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.