Bendigo and Adelaide Bank reported making headway on an ongoing transformation with multiple milestones delivered, and costs weighing on overall operating expenses.
By the end of the 2023 financial year, Bendigo and Adelaide Bank had "reduced the number of core banking systems from seven to four, had 90 fewer IT applications and had moved one-third of them to the cloud”, CEO and managing director Marnie Baker said.
The bank outlined a plan in late 2021 to have a single core banking system in place by 2024, and to migrate half its application estate to cloud in a similar timeframe.
For comparative purposes, it dropped one core banking system in the previous financial year.
Under its transformation progress, Baker said that “since FY19, we have rationalised the number of business models we operate, reduced our core banking systems from eight to four, our brands from 13 to seven and our IT applications by more than 38 percent."
“Our strategic imperative to reduce complexity continues, with three brands and three core banking systems [now also] removed from operation,” Baker said.
“We have moved more applications to the cloud while removing those that are no longer required from operation.
"These improvements in technology have allowed us to decommission a physical data centre and related services providing instant cost benefits to the business.”
Baker continued: “This has been achieved in tandem with several key corporate transactions completed and partnerships established, such as the integration of Ferocia and full ownership of our digital bank app Up, which has now reached over $1.5 billion in deposit and over 700,000 customers.”
New lending platform
Speaking to investors on Monday, Baker said the bank also intends to launch a new lending platform as part of its transformation program this November.
"Our new lending platform will initially be made available to our third-party originators before being rolled out to our proprietary channel," she said.
“The new lending platform will significantly reduce application approval and settlement times, streamlining processes and removing unnecessary friction enabling a better experience for our customers and staff.”
Another “major program" under the transformation "is the rebuild of the business and agribusiness proposition” of the bank.
Costs increase
Chief financial officer Andrew Morgan said the bank “increased the volume of spend on our transformation program”.
Over the year, the bank's operating expenses rose to $1.06 billion, up from $1 billion in FY22.
As part of its operating expense rise, its investment spend rose 28.1 percent as the bank incurred costs under the transformation agenda, including staff costs, IT costs and external consultancy costs.
Combating the “prevalence of scams” also led to increased expenses as the bank “doubled the amount of our financial crimes team and along with other measures”.
Neobank Up and simplification progress
Baker said the Up Home loans offering “remains on a steady growth trajectory with a portfolio balance now at $74 million since beta launch 12 months ago”.
“June has been the strongest month of lending growth as Up Home is increasingly recognised as an attractive proposition.
"75,000 'Upsiders' have a self-identified savings towards a home totalling in excess of half a billion dollars, which underscores the future growth opportunity.”
The divestment of Bendigo and Adelaide Bank's merchant business and subsequent partnership with Tyro had enabled the consolidation of merchant systems "from seven to one”.
According to Baker, the bank has now also rolled out further “in-app Bendigo products, including the capability to open term deposits online by desktop in the iOS app, and soon Android.”
Baker said its own BEN Express is “becoming a key channel for the bank with our Bendigo branded Digital Home Loans delivering over $270 million in settlements since inception, with second-half FY23 settlements greater than the previous four years combined.
“Finally, our key digital partner tic:toc remains the backbone of our digital offering, providing a seamless customer experience for our digital customers.
“Digital plays a key part in our vision to be Australia's bank of choice and provides growing diversification alongside our strong proprietary and third-party banking networks.”
The bank's statutory net profit after tax came in at $497 million, up 1.8 percent year-on-year, while its cash earnings after tax reached $576.9 million, up 15.3 percent from the prior year.
