Regional bank sees stronger loan growth on the horizon
Australia’s fifth largest retail bank has set aside millions of dollars to fix risk management deficiencies after being warned by regulators.
Bendigo and Adelaide Bank are dealing with the fallout from a 2025 review that found it did not have adequate safeguards against money laundering before notifying the banking regulator and AUSTRAC.
On Monday, it reported first-half net cash earnings fell 3.3 percent to $256.4 million as loans fell.
The six-month performance ending in December also saw a 6.4 percent increase in statutory net profit, reaching $230.6 million.
The bank’s gain was driven by a 2.3 percent increase in deposits to almost $74 billion and a more than six percent reduction in operating expenses.
The value of its home loan book fell 0.1 percent to $65.1 billion after a former mortgage partner exited his business.
CEO Richard Fennel stated that the bank will reach three million customers by the end of the fiscal year and said, “We are confident that our mortgage loan book will return to growth in the second half of the fiscal year.”
As Australian households continue to face cost-of-living headwinds, the bank said its mortgage customers were resilient.
More than 45 percent of these customers take more than a year to repay their mortgage, and 88 percent maintain their financial buffer.
The bank hired consulting firm Deloitte to conduct an independent review in 2025 after suspicious activity at one of its branches went undetected for six years until Aug. 1.
The review, announced in November, found deficiencies extended beyond a single branch and identified weaknesses in many key aspects of money laundering and counter-terrorism financing risk management.
The Australian Prudential Regulation Authority then told the bank it had to retain $50 million in additional risk capital and investigate the extent of problems in its operations.
AUSTRAC is continuing an enforcement investigation to examine whether Bendigo has complied with its obligations under anti-money laundering and counter-terrorism laws.
Bendigo recently appointed a chief compliance officer and head of financial risk, Steve Blackburn, to lead its response.
“We have now received detailed recommendations, actions and a roadmap from Deloitte, which we are using to guide our improvement and remediation program, focusing on improving our enterprise-wide risk management, including transaction monitoring,” Mr. Fennell told analysts on an earnings call.
Bendigo expects total costs over three years to be between $70 million and $90 million, with the first $15 million occurring in the second half of 2025/26.
“We continue to engage proactively with regulators,” Mr. Fennell said.
Shares in Bendigo, which will pay an unchanged dividend of 30 cents per share in the first half, fell nearly one per cent to $11.32 in Monday afternoon trading.
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