Goodwill Impairment Clouds Bendigo Bank’s Strong Deposit and Lending Growth

Strong Customer Growth Amid Margin Pressure

Bendigo and Adelaide Bank Limited (ASX – BEN) delivered a mixed full-year result for FY25, showcasing robust customer growth and deposit inflows alongside challenges in earnings. The bank’s customer numbers rose 11% year-on-year to 2.9 million, reflecting successful engagement and expansion efforts, particularly through its digital platforms and the Bendigo Lending Platform.

Customer deposits increased by 6.6%, with an 8.5% rise in lower cost deposits such as savings and transaction accounts, underscoring the strength of the bank’s deposit franchise. This growth was supported by both proprietary and Community Bank branch networks, which remain vital sources of stable funding.

Lending Growth Driven by Digital and Platform Channels

Residential lending grew 7.6% for the year, outpacing system growth, with digital channels and the Bendigo Lending Platform accounting for 71% of total residential lending settlements in the second half. The bank also reported a 2.7% increase in Business and Agribusiness lending, with particular momentum in SME and commercial property sectors.

Despite this lending growth, net interest margin (NIM) remained stable at 1.88% in the second half, reflecting repricing efforts amid two cash rate cuts during the period. The bank noted that margin pressure from deposit and lending pricing was partly offset by benefits from replicating portfolios.

Earnings Impacted by Goodwill Impairment and Investment Spend

On the earnings front, Bendigo Bank reported cash earnings after tax of $514.6 million, down 8.4% from the prior year. Statutory earnings were significantly affected by a $539.5 million goodwill impairment charge related to the bank’s operating model restructure and core banking consolidations. Operating expenses rose 7.7%, driven by planned investment spend and inflationary pressures, particularly in staff and technology costs.

Credit expenses benefited from a net writeback, reflecting a strong credit profile and revised collective provision overlays, supporting the bank’s cautious but optimistic outlook on asset quality.

Strategic Focus on Digital, Efficiency, and Sustainability

Bendigo Bank launched its 2030 strategic plan, emphasizing five pillars – enhancing digital ease, simplifying operations, deepening customer relationships, setting trust and societal impact benchmarks, and reinventing banking for a new generation through its Up digital bank. The bank aims to achieve a return on equity above 10% by 2030, maintain a dividend payout ratio of 60-80% of cash earnings, and keep business-as-usual expenses within inflationary limits.

On the sustainability front, the bank continues to advance its ESG commitments, including ambitious climate targets, gender diversity goals, and community investment through its unique Community Bank model, which returned $50 million to communities in FY25 alone.

Capital Position and Dividend Stability

Bendigo Bank’s capital position remains strong, with a Common Equity Tier 1 (CET1) ratio of 11.00%, comfortably above major banks on a standardised basis. The bank declared a final dividend of 33 cents per share, consistent with the prior year, reflecting a payout ratio of approximately 75% for the half. The Dividend Reinvestment Plan (DRP) will be neutralised for the sixth consecutive half, underscoring disciplined capital management.