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February, 2024

Bendigo and Adelaide Bank reports steady growth amid economic challenges

Bendigo and Adelaide Bank Limited has reported its interim financial results for the half year ended 31 December 2023, noting strong customer growth through more digital offerings while highlighting its emphasis on profitable growth.

The ASX-listed bank’s statutory net profit after tax was $282.3 million, marking a 13.8% increase from the second half of 2023. However, cash earnings for the half were $268.2 million, down 5.0% from the previous half. The bank’s Net Interest Margin was 1.83%, down 15 basis points from the second half of 2023.

Customer growth remains strong, with a year-on-year increase of 8.3% to 2.47 million. The bank’s Net Promoter Score is 27.8 points above the industry. The bank’s digital bank Up saw customer growth of 11.8%, deposits growing at 16% and the settlement of $155 million digital mortgages, up from $92 million over the half.

Customer deposits overall grew 3.5% over the half to $68.4 billion, while deposits from Community Banks increased 5%. The group is working to transition Alliance Banks to its Community Bank model.

Bendigo and Adelaide Bank CEO and Managing Director, Marnie Baker, said revenue challenges faced in the last half have sharpened the group’s focus on accelerating investment in channels that drive profitable growth. A big one of these is the Digital Lending Platform, which aims to provide a streamlined process for home lending, automated credit decisioning and enable deeper relationships with customers. The first phase is open to over 3000 brokers and has processed over 200 applications to date.

“Digital mortgage settlements accounted for 16.3% of all residential lending settlements for the half,” Baker said. “For deposits, the launch of online functionality for term deposits and savings accounts for new and existing Bendigo Bank customers has seen a 28% increase in digital deposits. The introduction of the Bank’s new digital lending platform will provide greater optionality for scalable and sustainable growth.”

During the reporting period, Bendigo and Adelaide Bank also grew digital mortgages across direct channels in BEN Express and third-party channels such as Qantas Money Home Loans, Tiimely and the newly formed partnership with NRMA Insurance.

The bank’s residential lending reached $58.5 billion, down 0.1% from the second half of 2023, reflecting the tough current market conditions. The bank declared a first half 2024 dividend per share of 30 cents, up 3.4% from the first half of 2023. Business lending was up 0.2% and Agribusiness was down 3.9% due to seasonal run-off in the Agribusiness book.

Baker described the interim financial results presented as a reflection of prudent management of shareholder capital and the unique opportunities it has created for the Bank.

“Over the past six months we have continued to manage the business for long-term value whilst adjusting for short-term headwinds,” she said. “The Bank expects the official cash rate to remain at current levels for most of 2024 following the recent pause from the Reserve Bank. Inflationary pressures remain persistent but are moderating. The Australian economy is likely to outperform its peers over time, although we expect unemployment levels to rise in the short-term. Economic growth is likely to be very modest in financial year 2024 before showing improvement in financial year 2025.

“We have been patient with our choices, have confidence in our execution and are optimistic about our future,” Baker concluded.