AMP Bank Limited 2016 Financial Statements

48 Pages·2017·0.36 MB·English

AMP Bank Limited
ABN 15 081 596 009

Financial Report
for the year ended
31 December 2016
AMP Bank Limited
ABN 15 081 596 009
FULL YEAR FINANCIAL REPORT
31 December 2016
Table of Contents

DIRECTORS’ REPORT ........................................................................................................................................... 2
AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF AMP BANK LIMITED ....................... 4
INCOME STATEMENT ............................................................................................................................................ 5
STATEMENT OF COMPREHENSIVE INCOME ..................................................................................................... 6
STATEMENT OF FINANCIAL POSITION ............................................................................................................... 7
STATEMENT OF CHANGES IN EQUITY ............................................................................................................... 8
STATEMENT OF CASH FLOWS ............................................................................................................................ 9
NOTES TO THE FINANCIAL STATEMENTS ....................................................................................................... 10
1. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .......................... 10
2. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS ...................................... 18
3. NET INTEREST INCOME ................................................................................................................................. 19
4. OTHER INCOME AND OPERATING EXPENSES ........................................................................................... 20
5. INCOME TAX .................................................................................................................................................... 21
6. DEBT SECURITIES ........................................................................................................................................... 21
7. LOANS AND ADVANCES ................................................................................................................................. 22
8. ASSET QUALITY ............................................................................................................................................... 23
9. OTHER ASSETS ............................................................................................................................................... 23
10. DEPOSITS AND OTHER BORROWINGS ...................................................................................................... 24
11. DEBT SECURITIES ON ISSUE ...................................................................................................................... 24
12. EMPLOYEE PROVISIONS ............................................................................................................................. 24
13. SUBORDINATED DEBT ................................................................................................................................. 25
14. OTHER LIABILITIES ....................................................................................................................................... 25
15. DIVIDENDS AND DISTRIBUTIONS ................................................................................................................ 25
16. CONTRIBUTED EQUITY ................................................................................................................................ 26
17. COMMITMENTS .............................................................................................................................................. 27
18. AUDITOR’S REMUNERATION ....................................................................................................................... 27
19. RELATED PARTY DISCLOSURES ................................................................................................................ 28
20. NOTES TO THE STATEMENT OF CASH FLOWS ........................................................................................ 30
21. GROUP CONTROLLED ENTITY HOLDINGS ................................................................................................ 31
22. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS INFORMATION ................................................... 32
23. FAIR VALUES ................................................................................................................................................. 41
24. CAPITAL ADEQUACY..................................................................................................................................... 43
25. EVENTS OCCURRING AFTER THE REPORTING DATE ............................................................................. 44
DIRECTORS’ DECLARATION .............................................................................................................................. 45

INDEPENDENT AUDITOR'S REPORT................................................................................................................. 46

Registered Office:
33 Alfred Street
Sydney NSW 2000 Australia
AMP Bank Limited, a company limited by shares, is incorporated and domiciled in Australia.
AMP Bank Limited

Directors’ Report
for the year ended 31 December 2016

The directors of AMP Bank Limited (the Company) present their report on the consolidated entity (the Bank) consisting of

AMP Bank Limited and the entities it controlled for the financial year ended 31 December 2016.

Directors

The directors of the Company during the year ended 31 December 2016 and up to the date of this report are shown below.
Directors were in office for this entire period except where stated otherwise.

Patricia Akopiantz (Chairperson)
Sally Bruce
Gordon Lefevre
Joanne Pollard
Professor Peter Shergold AC (appointed 29 February 2016)
Trudy Vonhoff
Robert Caprioli (resigned on 5 December 2016)

Principal activities

AMP Bank Limited is an Australian retail bank offering residential housing loans, deposits, transaction banking, and self-
managed superannuation fund products with circa 100,000 customers. It also has a portfolio of practice finance loans. The
Bank distributes through brokers, AMP aligned advisers, and direct to retail customers via phone and internet banking.

Review of operations and results

The result for the year ended 31 December 2016 was a consolidated net profit after tax of $122m (2015: $102m).

Dividends & distributions

During 2016, the Bank declared and paid $6m (2015: $20m) of dividends to its immediate parent company, AMP Financial
Investment Group Holdings Limited. During the full year ended 31 December 2016, AMP Bank paid $10m (2015: $3m) of
distributions on capital notes to AMP Limited. Details of dividends and distributions paid and declared during the year are
disclosed in note 15 of the financial report.

Significant changes in the state of affairs

There have been no significant changes in the state of affairs of the Company during the year.

Environmental regulations

The Company’s operations are not subject to any particular and significant environmental regulation under a Law of the
Commonwealth or State or Territory.

Events occurring after the reporting date

On 2 February 2017, the Company declared a final dividend of $8m. On 22 and 27 March 2017, the Company will pay
distributions on capital notes of $1m and $3m respectively.

With the exception of the above, the directors are not aware of any matter or circumstance that has arisen since the end of
the year that has significantly affected or may significantly affect the consolidated entity’s operations in future years, the
results of those operations in future years, or its state of affairs in future years which is not already reflected in this report.

Likely developments

In the opinion of the directors, disclosure of further information about likely developments in the Bank’s business is
commercially sensitive and would likely be detrimental and result in unreasonable prejudice to the Company.
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AMP Bank Limited

Directors’ Report (continued)
for the year ended 31 December 2016

Indemnification and insurance of directors and officers

Under its Constitution, the Company indemnifies, to the extent permitted by law, all officers of the Company, (including the
directors), for any liability (including the costs and expenses of defending actions for an actual or alleged liability) incurred in
their capacity as an officer of the Company.

This indemnity is not extended to current or former employees of the AMP group against liability incurred in their capacity as
an employee unless approved by the Board of AMP Limited. During or since the end of the financial year, no such
indemnities have been provided.

During the financial year, AMP Limited agreed to insure all the officers of the Company against certain liabilities as permitted
by the Corporations Act. The insurance policy prohibits disclosure of the nature of the cover, the amount of the premium, the
limit of liability and other terms.

AMP Group Holdings Limited (“AMPGH”) has entered into a deed of indemnity and access with each director and secretary
of the Company. Each deed of indemnity and access provides that:

• these officers will have access to the books of the Company for their period of office and for ten (and in certain cases,
seven) years after they cease to hold office (subject to certain conditions); and

• AMPGH agrees to indemnify the officer, to the extent permitted by law, against any liability incurred by the officer in his
or her capacity as a director or secretary of the Company and of other AMP group companies.

Rounding and parent entity information

In accordance with the Australian Securities and Investments Commission (ASIC) Corporations Instrument 2016/191,
amounts in this directors’ report and the accompanying financial report have been rounded to the nearest million Australian
dollars, unless stated otherwise. The Company has applied Class Order 10/654 and therefore continues to show both parent
and consolidated financial statements and notes to the financial statements.

Auditor’s independence

The directors have obtained an independence declaration from the Company’s auditor, Ernst & Young, a copy of which is

attached to this report and forms part of the directors’ report for the year ended 31 December 2016.

Signed in accordance with a resolution of the directors.

Director

Sydney, 9 February 2017
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Ernst & Young Centre Tel: [phone]
200 George Street Fax: [phone]
Sydney NSW 2000 Australia www.ey.com/au
GPO Box 2646 Sydney NSW 2001
Auditor’s Independence Declaration to the Directors of AMP Bank
Limited
As lead auditor for the audit of AMP Bank Limited for the financial year ended 31 December 2016, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of theCorporations Act 2001in
relation to the audit;and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of AMP Bank Limited and the entities it controlled during the financial
year.
Ernst & Young
Richard Balfour
Partner
9 February 2017
A member firm of Ernst & Young Global Limited
Liability limited by a schemeapproved under Professional Standards Legislation
AMP Bank Limited
Income statement
for the year ended 31 December 2016

Consolidated Company
Dec 2016 Dec 2015 Dec 2016 Dec 2015
Note $m $m $m $m
Interest income 3 756 770 754 765
Interest expense 3 (509) (555) (518) (561)
Net interest income 247 215 236 204
Fee and commission income 9 11 17 18
Other income 4 2 - 2 -
Impairment expenses (6) (6) (6) (6)
Operating expenses 4 (78) (74) (75) (70)
Profit for the year before tax 174 146 174 146
Income tax expense 5 (52) (44) (52) (44)
Profit for the year after tax 122 102 122 102

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AMP Bank Limited
Statement of comprehensive income
for the year ended 31 December 2016

Consolidated Company
Dec 2016 Dec 2015 Dec 2016 Dec 2015
$m $m $m $m
Profit for the year after tax 122 102 122 102
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Cash flow hedges (1)
- unrealised losses in fair value of derivative designated in cash flow hedges (14) (11) (14) (11)
- tax effect on cashflow hedge losses 4 3 4 3
- net amount transferred to profit for the year 19 18 19 18
- tax effect on amount transferred to profit for the year (6) (5) (6) (5)
Other comprehensive income for the year 3 5 3 5
Total comprehensive income 125 107 125 107
Footnote:
(1) Cash flow hedge movements relate to interest rate swaps used to manage the Banks’s interest rate risk.

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AMP Bank Limited
Statement of financial position
As at 31 December 2016

Consolidated Company
Dec 2016 Dec 2015 Dec 2016 Dec 2015
Note $m $m $m $m
Assets
Due from banks 342 297 308 239
Derivative financial assets 20 21 20 21
Debt securities 6 1,421 1,689 1,421 1,689
Loans and advances 7 17,200 15,275 17,200 15,275
Other assets 9 3 6 3 8
Deferred tax assets 5 28 34 16 16
Total assets 19,014 17,322 18,968 17,248
Liabilities
Due to banks 501 784 501 784
Derivative financial liabilities 22 44 22 44
Deposits and other borrowings 10 12,466 10,594 12,466 10,594
Intercompany tax payable to head entity 9 29 9 10
Debt securities on issue 11 5,001 4,964 1,904 1,805
Employee provisions 12 3 4 3 4
Due to controlled entities - - 3,052 3,104
Subordinated debt 13 150 150 150 150
Other liabilities 14 4 4 3 4
Total liabilities 18,156 16,573 18,110 16,499
Net assets 858 749 858 749
Equity
Contributed equity 16 484 484 484 484
Reserves (4) (7) (4) (7)
Retained earnings 378 272 378 272
Total equity 858 749 858 749

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AMP Bank Limited
Statement of changes in equity

for the year ended 31 December 2016
Equity attributable to shareholders of AMP Bank Limited
Contributed Other Retained
Total equity
equity reserves (1) earnings
Note $m $m $m $m
Consolidated
31 Dec 2016
Balance at the beginning of the year 484 (7) 272 749
Profit for the year after tax - - 122 122
Other comprehensive income - 3 - 3
Total comprehensive income - 3 122 125
Distributions paid - capital notes 15 - - (10) (10)
Dividends paid 15 - - (6) (6)
Balance at the end of the year 484 (4) 378 858
Consolidated
31 Dec 2015
Balance at the beginning of the year 444 (12) 193 625
Profit for the year after tax - - 102 102
Other comprehensive income - 5 - 5
Total comprehensive income - 5 102 107
Return of ordinary share capital (100) - - (100)
Capital notes issued 140 - - 140
Distributions paid - capital notes 15 - - (3) (3)
Dividends paid - ordinary shares 15 - - (20) (20)
Balance at the end of the year 484 (7) 272 749
Contributed Other Retained
Total equity
equity reserves (1) earnings
$m $m $m $m
Company
31 Dec 2016
Balance at the beginning of the year 484 (7) 272 749
Profit for the year after tax - - 122 122
Other comprehensive income - 3 - 3
Total comprehensive income - 3 122 125
Distributions paid - capital notes 15 - - (10) (10)
Dividends paid 15 - - (6) (6)
Balance at the end of the year 484 (4) 378 858
Company
31 Dec 2015
Balance at the beginning of the year 444 (12) 193 625
Profit for the year after tax - - 102 102
Other comprehensive income - 5 - 5
Total comprehensive income - 5 102 107
Return of ordinary share capital (100) - - (100)
Capital notes issued 140 - - 140
Distributions paid - capital notes 15 - - (3) (3)
Dividends paid 15 - - (20) (20)
Balance at the end of the year 484 (7) 272 749
Footnotes:
(1)Other reserves comprise of cash flow hedge reserve and share based payment reserve. Cash flow hedge reserve represents the cumulative
impact of changes in the fair value of derivatives designated as cash flow hedges which are effective under hedge accounting rules. Hedging
gains and losses are transferred to the income statement when they are deemed ineffective or upon realisation of the cash flow.

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AMP Bank Limited
Statement of cash flows
for the year ended 31 December 2016

Consolidated Company
Dec 2016 Dec 2015 Dec 2016 Dec 2015
Note $m $m $m $m
Cash flows (used in)/from operating activities
Interest received 761 792 758 787
Interest paid (513) (569) (514) (570)
Fees and commissions received 9 11 17 18
Cash payments in the course of operations (79) (74) (76) (70)
Income tax paid (66) (47) (66) (47)
Cash flows from operating activities before changes in
operating assets and liabilities
112 113 119 118
Changes in operating assets and liabilities:
Net funds advanced to customers for loans and advances (2,006) (730) (2,006) (730)
Proceeds from sale of loans to related party 68 - 68 -
Net funds advanced by banks (283) 86 (283) 86
Net acceptance from deposits and other borrowings 1,862 652 1,862 652
Decrease in interest receivables for derivatives - 2 - 2
(Decrease)/increase in interest payables for derivatives - - - 1
Net decrease in loans due to controlled entities
- - (54) (1,009)
Net decrease/(increase) in other assets 3 (2) 5 (4)
Decrease in other liabilities - (1) (1) (36)
Net cash (used in)/provided by operating activities 20(b) (244) 120 (290) (920)
Cash flows from investing activities
Purchase of debt securities (3,858) (1,010) (3,858) (1,010)
Proceeds from maturity of debt securities 4,126 1,652 4,126 1,652
Net cash (used in)/provided by investing activities 268 642 268 642
Cash flows from financing activities
Proceeds from issue of capital notes - 140 - 140
Return of ordinary shares - (100) - (100)
Proceeds from issue of debt securities on issue 2,120 450 602 450
Repayment of debt securities on issue (2,083) (1,356) (495) (305)
Dividends paid - ordinary shares (6) (20) (6) (20)
Distributions paid - capital notes (10) (3) (10) (3)
Net cash provided by/(used in) by financing activities 21 (889) 91 162
Net increase/(decrease) in cash and cash equivalents
45 (127) 69 (116)
Cash and cash equivalents at the beginning of the year 297 424 239 355
Cash and cash equivalents at the end of the year 20(a) 342 297 308 239

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