AML Breach and Integration Risks Loom Over Bendigo Bank’s Growth Plans

Strategic Expansion through RACQ Bank Acquisition

Bendigo and Adelaide Bank has announced a significant step in its growth trajectory with the planned acquisition of RACQ Bank’s retail loans and deposits, valued at book value upon completion. The portfolio comprises $2.7 billion in loans and $2.5 billion in retail deposits as of June 2025, marking a substantial expansion of Bendigo’s footprint, particularly in Queensland where the bank will increase its residential lending presence by 3 percentage points.

The acquisition, expected to close in the first half of 2027, will see approximately 90,000 RACQ customers integrated into Bendigo’s core banking system. The transaction is anticipated to be accretive to both return on equity (ROE) and cash earnings per share (EPS), with an estimated uplift of 35 to 40 basis points in ROE and 4 to 5 cents in EPS. Funding will come from Bendigo’s excess capital, with the transfer consuming around 35 basis points of CET1 capital.

Addressing AML Compliance with Transparency and Commitment

In a candid disclosure, Bendigo Bank revealed the detection of suspicious activity indicative of money laundering within one of its branches. The bank promptly self-reported the issue to AUSTRAC and law enforcement, engaging Deloitte to conduct an independent investigation. The findings highlighted deficiencies in the bank’s anti-money laundering (AML) and counter-terrorism financing (CTF) risk management frameworks.

Bendigo is now enhancing its AML systems and processes, with a board-committed uplift program underway. While the financial impact of this remediation effort remains to be finalized, the bank has pledged full cooperation with regulators and a transparent communication approach as the program progresses.

Driving Growth through Digital Innovation and Operational Excellence

The bank’s strategic update underscores a clear focus on leveraging technology and partnerships to fuel growth and efficiency. Bendigo has rolled out its lending platform across all branches and launched the “Grow & Flow” interest rate structure to attract deposits, which have grown 35% year-on-year to $3.3 billion. Collaborations with Google and AWS are accelerating the adoption of AI and cloud capabilities, streamlining operations and enhancing customer experience.

Operational excellence initiatives are yielding productivity gains, with a reduction in full-time equivalent staff and operating expenses trending lower. The bank aims to maintain business-as-usual costs within inflation levels while investing strategically to support growth.

Financial Outlook and Market Positioning

Bendigo Bank is targeting a return on equity above 10% by 2030, with a dividend payout ratio between 60% and 80% of cash earnings. Residential loan growth is expected to align with system levels, supported by a disciplined capital allocation approach and a focus on lower-cost deposits. The bank’s strong brand reputation, reflected in its Net Promoter Scores and emotional brand drivers, continues to differentiate it in a competitive banking landscape.

While the RACQ acquisition and AML remediation present near-term challenges, Bendigo’s strategic clarity and operational momentum position it well for sustainable growth and shareholder value creation.