“Encouragingly, inflation has eased and we could see the Reserve Bank of Australia reduce the cash rate as early as tomorrow. This should provide some relief to households and, over time, support business activity,” Miller said, unveiling net profits at Westpac of $1.7 billion – down 9 per cent on the second half of last year.
The bank’s net interest margin, a key measure of profitability, fell 3 basis points to 1.81 compared to the prior quarter.
Meanwhile, Fennell made the comments as he handed down his first results since taking over from former Bendigo chief executive Marnie Baker, who was recently appointed to the RBA board. Bendigo’s half-year earnings triggered an investor sell-off after missing consensus on several fronts, prompting analysts to describe the results as “concerning” and “fairly poor”.
Westpac chief executive Anthony Miller.Credit: Peter Rae
Shares in the mid-tier lender tumbled after Fennell unveiled Bendigo’s cash earnings declined 9.7 per cent on the June half to $265.2 million. The bank’s operating expenses climbed 5 per cent and its net interest margin – a key measure of profitability – fell 6 basis points to 1.88 per cent.
“[Customer] growth, which was slightly higher than we expected, meant we needed to go and fund that, and that came with slightly higher funding costs,” Fennell said. “We needed to go out to the wholesale markets and get some funding from those markets, which are relatively expensive versus customer deposits.”
Those deposits were also less financially valuable to the bank, Fennell admitted, with customers funnelling their savings into offset accounts and longer-term deposits.
The Bendigo chief said the bank did not expect Australians to save their tax refunds, stage 3 tax cuts and energy rebates as much as they had.
“We made some tweaks to our front book pricing late in the half-year … and we’ll have some margin benefits,” Fennell added, indicating the mid-tier lender was pulling back from intense mortgage pricing competition.
MST Financial analyst Brian Johnson said the bank’s margin on deposits contracted more than analysts had anticipated, while operating costs were higher than expected, and its cash profits came 5 per cent below consensus.
“The earnings result benefited from a $10 million write-back, so if it weren’t for the write-back, the result would be even lower,” Johnson said.
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Barrenjoey head of banks Jon Mott in a note to clients described the moving parts of Bendigo’s results as “concerning”.
UBS analyst John Storey said the bank’s results “reads fairly poorly with a lot of work to do and delivery needed to meet expectations on full-year numbers”.
Bendigo declared an interim dividend of 30¢ per share, in line with the first half of last year while 3¢ lower than the second half of 2024.
