Non-major bank sees resi book grow 15%

The bank on Monday (16 August) announced its results for the full year ending 30 June 2021.

According to the FY21 results, the bank saw its total loan book increase by 10.6 per cent to $72.2 billion, with residential lending up 14.8 per cent (or 2.8 per cent system) on the prior financial year.

The number of customers also grew, rising by 9.6 per cent to 2.06 million. As such, its customer deposits increased by over 14 per cent, with total deposits up 15.2 per cent to $78.0 billion.

Noting that residential lending was a “standout” in the results, Bendigo and Adelaide Bank managing director and chief executive, Marnie Baker, added that this was further bolstered by a 36.8 per cent increase in lending applications for the year.

“The division’s cash earnings contribution was up 9.0 per cent and operating expenses down 2.5 per cent,” she said.

“Our consumer division is now into its third year of outperforming system with our unique branch network, digital and third-party partner strategies [via Adelaide Bank] demonstrating how our customers and partners continue to respond to the experience, and service we provide them.”

Ms Baker particularly highlighted the work the bank is putting into its proprietary channel (via Bendigo Bank), stating: “We continue to modernise our branch network with six, new community-focused experience stores opening during the year. We’ve also invested in digital coaching in every branch to assist with upskilling customers, increased our mobile relationship managers by 27 per cent – which drove a 63 per cent increase in lending settlements – and delivered a 34 per cent uplift in servicing productivity across the branch network.

“Our branches remain a critical part of our retail distribution strategy and are important to our customer and community connections.”

Focus on digital offerings

The bank is particularly focusing on digitisation, with Ms Baker referencing the bank’s partnership with Tic:Toc, which was recently extended by another seven years to “allow Tic:Toc the capacity to increase its monthly volumes by more than 300 per cent and further accelerate its growth”.

“Tic:Toc sustained further growth in FY21 with a 55 per cent increase in home loan approvals, and a 61 per cent increase in settlements,” she said.

While announcing the financial results, the MD and CEO also revealed that the bank was looking to acquire Melbourne-based fintech Ferocia.

The acquisition of 100 per cent of the shares in Ferocia is for a total consideration of up to $116 million, and will be paid in shares (with a portion of the consideration being contingent on future performance).

The software development company, which has been operating Bendigo Bank’s banking app and e-banking platform for the past nine years, also owns the banking app, Up.

Up was launched in 2018 as a collaboration between Ferocia and Bendigo and Adelaide Bank and currently has 400,000 customers and $840 million in deposits.

It had previously operated under a collaboration model and is already supported by the bank’s core infrastructure.

Whilst the Ferocia team will join the bank under the proposed acquisition, Ferocia will continue to operate independently as a stand-alone division to support its innovation, engineering, and design culture.

“We are excited by this opportunity to continue to grow and advance the Up platform, and further develop our digital ecosystem, adding Up’s exciting product roadmap to the existing offerings provided by the Bank including the market leading digital home loan capability of our partner, Tic:Toc. More than 30 per cent of active Up customers are saving for a home loan,” Ms Baker said.

“The announcement unites our strong customer, community and innovation heritage with Ferocia’s market leading digital capability to deliver all Australians world-leading digital banking experiences.”

Cash earnings up 51.5 per cent

Strong agricultural conditions also helped deliver growth in the bank’s agribusiness division, with cash earnings contribution up 28.3 per cent and operating expenses down 3.5 per cent.

Cash earnings contribution for the business banking division was up 29.0 per cent, whilst operating expenses were down 10.7 per cent.

The business bank division also grew its market share in its target SME market during the year, particularly during the second half, resulting in customer growth of 3.5 per cent for the year.  

Overall, full-year cash earnings were up 51.5 per cent on the prior corresponding period, with statutory net profit up 172 per cent to $524.0 million.

Total income was $1.7 billion, up 4.5 per cent.

The board declared a final dividend of 26.5 cents per share with a DRP (dividend reinvestment plan) discount of 1.5 per cent, taking the fully franked, full-year dividend to 50.0 cents per share.

Looking forward, Ms Baker said that she expects economic and market conditions to continue to provide “both ongoing challenges and opportunities”.

She explained: “While we expect the housing and employment markets to grow nationally – as well as the economic expansion of regional Australia – we remain cautious of the potential impacts of further pandemic induced lockdowns, a slower than initially anticipated vaccine rollout and take-up, international trade sentiment and the continuing effects of natural disasters, and climate change.

“At the same time, we are encouraged by measures introduced by state and federal governments to aid Australia’s economic recovery.

“Even though we face a historic low interest rate environment, which continues to place pressure on our margins, we will continue to take advantage of strong customer lending demand across our consumer, business, and agribusiness divisions.”

Ms Baker continued: “As we advance our transformation strategy, we expect above system lending growth to continue, driven by our consumer business and further advances in small business and agribusiness sectors, whilst maintaining a resolute focus on costs, improving our productivity and preserving a strong and resilient balance sheet.

“Our greatest opportunity and key unique strengths lie in our ability to bring together our human approach to customer and community connections with our strong digital capabilities and new digital investments. We have a proven history in delivering innovative banking firsts in Australia and this provides us with an excellent foundation upon which to build further investment in new capabilities, partnerships, technology and skills.

“This foundation, as illustrated by our recent partnership with Tyro, our investment in Tic:Toc and our acquisition of Ferocia, will support a significant step change in our transformation and digital banking strategy to deliver market leading experiences for all customers.

“We remain resolute in our determination to realise our vision to be Australia’s bank of choice and we will continue to call on our point of difference, strength of purpose, digital innovation and community connection to position us for ongoing success, and shape the future of banking for all our stakeholders.”

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