BNK Banking Posts Q3 Profit Turnaround on Strategic Loan Sales and Margin Gains

Profit Turnaround and Margin Expansion

BNK Banking Corporation Limited (ASX: BBC) has delivered a notable turnaround in its financial performance for the third quarter of FY25, reporting an underlying profit after tax of $1.728 million compared to a loss of $414,000 in the same quarter last year. This marks a significant shift from the prior year’s challenges and underscores the effectiveness of BNK’s strategic initiatives.

The year-to-date underlying profit after tax stands at $3.516 million, a strong improvement from a loss of $1.603 million in the previous corresponding period. Statutory profits also reflect this positive momentum, with a Q3 FY25 profit of $1.293 million reversing a loss of $794,000 in Q3 FY24.

Strategic Loan Sales and Portfolio Optimisation

A key driver of BNK’s improved results was the strategic sale of approximately $220 million in prime residential mortgages to Bendigo Bank. This transaction not only generated $2 million in net revenue but also secured ongoing servicing fees, contributing to a more optimised and profitable balance sheet. The loan book was reduced to $0.9 billion following this sale, reflecting BNK’s disciplined approach to portfolio management.

Commercial lending continues to be a growth area, with the commercial loan book surpassing $100 million. Higher-margin lending settlements increased by over 400% compared to Q3 FY24, now comprising 29% of the total loan book. This shift towards more profitable lending segments aligns with BNK’s strategic focus on sustainable earnings growth.

Margin Management and Capital Strength

BNK’s net interest margin (NIM) improved to 1.65% in Q3 FY25, up from 1.39% in the first half of the financial year. This margin expansion reflects effective cost of funds management and a competitive positioning in the lending market. Despite a 4% decrease in total deposits to $1.0 billion, the bank maintained a healthy deposit-to-loan ratio of 114%, supporting liquidity and funding stability.

The bank’s capital position remains robust, with the capital adequacy ratio increasing to 29.10% from 26.98% at the end of December 2024. This strong capital buffer provides BNK with the flexibility to pursue new asset opportunities and potential partnerships, as highlighted by CEO Allan Savins.

Outlook and Strategic Focus

BNK’s CEO Allan Savins emphasised the bank’s commitment to long-term profitability through disciplined execution and strategic agility. The company is focused on controlling costs, managing margin pressures, and optimising its portfolio to create shareholder value. While residential loan arrears saw a slight seasonal uptick to 0.80%, this remains an improvement from 0.97% in Q3 FY24, with provision coverage deemed appropriate.

Looking ahead, BNK is well-positioned to navigate the evolving economic environment with strong capital and liquidity ratios. The bank’s ongoing efforts to identify value-accretive transactions and deploy capital effectively will be critical to sustaining its positive momentum.