Bendigo Bank FY26 slides: margin gains, risk spend weighs on outlook

Bendigo and Adelaide Bank Limited (ASX:BEN) released its full-year 2026 results on August 24, showcasing steady financial growth while facing challenging investments in risk management and compliance. The regional lender reported improved margins, a 3% increase in cash earnings, and a 7-basis-point rise in net interest margin. However, investors reacted negatively, with shares plunging 5.55% in pre-market trading and later settling 1.14% lower at $10.37.

Analysts attributed the cautious response to concerns over FY27's outlook, which includes higher costs, significant risk-related spending, and potential margin pressure from competitive factors. Despite a 3.0% rise in cash earnings, investors focused on projected increased expenses and strategic investments that could affect profitability.

The bank declared a final dividend of 33 cents per share, fully franked, resulting in a full-year payout of 63 cents per share, reflecting a 68% payout ratio. Risk management took center stage as a top priority, with substantial investments made in programs such as the Financial Crime Transformation Program (FCTP) and a Risk Rectification Plan, estimated to cost $70-90 million and $70 million respectively.

These initiatives aim to bolster the bank's capabilities, systems, and culture in response to regulatory demands. The digital banking sector demonstrated strong performance, with lower-cost deposits growing 6.8% to 54.8% of total customer deposits, and digital deposit sales accounting for 51.8% of total sales. The Up platform's growth, reaching 1.3 million customers with deposits of $4.1 billion, outperformed industry averages, as highlighted by Chief Financial Officer Andrew Morgan.