SUNCORP GROUP LIMITED — Interim / Quarterly Report 2021

Feb 8, 2021

SUNCORP GROUP LIMITED SUNCORP BANK APS 330

FOR THE QUARTER ENDED 31 DECEMBER 2020

RELEASE DATE: 9 FEBRUARY 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 December 2020 (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 February 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

Level 28, 266 George Street Brisbane Queensland 4000 suncorpgroup.com.au

Investor Relations

Andrew Dempster Jatin Khosla Head of Investor Relations EM Investor Relations 0497 799 960 0439 226 872 (02) 7911 2880 (07) 3167 5966 andrew.dempster@suncorp.com.au jatin.khosla@suncorp.com.au

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AS AT 31 DECEMBER 2020

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APS 330

TABLE OF 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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AS AT 31 DECEMBER 2020

SUNCORP

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	Statutory	Adjustments	Regulatory
		Capital	Dec-20	Dec-20	Dec-20
		Disclosure	$M	$M	$M
Assets
Cash and cash	equivalents		260	-	260
Receivables due from other banks			1,212	-	1,212
Trading securities			1,371	-	1,371
Derivatives			368	-	368
Investment securities			4,634	-	4,634
Investment in regulatory non-consolidated subsidiaries			-	-	-
Loans and advances			57,026	(2,537)	54,489
_of which: _	eligible collective provision component of GRCL in tier 2
	capital	(o)	-	-	141
_of which: _	loan and lease origination fees and commissions paid to
	mortgage originators and brokers in CET1 regulatory
	adjustments	(f)	-	-	166
Due from related parties			248	(1)	247
Deferred tax assets			64	-	64
_of which: _	arising from temporary differences included in CET1
	regulatory adjustments	(e)	-	-	76
Goodwill		(d)	21	-	21
Other assets			139	(5)	134
Total assets			65,343	(2,543)	62,800
Liabilities
Payables due to other banks			68	-	68
Deposits and short-term borrowings			47,294	12	47,306
Derivatives			530	-	530
_of which: _	securitisation derivatives in CET1 regulatory adjustments	(i)	-	-	1
Payables and other liabilities			132	(1)	131
Due to related parties			65	-	65
Provisions			-	-	-
Due to regulatory non-consolidated subsidiaries			-	39	39
Securitisation liabilities			2,590	(2,590)	-
_of which: _	securitisation start-up costs in CET1 regulatory adjustments	(h)	-	-	2
Long-term borrowings			9,720	-	9,720
_of which: _	costs associated with debt raisings in CET1 regulatory
	adjustments	(g)	-	-	8
Subordinated notes			672	-	672
_of which: _	directly issued qualifying tier 2 instruments	(k)	-	-	600
_of which: _	directly issued instruments subject tophase out from tier 2	(l)	-	-	38
Total liabilities			61,071	(2,540)	58,531
Net assets			4,272	(3)	4,269
Equity
Share capital		(a)	2,754	-	2,754
Capital notes		(j)	585	-	585
Reserves			(237)	-	(237)
_of which: _	equity component of GRCL in tier 2 capital	(m)	-	-	76
_of which: _	FVOCI reserve	(c)	-	-	32
_of which: _	cash flow hedge reserve	(n)	-	-	26
Retained profits			1,170	(3)	1,167
_of which: _	included in CET1	(b)	-	-	796
Total equity attributable to owners of the Company			4,272	(3)	4,269

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AS AT 31 DECEMBER 2020

SUNCORP

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:

		Total	Total
		assets	liabilities
		Dec-20	Dec-20
		$	$
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
		Dec-20	Dec-20
		$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
		Dec-20	Dec-20
		$M	$M
Securitisation special purpose vehicles(1)
Apollo Series 2011-1 Trust		131	131
Apollo Series 2012-1 Trust		136	136
Apollo Series 2013-1 Trust		185	185
Apollo Series 2015-1 Trust		325	325
Apollo Series 2017-1 Trust		500	500
Apollo Series 2017-2 Trust		676	676
Apollo Series 2018-1 Trust		640	640
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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AS AT 31 DECEMBER 2020

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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 Dec-20 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) 796 (c)+(n) 59 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 groupCET1)
	Common Equity Tier 1 capital before regulatory adjustments 3,609
	Common Equity Tier 1 capital: regulatory adjustments (d) 21 (n) 27 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 253 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 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)
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) 76 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 1 301
	Common Equity Tier 1 Capital(CET1) 3,308

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APS 330

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) 3,893
	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) 38 of which: instruments issued by subsidiaries subject to phase out Provisions (m)+(o) 217 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 855
	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) 855
	Total capital(TC=T1+T2) 4,748
	Total risk-weighted assets based on APRA standards 32,921

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APS 330

	Capital Dec-20 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) 10.05% Tier 1 (as a percentage of risk-weighted assets) 11.83% Total capital (as a percentage of risk-weighted assets) 14.42% 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) 10.05% 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) 76
	Applicable caps on the inclusion of provisions in Tier 2 (m)+(o) 217 365 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) 38 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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AS AT 31 DECEMBER 2020

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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] .

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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SUNCORP

APS 330

TABLE 3: CAPITAL ADEQUACY

			Avg risk
		Carrying value	w eight	Risk Weighted Assets
	Dec-20	Sep-20	Dec-20	Dec-20	Sep-20
	$M	$M	%	$M	$M
On-balance sheet credit risk-weighted assets
Cash items	1,106	850	1	11	25
Claims on Australian and foreign governments	3,310	3,202	-	-	-
Claims on central banks, international banking
agencies, regional development banks, ADIs and	731	731	33	241	283
overseas banks
Claims on securitisation exposures	873	947	20	174	188
Claims secured against eligible residential mortgages	43,743	43,847	37	16,035	16,048
Past due claims	662	621	90	594	542
Other retail assets	842	531	99	834	525
Corporate	9,284	9,712	100	9,278	9,706
Other assets and claims	231	298	100	231	298
Total banking assets	60,782	60,739		27,398	27,615

		Notional	Credit	Avg risk
		amount	equivalent	w eight	Risk Weighted Assets
		Dec-20	Dec-20	Dec-20	Dec-20	Sep-20
		$M	$M	%	$M	$M
Off-balance sheet positions
Guarantees entered into in the normal course of
business		324	324	98	318	323
Commitments to provide loans and advances		9,542	2,100	60	1,253	1,246
Foreign exchange contracts		3,460	48	52	25	32
Interest rate contracts		40,404	80	55	44	51
Securitisation exposures		2,629	130	20	26	27
CVA capital charge		-	-	-	105	116
Total off-balance sheetpositions		56,359	2,682		1,771	1,795
		.
Market risk capital charge					131	118
Operational risk capital charge					3,621	3,572
Total off-balance sheet credit risk-w eighted assets					1,771	1,795
Total on-balance sheet credit risk-w eighted assets					27,398	27,615
Total assessed risk(Total Risk Weighted Assets)					32,921	33,100
Risk-weighted capital ratios					%	%
Common Equity Tier 1					10.05	9.62
Tier 1					11.83	11.38
Tier 2					2.59	2.65
Total risk-weighted capital ratio					14.42	14.03

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AS AT 31 DECEMBER 2020

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APS 330

TABLE 4: CREDIT RISK

Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2020

Table 4A: Credit risk by gross credit exposure – outstanding as at 31 December 2020	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 .

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APS 330

TABLE 4: CREDIT RISK (CONTINUED)

Table 4A: Credit risk by gross credit exposure – outstanding as at 30 September 2020

TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 30 September 2020	TABLE 4: CREDIT RISK (CONTINUED) Table 4A: Credit risk by gross credit exposure – outstanding as at 30 September 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 - - - - 4,089 261 Construction & development - - - - 788 206 Financial services 917 - 154 575 104 269 Hospitality - - - - 905 58 Manufacturing - - - - 282 26 Professional services - - - - 324 20 Property investment - - - - 3,100 115 Real estate - Mortgage - - - - 43,314 1,252 Personal - - - - 158 - Government/public authorities - 1,399 - 3,186 - - Other commercial & industrial(6) - - - - 1,914 181	4,350 36 37 4,277 8 994 3 3 988 1 2,019 - - 2,019 - 963 29 11 923 14 308 3 1 304 1 344 1 2 341 1 3,215 16 6 3,193 5 44,566 53 430 44,083 7 158 - 6 152 - 4,585 - - 4,585 - 2,095 28 18 2,049 8
Total gross credit risk 917 1,399 154 3,761 54,978 2,388 Securitisation exposures(1) - - 89 947 2,705 48	63,597 169 514 62,914 45 3,789 1 28 3,760 -
Total including securitisation exposures 917 1,399 243 4,708 57,683 2,436 Impairment provision Total	67,386 170 542 66,674 45 (300) (59) (33) (208) 67,086 111 509 66,466

(1) The securitisation exposures of $2,705 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 $45 million specific provisions for accounting purposes plus $103 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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AS AT 31 DECEMBER 2020

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APS 330

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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AS AT 31 DECEMBER 2020

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APS 330

TABLE 4: CREDIT RISK (CONTINUED)

Table 4A: Credit risk by gross credit exposure – average gross exposure over period 1 July to 30 September 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 - - - - 4,085 258 Construction & development - - - - 789 213 Financial services 742 - 177 623 97 254 Hospitality - - - - 909 57 Manufacturing - - - - 281 23 Professional services - - - - 326 19 Property investment - - - - 3,022 139 Real estate - Mortgage - - - - 43,451 1,123 Personal - - - - 157 - Government/public authorities - 1,430 - 3,140 - - Other commercial & industrial(5) - - - - 1,943 182	4,343 1,002 1,893 966 304 345 3,161 44,574 157 4,570 2,125
Total gross credit risk 742 1,430 177 3,763 55,060 2,268 Securitisation exposures(1) - - 92 998 2,796 50	63,440 3,936
Total including securitisation exposures 742 1,430 269 4,761 57,856 2,318 Impairment provision Total	67,376 (301)
	67,075

(1) The securitisation exposures of $2,796 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 December 2020

						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)	48,021	48,188	61	431	9	2
Other retail	151	155	-	5	-	-
Financial services	2,203	2,112	-	-	-	-
Government and public authorities	4,636	4,611	-	-	-	-
Corporate and other claims	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.

Table 4B: Credit risk by portfolio as at 30 September 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	48,355 48,510 54 458 7 1 158 157 - 6 - - 2,019 1,893 - - - - 4,585 4,570 - - - - 12,269 12,246 116 78 38 2
Total	67,386 67,376 170 542 45 3

(1) $3,789 million, $3,936 million, $1 million and $28 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 $45 million represents the specific provisions for accounting purposes. It excludes the ineligible collective provisions of $103 million which in accordance with APS 220 Credit Quality are regulatory specific provisions. The regulatory specific provisions under APS 220 Credit Quality are $148 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
	Dec-20	Sep-20
	$M	$M
Collective provision for impairment	255	255
Ineligible collectiveprovisions	(114)	(103)
Eligible collective provisions	141	152
Equityreserve for credit losses	76	87
General reserve for credit losses(1)	217	239

(1) The reduction in the General Reserve for Credit Losses ( GRCL ) is due to a more favourable macroeconomic forecast, which resulted in the lifetime loss for Stage 1 exposures reducing over the period, together with a reduction in forward-looking provisions for future, presently unidentified losses.

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TABLE 5: SECURITISATION EXPOSURES

Table 5A: Summary of securitisation activity for the period

During the quarter ending 31 December 2020, there was no new securitisation activity undertaken (quarter ending 30 September 2020: Nil).

During the quarter ending 31 December 2020, ending 30 September 2020: Nil).	there was no new securitisation activity undertaken (quarter	there was no new securitisation activity undertaken (quarter	there was no new securitisation activity undertaken (quarter	there was no new securitisation activity undertaken (quarter
	Exposures Securitised Recognised Gain or(Loss)on Sale
	Dec-20	Sep-20	Dec-20	Sep-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
Dec-20 Sep-20 Exposure type $M $M	Dec-20	Sep-20
Debt securities 873 947
Total on-balance sheet securitisation exposures 873 947

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
Dec-20 Sep-20 Exposure type $M $M	Dec-20	Sep-20
Liquidity facilities 44 48 Derivative exposures 86 89
Total off-balance sheet securitisation exposures 130 137

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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)
Dec-20 Dec-20 Sep-20 Sep-20 Jun-20 Jun-20
$M $M $M $M $M $M
Liquid assets, of which: High-quality liquid assets (HQLA) 5,308 4,588 4,753 Alternative liquid assets (ALA) 7,410 6,842 6,484
Cash outflows Retail deposits and deposits from small business customers, of w hich: 30,707 2,981 29,359 2,835 27,243 2,617 stable deposits 19,063 953 18,261 913 17,117 856 less stable deposits 11,644 2,028 11,098 1,922 10,126 1,761 Unsecured w holesale funding, of w hich: 4,083 2,796 4,411 3,075 4,762 3,298 operational deposits (all counterparties) and deposits in networks for cooperative banks - - - - - - non-operational deposits (all counterparties) 2,825 1,538 2,924 1,588 3,239 1,775 unsecured debt 1,258 1,258 1,487 1,487 1,523 1,523 Secured w holesale funding - 57 - 66 - 59 Additional requirements, of w hich: 8,552 1,572 8,069 1,315 8,679 2,004 outflows related to derivatives exposures and other collateral requirements 1,191 1,191 941 941 1,637 1,637 outflows related to loss of funding on debt products - - - - - - credit and liquidity facilities 7,361 381 7,128 374 7,042 367 Other contractual funding obligations 785 488 685 391 684 379 Other contingent funding obligations 5,606 505 4,974 441 5,899 478
Total cash outflows 8,399 8,123 8,835
Cash inflows Secured lending (e.g. reverse repos) 33 - 17 - 330 - Inflow s from fully performing exposures 616 319 609 315 624 320 Other cash inflow s 828 828 566 566 1,318 1,318
Total cash inflows 1,477 1,147 1,192 881 2,272 1,638
	Total Adjusted Value		Total Adjusted Value		Total Adjusted Value
Total liquid assets 12,718 11,430 11,237
Total net cash outflows 7,252 7,242 7,197
Liquidity Coverage Ratio(%) 175 158 156
Number of data points used 64 66 63

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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 (2019 calendar year: $4.9 billion); 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. SML received approval from APRA to normalise the CLF to $4.6 billion as of 1 December 2020. 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.

The main contributors to net cash outflows were modelled outflows associated with deposits, offset by inflows from maturing loans and issuance of term wholesale liabilities.

The daily average LCR was 175% over the December 2020 quarter, compared to an average of 158% over the September 2020 quarter. The increase in the average LCR was due to increase in average HQLA and Alternative Liquid Assets ( ALA ) over the quarter. This reflected the introduction of the supplementary allowance in October 2020 and an increase in the additional allowance available under the TFF. This was partially offset by the decrease in CLF on 1 December and an increase in net cash outflows associated with an increase in retail and small to medium business customers placing their funds at call rather than in term deposits. The LCR is forecast to remain above the normal operating range over the next period due to the impact of the TFF measures.

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TABLE 21: NET STABLE FUNDING RATIO DISCLOSURE

	Dec-20		Sep-20
	Unw eighted value byresidual maturity ($M)	Weighted	Unw eighted value byresidual maturity ($M)	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	3,865 - - 1,185	5,050	3,772 - - 1,185	4,957
Regulatory capital Other capital instruments	3,865 - - 1,185 - - - -	5,050 -	3,772 - - 1,185 - - - -	4,957 -
Retail deposits and deposits from small business customers	- 35,448 1 -	32,985	- 34,946 - -	32,516
Stable deposits Less stable deposits	- 21,621 - - - 13,827 1 -	20,540 12,445	- 21,267 - - - 13,679 - -	20,204 12,312
Wholesale funding	- 12,762 393 8,279	10,973	- 12,398 1,598 7,679	10,707
Operational deposits Other wholesale funding	- - - - - 12,762 393 8,279	- 10,973	- - - - - 12,398 1,598 7,679	- 10,707
Liabilities with matching interdependent assets Other liabilities	- - -	-	- - -	-
	567 41 - -	-	713 6 - -	-
NSFR derivative liabilities	41		6
All other liabilities and equity not included in the above categories	567 - - -	-	713 - - -	-
Total ASF		49,008		48,180
Required Stable Funding (RSF) Item
Total NSFR (HQLA) ALA RBNZ securities Deposits held at other financial institutions for operational purposes Performing loans and securities		233		231
		664		692
		-		-
	3 - -	1	5 - -	2
	2,592 944 45,288	34,276	2,618 1,006 45,203	34,309
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	151 - - - - - 1,271 886 10,918 - - - 1,170 58 34,370 1,170 58 34,370 - - -	15 - 10,366 - 23,895 23,895 -	122 - - - - - 1,302 920 10,949 - - - 1,194 86 34,217 1,194 86 34,217 - - 37	12 - 10,424 - 23,842 23,842 31
Assets with matching interdependent liabilities Other assets:	- - -	-	- - -	-
	711 393 11 531	1,460	707 304 1 568	1,460
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	233 - -	- - 47	151 - -	- - 30
All other assets not included in the above categories	711 160 11 531	1,413	707 153 1 568	1,430
Off-balance sheet items	10,468	463	10,284	459
Total RSF		37,097		37,153
Net Stable Funding Ratio(%)		132%		130%

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The Net Stable Funding Ratio ( 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 130% as at 30 September 2020 to 132% at 31 December 2020). This was consistent with strong growth in retail and Small and Medium-sized Enterprises ( SME ) deposits, the reduction of funding from financial corporates, the low lending growth environment and support mechanisms provided by the RBA and APRA. The NSFR is expected to remain above the typical target range over the coming months.

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APPENDIX - 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 of 25 basis points.
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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