Bendigo & Adelaide Bank (ASX:BEN)

Marnie Baker
Market Cap (AUD): 3.59B
Sector: Financials
Last Trade (AUD): 6.62 -0.15 (-2.22%)
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1. About

Bendigo and Adelaide Bank are Australia's fifth largest retail bank, with more than 7,200 staff helping its 1.6 million customers to achieve their financial goals. These businesses and more than 80 other organisations have come together to become the Bendigo and Adelaide Bank Group, an Australian owned, top 60 ASX listed company, with more than 99,000 shareholders.

Bendigo & Adelaide Bank Limited provides retail and wholesale banking, as well as other financial products and services in Australia. The Bank is headquartered Bendigo, Victoria. Bendigo & Adelaide Bank is listed on the Australian Securities Exchange under the code, BEN.

Bendigo & Adelaide Bank Limited provides a wide range of banking and other financial services via a network of brands, including:

  • Adelaide Bank - a wholesale banking business providing home loans via the mortgage broker and mortgage manager market.
  • Bendigo Bank - specialised in retail banking that provides banking and wealth management services to small to medium businesses and individuals.
  • Bendigo Wealth - a wealth management division with expertise in banking, investment and lending.
  • Community Telco Australia – provides regional telecommunication services such as mobile phones, fixed telephones and internet solutions.
  • Delphi Bank - boutique financial services provider that offers a variety of banking services to individuals.
  • Leveraged Equities - specialises in private banking account management service.
  • Rural Bank - provides banking services targeted to the farming sector.
  • Rural Finance – provides specialist lending services to agricultural businesses.
  • Sandhurst Trustees - provides managed funds, cash management accounts, common funds and wills, superannuation and estate management.
  • Alliance Bank - provides banking services.

2. Business model


The Company operates the following divisions:[1]



Revenue ($M)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

Local Connection




  • The cash earnings contribution from its largest business segment, Local Connection, increased from $200.7 M to $213.5 M
  • The improvement was mainly driven by an increase in net interest income of $57.5 M. This reflects the growth in residential loans of just over $900 M and active margin management
  • The result included an increase in operating expenses of $13.5 M. This was mainly due to wage and salary increases totalling $8.3 M and higher allocated costs of $5.8 M
  • The result was also impacted by a $16.9 M increase in credit expenses, which was mainly due to a provision on a single exposure in the commercial lending portfolio

Partner Connection




  • The cash earnings contribution from the Partner Connection division increased from $133.8 M to $163.0 M. The improvement was mainly due to a 21.8 percent increase in net interest income of $35.8 M
  • The result included an increase in operating expenses of $12.8 M which was mainly due to litigation costs and higher allocated costs
  • The Wealth business increased its contribution for the year. The Bendigo Smart Start Super product grew strongly again this year and now represents in excess of $1.2 B in funds under administration





  • The cash earnings contribution from its Agribusiness segment decreased marginally from $69.7 M to $68.8 M for the year. This was achieved in a market dominated by high levels of pricing competition

Central Functions





3. Strategy


Key strategies include:[3]


The Company aims to be Australia’s most customer-connected bank.

  • At Bendigo and Adelaide Bank, it focuses on building and improving the prospects of its customers, communities and partners in order to develop sustainable earnings and growth for its business
  • The bank’s motivation is to help its customers and partners succeed and its communities and districts to flourish, thereby ensuring its business and its shareholders share in their success
  • To achieve this the Company commit to exceed its customers expectations, delivering quality customer service on each and every occasion
  • Its priority is the customer – and figuring out what they are trying to achieve. The Company offer products relevant to its respective customers’ lifestyle and business needs and provide convenient access to its services
  • The Bank creates trust by always acting in an ethical manner and the Bank delivers value to its customers, shareholders and the community by ensuring equity and fairness in its pricing.
  • The Bank is proud to be a regional and community-focussed bank, dedicated to building long-term relationships with its customers, shareholders and the communities it serves
  • The Bank lead and empower its staff to make a difference and contribute to the communities in which it operates
  • The Bank apply its skills in finance to develop the best options for success, firmly believing that successful customers will create a more successful bank

4. Markets


The Bank operates in markets including:[4]


Industry (Australia)

Industry Revenue (2018)

  Growth rate

National and Regional Commercial Banks

$146 billion

(1.7%) (annual 13-18)

Custody, Trustee and Stock Exchange Services

$15 billion

1.6% (annual 14-19)

Financial Planning and Investment Advice

$5 billion

0.3% (annual 13-18)

5. Competition


Major competitors include:[5]


  • Suncorp Group Ltd (ASX: SUN)
  • Australia and New Zealand Banking Group (ASX: ANZ)
  • Bank of Queensland Limited (ASX: BOQ)
  • National Australia Bank Ltd. (ASX: NAB)

6. History



First Australian financial institution to launch Visa Debit Card



First Australian financial institution to launch Visa Credit Card



Introduced Mortgage Help Centre, assisting customer through period of high-interest rates

Launched Australia’s first mortgage offset account



Launched Inspirations, a portal for employee to share ideas to improve the Bank’s policies, practices and products



Established Community Bank model



Established Lead on Australia to the development and engage young Australian

Established Community Telco, allowing customer to invest in community initiatives

Launched Ethical Investment fund, Australia first ethical bank deposit

Launched Australia’s first regional development Fund to attract superannuation back to regional investments



First Australian bank to provide an online portal to improve access to third-party financial products



Launched community sector banking supporting not-for-profit community venture

Introduce Australia first Green loan products



Launched Homesafe solutions, the only product of its kind available

Established Community Enterprise Foundation



Opened the Bendigo Centre, the first building in regional Australia to receive a 5-star Green rating



Bendigo and Adelaide bank recognised with inclusion in BRW’s most Innovative companies list

Launched GoPos Lite

Launched Alliance Bank partnership with mutual companies

Adelaide’s new office opened with a 5-star green rating and introduced activity-based working



Introduced IGNITE, an event where its people share their innovation ideas

Launched miVoice



Launched Deakin University Community Bank

Acquired portion of Keystart portfolio from WA government

Rural Bank launched first Farm Management Deposit (FMD) offset



Launched Socially Responsible Growth Fund

Entered partnership with Tic:Toc, Tic:Toc allows consumers to receive loan approvals in just 22 minutes



Welcomes Nova Credit Union to Alliance Bank partnership

Approved as a panel Financier in HomesVic Scheme, a Vic. Government concept to aid first home buyers

First bank to provide all together: Apple Pay, Samsung Pay, Google Pay, Fitbit Pay, Gramin Pay, OSKO and PayID

7. Team


Board of Directors[7]


Robert Johanson – Chairman, Independent Director

Marnie Baker – Managing Director

Jan Harris – Independent Director

Jim Hazel – Independent Director

Jacqueline Hey – Independent Director

Robert Hubbard – Independent Director

David Matthews – Independent Director

Deborah Radford – Independent Director[8]

Tony Robinson – Independent Director

Vicki Carter – Independent Director


Management Team


Marnie Baker – Managing Director

Taso Corolis – Chief Risk Officer

Travis Crouch – Chief Financial Officer

Richard Fennell – Executive, Consumer  

Alexandra Gartmann – Executive, Agribusiness

Robert Musgrove – Executive, Corporate and Public Affairs

Bruce Speirs – Executive, Business

Stella Thredgold – Executive, Technology and Business Enablement

Andrew Twaits – Executive, Customer and Partner Engagement

read more

8. Financials


2018 Full Year Results Presentation


Financial year 2017/18 (ended 30 June):[9]



Revenue ($M)

% % Change

Profit (before Tax) ($M)

  % Change

Local Connection





Partner Connection










Central Functions










9. Risk


Major risks include:[10]


Business risks

There are a number of business risks that the Company manage including credit risk, market risk, liquidity risk and operational risk. To manage these risks the Company have established a framework of systems, policies, standards and procedures which are overseen by the Board Risk Committee and Board Credit Committee, with support from senior management committees and its independent risk management functions.


Credit risk

Credit risk is the risk of loss of principal and/or interest resulting from a borrower failing to meet a scheduled repayment or otherwise failing to repay a loan. The majority of its credit risk exposure arises from general lending activities and the funding, trading and risk management activities of Group Treasury.


Market risk

Market risk comprises Traded Market Risk and Non-Traded Market Risk (Interest Rate Risk in the Banking Book (IRRBB)).

IRRBB is the risk of loss in earnings or in the economic value in the banking book as a consequence of movements in interest rates. Non-traded market risk arises predominantly from the Group’s general lending activities as well as balance sheet funding activities.

Traded Market Risk is defined as the risk of loss owing to changes in the general level of market prices or interest rates from trading positions in interest rates, equities, foreign exchange, and commodities. It arises from positions held in the Trading Book which consists of securities held for both trading and liquidity purposes.


Liquidity risk

Liquidity risk is defined as the inability to access funds, both anticipated and unforeseen, which may lead to the Group being unable to meet its obligations in an orderly manner as they arise or forgoing investment opportunities. Liquidity Risk is inherent in all banking operations due to the timing mismatch between cash inflows and cash outflows.


Operational risk

Operational risk is defined as the risk of an adverse impact on its objectives or the risk of loss resulting from inadequate or failed internal processes, activities, and systems or from external events. Operational risk can directly impact its reputation and result in financial losses which could adversely affect its financial performance and/or financial condition.


Strategic risk

There is a risk that adverse business decisions, ineffective or inappropriate business plans or a failure to respond to changes in the operating environment will impact its ability to deliver its strategy and business objectives. The Bank also regularly examines new initiatives and market opportunities, including acquisitions and disposals, with a view to growing shareholder value.


Compliance risk

The Group’s operations are highly regulated. A failure to comply with the laws, regulations, licence conditions, codes, principles and industry standards applicable to its operations could result in a range of actions against the Group including sanctions being imposed by regulatory authorities, the exercise of discretionary powers by regulatory authorities or compensatory action by affected persons.


Fraud risk

The Group is exposed to the risk of fraud, both internal and external. Financial crime is an inherent risk within financial services, given the ability for employees and external parties to obtain advantage for themselves or others. An inherent risk also exists due to systems and internal controls failing to prevent or detect all instances of fraud. The Company has established robust techniques and capabilities to detect and prevent fraud. All actual or alleged fraud is investigated under the authority of its financial crimes unit.


Risk of disruption of information technology systems or failure to successfully implement new technology

Most of its daily operations are highly dependent on information technology and there is a risk that these systems or technologies might fail or not be available. The exposure to systems risks includes the complete or partial failure of information technology or data centre infrastructure and using internal or third-party information technology systems that do not adequately support the requirements of the business.


Data and Information security risk

The risk of security breaches, external attacks and unauthorised access to its systems continues to increase with the growing sophistication of fraud and other criminal activities. The Company is conscious that threats to information security are continuously evolving due to the increasing use of the internet and other digital devices to communicate data and conduct financial transactions.


Vendor failure or non-performance risk

The Group sources a number of key services from external suppliers and service providers. The failure of a key service provider, or the inability of a key service provider to meet their contractual obligations, including key service standards, could disrupt its operations and ability to comply with regulatory requirements.


Conduct risk

The business is exposed to risks relating to product flaws, processing errors and mis-selling. These risks can arise from product design or disclosure flaws or errors in transaction processing. It can also include mis-selling of products to its customers in a manner that is not aligned to the customer’s risk appetite, needs or objectives.


Litigation risk

From time to time, the Group may be subject to material litigation, regulatory actions, legal or arbitration proceedings and other contingent liabilities which, if they crystallise, may adversely affect the Group’s results. There is a risk that these contingent liabilities may be larger than anticipated or that additional litigation or other contingent liabilities may arise.


Partner risk

The Company has Community Bank® branches operating in all States and Territories, along with its Alliance Bank network. The branches are operated by companies that have entered into franchise and management agreements with the Bank to manage and operate a Community Bank® or Alliance Bank branch. The Company carefully assess and monitor the progress of the franchisees but there can be no guarantee of the success of a Community Bank® or Alliance Bank branch. Whilst this network continues to mature, there are still risks that may develop over time. Additional risks associated with the organisations activities, which are assessed as part of the internal capital adequacy assessment process, include the following:

Reputation risk

Reputation risk is defined as the risk of potential loss to the Group due to damage to the Group’s reputation. Reputation risk may arise as a result of an external event, its own actions or the actions of a partner, and adversely affect perceptions about us held by the public including customers, shareholders, investors, regulators or rating agencies


Contagion risk

The Group includes a number of subsidiaries that are trading entities and holders of Australian Financial Services Licences and/or Australian Credit Licences. Dealings and exposures between the Bank and its subsidiaries principally arise from the provision of administrative, corporate, distribution and general banking services. The majority of subsidiary resourcing and infrastructure is provided by the Bank’s centralised back office functions. Other dealings arise from the provision of funding and equity contributions.


Financial Risk


Credit risk

Credit risk is a risk of the Group suffering a financial loss if any of its customers or counterparties fail to fulfill their contractual obligations. The Group is predominantly exposed to credit risk as a result of its lending activities as well as counterparty exposures arising from the funding activities of Group Treasury and the use of derivative contracts. The table below presents the maximum exposure to credit risk arising from balance sheet and off-balance sheet financial instruments. The exposure is shown gross before taking into account any master netting, collateral agreements or other credit enhancements.


Liquidity risk

Liquidity risk is defined as the risk that the Group is unable to meet its payment obligations as they fall due. The principal objectives are to ensure that all cash flow commitments are met in a timely manner and prudential requirements are satisfied. In accordance with APS210, APRA Prudential Standard the Group needs to maintain a ratio of High-Quality Liquid Assets (HQLA) to cover defined projected cash outflows over a 30 day period, using the scenario based Liquidity Coverage Ratio (LCR). The Group continues to manage the liquidity holdings in line with the Board approved funding strategy and funding plan, ensuring adequate levels of HQLA, other liquid assets and diversified sources of funding. In meeting its liquidity requirement the Group makes use of the Reserve Bank of Australia provided Committed Liquidity Facility. The Group also maintains a significant amount of contingent liquidity in the form of internal securitisation whereby the collateral can be presented to the Reserve Bank of Australia for cash in extraordinary circumstances such as systemic liquidity issues. Liquidity risk is managed in line with the Board approved Risk Appetite, Framework, and Policy. The framework incorporates limits, monitoring and escalation processes to ensure sufficient liquidity is maintained. The Group has established a set of early warning indicators to support the liquidity risk management process, in particular, to alert management of emerging or increased risk or vulnerability in its liquidity position. The liquidity risk management framework is also supported by liquidity standards and policies which are regularly reviewed and updated to reflect prevailing market conditions, changes in operational requirements and regulatory obligations.


Market risk (including interest rate and currency risk)

Market risk is the risk that changes in market rates and prices including interest rates, foreign currency exchange rates, and equity prices which will affect the Group’s financial performance and financial position. Market risk is referred to as either traded or non-traded risk. Traded market risk primarily represents interest rate risk in the trading book which operates as an integral part of the liquidity risk management function. The trading book portfolio consists of securities held for trading and liquidity purposes. This risk is represented by the potential adverse impact to net interest income (NII) and other income resulting from positions held in traded interest rate securities such as government bonds and traded interest rate swaps. Non-traded market risk primarily represents interest rate risk in the banking book (IRRBB). This risk is represented by the potential adverse impact on NII resulting from a mismatch between the maturity and repricing dates of its assets and liabilities that arises in the normal course of its business activities. The banking book activities that give rise to market risk include general lending activities, balance sheet funding, and capital management. The Group currently uses both a static and dynamic approach to model the effect of interest rate movements on NII and market value of equity (MVE). The primary interest rate monitoring tools used are simulation models and gap analysis. The interest rate simulation model is a dynamic technique that allows the performance of risk management strategies to be tested under a variety of rate environments over a range of timeframes extending out to five years. The results of this testing are then compared to the risk appetite limits for NII.


Foreign currency risk

The Group does not have any significant exposure to foreign currency risk, as all borrowings through the Company’s Euro Medium Term Note program (EMTN) and Euro Commercial Paper program (ECP) are fully hedged. At balance date, the principal of foreign currency denominated borrowings under these programs was AUD $216.2m (2017: AUD $583.2m) with all borrowings fully hedged by cross currency swaps and foreign exchange swaps. Retail and business banking FX transactions are managed by the Group’s Financial Markets unit, with resulting risk constrained by Board approved spot and forward limits. Adherence to limits is independently monitored by the Middle Office function. The Group conducts discretionary interest rate and foreign exchange trading. This trading forms part of the trading book activity within the liquidity management function. The trading book positions include approved financial instruments, both physical and derivative.