Bendigo and Adelaide Bank has posted a statutory net profit of $376.8 million, down 13.3 per cent, on the back of remediation and redundancy costs, according to its full year 2019 results.
Remediation and redundancy costs of Bendigo Financial Planning divestment were responsible for impacted earnings, the bank said.
The bank said unrealised losses relating to Homesafe due to the decline in property valuations in Melbourne and Sydney were also to blame for the impacted earnings.
Cash earnings after tax were down 6.6 per cent at $415.7 million also due to remediation and redundancy costs, and underlying earnings were down 2.5 per cent at $435.7 million.
The announcement said the total costs for remediation for the year were $16.7 million and related to:
- Insufficient documentation to demonstrate that services had been provided to Bendigo Financial Planning customers in accordance with their service contracts. This business was subsequently sold; and
- Products not operating in accordance with their terms and conditions.
The bank’s managing director and chief executive, Marnie Baker, said: “The Bank is committed to comprehensively and efficiently addressing where errors lead to poor customer outcomes and we have always taken a proactive and customer focused approach as part of our risk management and governance process.
“This approach is aligned with Bendigo’s values of integrity to maintain customer trust and by taking a conservative view of applying any remediation, including when there was any uncertainty,” she said.
The announcement noted that the Bendigo Financial Planning divestment was to simplify and de-risk the business and to deliver cost savings.
“Earnings for the year were impacted by remediation and redundancy costs,” Barker said. “Despite this, we delivered total income of $1.6 billion, in line with the prior year, in an environment of low growth, political uncertainty, subdued consumer confidence and increasing competition.”
Barker noted that net interest margin was steady year-on-year, and, half-on-half, increased by two basis points, and this reflected the active management of margin and volume for both lending and deposits.
“We achieved positive momentum from the implementation of our new strategy, with a strong uplift in performance in our key priority markets, particularly half-on-half,” she said.
The bank’s operating expenses were up 5.9 per cent at $954.5 million, including the remediation and redundancy costs.
“Whilst we’re continuing to invest in our capability and total income was steady, we maintain our ongoing focus to sustainably reduce our cost base, targeting a cost to income ratio towards 50 per cent in the medium term. This is especially important in a low revenue environment,” Baker said.
“We will also continue to review and deliver operational efficiencies and expect to see further cost benefits in the next period from redundancies undertaken in this period.”