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SUNCORP GROUP LIMITED Interim / Quarterly Report 2017

Nov 2, 2016

65879_rns_2016-11-02_bb309599-e10c-45df-a1d9-17c76c797035.pdf

Interim / Quarterly Report

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ASX announcement

==> picture [82 x 53] intentionally omitted <==

3 November 2016

Suncorp Bank APS330 Update

Suncorp Bank today provided its quarterly update on Bank assets, credit quality and capital as at 30 September 2016, as required under Australian Prudential Standard 330.

Suncorp’s lending assets remained broadly flat over the quarter at $54.1 billion, as the Bank actively managed volume and margin in a price driven market.

Credit quality remained strong with gross non-performing loans decreasing 4.8% over the quarter to $581 million. Impairment losses of $10 million for the quarter represent an annualised 7 basis points of gross loans and advances, below the Bank’s 10 to 20 basis points expected operating range.

Suncorp Banking & Wealth CEO David Carter said the Bank remained committed to driving sustainable growth, while prudently managing risk, liquidity and the funding mix. The Net Stable Funding Ratio (NSFR) was 111% at 30 September.

“We’re focused on leveraging the significant investment we have made in our new core banking platform to deliver greater value for our customers,” Mr Carter said.

“We’re also continuing our discussions with APRA as we progress towards achieving Advanced Accreditation. In the meantime, we are operating as an Advanced Bank, with strong risk management and advanced models in use across the business.”

Modest growth in business lending continued during the quarter, with the commercial portfolio increasing 1.8% to $5.5 billion and agribusiness growing 1.1% to $4.4 billion. The home lending portfolio contracted marginally, as the Bank remained focused on sustainable and profitable lending.

Consistent with others in the market the Bank saw a sharp increase in term deposit funding costs following the May RBA rate cut. Whilst some of that pressure has recently abated, average funding costs will be higher than originally expected this half.

The capital position of the Bank is robust with a Common Equity Tier 1 (CET1) ratio of 8.92% as at 30 September 2016, at the upper end of the 8.5% to 9% target.

Ends

For more information contact:

Media: Alexandra Foley 0419 794 294 Analysts/Investors: Mark Ley 0411 139 134

Suncorp Group Ltd - ABN 66 145 290 124 – Level 28, 266 George Street, Brisbane, Qld, 4000 suncorpgroup.com.au

ABN 66 145 290 124 Suncorp Group Limited Suncorp Bank APS 330 for the quarter ended 30 September 2016

Release date: 3 November 2016

==> picture [124 x 81] intentionally omitted <==

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

Table of contents

Basis of preparation ................................................................................................................................................... 3 Overview ...................................................................................................................................................................... 4 Outlook......................................................................................................................................................................... 4 Loans and advances ................................................................................................................................................... 5 Retail lending ............................................................................................................................................................... 5 Business lending ........................................................................................................................................................ 6 Impairment losses on loans and advances .............................................................................................................. 6 Impaired assets ........................................................................................................................................................... 7 Non-performing loans ................................................................................................................................................. 8 Provision for impairment ............................................................................................................................................ 9 Gross non-performing loans coverage by portfolio .............................................................................................. 10 Appendix 1 – APS 330 tables ................................................................................................................................... 11 Appendix 2 – Suncorp Bank updated slide information ........................................................................................ 32 Appendix 3 – Definitions .......................................................................................................................................... 36

2

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Basis of preparation

This document has been prepared by Suncorp Bank to meet the disclosure obligations under the Australian Prudential Regulation Authority (APRA) Australian Prudential Standard (APS) 330 Public Disclosure .

Suncorp Bank is represented by Suncorp-Metway Limited (SML) and its subsidiaries. SML is an authorised deposit-taking institution (ADI) and a wholly owned subsidiary of Suncorp Group Limited. Suncorp Group is represented by Suncorp Group Limited and its subsidiaries.

Other than statutory information required by a regulator (including APRA), all financial information is measured in accordance with Australian Accounting Standards. All figures have been quoted in Australian dollars and have been rounded to the nearest million.

This document has not been audited nor reviewed in accordance with Australian Auditing Standards. It should be read in conjunction with Suncorp Group’s consolidated annual and interim financial reports which have been either audited or reviewed in accordance with Australian Auditing Standards.

Figures relate to the quarter ended 30 September 2016 (unless otherwise stated) and should be read in conjunction with other information concerning Suncorp Group filed with the Australian Securities Exchange (ASX).

Disclaimer

This report contains general information which is current as at 3 November 2016. It is information given in summary form and does not purport to be complete.

It is not a recommendation or advice in relation to the Suncorp Group and Suncorp Bank or any product or service offered by its entities. It is not intended to be relied upon as advice to investors or potential investors, and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

The information in this report is for general information only. To the extent that the information may constitute forward-looking statements, the information reflects Suncorp Group’s intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices at the date of this report. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties, many of which are beyond Suncorp Group’s control, which may cause actual results to differ materially from those expressed or implied.

Suncorp Group and Suncorp Bank undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this report (subject to ASX disclosure requirements).

Registered Office

Level 28, 266 George Street, Brisbane Queensland 4000 Telephone: (07) 3362 1222 www.suncorpgroup.com.au

Investor Relations

Mark Ley Head of Investor Relations Telephone: (02) 8121 1221 [email protected]

3

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

Overview

Suncorp Bank remains focused on achieving sustainable profitable growth through the acquisition of good quality lending assets, in a low interest rate, low credit growth environment. The benefits of this approach continue to be reflected in the September quarter with another strong credit quality performance.

Total lending assets remained broadly flat over the quarter at $54.1 billion, as the Bank actively manages volume and margin in a price driven market. The Bank has partially mitigated a sharp rise in term deposit pricing since the RBA rate cut in May 2016 through active use of its range of wholesale funding programs. Suncorp Bank is on track to satisfy the most recent APRA guidance on the Net Stable Funding Ratio (NSFR). NSFR at 30 September was approximately 111%.

Gross non-performing loans reduced by $29 million or 4.8% to $581 million. Gross impaired assets increased slightly to $220 million, representing 41 basis points (bps) of gross loans and advances. Impairment losses of $10 million for the quarter represents just 7 bps (annualised) of gross loans and advances, below the Bank’s 10 to 20 bps expected operating range. The Bank has conducted detailed analysis of identified higher risk portfolio segments and is confident in the credit quality across its loan exposure portfolio. The Bank has maintained very limited exposure to inner-city apartments and the resources sector.

As expected, the Bank’s Common Equity Tier 1 (CET1 ratio) has reduced following the payment of the final FY16 dividend to Suncorp Group Limited. The ratio at 30 September 2016 is 8.92% and remains at the upper end of its target range of 8.50% to 9.00%.

Discussions continue with APRA as part of progressing towards Advanced Accreditation. The Bank is operating as an Advanced Bank, with robust risk management and advanced models in use across the business.

Outlook

Suncorp Bank remains committed to driving sustainable profitable growth and elevating the customer, while prudently managing risk, the balance sheet and funding mix. The Bank is focused on leveraging its significant investments in technology, capability and the Suncorp Marketplace to deepen relationships and deliver more value for the customer.

The Bank expects to continue to grow modestly in its business banking portfolio, with the home lending portfolio expected to return to growth. The Bank continues to focus on both geographic and segment diversification.

The Bank will maintain its disciplined approach to monitoring and assessing the influence of weather conditions, industry wide impacts and shifting macroeconomic conditions.

The industry is currently aligning the treatment of hardship reporting following guidance from APRA. These changes may have some effect on reporting but will not materially impact the risk or loss experience in the Bank. Impairment losses are expected to remain in the lower end of the 10 to 20 bps target operating range.

4

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Loans and advances

Loans and advances
SEP-16
SEP-16
QUARTER ENDED
SEP-16
JUN-16
SEP-15
vs JUN-16
vs SEP-15
$M
$M
$M
%
%
Housing loans
Securitised housingloans and covered bonds		 37,487
37,704
36,657
(0.6)
2.3
6,435
6,548
6,354
(1.7)
1.3
Total housing loans
Consumer loans		 43,922
44,252
43,011
(0.7)
2.1
284
312
365
(9.0)
(22.2)
Retail loans 44,206
44,564
43,376
(0.8)
1.9
Commercial (SME)
Agribusiness		 5,455
5,356
5,277
1.8
3.4
4,410
4,360
4,313
1.1
2.2
Total Business loans 9,865
9,716
9,590
1.5
2.9
Total lending 54,071
54,280
52,966
(0.4)
2.1
Other lending 9
18
12
(50.0)
(25.0)
Gross loans and advances
Provision for impairment		 54,080
54,298
52,978
(0.4)
2.1
(164)
(164)
(191)
-
(14.1)
Total loans and advances 53,916
54,134
52,787
(0.4)
2.1
Credit-risk weighted assets 26,369
26,444
25,740
(0.3)
2.4
Geographical breakdown - Total lending
Queensland		 28,926
29,132
28,828
(0.7)
0.3
New South Wales
Victoria
Western Australia
South Australia and other		 13,857
13,808
13,231
0.4
4.7
5,496
5,499
5,230
(0.1)
5.1
3,714
3,747
3,696
(0.9)
0.5
2,078
2,094
1,981
(0.8)
4.9
Outside of Queensland loans 25,145
25,148
24,138
(0.0)
4.2
Total lending 54,071
54,280
52,966
(0.4)
2.1

Retail lending

The home lending portfolio contracted marginally to $43.9 billion. During the quarter, the market was characterised by intense price competition and the Bank concentrated on the optimisation of volume and margin to maintain profitable lending and sustainable lending practices.

The quality of the lending portfolio remained favourable across a range of measures including quantitative serviceability parameters, credit quality and loan to value ratio (LVR), with 80% of new loans having a LVR of 80% or less.

5

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

Business lending

Commercial (SME)

The commercial (SME) portfolio increased 1.8% to $5.5 billion during the quarter. The Bank is focused on considered and disciplined growth within its risk appetite and continues to conservatively target growth within selected industry segments. The Bank maintains a very limited exposure to inner-city apartment developments and the resources sector.

developments and the resources sector. developments and the resources sector.
Development Finance exposures as at 30 September 2016
Limits
$M
Units & Town Houses 282
Residential Subdivision 127
Retail 27
Other 44
Grand Total 480

Agribusiness

The agribusiness portfolio grew 1.1% to $4.4 billion during the quarter. Operating conditions improved for many customers with above average rainfall in regions across Australia. The Bank endeavours to support customers impacted by excessive rainfall or drought, and exercises prudent risk selection. Recent developments in the dairy and poultry industries are monitored with a low gross exposure maintained. The Bank is proud of its long heritage in agribusiness and is focused on maintaining a collaborative customer approach.

Impairment losses on loans and advances

SEP-16
SEP-16
SEP-16
JUN-16
SEP-15
vs JUN-16 vs SEP-15
$M
$M
$M
%
%
QUARTER ENDED
Collective provision for impairment
Specific provision for impairment
Actual net write-offs		 (5)
(5)
-
-
n/a
11
8
5
37.5
120.0
4
(2)
1
n/a
300.0
Impairment losses 10
1
6
large
66.7
Impairment losses to gross loans and advances
(annualised)
0.07%
0.01%
0.04%

Impairment losses of $10 million for the quarter, representing 7bps (annualised) of gross loans and advances, continues to trend below the Bank’s through the cycle expected operating range of 10-20bps.

During the quarter, one mid-sized exposure became impaired resulting in an increase in the specific provision.

The Bank is comfortable with the current level of provisioning across all portfolios. Whilst changes in market conditions have the potential to increase bad debt expense in FY17, the Bank expects that impairment losses will be at the lower end of the expected 10 to 20 bps range.

The Bank is confident that its risk review processes allow for early warning indicators of financial distress to be identified and addressed.

6

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Impaired assets

Impaired assets
SEP-16
SEP-16
QUARTER ENDED
SEP-16
JUN-16
SEP-15 vs JUN-16 vs SEP-15
$M
$M
$M
%
%
Retail lending
Agribusiness lending
Commercial/SME lending		 28
27
28
3.7
-
122
117
119
4.3
2.5
70
62
55
12.9
27.3
Gross impaired assets
Specificprovision for impairment		 220
206
202
6.8
8.9
(61)
(56)
(65)
8.9
(6.2)
Net impaired assets 159
150
137
6.0
16.1
Gross impaired assets togross loans and advances
0.41%
0.38%
0.38%

Gross impaired assets increased by $14 million to $220 million during the quarter, representing 0.41% of gross loans and advances.

Whilst there is evidence the slowdown in the resource sector has had downstream impacts in some regional centres in Queensland, the impact is limited to a small number of exposures. The increase in the September quarter was driven by one mid-sized Commercial/SME loan with an indirect exposure to the downturn in the Queensland resources sector.

7

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

Non-performing loans

Non-performing loans
SEP-16
SEP-16
QUARTER ENDED
SEP-16
JUN-16
SEP-15 vs JUN-16 vs SEP-15
$M
$M
$M
%
%
Gross balances of individually impaired loans
Gross impaired assets
Specificprovision for impairment		 220
206
202
6.8
8.9
(61)
(56)
(65)
8.9
(6.2)
Net impaired assets 159
150
137
6.0
16.1
Size of gross individually impaired assets
Less than one million
Greater than one million but less than ten million
Greater than ten million		 29
22
21
31.8
38.1
109
117
110
(6.8)
(0.9)
82
67
71
22.4
15.5
220
206
202
6.8
8.9
Past due loans not shown as impaired assets 361
404
367
(10.6)
(1.6)
Gross non-performing loans 581
610
569
(4.8)
2.1
Analysis of movements in gross individually
impaired assets
Balance at the beginning of the period
Recognition of new impaired assets
Increases in previously recognised impaired assets
Impaired assets written off/sold during the period
Impaired assets which have been reclassed as
performingassets or repaid		 206
190
218
8.4
(5.5)
38
40
23
(5.0)
65.2
2
1
1
100.0
100.0
(4)
(5)
(21)
(20.0)
(81.0)
(22)
(20)
(19)
10.0
15.8
Balance at the end of theperiod 220
206
202
6.8
8.9

Gross non-performing loans decreased 4.8% over the quarter to $581 million, representing 1.07% of gross loans and advances.

The balance of past due loans that are not impaired decreased by 10.6% to $361 million as at 30 September 2016.

8

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Provision for impairment SEP-16
SEP-16
QUARTER ENDED
SEP-16
JUN-16
SEP-15 vs JUN-16 vs SEP-15
$M
$M
$M
%
%
Collective provision
Balance at the beginning of the period
Charge against impairment losses		 108
113
126
(4.4)
(14.3)
(5)
(5)
-
-
n/a
Balance at the end of the period 103
108
126
(4.6)
(18.3)
Specific provision
Balance at the beginning of the period
Charge against impairment losses
Impairment provision written off
Unwind of discount		 56
54
82
3.7
(31.7)
11
8
5
37.5
120.0
(4)
(5)
(21)
(20.0)
(81.0)
(2)
(1)
(1)
100.0
100.0
Balance at the end of theperiod 61
56
65
8.9
(6.2)
Totalprovision for impairment - Banking activities 164
164
191
-
(14.1)
Equity reserve for credit loss (ERCL)
Balance at the beginning of the period
Transfer(to)from retained earnings		 85
92
146
(7.6)
(41.8)
1
(7)
(1)
n/a
n/a
Balance at the end of theperiod 86
85
145
1.2
(40.7)
Pre-tax equivalent coverage 123
121
207
1.7
(40.6)
Total provision for impairment and equity reserve for
credit loss - Banking activities		 287
285
398
0.7
(27.9)
%
%
%
27.7
27.2
32.2

0.19
0.20
0.24
0.11
0.10
0.12
0.30
0.30
0.36
0.23
0.22
0.39
0.53
0.52
0.75
Specific provision for impairment expressed as a
percentage ofgross impaired assets
Provision for impairment expressed as a percentage of
gross loans and advances are as follows:
Collective provision
Specific provision
Total provision
ERCL coverage
Total provision and ERCL coverage

The Bank has maintained a prudent and conservative provision coverage to recognise the fluctuating nature of market conditions. This includes maintaining relevant and appropriate economic and operational overlays.

The specific provision movement quarter on quarter is driven by the previously mentioned mid-sized Commercial/SME exposure greater than $10 million.

Stabilisation of retail lending arrears over the quarter was the main driver of the $5 million decrease in collective provision.

9

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

Gross non-performing loans coverage by portfolio

Total provision
SEP-16 Past due Impaired Specific Collective ERCL (pre-tax
and ERCL
loans assets provision provision equivalent) coverage
$M $M $M $M $M %
Retail lending 319 28 7 39 48 27.1
Agribusiness lending 14 122 24 37 25 63.2
Commercial/SME lending 28 70 30 27 50 109.2
Total 361 220 61 103 123 49.4
Total provision
JUN-16 Past due Impaired Specific Collective ERCL (pre-tax
and ERCL
loans assets provision provision equivalent) coverage
$M $M $M $M $M %
Retail lending 358 27 10 43 47 26.0
Agribusiness lending 12 117 27 36 25 68.2
Commercial/SME lending 34 62 19 29 49 101.0
Total 404 206 56 108 121 46.7

Retail past due loans decreased by $39 million to $319 million over the quarter. The favourable movement follows the embedding of enhancements to the collections system and processes that were disclosed with previous financial results.

During the quarter, the Bank undertook detailed analysis of identified higher risk segments of its retail portfolio. This included regional locations and capital cities experiencing greater impacts from the slowdown in the resources and manufacturing sectors. In addition, the Bank reviewed its agribusiness portfolio in relation to dairy, poultry and cropping sectors.

10

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Appendix 1 – APS 330 tables

  • Table 2: Main Features of Capital Instruments

  • Table 3: Capital Adequacy

  • Table 4: Credit Risk

  • Table 5: Securitisation Exposures

  • Table 18: Remuneration Disclosures

TABLE 2: MAIN FEATURES OF CAPITAL INSTRUMENTS

Attachment B of APS 330 details the continuous disclosure requirements for the main features of all capital instruments included in Suncorp Bank’s regulatory capital.

The Suncorp Group’s main features of capital instruments are updated on an ongoing basis and are available at www.suncorpgroup.com.au/investors/regulatory-disclosures.

The full terms and conditions of all of Suncorp Group’s regulatory capital instruments are available at http://www.suncorpgroup.com.au/investors/securities[1] .

Note

  1. The published full terms and conditions represent the comparable capital instruments issued by Suncorp Group Limited to external investors. The terms of these instruments may differ slightly to those instruments issued by the regulatory Level 2 group.

11

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

TABLE 3: CAPITAL ADEQUACY

CARRYING VALUE CARRYING VALUE AVG RISK
WEIGHT
RISK-WEIGHTED ASSETS
RISK-WEIGHTED ASSETS
SEP-16
JUN-16
SEP-16
SEP-16
JUN-16
$M
$M
%
$M
$M
On-balance sheet credit risk-weighted assets
Cash items
Claims on Australian and foreign governments
Claims on central banks, international banking agencies,
regional development banks, ADIs and overseas banks
Claims on securitisation exposures
Claims secured against eligible residential mortgages
Past due claims
Other retail assets
Corporate
Other assets and claims		 435
430
-
2 12
2,332
2,572
- - -
2,740
2,807
22 598
597
912
937
20
182
187
42,206
42,239
38
15,863
15,962
528
549
94
497
487
412
558
82
339
474
8,597
8,443
100
8,581
8,432
307
294
100
307
293
Total Banking assets 58,469
58,829
45
26,369
26,444
NOTIONAL
AMOUNT
CREDIT
EQUIVALENT
AVG RISK
WEIGHT
RISK-WEIGHTED ASSETS
SEP-16 SEP-16 SEP-16 SEP-16 JUN-16
$M
$M
%
$M
$M
Off-balance sheet positions
Guarantees entered into in the normal course of business
Commitments to provide loans and advances
Foreign exchange contracts
Interest rate contracts
Securitisation exposures
CVA capital charge		 252
251
66
165
165
8,072
1,997
58
1,149
1,220
6,202
140
37
52
43
53,279
105
40
42
40
1,920
29
86
25
26
- - - 74
62
Total off-balance sheet positions 69,725
2,522
60
1,507
1,556
Market risk capital charge
Operational risk capital charge
Total off-balance sheet positions
Total on-balance sheet credit risk-weighted assets		 87
108
3,351
3,351
1,507
1,556
26,369
26,444
Total assessed risk 31,314
31,459
Risk-weighted capital ratios %
%
Common Equity Tier 1
Tier 1
Tier 2		 8.92
9.15
10.35
10.58
2.90
2.89
Total risk-weighted capital ratio 13.25
13.47

12

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

TABLE 4: CREDIT RISK

Table 4A: Credit risk by gross credit exposure – outstanding as at 30 September 2016

REC EIV AB LES
D UE FROM
OTHER B AN KS
( 2 )
TR AD IN G
SECU RITIES
INV ESTM ENT
SEC UR ITIES
LOAN S AN D
AD V AN CES
CR ED IT
COM M ITM ENTS
( 3 )
D ERIV ATIV E
IN STR UM ENTS
( 3 )


TOTA L
C R EDIT RISK
GROSS
IM PA IRED
ASSETS
PA ST DU E
N OT
IM PA IR ED >
9 0 D AY S
TOTAL N OT
PA ST D UE OR
IM PA IR ED
SPEC IFIC
PR OV ISIONS
Agribusiness
Construction &
development
Financial services
Hospitality
Manufacturing
Professional services
Property investment
Real estate - Mortgage
Personal
Government/public
authorities
Other commercial &
industrial		 $M
$M
$M
$M
$M
$M		 $M
$M
$M
$M
$M
-
-
-
3,972
193
-		 4,165
113
13
4,039
19
-
-
-
538
150
-		 688
10
-
678
6
579
120
2,159
95
231
245		 3,429
-
-
3,429
-
-
-
-
914
41
-		 955
33
-
922
13
-
-
-
257
17
-		 274
-
-
274
-
-
-
-
247
10
-		 257
7
2
248
4
-
-
-
2,012
81
-		 2,093
5
5
2,083
2
-
-
-
41,776
1,365
-		 43,141
29
300
42,812
4
-
-
-
288
6
-		 294
4
8
282
3
-
1,526
2,252
1
-
-		 3,779
-
-
3,779
-
-
-
-
1,825
154
-		 1,979
19
22
1,938
10
Total gross credit risk
Securitisation
Exposures(1)		 579
1,646
4,411
51,925
2,248
245		 61,054
220
350
60,484
61
-
-
912
2,155
21
8		 3,096
-
11
3,085
-
Total including
Securitisation
Exposures
Impairment provision
TOTAL		 579
1,646
5,323
54,080
2,269
253		 64,150
220
361
63,569
61
(164)
(61)
(23)
(80)
63,986
159
338
63,489

(1) The securitisation exposures of $2,155 million included under “Loans and advances” qualify for regulatory capital relief under APS 120 and therefore do not contribute to the Bank’s Total gross credit risk. The remaining securitisation exposures carry credit risk commensurate with their respective asset classes in accordance with APS 120.

(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.

(3) “Credit commitments” and “Derivative instruments” represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112.

13

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

TABLE 4: CREDIT RISK (continued)

Table 4A: Credit risk by gross credit exposure – outstanding as at 30 June 2016

R EC EIV A B LES
D U E FR OM
OTHER B A N KS
( 2 )
TR A D IN G
SEC U R ITIES
IN V ESTM EN T
SEC U R ITIES
( 3 ) LOA N S
A N D
A D V A N C ES
C R ED IT
C OM M ITM EN TS
( 4 )
D ER IV A TIV E
IN STR U M EN TS
( 4 )


TOTA L
C R ED IT R ISK
GR OSS
IM PA IR ED
A SSETS
PA ST D U E
N OT
IM PA IR ED >
9 0 D A Y S
TOTA L N OT
PA ST D U E OR
IM PA IR ED
SPEC IFIC
PR OV ISION S
Agribusiness
Construction &
development
Financial services
Hospitality
Manufacturing
Professional services
Property investment
Real estate - Mortgage
Personal
Government/public
authorities
Other commercial &
industrial		 $M
$M
$M
$M
$M
$M		 $M
$M
$M
$M
$M
-
-
-
3,952
187
-		 4,139
105
11
4,023
21
653
8
2
643
5
3,225
-
-
3,225
-
938
21
-
917
3
298
1
-
297
1
264
7
1
256
4
2,046
14
3
2,029
4
43,630
24
333
43,273
4
318
8
11
299
5
3,585
-
-
3,585
-
-
-
-
528
125
-
552
199
2,001
92
173
208
-
-
-
902
36
-
-
-
-
278
20
-
-
-
-
252
12
-
-
-
-
1,953
93
-
-
-
-
41,962
1,668
-
-
-
-
312
6
-
-
1,298
2,287
-
-
-
-
-
-
1,759
190
-		 1,949
18
29
1,902
9
Total gross credit risk
Securitisation
Exposures(1)		 552
1,497
4,288
51,990
2,510
208
-
-
937
2,308
22
9		 61,045
206
390
60,449
56
3,276
-
14
3,262
-
Total including
Securitisation
Exposures
Impairment provision
TOTAL		 552
1,497
5,225
54,298
2,532
217		 64,321
206
404
63,711
56
(164)
(56)
(26)
(82)
64,157
150
378
63,629

(1) The securitisation exposures of $2,308 million included under “Loans and advances” qualify for regulatory capital relief under APS 120 and therefore do not contribute to the Bank’s Total gross credit risk. The remaining securitisation exposures carry credit risk commensurate with their respective asset classes in accordance with APS 120.

(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.

  • (3) $64 million was reclassified from “Personal” to “Other commercial & industrial”.

(4) “Credit commitments” and “Derivative instruments” represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112.

14

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

TABLE 4: CREDIT RISK (continued)

Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 July to 30 September 2016

RECEIV A BLES
DU E FR OM
OTHER B AN KS
( 2 )
TRA DING
SEC UR ITIES
INV ESTM EN T
SEC UR ITIES
LOAN S A ND
AD V A NC ES
CR EDIT
COM M ITM EN TS
( 3 )
DER IV ATIV E
INSTR UM ENTS
( 3 )


TOTA L
CR EDIT R ISK
Agribusiness
Construction &
development
Financial services
Hospitality
Manufacturing
Professional services
Property investment
Real estate - Mortgage
Personal
Government/public
authorities
Other commercial &
industrial		 $M
$M
$M
$M
$M
$M		 $M
-
-
-
3,962
190
-		 4,152
-
-
-
533
138
-		 671
565
159
2,080
94
202
227		 3,327
-
-
-
908
39
-		 947
-
-
-
267
19
-		 286
-
-
-
250
11
-		 261
-
-
-
1,983
87
-		 2,070
-
-
-
41,869
1,517
-		 43,386
-
-
-
300
6
-		 306
-
1,412
2,270
-
-
-		 3,682
-
-
-
1,792
172
-		 1,964
Total gross credit risk
Securitisation
Exposures(1)		 565
1,571
4,350
51,958
2,381
227		 61,052
-
-
925
2,232
22
9		 3,188
Total including
Securitisation
Exposures
Impairment provision
TOTAL		 565
1,571
5,275
54,190
2,403
236		 64,240
(164)
64,076

(1) The securitisation exposures of $2,232 million included under “Loans and advances” qualify for regulatory capital relief under APS 120 and therefore do not contribute to the Bank’s Total gross credit risk. The remaining securitisation exposures carry credit risk commensurate with their respective asset classes in accordance with APS 120.

(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.

(3) “Credit commitments” and “Derivative instruments” represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112.

15

APS 330 for the quarter ended 30 September 2016

Suncorp Bank

TABLE 4: CREDIT RISK (continued)

Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 April to 30 June 2016

REC EIV AB LES
D UE FROM
OTHER BA NKS
( 2 )
TR AD IN G
SECU RITIES
IN V ESTM ENT
SECU RITIES
LOA NS AN D
AD V A NC ES ( 3 )
CR EDIT
C OM M ITM EN TS
( 4 )
DER IV ATIV E
INSTR UM ENTS
( 4 )


TOTA L
CR EDIT R ISK
Agribusiness
Construction &
development
Financial services
Hospitality
Manufacturing
Professional services
Property investment
Real estate - Mortgage
Personal
Government/public
authorities
Other commercial &
industrial		 $M
$M
$M
$M
$M
$M		 $M
-
-
-
3,906
186
-		 4,092
642
3,683
912
287
249
2,076
42,766
351
3,554
-
-
-
516
126
-
545
244
2,194
288
187
225
-
-
-
869
43
-
-
-
-
269
18
-
-
-
-
238
11
-
-
-
-
1,982
94
-
-
-
-
41,154
1,612
-
-
-
-
344
7
-
-
1,176
2,378
-
-
-
-
-
-
1,707
160
-		 1,867
Total gross credit risk
Securitisation
Exposures(1)		 545
1,420
4,572
51,273
2,444
225		 60,479
-
-
936
2,504
24
10		 3,474
Total including
Securitisation
Exposures
Impairment provision
TOTAL		 545
1,420
5,508
53,777
2,468
235		 63,953
(166)
63,787

(1) The securitisation exposures of $2,504 million included under “Loans and advances” qualify for regulatory capital relief under APS 120 and therefore do not contribute to the Bank’s Total gross credit risk. The remaining securitisation exposures carry credit risk commensurate with their respective asset classes in accordance with APS 120.

(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.

(3) $32 million was reclassified from “Personal” to “Other commercial & industrial”.

(4) “Credit commitments” and “Derivative instruments” represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112.

16

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

TABLE 4: CREDIT RISK (continued)

Table 4B: Credit risk by portfolio – 30 September 2016

GROSS
CREDIT
RISK
EXPOSURE
AVERAGE
GROSS
EXPOSURE
GROSS
IMPAIRED
ASSETS
PAST DUE
NOT
IMPAIRED >
90 DAYS
SPECIFIC
PROVISIONS
CHARGES
FOR
SPECIFIC
PROVISIONS
& WRITE
OFFS
Claims secured against eligible residential
mortgages(1)
Other retail
Financial services
Government and public authorities
Corporate and other claims		 $M
$M
$M
$M
$M
**$M **

46,237 46,574 29 311 4 1
294 306 4 8 3 2
3,429 3,327 - - - -
3,779 3,682 - - - -
10,411 10,351 187 42 54 12
Total 64,150 64,240 220 361 61 15

(1) $3,096 million, $3,188 million and $11 million has been included in Gross Credit Risk Exposure, Average Gross Exposure and Past due not impaired > 90 days respectively to include securitisation exposures.

Table 4B: Credit risk by portfolio – 30 June 2016

GROSS
CREDIT
RISK
EXPOSURE
AVERAGE
GROSS
EXPOSURE
GROSS
IMPAIRED
ASSETS
PAST DUE
NOT
IMPAIRED >
90 DAYS
SPECIFIC
PROVISIONS
CHARGES
FOR
SPECIFIC
PROVISIONS
& WRITE
OFFS
Claims secured against eligible residential
mortgages(1)
Other retail
Financial services
Government and public authorities
Corporate and other claims		 $M
$M
$M
$M
$M
**$M **

46,906 46,240 24 347 4 3
382 383 8 11 5 2
3,225 3,683 - - - -
3,585 3,554 - - - -
10,223 10,093 174 46 47 1
Total 64,321 63,953 206 404 56 6

(1) $3,276 million, $3,474 million and $14 million has been included in Gross Credit Risk Exposure, Average Gross Exposure and Past due not impaired > 90 days respectively to include securitisation exposures.

Table 4C: General reserves for credit losses

SEP-16
JUN-16
Collective provision for impairment
Ineligible collectiveprovisions onpast due not impaired		 $M
$M
103
108
(23)
(26)
Eligible collective provisions
Equityreserve for credit losses		 80
82
86
85
General reserve for credit losses 166
167

17

APS330 for the quarter ended 30 September 2016

Suncorp Bank

TABLE 5: SECURITISATION EXPOSURES

Table 5A: Summary of securitisation activity for the period

EXPOSURES SECURITISED EXPOSURES SECURITISED RECOGNISED GAIN OR(LOSS) ON SALE RECOGNISED GAIN OR(LOSS) ON SALE
SEP-16 JUN-16 SEP-16 JUN-16
$M
$M
$M
$M
Residential mortgages -
-
-
-
Total exposures securitised during theperiod -
-
-
-

Table 5B(i): Aggregate of on-balance sheet securitisation exposures by exposure type

EXPOSURE
EXPOSURE		 EXPOSURE
EXPOSURE
Exposure type SEP-16 JUN-16
$M
$M
Debt securities 912
937
Total on-balance sheet securitisation exposures 912
937

Table 5B(ii): Aggregate of off-balance sheet securitisation exposures by exposure type

EXPOSURE
EXPOSURE		 EXPOSURE
EXPOSURE
Exposure type SEP-16 JUN-16
$M
$M
Liquidity facilities
Derivative exposures		 21
22
8
9
Total off-balance sheet securitisation exposures 29
31

18

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

TABLE 18: REMUNERATION DISCLOSURES AS AT 30 JUNE 2016

Basis of preparation

The Remuneration Disclosure has been prepared in accordance with the Australian Prudential Regulation Authority (APRA) Prudential Standard (APS) 330: Public Disclosure, effective as at 30 June 2016.

Remuneration Disclosure overview

This Remuneration Disclosure has been endorsed by the Remuneration Committee and approved by the Board.

The disclosure is structured as follows:

  • Section 1: Explains the Suncorp Group Limited (the Group) Remuneration Policy and remuneration practices and outlines the linkages between remuneration and strategic objectives, both financial and non-financial. References are made to the Group’s remuneration framework and governance as these define the remuneration arrangements for all employees relating to Suncorp Bank; and

  • Section 2: Details the aggregated remuneration data for Senior Managers and Material Risk Taker (MRT) roles relating to Suncorp Bank during the financial year ended 30 June 2016 (FY16).

The table below identifies the definitions considered for the purpose of the Remuneration Disclosure requirements under APS 330.

Number of
Reference Detail
Individuals 20161
Remuneration
Disclosure
completed on a
Level 2 basis		 Suncorp Bank is a core function of the Group and is represented by the
legal entity Suncorp Metway Limited (SML) and its subsidiaries. SML is an
authorised deposit-taking institution and a wholly owned subsidiary of the
Group. Therefore this Remuneration Disclosure is completed on a Level
22basis.
N/A
Senior Managers The Key Management Personnel (KMP) roles (excluding the Non-
Executive Directors) for the Group are also KMP for SML and its
subsidiaries and are considered Senior Managers for the purpose of this
aggregated Remuneration Disclosure. KMP roles are Responsible
Persons within the Group’s Fit and Proper Policy.		 14 individuals (11
roles)
Material Risk-
Taker (MRT) roles
for Suncorp Bank
On 28 June 2012 the Board approved the Group’s definition of ‘Material
Risk-Taker’ to align with the Responsible Persons’ definition within the
Group’s Fit and Proper Policy as it applies to Australia. The Group’s
definition of Responsible Person as per the Policy is broad and includes
managers who make, or participate in making, decisions that affect the
whole, or a substantial part, of the business of the APRA Regulated
Entity. For the purpose of this report, Executive General Managers
(EGMs) and other specified senior roles that meet the definition of		 24 individuals (21
roles)3

1 The number of individuals is based on headcount. Where the individual held the disclosed role for a portion of the financial year their remuneration is pro-rated to reflect this in Section 2 of this report.

2 Under Application Paragraph 3, ‘where a locally incorporated ADI is a subsidiary of an authorised non-operating holding company (authorised NOHC), the authorised NOHC must ensure that the requirements under this Prudential Standard are met on a Level 2 basis’ (APS 330, August 2015).

3 In the later part of FY16, the Group transitioned to a new operating model. As a result of the transformation, business units were realigned into customer-focused functions. In the FY15 report, the leadership team and select employees of the Banking Business Unit were disclosed as MRTs in Section 2 of this report. Given the Banking Business Unit no longer exist due to the function realignment, a rigorous review was undertaken on all functional EGM and specified senior roles across the Group to identify those roles that meet the MRT definition in relation to Banking –18 roles under the new operating model have been identified (the remaining three roles pertain to the old operating model and will not be disclosed after FY16).

19

APS330 for the quarter ended 30 September 2016

Suncorp Bank

Responsible Person in relation to Suncorp Bank are identified as MRT
roles.
All employees Section 1 details the qualitative disclosure covering all employees of
Suncorp Bank.		 N/A

Section 1

i. Remuneration governance framework

The Remuneration Committee (Committee) leads remuneration matters at Suncorp. The Committee operates under its own Charter and reports to the Board. The Committee consists of independent NonExecutive Directors, and membership as at 30 June 2016 is as follows[4] :

  • Ms Christine McLoughlin (Chairman)

  • Mr William Bartlett

  • Mr Ewoud Kulk

  • Dr Douglas McTaggart

  • Dr Zygmunt Switkowski AO (Ex Officio Member)

The Committee met six times during FY16 and fully discharged its responsibilities in accordance with its Charter. The Remuneration Committee’s Charter, which the Board reviews annually for appropriateness, was confirmed in June 2015. This Charter is available on the Company’s website at suncorpgroup.com.au/about-us/governance.

The Committee fee for FY16 for the Committee chair was $40,000 and for Committee members were $20,000.

The Group’s remuneration governance framework, which meets the standards expected by the ASX Corporate Governance Principles and Recommendations (3rd Edition) is summarised below.

4 Ms Christine McLoughlin was appointed Chairman of the Remuneration Committee effective 1 January 2016. Mr William Bartlett ceased to be Chairman of the Remuneration Committee effective 31 December 2015. Dr Douglas McTaggart was appointed as a member of the Remuneration Committee effective 1 January 2016.

20

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

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21

APS330 for the quarter ended 30 September 2016

Suncorp Bank

During FY16 the Committee did not engage external advisers to provide remuneration recommendations or act as ‘remuneration consultants’ to the Group as defined in the Corporations Act 2001 .

ii. Group Remuneration Policy and framework

The Group Remuneration Policy covers all directors and employees of the Group and provides, within the context of the Group’s long-term financial soundness and risk management framework, the:

  • reward objectives and principles underpinning remuneration; and

  • framework for the governance, structure and operation of remuneration within the Group.

The Group Remuneration Policy was last endorsed by the Committee and approved by the Board in November 2015.

The reward framework is comprised of a mix of fixed and at-risk remuneration.

Fixed remuneration

Fixed remuneration is comprised of base salary, salary sacrificed benefits, and other benefits plus superannuation[5] . Fixed remuneration is aligned to market and is determined based on a range of considerations including role size and complexity along with the individual’s performance, skills and experience.

At-risk remuneration

At-risk components of remuneration must satisfy performance and risk-related requirements. They are explicitly linked to the short-term and long-term performance of the Group and moderated by prudent risk management. These components are subject to clawback in part or whole (See iii).

The target remuneration mix for each role is determined by a number of factors including accountability of the role, level of influence over business function or group results and relevant market practice. Actual remuneration mix is determined on individual, business function and group performance.

Short-term incentives (STI)

Eligible employees participate in one of two types of STI:

  • The Corporate Incentive Plan: As the Group’s primary STI plan, it is designed to appropriately reward high performance and to encourage behaviour that supports the long-term financial soundness of the Group.

  • Non-Corporate Incentive Plans: Non-Corporate Incentive Plans are developed under exceptional circumstances where market reward practices necessitate a business specific incentive plan. The plans must adhere to the Group Remuneration Policy and standards and are reviewed annually to ensure compliance with the policy and with any regulatory changes.

All employees that participate in STI may have a portion of their incentive deferred for a period of two years, dependent upon the employee’s level and the amount of incentive received. A two year deferral period is considered appropriate to identify, if any, instances of significant adverse outcomes have occurred (refer to iii).

5 Superannuation is paid at a rate of 9.5% of base remuneration or the maximum contribution base, whichever is the lesser.

22

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Long-term Incentives (LTI)

Eligible participants participate in one of two types of LTI plans:

  • Senior Managers and EGMs are eligible to receive performance rights granted under the Group’s Equity Incentive Plan (EIP), these are subject to a market-based performance hurdle being met and potential clawback.

  • Select MRT roles are eligible to receive restricted shares granted under the Restricted Share Plan (RSP), consistent with comparable roles across the Group. The shares will vest subject to a time based hurdle being met and potential clawback.

23

APS330 for the quarter ended 30 September 2016

Suncorp Bank

The remuneration strategy, which is derived from linking the reward philosophy with business strategy and risk tolerance, ensures that the principles that determine remuneration are focused on driving the performance and behaviours consistent with achieving this objective. The following table demonstrates the link between the reward principles and the remuneration framework:

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24

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Performance Assessment

The Balanced Scorecard is adopted to assess performance for all employees of the Group and is one of several initiatives in place to promote a culture of prudent risk-taking in accordance with Group policies and values. To embed a culture of prudent risk-taking, risk based performance measures at all organisational levels are integrated with the Group’s risk management framework.

The various performance measures in the Balanced Scorecard are broadly categorised as:

  • profit and financial;

  • risk;

  • people;

  • customer; and

  • other measures – which includes individual measures.

Both STI plan types measure performance against both financial and non-financial objectives.

Performance outcomes are measured based on a challenging and robust assessment of achievement relative to pre-determined targets. Performance against goals is the basis to calculate incentive payments. Governance protocols include:

  • goals are reviewed at least annually to ensure that they are aligned with the business function’s strategy;

  • funding for the plans is assessed against the achievement of strategic business objectives of the business function to ensure it delivers the long-term strategy; and

  • deferral mechanisms are used in accordance with APRA Guidelines and Associated Standards and Group policies.

iii. Remuneration aligns with risk management

A rigorous approach to effective risk management is embedded throughout the Group.

The Enterprise Risk Management Framework (ERMF) lays the foundation for all risk management processes across the Group. The ERMF helps ensure the integration of effective risk management across the organisation and incorporates Suncorp’s policies (which include risk management policies and the Remuneration Policy).

The Board sets the Risk Appetite for the Group, and has ultimate responsibility for the effectiveness of the Group’s risk management practices.

In addition, the Chairman of the Remuneration Committee is a member of the Risk Committee and similarly the Chairman of the Risk Committee is a member of the Remuneration Committee.

The Group’s shared values and leader profiles make it clear to all employees the importance of embedding risk into decision-making processes, and risk management into the Group’s operations. Business function leaders develop their business strategy and risk tolerance with an understanding of the Group’s risk appetite and also what is happening in the market in which the Group operates. Financial returns delivered to the Group are commensurate with the risks the Group is willing to take in pursuit of the achievement of business objectives. Additionally, risk is embedded in the way performance is measured for all employees across Suncorp.

25

APS330 for the quarter ended 30 September 2016

Suncorp Bank

In determining ‘at-risk’ remuneration, the Board ensures risk management is considered through:

  • a separately weighted risk measure in the Group scorecard where the performance of the Group, business function and individuals are assessed by the Risk Committee and measured with reference to how risk is managed;

  • individual adherence to risk management policies is assessed to ensure all executives and employees adhere to the ERMF, demonstrating performance that is aligned to expected ethical standards;

  • an assessment based on behavioural and cultural measures, which considers compliance with the Group Risk Appetite Statement. This is a significant consideration of overall performance to deliver an organisation-wide focus on prudent management of the risks the Group faces; and

  • the application of Remuneration Committee discretion to consider additional factors in the determination of performance outcomes.

In determining performance and remuneration outcomes, the Remuneration Committee considers all factors to demonstrate alignment with the Group’s Risk Appetite and adherence to effective risk management practices to ensure the long-term financial soundness of outcomes is determined, before the Board makes its final determination of the overall Corporate Incentive Plan pool.

The table below provides the key risks and the measures for Suncorp Bank which are updated periodically to ensure that they comply with the legislative standards (note: these risks have not changed over the past year):

Key Risks Key measures Review of the measures
Financial risks
(credit risk,
market risk,
liquidity risks)		 Metrics embedded within Scorecard KPI’s
include compliance with Board delegated limits
for key credit, liquidity and market risk.
Other measures used to evaluate Financial
risk:
Stress testing, including sensitivity and
scenario analysis
Concentrations and large exposures
Funding, cashflow, liquidity		 Compliance with credit risk appetite
monitored and reported monthly.
Liquidity and market risk limits are
monitored continuously and part of
monthly reporting.
Operational
risks		 A number of measures are used to evaluate
Operational risk including:
Data Quality Metrics across customer and
operational systems
Manager Risk Assessment Ratings and
Incident Reporting
Internal and External Audit Findings		 Data Quality Monitoring performed
monthly, quarterly and annually
Data Governance and remediation
embedded within process control
Manager Risk Assessment Ratings
performance is assessed Monthly
and Quarterly
Internal and External Audits are
performed in accordance with the
Annual Audit Program
Compliance
risks		 A number of measures are used to evaluate
Compliance Risk, including:
Internal and External Audit Findings
Incident Management
Banking & Wealth Assurance Program
Rating
Scorecard KPI incorporation of acceptable
behaviours
Completion of Annual Mandatory
Compliance Training Program		 Compliance measures are reviewed
on a quarterly and half yearly cycle

26

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Deferral and clawback

Deferred amounts under the Suncorp Corporate Incentive Plan, Non-Corporate Incentive Plans and unvested LTI (from the October 2010 LTI Grant onwards) are subject to potential clawback based on the Board’s judgment, as summarised below:

Purpose Clawback enables the Board to adjust performance based remuneration (including
deferred STI and unvested LTI) downwards (including to zero) to protect the
Group’s financial soundness and ability to respond to unforeseen significant issues
Criteria The following criteria are considered when determining if clawback should be
applied during the deferral period.
Clawback will be applied if prior to the date of payment, it is determined that:
there was, during the performance year in respect of which the incentive was
awarded, a failure to comply with Suncorp's risk management policies and
practices;
the employee was aware of the above mentioned failure, or should reasonably
have been aware of that failure, when the incentive was awarded; and
the matters referred to above, if known at the time, would have resulted in
materially different assumptions being applied when determining the incentive to
be awarded to the employee.
Approval
process		 Senior Managers
The Chief Risk and Legal Officer (CRLO) and Chief Financial Officer (CFO)
produce a report on relevant matters to be considered for clawback and release of
deferred incentives and unvested LTI awards.The Chairmen of the Remuneration,
Risk and Audit Committees verify the report information and confirm that all
relevant matters have been considered. Based on this report:
the CEO & Managing Director makes a recommendation to the Board via the
Remuneration Committee, for approval of the release (and/or clawback where
appropriate) of deferred incentives and unvested LTI awards for the Senior
Managers; and
the Chairmen of the Remuneration, Risk and Audit Committees make a
recommendation to the Board, for approval of the release (and/or clawback where
appropriate) of deferred incentives and unvested LTI awards for the CEO &
Managing Director.
All other employees
A Remuneration Oversight Committee (ROC) comprising the CRLO, CFO and Chief
People Experience Officer has been established to provide recommendations to the
CEO & Managing Director on matters to be considered for the clawback and release
of deferred incentives and equity awards.
The ROC meet quarterly and may recommend the full or partial clawback of any
deferredincentive orequity awardfor relevant employees across the Group.

27

APS330 for the quarter ended 30 September 2016

Suncorp Bank

The amount deferred varies by level – the more senior the role, the larger the proportion deferred given the greater amount of influence senior roles have to influence the long-term future of the Group.The deferral arrangements by level are summarised as follows:

Level STI Deferral Proportion
CEO & Managing Director 50% of the STI award for the CEO & Managing Director is
deferred into cash
Senior Managers 35% of the STI award for Senior Managers is deferred into cash
EGMs 30% of the STI award for EGMs is deferred into cash
All other employees The deferral threshold is the lower of 30% of fixed salary or
$100,000 in STI award, of which 40% will be deferred into cash
(with a minimum deferral amount of $10,000 before deferral is
triggered)

Risk and financial control personnel

Separate performance and remuneration review processes govern remuneration decisions concerning employees working in the areas of risk and financial control.

In these roles, performance measures are set and assessed by leaders within the CRLO and CFO functions, independent of their business function, with oversight from the CRLO or CFO as appropriate.

In addition, employees working in risk roles across the Group typically have a comparatively higher percentage of risk-based measures in their scorecard.

Material Risk-Taker roles

The Board approved definition of MRT roles aligns with the Responsible Persons’ definition in the Fit and Proper Policy, as it applies to Australia.

All new appointments for these roles, and changes to remuneration arrangements requires approval by the Board. Within pre-defined parameters, delegated authority has been granted by the Board to the CEO & Managing Director to approve appointments or changes to remuneration and terms of employment.

The Board has final oversight and reviews the remuneration arrangements of all MRT roles on an annual basis.

For the purpose of this report, EGMs and other specified senior roles that meet the definition of Responsible Person in relation to Suncorp Bank are identified as MRT roles.

28

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

Section 2: Quantitative disclosure requirements

The table below contains aggregated remuneration details for Senior Managers[6] and MRT as calculated in accordance with Australian Accounting Standards, as required under paragraph (j) of Table 21:

FY16 FY16 FY16 FY16 FY15 FY15 FY15 FY15
Senior Managers Material Risk-Takers Senior Managers Material Risk-Takers
$000 Unrestrict
ed		 Deferre
d		 Unrestrict
ed		 Deferre
d		 Unrestrict
ed		 Deferre
d		 Unrestrict
ed		 Deferre
d
Fixed remuneration
Cash-based7 11,185 - 4,787 - 10,574 - 3,992 -
Other8 1,248 - 356 - 773 - 58 -
Variable remuneration9
Cash-based10 4,011 2,783 1,256 561 7,140 4,873 1,158 446
Share linked instruments11 - 5,779 - 296 - 5,628 - 336

  • 6 To be consistent with other disclosures, KMP for SGL (excluding non-executive directors) are considered as Senior Managers for the purpose of APS Remuneration Disclosure requirements.

  • 7 Represents actual fixed remuneration received, including salary sacrificed benefits and employer superannuation.

8 Represents non-monetary benefits including airfares and insurances paid on behalf of the employee and the net annual leave and long service leave accrual for the financial year.

9 Equity-settled performance rights issued as LTI are expensed to the profit or loss based on their fair value at grant date over the financial year from grant date to vesting date. The fair value is assessed using a Monte-Carlo model and reflects the fact that an individual’s entitlement to the shares is dependent on relative TSR performance. The values realised in subsequent years may differ to the accounting expense reported, depending on the extent to which the performance hurdles are met.

10 Cash incentives earned during the financial year. The deferred cash portion awarded includes interest accrued on prior year deferred STI’s and is subject to potential clawback during the deferral period.

11 Refer to the Suncorp Group Limited Annual Report for the financial year ended 30 June 2016 and 30 June 2015 for details regarding employee share plans and associated remuneration strategies to drive long-term strategic behavior.

29

APS330 for the quarter ended 30 September 2016

Suncorp Bank

During FY16 10 Senior Managers and 20 MRT received a variable remuneration award and in FY15 13 Senior Managers and 15 MRT received a variable remuneration award. No guaranteed bonus or sign-on awards were made to the disclosed individuals during FY16.

The table below summarises the termination payments made/granted to Senior Managers and MRT in FY16 and FY15.

FY16 FY16 FY16 FY16 FY15 FY15 FY15 FY15
Senior Managers Material Risk-Takers Senior Managers Material Risk-Takers
No. of
individuals		 Total
Amount
$000		 No. of
individuals		 Total
Amount
$000		 No. of
individuals		 Total
Amount
$000		 No. of
individuals		 Total
Amount
$000
Termination payments12 2 2,207 2 222 - - 1 721

12 Termination payments are paid in accordance with contractual commitments.

30

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

The following table summarises the requirements under paragraphs (i), (j) and (k) of table 21 for Senior Managers[13] and MRT.

$000 FY16 FY16 FY15 FY15
Senior Managers Material Risk-
Takers		 Senior Managers Material Risk-
Takers
Total outstanding deferred remuneration14 40,172 5,405 48,208 2,931
Cash-based15 12,183 2,383 15,241 1,276
Shares and share-linked instruments16 27,989 3,022 32,967 1,655
Total paid during the year17 12,595 1,147 13,161 916
Total reductions due to explicit adjustments18 6,301 33 0 (67)
Total reductions due to implicit adjustments19 (408) (185) (649) (37)

13 To be consistent with other disclosures, KMP for SGL (excluding non-executive directors) are considered as Senior Managers for the purpose of APS Remuneration Disclosure requirements.

14 Includes the total outstanding deferred cash and equity awards as at 30 June. Outstanding deferred remuneration is exposed to ex post explicit and implicit adjustments. All deferred remuneration outstanding for an employee in the position of Senior Manager or MRT at 30 June has been included, even where that award was earned in a different capacity within the the Group. The deferred balance has been excluded where the Senior Manager or MRT is no longer employed in that capacity at 30 June.

15 Deferred cash-based remuneration represents the deferred portion of STI’s awarded in 2014, 2015 and 2016 financial years (2015: 2013, 2014 and 2015 financial years), together with the interest accrued on outstanding deferral, for all Senior Managers and MRT employed within that capacity as at 30 June. Deferred cash may have been accrued whilst employed in non Senior Manager or MRT positions.

16 Deferred equity represents the market value as at 30 June, calculated by the number of performance rights or restricted shares granted multiplied by the closing share price as traded on the ASX on 30 June. The balance consists of all offers up to and including 30 June, that are still to vest for Senior Managers and MRT employed in that capacity as at 30 June.

17 Consists of all deferred cash incentives from prior years and associated interest paid during the financial year, received whilst employed in the capacity of Senior Manager or MRT. The value also includes any deferred equity vested during the financial year.

18 Represents the market value at grant date of performance rights or restricted shares forfeited during the financial year.

19 Represents any reduction in the market value at grant date compared to market value at 30 June, for performance rights or restricted shares yet to vest, or reduction in the market value at grant date compared to market value at vesting date during the period. Note increases may have occurred during the period, however, only reductions have been disclosed in accordance with the requirements of APS330.

31

APS330 for the quarter ended 30 September 2016

Suncorp Bank

Appendix 2

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APS 330 for the quarter ended 30 September 2016

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33

APS330 for the quarter ended 30 September 2016

Suncorp Bank

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34

Suncorp Bank

APS 330 for the quarter ended 30 September 2016

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35

Suncorp Bank

APS330 for the quarter ended 30 September 2016

Appendix 3 – Definitions

ADI Authorised Deposit-taking Institution
APRA Australian Prudential Regulatory Authority
Capital adequacy ratio Capital base divided by total assessed risk, as defined by APRA
Common Equity Tier 1 Common Equity Tier 1 Capital (CET1) comprises accounting equity
plus adjustments for intangible assets and regulatory reserves
Common Equity Tier 1 ratio Common Equity Tier 1 divided by total assessed risk
Credit Value Adjustment A capital charge that covers the risk of mark-to-market losses on the
(CVA) counterparty credit risk
Equity reserve for credit The equity reserve for credit losses represents the difference between
losses the collective provision for impairment and the estimate of credit
losses across the credit cycle based on guidance provided by APRA
Gross non-performing Gross impaired assets plus past due loans
loans
Impairment losses to gross Impairment losses on loans and advances divided by gross banking
loans and advances loans, advances and other receivables
Net Stable Funding Ratio NSFR is a measure announced as part of the Basel III liquidity
(NSFR) reforms that will apply from January 2018. The ratio establishes a
minimum acceptable amount of stable funding (the portion of those
types and amounts of equity and liability financing expected to be
reliable sources of funds over a one-year time horizon under
conditions of extended stress) based on the liquidity characteristics of
an ADI’s assets and activities over a one-year horizon.
Past due loans Loans outstanding for more than 90 days
Risk weighted assets Total of the carrying value of each asset class multiplied by their
assigned risk weighting, as defined by APRA
Total assessed risk Bank credit risk-weighted assets, off-balance sheet positions, market
risk capital charge and operational risk charge, as defined by APRA

36

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