Bendigo and Adelaide Bank is aiming to make its recent business settings sustainable after a half year of unusually low asset growth and a more familiar outcome of sub-par returns.  Help arrived late last year on two fronts, the bank's managing director Mike Hirst (pic, below) and CFO Richard Fennel told a briefing for investors and analysts yesterday.  One was the hike in investment lending rates led by major banks late last year. The second was regulatory "rebalancing", with APRA lifting home loan risk weights for large banks and nudging regional banks towards 'advanced' accreditation of risk models.  Richard Fennell, Bendigo Bank's chief financial officer, pointed to the margin compression in the last half of the year due to increased competition as hiding a turning point. "Net interest margin has been a tale of two quarters in the last half year," he said. "For the first two months we were really seeing very intense competition on the asset side, impacting our margins as we needed to compete and be relevant. But we did need to take lower margins for loans." However, BEN was under less pressure than its larger rivals when it came to funding costs, and net interest margin this half was only one basis point less than the previous half. "Deposit funding mix is 81.4 per cent, slightly higher than the target range but given the current pricing on wholesale markets it puts us in a pretty good position," Fennell said. RMBS continues to reduce as an overall percentage of BEN's funding. "This has some challenges from a capital generation perspective, as those notes that are getting towards their clean-up stage or else some will be amortised, and that will create some slight capital headwinds," said Fennell. "But we are not going to move back into that market if we can't do it at an appropriate price." From a credit point of view, bad and doubtful debt charges were down A$20.6 million. Hirst said this was "as expected" with the paying back of loans from Great Southern investors. Despite a rebalancing, as Hirst called it, BEN lost market share in investment and business lending, a situation Hirst shrugged off as being the result of credit practices adopted by some lenders adopting "unsustainable" pricing in search of market share. He said these were "outside our risk appetite". He said that these policies would "work themselves out", and later agreed that the slight decline in business lending had boosted BEN's capital ratios. "You'll see us return to above-system growth in the next 12 months, which is typically where we were before the uneven playing field became exacerbated," Hirst said.  Turning to the home loan business, Hirst said the bank's retail brand had been growing reasonably in line with system, up 6.6 per cent (compared with 7.7 per cent system growth) BEN's broker business has been refocused, thanks to a new platform that is being put in place in the third party business "which will provide brokers with a much better service proposition than they're getting to day," Hirst said. "Where we