How Did Bendigo Bank Boost CET1 to 11% Amid Rising Commercial Lending?

Capital Position and Risk-Weighted Assets

Bendigo and Adelaide Bank Limited (ASX – BEN) has published its Basel III Pillar 3 disclosures for the half-year ended 30 June 2025, in compliance with APRA’s updated Prudential Standard APS 330. The bank reported a Common Equity Tier 1 (CET1) capital ratio of 11.00%, marking a modest increase of 17 basis points from the previous quarter. This improvement was primarily driven by net regulatory retained earnings and reserves, partially offset by capital deductions and a slight rise in risk-weighted assets (RWA).

The total RWA increased by 0.36% to $39.3 billion, largely reflecting a 5.1% growth in commercial property lending. This was somewhat balanced by a 1.1% reduction in residential property lending, influenced by the settlement of a new securitisation trust in April 2025.

Liquidity Metrics and Funding Stability

Liquidity remains a key strength for Bendigo Bank, with the Liquidity Coverage Ratio (LCR) averaging 132.3% over the quarter, comfortably above the 100% regulatory minimum. The slight quarterly decline from 134.1% was due to a 2.8% reduction in high-quality liquid assets outpacing a 1.5% decrease in net cash outflows. The Net Stable Funding Ratio (NSFR) also remained robust at 115.9%, down marginally from 117.3%, reflecting shifts in long-term wholesale funding maturities.

The bank’s funding strategy emphasizes diversification and stability, with retail and small business deposits constituting the majority of available stable funding. The bank also maintains a comprehensive contingency funding plan and stress testing framework to ensure resilience under various stress scenarios.

Risk Management and Governance

Bendigo Bank’s disclosures provide a detailed overview of its risk management framework, which integrates a clear risk appetite, a three-lines-of-defence model, and strong governance oversight. The Board and senior management regularly review material risks, including credit, market, operational, and emerging risks such as climate change and ESG factors.

The bank’s credit risk remains well-managed, with provisions aligned to IFRS 9 standards and a focus on collateral quality and portfolio diversification. Non-performing exposures have increased slightly but remain under close management. Operational risk is monitored through historical loss data and scenario analysis, while conduct, data, technology, and information security risks are addressed through dedicated policies and oversight committees.

Securitisation and Capital Composition

The bank continues to utilise securitisation programs, including the TORRENS Trusts and Portfolio Funding initiatives, to optimise capital efficiency and liquidity. The disclosures detail the bank’s role as both originator and investor in securitisation exposures, with associated capital charges carefully managed.

Regulatory capital composition remains strong, with Tier 1 capital at $5.1 billion and total capital at nearly $6 billion. The bank maintains buffers above regulatory minimums to absorb potential losses and support ongoing lending capacity.

Outlook and Emerging Considerations

Bendigo Bank’s comprehensive disclosures underscore its commitment to prudent risk management and capital adequacy amid a complex operating environment. The bank’s approach to emerging risks, including climate-related scenarios and evolving regulatory expectations, positions it to navigate future challenges while maintaining financial resilience.