By 2020, BNK moved all its transactional business online and announced its remaining branch in Kalgoorlie would close.
The company prudently managed its way through the COVID years, as loan growth slowed throughout the entire banking sector.
In 2021, BNK muscled into new territory by teaming up with Bendigo Bank and Goldman Sachs to launch a $250 million prime and $500 million specialist residential securitisation warehouse – a savvy move that rewired its growth engine at just the right time.
BNK manages the loans and earns fees servicing them, while freeing up capital to fund new lending. The beauty of these warehouses was simple but powerful. By shifting to this model, growth was no longer chained to the size of its balance sheet.
Compressed margins had become a notable dynamic in the residential mortgage market, where stiff competition from the big four banks and non-bank lenders narrowed the lending spread to less than one per cent, making the mortgage market a largely loss-making sector for smaller operators.
Under the stewardship of its new chief executive officer Allan Savins, who took the company reins in January 2022, BNK made a bold pivot to shift 30 per cent of its book into higher margin loan offerings for the small to medium enterprise (SME) sector, while retaining property as its first form of security. It also sold Finsure to MA Financial Group in 2022, banking $151.6 million for the company and returning $60 million to shareholders through a combination of fully franked dividends and a capital return.
Between 2022 and 2025, BNK was able to put together some smart deals to rebalance its exposure. First it acquired $230 million in higher margin loans from the Goldman’s warehouse which the bank already underwrites and services on its system. The bank then bundled $347 million of Goldmans’ warehouse loans into a product dubbed Robusta 2024-1 as part of its securitisation deal. Lastly it sold $220 million in low margin residential mortgages from the Bendigo warehouse back to Bendigo for a gross profit of $2 million and ongoing servicing fees, thereby resetting the on-balance-sheet book closer to the desired 70:30 ratio.
Last week, BNK unlocked a third stream of lending revenue by diving into the structured credit market – teaming up with a syndicate of lenders to back a rising Australian non-bank financier.
Most of the senior funding came from an investment bank, with BNK chipping in a smaller slice. The final top-up came from the non-bank lender, which takes on the riskiest position in the stack and would be the first to wear any losses if things went south.
The warehouse facility was designed to allow the non-bank lender to access wholesale funds, which it can lend to its customers.
Banking is often regarded as easy money, but the reality can be very different. Razor-sharp margins, black swan events such as COVID and cost of living pressures have all presented challenges to growth across the sector, particularly for smaller and mid-tier players. By going online and slashing branch costs, however, BNK has started to turn the tide in one of banking’s toughest corners. Coupled with rejigging its loan book to focus on fatter margins, the strategy appears to be paying off handsomely.
The bank posted an underlying profit of $1.8 million for the first half of FY25 – a staggering 500 per cent jump on the previous half and demolishing 2024’s full-year loss of $900,000. It also continued an improving trend from losses of $1.5 million in FY23 and $2.1 million in FY22.
BNK’s transformation from a humble credit union in Kalgoorlie to an online, profit-making banking challenger with an unrestricted licence is remarkable. It’s a tale of savvy pivots, bold leadership and a laser focus on where the real margins lie.
In a sector where many small players have struggled to keep pace with the majors, BNK appears to be carving out its own path.
With profits on the rise, a lean digital model in the works and a diversified loan book aimed squarely at higher-margin small business enterprise lending, BNK now looks poised for a new era of growth. If recent moves are anything to go by, this nimble operator is far from done rewriting the banking playbook.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
