Australia Full Rating Report Ratings Foreign Currency Long-Term IDR Short-Term IDR A F1 Viability Rating a Support Rating 3 Support Rating Floor BB Sovereign Risk Long-Term Foreign-Currency IDR AAA Long-Term Local-Currency IDR AAA Outlooks Long-Term Foreign-Currency IDR Stable Sovereign Long-Term Foreign- Stable Currency IDR Sovereign Long-Term Local- Stable Currency IDR Financial Data 31 Mar 12 31 Mar 11 Total assets (USDm) 141,636 145,047 Total assets (AUDm) 136,169 140,362 Total equity (AUDm) 8,880 8,717 Operating profit 756 1,038 (AUDm) Published net income 640 833 (AUDm) Comprehensive 384 563 income (AUDm) Operating ROAA (%) 0.52 0.75 Operating ROAE (%) 8.51 12.40 Internal capital -0.44 3.68 generation (%) Fitch core capital/ 14.37 12.06 weighted risks (%) Tier 1 ratio (%) 13.83 10.71 Tangible common equity/tangible assets (%) 5.92 5.63 Key Rating Drivers Balance Sheet Strength: s (MBL) healthy liquidity and capital positions are a key driver of its Long- and Short-Term IDRs and Viability Rating. Other factors reflected in the ratings include a diverse business mix, prudent risk management and some earnings volatility. MBL s Support Rating and Support Rating Floor reflect Fitch Ratings view that there is a moderate chance of support from the Australian authorities, if required. MBL is the most likely entity within the group to receive support, as it is permitted to take deposits. Support is possible from MBL s parent, Macquarie Group Limited (MGL, A /Outlook Stable), although MGL s ability to do so may be limited in light of the relative size of MBL within the broader group. Market Conditions Weaken Profitability: MBL s operating profit declined by 27% in the financial year ended 31 March 2012 (FY12), largely due to reduced volumes and volatility in global capital markets. There was also an increase in impairment charges. Earnings in a number of MBL s operations are closely tied to market conditions which lends itself to a level of earnings volatility. As these operations are core to MBL, this volatility is likely to continue into the medium term, although partially offset by a number of other businesses. Cost Efficiency Focus: To address some of the more structural aspects of the recent market volatility, MGL and by extension MBL is implementing operational efficiency measures which include centralising a number of support functions (such as IT) and exiting some businesses. The focus is on MGL s market-oriented businesses and implementation will continue through FY13. These measures are being taken in conjunction with a series of capital efficiency initiatives which added 2.4pp to MBL s Basel III common equity Tier 1 ratio in H212. Healthy Liquidity and Capital: MBL has a reliance on wholesale funding, although customer deposits continue to increase within the funding mix, accounting for 46% of total funding at FYE12. To address this reliance, MBL has lengthened the duration of wholesale funding and reduced reliance on short-term markets since FY07, while maintaining a sizeable holding of central bank repo-eligible assets. At FYE12 these totalled AUD20.9bn, which more than covered wholesale funding maturities for the next 12 months. Capital is strong relative to peers, with a Fitch core capital ratio of 14.4% at FYE12. MBL already meets all Basel III capital requirements, including the more onerous Australian regulations. Slight Asset Quality Deterioration: There was a modest uptick in impaired assets during FY12, resulting in a rise in the impaired loan ratio to 1.55%. Nevertheless, this remains low relative to international peers. Related Research Macquarie Group Limited () Analysts Tim Roche +612 8256 0310 tim.roche@fitchratings.com Andrea Jaehne +612 8256 0343 andrea.jaehne@fitchratings.com What Could Trigger a Rating Action Weaker Capital or Liquidity: Should there be a material weakening of MBL s capital and/or liquidity positions in conjunction with a deteriorating operating environment, ratings are likely to come under downward pressure. Any reputational damage to the bank s franchise could also result in negative rating action. Positive Rating Action Unlikely: The volatile nature of earnings in a number of MBL s business divisions limits the upside potential for the bank s ratings. www.fitchratings.com 6
MBL undertakes the more traditional banking operations of MGL MBL s Long-Term IDR is one notch higher than MGL s, as it has a lower risk profile Figure 1 Profit Contribution by Business AUDm FY12 FY11 Macquarie funds 372 251 Corporate and asset 699 505 finance Banking and financial 265 278 services Macquarie securities -205-132 Fixed income, 480 549 currencies and commodities Corporate centre -976-622 Total a 635 829 a After distributions to non-controlling interests Source: MBL FY12 Financial Report Profile History Established in 1969 as a wholly owned subsidiary of UK-based Hill Samuel Bank Limited, MBL is a subsidiary of MGL. MBL was listed on the Australian Stock Exchange in 1996, and was the parent entity of the broader group until a restructuring in November 2007. MBL is the sixth biggest bank in Australia by total assets, accounting for 2% of banking system assets at 30 June 2012. Structure MBL is one of two main subsidiaries of MGL, a non-operating holding company and listed parent of the group the other main subsidiary is Macquarie Financial Holdings Limited (MFHL, A /Outlook Stable). MBL houses the more traditional banking activities of MGL, while MFHL undertakes the group s non-bank operations. Fitch views the non-bank operations as having a higher risk profile than MBL s operations. For this reason, the Long-Term IDR of MFHL and MGL is one notch lower than MBL s. MBL operates in all operating groups and divisions of MGL except the Macquarie capital group. Operating group contributions to MBL s profit shown are Figure 1 (see the MGL report under Related Research on the front page for more detail on the groups). Services such as risk management, treasury, IT and finance are centralised in MGL, with MBL utilising them through outsourcing arrangements. In line with its parent, MBL is in the process of implementing operational efficiency measures, with the focus on the Macquarie securities group. Initiatives include centralising support functions such as IT and exiting certain businesses eg some derivatives operations in the Macquarie securities group and aircraft engine leasing. These measures are being taken in conjunction with capital efficiency measures and will continue through FY13. Corporate Governance MBL s board consists of two executive directors and eight non-executive directors. There was one change during FY12, with the managing director retiring and being replaced internally. MBL reports using IFRS and is subject to prudential regulation by the Australian Prudential Regulation Authority (APRA). Capital market volatility and increased impairment charges negatively impacted operating profit in FY12 More stable earnings streams have grown in recent years, although earnings volatility is likely to remain a feature into the medium term Performance Numbers in this analysis are based on Fitch s calculations, and may vary from those reported by MBL. Overview and outlook Operating profit declined by 27% to AUD756m in FY12, following an increase of 85% in FY11. This earnings volatility is a function of a number of businesses which are substantially influenced by capital market conditions. Both trading and net fee and commission income fell in FY12 due to reduced volumes and volatility in global capital markets. There was also an increase in impairment charges. The Macquarie securities and fixed-income, currencies and commodities groups were impacted by weaker volumes in the capital markets. Conversely, MGL s fund and corporate and asset finance (CAF) businesses performed well during FY12, reflecting higher volumes, increased performance fees in the fund business, and in the case of CAF the first full-year benefit of FY11 acquisitions. Related Criteria Global Financial Institutions Rating Criteria (August 2012) Despite an increased focus in recent years on businesses with more stable earnings, the market-oriented businesses remain core to MBL and therefore earnings volatility is likely to remain a feature of the bank s financial performance into the medium term. Strong liquidity and capital positions provide an important buffer to this volatility at the current rating levels. 2
Figure 2 Operating Income AUDm FY12 FY11 Net interest income 1,624 1,681 Net trading income 999 1,300 Net fees and 733 853 commissions Other operating 888 616 income Operating income 4,244 4,450 Staff costs 1,507 1,553 Other costs 1,710 1,704 Operating expenses 3,217 3,257 Source: MBL FY12 financials and Fitch Operating revenue All three of MBL s main revenue lines fell during FY12 (see Figure 2). Net interest income suffered the smallest decline, falling 3%. This largely stemmed from the mortgage portfolio, where net interest margins tightened (primarily Canada) and loan balances declined (primarily Australia). Net interest income from other lending such as corporate loans and MBL s lease portfolios increased due to wider net interest margins and larger volumes. Growth in the nonmortgage portfolio appears to be MBL s focus these loans typically have wider net interest margins than mortgages and thus are beneficial for net interest income. Nevertheless, such loan classes typically have a greater risk profile, which may result in higher impairment charges. Net trading income fell by 23% in FY12, reflecting reduced client activity. Of the bank s four main trading areas (equities, commodities, foreign exchange products and interest rate products), only foreign exchange products recorded an increase due to greater volatility and higher client margins. As MBL s trading operations are largely client focused, earnings are susceptible to changes in investor sentiment and therefore volumes (although some businesses, such as foreign exchange trading, benefit from market volatility). As a result, net trading income is likely to remain a somewhat volatile revenue item for MBL. Net fee and commission income declined 14%, largely due to reduced brokerage fees and the impact of the stronger Australian dollar on offshore earnings. Base fees from MBL s fund management operations are the largest source of fee and commission income and are closely aligned with the level of assets under management. They were broadly flat during FY12 higher levels of assets under management were offset by the stronger Australian dollar and the first full-year impact of the conversion of the off-balance sheet cash management trust to the on-balance sheet cash management account. While more stable than trading income, certain aspects of net fee and commission income, such as performance fees, brokerage fees and performance fees mean a degree of volatility is likely into the medium term. Other operating income increased significantly during FY12, largely reflecting increased operating lease income relating to a number of acquisitions made in FY11. As such, similar growth levels in FY13 are unlikely. Operating expenses Expense management, including reduced staff numbers, contributed to a fall in operating expenses of 1% in FY12. However, the fall in operating revenue outpaced this decline, resulting in a modest increase in the cost/income ratio to 76% (FY11: 74%). Expense growth is likely to be limited during FY13 as the bank continues to focus on cost efficiency measures. MBL adheres to the proven and robust group risk framework Credit risk arises mainly through the bank s lending and trading activities MBL has sound asset quality by international standards Market risk exposure is modest relative to its international peers, as proprietary trading is only a small component of total trading activities Impairment charges Impairment charges rose by 75% in FY12, with the majority of these relating to resource equity holdings. This equated to 26% of pre-impairment operating profit (FY11: 13%) which is still at the low end relative to MBL s last five financial years. Risk Management Risk management is centralised within MGL and applied consistently to all parts of the group. Details of the framework are available in Fitch s latest full rating report on MGL (see Related Research on the front page). Credit risk Figure 3 provides a breakdown of gross credit exposure by type (this includes both on- and offbalance sheet items). Gross credit exposures declined by 3% in FY12. 3
Figure 3 Gross Credit Exposure At FYE12 Other retail 11% Bank 13% Other assets 15% Sovereign 8% Source: MBL FY12 Pillar 3 report Corporate 34% Residential mortgages 19% Loans (35% of on-balance sheet assets) Loans are dominated by residential mortgages, leasing and corporate lending. Mortgages and auto leases are primarily financed through securitisation at FYE12 28% of loans were securitised (FYE11: 27%). Impaired loans rose by 2%, which combined with a decline in loans led to an increase of 13bp in MBL s impaired loan ratio to 1.55% in FY12. Asset quality is sound by international standards, although the impaired loan ratio is at the higher end of ratios reported by other Australian banks. Provisioning levels appear adequate, with total provisions (collective and individual) equating to 77% of impaired loans at FYE12 (FYE11: 73%). The bank has a modest lending exposure to the more troubled European economies (mainly Spain, Portugal and Ireland), although this is largely to the corporate sector. Given a greater weighting toward leases and corporate lending, MBL s loan portfolio has a higher risk profile than those of other Australian banks which are weighted much more heavily toward residential mortgages. As a result, impaired asset levels are likely to remain above those of domestic peers through the cycle. Nevertheless, MBL appears to manage this well through its robust risk management framework. Securities (28% of on-balance sheet assets) MBL s securities holdings represent another source of credit risk and include trading assets (8.5% of total assets), available-for-sale (AFS) investment securities (12.0%), investment securities at fair value (3.1%), and life insurance assets (4.3%). The asset quality of these securities is strong, in part because a significant portion relate to MBL s sizeable liquid asset portfolio (see Funding and Liquidity below). At FYE12, MBL reported just AUD11m of impaired debt AFS securities (0.07% of the total). In addition, trading exposures are largely hedged in line with the bank s client focus. This is conducted mainly through the use of repurchase agreements and derivative instruments. The bank s life insurance assets are largely self-funded, with the net asset position on MBL s balance sheet being immaterial. Other assets Derivatives, at 16% of total assets, are the only other on-balance sheet asset class above 10% and are used primarily for client-initiated transactions or hedging. Off-balance sheet exposures appear manageable at AUD3.4bn, committed credit facilities are the largest exposure. Equity risk MBL s equity exposures arise through its investments in Macquarie-managed funds, direct investments in external companies, assets and property, and lease residuals. At FYE12, the bank s gross exposure totalled AUD3.5bn, while net of hedging and reserves it was AUD1.3bn (FYE11: AUD4.1bn and AUD1.5bn, respectively). It is important to note that these investments are not marked to market through the profit and loss statement. Instead, they are subject to impairment tests, which reduce the volatility in impairment charges. For listed investments, a significant or prolonged decline in market value below book value is a trigger for a review, while for unlisted investments the trigger is a period of asset underperformance. Operational risk Operational risk is MBL s second largest, accounting for 12% of risk-weighted assets at FYE12. MBL s operational risk framework appears robust, with regular assessment of operational risks and controls at the business level and a centralised database for operational risk incidents. The framework has been approved for use under the advanced measurement approach of Basel II. Market risk Traded market risk is MBL s main form of market risk, although it is also exposed to interestrate risk in its banking book. Where possible, MBL transfers interest-rate risk in the banking book to its trading portfolio, with the residual exposure monitored and controlled by the risk 4
management group (RMG) and reported to senior management regularly. Non-traded foreigncurrency exposures are hedged, unless specifically approved by RMG. Traded market risk is managed within three complementary limit structures. Contingent loss limits are implemented and tested using a range of rigorous price and volatility stress tests on a daily basis, including comprehensive worst-case scenarios, with findings reported to senior management. Multiple scenarios are set for each market, with the worst-case multi-market scenario analysis used as the basis for calculating the total capital requirement for market risk in MGL s economic capital model. The group has stated that the assumptions in this scenario are considerably more severe than the conditions that prevailed during the 2007-2009 financial crisis, eg gap moves in global equity markets of between 20%-30%, and simultaneous interest rate shocks across all yield curves of 50-100bp. Volume, maturity and open-position limits are used to constrain concentration risk and to avoid the accumulation of risky, illiquid positions. Value-at-risk (VaR) is calculated using Monte Carlo simulations. A one-day holding period and 99% confidence interval is used for statutory reporting, although the bank adheres to more stringent internal limits such as a 10-day holding period. Daily statutory VaR averaged just AUD15m during FY11, with a maximum of AUD20m. Trading is undertaken primarily on behalf of clients, with only relatively small proprietary positions recorded. All positions are marked to market and reported to senior management on a daily basis. This has typically led to low volatility in trading revenue. MBL s funding mix continues to improve, while liquidity is strong and well managed MBL is well positioned for the implementation of Basel III, with solid capital ratios Figure 4 Funding Mix (%) 100 80 60 40 20 0 Short-term w'sale Long-term w'sale Deposits Equity & hybrids FYE10 FYE11 FYE12 a Reflects maturity at issuance Source: MGL results announcements a a Funding, Liquidity and Capital Funding and Liquidity MBL is one of only two entities within the group (the other being MGL) that obtains debt funding from external sources. It is also the only entity within the group authorised to take deposits. MBL s funding profile has improved substantially since the onset of the 2008 crisis, with a greater emphasis on deposits and longer-term wholesale funding at the expense of short-term wholesale funding. Deposits continue to increase as a percentage of total funding and accounted for 46% at FYE12 (see Figure 4). Long-term wholesale funding had a weighted average term to maturity of 3.3 years at FYE12 (down from 4.0 years at FYE11) and has been supported by issuance post-fye12. To offset the risks associated with wholesale funding, MBL maintains a very liquid balance sheet. Cash and unencumbered liquid assets totalled AUD20.9bn at FYE12, and covered short-term wholesale funding 3.3x (FYE11: AUD23.8bn and 4.6x). 99% of these assets are unencumbered and eligible for central bank repurchase programmes. MBL s liquidity policy requires that it is able to meet all of its liquidity obligations on a daily basis during a 12-month period with constrained access to funding markets and only a limited reduction in the core operations of the group. Scenario analysis is used to test MBL s liquidity position under various degrees of constrained capital markets access. MBL s strong liquidity position leaves it well placed to address the Basel III liquidity requirements as and when they are implemented. Capital MBL has been accredited to use the foundation internal ratings based approach for credit risk and the advanced measurement approach for operational risk under Basel II. At FYE12, its Fitch core capital ratio was 14.37%, while its core Tier 1 ratio was 12.49% (FYE11: 12.06% and 9.89% respectively). Much of the improvement in capital ratios during FY12 related to the bank s capital efficiency initiatives. 5
MBL estimates its common equity Tier 1 ratio at FYE12 under the Australian Prudential Regulation Authority s conservative approach to Basel III at 10.1%, while under a fully harmonised approach it was 12.2%. The harmonised ratio had fallen to 11.7% at 30 June 2012 due to a AUD500m special dividend paid to MGL during the quarter. Nevertheless, Basel III ratios remain well above the 7% minimum which will be implemented from 2016 and leave MBL well positioned relative to peers. Importantly, capital in MBL is ring-fenced dividends can only be paid out of current year s earnings unless approved by APRA. 6
Income Statement 31 Mar 2012 31 Mar 2011 31 Mar 2010 31 Mar 2009 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm Earning AUDm Earning AUDm Earning AUDm Earning Unqualified Unqualified Assets Unqualified Assets Unqualified Assets Unqualified Assets 1. Interest Income on Loans n.a. n.a. - n.a. - n.a. - n.a. - 2. Other Interest Income 5,364.1 5,157.0 4.20 5,141.0 3.96 4,353.0 3.59 6,267.0 5.00 3. Dividend Income 21.8 21.0 0.02 30.0 0.02 23.0 0.02 19.0 0.02 4. Gross Interest and Dividend Income 5,385.9 5,178.0 4.21 5,171.0 3.98 4,376.0 3.61 6,286.0 5.01 5. Interest Expense on Customer Deposits n.a. n.a. - n.a. - n.a. - n.a. - 6. Other Interest Expense 3,696.7 3,554.0 2.89 3,490.0 2.69 3,028.0 2.50 5,302.0 4.23 7. Total Interest Expense 3,696.7 3,554.0 2.89 3,490.0 2.69 3,028.0 2.50 5,302.0 4.23 8. Net Interest Income 1,689.2 1,624.0 1.32 1,681.0 1.29 1,348.0 1.11 984.0 0.78 9. Net Gains (Losses) on Trading and Derivatives 1,039.1 999.0 0.81 1,300.0 1.00 1,237.0 1.02 1,545.0 1.23 10. Net Gains (Losses) on Other Securities 187.2 180.0 0.15 205.0 0.16 42.0 0.03-6.0 0.00 11. Net Gains (Losses) on Assets at FV through Income Statement 38.5 37.0 0.03 18.0 0.01 n.a. - n.a. - 12. Net Insurance Income n.a. n.a. - n.a. - n.a. - n.a. - 13. Net Fees and Commissions 762.4 733.0 0.60 853.0 0.66 488.0 0.40 486.0 0.39 14. Other Operating Income 659.5 634.0 0.52 348.0 0.27 183.0 0.15 158.0 0.13 15. Total Non-Interest Operating Income 2,686.7 2,583.0 2.10 2,724.0 2.10 1,950.0 1.61 2,183.0 1.74 16. Personnel Expenses 1,567.5 1,507.0 1.23 1,553.0 1.20 1,089.0 0.90 887.0 0.71 17. Other Operating Expenses 1,778.7 1,710.0 1.39 1,704.0 1.31 1,253.0 1.03 1,048.0 0.84 18. Total Non-Interest Expenses 3,346.2 3,217.0 2.62 3,257.0 2.51 2,342.0 1.93 1,935.0 1.54 19. Equity-accounted Profit/ Loss - Operating 38.5 37.0 0.03 45.0 0.03 7.0 0.01 98.0 0.08 20. Pre-Impairment Operating Profit 1,068.2 1,027.0 0.84 1,193.0 0.92 963.0 0.79 1,330.0 1.06 21. Loan Impairment Charge 133.1 128.0 0.10 102.0 0.08 210.0 0.17 450.0 0.36 22. Securities and Other Credit Impairment Charges 148.7 143.0 0.12 53.0 0.04 193.0 0.16 579.0 0.46 23. Operating Profit 786.4 756.0 0.62 1,038.0 0.80 560.0 0.46 301.0 0.24 24. Equity-accounted Profit/ Loss - Non-operating n.a. n.a. - n.a. - n.a. - n.a. - 25. Non-recurring Income n.a. n.a. - n.a. - 55.0 0.05 n.a. - 26. Non-recurring Expense n.a. n.a. - n.a. - n.a. - n.a. - 27. Change in Fair Value of Own Debt n.a. n.a. - n.a. - n.a. - n.a. - 28. Other Non-operating Income and Expenses 132.1 127.0 0.10 67.0 0.05 147.0 0.12 324.0 0.26 29. Pre-tax Profit 918.5 883.0 0.72 1,105.0 0.85 762.0 0.63 625.0 0.50 30. Tax expense 252.8 243.0 0.20 272.0 0.21 65.0 0.05-32.0-0.03 31. Profit/Loss from Discontinued Operations n.a. n.a. - n.a. - n.a. - 0.0 0.00 32. Net Income 665.7 640.0 0.52 833.0 0.64 697.0 0.57 657.0 0.52 33. Change in Value of AFS Investments -241.3-232.0-0.19 115.0 0.09 188.0 0.15-52.0-0.04 34. Revaluation of Fixed Assets n.a. n.a. - n.a. - n.a. - n.a. - 35. Currency Translation Differences -15.6-15.0-0.01-406.0-0.31-167.0-0.14 39.0 0.03 36. Remaining OCI Gains/(losses) -9.4-9.0-0.01 21.0 0.02 70.0 0.06-141.0-0.11 37. Fitch Comprehensive Income 399.4 384.0 0.31 563.0 0.43 788.0 0.65 503.0 0.40 38. Memo: Profit Allocation to Non-controlling Interests 5.2 5.0 0.00 4.0 0.00 13.0 0.01 48.0 0.04 39. Memo: Net Income after Allocation to Non-controlling Interests 660.5 635.0 0.52 829.0 0.64 684.0 0.56 609.0 0.49 40. Memo: Common Dividends Relating to the Period 675.1 649.0 0.53 482.0 0.37 485.0 0.40 345.0 0.28 41. Memo: Preferred Dividends Related to the Period 31.2 30.0 0.02 30.0 0.02 29.0 0.02 78.0 0.06 Exchange rate USD1 = AUD0.96140 USD1 = AUD0.96770 USD1 = AUD1.09182 USD1 = AUD1.45500 7
Balance Sheet 31 Mar 2012 31 Mar 2011 31 Mar 2010 31 Mar 2009 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets Assets A. Loans 1. Residential Mortgage Loans n.a. n.a. - n.a. - n.a. - n.a. - 2. Other Mortgage Loans n.a. n.a. - n.a. - n.a. - n.a. - 3. Other Consumer/ Retail Loans n.a. n.a. - n.a. - n.a. - n.a. - 4. Corporate & Commercial Loans n.a. n.a. - n.a. - n.a. - n.a. - 5. Other Loans 49,494.5 47,584.0 34.94 50,826.0 36.21 49,395.0 37.96 51,674.0 39.63 6. Less: Reserves for Impaired Loans/ NPLs 587.7 565.0 0.41 526.0 0.37 564.0 0.43 629.0 0.48 7. Net Loans 48,906.8 47,019.0 34.53 50,300.0 35.84 48,831.0 37.53 51,045.0 39.14 8. Gross Loans 49,494.5 47,584.0 34.94 50,826.0 36.21 49,395.0 37.96 51,674.0 39.63 9. Memo: Impaired Loans included above 766.6 737.0 0.54 723.0 0.52 994.0 0.76 1,340.0 1.03 10. Memo: Loans at Fair Value included above 1,878.5 1,806.0 1.33 2,475.0 1.76 2,646.0 2.03 2,476.0 1.90 B. Other Earning Assets 1. Loans and Advances to Banks 8,649.9 8,316.0 6.11 7,579.0 5.40 6,490.0 4.99 10,169.0 7.80 2. Reverse Repos and Cash Collateral 7,306.0 7,024.0 5.16 7,418.0 5.28 6,084.0 4.68 4,534.0 3.48 3. Trading Securities and at FV through Income 12,008.5 11,545.0 8.48 14,423.0 10.28 11,324.0 8.70 8,772.0 6.73 4. Derivatives 22,832.3 21,951.0 16.12 21,145.0 15.06 21,540.0 16.56 27,335.0 20.96 5. Available for Sale Securities 16,938.8 16,285.0 11.96 15,003.0 10.69 16,761.0 12.88 14,544.0 11.15 6. Held to Maturity Securities n.a. n.a. - n.a. - n.a. - n.a. - 7. At-equity Investments in Associates 735.4 707.0 0.52 856.0 0.61 915.0 0.70 1,571.0 1.20 8. Other Securities 4,322.9 4,156.0 3.05 8,132.0 5.79 4,479.0 3.44 3,065.0 2.35 9. Total Securities 64,144.0 61,668.0 45.29 66,977.0 47.72 61,103.0 46.96 59,821.0 45.87 10. Memo: Government Securities included Above 2,780.3 2,673.0 1.96 2,523.0 1.80 3,823.0 2.94 4,523.0 3.47 11. Memo: Total Securities Pledged 2,094.9 2,014.0 1.48 3,721.0 2.65 4,144.0 3.18 n.a. - 12. Investments in Property n.a. n.a. - n.a. - n.a. - n.a. - 13. Insurance Assets 6,145.2 5,908.0 4.34 5,062.0 3.61 4,854.0 3.73 4,314.0 3.31 14. Other Earning Assets 0.0 0.0 0.00 0.0 0.00 51.0 0.04 56.0 0.04 15. Total Earning Assets 127,845.8 122,911.0 90.26 129,918.0 92.56 121,329.0 93.25 125,405.0 96.17 C. Non-Earning Assets 1. Cash and Due From Banks 0.0 0.0 0.00 0.0 0.00 0.0 0.00 141.0 0.11 2. Memo: Mandatory Reserves included above n.a. n.a. - n.a. - n.a. - n.a. - 3. Foreclosed Real Estate n.a. n.a. - n.a. - n.a. - n.a. - 4. Fixed Assets 5,029.1 4,835.0 3.55 2,363.0 1.68 893.0 0.69 88.0 0.07 5. Goodwill 349.5 336.0 0.25 332.0 0.24 378.0 0.29 189.0 0.14 6. Other Intangibles 559.6 538.0 0.40 534.0 0.38 570.0 0.44 148.0 0.11 7. Current Tax Assets n.a. n.a. - n.a. - n.a. - n.a. - 8. Deferred Tax Assets 109.2 105.0 0.08 376.0 0.27 373.0 0.29 93.0 0.07 9. Discontinued Operations n.a. n.a. - n.a. - n.a. - n.a. - 10. Other Assets 7,742.9 7,444.0 5.47 6,839.0 4.87 6,567.0 5.05 4,341.0 3.33 11. Total Assets 141,636.2 136,169.0 100.00 140,362.0 100.00 130,110.0 100.00 130,405.0 100.00 Liabilities and Equity D. Interest-Bearing Liabilities 1. Customer Deposits - Current 38,500.1 37,014.0 27.18 35,106.0 25.01 22,288.0 17.13 21,603.0 16.57 2. Customer Deposits - Savings n.a. n.a. - n.a. - n.a. - n.a. - 3. Customer Deposits - Term n.a. n.a. - n.a. - n.a. - n.a. - 4. Total Customer Deposits 38,500.1 37,014.0 27.18 35,106.0 25.01 22,288.0 17.13 21,603.0 16.57 5. Deposits from Banks 4,471.6 4,299.0 3.16 1,580.0 1.13 2,167.0 1.67 3,264.0 2.50 6. Repos and Cash Collateral 4,970.9 4,779.0 3.51 6,103.0 4.35 7,201.0 5.53 3,881.0 2.98 7. Other Deposits and Short-term Borrowings n.a. n.a. - n.a. - n.a. - n.a. - 8. Total Deposits, Money Market and Short-term Funding 47,942.6 46,092.0 33.85 42,789.0 30.48 31,656.0 24.33 28,748.0 22.05 9. Senior Debt Maturing after 1 Year 39,619.3 38,090.0 27.97 43,414.0 30.93 47,416.0 36.44 51,602.0 39.57 10. Subordinated Borrowing 2,168.7 2,085.0 1.53 1,897.0 1.35 1,404.0 1.08 1,942.0 1.49 11. Other Funding 1,755.8 1,688.0 1.24 2,909.0 2.07 2,634.0 2.02 3,878.0 2.97 12. Total Long Term Funding 43,543.8 41,863.0 30.74 48,220.0 34.35 51,454.0 39.55 57,422.0 44.03 13. Derivatives 21,736.0 20,897.0 15.35 21,455.0 15.29 21,634.0 16.63 27,273.0 20.91 14. Trading Liabilities 3,647.8 3,507.0 2.58 5,732.0 4.08 4,921.0 3.78 1,980.0 1.52 15. Total Funding 116,870.2 112,359.0 82.51 118,196.0 84.21 109,665.0 84.29 115,423.0 88.51 E. Non-Interest Bearing Liabilities 1. Fair Value Portion of Debt n.a. n.a. - n.a. - n.a. - n.a. - 2. Credit impairment reserves n.a. n.a. - n.a. - n.a. - n.a. - 3. Reserves for Pensions and Other 103.0 99.0 0.07 80.0 0.06 71.0 0.05 76.0 0.06 4. Current Tax Liabilities 47.8 46.0 0.03 67.0 0.05 76.0 0.06 111.0 0.09 5. Deferred Tax Liabilities 557.5 536.0 0.39 393.0 0.28 273.0 0.21 72.0 0.06 6. Other Deferred Liabilities n.a. n.a. - n.a. - n.a. - n.a. - 7. Discontinued Operations 0.0 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 8. Insurance Liabilities 6,133.8 5,897.0 4.33 5,055.0 3.60 4,864.0 3.74 4,312.0 3.31 9. Other Liabilities 8,030.0 7,720.0 5.67 7,463.0 5.32 6,727.0 5.17 4,001.0 3.07 10. Total Liabilities 131,742.3 126,657.0 93.01 131,254.0 93.51 121,676.0 93.52 123,995.0 95.08 F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt 250.7 241.0 0.18 0.0 0.00 0.0 0.00 0.0 0.00 2. Pref. Shares and Hybrid Capital accounted for as Equity 406.7 391.0 0.29 391.0 0.28 391.0 0.30 391.0 0.30 G. Equity 1. Common Equity 9,807.6 9,429.0 6.92 9,081.0 6.47 8,128.0 6.25 5,810.0 4.46 2. Non-controlling Interest 70.7 68.0 0.05 72.0 0.05 85.0 0.07 410.0 0.31 3. Securities Revaluation Reserves 78.0 75.0 0.06 307.0 0.22 192.0 0.15 4.0 0.00 4. Foreign Exchange Revaluation Reserves -684.4-658.0-0.48-643.0-0.46-241.0-0.19-9.0-0.01 5. Fixed Asset Revaluations and Other Accumulated OCI -35.4-34.0-0.02-100.0-0.07-121.0-0.09-196.0-0.15 6. Total Equity 9,236.5 8,880.0 6.52 8,717.0 6.21 8,043.0 6.18 6,019.0 4.62 7. Total Liabilities and Equity 141,636.2 136,169.0 100.00 140,362.0 100.00 130,110.0 100.00 130,405.0 100.00 8. Memo: Fitch Core Capital 7,752.2 7,453.0 5.47 6,682.0 4.76 6,332.0 4.87 4,557.0 3.49 9. Memo: Fitch Eligible Capital 8,082.0 7,770.0 5.71 6,878.0 4.90 6,332.0 4.87 4,557.0 3.49 Exchange rate USD1 = AUD0.96140 USD1 = AUD0.96770 USD1 = AUD1.09182 USD1 = AUD1.45500 8
Summary Analytics 31 Mar 2012 31 Mar 2011 31 Mar 2010 31 Mar 2009 Year End Year End Year End Year End A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans n.a. n.a. n.a. n.a. 2. Interest Expense on Customer Deposits/ Average Customer Deposits n.a. n.a. n.a. n.a. 3. Interest Income/ Average Earning Assets 3.92 4.04 3.57 4.47 4. Interest Expense/ Average Interest-bearing Liabilities 2.92 3.00 2.71 4.24 5. Net Interest Income/ Average Earning Assets 1.23 1.31 1.10 0.70 6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets 1.13 1.23 0.93 0.38 7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets 1.21 1.29 1.08 0.64 B. Other Operating Profitability Ratios 1. Non-Interest Income/ Gross Revenues 61.40 61.84 59.13 68.93 2. Non-Interest Expense/ Gross Revenues 76.47 73.94 71.01 61.10 3. Non-Interest Expense/ Average Assets 2.22 2.37 1.81 1.33 4. Pre-impairment Op. Profit/ Average Equity 11.56 14.25 14.09 22.55 5. Pre-impairment Op. Profit/ Average Total Assets 0.71 0.87 0.74 0.92 6. Loans and securities impairment charges/ Pre-impairment Op. Profit 26.39 12.99 41.85 77.37 7. Operating Profit/ Average Equity 8.51 12.40 8.19 5.10 8. Operating Profit/ Average Total Assets 0.52 0.75 0.43 0.21 9. Taxes/ Pre-tax Profit 27.52 24.62 8.53-5.12 10. Pre-Impairment Operating Profit / Risk Weighted Assets 1.98 2.15 2.03 3.55 11. Operating Profit / Risk Weighted Assets 1.46 1.87 1.18 0.80 C. Other Profitability Ratios 1. Net Income/ Average Total Equity 7.21 9.95 10.19 11.14 2. Net Income/ Average Total Assets 0.44 0.61 0.54 0.45 3. Fitch Comprehensive Income/ Average Total Equity 4.32 6.72 11.53 8.53 4. Fitch Comprehensive Income/ Average Total Assets 0.26 0.41 0.61 0.35 5. Net Income/ Av. Total Assets plus Av. Managed Securitized Assets n.a. n.a. n.a. n.a. 6. Net Income/ Risk Weighted Assets 1.23 1.50 1.47 1.75 7. Fitch Comprehensive Income/ Risk Weighted Assets 0.74 1.02 1.66 1.34 D. Capitalization 1. Fitch Core Capital/Weighted Risks 14.37 12.06 13.38 12.16 2. Fitch Eligible Capital/ Weighted Risks 14.98 12.42 13.38 12.16 3. Tangible Common Equity/ Tangible Assets 5.92 5.63 5.49 4.37 4. Tier 1 Regulatory Capital Ratio 13.83 10.71 11.54 11.43 5. Total Regulatory Capital Ratio 16.62 12.39 13.27 14.37 6. Core Tier 1 Regulatory Capital Ratio 12.49 9.89 n.a. n.a. 7. Equity/ Total Assets 6.52 6.21 6.18 4.62 8. Cash Dividends Paid & Declared/ Net Income 106.09 61.46 73.74 64.38 9. Cash Dividend Paid & Declared/ Fitch Comprehensive Income 176.82 90.94 65.23 84.10 10. Cash Dividends & Share Repurchase/Net Income n.a. n.a. n.a. n.a. 11. Net Income - Cash Dividends/ Total Equity -0.44 3.68 2.28 3.89 E. Loan Quality 1. Growth of Total Assets -2.99 7.88-0.23-14.37 2. Growth of Gross Loans -6.38 2.90-4.41-14.96 3. Impaired Loans(NPLs)/ Gross Loans 1.55 1.42 2.01 2.59 4. Reserves for Impaired Loans/ Gross loans 1.19 1.03 1.14 1.22 5. Reserves for Impaired Loans/ Impaired Loans 76.66 72.75 56.74 46.94 6. Impaired Loans less Reserves for Imp Loans/ Equity 1.94 2.26 5.35 11.81 7. Loan Impairment Charges/ Average Gross Loans 0.26 0.21 0.43 0.83 8. Net Charge-offs/ Average Gross Loans 0.12 0.12 0.09 0.06 9. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets 1.55 1.42 2.01 2.59 F. Funding 1. Loans/ Customer Deposits 128.56 144.78 221.62 239.20 2. Interbank Assets/ Interbank Liabilities 193.44 479.68 299.49 311.55 3. Customer Deposits/ Total Funding excl Derivatives 40.47 36.29 25.32 24.51 9
Reference Data 31 Mar 2012 31 Mar 2011 31 Mar 2010 31 Mar 2009 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets A. Off-Balance Sheet Items 1. Managed Securitized Assets Reported Off-Balance Sheet n.a. n.a. - n.a. - n.a. - n.a. - 2. Other off-balance sheet exposure to securitizations n.a. n.a. - n.a. - n.a. - n.a. - 3. Guarantees 459.7 442.0 0.32 446.0 0.32 755.0 0.58 858.0 0.66 4. Acceptances and documentary credits reported off-balance sheet n.a. n.a. - n.a. - n.a. - n.a. - 5. Committed Credit Lines 3,568.8 3,431.0 2.52 5,317.0 3.79 3,990.0 3.07 2,805.0 2.15 6. Other Contingent Liabilities 378.6 364.0 0.27 451.0 0.32 272.0 0.21 275.0 0.21 7. Total Business Volume 146,043.3 140,406.0 103.11 146,576.0 104.43 135,127.0 103.86 134,343.0 103.02 8. Memo: Total Weighted Risks 53,953.6 51,871.0 38.09 55,400.0 39.47 47,333.0 36.38 37,475.0 28.74 9. Fitch Adjustments to Weighted Risks. n.a. n.a. - n.a. - n.a. - n.a. - 10. Fitch Adjusted Weighted Risks 53,953.6 51,871.0 38.09 55,400.0 39.47 47,333.0 36.38 37,475.0 28.74 B. Average Balance Sheet Average Loans 50,352.3 48,408.7 35.55 49,279.7 35.11 48,690.7 37.42 54,315.3 41.65 Average Earning Assets 137,462.8 132,156.7 97.05 128,077.7 91.25 122,523.0 94.17 140,479.0 107.73 Average Assets 150,833.9 145,011.7 106.49 137,589.7 98.02 129,435.3 99.48 145,264.3 111.39 Average Managed Securitized Assets (OBS) n.a. n.a. - n.a. - n.a. - n.a. - Average Interest-Bearing Liabilities 126,687.1 121,797.0 89.45 116,283.0 82.85 111,807.7 85.93 125,039.0 95.89 Average Common equity 9,642.9 9,270.7 6.81 8,607.3 6.13 6,783.3 5.21 5,255.7 4.03 Average Equity 9,238.6 8,882.0 6.52 8,372.3 5.96 6,837.0 5.25 5,898.3 4.52 Average Customer Deposits 38,122.5 36,651.0 26.92 30,741.0 21.90 21,465.0 16.50 17,962.7 13.77 C. Maturities Asset Maturities: Loans & Advances < 3 months n.a. n.a. - n.a. - n.a. - n.a. - Loans & Advances 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Loans and Advances 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Loans & Advances > 5 years n.a. n.a. - n.a. - n.a. - n.a. - Debt Securities < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - Debt Securities 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Debt Securities 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Debt Securities > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Interbank < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - Interbank 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Interbank 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Interbank > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Liability Maturities: Retail Deposits < 3 months n.a. n.a. - n.a. - n.a. - n.a. - Retail Deposits 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Retail Deposits 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Retail Deposits > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Other Deposits < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - Other Deposits 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Other Deposits 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Other Deposits > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Interbank < 3 Months n.a. n.a. - n.a. - n.a. - n.a. - Interbank 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Interbank 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Interbank > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing < 3 months n.a. n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing 1-5 Years n.a. n.a. - n.a. - n.a. - n.a. - Senior Debt Maturing > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Total Senior Debt on Balance Sheet n.a. n.a. - n.a. - n.a. - n.a. - Fair Value Portion of Senior Debt n.a. n.a. - n.a. - n.a. - n.a. - Covered Bonds n.a. n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing < 3 months n.a. n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing 3-12 Months n.a. n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing 1-5 Year n.a. n.a. - n.a. - n.a. - n.a. - Subordinated Debt Maturing > 5 Years n.a. n.a. - n.a. - n.a. - n.a. - Total Subordinated Debt on Balance Sheet 2,168.7 2,085.0 1.53 1,897.0 1.35 1,404.0 1.08 1,942.0 1.49 Fair Value Portion of Subordinated Debt n.a. n.a. - n.a. - n.a. - n.a. - D. Equity Reconciliation 1. Equity 9,236.5 8,880.0 6.52 8,717.0 6.21 8,043.0 6.18 6,019.0 4.62 2. Add: Pref. Shares and Hybrid Capital accounted for as Equity 406.7 391.0 0.29 391.0 0.28 391.0 0.30 391.0 0.30 3. Add: Other Adjustments n.a. n.a. - n.a. - n.a. - n.a. - 4. Published Equity 9,643.2 9,271.0 6.81 9,108.0 6.49 8,434.0 6.48 6,410.0 4.92 E. Fitch Eligible Capital Reconciliation 1. Total Equity as reported (including non-controlling interests) 9,236.5 8,880.0 6.52 8,717.0 6.21 8,043.0 6.18 6,019.0 4.62 2. Fair value effect incl in own debt/borrowings at fv on the B/S- CC only 0.0 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 3. Non-loss-absorbing non-controlling interests 65.5 63.0 0.05 63.0 0.04 67.0 0.05 398.0 0.31 4. Goodwill 349.5 336.0 0.25 332.0 0.24 378.0 0.29 189.0 0.14 5. Other intangibles 559.6 538.0 0.40 534.0 0.38 570.0 0.44 148.0 0.11 6. Deferred tax assets deduction 0.0 0.0 0.00 0.0 0.00 100.0 0.08 21.0 0.02 7. Net asset value of insurance subsidiaries 445.2 428.0 0.31 552.0 0.39 510.0 0.39 566.0 0.43 8. First loss tranches of off-balance sheet securitizations 64.5 62.0 0.05 554.0 0.39 86.0 0.07 140.0 0.11 9. Fitch Core Capital 7,752.2 7,453.0 5.47 6,682.0 4.76 6,332.0 4.87 4,557.0 3.49 10. Eligible weighted Hybrid capital 329.7 317.0 0.23 196.0 0.14 0.0 0.00 0.0 0.00 11. Government held Hybrid Capital 0.0 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 12. Fitch Eligible Capital 8,082.0 7,770.0 5.71 6,878.0 4.90 6,332.0 4.87 4,557.0 3.49 Exchange Rate USD1 = AUD0.96140 USD1 = AUD0.96770 USD1 = AUD1.09182 USD1 = AUD1.45500 10
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