Bendigo alliance to boost NSW footprint

The Victoria-based lender has traditionally held a smaller position in the NSW mortgage market.

Speaking at the announcement of the bank’s profit results this week, Bendigo and Adelaide CEO Mike Hirst said the bank has always had competing views about its presence in NSW.

“One is that it is the largest economy and it is important to be there,” Mr Hirst said.

“The other is that it is the most competitive part of the economy and price is a real driver and you need to balance that out.

“Obviously with our third-party business we do some reasonable mortgages and business out of NSW, but I think our alliance business model is a real opportunity for us to increase our presence in NSW.

“We have got one credit union that joined from NSW and the growth that they’ve seen over the last little bit has been good. We hope there are opportunities there to grow that further,” he says.

Last year, Bendigo and Adelaide announced an agreement with an alliance of four credit unions that made Bendigo their approved deposit-taking institution responsible for compliance and balance sheet management.

Speaking about the alliance between AWA, BDCU, Circle and Service One at the time, Mr Hirst said Bendigo would continue to play an active role in the changing financial landscape.

However, while the alliance helps Bendigo’s loan growth and scale, and potentially shareholder returns, Morningstar analysts do not expect additional deals to be material enough to weaken the competitive advantages its major bank competitors hold.

“Even if Bendigo can sign deals with a large number of the remaining 80-odd credit unions in Australia, who combined have loans of $33 billion, it would still be dwarfed by the major banks' Australian gross loans, which range from $325 billion to $500 billion for each of the big four banks,” Mr Zaia said.

In a research note this week following the release of the bank’s profit results, Morningstar reaffirmed that Bendigo struggles to generate comparable profitability due to its smaller customer base and lower credit rating, hence higher funding costs.

“Bendigo is a fast follower, not an innovator or price leader,” Mr Zaia said.