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SUNCORP GROUP LIMITED — Interim / Quarterly Report 2019
May 7, 2019
65879_rns_2019-05-07_e9315b3d-7b5a-4abc-a8aa-e93153b021a4.pdf
Interim / Quarterly Report
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ASX announcement
8 May 2019
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Suncorp Bank APS330 Update
Suncorp Group (ASX: SUN | ADR: SNMCY) provided its quarterly update as at 31 March 2019, as required under the Australian Prudential Standard 330.
Suncorp’s total lending portfolio ended the March quarter at $58.9bn, up 1.0% from March 2018, and down 0.5% from December 2018.
Suncorp Banking and Wealth CEO, David Carter said growth in the business lending portfolios was offset by a $314 million contraction in home lending, amid increased price-driven competition and a continued credit market slowdown.
“Over this time, we have maintained focus on asset quality, managing our margin and supporting the broker channel, including initiatives to improve operational efficiencies.
“We expect home and business lending growth to improve in the quarter ending June 2019, particularly following Suncorp’s $3 billion lending pledge to the small business and agribusiness sectors, providing these important market segments access to credit to invest and grow.
“Hardship applications relating to floods in Townsville, contributed to an increase in home loans in arrears. We know from experience with past flood events, that the increase in arrears is temporary, with most customers successfully recovering after approximately six months.
“Additionally, during the quarter, the Bank has provided support to agribusiness customers materially impacted by significant weather events,” Mr Carter said.
Mr Carter said the Bank continued to target sustainable business with acceptable margins and risk and maintained a strong balance sheet.
“We remain selective in our target markets and have maintained a high-quality lending portfolio. Our diversified, flexible and stable funding base allowed us to further bolster our balance sheet with the recent completion of an offshore USD senior unsecured transaction of $500 million.
“We expect the ongoing investment in digital enhancements and payment capabilities that improve the banking experience for our customers to continue to deliver at-call deposits growth in the final quarter and beyond,” Mr Carter said.
Following payment of the 2019 financial year interim dividend to Suncorp Group, Banking’s Common Equity Tier 1 (CET1) ratio of 9.10% reflects a robust capital position, above the target operating range of 8.5% to 9.0%.
Ends
| Ends | Ends | |
|---|---|---|
| For more information contact: | ||
| Media | Fiona Bednarz | +61 427 189 795 |
| [email protected] | ||
| Analysts and | Kelly Hibbins | +61 414 609 192 |
| Investors | +61 2 8121 9208 | |
| [email protected] |
Suncorp Group Limited | ABN 66 145 290 124 | Level 28, 266 George Street, Brisbane Qld 4000 1 suncorpgroup.com.au
SUNCORP GROUP LIMITED SUNCORP BANK APS 330
FOR THE QUARTER ENDED 31 MARCH 2019
RELEASE DATE: 8 MAY 2019
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Suncorp Group Limited
ABN 66 145 290 124
SUNCORP
APS 330
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 31 March 2019 (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 8 May 2019. 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 consider 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
Investor Relations
Level 28, 266 George Street Kelly Hibbins Jatin Khosla Brisbane Queensland 4000 EGM Investor Relations EM Investor Relations suncorpgroup.com.au 0414 609 192 0439 226 872 (02) 8121 9208 (07) 3362 1322 [email protected] [email protected]
PAGE 2
AS AT 31 MARCH 2019
SUNCORP
APS 330
TABLE OF CONTENTS
Basis of preparation ................................................................................................................................................ 2 Overview ................................................................................................................................................................ 4 Outlook ................................................................................................................................................................... 4 Loans and advances ............................................................................................................................................... 5 Impairment losses on loans and advances ............................................................................................................... 6 Impaired assets ...................................................................................................................................................... 6 Non-performing loans.............................................................................................................................................. 7 Provision for impairment .......................................................................................................................................... 8 Gross non-performing loans coverage by portfolio.................................................................................................... 9 Appendix 1 – APS 330 Tables ............................................................................................................................... 10 Appendix 2 – Definitions ........................................................................................................................................ 21
PAGE 3
AS AT 31 MARCH 2019
SUNCORP
APS 330
OVERVIEW
The total lending portfolio ended the March quarter at $58.9bn, up 1.0% from March 2018 and down 0.5% from December 2018. The commercial portfolio grew by 0.2% over the quarter to $6.7bn and continues to be well diversified and weighted towards lending facilities less than $5m. The agribusiness portfolio grew by 0.4% to $4.4bn despite significant weather events in some areas during the quarter.
Growth in the business lending portfolios was offset by a $314m contraction in home lending amidst ongoing and intense price-driven competition and a continued slow-down in the credit market. During the March quarter, Banking focused on strengthening broker partnerships, supporting first home buyers and implementing initiatives to improve operational efficiencies. At the end of the quarter, the home lending portfolio was conservatively positioned as follows:
-
Owner occupier: 72%, Investor: 28%
-
Principal and Interest: 79%, Interest Only 21%
-
LVR <80%: 79%, LVR>80%: 21%
Banking continues to remain selective in its target markets, maintaining a high-quality lending portfolio. A net positive impairment recovery of $2m over the quarter was primarily underpinned by improvements in the commercial lending portfolio’s risk profile, following favourable migration across the credit stages as assessed under AASB 9.
Past due loans which are not impaired increased by 2.5% to $537m over the quarter. The increase in arrears was mainly attributable to major weather events, including floods in Townsville and across NorthWest Queensland that occurred during the quarter. Past experience with flood events suggests the increase in arrears is temporary, with the majority of customers successfully recovering after a period of approximately six months.
On average, the 90 day Bank Bill Swap Rate (BBSW) was 1.95% in the March quarter, compared to 1.97% in the previous quarter. The reduction in BBSW since mid March provided some relief in wholesale funding costs. Suncorp has maintained a measured approach to the management of funding and liquidity risk to support a sustainable funding profile. During the quarter, Banking utilised its diversified, flexible and stable funding base to complete an offshore USD senior unsecured transaction of $500m to further strengthen the balance sheet. Banking’s focus on growing the deposit portfolio continued, with enhanced digital functionality delivered in March. Strong growth in at-call deposits was achieved at a rate materially above system against a retracting deposit market. The Net Stable Funding Ratio (NSFR) was 112% as at 31 March 2019, comfortably above the target of 105%.
Following payment of the 2019 financial year interim dividend to Suncorp Group, Banking’s Common Equity Tier 1 (CET1) ratio of 9.10% reflects a robust capital position, above the target operating range of 8.5% to 9.0%.
OUTLOOK
Suncorp is targeting above system growth in at-call customer deposits in Q4FY19, leveraging the investment in enhanced digital and payment capabilities to improve customer experiences. Despite wholesale funding costs starting to ease, sustained pressure from price-driven mortgage competition is expected to result in a FY19 net interest margin at, or just below, the bottom end of the 1.80% to 1.90% target range.
Total lending growth is expected to improve in Q4FY19 and Suncorp will continue to manage the portfolio mix and target sustainable business with acceptable margins and risk. It is anticipated that the home lending market will be impacted by the continued tightening of serviceability and lending standards across the industry, as well as reducing demand and declining confidence in the property sector. The agribusiness portfolio is expected to benefit from an improvement in agricultural conditions following recent widespread rainfall. In March, Suncorp announced a commitment to lend an additional $3bn to small business and agribusiness customers, ensuring availability of credit to these segments.
Suncorp will continue to maintain a prudent risk appetite, with no material changes anticipated in any segment. Impairment losses are expected to remain below the bottom end of the through-the-cycle operating range of 10 to 20 basis points of gross loans and advances in FY19.
PAGE 4
AS AT 31 MARCH 2019
SUNCORP
APS 330
LOANS AND ADVANCES
| LOANS AND ADVANCES | |||||
|---|---|---|---|---|---|
| Mar-19 | Mar-19 | ||||
| Mar-19 | Dec-18 | Mar-18 | vs Dec-18 | vs Mar-18 | |
| $M | $M | $M | % | % | |
| Housing loans | 40,569 | 40,663 | 40,929 | (0.2) | (0.9) |
| Securitised housingloans and covered bonds | 7,099 | 7,319 | 6,372 | (3.0) | 11.4 |
| Total housing loans | 47,668 | 47,982 | 47,301 | (0.7) | 0.8 |
| Consumer loans | 155 | 162 | 251 | (4.3) | (38.2) |
| Retail loans | 47,823 | 48,144 | 47,552 | (0.7) | 0.6 |
| - | |||||
| Commercial (SME) | 6,675 | 6,662 | 6,300 | 0.2 | 6.0 |
| Agribusiness | 4,380 | 4,364 | 4,453 | 0.4 | (1.6) |
| Total Business loans | 11,055 | 11,026 | 10,753 | 0.3 | 2.8 |
| Total lending | 58,878 | 59,170 | 58,305 | (0.5) | 1.0 |
| - | |||||
| Other lending | 4 | 6 | 13 | (33.3) | (69.2) |
| Gross loans and advances | 58,882 | 59,176 | 58,318 | (0.5) | 1.0 |
| Provision for impairment | (138) | (145) | (131) | (4.8) | 5.3 |
| Total loans and advances | 58,744 | 59,031 | 58,187 | (0.5) | 1.0 |
| Credit-risk weighted assets | 27,561 | 27,584 | 27,259 | (0.1) | 1.1 |
| - | |||||
| Geographical breakdown - Total lending | - | ||||
| Queensland | 31,228 | 31,266 | 30,550 | (0.1) | 2.2 |
| New South Wales | 15,798 | 15,904 | 15,533 | (0.7) | 1.7 |
| Victoria | 5,976 | 6,063 | 6,119 | (1.4) | (2.3) |
| Western Australia | 3,496 | 3,528 | 3,662 | (0.9) | (4.5) |
| South Australia and other | 2,380 | 2,409 | 2,441 | (1.2) | (2.5) |
| Outside of Queensland loans | 27,650 | 27,904 | 27,755 | (0.9) | (0.4) |
| Total lending | 58,878 | 59,170 | 58,305 | (0.5) | 1.0 |
PAGE 5
AS AT 31 MARCH 2019
SUNCORP
APS 330
IMPAIRMENT LOSSES ON LOANS AND ADVANCES
| Quarter Ended | Mar-19 | Mar-19 | |||
|---|---|---|---|---|---|
| Mar-19 | Dec-18 | Mar-18 | vs Dec-18 | vs Mar-18 | |
| $M | $M | $M | % | % | |
| Collective provision for impairment | (7) | 6 | (1) | (216.7) | 600.0 |
| Specific provision for impairment | 3 | 2 | 3 | 50.0 | - |
| Actual net w rite-offs | 2 | 2 | - | - | n/a |
| Impairment losses | (2) | 10 | 2 | ||
| Impairment losses to gross loans and | |||||
| advances(annualised) | 0.00% | 0.02% | 0.01% |
IMPAIRED ASSETS
| IMPAIRED ASSETS | |||||
|---|---|---|---|---|---|
| Quarter Ended | Mar-19 | Mar-19 | |||
| Mar-19 | Dec-18 | Mar-18 | vs Dec-18 | vs Mar-18 | |
| $M | $M | $M | % | % | |
| Retail lending | 58 | 61 | 49 | (4.9) | 18.4 |
| Agribusiness lending | 37 | 37 | 50 | - | (26.0) |
| Commercial/SME lending | 65 | 66 | 41 | (1.5) | 58.5 |
| Gross impaired assets | 160 | 164 | 140 | (2.4) | 14.3 |
| Specificprovision for impairment | (34) | (34) | (38) | - | (10.5) |
| Net impaired assets | 126 | 130 | 102 | (3.1) | 23.5 |
PAGE 6
AS AT 31 MARCH 2019
SUNCORP
APS 330
NON-PERFORMING LOANS
| NON-PERFORMING LOANS | |||||
|---|---|---|---|---|---|
| Quarter Ended | Mar-19 | Mar-19 | |||
| Mar-19 | Dec-18 | Mar-18 | vs Dec-18 | vs Mar-18 | |
| $M | $M | $M | % | % | |
| Gross balances of individually impaired loans | |||||
| Gross impaired assets | 160 | 164 | 140 | (2.4) | 14.3 |
| Specificprovision for impairment | (34) | (34) | (38) | - | (10.5) |
| Net impaired assets | 126 | 130 | 102 | (3.1) | 23.5 |
| Size of gross individually impaired assets | |||||
| Less than one million | 43 | 43 | 47 | - | (8.5) |
| Greater than one million but less than ten million | 102 | 106 | 77 | (3.8) | 32.5 |
| Greater than ten million | 15 | 15 | 16 | - | (6.3) |
| Gross impaired assets | 160 | 164 | 140 | (2.4) | 14.3 |
| - | |||||
| Past due loans not shown as impaired assets | 537 | 524 | 453 | 2.5 | 18.5 |
| - | - | ||||
| Gross non-performing loans | 697 | 688 | 593 | 1.3 | 17.5 |
| Analysis of movements in gross individually impaired | |||||
| assets | |||||
| Balance at the beginning of the period | 164 | 140 | 136 | 17.1 | 20.6 |
| Recognition of new impaired assets | 13 | 41 | 22 | (68.3) | (40.9) |
| Increases in previously recognised impaired assets | 1 | 1 | 1 | - | - |
| Impaired assets w ritten off/sold during the period | (2) | (5) | (1) | (60.0) | 100.0 |
| Impaired assets w hich have been reclassed as performing | |||||
| assets or repaid | (16) | (13) | (18) | 23.1 | (11.1) |
| Balance at the end of theperiod | 160 | 164 | 140 | (2.4) | 14.3 |
PAGE 7
AS AT 31 MARCH 2019
SUNCORP
APS 330
PROVISION FOR IMPAIRMENT
| Mar-19 | Mar-19 | ||||
|---|---|---|---|---|---|
| Mar-19 | Dec-18 | Mar-18(1) | vs Dec-18 | vs Mar-18 | |
| $M | $M | $M | % | % | |
| Collective provision | |||||
| Balance at the beginning of the period | 111 | 105 | 94 | 5.7 | 18.1 |
| Charge against impairment losses | (7) | 6 | (1) | (216.7) | 600.0 |
| Balance at the end of theperiod | 104 | 111 | 93 | (6.3) | 11.8 |
| Specific provision | |||||
| Balance at the beginning of the period | 34 | 38 | 37 | (10.5) | (8.1) |
| Charge against impairment losses | 3 | 2 | 3 | 50.0 | - |
| Impairment provision w ritten off | (2) | (5) | (1) | (60.0) | 100.0 |
| Unw ind of discount | (1) | (1) | (1) | - | - |
| Balance at the end of theperiod | 34 | 34 | 38 | - | (10.5) |
| Totalprovision for impairment - Banking activities | 138 | 145 | 131 | (4.8) | 5.3 |
| Equity reserve for credit loss (ERCL) | |||||
| Balance at the beginning of the period | 111 | 103 | 84 | 7.8 | 32.1 |
| Transfer(to)from retained earnings | (11) | 8 | (1) | (237.5) | 1,000.0 |
| Balance at the end of theperiod | 100 | 111 | 83 | (9.9) | 20.5 |
| Pre-tax equivalent coverage | 143 | 159 | 119 | (10.1) | 20.2 |
| Total provision for impairment and equity reserve for | |||||
| credit loss - Banking activities | 281 | 304 | 250 | (7.6) | 12.4 |
| % | % | % | |||
| Specific provision for impairment expressed as a | |||||
| percentage ofgross impaired assets | 21.3 | 20.7 | 27.1 | ||
| Provision for impairment expressed as a percentage of | |||||
| gross loans and advances are as follows: | |||||
| Collective provision | 0.18 | 0.19 | 0.16 | ||
| Specific provision | 0.06 | 0.06 | 0.07 | ||
| Total provision | 0.24 | 0.25 | 0.23 | ||
| ERCL coverage | 0.24 | 0.27 | 0.20 | ||
| Totalprovision and ERCL coverage | 0.48 | 0.51 | 0.43 |
(1)Changes in recognition and measurement resulting from the adoption of AASB 9 Financial Instruments are reflected in all reporting periods from 1 July 2018 onw ards. Prior to 1 July 2018, recognition and measurement of provision for impairment is under AASB 139 Financial Instruments: Recognition and Measurement.
PAGE 8
AS AT 31 MARCH 2019
SUNCORP
APS 330
GROSS NON-PERFORMING LOANS COVERAGE BY PORTFOLIO
| PORTFOLIO | ||||||
|---|---|---|---|---|---|---|
| 31-Mar-19 (AASB 9) | Total provision | |||||
| Past due | Impaired | Specific | Collective | ERCL (pre-tax | and ERCL | |
| loans | assets | provision | provision | equivalent) | coverage1 | |
| $M | $M | $M | $M | $M | % | |
| Retail lending | 486 | 58 | 8 | 37 | 60 | 19% |
| Agribusiness lending | 25 | 37 | 9 | 26 | 11 | 74% |
| Commercial/SME lending | 26 | 65 | 17 | 41 | 72 | 143% |
| Total | 537 | 160 | 34 | 104 | 143 | 40% |
| 31-Dec-18 (AASB 9) | Total provision | |||||
| Past due | Impaired | Specific | Collective | ERCL (pre-tax | and ERCL | |
| loans | assets | provision | provision | equivalent) | coverage1 | |
| $M | $M | $M | $M | $M | % | |
| Retail lending | 479 | 61 | 8 | 37 | 66 | 21% |
| Agribusiness lending | 14 | 37 | 10 | 28 | 11 | 96% |
| Commercial/SME lending | 31 | 66 | 16 | 46 | 82 | 148% |
| Total | 524 | 164 | 34 | 111 | 159 | 44% |
1 Computed as: (ERCL (pre-tax) + Collective provision + Specific provision) / (Past due loans + Impaired assets)
PAGE 9
AS AT 31 MARCH 2019
SUNCORP
APS 330
APPENDIX 1 – APS 330 TABLES
-
Table 1: Capital disclosure template – not applicable for this reporting period. This table was disclosed in the December 2018 reporting period.
-
Table 2: Main features of capital instruments
-
Table 3: Capital adequacy
-
Table 4: Credit risk
-
Table 5: Securitisation exposures
-
Table 20: Liquidity Coverage Ratio Disclosure
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 http://www.suncorpgroup.com.au/investors/reports.
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] .
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.
PAGE 10
SUNCORP
APS 330
TABLE 3: CAPITAL ADEQUACY
| Avg risk | |||||
|---|---|---|---|---|---|
| Carrying value | w eight | Risk Weighted Assets | |||
| Mar-19 | Dec-18 | Mar-19 | Mar-19 | Dec-18 | |
| $M | $M | % | $M | $M | |
| On-balance sheet credit risk-weighted assets | |||||
| Cash items | 434 | 369 | - | 2 | - |
| Claims on Australian and foreign governments | 2,411 | 2,905 | - | - | - |
| Claims on central banks, international banking | |||||
| agencies, regional development banks, ADIs and | 1,113 | 1,027 | 25 | 277 |
294 |
| overseas banks | |||||
| Claims on securitisation exposures | 1,021 | 1,117 | 20 | 203 |
214 |
| Claims secured against eligible residential mortgages |
44,176 | 44,277 | 37 | 16,244 |
16,309 |
| Past due claims | 640 | 629 | 83 | 530 |
518 |
| Other retail assets | 210 | 244 | 97 | 203 |
238 |
| Corporate | 9,691 | 9,632 | 100 | 9,680 |
9,622 |
| Other assets and claims | 422 | 390 | 100 | 422 |
389 |
| Total banking assets | 60,118 | 60,590 | 27,561 | 27,584 |
| TABLE 3: CAPITAL ADEQUACY | TABLE 3: CAPITAL ADEQUACY | TABLE 3: CAPITAL ADEQUACY | TABLE 3: CAPITAL ADEQUACY | TABLE 3: CAPITAL ADEQUACY | TABLE 3: CAPITAL ADEQUACY |
|---|---|---|---|---|---|
| Avg risk w eight Mar-19 Dec-18 Mar-19 Mar-19 Dec-18 $M $M % $M $M Carrying value Risk Weighted Assets |
|||||
| On-balance sheet credit risk-weighted assets | |||||
| Cash items 434 369 - 2 - Claims on Australian and foreign governments 2,411 2,905 - - - |
|||||
| Claims on central banks, international banking agencies, regional development banks, ADIs and overseas banks 1,113 1,027 25 277 294 Claims on securitisation exposures 1,021 1,117 20 203 214 Claims secured against eligible residential mortgages 44,176 44,277 37 16,244 16,309 Past due claims 640 629 83 530 518 Other retail assets 210 244 97 203 238 Corporate 9,691 9,632 100 9,680 9,622 Other assets and claims 422 390 100 422 389 |
|||||
| Total banking assets 60,118 60,590 27,561 27,584 |
|||||
| Notional amount Credit equivalent Avg risk w eight Risk Weighted Assets |
|||||
| Mar-19 | Mar-19 | Mar-19 |
Mar-19 |
Dec-18 |
|
| $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 |
281 280 70 195 197 8,541 2,032 63 1,270 1,272 5,710 112 24 27 31 52,723 103 42 43 27 4,096 182 20 36 36 - - - 129 121 |
||||
| Total off-balance sheetpositions | 71,351 2,709 1,700 1,684 |
||||
| . | |||||
| Market risk capital charge Operational risk capital charge Total off-balance sheet positions Total on-balance sheet credit risk-w eighted assets |
90 85 3,512 3,512 1,700 1,684 27,561 27,584 |
||||
| Total assessed risk | 32,863 32,865 |
||||
| Risk-weighted capital ratios | % % |
||||
| Common Equity Tier 1 Tier 1 Tier 2 |
9.10 9.14 10.77 10.81 2.42 2.50 |
||||
| Total risk-weighted capital ratio | 13.19 13.32 |
PAGE 11
AS AT 31 MARCH 2019
SUNCORP
APS 330
TABLE 4: CREDIT RISK
Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2019
| TABLE 4: CREDIT RISK Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2019 |
TABLE 4: CREDIT RISK Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2019 |
|---|---|
| Receivables due from other Banks(2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) Gross Impaired Assets Past due not impaired > 90 days Total not past due or impaired Specific Provisions (5) $M $M $M $M $M $M $M $M $M $M $M |
|
| Agribusiness - - - - 3,902 220 Construction & development - - - - 792 261 Financial services 494 - 215 904 93 359 Hospitality - - - - 977 61 Manufacturing - - - - 237 31 Professional services - - - - 304 18 Property investment - - - - 2,695 143 Real estate - Mortgage - - - - 43,676 1,036 Personal - - - - 161 4 Government/public authorities - 1,179 - 1,964 2 - Other commercial & industrial(6) - - - - 2,071 179 |
4,122 37 25 4,060 9 1,053 6 2 1,045 1 2,065 - - 2,065 - 1,038 26 3 1,009 6 268 4 1 263 - 322 1 4 317 1 2,838 2 2 2,834 2 44,712 57 448 44,207 8 165 1 4 160 - 3,145 - - 3,145 - 2,250 25 14 2,211 7 |
| Total gross credit risk 494 1,179 215 2,868 54,910 2,312 Securitisation exposures(1) - - 112 1,021 3,972 70 |
61,978 159 503 61,316 34 |
| 5,175 1 34 5,140 - |
|
| Total including securitisation exposures 494 1,179 327 3,889 58,882 2,382 Impairment provision Total |
67,153 160 537 66,456 34 |
| (138) (34) (31) (73) |
|
| 67,015 126 506 66,383 |
(1) The securitisation exposures of $3,972 million included under Loans and advances qualify for regulatory capital relief under APS 120 Securitisation 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 Securitisation .
(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.
(3) Represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112 Capital Adequacy .
(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.
(5) In accordance with APS 220 Credit Quality , regulatory specific provisions represent $34 million specific provisions for accounting purposes plus $66 million ineligible collective provision. The ineligible collective provision is split between Past due not impaired > 90 days ($31 million) and Total not past due or impaired ($35 million), in accordance with Expected Credit Loss (ECL) stages under AASB 9 Financial Instruments .
(6) Includes a portion of small business loans, with limits below $1 million, that are not classified.
PAGE 12
AS AT 31 MARCH 2019
SUNCORP
APS 330
TABLE 4: CREDIT RISK (CONTINUED)
Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2018
| TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2018 |
TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2018 |
|---|---|
| Receivables due from other Banks(2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) Gross Impaired Assets Past due not impaired > 90 days Total not past due or impaired Specific Provisions (5) $M $M $M $M $M $M $M $M $M $M $M |
|
| Agribusiness - - - - 3,862 232 Construction & development - - - - 767 265 Financial services 351 - 187 899 99 349 Hospitality - - - - 1,001 71 Manufacturing - - - - 231 24 Professional services - - - - 306 18 Property investment - - - - 2,676 127 Real estate - Mortgage - - - - 43,799 1,064 Personal - - - - 168 4 Government/public authorities - 1,540 - 1,956 - - Other commercial & industrial(6) - - - - 2,085 179 |
4,094 37 14 4,043 10 1,032 7 5 1,020 1 1,885 - - 1,885 - 1,072 27 1 1,044 7 255 4 1 250 - 324 2 1 321 1 2,803 1 3 2,799 1 44,863 59 441 44,363 8 172 1 5 166 - 3,496 - - 3,496 - 2,264 25 19 2,220 6 |
| Total gross credit risk 351 1,540 187 2,855 54,994 2,333 Securitisation exposures(1) - - 108 1,117 4,182 73 |
62,260 163 490 61,607 34 |
| 5,480 1 34 5,445 - |
|
| Total including securitisation exposures 351 1,540 295 3,972 59,176 2,406 Impairment provision Total |
67,740 164 524 67,052 34 |
| (145) (34) (33) (78) |
|
| 67,595 130 491 66,974 |
(1) The securitisation exposures of $4,182 million included under Loans and advances qualify for regulatory capital relief under APS 120 Securitisation 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 Securitisation .
(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.
(3) Represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112 Capital Adequacy .
(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.
(5) In accordance with APS 220 Credit Quality , regulatory specific provisions represent $34 million specific provisions for accounting purposes plus $70 million ineligible collective provision. The ineligible collective provision is split between Past due not impaired > 90 days ($33 million) and Total not past due or impaired ($37 million), in accordance with Expected Credit Loss (ECL) stages under AASB 9 Financial Instruments .
(6) Includes a portion of small business loans, with limits below $1 million, that are not classified.
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TABLE 4: CREDIT RISK (CONTINUED)
Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 January to 31 March 2019
| Receivables due from other Banks (2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) $M $M $M $M $M $M $M |
Receivables due from other Banks (2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) $M $M $M $M $M $M $M |
|---|---|
| $M | |
| Agribusiness - - - - 3,882 226 Construction & development - - - - 780 263 Financial services 423 - 201 902 96 354 Hospitality - - - - 989 66 Manufacturing - - - - 234 28 Professional services - - - - 305 18 Property investment - - - - 2,686 135 Real estate - Mortgage - - - - 43,738 1,050 Personal - - - - 165 4 Government/public authorities - 1,360 - 1,960 1 - Other commercial & industrial - - - - 2,078 179 |
4,108 1,043 1,976 1,055 262 323 2,821 44,788 169 3,321 2,257 |
| Total gross credit risk 423 1,360 201 2,862 54,954 2,323 Securitisation exposures(1) - - 110 1,069 4,077 72 |
62,123 5,328 |
| Total including securitisation exposures 423 1,360 311 3,931 59,031 2,395 Impairment provision Total |
67,451 |
| (142) | |
| 67,309 |
(1) The securitisation exposures of $4,077 million included under Loans and advances qualify for regulatory capital relief under APS 120 Securitisation 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 Securitisation .
(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.
(3) Represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112 Capital Adequacy .
(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.
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TABLE 4: CREDIT RISK (CONTINUED)
Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 October to 31 December 2018
| Receivables due from other Banks (2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) $M $M $M $M $M $M $M |
Receivables due from other Banks (2) Trading Securities Derivatives (3) Investment Securities Loans and Advances Off-balance sheet exposures (credit equivalent amount)(3) Total Credit Risk (4) $M $M $M $M $M $M $M |
|---|---|
| $M | |
| Agribusiness - - - - 3,855 229 Construction & development - - - - 769 277 Financial services 401 - 201 854 93 345 Hospitality - - - - 997 76 Manufacturing - - - - 232 24 Professional services - - - - 305 19 Property investment - - - - 2,599 131 Real estate - Mortgage - - - - 43,661 1,264 Personal - - - - 171 4 Government/public authorities - 1,539 - 2,038 - - Other commercial & industrial - - - - 2,088 185 |
4,084 1,046 1,894 1,073 256 324 2,730 44,925 175 3,577 2,273 |
| Total gross credit risk 401 1,539 201 2,892 54,770 2,554 Securitisation exposures(1) - - 95 1,122 4,318 75 |
62,357 5,610 |
| Total including securitisation exposures 401 1,539 296 4,014 59,088 2,629 Impairment provision Total |
67,967 |
| (144) | |
| 67,823 |
(1) The securitisation exposures of $4,318 million included under Loans and advances qualify for regulatory capital relief under APS 120 Securitisation 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 Securitisation .
(2) Receivables due from other banks include collateral deposits provided to derivative counterparties.
(3) Represent the credit equivalent amount of the Bank’s off-balance sheet exposures calculated in accordance with APS 112 Capital Adequacy .
(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.
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TABLE 4: CREDIT RISK (CONTINUED)
Table 4B: Credit risk by portfolio as at 31 March 2019
| Charges for | |||||||
|---|---|---|---|---|---|---|---|
| Average | Past due Not | Specific | Specific |
||||
| Gross Credit | Gross | Impaired | Impaired > 90 | Provisions | Provisions & |
||
| Risk Exposure | Exposure | Assets | days | (2) |
Write Offs | ||
| $M | $M | $M | $M | $M |
$M |
||
| Claims secured against eligible residential mortgages(1) |
49,887 | 50,116 | 58 | 482 | 8 | 1 | |
| Other retail | 165 | 169 | 1 | 4 | - | 2 | |
| Financial services | 2,065 | 1,976 |
- | - | - | - | |
| Government and public authorities | 3,145 | 3,321 |
- | - | - | - | |
| Corporate and other claims | 11,891 | 11,869 | 101 | 51 | 26 | 2 | |
| Total | 67,153 | 67,451 | 160 | 537 | 34 | 5 |
(1) $5,175 million, $5,328 million, $1 million and $34 million has been included in gross credit risk exposure, average gross exposure, gross impaired assets and past due not impaired greater than 90 days respectively to include securitisation exposures.
(2) The specific provisions of $34 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $66 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $100 million.
Table 4B: Credit risk by portfolio as at 31 December 2018
| Charges for | |||||||
|---|---|---|---|---|---|---|---|
| Average | Past due Not | Specific | Specific |
||||
| Gross Credit | Gross | Impaired | Impaired > 90 | Provisions | Provisions & |
||
| Risk Exposure | Exposure | Assets | days | (2) |
Write Offs | ||
| $M | $M | $M | $M | $M |
$M |
||
| Claims secured against eligible residential mortgages(1) |
50,343 | 50,535 | 60 | 475 | 8 | 3 | |
| Other retail | 172 | 175 | 1 | 5 | - | - | |
| Financial services | 1,885 | 1,894 |
- | - | - | - | |
| Government and public authorities | 3,496 | 3,577 |
- | - | - | - | |
| Corporate and other claims | 11,844 | 11,786 | 103 | 44 | 26 | 1 | |
| Total | 67,740 | 67,967 | 164 | 524 | 34 | 4 |
(1) $5,480 million, $5,610 million, $1 million and $34 million has been included in gross credit risk exposure, average gross exposure, gross impaired assets and past due not impaired greater than 90 days respectively to include securitisation exposures.
(2) The specific provisions of $34 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $70 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $104 million.
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TABLE 4: CREDIT RISK (CONTINUED)
Table 4C: General reserves for credit losses
| TABLE 4: CREDIT RISK (CONTINUED) Table 4C: General reserves for credit losses |
||
|---|---|---|
| Mar-19 | Dec-18 | |
| $M | $M | |
| Collective provision for impairment | 104 | 111 |
| Ineligible collectiveprovisions | (66) | (70) |
| Eligible collective provisions | 38 | 41 |
| Equityreserve for credit losses | 100 | 111 |
| General reserve for credit losses | 138 | 152 |
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TABLE 5: SECURITISATION EXPOSURES
Table 5A: Summary of securitisation activity for the period
During the quarter ending 31 March 2019, there was no securitisation activity (quarter ending 31 December 2018: Nil).
Table 5B(i): Aggregate of on-balance sheet securitisation exposures by exposure type
| Table 5B(i): Aggregate of on-balance sheet securitisation exposures by exposure type | sure type | |
|---|---|---|
| Mar-19 Dec-18 Exposure type $M $M |
Mar-19 | Dec-18 |
| Debt securities 1,021 1,117 |
||
| Total on-balance sheet securitisation exposures 1,021 1,117 |
Table 5B(ii): Aggregate of off-balance sheet securitisation exposures by exposure type
| Table 5B(ii): Aggregate of off-balance sheet securitisation exposures by exposure type | sure type | |
|---|---|---|
| Mar-19 Dec-18 Exposure type $M $M |
Mar-19 | Dec-18 |
| Liquidity facilities 70 73 Derivative exposures 112 108 |
||
| Total off-balance sheet securitisation exposures 182 181 |
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TABLE 20: LIQUIDITY COVERAGE RATIO DISCLOSURE
| Total Unw eighted Value (Average) |
Total Weighted Value (Average) |
Total Unw eighted Value (Average) |
Total Weighted Value (Average) Total Unw eighted Value (Average) Total Weighted Value (Average) |
Total Weighted Value (Average) Total Unw eighted Value (Average) Total Weighted Value (Average) |
Total Weighted Value (Average) Total Unw eighted Value (Average) Total Weighted Value (Average) |
|---|---|---|---|---|---|
Total Unw eighted Value (Average) |
Total Weighted Value (Average) |
||||
| Mar-19 Mar-19 Dec-18 Dec-18 Sep-18 Sep-18 |
|||||
| $M $M $M $M $M $M |
|||||
| Liquid assets, of which: High-quality liquid assets (HQLA) 4,114 4,265 4,181 Alternative liquid assets (ALA) 4,597 4,398 4,399 |
|||||
| Cash outflows - Retail deposits and deposits from small business customers, of w hich: 21,660 1,899 21,263 1,851 21,153 1,831 stable deposits 14,707 735 14,629 731 14,478 724 less stable deposits 6,953 1,164 6,634 1,120 6,675 1,107 Unsecured w holesale funding, of w hich: 4,983 3,663 4,605 3,400 4,651 3,210 operational deposits (all counterparties) and deposits in networks for cooperative banks - - - - - - non-operational deposits (all counterparties) 3,380 2,060 2,881 1,676 3,224 1,783 unsecured debt 1,603 1,603 1,724 1,724 1,427 1,427 Secured w holesale funding 9 5 - 7 Additional requirements, of w hich: 7,895 1,446 7,992 1,400 7,858 1,323 outflows related to derivatives exposures and other collateral requirements 1,084 1,084 1,030 1,030 954 954 outflows related to loss of funding on debt products - - - - - - credit and liquidity facilities 6,811 362 6,962 370 6,904 369 Other contractual funding obligations 557 269 781 509 832 570 Other contingent funding obligations 6,658 555 6,911 567 7,764 757 |
|||||
| Total cash outflows 7,841 7,732 - 7,698 |
|||||
| Cash inflows Secured lending (e.g. reverse repos) 317 - 299 - 177 - Inflow s from fully performing exposures 697 410 691 419 665 403 Other cash inflow s 566 566 711 711 590 590 |
|||||
| Total cash inflows 1,580 976 1,701 1,130 1,432 993 |
|||||
| Total Adjusted Value |
Total Adjusted Value |
Total Adjusted Value |
|||
| Total liquid assets 8,711 8,663 8,580 |
|||||
| Total net cash outflows 6,865 6,602 6,705 |
|||||
| Liquidity Coverage Ratio(%) 127 131 128 |
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The Liquidity Coverage Ratio (LCR) promotes shorter-term resilience by requiring ADIs to maintain sufficient qualifying HQLA to meet expected net cash outflows under an APRA-prescribed 30 calendar day stress scenario. SML manages its LCR on a daily basis and maintains a buffer over the regulatory minimum of 100%.
The amount of liquid assets held considers the amount needed to meet prudential and internal requirements (including a variety of internal stress scenarios as part of the risk management framework) and a suitable buffer reflecting management’s preference.
Liquid assets included in the LCR comprise HQLA (cash, Australian Semi-government and Commonwealth Government securities) and alternative liquid assets covered by the Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). SML received approval from APRA for a CLF of $4.9 billion for the 2019 calendar year (2018 calendar year: $4.7 billion). Assets eligible for the CLF include senior unsecured bank paper, covered bonds and residential mortgage backed securities that are repo-eligible with the RBA.
The main contributors to net cash outflows were modelled outflows associated with deposits and unsecured wholesale funding, offset by inflows from maturing loans and issuance of term wholesale liabilities. The net cash outflow is sought to be minimised by targeting funding with lower LCR runoff rates and managing the maturity profile of wholesale liabilities.
The daily average LCR was 127% over the March 2019 quarter (131% for the December 2018 quarter). The table provides detailed information of the average LCR for the preceding quarters.
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APPENDIX 2 - DEFINITIONS
| AASB 9 | AASB 9_Financial Instruments_was issued in December 2014. It addresses recognition and |
|---|---|
| measurement requirements for financial assets and financial liabilities, impairment requirements that | |
| introduce a forward-looking expected credit loss impairment model, and general hedge accounting | |
| requirements which more closely align with risk management activities undertaken when hedging | |
| financial and non-financial risks. This standard became mandatory for the annual reporting period | |
| from 1 July 2018. | |
| Capital adequacy ratio | Capital base divided by total assessed risk, as defined by APRA. |
| Collective provision | A collective provision is established to determine expected credit losses (see also Expected Credit |
| Losses definition below) for loan exposures which are not specifically provisioned, and can be in the | |
| performing or non-performing portfolios. For business banking exposures, a ratings-based approach | |
| is applied using estimates of probability of default and loss given default, at a customer level. For | |
| portfolio managed exposures, the portfolios are split into pools with homogenous risk profiles and | |
| pool estimates of probability of default and loss given default are used to calculate the collective | |
| provision. | |
| Common Equity Tier 1 (CET1) | Common Equity Tier 1 capital comprises accounting equity plus adjustments for intangible assets |
| and regulatory reserves. | |
| Common Equity Tier 1 ratio | Common Equity Tier 1 divided by total risk weighted assets, as defined by APRA. |
| Credit value adjustment (CVA) | A capital charge that covers the risk of mark-to-market losses on the counterparty credit risk. |
| Expected Credit Losses (ECL) | Expected credit losses (ECL) are calculated as the probability of default (PD) x loss given default |
| (LGD) x exposure at default. The credit models are calibrated to reflect PD and LGD estimates | |
| based on historical observed experience, as well as reflecting unbiased forward-looking views of | |
| macroeconomic conditions, through macroeconomic variables that influence credit losses, for | |
| example unemployment rates and changes in house prices. | |
| Equity reserve for credit losses | The equity reserve for credit losses represents the difference between the collective provision for |
| impairment and the estimate of credit losses across the credit cycle based on guidance provided by | |
| APRA. | |
| General reserve credit loss (GRCL) | The general reserve for credit losses is a reserve that covers credit losses prudently estimated but |
| not certain to arise over the full life of all the individual facilities based on guidance provided by | |
| APRA. | |
| Impaired assets | Impaired assets are those for which the Bank has determined that it is probable that it will be unable |
| to collect all principal and interest due according to the contractual terms. The Bank fully considers | |
| the counterparty’s capacity to repay and security valuation position before an asset is considered | |
| impaired. | |
| Liquidity coverage ratio (LCR) | An APRA requirement to maintain a sufficient level of qualifying high-quality liquid assets to meet |
| liquidity needs under an APRA-defined significant stress event lasting for 30 calendar days. Absent | |
| of a situation of financial stress, the LCR must not be less than 100%. The LCR is calculated as the | |
| ratio of qualifying high-quality liquid assets relative to net cash outflows in a modelled APRA-defined | |
| 30-day stress scenario. | |
| 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. | |
| Specific provision | A specific provision for impairment is recognised where there is objective evidence of impairment and full recovery of principal and interest is considered doubtful. The present value of the expected |
| future cash flows is compared to the carrying amount of the loan to determine the specific provision | |
| required. | |
| Total assessed risk | Credit risk-weighted assets, off-balance sheet positions, market risk capital charge and operational |
| risk charge, as defined by APRA. |
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