Bendigo and Adelaide Bank posts record cash earnings

Results buoyed by digital offerings despite subdued lending growth

Bendigo and Adelaide Bank posts record cash earnings


By Ryan Johnson

Bendigo and Adelaide Bank has reported record cash earnings for the full year despite subdued lending growth amid a competitive lending environment.

While the bank’s cash earnings after tax was $576.9 million up 15.3%, its statutory net profit was only up 1.8% after being impacted by one-off software intangible write downs and restructuring costs.

CEO and managing director Marnie Baker (pictured above) said overall it was “another strong result” that demonstrated the progress the bank has made to deliver on its strategy.

“These metrics are proof of our progress to become a bigger, better, and stronger bank. We have contained business-as-usual costs in an environment of high inflation, we have delivered profitable growth at a time of unsustainable competition for home loans, and we have retained our market leading customer advocacy and satisfaction scores while doing so,” Baker said.

“We continue to focus on driving profitable growth with sustainable returns, supported by our unique Community Bank model. Our focus on returns and execution is paying off and can be seen with our prudent approach to competing in key lending markets and the return of lending growth over the last quarter.”

The opportunity in digital home loans

The opportunity in digital mortgages “has never been clearer” for Bendigo and Adelaide Bank, as customer interest in its digital products accounting for 12% of total settlements for the second half of the year.

This is on the back of its BEN Express digital home loan product growing by 178% year-on-year growth in 2022, which now account doe 12% of settlements in the second half of this 2023.

This year, the bank also launched digital term deposits, which contributed to 2.8% growth in customer deposits over the year.

Baker said the proportion of its customers who actively use e-banking has risen from 68% to 72% over the year as they recognise the “convenience and utility of the platforms”.

“We are digital by design and human when it matters. We interact with our customers when and where they want to, in channels that are convenient for them and efficient for the Bank,” Baker said.

Challenging market conditions

At the same time the external environment presents the bank and its customers with challenges.

Baker said while arrears remain benign at this point in the cycle and our credit expenses are “low by industry standards”, the bank expects arrears to move back to long-term averages for the bank.

Still credit quality currently remains sound in home lending, with 90-day plus arrears having increased 5 basis points to 0.46% since December 2022 despite the impact of rising rates on borrowers.

“While we are not seeing material signs of borrower distress, we are ready to support our customers. Our Mortgage Help Centre was established to keep our customers in their homes and remains well placed to deliver on its purpose.”

Cash earnings for its business and agribusiness division also rose 0.4% to $293.4 million. Over the past 12 months, the division has undergone a strategic review that has identified opportunities that support the bank’s focus on sustainable returns.

The bank entered the broker market for agribusiness banking earlier this year with growth recorded over the last quarter.

Community Bank model

Bendigo and Adelaide Bank Community Bank model, which recently celebrated its 25th anniversary, is on track to return $320 million in profits to the community since inception.

Baker said the model, which has attracted $20.8 billion in loans and $32.3 billion in deposits, is one of the ways the bank continues to deliver on our purpose.

Overall, the bank’s customer numbers continue to grow, increased by 9.9% 2.4 million making it the sixth-largest lender in Australia.

Baker cited its products, service, and digital offering as reasons for the increase.

Our longstanding purpose of feeding into the prosperity of our customers and their communities resonates deeply with them and can be seen in our market leading customer advocacy and satisfaction scores,” Baker said.

“We are motivated to meet their expectations and our Net Promoter Score is 28.4 points higher than the industry average, with the gap widening by 2.1 points over the 12 months.”

Transformation agenda

Bendigo and Adelaide Bank also said its transformation agenda is on track, delivering “several significant milestones” over the year.

Introduced in 2019, the strategy sought to digitalise its offerings and processes while streamlining its services.

Baker said she is proud of what the bank has achieved.

“We have reduced the number of core banking systems from seven to four, have 90 fewer IT applications and have moved one third of them to the cloud. Meeting customer expectations for an intuitive and seamless digital experience is a key driver of our transformation program,” Baker said.

“Since financial year 2019, the Bank has launched a market leading digital offering with Up, halved the number of core banking systems, reduced the number of customers facing brands from 13 to seven.”

“We have also acquired and integrated ANZ’s Margin Lending business, integrated Delphi Bank and reduced complexity right across the business.”

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