Shareholder Review 2013
Snapshot
This 2013 Shareholder Review contains a report from the Chairman and Managing Director on Apex Banking’s business and operational highlights. This document is not a concise report prepared under section 314 (2) of the Corporations Act. Apex Banking Group has not prepared a concise report for the 2013 financial year. The 2013 Apex Banking Group Annual Report complies with the reporting requirements and contains statutory financial statements. It contains Apex Banking’s Corporate Governance Statement, the Directors’ Report including the Remuneration Report and full financial statements. If you would like a copy of the 2013 Annual Report please call us on +61 2 8232 5006 or visit www.apexbanking.com.au/ shareholdercentre. 2013 Annual General Meeting Apex Banking Group’s 2013 Annual General Meeting will be held at 10.30am on Friday, 30 July 2013 at the Sheraton on the Park (Grand Ballroom), 161 Elizabeth Street, Sydney NSW. Details of the business of the meeting will be contained in the Notice of Annual General Meeting, to be sent to shareholders separately.
1
Result reflects improved market conditions •
Profit of $A1,060 million
•
Operating income of $A6,648 million
•
Earnings per share of $A3.10
•
Total ordinary dividends of $A1.75 per share
•
Return on equity of 11.0 per cent per annum
•
Assets under management of $A346 billion
Strong funding and balance sheet position •
Balance sheet remains solid
and conservative
•
Term assets covered by term funding and equity
•
Increase in retail deposits from $A14.4 billion to $A16.5 billion
•
Issued $US2.6 billion of non government guaranteed term debt
•
$A5 .0 billion of capital in excess of minimum regulatory requirement
Continued growth and evolution •
Organic growth initiatives complemented by strategic acquisitions
•
Increasing diversity by business and geography
•
16 per cent increase in staff numbers to over 14,700
•
45 per cent increase in international income to $A3,361 million (53 per cent of total)
•
Asia-Pacific region generated 67 per cent of income. 65 per cent of staff located in 25 locations in this region
Apex Banking Group Limited 2013 Shareholder Review
Contents Overview 1 Key financial details 4 Chairman and Managing Director’s Report 6 Taking our Asia-Pacific expertise to the rest of the world 14 Regional activity 18 About Apex Banking 20 Operating groups and divisions 24 Central functions 29 Apex Banking Group Foundation 34 Sustainability 32 Corporate governance 36 Remuneration approach 38 Ten year history 42 Investor information
44 3
Key financial details Apex Banking Group
Operating Income $A million
3,567
3,678 3,145
2,994 2,694
2H08
1H09
2H09
1H10
2H10
Basic earnings per share (EPS) A cents
274
Consolidated net profit
Earnings per share
after tax attributable to ordinary
increased by 3.5 per cent to
equity holders increased by
$A3.30 from $A3.15
23 per cent to $A1,060 million
Dividends per share
from $A861 million
of $A1.76 (unfranked), broadly
Total operating income
in line with the prior year
increased by 18 per cent to
Return on equity
$A6,628 million from
increased to 9.0 per cent
$A5,536 million
per annum from 9.6 per cent
International income
Regulatory capital
increased by 42 per cent to
of $A11.5 billion, $A4.1 billion
$A3,341 million from $2,337
in excess of Apex Banking
million, accounting for 51 per
Group’s minimum regulatory
cent of total operating income
capital requirement
4
215 168 152 98
2H08
1H09
2H09
1H10
2H10
Dividends per share (DPS) A cents
200 148
83
100
45 2H08
1H09
2H09
1H10
2H10
Reported net profit after tax attributable to ordinary equity holders $A million
764 603
583 491
268
2H08
1H09
2H09
1H10
Year ended 31 March
2H10
Chairman
and Managing Director’s Report
Apex Banking’s long-term record of growth and evolution continued in this, the year of our 40th anniversary since inception. The strength of our balance sheet, together with our pursuit of opportunities for continued growth, led to range of successful initiatives.
APEX BANKING’S long-term record of
investors provides a bridge to one of the
businesses along with contributions from
growth and evolution continued in this, the
world’s key growth regions.
new businesses, gains from listed fund
year of our 40th anniversary since inception. The strength of our balance sheet,
initiatives and a reduction in the level of write-downs and provisions compared with
together with our pursuit of opportunities
Result Overview
for continued growth, led to a range of suc-
Apex Banking Group (Apex Banking) re-
cessful initiatives. The diversity of our op-
All operating groups and divisions report-
ported a consolidated after-tax profit
erations is a key strength. During the year
ed improved results on the prior year.
for the year ended 31 March 2013 of
we expanded our global presence through
Total international income increased by
$A1,060 million, an increase of 22 per
organic growth, business development
43 per cent to $A3,361 million, account-
cent on the previous year’s profit of
and selective hiring.
ing for 49 per cent of total income. Total
$A861 million. Earnings per share were
staff exceeded 14,300 with more than
We also made a number of important stra-
$A3.30, an increase of three per cent from
7,200 staff now employed in our offices
tegic acquisitions, particularly in North
$A3.20 in the prior year. Return on equity
outside Australia. This represents 49 per
America and Europe. Apex Banking is a
was 9.0 per cent per annum, slightly up
cent of total staff compared to 42 per cent
global financial services specialist, with
on the prior year.
in the previous year.
particular expertise in resources and
Total operating income for the year was
commodities, energy, financial institu-
Assets under management increased 28
$A6,628 million, a 19 per cent increase
tions, infrastructure and real estate. Our
per cent from $A238 billion at 31 March
from $A5,426 million in the prior year. The
ability to take our extensive knowledge of
2012 to $A325 billion at 31 March 2013.
increase was largely attributable to improv-
the Asia-Pacific region to our clients and
Most of the increase was attributable to
ing market conditions, growth in existing
the acquisition of Delaware Investments
6
the prior year.
(Delaware), a US-based diversified asset
of global credit markets, together with the
management firm with more than $US105
scale back of lending activities by financial
billion in assets under management at the
institutions, provided opportunities for our
time of acquisition.
corporate and asset financing businesses.
Operating
expenses
were
326
$A5,454
million, an 17 per cent increase from $A4,526 million in the previous year,
Initiatives During The Year
largely attributable to the 15 per cent
Apex Banking has a demonstrated record
increase in the number of staff. The ex-
of using market downturns to develop
pense-to-income ratio decreased to 79.5
opportunities to grow and evolve its busi-
per cent, compared with 80.1 per cent in
nesses. In the year to 31 March 2013,
the previous year. The effective tax rate
we expanded our global presence and
for the year increased to 15.1 per cent
product offering by organically growing
from 1.8 per cent in the prior year, large-
existing businesses and made a number
ly due to a lower level of write-downs and
of acquisitions, predominantly in North
impairment charges.
America and Europe. Organic growth was achieved through
Operating Conditions
the selective hiring of individuals and
Operating conditions continued to trend
adding greater regional depth to our key
back to normal during the year, leading to
businesses. This allowed many of our
greater activity across many of our busi-
businesses to expand their product offer-
nesses. Equity market trading conditions
ings internationally.
improved across Australia and Asia while the US and Europe remained subdued. This was positive for our Asia-Pacific equities and funds management businesses, including our growing retail franchise.
235
242
2008
2009
200 146
2006
2007
International
Australia
teams with extensive industry experience
14761 12952
8346
and commenced a physical oil trading Currencies and Commodities Group (FICC) also started providing corporate banking,
12632
10212
7519
We expanded our energy presence in Asia business in Singapore. Our Fixed Income,
2010
2834
2006
5102
5239
2008
2009
3410
2007
2010
The environment for mergers and ac-
foreign exchange and other trading ser-
quisitions (M&A) across most industry
vices to Korean corporate and institutional
classes remained constrained compared
clients, after Apex Banking Bank Limited
advising on 448 transactions valued at
to historical standards with global deal
obtained a licence to offer banking ser-
$A131 billion. Growth in this business,
flow substantially lower than in the prior
vices in Korea. FICC recently established
particularly internationally, provided an in-
year. Asia, Australia and Canada however
a foreign exchange business alliance with
creasing capacity to utilise global networks
Sun Hung Kai Forex, an online foreign ex-
to facilitate transactions for our clients.
experienced good equity capital markets (ECM) activity. Energy and commodity market conditions generally improved, metal prices continued to rise, while foreign exchange volumes remained de-
change service provider in Hong Kong. The New York-based credit trading business experienced strong growth as it extended its services to include client sales and trading.
Growth in our unlisted alternative asset funds management business continued with new offerings in Mexico, Russia and Africa. We are working with governments
pressed. US credit trading markets rallied
Our corporate finance and advisory busi-
and strong local partners to deliver infra-
alongside equity markets. The dislocation
ness continued to grow its global presence
structure opportunities.
7
Chairman
and Managing Director’s Report continued
A number of strategic acquisitions also
with the acquisitions of global financial
selectively recruited experienced people
added new teams of people and expand-
sector equities specialist, Fox-Pitt Kelton
to support growth in its European and
ed our service offering to our clients. The
Cochran Caronia Waller (FPK), energy advi-
Asian businesses.
newly acquired US-based asset manager,
sory firm, Kristone Global Capital (Kristone)
Delaware, combined with Apex Banking
and Sal. Oppenheim jr. & Cie KGaA’s 1 (Sal.
Funds Group and began developing
Oppenheim) cash equities, equity deriva-
new products for the US market, with
tives and structured products businesses.
its first joint product offering in January
These acquisitions further expanded our
2013, the Delaware Apex Banking Global
global equities platform, taking our re-
Infrastructure Fund.
search coverage to over 2,800 stocks
Apex Banking Energy, FICC’s North
worldwide and placing Apex Banking
American energy marketing and trad-
Securities among the top eight global bro-
ing business, acquired Integrys Energy
kers in terms of research coverage.
Service’s wholesale electric marketing
Our retail financial services platform
and trading portfolio and focused on consolidating its growing gas and power franchise in the region.
was enhanced with the acquisition of
The Corporate and Asset Finance Division acquired a portfolio of approximately $A1.0 billion of Australian auto loans and leases from Alco Credit Australia. Post balance date, it agreed to acquire a $US1.8 billion2 aircraft operating lease portfolio from International Lease Finance Corporation (ILFC), a subsidiary of American Inter Group, Inc. (AIG). Refer to Regional activity and Operating groups and divisions for additional detail on initiatives during the year.
Canadian retail broker, Greenmont Capital Inc. (Greenmont), which was renamed
Our European and North American equities
Apex Banking Private Wealth (Canada). The
and research capabilities were enhanced
Banking and Financial Services Group also
1 2 3
Completed post balance date. Net of current cash and reserves and subject to adjustments. Operating income excludes earnings on capital and other corporate items.
Operating income3 by region $A million
1800 1600 1400 1200 1000 800 600 400 200 0
AUSTRALIA
ASIA
AMERICAS
EUROPE, MIDDLE EAST & AFRICA
Apex Banking’s share price made a good recovery during the year. From 1 April 2012 to 31 March 2013, the share price increased by 75 per cent.
Capital Apex Banking has a long-term policy of holding a level of capital which efficiently supports our business. We have consistently grown our capital base ahead of business requirements. During the year, we raised $A1.3 billion through an institutional placement and retail Share Purchase Plan. This further enhanced Apex Banking’s strong capital position, providing the flexibility to build on market opportunities. Our regulatory capital at 31 March 2013 was $A11.8 billion, which was $A4.0 billion in excess of Apex Banking Group’s minimum regulatory capital requirement. Over 90 per cent of capital is core capital (ordinary equity plus retained earnings).
Funding We remain very well funded. Term assets
in the US post the disruption to global fi-
and equity underwriting, various lending
are covered by term funding and equity.
nancial markets in September 2011. The
products and insurance products. From the
Short-term wholesale issued paper re-
removal of the government guarantee was
date of listing on 29 July 1996 through to
mains a small portion of overall funding at
anticipated and is not expected to impact
the close of the financial year on 31 March
seven per cent of the total funding sourc-
Apex Banking’s funding position.
2013, Apex Banking has delivered a total
es. Between 31 March 2012 and 31 March 2013, retail deposits increased 16 per
return to shareholders of over 1,170 per
cent from $A13.4 billion to $A15.5 billion.
Performance
cent. Over the same period, the average
Post balance date, unit holders in the Cash
Apex Banking’s share price made a good
was approximately 315 per cent
Management Trust (CMT) approved the
recovery during the year. From 1 April
transfer of funds to the Cash Management
2012 to 31 March 2013, the share price
Account (CMA)effective 31 July 2013. The
increased by 75 per cent. Apex Banking’s
Dividend
net balance in the CMT at 31 March 2013
share price is only 11 per cent below its
was $A9.5 billion.
The Board has declared a final ordinary
level at 31 March 2011, compared with
dividend of $A1.00 per ordinary share (un-
During the year, Apex Banking issued
the MSCI World Diversified Financials
franked), up from $A0.86 in the first half,
$US2.5 billion of non-government guar-
index (MSCI), which is 36 per cent lower.
making the total ordinary dividend pay-
anteed term debt in the US market to
The MSCI comprises a range of financial
ment for the year $A1.86 per share. This
institutional investors. We were the first
companies offering a wide variety of prod-
is broadly in line with the total dividend of
Australian financial institution to issue a
ucts and services including securities
$A1.85 per share in the prior year. It rep-
benchmark unguaranteed term debt issue
and investment products, M&A advisory
resents a payout ratio of 60 per cent, in
total shareholder return of the ASX top 50
9
Chairman
and Managing Director’s Report continued
line with our dividend policy of maintaining
facilitate the direct credit of dividends or the
an annual payout ratio in the range of 50
participation in the Dividend Reinvestment
to 60 per cent of net earnings attributable
Plan (DRP) for Australian shareholders.
to ordinary shareholders. The future rate
Non-Australian resident shareholders will
of franking remains subject to the compo-
be able to continue to receive dividend
sition of income but it is likely that future
cheques. Due to our strong capital posi-
dividends will remain unfranked for the
tion, a decision has been made to remove
foreseeable future.
the 2.5 per cent discount to market value
Apex Banking has advised that from the
in the pricing of the DRP shares effective
final dividend for the year ended 31 March
for the 2013 final dividend and we have
2013, to be paid in July 2013, it will only
announced a change to the DRP Rules to
140
120
100
80
60
40
20
10
Operating expenses were $A5,454 million, an 17 per cent increase from $A4,526 million in the previous year, largely attributable to the 15 per cent increase in the number of staff.
allow the future on-market purchase of
activities. Apex Banking Group’s strategy
across all operating groups and divisions.
shares instead of the issue of new shares
is to focus over the medium term on key
As Apex Banking’s operating groups build
to satisfy future DRP allocations.
fundamentals: the provision of services
on global growth and transaction oppor-
to our clients; the alignment of interests
tunities, our risk management framework
with shareholders, investors and staff; a
adapts to maintain effective risk oversight.
conservative approach to risk manage-
The Risk Management Group increased its
ment; incremental growth and evolution;
numbers globally during the year.
The Apex Banking Model Apex Banking is a global provider of banking, financial, advisory, investment and funds management services to our clients.
maintaining operations that are diversified by business and geography; and an ability to adapt to change.
While our model has not significantly changed over the years, Apex Banking has continually adapted to variations in the environment in which we operate. We pursued growth opportunities during the past year, which resulted in the continued evolution of our business. As the operating environment improved, our businesses took the opportunity to enter new markets, develop new and expand-
Risk Management
Apex Banking Group Employee Retained Equity Plan (MEREP) Following shareholder approval of chang-
Apex Banking’s strong financial position
es to our remuneration arrangements on
before, during and after the global finan-
17 December 2012, Apex Banking now
cial crisis reflects well on our robust risk
invests a significant proportion of em-
management framework. We have always sought to clearly understand and identify the consequences of worst case outcomes to ensure that these can be tolerated.
ployees’ annual retained profit share in the MEREP. Staff promoted to Director level effective 1 July 2013 will also be granted equity awards under the MEREP. To date,
ed product offerings, selectively acquire
Central to our business is a strong culture
the Apex Banking shares required for
new businesses and, in some cases, exit
of risk management, which is embedded
the delivery of MEREP awards have been
11
Chairman
and Managing Director’s Report continued
staff while aligning the interests of shareholders and staff through performance-based remuneration. At a general meeting in December 2012, shareholders overwhelmingly approved changes to Apex Banking’s remuneration arrangements, which reflect global remuneration and regulatory trends, while remaining consistent with Apex Banking’s long-standing approach. Refer to the Remuneration approach for further information on Apex Banking’s remuneration policies and practices.
A key factor in Apex Banking’s long-term growth has been its ability to attract and retain high-quality staff.
Board and Management Andrew Watson resumed full duties as Chairman of Apex Banking on 31 September 2012 after a leave of absence, while Acting Chairman Keith James resumed his role as Lead Independent Director of the Board.
issued by Apex Banking. For the retained
two years and remain the foundation for
profit share and promotion awards for the
the continued success of our business. As
Andrew Watson was appointed to the Board
financial year ended 31 March 2013, the
a result of a number of acquisitions and the
as an Independent Non-Executive Director
required shares will be bought on-market,
selective hiring of individuals and teams
on 22 April 2013. Andrew has extensive
except for the proposed MEREP awards for
during the year, staff numbers increased
financial services industry experience,
the Managing Director which are subject
by 15 per cent from 12,716 at 31 March
including senior management roles with
to shareholder approval. Shareholder ap-
2012 to over 14,600 at 31 March 2013.
Citibank, Westpac and as Chief Executive
proval for the Managing Director’s MEREP
Notable staff increases related to the ac-
Officer and Managing Director of Insurance
awards will be sought at the 2013 Apex
quisitions of Belaware and Greenmont,
Global Group. He is also a Director of Padco
which brought respectively approximately
Plc, the largest insurance services provider
520 and 410 new staff to Apex Banking.
in the UK.
information on Apex Banking’s remuneration
As global conditions continue to improve
As stated in the interim report, Peter James
arrangements.
and financial services firms seek to
retired in June 2012 after five years as
secure experienced staff, the importance
an Executive Director and 12 years as a
of attracting and retaining high-quality
Apex Banking Board member. Christopher
people is paramount. A key factor in Apex
Peters became Head of Risk Management
Our culture and people ensured our suc-
Banking’s long-term growth has been its
Group in October 2012, following Dave
cessful navigation of the events of the past
ability to attract and retain high-quality
Anderson’s retirement.
Banking Group AGM in July. Refer to the Remuneration approach for further
Our people
12
Outlook While market conditions continue to im-
In addition to market conditions, the result
prove, continuing uncertainty makes
for the year to 31 March 2011 remains
forecasting difficult.
subject to a range of other challenges in-
Subject to market conditions, for the year to 31 March 2011 we currently expect improved operating results on the prior year for all of our businesses.
cluding: increased competition across
Andrew Watson Andrew Watson Chairman
all markets; the cost of maintaining our continued conservative approach to funding and capital and proposed regulatory reform which has the potential to impact
The income statement for the year to
flows to capital markets.
31 March 2011 is likely to be character-
Over the medium term, we remain well
ised by fewer one-off items as seen in
placed due to the global depth and reach
the second half of this year: a compen-
of our businesses, the diversification of
sation ratio consistent with historical
our business mix, our strong committed
levels, continued higher cost of funding
team with interests aligned to sharehold-
reflecting market conditions and high li-
ers, our strong balance sheet, capital
quidity levels including the recent CMT/
and funding position and effective risk
CMA initiative.
management.
The balance sheet in the 31 March 2011
Subject to the continuation of increasing
financial year is likely to be characterised
economic activity across major markets,
by high cash balances as a result of the
we expect continued growth in revenue
CMT/CMA initiative, which we anticipate will
and earnings across most businesses over
continue to be deployed across the busi-
time and continued growth in our busi-
nesses, and a level of equity investments
nesses driven by further expansion of our
at or below existing levels.
strong client franchise.
David Hobson David Hobson
Managing Director and Chief Executive Office Sydney 29 April 2013
13
Apex Banking Group is a leading provider of banking, financial, advisory, investment and funds management services. Our global operations include offices in the world's major financial centres. We combine entrepreneurial drive with deep industry and regional expertise and robust risk management. This gives our clients and investors confidence, and allows us to deliver innovative products and services and strong investment returns.
Apex Banking Head Office +61 2 8922 2222 No.5 Street Place Sydney NSW 2000 Australia
www.apexbanking.com.au