Bendigo Bank Faces Capital Pressure Amid Rising Risk-Weighted Assets
Bendigo and Adelaide Bank reported a slight dip in its Common Equity Tier 1 ratio to 10.83% for the March 2025 quarter, reflecting dividend payments and increased residential lending. Despite this, the bank sustained robust liquidity and funding metrics well above regulatory minimums.
- CET1 ratio decreased to 10.83% due to dividend payout and higher risk-weighted assets
- Risk-weighted assets rose 0.75% driven by residential property lending growth
- Liquidity Coverage Ratio steady at 134.1%, well above 100% regulatory minimum
- Net Stable Funding Ratio slightly declined to 117.3% but remains strong
- Disclosures comply with updated APS 330 standard and are attested by CFO and CRO
Capital Position Under Pressure but Resilient
Bendigo and Adelaide Bank Limited released its Basel III Pillar 3 disclosures for the quarter ended 31 March 2025, revealing a modest decline in its Common Equity Tier 1 (CET1) capital ratio to 10.83% from 11.17% in the previous quarter. This reduction was primarily influenced by the payment of an interim dividend, which reduced capital by 44 basis points, alongside increased risk-weighted assets (RWA) that added further pressure.
Despite these headwinds, the bank’s CET1 ratio remains comfortably above the minimum regulatory requirements, reflecting a solid capital base. The increase in RWA, up 0.75% to $39.16 billion, was largely driven by strong growth in residential property lending, which rose 2.13% over the quarter. This lending expansion underscores Bendigo Bank’s ongoing commitment to supporting the housing market, even as it carefully manages its capital buffers.
Liquidity Metrics Signal Robust Funding
On the liquidity front, Bendigo Bank maintained a steady Liquidity Coverage Ratio (LCR) of 134.1%, slightly down from 135.2% in December 2024 but still well above the 100% regulatory minimum. This ratio measures the bank’s ability to withstand a 30-day severe liquidity stress scenario, with high-quality liquid assets exceeding net cash outflows by approximately $3.4 billion on average during the quarter.
The Net Stable Funding Ratio (NSFR), which assesses the stability of funding over a one-year horizon, declined marginally to 117.3% from 118.0%. This slight dip was due to lending growth outpacing the increase in stable funding sources, including customer deposits and term wholesale funding. Nonetheless, the NSFR remains comfortably above the regulatory threshold, indicating Bendigo Bank’s prudent funding strategy.
Regulatory Compliance and Governance Assurance
The disclosures were prepared in accordance with the updated Prudential Standard APS 330, effective from 1 January 2025, which aligns with international Basel Committee standards. Bendigo Bank’s Chief Financial Officer and Chief Risk Officer have attested to the accuracy and reliability of the information, underscoring strong internal governance and risk management practices.
These quarterly disclosures provide investors and regulators with critical insights into the bank’s capital adequacy, risk exposure, and liquidity resilience. While the CET1 ratio’s slight decline warrants monitoring, the bank’s overall financial health remains robust amid a dynamic lending environment.
Bottom Line?
Bendigo Bank’s capital and liquidity metrics remain solid, but ongoing lending growth and dividend policies will require careful balancing in coming quarters.
Questions in the middle?
- Will continued residential lending growth further pressure Bendigo Bank’s capital ratios?
- How might future dividend payments impact the bank’s CET1 buffer?
- What strategies will Bendigo Bank employ to sustain its strong liquidity amid evolving market conditions?