Bendigo and Adelaide Bank’s Mortgage Book Contraction Amid Robust Credit Growth
Bendigo and Adelaide Bank, a respected institution in the Australian banking industry, has recently reported a contraction in its mortgage book. This comes as a surprising development, considering the current robust period of credit growth and demand in the banking sector.
The Bank’s Credibility and Performance
Bendigo Bank has been facing credibility issues with its investors and industry analysts. A series of unanticipated market confoundments over recent years has raised scepticism about the bank’s performance and future outlook. The bank’s residential lending fell 2.3% to $65 billion half on half, over the half year to December 2025, with the total residential lending portfolio remaining flat year on year as reported in their financial results.
Decline in Mortgage Book and the Role of Third-Party Channels
The bank’s mortgage book saw a steep decline of 5.6%, according to a September trading update. This reduction was mainly due to a 7.4% decrease in third-party originated channels, largely attributable to the bank’s exit from the Mortgage Partner business. This was offset, however, by a strong growth in digital channels, which increased by 6% over the half year.
Growth in Proprietary Channels and Digital Deposits
Despite the above challenges, Bendigo Bank reported that almost two thirds of new business was written in its proprietary channels, including 47% via the retail network and 17% via digital channels over the first half of this financial year. The bank also saw a four basis point rise in its net interest margin, largely due to its success in attracting lower cost deposits. The bank’s digital deposit momentum continues to increase, up by 35% year on year and 19% over the prior half, mainly through its Up banking brand.
Deposit Growth and Future Targets
While the bank’s overall deposit growth of 2.4% over 12 months slightly lags behind the system, the brighter side of the story is the growth was primarily driven by lower cost deposit growth of 3.6% for the half year. The bank also reported an improvement in its deposit mix, with 53.8% of its deposit book being “lower cost deposits”, up from 51.5% a year ago.
To mitigate the growing cynicism around its outlook, Bendigo management has outlined a number of growth targets. This includes a return to residential loan growth “at or around system” in the near term, savings growth “above system”, and improved business and agricultural growth in FY2026. Despite these ambitious targets, given the bank’s track record, market confidence in their ability to meet or surpass these targets remains muted.
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