Expenses probed as regional bank takes loans from majors

“We often do get a stronger lending growth towards that June period, but we did see the benefit of some of the other banks tightening their serviceability, and making the processing time not quite as efficient as it had been,” the CFO said.

“We have seen the benefit and we were the recipient of increased flows as the rest of the industry tightened their requirements.

“We had moved our [requirements] ahead of that, so we were actually already in that position and did get the benefit of some of those increased flows as others adjusted to be in line with where we are and where we need to be.”

Mr Crouch’s claim is reflected in the bank’s financial results, which revealed that the lender’s home loan settlements increased by 4.7 per cent in the second half of the year (2H18), from $6.3 billion in the first half (1H18) to $6.6 billion.

“We’ve seen improved flows through our local connection retail business and our third-party mortgage businesses, with housing lending growth up 4.7 per cent in the half,” Mr  Crouch added.

The result prompted one UBS analyst to question the bank’s borrower verification process during a briefing on Monday: “Are you requesting from mortgage brokers (or the customer) that they provide the transaction banking accounts and their credit card [transaction data] so they can verify their living expenses [in compliance with] responsible lending [obligations]?”

Bendigo and Adelaide Bank’s chief risk officer Taso Corolis confirmed “yes”, and explained that the regional lender will be reviewing transactional accounts when verifying a borrower’s income and expense information.

“Where we do have the transactional accounts with us, we will review living expenses declared against our own transactional accounts,” Mr Corolis said.

He also confirmed that brokers and customers will be required to provide such documentation when submitting a home loan application to the bank.  

Bendigo’s home loan settlements fall year-on-year

Despite residential mortgage lending growth in 2H18, the total value of reported home loan settlements fell by $2.2 billion year-on-year, from $15.1 billion in FY17 to $12.9 billion in FY18.

The bank’s managing director, Marnie Baker, made note of “challenging” market conditions, making reference to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the changing regulatory landscape.

“There’s no doubt, it continues to be a challenging environment for Australian banks, with the effects of the royal commission into misconduct casting a shadow across the industry.

“[With] increased regulatory oversight and a renewed debate around culture, trust in the banking sector is at an all-time low.

“It’s a subdued banking sector, with declining asset growth, diminishing bank margins and increasing costs as banks seek to bolster their compliance functions.”

The lender’s overall residential mortgage portfolio now totals just under $40 billion. 

Ms Baker added that she was satisfied with the bank’s performance in light of weakening market conditions, rising costs and stiffer competition.

“In an environment where we’re seeing aggressive mortgage pricing, low volumes, tightening of lending standards and increasing funding costs, margin and volume of both deposits and loans were well managed throughout the year,” Ms Baker said.

The managing director also noted that she was expecting the bank to record “above system” growth in FY19.

“We believe we should be at least system, if not better. Depending on where system settles, we’ll be committing to exceed or be at least the same as system,” the MD said.

Despite weakening market conditions, Ms Baker said that the bank was “poised to take advantage of the opportunities ahead”.

On the whole, Bendigo and Adelaide Bank reported a statutory net profit after tax (NPAT) of $434.5 million, with underlying cash earnings of $445.1 million.

[Related: Non-bank lender posts record settlements]