Bendigo and Adelaide Bank Limited

Good morning everyone. Thanks for joining us for Bendigo Bank's 2026 full year results briefing. Let me begin today by acknowledging the traditional owners of the lands in which we meet today, the Gadigal people of the Eora Nation, and I pay my respects to their elders past, present and emerging. I also extend my respects to the Aboriginal and Torres Strait Islander people who are present on the call today. Following our recent results announcement on the 18th of August, we have slightly adjusted our approach to the result presentation today. Richard will start with a high-level overview of the key performance highlights. He'll run through the strategic deliverables and an update on the AML CTF program. Andrew will then step through the audited financial performance and provide an overview of our credit position within the current macro environment. We'll then move on to Q&A. I'll now hand over to Richard.

Thanks Sam and good morning everyone and thanks for taking the time to join us today. We recognise our market release on the 18th of August provided a number of updates including unaudited statutory profit and financial metrics. So today I'd like to provide some more detail in relation to our strategic progress and risk programs. A full year result demonstrates our ongoing disciplined approach to driving targeted business growth and delivery against our strategic agenda. Cash earnings have again improved this half, benefiting from continued growth in lower cost deposits, supporting margin expansion. Our second half expenses were down, reflecting the benefits from phase one of our productivity program and fewer days in the second half. We have regained lending momentum following a return to growth in our residential lending book in half two. Our key differentiators, including our quality products and the Bendigo brand net promoter score, that is 21 points above the industry average, continues to attract customers. We're on track to exceed three million customers with ups customer numbers growing eleven and a half percent over the year. Up's profitability continued to improve into the second half, with deposit balances growing 45% over the year to more than $4 billion, while momentum in Up's home loans continues with growth of 56% over the year, now reaching $2.6 billion just over three years since launch. Our acquisition of RACQ Bank's loan and deposit book is progressing at pace, with a significant amount of pre-migration work completed. And as outlined on the 18th, the uplift of our risk capabilities is our number one priority. I'll provide more detail on this later in the presentation. I want to share some more detail with you now in relation to the financial performance for the 2026 financial year. Cash earnings for the year of $530 million were 3% higher than the prior year. driven by income growth of 5.1% while expense growth was 4.2%. Income growth benefited from a seven basis point increase in net interest margin, higher fee revenue and HomeSafe realised income. The improvement in margin over the year was largely driven by our continued focus on delivering a more favourable mix of lower cost deposits and a measured approach to term deposit pricing. Operating expenses for the year increased by 4.2%, reflecting the expected increases in software amortization and technology costs, and the ongoing investment in risk and digital capabilities. Our focus on productivity and cost management helped to offset a proportion of these costs. And second half costs were down 2.1%. benefiting from a lower average FTE number as a result of our productivity programs and lower remediation expenses and fewer workdays. Credit costs increased for the full year, reflecting our cautious outlook from the updated macroeconomic forecast. That said, the overall credit portfolio remains resilient. and we are focused on helping customers that face difficult choices due to cost of living and other pressures. Pleasingly, our ROE is now back above 8% and our return on tangible equity is above 10%, with half to ROTE near 10.5%. Our three areas of focus that will support our 2030 ROE target are all progressing well. Our efforts in these areas will be further enabled by our risk uplift programs, which will strengthen our risk management frameworks and systems to support sustainable growth. Let me step you through the progress we've made this half. Our deposit-first approach to managing our balance sheet has been supported by digital deposit sales growth of 34% over the year. Following the introduction of new digital onboarding capability in the Bendigo app, along with continued growth in our up customer base. The enhanced functionality in the Bendigo app has materially improved the experience for new to bank and existing customers. EasySaver deposits continue to grow up 10.7% over the year and the introduction of grow and flow to upsiders has helped grow ups deposit balances by 45% over the year to reach 4.1 billion. Leveraging what we've learned, we will improve the functionality and experience for business and agri customers over the next 18 months with a sequence of improvements and uplift in the digital capability for B&A. This functionality we're building will make it easier for our customers to join the bank and further support growth in lower cost deposits. Turning to productivity. Our FTE numbers have reduced by 3.4% over the year, driven by the first phase of our productivity program. In April, at the quarterly trading update, we announced two significant strategic partnerships as part of the second phase of this program. And in July this year, we commenced a seven-year technology service partnership with Infosys, which will significantly improve IT service delivery and provide access to enhanced capabilities software engineering and AI talent to deliver innovation capacity. We've also established our six year business operations partnership with Genpact, which will bring deep expertise in process optimisation and delivery to drive greater productivity and support stronger process disciplines across the bank. And finally, to sustainable growth. was seeing some positive impact from recent targeted pricing through Ben Express and our Qantas partnership to support digital channel growth momentum in residential lending, which was up 1.9% in the second half. The Bendigo lending platform now accounts for 80% of home loan flow for the Bendigo brand, reducing time to decision for our customers and improving our productivity. the momentum behind up home continues up 56% to 2.6 billion and coming soon to upsiders in this half the up home investment loan. We've been clear about our objectives for business and agribusiness to be at growth by FY26 and above system in FY27. We achieved our growth targets this year with agribusiness lending up 3.8% and business lending, excluding portfolio funding, up 8%. Since Adam Rouse has joined the bank in 2022, we've selectively grown our agribusiness book by more than 15%. And in business, we continue to build in Business Direct and the Commercial Broker Channel. In FY27, we'll be launching a new equipment finance platform to support both our agri and SME customers. I want to share how the two programs of work depicted here will serve as the foundation to strengthen our risk management frameworks and systems to support sustainable growth as we deliver on our 2030 strategy. In December 2025, the Financial Crime Transformation Program commenced with a focus on enhancing our enterprise-wide AML CTF risk management. This program will deliver a material uplift in our ability to detect, deter and disrupt financial crime and we continue to add capacity and capability to our financial crime operations team to support this work. We expect to invest $70 to $90 million of which $8 million was spent in FY26. These expenses will be contained within our existing investment slate. Last week we announced a rectification plan to address deficiencies in our management of non-financial risk. This multi-year program of work is expected to require an initial estimated provision of $70 million which has been included in the 2026 financial year results. The plan will drive a fundamental shift in our risk maturity. Our approach to embed non-financial risk management into all aspects of the organisation will ensure we can continue delivering for our shareholders, our customers, our people and our communities. This is the number one priority for the board and executive team and will be led by me. Andrew will run through the costs and associated treatment of these expenses in more detail shortly. Now for some more detail on our Financial Crime Transformation Program. We launched this program to significantly strengthen our controls against financial crime and enhance our AML-CTF framework. Since the announcement late last calendar year, we've acted with pace and purpose. We appointed a new AML-CTF Chief Compliance Officer in January bringing in significant experience to drive this change. This program is well established across five dedicated work streams and we're already seeing tangible results. We've upgraded our monitoring systems, improved controls and are leveraging our new partnership with Genpact to draw on their global expertise and capacity. Looking ahead, our focus remains on building a best in class financial crime function to help protect our customers and the broader community. And finally, I'd like to recap our progress on the first year of our 2030 strategy and the strategic deliverables we've achieved. We first spoke to the market about our new strategy this time last year, outlining the five strategic pillars and our three enablers that will help deliver on building scale through innovation. We recognise as a bank with 2-3% market share innovation, partnerships and capability will create the opportunities we need to grow efficiently The FY26 results demonstrate our progress on the 2030 strategy with the streamlining of our approach to both lending and deposits The Bendigo lending platform is now being utilised by all of our retail branches in addition to our broker network and approximately half of our new to bank customers are being onboarded digitally by the Bendigo Bank app. The migration of our Adelaide Bank customers to Bendigo Bank in December 2025 marked the completion of our multi-year core banking consolidation project. This key strategic program has delivered a simpler and more efficient bank and created a platform for sustainable growth. Over the year, we've delivered several initiatives that will pave the way for the next phase of growth, including our partnership with Google. We currently have over 5,000 of our staff actively utilising our Google AI platform, Gemini Enterprise, to support their daily productivity. Our partnerships with Emphasis and Gempact will deliver the capabilities we need to maintain and improve our foundational technology, allowing our core technology team to drive improvements in data quality, cybersecurity and AI. And finally, we've appointed a new Chief Customer Officer for Consumer, Christopher Dean, who assumes the role in September. Christopher brings deep retail banking experience, most recently as Managing Director at HSBC UK, where we managed a network of 300 branches and led digital banking services for 8 million customers. Christopher is well placed to help us deliver on our 2030 strategy by deepening our customer relationships and improving how we manage risk. I'd like to thank Adam Rouse for leading both customer divisions over the past six months and helping to bring a consistent, disciplined approach to customer experience across both networks. I'll now hand over to Andrew.

Thanks very much, Richard, and good morning, everyone. First of all, let me confirm that there are no changes from the unaudited numbers which we presented last week to the audited numbers we're presenting today. Going now into some of the metrics underpinning the second half result. Total lending grew 3.5%, with strong seasonal growth in agri and business lending and a return to growth in residential lending which grew around 0.6 times this one. We've also seen an improved funding mix with lower cost deposits now comprising almost 55% of total deposits. Through careful management of our funding requirements, we have continued to improve net interest margin, printing 1.98% for the half. and we've tightened our management of business as usual costs in the half, delivering absolute cost reduction compared to the first half. Given the uncertain macro environment, we've increased our collective provision and skewed scenario weights more to the downside. Our operating performance was 11.2% higher than the prior half, reflecting a combination of income growth and expense reduction. Cash earnings of $273.8 million was 7.7% higher than the prior half, with the improved operating performance return on equity for the half improved to 8.26%. Our balance sheet is in a strong position going into the financial year 2027, reflected in strong capital, funding and liquidity. Turning now to total income for the half. Income of $1.04 billion was up 2.6% on the prior half. Net interest income increased 1.6%, reflecting an improved margin, offset by a small reduction in average interest earning assets and the impact of three less days. Other income, excluding HomeSafe, was up 5%, reflecting improved wealth and cards income. Unsafe income was up 29%, reflecting 40% growth in completed contracts on the prior half, and a slightly softer average profit per completion. In respect of key considerations, there are two. First, we expect the RACQ transaction to complete during second quarter 2027, so you should expect a resultant uplift in income in year of the $2033 to $37 million, and that reflects around $2.6 billion of loans and around $2.3 billion of deposits, and for these GAAP and LCR requirements to be funded, most likely with wholesale funding. Second, as previously flagged, income from the HomeSafe portfolio will reduce over time, subject to the rate and profit on contract completions. This half saw the number of open contracts reduced by around 4%, which is a slightly faster rate than the last two halves. whilst the average life of contracts completed through the half was around 10 years. Turning now to net interest margin. Compared to the prior half, our NIM was up six basis points to 1.98%. Asset pricing negatively impacted four basis points which was due to a combination of front book pricing pressure in residential lending and ongoing retention pricing pressure in business and agri. Deposit and funding pricing improved six basis points, mostly reflecting the benefit of term deposit repricing. Mix provided a four basis points benefit, reflecting a combination of improved funding mix and improved asset mix. Income from our replicating portfolios was up three basis points as expected, and revenue share negatively impacted three basis points. Our fourth quarter average NIM was 200 basis points. On key considerations for 1.527, we definitely see headwinds and a couple of tailwinds. On headwinds, there are two. We see competitive pressure on both sides of the balance sheet, and funding costs will also be a headwind, noting that we put some wholesale funding into the balance sheet in the fourth quarter. We also lifted term deposit pricing through the fourth quarter. On tailwinds, we think there is possibly one more cash rate rise. likely late in the first half and higher swap rates should see replicating portfolio contribution continue positively given the current delta between replacement yields and expiring trackers. Turning now to residential lending. Settlement volumes in aggregate were up 31% on the prior half with strong growth recorded in third party and digital channels. Discharges improved following a spike in the first half which was mostly due to the closing down of one of our partner channels. We continue to prioritise the deployment of capital into channels where both the economics are compelling and growth opportunities exist, being self-serve digital mortgages and our proprietary branch network. This half, around 35% of new settlements came through our physical network whilst just under half came through broker intermediated channels and 15% through direct digital channels including up. The positive trends in our mortgage book continue. First, around 40% of new loans are below 60% LVR and almost 90% of new loans are below 80% LVR. And second, the average credit risk weight on new mortgages has continued to improve. Momentum in the book has slowed following the federal budget. We expect system credit growth for residential lending to ease to around 3% to 4%. At the same time, we see a lot of opportunity to continue to grow through our digital and our physical networks. Importantly, discharges also slowed progressively over the second half. So with this momentum in mind, we are targeting growth around system through financial year 27, although this may be influenced by the level of competitive pressure. On deposits, our deposit gathering franchise has strengthened this half. we continue to see good momentum in digital deposits. In our up business, digital deposits increased 16% over the half, whilst Bendigo digital deposits grew 14% over the same period. Whilst deposit growth over the half looks modest at 1.1%, deposit mix has continued to improve. We continue to see strong growth in EasySaver accounts, which were up 3.4% on the prior half, and overall savings accounts up 4.3%. Following a dip in third quarter, transaction account balances had a strong fourth quarter, finishing marginally lower than the prior half. We also saw offset accounts reduce almost 2% over the half. Whilst term deposit balances were down 0.6% on the prior half, we did recede our pricing in fourth quarter and recorded 3% growth for the final quarter. The overall picture is that lower cost deposits increased to 54.8% of total deposits, up from 52.5% just 12 months ago. Critically, our household deposit to loan ratio remains strong at 76%, which is 10 percentage points higher than the industry average. Turning now to operating expenses. As previously flagged, second half costs came in lower than first half, down 2.1%. Business as usual costs, which exclude remediation costs, reduced 1.1% over the half, mostly reflecting our ongoing productivity and cost management program. Spot FTE were 0.7% higher than the prior half, reflecting investment in our risk team as we continue our work on lifting risk maturity across the organisation. In respect of financial year 27, we expect business as usual cost growth to be between 5% to 6%. including RACQ. This reflects three factors. First, we expect inflationary pressures to persist and inflation to stay around the fours. Second, as we complete the RACQ transaction, we will bring $8 to $9 million of costs into the organisation in-year, which is in line with previous guidance. And third, we are making further investment in risk capability as we seek to uplift our maturity. we expect expensed investment spend to be flat year on year. And over the medium term we reiterate our cost guidance which is to keep BAU cost which excludes remediation and investment spend contained to no higher than inflation through the cycle. Underpinning that we expect to fully realise the benefit of our strategic partnerships in financial year 28. Moving to credit quality and credit expenses. Our key credit metrics remain sound and we continue to carefully watch trends in the industry and within our book. Through the half, we booked a charge of $16 million, mostly related to an increase to collective provision, reflecting an expected deterioration in the economic environment. Our coverage of total provisions to credit-resuaded assets has increased three basis points on the half and two basis points on the prior year. gross impaired loans have continued to reduce down to now 13 basis points of gross loans. Arrears across the book remain low but are increasing. 90 plus days arrears in residential lending have increased in the low single digit basis points in the last six months to 87 basis points. In agribusiness, arrears have reduced over the half and the dollar value of arrears has reduced. The technical issue that we have previously disclosed around expired facilities has mostly been resolved. Business arrears have continued to improve, now at their lowest level in a number of years. Whilst asset quality remains sound and arrears are at relatively low levels, we do expect bad debts to trend upwards over time. This half, we've included further detail on the composition of our business and agribusiness exposures. In our business book, Excluding Our Portfolio Funding Business, Over 99% of customers have loans of less than $10 million and we have a very small number of large customers. A reads in the portfolio are modest and 95% of the book is secured. In agribusiness the profile is similar. Almost 99% of customers are sub $10 million and again we have very few large customers. 99% of the book is secured. Our funding and liquidity metrics remain strong and well diversified. Our average liquidity coverage ratio for the fourth quarter was strong at 140.2%. The proportion of customer deposits to total funding reduced on the prior half to around 77% following the raising of around $1.8 billion of wholesale funding to fund around $3 billion of asset growth. Our coverage of household deposits to loans at 76% is well above the industry average. Our community bank partnerships importantly provide us with a net $15 billion of funding which provides further diversification and a relatively cheaper funding source than wholesale funding. To illustrate my earlier point on funding pressures, you can see that we have a large volume of term funding maturities to manage through financial year 27. Turning now to capital and dividends. Our CET1 ratio eased 3 basis points to 11.34% over the half and this reflected a few key drivers. Earnings were impacted by lower statutory profits resulting from $59 million of regulatory provisions which we took up as disclosed last week which lowered CET1 by around 15 basis points. We did benefit through the half from some data and modelling enhancements which lifted CET1 by 11 basis points. CET1 was also impacted 18 basis points by the APRA capital overlay reflected through a higher operational risk capital charge which was effective 1 January 2026. Our capital remains well above the board target of above 10%. Directors have determined to pay a final dividend of 33 cents per share which will be fully franked. This represents a 69% payout ratio for the half and on a cents per share basis is flat on the prior comparative period. So in summary, we're in a strong capital position going into financial year 27. Last week we gave you a summary of some notable items into next year, so I wanted to now bring that picture together for you, along with a reminder of the benefits associated with a couple of our strategic programs. For financial year 27, as we disclosed last week, you can expect us to report on three key notable expense items. First is the costs associated with the implementation of our strategic partnerships of $56 to $66 million. This is consistent with the disclosure which we made in early April of total costs of roughly $85 to $95 million. Second is costs related to the migration of RSCQ customers onto our core banking platform of $28 to $34 million. This is consistent with the disclosure which we made in early December 2025. and third is a one-off methodology change to the mechanics of our staff equity scheme of around $16 to $23 million. In aggregate, these costs will total between $100 and $123 million pre-tax. We expect each of these costs to be isolated to financial year 27. As a result, our costs including notables will be elevated and return on equity inclusive of notables will be diluted in financial year 27. to support our progress towards our return on equity target of above 10%. We are on track to deliver the benefits which we previously guided to on both our strategic partnerships and ROCQ, as you can see on the right-hand side of this slide. So there's a lot of information which we've just run through. Let me summarise the total impacts across our key line items in financial year 27, and this includes income, expenses and capital. On BAU expenses, we expect to grow between 4% and 5% on financial year 26, excluding RACQ operating expenses. We expect investment spend to be in the range of $230 to $240 million, inclusive of notables. We expect $120 million of that to be expensed, around $60 million to be capitalised, and $50 to $60 million of notable items related to our strategic partnerships and RACQ. So that means expense to investment spend pre-notables is expected to be flat on financial year 26. For RACQ specifically, on the basis that we complete the transaction during second quarter 27, we expect the following in-year impacts. First, NII of $33 to $37 million. Second, incremental OPEX of $8 to $9 million. Third, a 31 basis points impact to CET1 upon completion reflecting the risk weighted asset carried. And fourth, an uplift to return on equity of 23 to 27 basis points. I'll now hand back to Richard for closing comments.

Thanks Andrew. To recap, our areas of focus for FY27 are clear. embed our risk programs to drive a fundamental shift in risk maturity, continue to grow our deposit base, migrate the RACQ customers, and leverage our strategic partnerships as we build a better bank. We remain committed to our target of an ROE of 10% by 2030, delivering long-term value for our shareholders, supported by the necessary uplift in our risk capabilities as we build a better bank. And finally, let me take the opportunity to thank our people, partners and customers for their continued support over what has at times been a challenging last 12 months. I'll now hand back to Sam to moderate the Q&A.

Thanks Richard. Thank you.

Thank you. Just a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask a question. I'll now hand back to Sam.

Thank you. Our first question comes from Annabel Ross of Barranjari.

Good morning and thank you for taking my question. Hopefully you can hear me okay. So I just wanted to go through the operating expenses guidance that you provided. So in FY26 your operating expenses excluding investment spend landed at $1142 and your guidance for FY27 operating expenses pre-notable and RACQ is to grow between 4% to 5%. If we then add in the RACQ impact of which you're guiding to approximately $8 million, this implies BAU expenses next year should be around $1.2 billion. Next, adding in the investment spend, expense of $120 million. This means cost X notables should land at around $1320. If we then add in notables of $100 to $123 million, this means total expenses should land around $1420 to $1460 in FY27. Is this the correct way of thinking about it? And then just to add to that, in FY28, you talk about the strategic partnerships. which are going to give a 65 to 75 benefit. And is this benefit required to keep the cost growth in 28 to around inflation or are you implying cost will fall further by that number? Thank you.

Annabel, that was about 87 questions in one. So what we might do is just... Andrew or Richard, if you could just hit the top line on that expense guidance, that would probably help you.

Yeah, I'll let you in. So, Annabel, just on your second question first, let me cover that off. So... what we previously said is that our business as usual cost growth ambition over the medium term is no higher than inflation through the cycle. To be clear, the benefit of the partnerships is included in that BAU cost growth of no higher than inflation. And the key reason for that is that there is a large part of our cost base or around 20% of our cost base which is growing faster than inflation and that is licensed cloud monetisation costs. So what those partnership benefits will do is allow us to meet that BAU cost guidance no higher than inflation. That's the first question to cover off. Let me step briefly through then the second part of your question, which is how do we bring all these pieces together? And there is quite a bit of detail we've given, which I'll step through. So you're absolutely right. Our business as usual costs for 26 were 1142. That is absolutely right. We then said add 4% to 5% on top of that. then add the run costs or the operating expenses for ROCQ on top of that again. So that's $8 to $9 million. So that total cost for BAU is around about 5% to 6%. And there are a couple of notable OPEX items. So these are items that will only occur, we believe, in 27 and no further than that. So there's a proportion of the partnership costs which we disclosed. That's somewhere between $34 and $40 million. and then there's the incentive scheme adjustment, which is $16 to $23 million. So that implies then that the overall costs are growing somewhere between 9% and 11%. That's the BAU costs. Then on investment spend, we've said the expensed investment spend we expect to be flat year on year, so around about $120 million. Then there's a proportion of that partnership spend which relates to investment spend. That's between $22 and $26 million. So that means that our overall investment spend OPEX is between $142 million and $146 million. So hopefully that's clear in the way that all those parts come together.

Yes, thank you. Our next question is from Kelsey Bentley of JP Morgan.

Hi, thank you, Sam. Richard and Andrew, I just wanted to ask a question on your outlook for mortgage growth. You talked to wanting to grow a round system just based on competitive tensions, sort of see how that tracks. How does that sort of feed into the information you give on slide 9 where you talk about the average mortgage NIM for new business and we can see a pretty steady trend downwards over the last year. How is this sort of fed into your growth in particularly the fourth quarter of FY26 and how you see things trending in FY27? Thanks.

Yeah, it's a really good question, Kelsey, because I think we're all going to be facing a pretty dynamic year when it comes to the mortgage industry given what has been happening from a government perspective with changes to tax rules, etc. From my perspective, I think we're reasonably well positioned to continue to see some growth going forward, particularly through a couple of channels that I'd like to highlight. First of those is the digital channel which consistently has sort of been that 15% to 20% of mortgage settlements for us and we expect that will continue to see pretty steady growth and with some of the pricing changes we've made recently in a couple of those offerings there, I think that will hold us in good stead. And the other one is we continue to mature the use of the Bendigo lending platform through our retail channel. where we expect we'll continue to see some growth there. We have seen a reduction in application volume from where they were through most of FY26 by about 15% but that has steadied now and we're starting to certainly see some, in the last few weeks maybe, a little bit of more resilience coming back to that market. But it is going to be dynamic this year. So that's why we're not giving any firm guidance on that.

I don't know, Andrew, is there anything you want to add?

Yeah, Kelsey, just picking up your comment on slide nine. Part of the reason why we saw a dip in that NIM to credit-restricted assets, that's the chart on the top right-hand side, is we did see an opportunity through the course of of the half to write some fixed rate business and we felt it was important to build some momentum. It was a little on the thinner side in respect of margin. The returns were still returns we were looking for so that really is the explainer for that dip.

Thank you both. Thanks Kelsey. Our next question is from Sally Hong from Morgan Stanley.

Good morning team. I have a couple of questions. Firstly, you're targeting business and agribusiness growth at system for next year. What do you think system growth is for FY27 and can you comment on the business and agri-competitive landscape?

Yeah, Sally, we're thinking that that's going to be in the order of just above mid-single digits. Again, there's a little bit of a wet finger in the air with this stuff, but probably in the order of of maybe 6% to 7% growth, just based on the resilience we've seen last year and over the last few months. We actually are pretty comfortable with the offerings that we've got, that we can continue to see some solid growth coming through our business there. We clearly have some strength in the agri space. There was some concerns earlier this calendar year on the back of what happened in the Middle East that this was going to be a really challenging year for farmers around the country with fuel prices and fertiliser prices but on the back of what has been a pretty good year in many parts of the country from a climate perspective it looks like there will be another probably solid year from a yield perspective So as we're looking forward, we think there are a number of areas that we can continue to drive that growth. Sure, things are competitive. There's always competitiveness out there in the market, although we're finding plenty of opportunity based on our relationship-based banking to find customers that are interested in joining us.

Thanks Richard and just a second question on the margin. So the June quarter margin was around 2% but you're flagging mortgage competition and term deposit repricing as headwinds with some benefit from the replicating portfolio to come through. Should we expect the first half 27 margin to be below this June quarter margin and can you give us a sense of what those magnitude of those competing impacts would be?

I do not know. Sally, we don't normally give too much guidance on margin other than talk about the headwinds and the tailwinds. And as we said last week, we think there are definitely headwinds. And those headwinds you've just laid out, which are competition, which we're all seeing on a day-to-day basis on both sides of the balance sheet. And in respect to funding costs, we can definitely see headwinds there. And so we have a wholesale funding task ahead of us through the course of 27. We've put some wholesale funding funding onto the balance sheet in the third quarter. So there's some headwinds there. And in addition to that, part of what drove our margin outcome in the half and to an extent in the final quarter was our approach in respect of term deposit pricing. And of course, as those term deposits further reprice when that book turns, there will be a headwind there. On the positive side, on the tailwind side, we can certainly see that in our replicating portfolio, particularly on the deposit side, the gap between front book tractors and back tractors is still quite wide and so that will give us a benefit assuming that five-year swap kind of stays about where it is. And then we do think there's still a possibility of a cash rate rise. I think the market this morning is still implying somewhere between 60% and 65% by the time we get to the end of the calendar and as you all know what we have typically talked about in respect of our leverage to rates is roughly, roughly two basis points for every 25 in cash rate. can't give you any more specifics on that other than give you all of the various considerations.

Thanks so much Andrew. Thanks Sally. Our next question comes from Andrew Lyons from Jefferies.

Thanks and good morning. Just a question on investment and the progression out to your 2030 targets. Your investment slate, you're now carrying a number of items that you describe as notables and there's also the 70 to 90 million that will come through over the next two years for AML. Now you obviously speak to value cost growth of sub-inflation but just thinking about the impact of investment spend on that cost trajectory out to 2030, as some of these sort of programs, notable programs fall away, how should we be thinking about investment spend? Should we see it decline or will you be basically reinvesting in the broader franchises as those programs come to an end?

It's a really good question Andrew. It's one we ponder a little ourselves so I can't give you a definitive answer. It's one of those things that we're going to need to turn our mind to over the next year or so. As you point out, some of those programs naturally start to wind down. This year obviously there's a fair bit of work going into setting up those new partnerships and the RACQ migration that'll be finishing up but at the same time we'll be ramping up the work we're doing on the risk front both the AML CDF piece but also the work we're going to need to do on the non-financial risk in the non-financial risk area It is really going to be dependent on what is happening in the market and what are the investments we need to make to remain competitive and relevant going forward. I'd love us to be able to be in a position where we can see some reduction in that investment spend between now and 2030 but I'm not going to sit here and make that sort of commitment because things are changing so quickly in the technology space in particular that I'm not sure how that's going to play. The whole AI area is really interesting because you can mount an argument that that's going to drive so much productivity from a development perspective that you should be able to do more for less but at the same time I'm not sure what sort of developments we're going to need to implement within our organisation to keep up with the industry and our customers' expectations importantly.

Just one other point, Andrew, sorry, just before you go to your next question. The rectification claim that Richard mentioned, we did provide for in our 26 results, so that's not part of our investment spend. That's already been put on the balance sheet and we will draw that. So I just want to make sure that's clear.

That is clear, thank you. And maybe just, thanks for those comments, Richard and Andrew. Andrew, one for you. And again, it's similar to the previous question, maybe a bit of an extension, just around the replicating portfolio and assume sort of swap rates remain where they are at the moment and that's purely an assumption but how long would you estimate if that was the case that you'd have an ongoing tailwind from your replicating portfolio if you were to make that assumption?

So there's a couple of big ifs in that Andrew so if swap stayed where it is now there's probably another I would say 12 to 18 months of benefit ahead of us and that's really a function of where those back tractors sit right now relative to where we're printing front tractors. Appreciate it. Thank you.

Our next question is from Ed Henning at CLSA.

Thanks for taking my questions. Just a couple of follow-ups. Just firstly on the margin, Andrew talked about you put in some more wholesale funding and there's some more to do and you increased your TD prices in the fourth quarter where you've got to benefit through the half. Can you just talk about your margin? Obviously, you printed two in the fourth quarter. Is the exit from that down a little bit given CD pricing up, wholesale funding coming through and then to think about then going forward with the headwinds of competition and that was the first question.

So Ed, we're not disclosing what the exit name actually was. What I can tell you is that the term deposit book doesn't reprice straight away. So there's new business that comes through, there's roles, so there's a progressive reprice that will happen in the term deposit book. It then depends on what tenants' customers choose. So if we've got customers that are on a 12-month rate and they were on that rate nine months ago, then clearly there's going to be an impact as those term deposits roll. Similarly with wholesale, that's a part impact that will have come through in the fourth quarter and then that more full impact will play out into next year. What I will say, just in the interest of balance, is that we do have a pretty substantial maturity profile into next year which we're going to be refinancing I would hope that we do better in respect of spread so where those deals were printing 3, 4, 5 years ago depending on the tenor our spreads would have been basis points wider than where we've been able to write wholesale business recently so whilst the volume of wholesale funding will certainly increase I'd hope to see some better spread as we print in whichever form of execution we choose

Okay, that's helpful, thank you. And then just a second question thinking about kind of cost and revenue growth going forward and you're talking about some margin headwinds, you've got HomeSafe rolling off a little bit and you've got substantial investment going through your P&L just on regulatory and compliance. If we do get an environment where the revenue growth starts to fall for the system, how much discretionary spend do you have that you're able to pull back on spending or how should we think about that with you? Obviously, the regulatory spend has got to come through.

Yeah, thanks Ed. From my perspective, that's the reason we're doing things like these strategic partnerships, to give us more flexibility there. And they are, by their nature, costs that we can flex depending on the resources we're requiring from those areas. So if we think about things like operations, that there's less volume going through we require less support in processing areas and the like and likewise with the relationship with Infosys we can make some decisions to flex up and down. Now that's generally though around the edges. The reality is there's significant fixed costs in running a bank but look we're always conscious of the revenue environment and in how we then look to manage our our cost base to try and make sure that we can continue to generate strong returns and over time improving returns for our shareholders. Okay, thank you.

Thanks, Ed. Our next question is from John Story at UBS.

Thanks very much. Good morning, Stephen. Hopefully you can hear me. I just wanted to kind of to the question just around the deposit benefits that you saw. I'd be quite interested to just get a high-level understanding of your strategy in terms of how you think about deposit pricing, particularly on your savings product and just the elasticity of your rates, I guess, and how high it's potentially if you kind of think about potentially moving to other banks relative to your rates relative to the peers would be helpful.

Yeah, thanks, John. We get this question a lot, and I assume in particular you're probably talking about the EasySaver product, which from a savings product perspective, it provides a solid return for customers, but there are higher returns available elsewhere. We recognise that. But it is interesting. We continue to get strong growth in that product over the last 12 months, north of 10%. We think that reflects the more general attraction of our offering to customers. It's not just around the product. It's around having access to over 400 branches if they want to come in and speak to someone face to face, which obviously for many of those banks that offer higher rates, that's not possible. It's for customers who actually like what we do in the community, over $50 million in the last 12 months going back into community contributions. often those contributions are supporting things that are meaningful to those customers around the country and their local communities. So I think the last one I'd probably point out is the reflection then in our net promoter score. Being more than 20 points, percentage points above the average of the industry isn't by accident. So customers that continue to be attracted to banking with us, they're satisfied with with the returns they're getting from the products we're offering on the deposit side. If they're looking for a higher return, there are other options that we offer as well, but we do know that the EasySaver product with the functionality it provides along with a solid return, it continues to attract people to putting their funds there. So right now with the flows we're getting, we're comfortable with where we've got that position.

What percentage of investors actually take up their dividend in Scripps?

I'm discounted, John. It's typically around 12 to 13%.

Okay, fantastic. Thank you.

Our next question is from Tom Strong at Citi.

Good morning and thanks for taking my questions. Perhaps a question for you Andrew to start with just on the NIM. On the waterfall you can see six basis points from deposits and you've called out term deposits for also six. I mean you should have got a benefit on the unhedged deposits from the cash rate rises. It would have been about probably two to three bits from those. Can you just sort of talk to the other things that might have netted off in that deposit pile?

Thanks Tom for the question. So the deposit and funding pricing block of six basis points is all term deposits. We capture all the replicating portfolio benefit inside that replicating portfolio column so that includes both unhedged and hedged deposits and remember that it's 80% that are hedged and only 20% unhedged so that's how we pick it up. What I will also point out again in the interest of balance is Revenue Share which someone will know that ask about so we'll go there now. So of that three basis points impact of Revenue Share about two of that three is term deposits and so whilst as you all know the Revenue Share somewhat acts as a limiter when our margins is expanding and vice versa and so what we've seen with that pickup of term deposit margins through the course of the half about two of the six has played out in Revenue Share just to make that clear.

Great. Thanks for clarifying that. And just a question on the RACQ book. You sort of make reference to the 30 June 2025 numbers, but if we look at the December balances first today, it looks like the lending and deposit balances are down sort of 2% to 3%. Can you just talk about how that looks performing and how you can sort of arrest that decline under new ownership?

Tom, in respect of RACQ, we're not giving an update on their 30 June numbers because they are yet to release those publicly. Looking forward, we're very keen to see if we can continue to grow that book. We're bringing over nearly about 20 lenders who currently support the lending book with RACQ. and also those RACQ members will have access to our very large branch network in Queensland. I can't remember off the top of my head, but I think it's about 90 branches across Queensland where they can do their banking going forward. So we are gonna have a referral agreement in place with RACQ going forward. So we'd hope we can continue to attract more customers from their very large member base in Queensland going forward.

Great. Thanks Richard.

Our next question comes from Carlos Catcher from Macquarie.

Thanks Sam. I just had a quick first question just around the partnership work. I know it's still early, but it'd be great to kind of hear, you know, how that's progressing versus your expectations and if there's any kind of key learnings or insights as you've worked through that work with Infosys and Genpax so far.

Yeah, thanks, Carlos. Look, things are very much on track. We're very pleased with the way the partnerships are performing early days. The Infosys work is further progressed and as part of that we've had a significant number of ex-Bendigo members of our team transferred to Infosys as part of that arrangement and things are starting to get better down there with Infosys picking up a range of existing services to provide back to the bank on our behalf. Gempact, that work is not as far advanced, but we're certainly in the process of, we'll progress with the blueprinting of all the processes that are planned to move across to Gempact. And one of the learnings from that, through that process, that has really helped as we've worked with Gempact to map our existing processes and to be able to leverage their experience where they see opportunities from the work they do with other banks around the world to provide support and advice to us on how we may want to look at doing things differently or more efficiently going forward. So from my perspective, it's certainly really quite exciting the way things are progressing and I'll be heading across to visit those operations in October along with a number of others. within the organisation to see firsthand how things are progressing. But as we sit here today, certainly we're really pleased, recognising it's still early days.

Great. And then a second question maybe for you, Andrew, just around the non-interest income. You called out ex-home safe. That was driven by better wealth management and cards income. How sustainable is that? Should we kind of think of that as a new base going forward or are there any one-offs that allow for the roll-off of FY27?

Yeah, I'll deal with the two. Thanks, Carlos. I'll deal with the two separately. So the wealth business is absolutely sustainable and so what we've seen through the course of both the half and full year is strong growth in funds under management and some improvement in margin as well. And so it's a good set of products. Our customers like them. they're very straightforward products so our people provide general advice in respect of the sales of those so that is a good business there and we expect that business to hopefully continue. On cards there is a little bit of a one-off so we extended our partnership with Mastercard through the course of the year and so there was a little bit of a one-off benefit which will mostly recur but not fully recur in 2027 but that's $3-4 million it's not a big number in the scheme of things.

Great, thank you. Thanks Carlos. Our next question is from Brendan Spriles from Goldman Sachs.

Good morning team. I have a couple of questions. Firstly just Andrew in relation to your comment during the presentation around inflation, you kind of flagged 4%. Could you maybe distinguish between I guess staff wage inflation versus say tech inflation? and other cost inflation that you're expecting in 27.

Yeah, thanks Brendan. So just to reiterate the way we've been talking about our cost base the last few times we've spoken to you. So if you think about it like this, we've got roughly 60% of our costs today that are staff related costs. And as you've seen through both our half and our full year results, we have managed that cost base to below inflation and that's largely because of the first wave of productivity work that we've been doing. Clearly that part of the cost base will be impacted by any wage inflation. At the same time, the strategic partner benefits will come through that line as well. The second group of costs, which is around about 17, 18% of our cost base, is licensed cloud and amortizations costs. So software licenses, cloud costs and amortization costs. This part of our cost base is growing at a multiple of inflation. And it'd be no surprise to you or anyone on this call that we continue to see when we utilise the services of global tech companies that the cost of such services have been increasing in the double digits. The third part of our cost base is then what we would describe as property and external services and whilst those costs over the course of the year have grown around about inflation, we're actually quite bullish on these going forward because we've continued to do a lot of work in respect of our corporate property footprint. So we think over time we can grow those costs below inflation, and then the final part of our cost, which is a very small amount, is what we describe as non-lending losses. And so 60% of our cost, going back to your point, we expect to see grow below inflation, and that's staff costs. We expect another 20% of our cost, which is property and external services, to be able to grow a little below inflation as well. Where the partnerships are really helping us to stand in front of a cost group that is growing faster than inflation is those licensed cloud and amortization costs. That's why, again, we come back to that overall guidance of our cost base of growing no higher than inflation through the cycle. So I hope that answers the question, Brendan.

Oh, that's great, Andrew. Really appreciate it. And my second question is just on the performance of the business and agri-business division on slide 46. I mean, you've shown lending balances are growing, you know, above system 12.6%. also driven by the portfolio funding business which you show in the slide is a higher NIM to credit risk weight assets. When I look into 27, how do I balance out that with sort of falling customer balances, falling other income, particularly FX, higher expenses and you've seen quite a fall in profit I guess over the year. Do we expect those similar trends to continue into 27 outside of lending?

So a couple of things, Brennan, on that. I'll start and Richard might want to jump in as well. So we remain pretty bullish about business and agri. So we talked about strong growth in agri. We recognise that there's seasonal growth that happens typically in the second half and then runs down in the first half. We have continued to expand our different channel offers through business lending and you've already rightly pointed that out. One of those is portfolio funding which is a a really good business. It's a business that has been growing and it offers, depending on the variety, either both near-end credit-resuaded asset benefit and or just credit-resuaded asset benefit. And so we continue to be pretty optimistic there. We've increased our presence in broker markets, not substantially, but nonetheless that's a benefit there. Where we've got more work to do, and it's part of our investments leading to next year, is in onboarding and digital onboarding. And so we very successfully through the consumer bank rolled out digital onboarding this year and we've seen good signs of success there early on. The next piece of the strategy that we need to tackle is digital deposit gathering for our business and agri customers and so that's certainly part of that investment slate we talked about earlier. We know we've got work to do there and so getting that part of our business really humming again will certainly help to underpin I would hope better stability in margin.

But Richard, you might want to... Yeah, look, on that slide, John, I think the... Sorry, Brendan. I think the key point there is if you look at the growth in assets, yeah, that's positive and it tends to be every second half stronger because we get the agri flows with the seasonal lending there. But the liabilities has been pretty much flat over four halves. that's where we're looking to drive that growth which will then help the margin and so that's the key for us arresting that decline in margin from a divisional perspective is starting to get the liability flow growing there and the reality is we have fallen behind when it comes to digital capability in the B&A space for deposit gathering and so that's a key focus for our digital team this financial year.

Thank you.

Thanks Brendan. Our next question is from Brian Johnson at MST.

Hi, two questions if I may. If we have a look at slide 42, we can see that the average flow of a new home loan being done is about $480,000 which is really low compared to the overall stats. What we can also see is that you seem to be over indexed towards investment property could you then, and when we think about that it would appear that even the life of the digital home loans would appear to be shorter than through the branch. Can we just get a feeling as to whether those three observations are right and why that may be? So low average home loan drawdown, and another question after this, is shorter life than the over index towards investment?

Yeah, thanks Brian. We historically had a lower average mortgage value than the market which also reflects our strength in regional Australia. The reality is if you're buying a property in regional Australia where many of our branches are, the price of those properties and therefore the amount you need to borrow tends to be significantly less than if you're focused more around Sydney and Melbourne. historically been a key element of lower average value. As far as the investment flow, yeah, it's been 27% in the most recent half, but it's not massively different to the portfolio, which has been at 23%, 24% over the last three halves. Yes, we have chosen to be a little bit more competitive from a pricing perspective, in investor. The reason we've done that is because we know that we can generate an appropriate return there because even being slightly sharper on rate there, it's still a rate that's above the owner occupied rate. So we saw an opportunity there in the market to position ourselves to take a little bit of market share through that investment space. certainly at 27% versus a portfolio at 24%. I don't feel like we're skewing the business in any significant way. On the weighted average life, I must admit I haven't turned my mind to that. The reality is I think with I suspect one of the drivers of that may be the fact that we shut down one of our third party channels about 12 months ago and we've seen increased turnover in that back book there as a lot of those customers through that channel have refinanced elsewhere. And so I suspect that will be impacting that weighted average life as that portfolio continues to reduce in absolute size. the amount of attrition there on a month-to-month basis continues to reduce. But it might be one that, unless, Andrew, you've turned your mind to it, we might have taken one on notice.

On the digital point, Brian, narrowly, it's probably still too early days to really get a sense as to the average life of the digital loan. We certainly know those numbers for broker-introduced customers and also through our proprietary network. And no surprise for a proprietary loan, it's typically around five to six years' average life. depending on the number of products the customer takes. And it's typically somewhere between three to four, maybe three to four and a half for third party. But it's still a little early in our digital through the various channels like up to get a good sense as to how sticky or otherwise the life of those loans are. But Richard's point on the mortgage partner channel is right.

Okay. And now the second question, Richard, and I apologise, I'm not sure whether this is a question for you or the chair or the head of the risk committee. but it is quite disappointing to actually go through another presentation and still we haven't had it clearly enunciated whatever the Austrac problem basically is, where the staff are involved, etc. But that said, right now if we have a look at the stock, as far as I can work out, net book value is $11.67. So you're trading global value. Common Sense says issuing shares at a discount to net book value is net book value dilutive and when we have a look this time around, you're issuing DRP shares, that's on slide 22, but then when I actually have a look at slide 23, I can see the employee bonus equity plan, there's this one-off adjustment where you're moving from 100% shares as I recall to 50% cash. I'd just really like to understand what is the logic when you're trading below book value asking shareholders issuing new shares under the DRP but giving the staff basically 50% of the bonuses through cash in an environment where there has been this recurring governance issue which shareholders are yet to pay for when we find out what the AUSTRAC fine is. Do you have some comments?

yeah Brian there's a few elements in there the first thing I will say is and there was some information in the press over the last last week these matters are still being dealt with by law enforcement and as such I just can't comment around any details around the specific issues that that led to the AML issue coming to light last calendar year. Now, unfortunately, that's going to remain that way until the police announce any action that they do or don't want to take in relation to that. We're certainly conscious of the fact that we're operating at a discounted net book value for a number of halves there. We were not adding to our share count and doing that quite deliberately. The reality as we sit here today, as I think you're aware, we do not know yet what will come of the investigation from AUSTRAC and that may lead to some form of penalty. We just don't know. We continue to collaborate with AUSTRAC through that process but we don't know when we'll find out and what impact that will be. So during...

Sorry, Richard, can I just interrupt you there? So the $120 million DRC underwrite we did last time around, which I think has been more or less linked to the Austrac risk... What you're saying today is this DRP issuance is the uncertainty around the same issue which is implying the findings are greater than that?

No, you're not doing a great job putting words in my mouth. Yeah, I know you are. The reality is in an environment like this where there is uncertainty going forward, we feel it is an appropriate thing for us to be conservative in relation to our capital position. We have just set aside about $70 million at the end of 2026 for some further work we need to do on the risk front and that has had an impact on our capital position at 30 June. We are making sure we are conservatively positioned until we have greater certainty around this issue in particular. I certainly don't have any view and will not be making any prediction about any potential penalty if one is applied and to what value that will be. And I wouldn't read into the excess capital position we're holding today as any form of indication of what we're expecting on that front. Yeah, and that is more driven by making sure we've got a competitive offer for the majority of our people that we look to attract and retain to this organisation. We want them to be shareholders, hence 50% of their bonus plan. It will remain in equity, but the reality for a lot of those people, they do really appreciate getting part of their bonuses in cash as well rather than 100% equity. So that's the decision that was made by the organisation which has a one-off impact with a timing impact effectively bringing forward that cash element rather than being deferred by 12 months. That's the impact that is called out in the PAC.

Thanks Richard, I appreciate it.

No worries.

Thanks Brian. We're going to our final question from Christian Mazza at Jarden.

Good morning team. Just one quick last question. Referring to slide 20 in the presentation, you mentioned there is 11.4% of your business portfolio exposures greater than $50 million. Is there any exposures that exceed $100 million and if so, what are they secured by?

We will come back and we'll confirm after. Let's get the data for you. We'll happily share that data. That's fine.

Yeah. From memory, Christian, I think there might be in the order of less than five. But again, let us come back with the security information on those through a one-on-one discussion. But it's... certainly for a bank of our size, anything with an exposure north of $50 million, we make sure that there is very strong collateral in place and we manage those very carefully.

Thanks very much. Thank you very much everyone for joining us and we'll talk to you all this afternoon.