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SUNCORP GROUP LIMITED — Interim / Quarterly Report 2021
May 16, 2021
65879_rns_2021-05-16_3d5a7360-d4e3-401f-86a8-93e9a8610854.pdf
Interim / Quarterly Report
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ASX announcement
17 May 2021
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Suncorp Bank APS330 31 March 2021
Suncorp Group (ASX: SUN | ADR: SNMCY) today released its Bank quarterly update as at 31 March 2021, as required under the Australian Prudential Standard 330. The report is attached.
ENDS
Authorised for lodgement with the ASX by Suncorp Audit Committee.
For more information contact:
Media
Analysts / Investors
Pip Freebairn +61 402 417 368 [email protected] Andrew Dempster +61 497 799 960 [email protected] Howard Marks +61 402 438 019 [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 2021
RELEASE DATE: 17 MAY 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 31 March 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 17 May 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 forwardlooking 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 [email protected]
PAGE 2
AS AT 31 MARCH 2021
SUNCORP
APS 330
TABLE OF CONTENTS
Basis of preparation ................................................................................................................................................ 2 Overview ................................................................................................................................................................ 4 Loans and advances ............................................................................................................................................... 5 Impairment losses on loans and advances ............................................................................................................... 6 Non-performing loans.............................................................................................................................................. 6 Provision for impairment .......................................................................................................................................... 7 Gross non-performing loans coverage by portfolio.................................................................................................... 8 Appendix 1 – APS 330 Tables ................................................................................................................................. 9 Appendix 2 – Definitions ........................................................................................................................................ 20
PAGE 3
AS AT 31 MARCH 2021
SUNCORP
APS 330
OVERVIEW
Following a period of decline, the home lending portfolio returned to growth during the quarter, increasing $102 million or 0.2%. Home lending lodgement momentum continued, with total lodgements over 50% higher than 3Q20 and a 16% increase on last quarter. This increase was attributable to the Bank’s improved competitive offerings, stable turnaround times and increased credit assessment efficiency. The Bank continues to deliver its targeted program of work to improve customer and broker experiences and to simplify its origination process. The Bank maintains a high-quality and conservatively positioned home lending portfolio, remaining weighted towards owner occupiers, principal and interest repayments and loans with an LVR below 80%.
Business lending contracted $16 million or 0.1%, due to a reduction in the commercial loan portfolio partially offset by growth in agribusiness lending. The contraction of commercial loans was driven by material paydowns due to successful project completions in the development finance portfolio. Following consecutive seasons of favourable environmental conditions across several geographic areas, agribusiness growth was assisted by customers’ property purchases, through support of cropping activity, and several new to bank refinances.
Household deposits grew broadly in line with system during the quarter with growth in at-call deposits offset by a strategic reduction in the higher-cost term portfolio. At-call deposit growth was predominantly driven by growth in transaction account balances supported by customer focused initiatives including zero accountkeeping fees, competitive rates and ongoing development of digital banking functionality.
The Bank has continued to focus on increasing its digital enablement and capabilities. The number of digitally active Bank customers increased 6% (annualised) through the quarter, as customer logins increased to 1 million in a week. The average number of monthly Suncorp App logins per user has continued to grow, increasing to 20.0 by March 2021 (March 2020: 12.9). This increasing digital engagement remains a key focus.
Total impairment losses for the quarter were $1 million, equivalent to 1 basis point of gross loans and advances (annualised). This reflects an unchanged collective provision and a small specific provision expense during the period. The Bank held an unchanged collective provision from 31 December 2020, despite an improved economic outlook, recognising the residual uncertainty following the cessation of a number of COVID-19 related government support and stimulus measures and the end of APRA capital concession loan repayment deferrals. A full review of the collective provision, incorporating changes in the economic outlook and emerging default experience over the next few months, will be undertaken as part of finalising the 30 June financial position.
Gross impaired assets increased $20 million over the quarter to $205 million or 36 basis points of gross loans and advances (GLA), mainly due to the impairment of a single commercial borrower group in the hospitality industry, which is heavily reliant on tourism and accordingly has been significantly impacted by the COVID-19 pandemic. Gross impaired retail loans decreased by $8 million, underpinned by the strong housing market supporting voluntary asset sales by borrowers, coupled with strong clearance rates for properties brought to auction.
Total past due loans not impaired increased by $85 million over the quarter to $599 million or 1% of GLA, predominantly driven by a $76 million increase in retail lending arrears. Whilst some of this increase can be attributed to the seasonal increase in arrears post-Christmas, it is also a result of customers previously under a COVID-19 deferral arrangement moving into business-as-usual hardship and arrears. There was a $1 million increase in the agribusiness portfolio and an $8 million increase in the commercial portfolio, due to several small borrower groups.
As at 31 March 2021, the Net Stable Funding Ratio (NSFR) was 133% and the Liquidity Coverage Ratio (LCR) was 159%, demonstrating the continued strength of Suncorp’s funding and liquidity position as well as the benefit of the undrawn RBA term funding facility.
Suncorp’s capital levels remain sound, with a risk-weighted Common Equity Tier 1 ratio of 9.79% (December 2020: 10.05%), above the Bank’s target operating range of 9-9.50%.
PAGE 4
AS AT 31 MARCH 2021
SUNCORP
APS 330
LOANS AND ADVANCES
| LOANS AND ADVANCES | |||||
|---|---|---|---|---|---|
| Mar-21 | Mar-21 | ||||
| Mar-21 | Dec-20 | Mar-20(1) | vs Dec-20 | vs Mar-20(1) | |
| $M | $M | $M | % | % | |
| Housing loans | 40,797 | 40,448 | 41,860 | 0.9 | (2.5) |
| Securitised housingloans and covered bonds | 5,023 | 5,270 | 5,028 | (4.7) | (0.1) |
| Total housing loans | 45,820 | 45,718 | 46,888 | 0.2 | (2.3) |
| Consumer loans | 140 | 151 | 158 | (7.3) | (11.4) |
| Retail loans | 45,960 | 45,869 | 47,046 | 0.2 | (2.3) |
| Commercial (SME) | 7,298 | 7,417 | 7,220 | (1.6) | 1.1 |
| Agribusiness | 4,142 | 4,039 | 3,968 | 2.6 | 4.4 |
| Total Business loans | 11,440 | 11,456 | 11,188 | (0.1) | 2.3 |
| Total lending | 57,400 | 57,325 | 58,234 | 0.1 | (1.4) |
| Other lending | 4 | 5 | 8 | (20.0) | (50.0) |
| Gross loans and advances | 57,404 | 57,330 |
58,242 | 0.1 | (1.4) |
| Provision for impairment | (303) | (304) | (267) | (0.3) | 13.5 |
| Total loans and advances | 57,101 | 57,026 | 57,975 | 0.1 | (1.5) |
| Credit-risk weighted assets | 27,454 | 27,398 | 27,661 | 0.2 | (0.8) |
| Geographical breakdown - Total lending | |||||
| Queensland | 28,055 | 28,219 | 28,823 | (0.6) | (2.7) |
| New South Wales | 15,697 | 15,582 | 15,881 | 0.7 | (1.2) |
| Victoria | 7,288 | 7,171 | 7,040 | 1.6 | 3.5 |
| Western Australia | 3,682 | 3,677 | 3,788 | 0.1 | (2.8) |
| South Australia and other | 2,678 | 2,676 | 2,702 | 0.1 | (0.9) |
| Outside of Queensland loans | 29,345 | 29,106 | 29,411 | 0.8 | (0.2) |
| Total lending | 57,400 | 57,325 | 58,234 | 0.1 | (1.4) |
(1) The 31 March 2020 comparatives have been restated to reflect changes to business loan reporting to reclassify asset location based on the industry code and the primary collateral state rather than the loan origination business centre.
PAGE 5
AS AT 31 MARCH 2021
SUNCORP
APS 330
IMPAIRMENT LOSSES ON LOANS AND ADVANCES
| Quarter Ended | Mar-21 | Mar-21 | |||
|---|---|---|---|---|---|
| Mar-21 | Dec-20 | Mar-20 | vs Dec-20 | vs Mar-20 | |
| $M | $M | $M | % | % | |
| Collective provision for impairment | - | - | 130 | n/a | (100.0) |
| Specific provision for impairment | - | 5 | 3 | (100.0) | (100.0) |
| Actual net w rite-offs | 1 | - | - | n/a | n/a |
| Impairment losses | 1 | 5 | 133 | (80.0) | 99.2 |
| Impairment losses to gross loans and advances | |||||
| (annualised) | 0.01% | 0.03% | 0.91% |
NON-PERFORMING LOANS
| NON-PERFORMING LOANS | |||||
|---|---|---|---|---|---|
| Quarter Ended | Mar-21 | Mar-21 | |||
| Mar-21 | Dec-20 | Mar-20 | vs Dec-20 | vs Mar-20 | |
| $M | $M | $M | % | % | |
| Retail lending | 53 | 61 | 54 | (13.1) | (1.9) |
| Agribusiness lending | 35 | 35 | 38 | - | (7.9) |
| Commercial/SME lending | 117 | 89 | 65 | 31.5 | 80.0 |
| Gross impaired assets | 205 | 185 | 157 | 10.8 | 30.6 |
| Impairment provision | (64) | (61) | (48) | 4.9 | 33.3 |
| Net impaired assets | 141 | 124 | 109 | 13.7 | 29.4 |
| Impairment provisons as a percentage of gross | |||||
| impaired assets | 31% | 33% | 31% | ||
| Size of gross individually impaired assets | |||||
| Less than one million | 41 | 46 | 45 | (11.1) | (8.9) |
| Greater than one million but less than ten million | 109 | 115 | 88 | (4.9) | 23.9 |
| Greater than ten million | 55 | 24 | 24 | 129.2 | 129.2 |
| Gross impaired assets | 205 | 185 | 157 | 11.0 | 30.6 |
| Past due loans not shown as impaired assets | 599 | 514 | 563 | 16.5 | 6.4 |
| Gross non-performing loans | 804 | 699 | 720 | 15.1 | 11.7 |
| Analysis of movements in gross individually impaired | |||||
| assets | |||||
| Balance at the beginning of the period | 185 | 170 | 153 | 8.8 | 21.1 |
| Recognition of new impaired assets | 39 | 23 | 17 | 69.6 | 129.4 |
| Increases in previously recognised impaired assets | 1 | 1 | 1 | - | - |
| Impaired assets w ritten off | - | (1) | (1) | (100.0) | (100.0) |
| Impaired assets w hich have been reclassed as performing | |||||
| assets or repaid | (20) | (8) | (13) | 150.0 | 53.8 |
| Balance at the end of the period | 205 | 185 | 157 | 10.8 | 30.8 |
PAGE 6
AS AT 31 MARCH 2021
SUNCORP
APS 330
PROVISION FOR IMPAIRMENT
| Mar-21 | Mar-21 | ||||
|---|---|---|---|---|---|
| Mar-21 | Dec-20 | Mar-20 | vs Dec-20 | vs Mar-20 | |
| $M | $M | $M | % | % | |
| Collective provision | |||||
| Balance at the beginning of the period | 255 | 255 | 103 | - | 147.6 |
| Charge against impairment losses | - | - | 130 | n/a | (100.0) |
| Balance at the end of the period | 255 | 255 | 233 | - | 9.4 |
| Specific provision | |||||
| Balance at the beginning of the period | 49 | 45 | 33 | 7.9 | 48.5 |
| Charge against impairment losses | - | 5 | 3 | (100.0) | (100.0) |
| Impairment provision w ritten off | - | (1) | (1) | (100.0) | (100.0) |
| Unw ind of discount | (1) | - | (1) | n/a | - |
| Balance at the end of the period | 48 | 49 | 34 | (2.0) | 41.2 |
| Total provision for impairment - Banking activities | 303 | 304 | 267 | (0.3) | 13.5 |
| Equity reserve for credit loss (ERCL) | |||||
| Balance at the beginning of the period | 76 | 87 | 86 | (12.6) | (11.6) |
| Transfer (to) from retained earnings | - | (11) | (2) | (100.0) | (100.0) |
| Balance at the end of the period | 76 | 76 | 84 | - | (9.5) |
| Pre-tax equivalent coverage | 109 | 109 | 120 | - | (9.5) |
| Total provision for impairment and equity reserve for | |||||
| credit loss - Banking activities | 412 | 413 | 387 | (0.2) | 6.3 |
| Provision for impairment expressed as a percentage of | |||||
| gross loans and advances are as follows: | % | % | % | ||
| Collective provision | 0.44 | 0.44 | 0.40 | ||
| Specific provision | 0.08 | 0.09 | 0.06 | ||
| Total provision | 0.52 | 0.53 | 0.46 | ||
| ERCL coverage | 0.19 | 0.19 | 0.21 | ||
| Total provision and ERCL coverage | 0.71 | 0.72 | 0.67 |
PAGE 7
AS AT 31 MARCH 2021
SUNCORP
APS 330
GROSS NON-PERFORMING LOANS COVERAGE BY PORTFOLIO
| GROSS NON-PERFORMING PORTFOLIO |
LOANS COVERAGE BY |
|---|---|
| 31-Mar-21 | Past due loans Impaired assets Specific provision Collective provision Total provision coverage1,2 |
| $M $M $M $M % |
|
| Retail lending Agribusiness lending Commercial/SME lending |
512 53 7 23 5.3 |
| 37 35 8 16 33.3 |
|
| 50 117 33 32 38.9 |
|
| Total | 599 205 48 71 14.8 |
| Past due loans Impaired assets Specific provision Collective provision Total provision coverage1,2 |
|
| 31-Dec-20 | |
| $M $M $M $M % |
|
| Retail lending Agribusiness lending Commercial/SME lending |
436 61 9 18 5.4 |
| 36 35 8 12 28.2 |
|
| 42 89 32 14 35.1 |
|
| Total | 514 185 49 44 13.3 |
1 Calculated as: (Specific provision + Collective provision Stage 3) / (Past due loans + Impaired assets)
2 The basis for the coverage ratio has been revised during the period to provide a ratio which better reflects the provisions held for Gross non-performing loans. The collective provision presented in the table above is the provision held for non-performing loans i.e. loans in Stage 3 only. Comparatives for Dec-20 have been restated accordingly.
PAGE 8
AS AT 31 MARCH 2021
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 2020 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 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] .
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 9
SUNCORP
APS 330
TABLE 3: CAPITAL ADEQUACY
| Avg risk | |||||||
|---|---|---|---|---|---|---|---|
| Carrying value | w eight | Risk Weighted Assets | |||||
| Mar-21 | Dec-20 | Mar-21 | Mar-21 | Dec-20 | |||
| $M | $M | % | $M | $M | |||
| On-balance sheet credit risk-weighted assets | |||||||
| Cash items | 1,017 | 1,106 | 2 | 21 | 11 | ||
| Claims on Australian and foreign governments | 3,817 | 3,310 | - | - | - | ||
| Claims on central banks, international banking | |||||||
| agencies, regional development banks, ADIs and | 651 | 731 | 28 | 181 |
241 | ||
| overseas banks | |||||||
| Claims on securitisation exposures | 807 | 873 | 20 | 160 |
174 | ||
| Claims secured against eligible residential mortgages |
44,109 | 43,743 | 37 | 16,196 |
16,035 | ||
| Past due claims | 765 | 662 | 92 | 702 |
594 | ||
| Other retail assets | 1,056 | 842 | 99 | 1,050 |
834 | ||
| Corporate | 8,928 | 9,284 | 100 | 8,918 |
9,278 | ||
| Other assets and claims | 227 | 231 | 100 | 226 |
231 | ||
| Total banking assets | 61,377 | 60,782 | 27,454 | 27,398 | |||
| Notional | Credit |
Avg risk |
|||||
| amount | equivalent | w eight | Risk Weighted Assets | ||||
| Mar-21 | Mar-21 | Mar-21 | Mar-21 | Dec-20 | |||
| $M | $M | % | $M | $M | |||
| Off-balance sheet positions | |||||||
| Guarantees entered into in the normal course of | |||||||
| business | 312 | 312 | 98 | 307 | 318 | ||
| Commitments to provide loans and advances | 9,651 | 2,298 | 55 | 1,275 | 1,253 | ||
| Foreign exchange contracts | 3,239 | 69 | 48 | 33 | 25 | ||
| Interest rate contracts | 41,375 | 80 | 50 | 40 | 44 | ||
| Securitisation exposures | 2,353 | 127 | 20 | 25 | 26 | ||
| CVA capital charge | - | - | - | 98 | 105 | ||
| Total off-balance sheetpositions | 56,930 | 2,886 | 1,778 | 1,771 | |||
| . | |||||||
| Market risk capital charge | 152 | 131 | |||||
| Operational risk capital charge | 3,621 | 3,621 | |||||
| Total off-balance sheet credit risk-w eighted assets | 1,778 | 1,771 | |||||
| Total on-balance sheet credit risk-w eighted assets | 27,454 | 27,398 | |||||
| Total assessed risk(Total Risk Weighted Assets) | 33,005 | 32,921 | |||||
| Risk-weighted capital ratios | % | % | |||||
| Common Equity Tier 1 | 9.79 | 10.05 | |||||
| Tier 1 | 11.56 | 11.83 | |||||
| Tier 2 | 2.47 | 2.59 | |||||
| Total risk-weighted capital ratio | 14.03 | 14.42 |
PAGE 10
AS AT 31 MARCH 2021
SUNCORP
APS 330
TABLE 4: CREDIT RISK
Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2021
| Table 4A: Credit risk by gross credit exposure – outstanding as at 31 March 2021 | 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 Personal - - - - 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 .
PAGE 11
AS AT 31 MARCH 2021
SUNCORP
APS 330
TABLE 4: CREDIT RISK (CONTINUED)
Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2020
| TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2020 |
TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2020 |
|---|---|
| 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 - - - - 4,039 289 Construction & development - - - - 804 173 Financial services 1,212 - 128 496 103 264 Hospitality - - - - 893 56 Manufacturing - - - - 232 27 Professional services - - - - 351 20 Property investment - - - - 3,178 115 Real estate - Mortgage - - - - 43,181 1,300 Personal - - - - 151 - Government/public authorities - 1,371 - 3,265 - - Other commercial & industrial(6) - - - - 1,861 180 |
4,328 35 36 4,257 8 977 2 3 972 1 2,203 - - 2,203 - 949 35 5 909 15 259 3 - 256 1 371 1 12 358 1 3,293 19 8 3,266 6 44,481 60 404 44,017 9 151 - 5 146 - 4,636 - - 4,636 - 2,041 29 14 1,998 8 |
| Total gross credit risk 1,212 1,371 128 3,761 54,793 2,424 Securitisation exposures(1) - - 86 873 2,537 44 |
63,689 184 487 63,018 49 3,540 1 27 3,512 - |
| Total including securitisation exposures 1,212 1,371 214 4,634 57,330 2,468 Impairment provision Total |
67,229 185 514 66,530 49 (304) (61) (31) (212) 66,925 124 483 66,318 |
(1) The securitisation exposures of $2,537 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 $49 million specific provisions for accounting purposes plus $114 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 .
.
PAGE 12
AS AT 31 MARCH 2021
SUNCORP
APS 330
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 Personal - - - - 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 4A: Credit risk by gross credit exposure – average gross exposure over period 1 October to 31 December 2020
| 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 - - - - 4,064 275 Construction & development - - - - 796 189 Financial services 1,065 - 141 536 104 266 Hospitality - - - - 899 57 Manufacturing - - - - 257 27 Professional services - - - - 338 20 Property investment - - - - 3,139 115 Real estate - Mortgage - - - - 43,248 1,276 Personal - - - - 155 - Government/public authorities - 1,385 - 3,226 - - Other commercial & industrial(5) - - - - 1,888 181 |
4,339 985 2,112 956 284 358 3,254 44,524 155 4,611 2,069 |
| Total gross credit risk 1,065 1,385 141 3,762 54,888 2,406 Securitisation exposures(1) - - 87 910 2,621 46 |
63,647 3,664 |
| Total including securitisation exposures 1,065 1,385 228 4,672 57,509 2,452 Impairment provision Total |
67,311 (302) |
| 67,009 |
(1) The securitisation exposures of $2,621 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 31 March 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) |
48,319 | 48,171 | 53 | 507 | 7 | - |
|
| Other retail | 140 | 146 |
- | 5 | - | - | |
| Financial services | 2,114 | 2,159 |
- | - | - | - | |
| Government and public authorities | 5,153 | 4,895 |
- | - | - | - | |
| Corporate and other claims | 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.
Table 4B: Credit risk by portfolio as at 31 December 2020
| 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 |
48,021 48,188 61 431 9 2 151 155 - 5 - - 2,203 2,112 - - - - 4,636 4,611 - - - - 12,218 12,245 124 78 40 3 |
| Total | 67,229 67,311 185 514 49 5 |
(1) $3,540 million, $3,664 million, $1 million and $27 million have 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 $49 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $114 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $163 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 |
||
|---|---|---|
| Mar-21 | Dec-20 | |
| $M | $M | |
| Collective provision for impairment | 255 | 255 |
| Ineligible collectiveprovisions | (136) | (114) |
| Eligible collective provisions | 119 | 141 |
| Equityreserve for credit losses | 76 | 76 |
| General reserve for credit losses | 195 | 217 |
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TABLE 5: SECURITISATION EXPOSURES
Table 5A: Summary of securitisation activity for the period
During the quarter ending 31 March 2021, there was no new securitisation activity undertaken (quarter ending 31 December 2020: Nil).
| ending 31 December 2020: Nil). | ||||
|---|---|---|---|---|
| Exposures Securitised Recognised Gain or(Loss)on Sale |
||||
| Mar-21 | Dec-20 | Mar-21 | Dec-20 | |
| $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 | |
|---|---|---|
| Mar-21 Dec-20 Exposure type $M $M |
Mar-21 | Dec-20 |
| Debt securities 807 873 |
||
| Total on-balance sheet securitisation exposures 807 873 |
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-21 Dec-20 Exposure type $M $M |
Mar-21 | Dec-20 |
| Liquidity facilities 43 44 Derivative exposures 84 86 |
||
| Total off-balance sheet securitisation exposures 127 130 |
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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-21 Mar-21 Dec-20 Dec-20 Sep-20 Sep-20 |
|||||
| $M $M $M $M $M $M |
|||||
| Liquid assets, of which: High-quality liquid assets (HQLA) 5,574 5,308 4,588 Alternative liquid assets (ALA) 6,350 7,410 6,842 |
|||||
| Cash outflows Retail deposits and deposits from small business customers, of w hich: 31,108 3,015 30,707 2,981 29,359 2,835 stable deposits 19,291 965 19,063 953 18,261 913 less stable deposits 11,817 2,050 11,644 2,028 11,098 1,922 Unsecured w holesale funding, of w hich: 4,467 3,050 4,083 2,796 4,411 3,075 operational deposits (all counterparties) and deposits in networks for cooperative banks - - - - - - non-operational deposits (all counterparties) 2,986 1,569 2,825 1,538 2,924 1,588 unsecured debt 1,481 1,481 1,258 1,258 1,487 1,487 Secured w holesale funding - 91 - 57 - 66 Additional requirements, of w hich: 8,624 1,537 8,552 1,572 8,069 1,315 outflows related to derivatives exposures and other collateral requirements 1,154 1,154 1,191 1,191 941 941 outflows related to loss of funding on debt products - - - - - - credit and liquidity facilities 7,470 383 7,361 381 7,128 374 Other contractual funding obligations 833 513 785 488 685 391 Other contingent funding obligations 5,363 505 5,606 505 4,974 441 |
|||||
| Total cash outflows 8,711 8,399 8,123 |
|||||
| Cash inflows Secured lending (e.g. reverse repos) 33 - 33 - 17 - Inflow s from fully performing exposures 679 359 616 319 609 315 Other cash inflow s 837 837 828 828 566 566 |
|||||
| Total cash inflows 1,549 1,196 1,477 1,147 1,192 881 |
|||||
| Total Adjusted Value |
Total Adjusted Value |
Total Adjusted Value |
|||
| Total liquid assets 11,924 12,718 11,430 |
|||||
| Total net cash outflows 7,515 7,252 7,242 |
|||||
| Liquidity Coverage Ratio(%) 159 175 158 |
|||||
| Number of datapoints used 62 64 66 |
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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 for a CLF of $4.6 billion for the 2020 calendar year, however, as part of support measures provided by APRA and the RBA in response to COVID-19, SML received an increase to the CLF of $1.4 billion (total of $6.0 billion) from 1 May 2020, which was returned to $4.6 billion as of 1 December 2020. The CLF remained at $4.6 billion for the March 2021 quarter and following further approval, reduced to $3.91 billion 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 has covered the CLF increase from May 2020, and the TFF.
The daily average LCR was 159% over the March 2021 quarter, compared to an average of 175% over the December 2020 quarter. The decrease in the average LCR was primarily due to the decrease to the CLF on 1 December 2020 noted above, as well as an increase in average net cash outflows over the quarter. This decrease in CLF was partially offset by increases in the additional TFF between the December and March quarters. The main contributors to increases in net cash outflows were; an increase in retail customers placing their funds at call rather than in term deposits, and modelled outflows associated with short term wholesale funding, offset by inflows from maturing loans and issuance of term wholesale liabilities.
The LCR is forecast to remain above normal operating range over the next period due to the impact of the TFF measures.
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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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