Bendigo CEO says borrowers ‘well positioned’ as rates rise

Bendigo and Adelaide Bank chief executive Marnie Baker says the bulk of its customers are still ahead on their mortgage repayments, as the regional lender became the latest bank to highlight the buffers many households have to absorb rising interest rates.

In its results on Monday, Bendigo said the Reserve Bank could lift the cash rate to about 4 per cent, and Baker said that although some borrowers would struggle, the issue was more “nuanced” than some public discussion about rising interest rates suggested.

Bendigo and Adelaide Bank chief executive Marnie Baker.
Bendigo and Adelaide Bank chief executive Marnie Baker.Credit: Louie Douvis

If futures markets are right, mortgage holders could face approximately three more 0.25 percentage point interest rate rises. How these expected rate rises will affect households is a key focus of markets, and Westpac’s chief executive Peter King on Friday said a cash rate of about 4 per cent may force more people to tighten their belts.

Baker said although rising rates would be challenging for some, borrowers remained “well positioned” overall and many people had built up savings in the last three years.

“In our book, 84 per cent of customers are in advance and 43 per cent of those are at least 12 months in advance of their prepayments,” she said in an interview.

Baker said that over the next six months, a clearer picture of the extent of mortgage stress would emerge. “For every rate rise, it will get more challenging. For every rate rise, there’s probably a few more people who’ll be in that situation,” she said.

Last week Commonwealth Bank also said households generally had “strong” buffers, pointing to borrowers who had made extra repayments on their loans or who had money in offset accounts.

At the same time, figures from the Reserve Bank suggest one in 10 variable rate borrowers have virtually no spare cash flow after covering their mortgage and other living costs.

Bendigo’s results, which showed cash earnings rose 23 per cent to $294.7 million in the first half, said the proportion of customers behind on repayments was also at historic lows.


Like rivals, Bendigo’s net interest margin (NIM) – which compares funding costs with what the bank charges for loans – increased sharply, rising by 19 basis points to 1.88 per cent. It raised its interim dividend to 29c a share, which will be fully franked and paid on March 31.

Despite the lift in profits and the low level of stress in its loan portfolio, Bendigo said it expected that bad debt charges would rise from historically low levels due to the impact of higher rates. The bank topped up a provision for potential customer stress for people who are fixed rate loans that expire at higher rates.

The bank’s loan growth slowed in the half, and Baker highlighted fierce competition in mortgages, as rival banks seek to lure customers with cashbacks worth thousands of dollars.

Much of the market reaction to Bendigo’s result focused on its net interest margins – which have been in focus after Commonwealth Bank last week suggested its NIM peaked in October.

Citi analyst Brendan Sproules said the market was likely to upgrade its forecast for Bendigo’s NIM as a result of its earnings, which he said should also dispel the idea that margins had peaked across the banking sector.

UBS analyst John Storey said it was a strong result from Bendigo, though it would get harder for the bank to expand its loan book due to funding costs and the stiff competition for mortgages.

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