Bendigo Bank 1H25 Cash Earnings Dip 1.1% as Deposits and Mortgages Surge
Bendigo and Adelaide Bank's half-year results for 1H25 reveal a modest decline in cash earnings due to inflationary pressures and increased investment spend, balanced by robust customer growth and digital innovation.
- Cash earnings down 1.1% year-on-year, impacted by deposit mix and inflation
- Customer base grows 4.9% to over 2.7 million, with strong mortgage and deposit growth
- Digital lending platforms drive 28% of residential settlements
- Operating expenses rise due to transformation investments and wage inflation
- Strong capital position maintained with CET1 ratio at 11.17%
Overview of 1H25 Financial Performance
Bendigo and Adelaide Bank Limited (ASX: BEN) reported its half-year results for the period ending 31 December 2024, highlighting a nuanced performance amid a challenging economic backdrop. Cash earnings after tax declined slightly by 1.1% compared to the prior corresponding period, reflecting the combined effects of inflationary cost pressures, a shift in deposit mix, and ongoing investment in digital transformation initiatives.
Despite the earnings dip, the bank demonstrated resilience with total income increasing 1.6% year-on-year, supported by mortgage growth outpacing the system and a 10.8% annualised increase in deposits. The deposit-to-loan ratio improved to 73%, underscoring a stable funding base.
Customer Growth and Digital Innovation
Customer numbers expanded by 4.9% over the half, surpassing 2.7 million, driven by the success of the Bendigo Lending Platform and the Up Digital Bank. Notably, the Bendigo Lending Platform accounted for 28% of residential lending settlements, while Up Home deposits surged 23% half-on-half, reflecting strong engagement with younger demographics and digital-first customers.
The bank's Net Promoter Score (NPS) remains robust at +31.1, significantly above the industry average, signaling strong customer satisfaction and loyalty. This is supported by the bank's extensive branch network, including 429 branches with a strong regional presence, and its commitment to community banking.
Cost Pressures and Investment Spend
Operating expenses rose by 8.3% half-on-half, primarily due to wage inflation and increased investment in technology and transformation programs. Staff costs increased by nearly 10%, reflecting the bank's focus on delivering its strategic initiatives, including digital platform enhancements and process automation.
Investment spend remains elevated, with key projects such as the Digital Lending Platform, Up Digital Bank, and Data Platform Transformation driving future growth and productivity improvements. The bank expects investment expenditure to remain higher in the second half of FY25, aligning with its strategic roadmap.
Capital and Risk Position
Bendigo Bank maintains a strong capital position with a Common Equity Tier 1 (CET1) ratio of 11.17%, comfortably above regulatory requirements and board targets. The bank's liquidity coverage ratio (LCR) stands at a healthy 135.2%, supported by a diversified funding base that includes a significant contribution from its Community Bank network.
Credit quality remains sound, with impaired loans decreasing and collective provisions reflecting a cautious stance amid economic uncertainties. The bank's residential lending portfolio shows resilience, with average loan-to-valuation ratios trending downward and a conservative approach to new lending.
Strategic Outlook
Looking ahead, Bendigo Bank is focused on executing its multi-channel growth strategy, enhancing customer experience, and continuing its digital transformation journey. The rollout of the Bendigo Lending Platform to retail branches and mortgage partners is expected to accelerate lending efficiency and customer acquisition.
The bank also anticipates a likely cash rate cut by the Reserve Bank of Australia, which may positively influence margins and customer borrowing costs in the second half of FY25. However, ongoing inflation and investment costs will require disciplined expense management to sustain profitability.
Bottom Line?
Bendigo Bank’s steady customer growth and digital momentum provide a solid foundation, but navigating inflation and investment costs will be critical to restoring earnings growth.
Questions in the middle?
- How will Bendigo Bank balance continued investment spend with margin pressures in FY25?
- What impact will anticipated RBA rate cuts have on the bank’s net interest margin and lending growth?
- Can the Bendigo Lending Platform rollout to retail branches sustain the strong mortgage growth momentum?
