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Sydney —The choice by Adelaide Bank and Bendigo to pre-fund the repayment of the Australian central bank’s lending program during the epidemic may have had an effect on important performance metrics, but it will give future funding costs more predictability, according to the bank’s chief executive.

The Australian regional bank announced on Monday that its net interest margin for the six months ended December was 1.83%, a 15 basis point decrease from the second half of fiscal 2023. Net interest margin is a crucial profitability metric that compares funding costs with what is charged for loans.

According to Bendigo Chief Executive Marnie Baker, just under half of the decline was caused by the Reserve Bank of Australia’s early repayment of its term funding facility. The lender purposefully pre-funded early to get ahead of potential future competition in the wholesale market for funding.

“When there is a large number of participants in the market, price becomes somewhat unpredictable.We left early and proceeded cautiously. Thus, we’re at a great place right now. We have a solid balance sheet,” she stated in a Monday interview with The Wall Street Journal.

Baker also mentioned the increasing strength of NIM. Although Bendigo doesn’t offer NIM advice, there was some progress in the

Australian banks are facing significant challenges in terms of deposits and funding base diversification as financial entities continue to repay the RBA’s TFF. The nation’s approved deposit-taking institutions received 188 billion Australian dollars, or $122.8 billion, as a result of this pandemic stimulus package. The RBA stated that the September 2023 and the upcoming June 2024 quarters were when the majority of the anticipated TFF maturities were due.

As of the end of December, Bendigo had paid back A$1.8 billion of the TFF. As of December 31, the remaining amount, or about A$2.9 billion, had been pre-funded. In FY 2024, it has no further long-term wholesale maturities.

As of the end of December, Bendigo had paid back A$1.8 billion of the TFF. As of December 31, the remaining amount, or about A$2.9 billion, had been pre-funded. In FY 2024, it has no further long-term wholesale maturities.

In contrast, ANZ Group Holdings, a significant lender, disclosed in its first quarter financial statements for the fiscal year 2024 that it has around A$8 billion in term of maturity for term funding, for which it stated that it was “well-prepared.” Still, it stated that it anticipated needing up to A$35 billion in funds for its fiscal 2024 term.

Westpac Banking Corp. said on Monday that it had A$12 billion in maturities that were due in its fiscal year 2024 in its own first-quarter report. Australia’s Commonwealth Bank revealed that it has paid back A$19 billion to the TFF in the first half of

According to Baker, Bendigo had the money and liquidity strength to invest in productivity and expand the company because it had pre-funded its TFF repayment. However, it had decided to withdraw from that cutthroat market when it came to residential lending, as lending volumes decreased by 0.1% during the first half of the fiscal year.

“Where we have concentrated on is in areas where we think we’ve got a really good advantage and our digital channels are showing that,” she stated.

For the first half of the year, slightly more than sixteen percent of Bendigo’s home loan settlements were digital mortgage settlements.

“We’ve got an opportunity there that we can take advantage of a channel that’s not really too crowded at this particular point in time,” Baker said.