A smaller direct loan book and rapid commercial growth headline BNK Banking Group’s half-year update.
BNK Banking Group, the non‑bank lender behind the Better Choice brand, has reported that its loan book has shrunk, reflecting ongoing run‑off in lower‑margin loans and a deliberate focus on reshaping the book.
The group has been focused on building higher‑yielding loans over the past year, pushing further into commercial and other higher‑return segments, while letting go of lower-margin loans.
BNK’s loan book stood at $983 million at 31 December 2025, down from $1.18 billion a year earlier, reflecting ongoing run‑off in lower‑margin loans and a deliberate focus on reshaping the book. However, this was 9 per cent up on the previous six months (ending 30 June 2025).
Of the December balance, $922 million was traditional loans, while $60 million was in new senior secured investments.
Deposits also eased over the year, from $1.10 billion to $1.03 billion.
However, the composition of lending has changed markedly, with 57 per cent of the $983 million portfolio at December 2025 comprising prime residential, 18 per cent higher‑return residential, 19 per cent commercial, and 6 per cent senior secured investments.
A year earlier, prime residential made up 78 per cent of the larger $1.18 billion book, with 14 per cent in higher‑return residential and 8 per cent in commercial lending.
CEO Allan Savins framed the half as another step in BNK’s multi‑year pivot away from low‑margin prime lending.
“The group continued to rebalance the portfolio towards higher‑return, capital-efficient assets, supporting an improvement in asset mix and further strengthening NIM,” he said.
Settlements up, total managed book lower
Despite the smaller year‑on‑year book, lending flows were stronger.
Lending settlements increased 19 per cent during the half to $309 million, with BNK stating it was selectively writing higher‑margin business.
The total managed loan book, excluding offset balances, declined to $1.9 billion from $2.1 billion at June 2025.
Residential mortgages account for 79 per cent of the total loan book, yet commercial lending has become a more meaningful contributor following a 40.3 per cent lift since June to $190.8 million.
Residential: Conservative LVRs, modest arrears rise
BNK’s residential portfolio sits at $732 million, with an average loan size of $393,000.
At 31 December 2025, 16.6 per cent of residential loans were interest‑only, up from 13.7 per cent at June, while principal and interest loans fell to 83.4 per cent from 86.3 per cent.
The lender’s own risk metrics still paint a relatively conservative picture.
The weighted average loan‑to‑value ratio on the residential book was 62 per cent at December.
Arrears over 90 days sat at 1.37 per cent, while 46.4 per cent of borrowers were ahead on their repayments, 51.5 per cent up to date, and 2.1 per cent in arrears.
By borrower type, 37.5 per cent of the residential portfolio was investor at December 2025, slightly above the 37 per cent recorded a year earlier, with owner‑occupiers making up 62.5 per cent.
Savins acknowledged that borrowers were feeling the impact of higher rates, but stressed the resilience of the portfolio.
“While arrears rose during the period, the absolute number of customers involved remains low, and we remain appropriately provisioned,” he said.
Commercial: Rapid growth, disciplined risk
Commercial lending remains a smaller, but fast‑growing part of BNK’s business.
The commercial portfolio totalled $191 million at 31 December 2025, with an average loan size of $619,000.
On a repayment basis, interest‑only commercial loans fell to 26.9 per cent at December from 32.3 per cent at June, while principal and interest loans rose to 73.1 per cent from 67.7 per cent.
Arrears remain contained, but were slightly higher than in the residential book, with 90‑plus‑day delinquencies at 1.84 per cent.
At December, 24.9 per cent of commercial borrowers were ahead on their repayments, 72.6 per cent were on time, and 2.6 per cent were in arrears.
This footprint and risk profile underpin Savins’ characterisation of a “stable risk profile with continued growth in commercial loan book.”
Margins rise as profit stays modest
Net interest margin improved by 49 basis points on 1H25 to 1.88 per cent – a sizeable uplift in the current competitive funding environment.
The group reported statutory net profit after tax of $0.42 million, up 31 per cent on the pcp, while underlying NPAT came in at $0.44 million, down 76 per cent.
Yet Savins said that the changing asset mix was starting to do the heavy lifting on earnings.
“We also advanced key strategic initiatives, including the commencement of senior secured investments and measured growth in commercial lending, further diversifying our earnings base,” he said.
[Related: Better Choice bolsters leadership ranks with key hires]
