Bendigo chief promises to crunch costs
Bendigo Bank chief executive Marnie Baker yesterday promised to lower the company's cost base as part of her wider program to reshape the group's operations.
Baker told shareholders at the annual meeting in Bendigo that reducing costs was essential for sustaining business growth.
"As we accelerate our strategy and reshape our business for the future, we continue to focus on the markets where we see the best opportunity for our relationship-based style of banking and where trust and authentic relationships are most valued," she told the meeting.
"My leadership team and I are committed to reshaping our business and sustainably lowering our cost base so that we can continue to deliver sustainable growth and shareholder returns."
While Bendigo for many years has been an industry chart-topper on customer satisfaction ratings, it has struggled to manage costs.
That underperformance has contributed to lower average returns to shareholders compared to other listed banks.
In an interview with Banking Day after Tuesday's AGM, Baker was tight-lipped about the specific measures the bank would implement to secure efficiency gains.
However, she defended the company's offer of 2.5 per cent annual wage rises to staff over the next three years despite decisions by NAB, CBA and Westpac to cough up increases of at least 3 per cent.
While the Finance Sector Union has called on Bendigo to improve the offer in the current round of enterprise negotiations, Baker indicated that higher pay increases might be beyond the company's capacity in the current economic environment.
She said the bank under previous agreements had delivered above-average pay rises and was now asking staff to consider that in terms of its current offer.
"We're in negotiations at the moment (with the union) and we're in talks with our own staff," she said.
"We will continue to invest in our people - none of that has changed - but we have to be cognizant of the current economic environment."
Baker said the bank had already withheld bonuses and pay increases to all staff on salaried packages.
Bendigo is also continuing to scope its options for rationalising the number of brands it has in the market with a view to achieving cost savings.
There has been heavy speculation that niche brands such as Delphi Bank would be dumped when the review is completed.
Delphi has a bond with the Cypriot and Greek communities in different states but probably lacks sufficient scale for the group to support further investment as a separate business process.
While no decisions have been made on the future of Bendigo's niche businesses, Baker confirmed that brand consolidation was part of her agenda.
"We've been reviewing all our business models because brands hang off a business model," she said.
"Some we're looking to divest and Bendigo Financial Planning was a good example of that.
"Other businesses we are looking to consolidate - Delphi is one of those along with every other business we are reviewing."
Baker and retiring chairman Robert Johanson yesterday intensified the bank's rhetoric on how advanced accredited banks(the four majors and ING) would continue to enjoy discounted regulatory costs on residential lending under APRA's proposed new capital framework.
Although each acknowledged that APRA's planned overhaul of risk weights would narrow the differential on regulatory capital costs between what the four big banks put aside compared to other regulated lenders, Baker insists that the regulator needs to do more to level the playing field.
"Any regulator actually has the ability to depart from the exact prescription of the Basle committee," Baker said.
"On more complicated lending if an advanced bank has got more sophisticated risk systems that help it to make better risk assessments then there should be a differential.
"But for stock-standard home loans where the risk is the same I don't think large and small banks should be treated differently."