Bendigo and Adelaide Bank opted for a “selective” approach to competition in the home loan and deposit markets during the December half, moderating volume growth while achieving strong growth in income, margin and earnings.
The bank also made progress with its cost management and digital transformation goals.
Bendigo and Adelaide reported net profit of A$249 million – an increase of 49.3 per cent compared with the June half last year but down 22.5 per cent on the previous corresponding period.
On a cash basis, earnings of $294.7 million were up 22.9 per cent on the June half last year and up 13 per cent on the previous corresponding period.
Net interest income rose 19 per cent year-on-year to $821.8 million. Total income rose 9.7 per cent to $958.2 million.
The net interest margin of 1.88 per cent was up from 1.69 per cent in the June half last year and 1.8 per cent in the December half 2021.
Operating expenses rose by 4.9 per cent year-on-year to $523.3 million. The bank’s cost-to-income ratio was 54.6 per cent – down from 59.3 per cent in the previous corresponding period. The bank’s goal is to reach a sustainable cost-to-income ratio of 50 per cent.
The bank has introduced a new metric, profit after capital charge, to impose greater discipline and to keep a sharper focus on costs and returns.
The home loan book grew 6.4 per cent year-on-year to $57.5 billion but half-on-half it was down 0.1 per cent.
Bendigo and Adelaide Bank chief executive Marnie Baker said the bank’s strategy was to grow its mortgage book at system but in the current market it was being selective.
Credit quality improved during the December half, with 90-day arrears on home loans falling from 53 basis points in the December half 2021 to 49 bps in the June half last year and 41 bps in the December half.
Customer deposits grew by 2.3 per cent to $65.7 billion. Customer deposits made up 73.9 per cent of the bank’s funding – up from 73.3 per cent in the June half last year.
The bank is developing new distribution channels and tapping a new customer demographic through its digital banking developments. Subsidiary Up launched Up Home in beta in July last year, when it was offered to existing customers without any external marketing. It has a $38 million book, which is expected to grow strongly.
Bendigo Bank’s BEN Express book grew 52 per cent in the December half to over $100 million. Tic:Toc’s book is $2.9 billion.