Three factors contributed to Bendigo & Adelaide Bank's announcement yesterday that it had downgraded its earnings guidance for the 2008/09 financial year.The bank has suffered a big fall in lending volume in its margin lending subsidiary Leveraged Equities; it has had to maintain a high liquidity position beyond the point at which it expected to be able to start easing; and it made a counting error in the first half that has been reversed.The revised guidance is for full-year earnings of 70 to 75 cents a share.Last August, when it reported its 2007/08 results, its guidance was for earnings of more than 90 cents per chare for 2008/09. At the half-year results announcement in February it confirmed that guidance and reported earnings of 44.3 cents per chare for the six months to December.The fall in margin lending volumes has been a double whammy for the bank. Three quarters of its assets are residential mortgages and it has passed on the bulk of cash rate cuts to customers. It has not had the luxury enjoyed by its bigger rivals of having a big commercial book that can be re-priced to restore margins. Its margin lending business is one of the few areas where it could do that.The bank has maintained a liquid assets ratio of 14 per cent since last year. It was expecting to be able to reduce that ratio by now but conditions remain uncertain and the liquidity ratio remains in place. The $14 million counting error was the result of a systems error that arose during the merger of Bendigo and Adelaide last year.Bendigo & Adelaide chief executive Rob Hunt said the bank had made a successful transition to retail deposit funding in response to the global financial crisis. Ninety per cent of the bank's funding now comes from retail deposits. But that change has come at a cost to earnings. The bank has had to offer high rates to attract deposits but has had to cut lending rates in line with the big banks.Hunt said: "Changes in the cash rate have not reflected funding costs. We have been caught and that will flow through to our profitability this year."