Bendigo Bank Reports $375 Million FY26 Profit Amid $70 Million Risk Program Provision
Bendigo and Adelaide Bank is embarking on a three-year, $70 million program to fix significant non-financial risk management weaknesses flagged by APRA, while reporting a $375 million statutory profit for FY26 impacted by rectification provisions and legal penalties.
- APRA imposes licence conditions over non-financial risk deficiencies
- Bank commits $70 million in FY26 for risk rectification program
- FY26 statutory net profit of $375.1 million includes major provisions
- Strong capital position maintained with CET1 ratio at 11.34%
- FY27 reporting changes to align with industry standards, $100-123 million cost forecast
APRA Licence Conditions Trigger Major Risk Program
Bendigo and Adelaide Bank (ASX:BEN) is responding to a stern regulatory intervention after the Australian Prudential Regulation Authority (APRA) imposed licence conditions related to the bank’s management of non-financial risk (NFR). The conditions follow a root cause analysis requested by APRA in December 2025, which uncovered significant weaknesses in Bendigo Bank’s risk frameworks.
In a clear admission of the scale of the problem, CEO Richard Fennell announced a multiyear rectification plan estimated to cost $70 million, already included in the FY26 results. The program aims to overhaul governance, compliance, risk culture, and accountability across the bank.
FY26 Results Reflect Cost of Risk Remediation and Legal Penalties
The bank reported unaudited statutory net profit after tax of $375.1 million for FY26, down significantly from cash earnings of $530.2 million due to substantial non-cash items. These included $49 million after tax provision for the rectification plan and a $9.8 million charge for a proposed $8 million legal penalty plus associated costs related to regulatory breaches.
Other notable impacts included a $24.8 million after-tax adjustment linked to the Homesafe portfolio, reflecting mixed housing price movements in Sydney and Melbourne during the year. Despite these headwinds, Bendigo Bank maintained a robust capital position with a Common Equity Tier 1 ratio of 11.34% and a Liquidity Coverage Ratio of 140.2% at 30 June 2026.
Lending Growth and Operational Efficiencies Support Performance
Underlying business momentum showed signs of improvement with total lending up 3.5% in the second half of FY26. Residential lending grew 1.9%, agribusiness lending surged 10.6%, and portfolio funding jumped 16.8%. The net interest margin (NIM) rose 7 basis points to 1.95% for the full year, supported by better deposit mix and term deposit repricing.
Operating expenses declined 2.1% over the half, aided by ongoing productivity initiatives and fewer working days. Credit expenses increased to $15.7 million before tax, reflecting a cautious stance amid macroeconomic and geopolitical uncertainties.
FY27 Financial Reporting Changes and Cost Outlook
From FY27, Bendigo Bank will shift its financial reporting to a cash basis including and excluding notable items, aligning with industry peers. This change will bring programs previously considered non-cash, such as the Strategic Partnerships and RACQ Bank acquisition costs, into the spotlight as notable items.
The bank forecasts $100-123 million pretax in costs for these ongoing programs in FY27. This includes $56-66 million pretax remaining costs for the Infosys and Genpact partnerships announced earlier in the year, and $27-34 million pretax for the RACQ loan and deposit book migration.
Chair Vicki Carter acknowledged the bank’s shortcomings and reinforced the board’s commitment to building the necessary risk management capabilities. The rectification plan is sponsored at the highest level, with CEO Fennell emphasizing the critical importance of elevating risk maturity to serve customers and communities better.
Bottom Line?
Bendigo Bank’s multi-year, $70 million risk overhaul signals deep-rooted challenges in non-financial risk management, with FY27 costs and regulatory scrutiny set to remain elevated.
Questions in the middle?
- How effectively will Bendigo Bank execute its rectification plan amid ongoing regulatory pressure?
- What impact will the FY27 reporting changes have on investor perception and earnings volatility?
- Can lending growth and operational efficiencies offset the rising costs of risk remediation and strategic initiatives?
