SUNCORP GROUP LIMITED — Interim / Quarterly Report 2021

Aug 8, 2021

SUNCORP GROUP LIMITED SUNCORP BANK APS 330

FOR THE QUARTER ENDED 30 JUNE 2021

RELEASE DATE: 9 AUGUST 2021

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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 30 June 2021 (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 9 August 2021. 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, Andrew Dempster 266 George Street Head of Investor Relations Brisbane, QLD 4000 0497 799 960 suncorpgroup.com.au andrew.dempster@suncorp.com.au

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APS 330

Contents

Basis of preparation ..................................................................................................................................................... 2 Regulatory Capital Reconciliation ................................................................................................................................. 4 Table 1: Capital Disclosure Template ........................................................................................................................... 6 Table 2: Main features of capital instruments ............................................................................................................... 9 Table 3: Capital adequacy .......................................................................................................................................... 10 Table 4: Credit risk ..................................................................................................................................................... 11 Table 5: Securitisation exposures .............................................................................................................................. 17 Table 20: Liquidity Coverage Ratio Disclosure ........................................................................................................... 18 Table 21: Net Stable Funding Ratio Disclosure .......................................................................................................... 20 Appendix - Definitions ................................................................................................................................................ 22

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APS 330

REGULATORY CAPITAL RECONCILIATION

The following table discloses the consolidated balance sheet of SML and its subsidiaries (Suncorp Bank), as published in its financial statements, and the balance sheet under the Level 2 regulatory scope of consolidation pursuant to APS 111 Capital Adequacy: Measurement of Capital.

Each component of capital reported below in Table 1: Common Disclosures – Composition of Capital can be reconciled to the balance sheets below using the reference letters included in both tables.

	Per table 1 Capital Disclosure Statutory Jun-21 $M Adjustments Jun-21 $M Regulatory Jun-21 $M
Assets Cash and cash equivalents Receivables due from other banks Trading securities Derivatives Investment securities Investment in regulatory non-consolidated subsidiaries Loans and advances of which: eligible collective provision component of GRCL in tier 2 capital of which: loan and lease origination fees and commissions paid to mortgage originators and brokers in CET1 regulatory adjustments Due from related parties Deferred tax assets	68 (1) 67 1,495 - 1,495 1,579 - 1,579 310 - 310 4,538 - 4,538 - - - 57,324 (2,126) 55,198 (o) - - 114 (f) - - 167 223 (1) 222 49 - 49
of which: arising from temporary differences included in CET1 regulatory adjustments	(e) - - 61
Goodwill Other assets	(d) 21 - 21 258 (4) 254
Total assets	65,865 (2,132) 63,733
Liabilities Payables due to other banks Deposits and short-term borrowings Derivatives of which: securitisation derivatives in CET1 regulatory adjustments Payables and other liabilities Due to related parties Provisions Due to regulatory non-consolidated subsidiaries Securitisation liabilities of which: securitisation start-up costs in CET1 regulatory adjustments Borrowings of which: costs associated with debt raisings in CET1 regulatory adjustments Subordinated notes of which: directly issued qualifying tier 2 instruments of which: directly issued instruments subject tophase out from tier 2	103 - 103 41,520 8 41,528 272 - 272 (i) - - 1 158 (1) 157 84 - 84 - - - - 29 29 2,165 (2,165) - (h) - - 1 16,581 - 16,581 (g) - - 8 672 - 672 (k) - - 600 (l) - - 19
Total liabilities	61,555 (2,129) 59,426
Net assets	4,310 (3) 4,307
Equity Share capital Capital notes	(a) 2,754 - 2,754 (j) 585 - 585
Reserves	(234) - (234)
of which: equity component of GRCL in tier 2 capital	(m) - - 85
of which: FVOCI reserve	(c) - - 25
of which: cash flow hedge reserve	(n) - - 28
Retained profits	1,205 (3) 1,202
of which: included in CET1	(b) - - 829
Total equity attributable to owners of the Company	4,310 (3) 4,307

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APS 330

REGULATORY CAPITAL RECONCILIATION (CONTINUED)

The Level 2 group for regulatory capital purposes consists of the parent entity, SML, and its eligible subsidiaries.

The following legal entities are included in the accounting scope of consolidation but are excluded from the regulatory scope of consolidation:

regulatory scope of consolidation:
	Total	Total
	assets	liabilities
	Jun-21	Jun-21
	$	$
SPDEF #2 Pty Ltd	1	-
Principal activity:
The company acts as trustee for Suncorp Property Development Equity Fund #2 Unit Trust.
	Total	Total
	assets	liabilities
	Jun-21	Jun-21
	$M	$M
Suncorp Property Development Equity Fund #2 Unit Trust	4	0
Principal activity:
The Trust was established by the directors of SPDEF #2 Pty Ltd (the trustee) for the purpose of forming an unincorporated joint
venture to develop land for the purpose of reselling as residential housing lots.
	Total	Total
	assets	liabilities
	Jun-21	Jun-21
	$M	$M
Securitisation special purpose vehicles(1)
Apollo Series 2012-1 Trust	123	123
Apollo Series 2013-1 Trust	164	164
Apollo Series 2015-1 Trust	289	289
Apollo Series 2017-1 Trust	437	437
Apollo Series 2017-2 Trust	591	591
Apollo Series 2018-1 Trust	563	563
Principal activity:
The Trusts were established for the purpose of raising funds, via the issue of mortgage backed securities, to fund the purchase
of mortgage loans by equitable assignment.

(1) The Trusts qualify for regulatory capital relief under APS 120 and are therefore deconsolidated from the Level 2 regulatory group. The assets of the Trusts include the secured loans from SML, representing the outstanding balance of securitised mortgages and accrued interest, as well as cash and other receivables.

Any transfer of funds or regulatory capital within the Level 2 group can occur only after the relevant approvals from management and the Board of each affected entity, in line with the Suncorp Group’s capital management policies. Any such transactions must be consistent with the Suncorp Group’s capital management strategy objectives to ensure each entity in the Level 2 group has sufficient capital resources to maintain the business and operational requirements, retain sufficient capital to exceed externally imposed capital requirements, and ensure Suncorp Bank’s ability to continue as a going concern.

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APS 330

TABLE 1: CAPITAL DISCLOSURE TEMPLATE

The disclosures below are presented using the post 1 July 2018 common disclosure template as, pursuant to APRA guidelines, SML and its eligible subsidiaries are applying, in full, the Basel III regulatory adjustments from 1 January 2013.

	Capital Jun-21 Reconciliation $M Per Regulatory
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26	Common Equity Tier 1 capital: instruments and reserves (a) 2,754 Retained earnings (b) 829 (c)+(n) 53 Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) Accumulated other comprehensive income (and other reserves) Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)
	Common Equity Tier 1 capital before regulatory adjustments 3,636
	Common Equity Tier 1 capital: regulatory adjustments (d) 21 (n) 28 of which: significant investments in the ordinary shares of financial entities of which: mortgage servicing rights of which: deferred tax assets arising from temporary differences 238 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) Reciprocal cross-holdings in common equity Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) Mortgage service rights (amount above 10% threshold) Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) Amount exceeding the 15% threshold National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) Prudential valuation adjustments Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) Goodwill (net of related tax liability) Other intangibles other than mortgage servicing rights (net of related tax liability) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) Cash-flow hedge reserve Shortfall of provisions to expected losses Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) Gains and losses due to changes in own credit risk on fair valued liabilities Defined benefit superannuation fund net assets
26a	of which: treasury shares
26b 26c 26d 26e 26f	of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase new ordinary shares issued by the ADI of which: deferred fee income of which: equity investments in financial institutions not reported in rows 18, 19 and 23 of which: deferred tax assets not reported in rows 10, 21 and 25 (e) 61 of which: capitalised expenses (f)+(g)+(h) 176
26g	of which: investments in commercial (non-financial) entities that are deducted under APRA requirements -
26h	of which: covered bonds in excess of asset cover in pools
26i 26j	of which: undercapitalisation of a non-consolidated subsidiary of which: other national specific regulatory adjustments not reported in rows 26a to 26i (i) 1
27 28 29	Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions
	Total regulatory adjustments to Common Equity Tier 1 287
	Common Equity Tier 1 Capital(CET1) 3,349

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APS 330

	Capital Jun-21 Reconciliation $M Per Regulatory
30 31 32 33 34 35 36 37 38 39 40 41	Additional Tier 1 Capital: instruments Directly issued qualifying Additional Tier 1 instruments 585 of which: classified as equity under applicable accounting standards (j) 585 of which: classified as liabilities under applicable accounting standards Directly issued capital instruments subject to phase out from Additional Tier 1 of which: instruments issued by subsidiaries subject tophase out Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1)
	Additional Tier 1 Capital before regulatory adjustments 585
	Additional Tier 1 Capital: regulatory adjustments Investments in own Additional Tier 1 instruments Reciprocal cross-holdings in Additional Tier 1 instruments National specific regulatory adjustments (sum of rows 41a, 41b and 41c) Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)
41a 41b	of which: holdings of capital instruments in group members by other group members on behalf of third parties of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows 39 and 40
41c	of which: other national specific regulatory adjustments not reported in rows 41a and 41b
42 43 44 45 46 47 48 49 50 51 52 53 54 55 56	Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions
	Total regulatory adjustments to Additional Tier 1 capital -
	Additional Tier 1 capital(AT1) 585
	Tier 1 Capital(T1=CET1+AT1) 3,934
	Tier 2 Capital: instruments and provisions Directly issued qualifying Tier 2 instruments (k) 600 Directly issued capital instruments subject to phase out from Tier 2 (l) 19 of which: instruments issued by subsidiaries subject to phase out Provisions (m)+(o) 199 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group T2)
	Tier 2 Capital before regulatory adjustments 818
	Tier 2 Capital: regulatory adjustments Investments in own Tier 2 instruments Reciprocal cross-holdings in Tier 2 instruments National specific regulatory adjustments (sum of rows 56a, 56b and 56c) Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold)
56a 56b	of which: holdings of capital instruments in group members by other group members on behalf of third parties of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows 54 and 55
56c	of which: other national specific regulatory adjustments not reported in rows 56a and 56b
57 58 59 60	Total regulatory adjustments to Tier 2 capital -
	Tier 2 capital(T2) 818
	Total capital(TC=T1+T2) 4,752
	Total risk-weighted assets based on APRA standards 33,284

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APS 330

	Capital Jun-21 Reconciliation $M Per Regulatory
61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85	Capital ratios and buffers Common Equity Tier 1 (as a percentage of risk-weighted assets) 10.06% Tier 1 (as a percentage of risk-weighted assets) 11.82% Total capital (as a percentage of risk-weighted assets) 14.28% 7.00% of which: capital conservation buffer requirement 2.50% of which: ADI-specific countercyclical buffer requirements of which: G-SIB buffer requirement (not applicable) 10.06% Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 2.5% plus any countercyclical buffer requirements expressed as a percentage of risk- weighted assets) Common EquityTier 1 available to meet buffers(as apercentage of risk-weighted assets)
	National minima (if different from Basel III) National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) National Tier 1 minimum ratio (if different from Basel III minimum) National total capital minimum ratio(if different from Basel III minimum)
	Amount below thresholds for deductions (not risk-weighted) Non-significant investments in the capital of other financial entities Significant investments in the ordinary shares of financial entities Mortgage servicing rights (net of related tax liability) Deferred tax assets arisingfrom temporarydifferences(net of related tax liability) (e) 61
	Applicable caps on the inclusion of provisions in Tier 2 (m)+(o) 199 369 Capfor inclusion ofprovisions in Tier 2 under internal ratings-based approach Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings- based approach (prior to application of cap) Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap) Cap on inclusion of provisions in Tier 2 under standardised approach
	Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) (l) 19 Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) Current cap on T2 instruments subject to phase out arrangements Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) Current cap on CET1 instruments subject to phase out arrangements Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) Current cap on AT1 instruments subject to phase out arrangements

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APS 330

TABLE 2: MAIN FEATURES OF CAPITAL INSTRUMENTS

Attachment B of Prudential Standard 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] .

On 4 May 2021, the Company elected to redeem all of the perpetual cumulative non-convertible notes with a floating rate coupon issued on 17 December 1998. The subordinated notes were redeemed on the early redemption date of 28 July 2021. Each note holder received the face value ($100 per note) together with all unpaid accrued interest. There was no gain or loss recognised by the Company on redemption. The subordinated notes contributed $19 million to Tier 2 Capital as presented in Table 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.

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APS 330

TABLE 3: CAPITAL ADEQUACY

				Avg risk
		Carrying value		w eight		Risk Weighted Assets
		Jun-21	Mar-21	Jun-21		Jun-21	Mar-21
		$M	$M		%	$M	$M
On-balance sheet credit risk-weighted assets
Cash items		1,495	1,017		1	19	21
Claims on Australian and foreign governments		3,359	3,817		-	-	-
Claims on central banks, international banking
agencies, regional development banks, ADIs and		574	651		36	207	181
overseas banks
Claims on securitisation exposures		741	807		20	147	160
Claims secured against eligible residential mortgages		44,658	44,109		37	16,434	16,196
Past due claims		689	765		91	629	702
Other retail assets		1,411	1,056		99	1,403	1,050
Corporate		8,435	8,928	100		8,430	8,918
Other assets and claims		266	227	100		266	226
Total banking assets		61,628	61,377			27,535	27,454
		Notional	Credit	Avg risk
		amount	equivalent	w eight		Risk Weighted Assets
		Jun-21	Jun-21	Jun-21		Jun-21	Mar-21
		$M	$M		%	$M	$M
Off-balance sheet positions
Guarantees entered into in the normal course of
business		292	292	98		287	307
Commitments to provide loans and advances		10,247	2,889	54		1,572	1,275
Foreign exchange contracts		3,439	52	46		24	33
Interest rate contracts		44,557	91	43		39	40
Securitisation exposures		2,202	91	20		18	25
CVA capital charge		-	-		-	74	98
Total off-balance sheetpositions		60,737	3,415			2,014	1,778
		.
Market risk capital charge						100	152
Operational risk capital charge						3,635	3,621
Total off-balance sheet credit risk-w eighted assets						2,014	1,778
Total on-balance sheet credit risk-w eighted assets						27,535	27,454
Total assessed risk(Total Risk Weighted Assets)						33,284	33,005
Risk-weighted capital ratios						%	%
Common Equity Tier 1						10.06	9.79
Tier 1						11.82	11.56
Tier 2						2.46	2.47
Total risk-weighted capital ratio						14.28	14.03

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APS 330

TABLE 4: CREDIT RISK

Table 4A: Credit risk by gross credit exposure – outstanding as at 30 June 2021

Table 4A: Credit risk by gross credit exposure – outstanding as at 30 June 2021	Table 4A: Credit risk by gross credit exposure – outstanding as at 30 June 2021
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 - - - - 4,228 209 Construction & development - - - - 728 269 Financial services 1,495 - 143 487 105 257 Hospitality - - - - 869 52 Manufacturing - - - - 228 18 Professional services - - - - 335 26 Property investment - - - - 3,110 100 Real estate - Mortgage - - - - 43,936 2,072 Consumer - - - - 122 - Government/public authorities - 1,579 - 3,310 - - Other commercial & industrial(6) - - - - 1,776 178	4,437 25 32 4,380 5 997 2 3 992 1 2,487 - - 2,487 - 921 68 - 853 17 246 3 1 242 1 361 1 3 357 - 3,210 9 19 3,182 4 46,008 46 448 45,514 8 122 - 4 118 - 4,889 - - 4,889 - 1,954 25 18 1,911 8
Total gross credit risk 1,495 1,579 143 3,797 55,437 3,181 Securitisation exposures(1) - - 54 741 2,126 37	65,632 179 528 64,925 44 2,958 1 22 2,935 -
Total including securitisation exposures 1,495 1,579 197 4,538 57,563 3,218 Impairment provision Total	68,590 180 550 67,860 44 (239) (59) (36) (144) 68,351 121 514 67,716

(1) The securitisation exposures of $2,126 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: Standardised Approach to Credit Risk .

(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 $44 million specific provisions for accounting purposes plus $81 million ineligible collective provision.

(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 – outstanding as at 31 March 2021

TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2021	TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2021
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 (7) Specific Provisions (5) $M $M $M $M $M $M $M $M $M $M $M
Agribusiness - - - - 4,142 220 Construction & development - - - - 754 158 Financial services 1,043 - 149 548 105 269 Hospitality - - - - 881 60 Manufacturing - - - - 224 18 Professional services - - - - 331 23 Property investment - - - - 3,170 116 Real estate - Mortgage - - - - 43,550 1,565 Consumer - - - - 140 - Government/public authorities - 1,421 - 3,732 - - Other commercial & industrial(6) - - - - 1,837 181	4,362 35 37 4,290 8 912 2 4 906 1 2,114 - - 2,114 - 941 66 5 870 15 242 3 - 239 1 354 1 4 349 1 3,286 16 16 3,254 6 45,115 51 481 44,583 7 140 - 5 135 - 5,153 - - 5,153 - 2,018 29 21 1,968 9
Total gross credit risk 1,043 1,421 149 4,280 55,134 2,610 Securitisation exposures(1) - - 84 807 2,270 43	64,637 203 573 63,861 48 3,204 2 26 3,176 -
Total including securitisation exposures 1,043 1,421 233 5,087 57,404 2,653 Impairment provision Total	67,841 205 599 67,037 48 (303) (64) (55) (184) 67,538 141 544 66,853

(1) The securitisation exposures of $2,270 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: Standardised Approach to Credit Risk .

(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 $48 million specific provisions for accounting purposes plus $136 million ineligible collective provision.

(6) Includes a portion of small business loans, with limits below $1 million, that are not classified.

(7) As per regulatory guidance, exposures which are granted COVID-19 temporary financial assistance are not to be treated as being in arrears during the deferral period and not be considered as Restructured under Prudential Standard APS 220 Credit Quality .

.

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TABLE 4: CREDIT RISK (CONTINUED)

Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 April to 30 June 2021

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 - - - - 4,185 215 Construction & development - - - - 741 213 Financial services 1,269 - 146 518 105 263 Hospitality - - - - 875 56 Manufacturing - - - - 226 18 Professional services - - - - 333 25 Property investment - - - - 3,140 108 Real estate - Mortgage - - - - 43,743 1,818 Consumer - - - - 131 - Government/public authorities - 1,500 - 3,521 - - Other commercial & industrial(5) - - - - 1,807 180	4,400 954 2,301 931 244 358 3,248 45,561 131 5,021 1,987
Total gross credit risk 1,269 1,500 146 4,039 55,286 2,896 Securitisation exposures(1) - - 69 774 2,198 40	65,136 3,081
Total including securitisation exposures 1,269 1,500 215 4,813 57,484 2,936 Impairment provision Total	68,217
	(271)
	67,946

(1) The securitisation exposures of $2,198 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: Standardised Approach to Credit Risk .

(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.

(5) 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 2021

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 - - - - 4,091 255 Construction & development - - - - 779 165 Financial services 1,128 - 139 522 104 266 Hospitality - - - - 887 58 Manufacturing - - - - 228 22 Professional services - - - - 341 21 Property investment - - - - 3,174 116 Real estate - Mortgage - - - - 43,366 1,432 Consumer - - - - 146 - Government/public authorities - 1,396 - 3,499 - - Other commercial & industrial(5) - - - - 1,849 181	4,346 944 2,159 945 250 362 3,290 44,798 146 4,895 2,030
Total gross credit risk 1,128 1,396 139 4,021 54,965 2,516 Securitisation exposures(1) - - 85 840 2,404 44	64,165 3,373
Total including securitisation exposures 1,128 1,396 224 4,861 57,369 2,560 Impairment provision Total	67,538 (304)
	67,234

(1) The securitisation exposures of $2,404 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: Standardised Approach to Credit Risk.

(4) Total credit risk excludes cash and cash equivalents, including any reverse repurchase agreements held by the ADI.

(5) 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 4B: Credit risk by portfolio as at 30 June 2021

						Charges for
		Average		Past Due Not		Specific
	Gross Credit	Gross	Impaired	Impaired > 90	Specific	Provisions &
	Risk Exposure	Exposure	Assets	days	Provisions(2)	Write Offs
	$M	$M	$M	$M	$M	$M
Claims secured against eligible residential mortgages(1)	48,966	48,642	47	470	8	2
Other retail	122	131	-	4	-	1
Financial services	2,487	2,301	-	-	-	-
Government and public authorities	4,889	5,021	-	-	-	-
Corporate and other claims	12,126	12,122	133	76	36	-
Total	68,590	68,217	180	550	44	3

(1) $2,958 million, $3,081 million, $1 million and $22 million has been included in gross credit risk exposure, average gross exposure, impaired assets and past due not impaired greater than 90 days respectively to include securitisation exposures.

(2) The specific provisions of $44 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $81 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $125 million.

Table 4B: Credit risk by portfolio as at 31 March 2021

	Gross Credit Risk Exposure Average Gross Exposure Impaired Assets Past Due Not Impaired > 90 days Specific Provisions(2) Charges for Specific Provisions & Write Offs
	$M $M $M $M $M $M
Claims secured against eligible residential mortgages(1) Other retail Financial services Government and public authorities Corporate and other claims	48,319 48,171 53 507 7 - 140 146 - 5 - - 2,114 2,159 - - - - 5,153 4,895 - - - - 12,115 12,167 152 87 41 1
Total	67,841 67,538 205 599 48 1

(1) $3,204 million, $3,373 million, $2 million and $26 million has been included in gross credit risk exposure, average gross exposure, impaired assets and past due not impaired greater than 90 days respectively to include securitisation exposures.

(2) The specific provisions of $48 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $136 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $184 million.

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TABLE 4: CREDIT RISK (CONTINUED)

Table 4C: General reserve for credit losses

TABLE 4: CREDIT RISK (CONTINUED) Table 4C: General reserve for credit losses
	Jun-21	Mar-21
	$M	$M
Collective provision for impairment	195	255
Ineligible collectiveprovisions	(81)	(136)
Eligible collective provisions	114	119
Equity reserve for credit losses	85	76
General reserve for credit losses	199	195

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TABLE 5: SECURITISATION EXPOSURES

Table 5A: Summary of securitisation activity for the period

During the quarter ending 30 June 2021, there was no new securitisation activity undertaken (quarter ending 31 March 2021: Nil).

During the quarter ending 30 June 2021, there ending 31 March 2021: Nil).	was no new securitisation activity undertaken (quarter
	Exposures Securitised Recognised Gain or(Loss)on Sale
	Jun-21 Mar-21 Jun-21 Mar-21 $M $M $M $M
Residential mortgages	- - - -
Total exposures securitised during theperiod	- - - -

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
Jun-21 Mar-21 Exposure type $M $M	Jun-21	Mar-21
Debt securities 741 807
Total on-balance sheet securitisation exposures 741 807

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

	Jun-21	Mar-21
Exposure type	$M	$M
Liquidity facilities	37	43
Derivative exposures	54	84
Total off-balance sheet securitisation exposures	91	127

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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)
Jun-21 Jun-21 Mar-21 Mar-21 Dec-20 Dec-20
$M $M $M $M $M $M
Liquid assets, of which: High-quality liquid assets (HQLA) 5,961 5,574 5,308 Alternative liquid assets (ALA) 4,424 6,350 7,410
Cash outflows Retail deposits and deposits from small business customers, of w hich: 31,947 3,107 31,108 3,015 30,707 2,981 stable deposits 19,684 984 19,291 965 19,063 953 less stable deposits 12,263 2,123 11,817 2,050 11,644 2,028 Unsecured w holesale funding, of w hich: 3,490 2,113 4,467 3,050 4,083 2,796 operational deposits (all counterparties) and deposits in networks for cooperative banks - - - - - - non-operational deposits (all counterparties) 2,844 1,467 2,986 1,569 2,825 1,538 unsecured debt 646 646 1,481 1,481 1,258 1,258 Secured w holesale funding 224 - 91 - 57 Additional requirements, of w hich: 8,235 1,080 8,624 1,537 8,552 1,572 outflows related to derivatives exposures and other collateral requirements 700 700 1,154 1,154 1,191 1,191 outflows related to loss of funding on debt products - - - - - - credit and liquidity facilities 7,535 380 7,470 383 7,361 381 Other contractual funding obligations 1,029 667 833 513 785 488 Other contingent funding obligations 5,614 447 5,363 505 5,606 505
Total cash outflows 7,638 8,711 8,399
Cash inflows Secured lending (e.g. reverse repos) 16 - 33 - 33 - Inflow s from fully performing exposures 745 384 679 359 616 319 Other cash inflow s 274 274 837 837 828 828
Total cash inflows 1,035 658 1,549 1,196 1,477 1,147
	Total Adjusted Value		Total Adjusted Value		Total Adjusted Value
Total liquid assets 10,385 11,924 12,718
Total net cash outflows 6,980 7,515 7,252
Liquidity Coverage Ratio(%) 149 159 175
Number of data points used 62 62 64

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The Liquidity Coverage Ratio (LCR) promotes shorter-term resilience by requiring ADIs to maintain sufficient qualifying High Quality Liquid Assets (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) and the available Term Funding Facility (TFF) with the Reserve Bank of Australia (RBA). SML received approval from APRA to reduce the CLF from $4.6 billion to $3.91 billion which became effective on 1 April 2021. Assets eligible for the CLF and TFF include senior unsecured bank paper, covered bonds and residential mortgage backed securities that are repo-eligible with the RBA. SML increased its self-securitisation in March 2020 which covered the CLF increase from May 2020, and the TFF.

The daily average LCR was 149% over the June 2021 quarter, compared to an average of 159% over the March 2021 quarter. The decrease in the average LCR was primarily due to the decrease to the CLF on 1 April 2021 and utilisation of the TFF before 30 June 2021. The LCR decrease was partially offset by a decrease in Net Cash Outflows which was primarily due to a reduction in short term wholesale maturities over the quarter.

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TABLE 21: NET STABLE FUNDING RATIO DISCLOSURE

		Jun-21		Mar-21 Unw eighted value byresidual maturity ($M)
	Unw eighted value byresidual maturity ($M)		Weighted		Weighted
	No maturity < 6 months 6 months to < 1yr ≥ 1yr		value ($M)	No maturity < 6 months 6 months to < 1yr ≥ 1yr	value ($M)
Available Stable Funding (ASF) Item
Capital	3,855 - - 1,185		5,040	3,748 - - 1,185	4,933
Regulatory capital Other capital instruments	3,855 - - 1,185 - - - -		5,040 -	3,748 - - 1,185 - - - -	4,933 -
Retail deposits and deposits from small business customers	- 35,606 - -		33,133	- 35,706 - -	33,222
Stable deposits Less stable deposits	- 21,761 - - - 13,845 - -		20,673 12,460	- 21,733 - - - 13,973 - -	20,646 12,576
Wholesale funding	- 11,148 1,618 9,446		12,588	- 11,897 591 8,929	11,664
Operational deposits Other wholesale funding	- - - - - 11,148 1,618 9,446		- 12,588	- - - - - 11,897 591 8,929	- 11,664
Liabilities with matching interdependent assets Other liabilities	- - -		-	- - -	-
	731 (10) - -		-	1,215 (7) - -	-
NSFR derivative liabilities	-10			-7
All other liabilities and equity not included in the above categories	731 - - -		-	1,215 - - -	-
Total ASF			50,761		49,819
Required Stable Funding (RSF) Item
Total NSFR (HQLA) ALA RBNZ securities Deposits held at other financial institutions for operational purposes Performing loans and securities			251		262
			391		663
			-		-
	3 - -		2	3 - -	2
	2,383 1,048 48,460		36,097	2,702 904 45,453	34,400
Performing loans to financial institutions secured by Level 1 HQLA Performing loans to financial institutions secured by non-Level 1 HQLA and unsecured performing loans to financial institutions Performing loans to non- financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and public sector entities (PSEs), of which: With a risk weight of less than or equal to 35% under APS 112 Performing residential mortgages, of which: With a risk weight equal to 35% under APS 112 Securities that are not in default and do not qualify as HQLA, including exchange-traded equities	- - - - - - 1,290 983 10,517 - - - 1,093 65 37,943 1,093 65 37,943 - - -		- - 10,080 - 26,017 26,017 -	100 - - - - - 1,460 842 10,682 - - - 1,142 62 34,771 1,142 62 34,771 - - -	10 - 10,238 - 24,152 24,152 -
Assets with matching interdependent liabilities Other assets:	- - -		-	- - -	-
	763 289 9 557		1,564	727 314 22 549	1,534
Physical traded commodities, including gold	-		-	-	-
Assets posted as initial margin for derivative contracts and contributions to default funds of central counterparties (CCPs) NSFR derivative assets NSFR derivative liabilities before deduction of variation margin posted	68 0 52		- 52 14	98 0 31	- 31 20
All other assets not included in the above categories	763 169 9 557		1,498	727 185 22 549	1,483
Off-balance sheet items	11,069		500	10,505	469
Total RSF			38,805		37,330
Net Stable Funding Ratio(%)			131%		133%

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The Net Stable Funding Ratio (NSFR) promotes longer-term funding resilience by requiring ADIs to fund their activities with sufficiently stable sources of funding on an ongoing basis.

The NSFR requires that an ADI has sufficient Available Stable Funding (ASF), the portion of capital and liabilities expected to be a reliable source of funds over a one-year time frame, to cover its Required Stable Funding (RSF), which is based on the liquidity characteristics and residual maturities of an ADIs assets and off-balance sheet exposures. SML manages its NSFR on a daily basis and maintains a buffer over the regulatory minimum of 100%.

The NSFR remained above the typical operating range over the quarter (from 133% as at 31 March 2021 to 131% at 30 June 2021). This was consistent with a slight reduction in deposits, lending growth and support mechanisms provided by the RBA and APRA. The Term Funding Facility (TFF) has enabled the Bank to optimise its current funding base in the low rate environment. The NSFR is expected to remain above the typical target range over the coming months.

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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.
Eligible collective provisions	Primarily represents the collective provision for impairment on loans and advances in Stage 1
	(performing and/or newly originated assets). Provisions for loans and advances in Stage 1 are
	established to provide for expected credit losses (ECL) for a period of 12 months. Forward-looking
	provisions for future, presently unidentified losses are also included within the Eligible collective
	provision balance.
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 for credit losses (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.
Ineligible collective provisions	Represents the collective provision for impairment on loans and advances in Stage 2 or Stage 3.
	Stage 2 assets include assets that have experienced a significant increase in credit risk (SICR) since
	origination (under-performing loans). Stage 3 assets within ineligible collective provisions include
	‘past due but not impaired’ and ‘impaired assets’ (non-performing loans, other than those for which a
	specific provision is held under AASB 9). Collective provisions for loans and advances in Stage 2
	and Stage 3 are established to provide for ECL for the remaining term of the loans and advances
	(lifetime ECL). Ineligible collective provision is considered as specific provision for regulatory
	purposes under APS 220_Credit Quality_.
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.
Loan-to-value ratio (LVR)	Ratio of a loan to the value of the asset purchased.
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.
Term Funding Facility (TFF)	On 19 March 2020, the RBA announced the Term Funding Facility (TFF) to support lending to Australian businesses as part of a package of measures to support the Australian economy. Under
	the TFF, Authorised Deposit-taking Institutions (ADIs) can access three-year funding through
	repurchase agreements at a fixed interest rate equivalent to the official cash rate at the time of
	drawdown.
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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