On the cost side, operating expenses climbed 12 per cent to $24.2 million, reflecting BNK’s initial $1.1 million expense of rolling out its improved core banking platform. Management says the spend provided the groundwork for future scalability, regulatory compliance and improved customer service – all necessary costs for a lender looking to grow without the ballast of a branch network.
Notably, the higher-margin lending portfolio now accounts for about 28 per cent of BNK’s loan book, nudging closer to its initial 30 per cent target, while commercial loans expanded strongly, climbing 79 per cent to $136 million.
Average residential loan sizes remained steady at $378,000 per loan and continued to maintain healthy equity ratios, helping BNK cut its bad debt provision by $223,000 and notably, without writing off a single bad debt.
Helping to reduce BNK’s interest rate risk, fixed-rate loans are largely a thing of the past with the book now predominantly variable, leaving the bank better aligned to current market conditions.
According to management, the credit quality of the loan book is also holding up well, even as it shifts towards higher-margin lending. Almost half of BNK’s customers are actually ahead on their repayments with only 1.1 per cent of home loans and 0.95 per cent of commercial loans running at more than 90 days overdue.
Perhaps most telling is BNK’s capital adequacy ratio – a measure of its own money available to cover the risk it takes on – which leapt 24 per cent to 29 per cent.
Regulators in Australia usually require banks to keep their capital adequacy ratio above 10 per cent. However, BNK is sitting on almost three times that minimum requirement, giving the lender a significant buffer and plenty of firepower to pursue growth opportunities going forward.
Commenting on the results, BNK Chief Executive, Allan Savins, said: “Our deliberate shift toward higher-margin, capital-efficient assets is driving sustainable performance. We also laid important groundwork for our technology transformation and regulatory frameworks. The focus remains on sustainable underlying profitability.”
Looking ahead, BNK says it plans to grow its higher-margin, higher-return lending business, while expanding its senior secured warehouse funding as it pushes to bring in a steady stream of fresh prime home loans.
It is also aiming to sew up new partnerships and add more products, while keeping a tight focus on controlling costs.
A top notch example of product innovation was announced two weeks ago when BNK opened up a third stream of revenue by stepping into the structured credit market, joining a syndicate of lenders to support a fast-growing Australian non-bank financier.
In the deal, most of the senior funding was supplied by a top tier investment bank, with BNK taking a smaller share. The non-bank lender tipped in the final layer, holding the riskiest slice of the structure and standing first in line to absorb any losses.
The warehouse facility gives the non-bank financier access to wholesale funding, which it can then on-lend to its customers, creating a new growth channel for all parties.
BNK’s 2025 results appear to show a challenger bank hitting its stride, with profits rebounding, margins widening and new revenue streams taking shape. By shifting into higher-return assets, unlocking capital through smart transactions and keeping credit quality intact, the bank has started to set itself apart in a crowded and highly competitive market.
With a rock-solid capital buffer, an expanding commercial book and a willingness to innovate through ventures like structured credit, BNK looks well positioned to build on its momentum and chase meaningful growth in FY26 and beyond.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
