BankEdge Margin Review

Margin Summary
2.15
Total Rate
Limit Fee 1.00%
Margin 1.15%
Undrawn Fee 0.50%

Facility Details
$30
Facility Limit
Facility Limit $30,000,000
Drawn $25,500,000
Facility Term 3.00 years

Other Fees
7.5
Fees per annum
Upfront Fees 7.5pts / year
Cross-sell n/a
Remaining Term 1.25 years

Financial Performance
Scenario Base Case Performance
Source Management Financial FY2019
Analysis Date 31-Dec-2019

Company Risk Grade

S&P: BBB CBA: C3

Financier

Risk Estimation Model

Review of historical margins
20.4
Excess Margin over Fair Return
26
Calculated Bank Return
1.35%
Fair Margin
@ 30-Jun-2018 calculated @ 14.0% RoE

Scenario Pricing Date: 31-Mar-2018

Margin Summary
2.25
Bank Proposed
Limit Fee 1.00%
Margin 1.15%
Undrawn Fee 0.50%

Facility Details
$35
Proposed Limit
Facility Limit 1$35,000,000
Drawn $35,000,000
Facility Term 4.00 years

Other Fees
7.5
Fees per annum
Upfront Fees 7.5pts / year
Cross-sell n/a
Remaining Term 1.25 years

Financial Performance
Scenario Base Case Performance
Source Management Financial FY2019
Analysis Date 31-Dec-2019

Company Risk Grade

S&P: BBB CBA: C3

Financier
Risk Estimation Model

Review of proposed margins
20.4
Excess Margin over Fair Return
26
Calculated Bank Return
1.35%
Fair Margin
@ 30-Jun-2018 calculated @ 14.0% RoE

Scenario Pricing Date: 31-Mar-2018

Initial Pricing Date

When your Facility pricing was negotiated in Jun 2018,

  • Total Margin was 1.70% for 3.0 years.
  • This generated a Return on Equity [RoE] of 24.2% for your financier: ANZ.
  • A Fair Margin that achieved a Bank hurdle RoE of 14.0% would have been 1.50%.
  • Opportunity cost: 15-25 pts
  • $225,000 Cost

This is based on;

  • Company Financial scenario ‘Management FY20818’
  • Company Risk Grade of C3-D1 [CBA internal risk scale]
  • Historic Bank, Regulatory, Wholesale Market and Facility Structure data points.

Analysis Date

A margin review as at Jan 2020,

  • Updated for Company supplied Financials ‘Forecast FY2019 Base Case’
  • With an updated Customer Risk Grade of C2-C3 [CBA scale]
  • Fair Return Bank Hurdle RoE of 14.0%
  • Re-based pricing variables for current Bank, Regulatory, Wholesale Market and Facility structure…
  • A Total Margin  1.50% for 3.0 years
  • Cost Saving of $315,000

This compares to your Bank Proposed offer of;

  • Total Margin 1.85% (bank proposed)
  • which yields Bank RoE = 26.5%
  • or an Opportunity Cost of 25pts.

Current Fairness

45%

Proposed Offer

75%

Base Case 2018

Limit Fee

0.75%

Margin

0.55%

Total Margin

1.30%

chart-3

Base Case 2019

Limit Fee

0.80%

Margin

0.61%

subtitle

Total Margin

1.30%

Top 3 variable increasing margin

  • +5.0 pts due to increase in CET1
  • +1.3 pts due to reduced funding benefit on the Non-bearing Interest Deposit Funding
  • 0.43 pts increase in Operational Risk Weighted Asset allocation

Top 3 factors decreasing the Total Margin

  • -6.5 pts due to reduction in Wholesale Funding Costs
  • -2.3 pts due to improvement in Customer Risk Grade
  • -1.2 pts due to reduction in Term Deposit funding costs.

Facility Details

Financial Performance

Bank Dimensions
Facility Term

Interest Benchmark

Interest Period

Revenue

EBITDA

Liabilities

Target Metric

Target RoE

CET1 Selection

Base Case 2018

Limit Fee

0.75%

Margin

0.55%

Total Margin

1.35%

chart-4

Base Case 2018

Limit Fee

0.75%

Margin

0.55%

Total Margin

1.35%

Top 3 variables increasing margin

  • +5.0 pts due to increase in CET1
  • +1.3 pts due to reduced funding benefit on the Non-bearing Interest Deposit Funding
  • 0.43 pts increase in Operational Risk Weighted Asset allocation

Top 3 factors decreasing the Total Margin

  • -6.5 pts due to reduction in Wholesale Funding Costs
  • -2.3 pts due to improvement in Customer Risk Grade
  • -1.2 pts due to reduction in Term Deposit funding costs.