Dividend Payments Pressure Bendigo Bank’s Capital Amid Lending Contraction Risks

Capital Position Holds Steady Amid Dividend Payout

Bendigo and Adelaide Bank Limited (ASX, BEN) has released its Basel III Pillar 3 disclosures for the quarter ending 30 September 2025, presenting a nuanced picture of its capital and liquidity health. The bank’s Common Equity Tier 1 (CET1) ratio edged down by 7 basis points to 10.93%, primarily reflecting the impact of a $187 million final dividend payment during the quarter. This outflow was partially offset by earnings of $86.7 million and a modest increase in other comprehensive income reserves linked to the fair value of treasury assets.

Risk-Weighted Assets Reflect Lending Contraction

Risk-weighted assets (RWA) decreased by 0.78% to just under $39 billion, driven largely by a $395 million reduction in credit risk associated with residential property lending. This contraction was attributed to a pullback in third-party lending channels, signaling a cautious approach in the housing finance segment. Meanwhile, operational risk-weighted assets rose by $90.8 million, reflecting growth in interest-earning assets over the past year.

Liquidity Ratios Strengthen on Stable Funding

Liquidity metrics showed marked improvement, with the Liquidity Coverage Ratio (LCR) climbing to 136.5% from 132.3% in the previous quarter. This increase was driven by a reduction in net cash outflows, aided by updated deposit stability classifications and lower wholesale funding maturities. High-quality liquid assets remained robust, exceeding net cash outflows by approximately $3.5 billion on average during the quarter.

The Net Stable Funding Ratio (NSFR) also improved to 117.7%, up from 115.9%, reflecting a decline in required stable funding due to run-off in the lending book and other assets. These liquidity buffers comfortably exceed APRA’s regulatory minimums, underscoring the bank’s prudent funding strategy.

Governance and Regulatory Compliance

The disclosures were prepared at the consolidated group level and attest to the reliability and accuracy of the reported figures by Bendigo’s Chief Financial Officer and Chief Risk Officer. The bank confirmed full compliance with APRA’s Prudential Standard APS 330, reinforcing its commitment to transparency and regulatory standards.

Overall, Bendigo and Adelaide Bank’s Q3 2025 regulatory disclosures portray a bank that is managing capital pressures from shareholder returns while strengthening its liquidity position amid evolving market conditions.