Why Did Bendigo Bank’s Cash Earnings Fall 7.8% in 3Q25?
Bendigo and Adelaide Bank reported a 7.8% decline in cash earnings for 3Q25, reflecting lower other income and a slight dip in net interest income, while completing its Rural Bank system migration.
- Cash earnings down 7.8% compared to 1H25 quarterly average
- Net interest margin stable despite lower cash rate
- Other income falls 13.6%, impacted by Homesafe completions and fees
- Rural Bank system migration completed, brand retired
- Balance sheet remains strong with solid liquidity and capital ratios
Earnings and Income Trends
Bendigo and Adelaide Bank’s third quarter of fiscal 2025 saw cash earnings decline by 7.8% relative to the first half average, settling at $122.2 million. This drop was primarily driven by a 13.6% fall in other income, notably from fewer completions in its Homesafe product and reduced account keeping fees. Net interest income edged down slightly, influenced by fewer business days in the quarter, though the net interest margin held steady despite a lower cash rate environment.
Operational Efficiency and Cost Management
On the expense front, the bank managed to reduce operating costs by 1.2% compared to the first half quarterly average. This was achieved through lower business-as-usual costs, including reduced staff expenses, even as investment spending increased marginally in line with prior guidance. Credit expenses remained low at $1.9 million, with a mix of lower collective provisions offset by higher specific provisions in the consumer segment.
Strategic Transformation Milestone
A significant highlight for the quarter was the completion of the Rural Bank system migration and the retirement of the Rural Bank brand. This milestone marks the final phase of a six-year transformation program aimed at simplifying Bendigo Bank’s technology platforms, reducing core banking systems from eight to two. This streamlining is expected to support sustainable growth and productivity improvements as the bank scales.
Balance Sheet and Growth Outlook
Residential mortgage growth slowed towards the end of the quarter, with annualised growth dipping below 10%. Deposit growth remained steady, driven by a 9.3% annualised increase in savings accounts, while transaction accounts declined. Business lending growth was supported by portfolio funding. The bank’s balance sheet remains robust, with a customer deposit funding ratio of 77%, a liquidity coverage ratio averaging 134%, and a net stable funding ratio of 117%. The Common Equity Tier 1 (CET1) capital ratio declined slightly by 34 basis points to 10.83%, reflecting dividend payments and regulatory adjustments.
Looking Ahead
While the bank anticipates more moderate growth going forward, its focus on sustainable expansion and operational efficiency positions it well to navigate the current economic environment. The integration benefits from the Rural Bank migration and ongoing technology simplification could underpin future performance improvements.
Bottom Line?
Bendigo Bank’s transformation journey reaches a key milestone, but earnings pressure signals cautious eyes on upcoming quarters.
Questions in the middle?
- How will the completion of the Rural Bank migration impact future cost savings and revenue growth?
- What factors are expected to influence residential mortgage growth amid slowing trends?
- Can the bank sustain its net interest margin in a fluctuating interest rate environment?
