Bendigo Bank’s 1Q26: Margin Up 3bps, Earnings Flat, Loans Contract 5.6%

Steady Earnings Amid Margin Improvement

Bendigo and Adelaide Bank’s first quarter of fiscal 2026 delivered a mixed but broadly stable financial performance. Cash earnings came in at $120.7 million, essentially flat compared to the same quarter last year but down 3.2% on the prior half-year average. The bank benefited from a modest increase in net interest margin (NIM) to 1.91%, up 3 basis points from the previous quarter, which helped lift net interest income by 3.4%.

This margin improvement was underpinned by a more favourable deposit mix, with lower-cost savings accounts growing to represent 53% of customer deposits, while term deposits declined to 34.7%. The repricing of term deposits and a shift in asset mix also contributed to the positive NIM trend, partially offsetting the impact of a lower cash rate.

Cautious Lending Amid Competitive Dynamics

Despite the margin gains, Bendigo Bank took a conservative stance on lending, with residential loan balances contracting at an annualised rate of 5.6%. This reflects the bank’s cautious approach in response to competitive pressures in third-party distribution channels. The balance sheet remains robust, however, with strong liquidity and capital ratios positioning the bank well for a potential return to growth in the second half of the financial year.

Rising Costs and One-Off Charges

Operating expenses rose by 7.6%, driven by seasonal factors and several one-off items. Adjusted for these, expenses increased by a more moderate 3%. Key contributors included higher staff costs due to more working days in the quarter, movements in leave provisions, and redundancy costs. Additionally, the bank booked an unplanned remediation provision of $3.7 million, highlighting ongoing compliance and operational challenges.

Credit expenses saw a slight reversal of $0.3 million, benefiting from a collective provision release in the Agribusiness segment, though this was partly offset by increased specific provisions in Consumer and Business lending portfolios.

Strategic Technology Rollouts to Drive Future Growth

Bendigo Bank marked several strategic milestones during the quarter. The Bendigo Lending Platform was successfully rolled out across most of the branch network nationally, with Victoria and Tasmania scheduled for completion in November. This platform aims to streamline lending processes and enhance customer experience.

Complementing this, the bank launched a refreshed in-app onboarding process at the end of October, receiving positive early feedback for enabling new customer onboarding within minutes. These technology initiatives are expected to support sustainable growth and operational efficiency in the coming periods.

Solid Capital and Credit Quality

The bank’s capital position remains solid, with a Common Equity Tier 1 ratio of 10.93%, slightly down 7 basis points from the prior quarter. Liquidity metrics also remain strong, with a Liquidity Coverage Ratio averaging 136.5% and a Net Stable Funding Ratio at 117.7%.

Credit quality indicators showed minor improvements, with a small reversal in credit expenses and a collective provision release in Agribusiness, although specific provisions increased in other segments. The bank continues to monitor credit risk closely amid evolving economic conditions.