Bendigo Bank’s 1H26: $1B Income, 53.8% Low-Cost Deposits, RACQ Acquisition

Solid Half-Year Performance Amid Strategic Expansion

Bendigo and Adelaide Bank Limited (ASX, BEN) has delivered a solid half-year financial performance for the six months ending 31 December 2025, reporting total income exceeding $1 billion. The bank’s growth was underpinned by a 3.6% increase in lower cost deposits, which now constitute 53.8% of total customer deposits, reflecting a successful push towards more cost-efficient funding sources.

Customer numbers are approaching the 3 million mark, supported by a Net Promoter Score (NPS) of +24.9, significantly above the industry average. This strong customer advocacy is a testament to the bank’s focus on digital innovation and customer experience, including the rollout of the Bendigo Lending Platform across all branches and the continued growth of the Up digital bank, which achieved profitability six months ahead of schedule.

Strategic Acquisition to Boost Queensland Presence

In a notable strategic move, Bendigo Bank has agreed to acquire the retail loan and deposit books of RACQ Bank, a transaction expected to complete in the first half of 2027. The acquisition will add approximately $2.7 billion in loans and $2.5 billion in retail deposits, enhancing Bendigo’s footprint in Queensland by 3 percentage points. The deal is anticipated to be accretive to both return on equity (ROE) and cash earnings per share (EPS), with an expected uplift of 35–40 basis points in ROE and 4–5 cents in EPS.

The integration will leverage Bendigo’s ‘One Core Banking System’ to ensure a smooth customer migration and operational efficiency. While the acquisition will consume around 35 basis points of CET1 capital, the bank’s capital position remains robust, with a CET1 ratio of 11.37%, comfortably above regulatory targets.

Addressing Compliance with AML/CTF Remediation

Bendigo Bank has self-reported shortcomings in its anti-money laundering and counter-terrorism financing (AML/CTF) risk management. The bank is implementing a comprehensive remediation program, guided by detailed recommendations from Deloitte, with an estimated cost of $70 million to $90 million over up to three years. This includes an estimated $15 million in costs for the second half of 2026 alone.

The bank has appointed a new Chief Compliance and Financial Crime Officer and allocated dedicated resources to support an ongoing AUSTRAC enforcement investigation. This proactive approach aims to futureproof the bank’s risk management capabilities and restore stakeholder confidence.

Productivity Gains and Sustainable Growth Focus

Operating expenses showed a 6.4% reduction in the second quarter, reflecting productivity improvements and a leaner workforce following recent restructuring. However, overall expenses rose 4.2% half-on-half due to higher software amortisation and remediation costs. The bank remains committed to limiting business-as-usual expenses to no more than inflation through the cycle.

Residential lending growth is regaining momentum, supported by strong application flows and a disciplined approach to capital allocation. The bank’s Community Bank network continues to be a vital source of stable, lower-cost funding, contributing approximately $15 billion in additional deposits and reinforcing Bendigo’s regional presence and community impact.

ESG and Community Impact Remain Core

Bendigo Bank continues to embed environmental, social, and governance (ESG) principles into its operations. The bank is on track to meet its 2026 operational emissions target and maintains a policy against lending to fossil fuels and native forest logging projects. Community Bank investments have returned $432 million to local communities since inception, supporting health, education, and disaster recovery initiatives.

With a fully franked interim dividend of 30 cents per share declared, Bendigo Bank balances shareholder returns with strategic investments in technology, compliance, and sustainable growth.