$112.7 million cash earnings as Bendigo margin falls to 1.94%
Bendigo Bank’s unaudited 1Q27 cash earnings rose 18.5% against the prior half-year quarterly average, but statutory profit fell as net interest margin narrowed and non-cash property revaluations weighed. Deposits grew while lending contracted, with the bank continuing its costly non-financial risk remediation program.
- Unaudited cash earnings of $112.7 million, up 18.5% on the 2H26 quarterly average
- Statutory net profit fell 8.6% to $66.0 million against the 2H26 quarterly average
- Net interest margin declined six basis points to 1.94%
- Customer deposits rose 4.8% annualised while lending balances fell 3.1% annualised
- FY27 reporting will reclassify certain previously non-cash programs as notable items
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Cash earnings recover as statutory profit declines
Bendigo and Adelaide Bank Limited (ASX:BEN) opened FY27 with a familiar tension: unaudited cash earnings improved sharply, while statutory profit moved in the opposite direction. Cash earnings including notable items reached $112.7 million for the September quarter, 18.5% above the 2H26 quarterly average, but statutory net profit after tax fell 8.6% against that benchmark to $66.0 million and was down 40.0% from 1Q26.
The cash earnings comparison benefits from the $70.0 million risk rectification provision recognised as a notable item in 4Q26. Operating expenses were 5.8% lower than the 2H26 quarterly average, while operating performance rose 16.4% to $172.8 million. Credit expenses were $6.8 million, broadly reflecting higher collective provisions associated with growth in the business portfolio.
Margin pressure follows funding and deposit shifts
Net interest margin fell six basis points from 4Q26 to 1.94%. Bendigo said the decline mainly reflected three wholesale funding transactions, including prefunding for the RACQ balance sheet, which temporarily lifted liquid assets by $2.7 billion and wholesale funding by $1.0 billion. Seasonal movement away from transaction accounts and into term deposits also changed the deposit mix, while interest-rate risk management effects, including basis risk, added pressure.
Net interest income nevertheless rose 2.4% against the 2H26 quarterly average to $453.0 million, supported by higher average interest-earning assets and additional quarterly days. That improvement was partly offset by the narrower margin. Other income fell 10.3% to $67.8 million, largely because Homesafe and foreign exchange income had been unusually strong in 4Q26.
Deposits grow while lending contracts
Customer deposits reached $74.3 billion, increasing at a 4.8% annualised rate during the quarter. Term deposits grew 13.3% annualised, while lower-cost deposits contracted 4.0% and now account for 54.1% of customer deposits. Up’s Grow & Flow product increased 45.3% annualised, and Bendigo’s EasySaver product grew 4.4%.
Lending balances moved the other way, contracting 3.1% annualised. Residential loans were down 0.8%, although the bank said momentum in applications and discharge rates improved. Business lending excluding Portfolio Funding grew 3.4% annualised, but total business lending fell 12.5% after the exit of a large Portfolio Funding client. Agribusiness balances declined 7.9% as seasonal outflows affected the portfolio.
Risk remediation remains a material investor issue
Bendigo continues to develop its risk rectification plan and has appointed an independent reviewer to assess its work addressing deficiencies in non-financial risk management. The program follows the $70 million risk overhaul announced after APRA imposed licence conditions, with the bank saying its balance sheet remains well positioned while the regulatory matters are addressed.
The quarter’s statutory result was also reduced by $46.7 million of after-tax non-cash items, mainly relating to the revaluation of Homesafe properties in Sydney and Melbourne. Bendigo is changing its reporting framework for FY27 so that certain programs previously treated as non-cash items, including regulatory remediation, strategic partnership restructures and acquisition integration costs, will instead be shown as notable items on a cash basis.
Reporting reset changes how FY27 costs will be read
The revised presentation is intended to align Bendigo’s disclosures with Australian banking peers and separate underlying operating performance from material, non-recurring or otherwise non-core items. Prior-period figures have been reclassified on an unaudited pro forma basis, meaning investors will need to take care when comparing the new FY27 series with earlier published numbers.
The next significant data point is scheduled for 13 November, when Bendigo plans to release its APS330 and additional credit tables. Those disclosures should provide a fuller view of asset quality and provisioning after a quarter in which deposits strengthened, lending shrank and the bank’s margin remained under pressure.
Bottom Line?
The earnings rebound is real but heavily entwined with prior risk provisions and a changing reporting lens; the next test is whether deposit growth can translate into profitable lending without further margin erosion.
Questions in the middle?
- Can Bendigo convert strong term-deposit growth into lending growth without increasing funding costs or compressing margin further?
- What will the independent review say about the scope, cost and timetable of the non-financial risk rectification plan?
- Will the 13 November credit disclosures show provisioning remains appropriate as business lending expands and cost-of-living pressures persist?
Sources
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BEN 1Q27 Trading Update (opens in a new tab)Verified source. Bendigo and Adelaide Bank Limited · 19 Oct 2026
