary share capital,
retained earnings and reserves less specified regulatory adjustments.
Cost to Income ratio
A performance measure which represents total operating expenses before non‑cash items and other
adjustments as a percentage of total income before non‑cash items and other adjustments.
Credit Risk
The risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation.
Dilutive earnings per share
An earnings measure calculated by dividing net profit after tax attributable to owners of the Bank by the
weighted average number of fully paid ordinary shares on issue over the period adjusted for the effect
of all potentially dilutive instruments.
Dividend payout ratio
Dividends paid on ordinary shares divided by net profit after tax attributable to owners of the Bank.
Dividend Reinvestment Plan
A plan which provides shareholders with the opportunity to convert all or part of their entitlement to a
dividend into new shares.
Earnings per share
An earnings measure calculated by dividing net profit after tax attributable to owners of the Bank by the
weighted average number of fully paid ordinary shares on issue over the period.
Expected Credit Loss (ECL)
Represents the probability‑weighted present value of expected cash shortfalls over the remaining
expected life of the financial instrument and considers reasonable and supportable information about
past events, current conditions, and forecasts of future events and economic conditions that impact the
Bank’s credit risk assessment.
Fair value
Is an amount at which an asset or liability could be exchanged between knowledgeable and willing
parties in an arm’s length transaction.
Financial assets measured
at amortised cost
Financial assets that are 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.
Directors’ ReportOperating and Financial ReviewRemuneration Report 192
Financial Report
Further information
Glossary
Financial assets measured
at fair value through
other comprehensive
income (FVOCI)
Financial assets that are held in a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets. Changes in fair value are recognised in other
comprehensive income.
Financial assets measured
at fair value through
profit or loss (FVTPL)
Financial assets that are not held in one of the two business models applicable to amortised cost or fair
value through other comprehensive income are measured at fair value through profit or loss. Changes in
fair value are recognised in the Income Statement.
Full time equivalent (FTE)
Includes all permanent full‑time staff and part‑time staff equivalents.
Equity Reserve for Credit
Losses (ERCL)
The equity reserve for credit losses was initially established to meet the requirements of APRA
Prudential Standard, APS 220 Credit Quality, which required a reserve to be held to recognise estimated
future credit losses which may arise over the life of the Group’s lending portfolio. This requirement was
removed from 1 January 2022, however, the Group has prudently maintained this reserve pending
further clarification.
Gross loans and other
receivables
Is the principal amount of loans and advances provided, gross of provisions and deferred fee income
and including any accrued interest.
Group
Hedging
Impaired loan
Is Bendigo and Adelaide Bank Limited (‘the Bank’) and the entities it controlled at financial year end and
during the financial year (‘the Group’).
The use of capital market contracts, namely derivatives, to eliminate or minimise the Bank’s exposure to
fluctuations in interest rates, foreign currency exchange rates, or other market factors.
A facility must be 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 achieved in a
timely manner. This is the case even if the full extent of the loss cannot be clearly determined.
Key Management Personnel
(KMP)
Persons having authority and responsibility for planning, directing and controlling the activities of an
entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.
Liquidity Coverage Ratio
(LCR)
The Liquidity Coverage Ratio (LCR) is the ratio measures the portion of High Quality Liquidity Assets
(HQLA) available to meet net cash outflows over a 30‑day period under an APRA defined severe short
term stress scenario.
Mark-to-Market valuation
A valuation that reflects current market rates as at the Balance Sheet date for financial instruments that
are carried at fair value.
Net Interest Income (NII)
The amount of interest received or receivable on assets net of interest paid or payable on liabilities.
Net Interest Margin (NIM)
Net interest income divided by average interest‑earning assets. This measure provides an indication
of the profitability of the Bank’s interest earning assets less the cost of interest bearing liabilities
(i.e. cost of funding).
Net Stable Funding Ratio
(NSFR)
The Net Stable Funding Ratio (NSFR) is the ratio of the amount of available stable funding (ASF) to the
amount of required stable funding (RSF). ASF is the portion of an Authorised Deposit‑taking Institution’s
(ADI) capital and liabilities expected to be a reliable source of funds over a one year time horizon. RSF
is the function of the liquidity characteristics and residual maturities of an ADI’s assets and Off Balance
Sheet activities.
Net tangible assets
Net assets excluding intangible assets and other equity instruments divided by ordinary shares on issue
at the end of the period (excluding treasury shares deduction).
Non-performing loans
Are loans that have been recognised as either impaired or 90 days past due, consistent with the
methodology in APS 220 Credit Risk Management.
Notional
Offset account
Is the face value on which the calculations of payments for derivative financial instruments is based.
An Offset Account (RCA) is a savings account which participates with a separate facility usually for a
mortgage. Instead of receiving interest on the savings account, the interest payment due on the loan is
calculated only on the net balance of the facility balance less the savings account balance.
Message from our ChairMessage from our CEO & MDYear in ReviewIntroduction Financial Report
Annual Report 2023 193
Operating segment
Past due
Past Due 90 Days
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
Managing Director for the purposes of resource allocation and performance assessment, hence it is
consistent with the internal reporting provided to the Managing Director and the Executive Team.
A financial asset is past due when a counterparty has failed to make a payment of principal, interest or
other amount, when contractually due.
For a loan subject to a regular repayment schedule:
• At least 90 days has elapsed from the due date of a contractual repayment which has not been
satisfied in full; and
• Total amount of arrears is equivalent to at least 90 days worth of Scheduled Payments. For a loan
not subject to a contractual repayment schedule (e.g. overdrafts and revolving credit facilities) the
facility remains over the contractual limit amount for at least 90 days.
Residential Mortgage
Backed Security (RMBS)
A debt security whose cash flow is backed by the principal and interest payments from a specified pool
of mortgage loans that are secured by mortgages over residential property.
Restructured facility
Return on average ordinary
equity (ROE)
A ‘Restructured Loan’ is a facility in which the original contractual terms have been modified to provide
for concessions of interest, or principal, or other payments due, or for an extension in maturity for a
non‑commercial period for reasons related to the financial difficulties of a customer and would not be
offered to new customers with similar risk.
Net profit attributable to owners of the Bank divided by average ordinary equity, excluding treasury shares.
Return on average tangible
equity (ROTE)
Net profit attributable to the owners of the Bank divided by average ordinary equity, excluding treasury
shares less goodwill and other intangible assets.
Right-of-use-asset (ROUA)
The right‑of‑use asset is a lessee’s right to use an asset over the life of a lease.
Rights
Rights to ordinary shares in Bendigo and Adelaide Bank Limited granted under Long‑Term Variable
Remuneration award and subject to performance, service and risk gateway conditions.
Risk-weighted assets (RWA)
Assets calculated by applying a regulatory risk‑weight factor, prescribed by APRA, to on and off‑balance
sheet exposures.
Share-based payments
(SBP)
Arrangements whereby employees services are exchanged for equity settled instruments namely
options or shares. These payments are accounted for under AASB 2 Share-Based Payments where,
in relation to employees and KMP, the organisation receives in exchange for providing equity
instruments (including shares and share options) of the organisation with the ability to settle in cash
at the Board’s discretion.
Special purpose entity (SPE)
A non‑bank entity established for a narrowly defined purpose, including for carrying on securitisation
activities. The structure of the SPE and its activities are intended to isolate its obligation from those
of the originator and the holders of the beneficial interests in the securitisation.
Term Funding Facility (TFF)
The Term Funding Facility (TFF) was established by the RBA in March 2020 to provide three‑year term
funding to authorised deposit‑taking institutions (ADIs), to support lending to Australian businesses.
Total Capital adequacy ratio
Total capital divided by total RWA calculated in accordance with relevant APS.
Treasury shares
Value at Risk (VaR)
Are shares that the Bank has issued but are held by a trust included within the Bank’s consolidated results.
Treasury shares are not considered shares outstanding and are not included in ‘per share’ calculations.
A measure of the loss that could occur on risk positions as a result of adverse movements in market risk
factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence.
Weighted average number
of shares
the calculation includes fully paid ordinary shares of the Bank and excludes treasury shares related to
investment in the Bank’s shares.
Directors’ ReportOperating and Financial ReviewRemuneration ReportShareholder information Bendigo and Adelaide Bank Limited. ABN 11068 049 178