Bendigo and Adelaide Bank Limited

Cash earnings were $256.4 million, up 2.8% on the prior half. Total income was $1.01 billion, up 3.7%, and this was the first half in the bank’s history with more than $1 billion in income. Net interest margin improved 4 bps to 192 bps, while operating expenses increased 4.2%; management also said second-quarter expenses were 6.4% lower than first-quarter expenses. Credit expenses included a $2.4 million write-back for the half, and the bank reported a net write-back of $2 million, with gross impaired loans at 15 bps of gross loans. Lower-cost deposits rose 3.6% to 53.8% of total customer deposits, CET1 increased 37 bps to 11.37%, and the interim dividend was $0.30 per share, fully franked, implying a 67% payout ratio. For the second half, management expects residential lending to return to growth, total BAU costs to be no higher than the first half, around $15 million of AML/CTF spend, and some NIM pressure as growth builds, partly offset by higher rates and potentially a slightly positive replicating portfolio contribution.

Richard Fennell framed the half as one of strategic execution, with the bank prioritizing deposit-led growth, productivity, and better returns rather than chasing volume at any cost. He highlighted major execution milestones: the rebuilt in-app digital onboarding, full rollout of the Bendigo lending platform, migration of 180,000 Adelaide customer accounts, and Up reaching its first month of profitability ahead of schedule. His tone was confident but measured, emphasizing that the bank is building momentum while staying disciplined on capital, pricing, and operating costs.

Andrew Morgan was absent, so Richard Fennell covered the financial commentary. He pointed to 3.7% income growth to $1.01 billion, a 4 bps lift in NIM to 192 bps, and a 2.8% increase in cash earnings to $256.4 million, while noting expenses rose 4.2% because of software, amortization, extra workdays and remediation. He also said investment spend declined 19% as major technology projects ended, and that AML/CTF remediation will cost $70 million to $90 million over up to 3 years, with $15 million expected in H2 FY26 and expense growth expected to stay within the existing FY26 investment slate. Capital remained strong, with CET1 at 11.37% after a 37 bps increase, and the board declared a $0.30 fully franked interim dividend while underwriting about 70% of it.

Analysts focused on BAU cost guidance, NIM pressure as lending growth returns, deposit pricing, and whether the bank is sacrificing investment spend to absorb AML/CTF and RACQ-related costs. Management said BAU costs should be no higher than the first-half level in H2, and that the inflation benchmark is the economy’s current 3% to 4% range rather than a fixed 2% to 3% target. On margins, management said fixed-rate roll-offs and fierce business-and-agri competition are creating pressure, but higher rates and better funding mix could help, while deposit mix benefits and term deposit repricing may not repeat at the same scale. On the AML issue, management said Deloitte and the new Chief Compliance Officer are still reviewing the scope, with the $70 million to $90 million estimate based on detailed actions and contingency, though the total could change as the review progresses.