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On Monday (15 August), Bendigo and Adelaide Bank Limited (Bendigo) released its results for the full year ended 30 June 2022, revealing that its loan book grew 7.7 per cent.
The banking group revealed that residential lending had risen by 11 per cent, with strong demand coming from the third-party channel.
According to the results, its residential lending portfolio came in at $26.8 billion at the end of June 2022, with the third-party banking portfolio at $29.2 billion.
As such, the broker channel is now responsible for the majority of the group’s lending book – with 52 per cent of the book coming from this channel. In June 2021, 49 per cent of the book was from non-direct sources.
Indeed, the third-party channel has been increasing its share of flow in the last year, the results showed. More than half (56 per cent) of residential mortgages came from the third-party channel in the first half of the financial year 2022, rising to just under two-thirds (64 per cent) in the second.
While Adelaide Bank has traditionally been the sole brand operating in the third-party channel, Bendigo Bank (which has been direct only) has been moving to break into the broker channel, too.
Rising share of owner-occupiers
The results also showed that 95 per cent of the banking group’s book is for owner-occupied loans (on principal and interest repayments, with 57 per cent on variable loans and 43 per cent on fixed.
Bendigo and Adelaide Bank has seen a rise in the proportion of owner-occupier loans coming into the bank generally, with 77 per cent of new business being owner-occupied in the second half of the financial year, up from 71 per cent in the first half.
Its business lending portfolio dropped over the year, however, falling from $8 billion in June 2021 to $7.8 billion in June 2022. Commitments have also been falling over the year, dropping to $9.4 billion.
The SME segment has also been falling, with the portfolio having dropped by $400 million from $6.2 billion to $5.8 billion by the end of June 2022 but the agribusiness lending portfolio has held firm at around $6.3 billion.
The drop comes after the bank moved to consolidate its rural bank and business banking businesses into a single division earlier this year.
Digital mortgage product takes first applications
Looking to the future, the bank flagged that it had soft-launched its new digital mortgage, Up Home, in July 2022 – leveraging the Tic:Toc platform.
Releasing the financial results, chief executive and managing director Marnie Baker commented: “Our journey to become a bigger, better and stronger bank continues. We have reduced the number of core banking systems and technology applications, while our new digital mortgage offering, Up Home, has taken its first applications.”
The CEO also noted the group has made progress with its transformation strategy, focusing on digitisation and streamlining the company, after the $116 million acquisition of software developer Ferocia during the first half.
She said: “We have completed the acquisition of Melbourne-based fintech, Ferocia, which has allowed the Bank to consolidate ownership of Up – Australia’s highest rated banking app – and deliver its flagship digital home loan product, Up Home.
“With more than 500,000 customers and over $1 billion in deposits, Up is empowering a new generation of savers and adding an important demographic to the Bank’s customer base at a low cost of acquisition.”
She also flagged that the bank has “more applications in the cloud, more APIs being re-used and more digital customers”, which was helping improve turnarounds.
The bank flagged that while the median time to decision for broker loans was around 13 days in FY22 (according to Broker Pulse figures from May 2021), its ambition was to bring them down to under one day in FY24.
“Our time-to-decision for home lending has improved and we continue to consolidate the number of suppliers we use and uplift our risk management frameworks and capabilities,” Ms Baker said.
“Our BEN Express digital home loan offering is not just a goal. It is in market today. Our BEN Express product – powered by home loan approvals platform Tic:Toc – settled more than $50 million in loans in FY22. We expect this to grow materially over the next 12 months.”
Overall, the banking group reported that total income for the year increased, rising 0.4 per cent to $1,7 billion while operating expenses were down 1.1 per cent to $1.0 billion.
Cash earnings for the year were up 9.4 per cent to $500.4 million, with statutory net profit down 6.9 per cent to $488.1 million due to “unrealised property revaluations in the Homesafe portfolio”.
“Our journey to become a bigger, better and stronger bank continues. We have reduced the number of core banking systems and technology applications, while our new digital mortgage offering, Up Home, has taken its first applications,” Ms Baker said.
“The external environment has become more complex and this has sharpened our focus and concentrated our efforts. We will continue to manage costs diligently, strengthen the returns we derive from our investments, and improve returns to shareholders.
“While our strategy and vision remain the same, as we enter a new financial year we will continue to strengthen our focus on returns, execution and sustainable growth and capital generation as we drive the business forward supporting and enhancing the experience for our customers.
“While customers and the community will always be our central focus and a unique point of difference for us, we recognise we must improve our overall returns.
“What we hoped was going to be a relatively smooth economic landing coming out of COVID has gotten a little bumpy, as we face into growing inflationary pressures, a tight jobs market, rising wages and general global uncertainty.
“Cash rate increases from the Reserve Bank are beginning to have an impact on property values in some markets and we can expect credit growth to moderate and competition to remain intense.
“We will be dynamic in our response to these conditions as we strive to better meet the needs of customers, including those who find the environment challenging, shareholders and other stakeholders.
“We will have a tighter focus on factors within our control such as our cost base and our continued judicious use of shareholder capital.
“Our focus on these areas has never been clearer, and our strategic imperatives never more important. We remain, as we have always been, a bank with heart and heritage, and we are united in our purpose of feeding into the prosperity of the community and not off it.”