Essay: Analysis Of Bendigo And Adelaide Bank

Discuss about the Analysis Of Annual Report Of Bendigo And Adelaide Bank For Fy 2016.

The title of the report is the analysis of the annual report of the company – Bendigo and Adelaide Bank. The annual report of the company consists of the financial statements of the company and the director’s report and the independent auditor’s report. The financial statements of the company tells about the financial performance of the company that it has gained during the reporting period and the financial position of the company that it has maintained at the end of the reporting period. Both the aspects go and work simultaneously and will inform about the working and functions of the company.

The main aim of this report is to analyze the annual report of the company with respect to certain issues like assets and debts which will equip the users of the financial statements of the company including the stakeholders of the company about the working details of the company and to assess whether the company is working as desired by its stakeholders. With this consideration and the aim the report has been bifurcated into different section starting from the historical background of the company. After that the financial position of the company has been analysed by considering the balance sheet at the end of the reporting period. Thereafter the financial performance of the company has been analysed by considering the statement of profit and loss for the given reporting period. At the end the report has been ended by citing the conclusion stating the overall findings and the recommendation stating whether the stakeholders shall invest in this company.

The company has its history started in the long back in late years of 1850’s. The company has been incorporated in the year of 1858 as Bendigo Mutual Permanent Land and Building Society to help the people who are migrating from Victoria to give them the better living and the better working conditions. After twenty years of the society formation, in the year of 1877 another society was formed namely Hind marsh Building Society which has only one aim of providing home to everyone who is in Australia. With this aim the society so created has gained the importance from many people. With the passage of the time, the society goes on growing and keeps on merging and acquiring the other societies and in the year 1982, Bendigo Building society has come up as the first financial institution which has introduced both visa and credit cards. In the year of 1993, Bendigo building society acquires the company namely National Mortgage Market Corporation Limited which is engaged in the business of mortgage and providing the introducers for the loans and acting as the brokers for arranging the loans. In the years of late 1990’s the company with the development in the field of banking has converted its name from the bendigo building society to Bendigo Bank (Intelligent Investor, 2017).  Bendigo bank opened its first branch office in Victoria and then has focused on the infrastructure projects of the country including the agricultural related business. The company has also been known as the company which has brought the account for offsetting the mortgage. This product has now standardized in the country of Australia. With this expansion and the growth in the business sector, the company in the year of 2007 has rejected the proposal from the Bank of Queensland for having the merger and merged with the well known bank namely Adelaide Bank. Soon after merging with the bank, the company with the approval of the members and shareholders of the company, the company has changed its name from Bendigo Bank to Bendigo and Adelaide Bank (Company Official Website, 2016).

With this merger, the existence of the Bendigo and Adelaide bank has come and is now regarded as the fifth largest retail bank in the Australia employing more than 70000 employees across its all branches and serving millions of the customers across Australia for achieving their financial goals.    

The financial position of any company is analyzed by critically evaluating the balance sheet of the company. The balance sheet of the company is prepared on the particular date therefore the financial position of the company has been analysed as on 30^th June 2016 (Company Official Website, 2016).

• Goodwill – As per Note number 27 of the Annual report of the company, goodwill amounting to1634.70 million dollars has been recorded as on 30^th June 2016 as compared to 1580.50 million dollar as on 30^th June 2015. As per the  accounting
• policy adopted by the company, intangible assets if acquired then are recognized at the cost price and then amortized accordingly. If the intangible assets are acquired on account of the mergers, acquisition or any form of business combination then they are recognized at the fair value as on date of such business combination. Goodwill is allocated to the cash generating units and then tested for the impairment if any. Four cash generating units has been identified Local connection, partner connection, wealth and the agribusiness. No business combination has been made during the year.
• Liabilities – The first liability of the company that comes across in case of all the banks is the deposit and notes payable. As on 30^th June, 2016, the total deposits of the company comes out as 57054.70 million dollar as compared to 53505.30 on the last year. The deposits are measured at the cost which is determined by deducting its issue cost from the fair value received and thereafter the deposits are amortized at the end of every year using the effective interest rate method. The effective interest rate is determined using the basic assumptions prevalent in the industry like risk, etc. Second liability is the subordinate debts which has been bifurcated according to the maturity analysis and are recognized at the cost and thereafter are amortized at the end of every year using the effective interest rate method.

There are also other issues like financial assets held for sale, trading and maturity, met loans and other receivable and the investment made in property plant and equipment and also the risk factors that have been mentioned separately in the annual report.      

The financial performance of the company is analysed from the statement of income for the financial year ending 30^th of June 2016. Following issues have been identified (Company Official Website, 2016):

• Increase in Bad and Doubtful Debts – The Company has written off the bad debts from the books amounting to 71.2 million dollars which is high in comparison to the last year amounting to 55.7 million dollars. It indicates that the chances of having the debts being irrecoverable have increased and therefore the company shall take corrective actions to reduce this.
• Increase in Fees and Commissions – The amount of fees and commission paid has been considerably increased from 8.1 million dollar to 35.9 million dollar. The amount pertains to the fees and commission paid for having the loans and cases of loans. Due to this increase the company’s operating expenses have been increased and thus reducing the profit margin.
• Decrease in EPS – The earnings per share of the company been decreased from 92.5 cents for the year ending 30^th June 2015 to 90.4 cents for the year ending 30^th June 2016. The decrease is mainly encountered due to the increase in the operating expenses of the company. The company shall consider this matter as the interest of the shareholder may get reduced.

Thus, apart from the above issues there other financial performance issues like Net Profit and the income tax expense, etc.   

Conclusion And Recommendation

The banking industry plays very important role in not only the development of the country but also the development of the individuals by keeping their money safe and providing the interest on their funds and more importantly funding the company which requires for the development of any project which may be infrastructural or financial like agricultural related project or dam building project. Thus, in this way, the banking industry plays very important role in the development. The report has laid down how Bendigo and Adelaide bank has been formed and how the same have grown over the past 158 years at the increasing rate and still have the position of having more developments in the future. The report has analyzed the financial position and performance of the company and thus it is concluded that the report has raised the financial issues with regard to its recognition and presentation in the financial statements.

It is recommended that the shareholders should invest and the stakeholder’s shall take interest in the company and shall make their decisions accordingly.

References

Company Official Website, (2016), “Annual Report 2016”, available on https://www.bendigoadelaide.com.au  accessed on 23/05/2017.

Intelligent Investor, (2017), “Bendigo and Adelaide Bank (BEN)”, available on https://www.intelligentinvestor.com.au/company/Bendigo-and-Adelaide-Bank-Limited-BEN-249121  accessed on 23/05/2017.accounting