Let me begin today by acknowledging the traditional owners of the land in which we meet today. Here in Sydney, it's the Gadigal people of the Eora Nation. I pay my respects to their elders, past and present, and extend my respect to the Aboriginal and Torres Strait Islander people who are present on the call today. Presenting on the call, we have our CEO and Managing Director, Marnie Baker; and our CFO, Andrew Morgan. Our CRO, Taso Corolis, will also be available on the call to take any questions alongside Marnie and Andrew at the end of the presentation. If you'd like to ask questions, please press star one, one. I'll now hand over to Marnie.
Thanks, Sam. Good morning, everyone. Today, we announce another strong result for our bank. Over the course of the last 12 months, we have made significant progress on our objectives, both financial and strategic. Financially, we have delivered on our key metrics. Cash earnings increased 15.3% to AUD 576.9 million. Return on equity increased 90 basis points to 8.62%, and our cost-to-income ratio improved by 420 basis points to 54.9%.
Strategically, we continue to deliver on our transformation agenda, with key milestones being achieved across the year. Further, our digital proposition has expanded, demonstrating our expertise in delivering channel diversification in response to customers' needs. I will spend some time taking you through the key elements of these strategic pieces in the coming slides.
It has been another year of continued progress for our organization. Most importantly, we continue to deliver on our transformation agenda without losing sight of who we are. We have remained true to our regional roots, we have worked hard to maintain and strengthen our connection with communities. We will continue to do everything we can to earn and keep our customers' trust.
We are united in our purpose of feeding into the prosperity of our customers and their communities. We are much closer to delivering on our vision to be Australia's bank of choice. Turning to our divisional results. Cash earnings across both of our divisions rose off the back of an improved revenue environment. Over the year, our largest division, consumer banking, increased cash earnings by 45.9%, driven by disciplined margin and volume management.
The consumer division has navigated a challenging year amidst high levels of mortgage market competition. Pleasingly, the division has seen growth across both lending and deposits. For business and agribusiness, cash earnings increased 0.4% on FY22, as an increase in credit provisions offset margin improvements through the year.
As mentioned at the first half 2023 results, the division has undergone an extensive review, with a new strategy now in place that is designed to deliver growth in our target markets and diversification to our balance sheet. The initial stages of this rebuild has begun. FY24 will be a key year for executing the new strategy. Throughout our 165-year history, the bank has worked hard to deliver positive outcomes for our customers and their communities.
We recognize the challenges facing some borrowers following a period of high inflation and rapid interest rate rises flowing from the Reserve Bank official cash rate changes. The vast majority of borrowers are well-positioned. However, there will be a portion that require our assistance. Our strength of balance sheets, customer focus, and flexibility to provide tailored solutions means we are well-placed to support customers in hardship.
Our customer care-driven Mortgage Help Center provides assistance to our customers who are experiencing financial difficulties, with the primary objective of keeping customers in their homes. This approach contributes to our market-leading customer advocacy and results in historical low rates on our mortgage portfolio, remaining one of the lowest in the industry.
As customers on fixed rate loans lead up to and then reach the end of their term, we are proactively reaching out to them on multiple occasions to discuss their options, again, with the purpose of supporting them as they transition and retaining them as customers. We understand the privileged role we play within Australia's communities and our purpose of feeding into prosperity, not off it.
Since inception, our Community Bank Model, which operates in over 300 communities across Australia, is on track to return over AUD 320 million in the form of sponsorships and grants to those communities. This year, the model is celebrating its 25th anniversary, and we look forward to evolving this model to ensure its success for future generations.
Our overarching strategy continues to be relevant, we are consistently delivering on our key strategic imperatives of reducing complexity through our transformation agenda, investing in capabilities across the organization, particularly in digital, data, and risk, and telling our story in more ways than ever. We are building the bank of the future today, cementing our position as a true alternative to the larger incumbents.
Four years in, our overarching strategy has produced substantial and important changes for our organization and clearly demonstrates our ability to execute. I'd like to recap on some of that work that has delivered sustainable and ongoing improvements across the group. Since FY2019, we have rationalized 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%.
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, Up, which has now reached over AUD 1.5 billion in deposits and over 700,000 customers. The divestment of our merchant business and subsequent partnership with Tyro, which provided additional functionality for our business customers and reduced our merchant systems from seven to one.
The more recent acquisition of ANZ's margin lending business into Leveraged equities and partnership with Qantas on Qantas Money Home Loans. We are not only simplifying our business and creating a more flexible organization, but we are doing this while investing in future capabilities and bringing greater diversification for our business. What pleases me most about our strategic delivery is how open and resilient our organization has been to change.
Our people, through all parts of our organization, have experienced greater change than ever before, and I want to thank each and every member of the Banks team who works hard every day to deliver good outcomes for our customers. As part of our journey, we recognized that we required a clearer emphasis on returns, execution, and business sustainability.
Our sharpened focus on financial returns has been evident over FY2023. Our Cash Earnings have increased strongly, driven by a range of key factors that have had a significant contribution to this result. A more disciplined approach to cost management has been an area of focus for us, including the continued simplification across our business. The sustained execution since 2019 is clearly observable in our key return metrics, with the exception of the COVID disruption in FY2020.
Our business decisions are focused on meeting strong return hurdles. During the year, our disciplined approach enabled the bank to generate better returns in a period of intense competition in residential lending. Our business as usual costs increased just 2.4%, as cost management initiatives and simplification benefits from our transformation program partially offset the impact of higher inflation.
Andrew will provide greater detail on the FY2023 financial results shortly. Underpinning our returns profile is our proven ability to execute, and it's clear our momentum is building. With foundational work now largely complete, FY2023 has been a pivotal year for our strategy, with key deliverables achieved and significant acceleration in progress towards our FY2024 targets. Our strategic imperative to reduce complexity continues, with three brands and three core banking systems removed from operation.
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 center and related services, providing instant cost benefits to the business. Our capabilities have increased with the commencement of in-app Bendigo products, including the capability to open term deposits online by a desktop, in the iOS app, and soon, Android.
Our reach has grown, with digital mortgages becoming a key contributor to our residential mortgage portfolio, while Up continues to leverage its NPS of 51.5 and grow its customer base and deposits. Further, we have expanded our margin lending business, one of our highest ROE businesses. We remain confident in achieving our targets of delivering a cost-to-income ratio towards 50% and an ROE above our cost of capital.
With the achievements of FY2023 firmly embedded in our business, the opportunities for us as an organization and for our stakeholders are significant. Our capability and growth in digital is evident. Last half, we highlighted the opportunity we have in front of us, and this half has underscored our ongoing strength in lending via our digital channels, with 12% of total settlements now coming through residential lending settlements now coming through our digital channels, up from 8.9% 6 months ago.
Up Home remains on a steady growth trajectory, with a portfolio balance now at AUD 74 million since beta launch 12 months ago. June has been the strongest month of lending growth, as Up Home is increasingly recognized as an attractive proposition.
75,000 Upsiders have self-identified savings towards a home, home totaling in excess of AUD 500 million, which underscores the future growth opportunity. BEN Express is becoming a key channel for the bank, with our Bendigo brand and digital home loans delivering over AUD 270 million in settlements since inception, with second half 2023 settlements greater than the previous four years combined. Qantas Money Home Loans, which, which launched in February of this year, has exceeded our expectations and continues to be a significant opportunity for us in the digital space.
Finally, our key digital partner, Tic:Toc, remains the backbone of our digital offering, providing a seamless customer experience for our digital customers through Up, BEN Express, Qantas Money Home Loans, and of course, through their own brand, which utilizes our balance sheet. Digital plays a key part in our vision to be Australia's bank of choice, provides growing diversification alongside our strong proprietary and third-party banking network.
Our market-leading digital bank, Up, resonates strongly with the 18-35 age target market, delivering regular milestones for the bank and an innovative experience for our customers, or as we know them, Upsiders. In less than five years since launch in October 2018, Up has attracted over 700,000 Upsiders and over AUD 1.5 billion in deposits.
The number of Upsiders is growing 2.6% month-on-month, largely through word of mouth and with a cost per acquisition of less than AUD 50. Up has a market-leading NPS of 51.5, and is the highest-rated bank app on the App Store and Google Play, because it has features that are attractive to a tech-savvy generation of users. It is digital-first and plastic-optional, saving over 800 kilograms of plastic cards. Up is also helping Upsiders to save money with features such as Save Up AUD 1,000 and Locked Savers, contributing to just over AUD 100 million in additional savings. Importantly, it is delivering us a strong pipeline of future home loan customers, with AUD 514 million in identified savings towards a home.
Our continued investment in Up is delivering strong growth in engaged customers at an age bracket that positions us well for fulfilling their ongoing banking needs for years to come. We remain excited about the future of Up. Business sustainability remains integral to our organization and plays an important role in ensuring we stay true to our purpose.
Our customers are experiencing the true multi-channel approach that we have been building. The ability to transact with us through any medium is becoming easier, enabling our customers to have the most seamless experience possible. This continues to be reflected in our strong NPS scores, which remain well above the industry average.
Our 309 Community Bank branches across Australia have gathered over AUD 32 billion in deposits and AUD 20 billion in lending since inception of the model, enabling more than AUD 320 million in funds to be delivered back into the communities in which we operate. Just within the last financial year, funding 6,215 much-needed local projects.
For shareholders, our ability to generate organic capital is crucial for our business sustainability, and why our two key focuses of returns and execution are so important. We remain intensely focused on improving our financial metrics and delivering a fair return for our shareholders. Finally, our people are what makes Bendigo and Adelaide Bank so special.
Our culture is driven by our 7,000-strong workforce and their dedication to our customers and their communities, which is crucial in bringing our purpose to life and driving our overall strategic direction. We continue to invest in the capability of our people and ensuring that their goals and rewards are aligned with all our stakeholders.
Our ESG program of work is well advanced. We have built strong foundational capability across the three disciplines of environment, social, and governance, and have achieved results in all three areas. This year, we delivered the final year of our inaugural Climate Change Action Plan, having reduced our Scope 1 and 2 Emissions by 43% since 2020, and we are making progress towards our climate commitment.
Our refreshed Diversity and Inclusion policy, Strategy, Belonging at BEN, delivered a number of important pieces of work, including the launch of our Reflect Reconciliation Action Plan. We remain committed to proactively managing the risks and incidences of financial crime for our bank's customers and our organization, and have mobilized our fraud reduction program to address the increasing financial crime risk landscape.
Our RepTrak reputation score continues to lead all banks and reflects how others view our organization against seven main drivers of reputation, including performance. I'm proud of our progress across all three ESG pillars. We have a privileged seat at the table in our communities, enabling us to partner at a grassroots level in building a lasting impact on both social and environmental issues.
I'll now pass over to Andrew to run through the financial detail behind the full year results and to expand on the themes I've just outlined.
Thanks very much, Marnie, and good morning, everyone. As Marnie said in her introduction, this is a strong set of financial results. It represents the outcome of a consistent focus through the year on three key financial areas, being management volumes and margins, improving cost efficiency, and improving returns on investment cases. Through the last six months, we've continued to deliver against these priorities.
On volumes and margins, we have carefully balanced growth with margin management. As lending competition and the prevalence of cash backs in the market eased through the second half, we saw an opportunity to compete and write business at returns above cost of capital. Our focus on cost efficiency has seen cost management efforts continue through the year. This has helped us to contain growth in our business-as-usual costs to a rate below inflation.
Given our strong income results, we also took the opportunity to accelerate investment spend, which will continue to position us for long-term sustainable growth. Our focus on improving returns on investment cases means that as our investment in transformation continues, we're ensuring that business cases will generate benefits in future periods.
Our Profit After Capital Charge metric has been further embedded into our business at both a group and divisional level, and is an integral part of our pricing and investment decisions. As a result of our disciplined execution across these areas, we have achieved strong results across our key financial metrics. Return on equity of 8.62% is up 90 basis points.
Cost-to-Income Ratio has fallen to below 55%, at 54.9%. Cash Earnings per share of AUD 1.021 is 13% higher than the prior year. Turning now to our results. For the year ended 30 June 2023, we recorded Cash Earnings after tax of AUD 576.9 million, which was up 15.3% on the prior year. Total income was up 14%, and operating expenses were up 5.9%, with the expense outcome mainly reflecting a higher amount of expensed investment spend and the impact of higher non-lending losses. Credit Expenses increased from historic lows to AUD 33.6 million, compared to a net write back of AUD 27.2 million in the prior year.
Our statutory net profit after tax was up 1.8% on the prior year, and I'll walk through the key non-cash items on the following page. On this page, you can see the usual two non-cash items and two items which were disclosed in our ASX announcement on the 4th of August. These items, in combination, represent the difference between cash earnings and statutory net profit. The first is HomeSafe Net Adjustments, which represent unrealized gains on open contracts, minus funding costs and gains on completed contracts, which have already been recognized through cash earnings. The second item is the impact of an impairment of software capitalized in prior years, as per our ASX announcement on the 4th of August.
The third item includes a number of restructures undertaken through the year and the consolidation of some of our smaller core banking platforms, also disclosed in our 4th August update. The 4th item represents a number of smaller items, including amortization of acquired intangibles, acquisition costs, and an impairment of a right of use asset.
Taking those items into account, statutory net profit after tax of AUD 497 million was up 1.8% on the prior year. Turning now to total income. Compared to the prior year, income of AUD 1,932.8 million increased 14%. The key driver of this growth was net interest income, which was up 17.6% on the prior year. Over the year, on average, residential lending balances grew 3.9%, and deposits were up 4.9%.
Business and agri lending was down 0.4% on average. The benefit of this growth was further boosted by a 20 basis points expansion in net interest margin over the year. Other income, excluding HomeSafe, was slightly lower than the prior year. This was mainly due to the non-recurrence of some income streams received in the prior year.
For HomeSafe, whilst completions were stronger in the second versus the first half, there was a lower level of completed contracts on the prior year, this led to a AUD 9.7 million reduction in HomeSafe income. I want to spend a few minutes updating you on what's happening in our residential lending book. At our half year results, we talked about how momentum in our book had slowed. Pricing in the refinancing market was aggressive and cash backs were prevalent.
As a result of that, we saw limited opportunity to write business at or above our cost of capital, which is a significant focus for us. We also talked about a substantial level of growth in an increasingly important channel for us, being digital mortgages. We talked about the shift in the proportion of business being written across our three key channels: physical, digital, and third party.
Wind the clock forward to now. Most lenders have ceased cash backs, and pricing across the sector is returning to more economically rational levels. Through the fourth quarter, the opportunity to compete improved, and at the same time, we launched the Qantas home loan program. We were able to write business above system growth in the last quarter.
Across our digital mortgage channels, we increased settlement volumes by around 43% in the second half versus the first half, and digital settlements now account for 12% of total settlements. We also continue to see the proportion of fixed to variable rate mortgages fall. As customers' fixed rate loans mature, our retention rates have improved on the prior half, and customers are typically choosing to refinance to a variable rate mortgage.
Pleasingly, less than 2% of these customers have an LVR above 80%. We enter the new year with positive momentum. Our disciplined approach to writing business at or above cost of capital will continue, and we will seek to grow above system, so long as the economics make sense. Another key strength is our deposit gathering franchise, and there are a few key points to make.
First, we have a high number of branches relative to our customer base and compared to other banks. This branch footprint is critical to our ability to gather deposits and represents about 73% of our total customer deposits base. Across both our proprietary network and Community Bank partners, we delivered growth of 4% on the prior year.
Second, we've lagged the market in our digital deposits offering, but are catching up fast. In March 2023, we launched term deposits online under the Bendigo brand, settling approximately AUD 145 million by 30 June. And in our Up business, we grew deposit balances by 40% on the prior year. We've also seen strong growth in term deposits on the prior year, and importantly, high retention rates as customers roll into new terms.
These factors strengthen our ability to fund the bank's lending activities at competitive rates. It shows up in our deposit-to-loan ratio, which at 69%, is 7 percentage points higher than system. Turning now to Net Interest Margin. Compared to the prior half, our NIM improved 8 basis points to 198 basis points. Asset pricing negatively impacted 8 basis points, reflecting the cost of funds, impacting variable rate mortgages in particular.
Deposit and funding pricing contributed strongly, adding 19 basis points. Mix and other provided a benefit of 6 basis points. Almost all of this number is the benefit from our Replicating Portfolio on capital and deposits. Our liquids increased modestly through the half, with growth in deposits outpacing lending. This impacted 1 basis point.
Finally, revenue share has increased 8 basis points compared to the prior half, primarily due to the impact of rising rates on deposit margins, where our community banks write meaningful volumes. Our fourth quarter average NIM was 196 basis points. With some volatility in our monthly numbers, this is a more reliable indicator of our exit NIM.
On key considerations, we continue to see both tailwinds and headwinds ahead of us. On tailwinds, we see cash rates continuing to rise, and we expect one more rate rise. We also continue to see customers rolling off fixed rates and mostly favoring variable rate mortgages. Variable rate front book margins are typically higher than our fixed rate back book margins. We'll also continue to see an ongoing benefit in Replicating Portfolio yields as a result of a rise in medium-term swap curves through the year.
On headwinds, competition in deposits is intense, and we continue to observe a shift of customers towards term deposits, albeit at a slowing rate. Higher funding costs are also likely as the industry continues to refinance the Term Funding Facility. Turning now to operating expenses. At a headline level, costs increased 5.9% on the prior year, and there are three key drivers behind this.
First, the prevalence of scams globally and domestically has increased through the year, and we, like other institutions, have felt some impact. Scam and fraud losses rose through the year and contributed 1.7% to our overall cost growth. Through the course of the year, we doubled the amount of our financial crimes team, and along with other measures which we have taken, we've seen a substantial slowdown in these costs in the last quarter of the year.
Second, with the strong income growth that we achieved through the year, we increased the volume of spend on our transformation program, and as you saw from Marnie's presentation, we're making good progress on our targets. This increase contributed to 1.8% to our overall cost growth. Third, our business as usual spend contributed just 2.4% to our overall cost growth, which is well below inflation.
Excluding the increase in our financial crimes team, our FTE levels would have reduced by around 0.5%. This result reflects our ongoing work in managing costs and creating efficiencies in our various teams. In respect to future considerations on costs, for financial year 2024, we expect inflation to stay elevated for most of the financial year. We will continue to invest in our transformation program, including investments to further strengthen our scam and fraud detection capabilities.
We will also continue the investment in our residential lending transformation program, we will commence new investment in business and agri lending. At the same time, our work on productivity and cost management will continue. We are targeting a further improvement in our Cost-to-Income Ratio through financial year 2024.
Over the medium term, we will continue to invest in the digitization of our business and at the same time, drive further productivity improvements. Our commitment to reducing our Cost-to-Income Ratio towards 50% is unchanged. Turning now to credit quality and credit expenses. Our key credit metrics remain sound. We continue to carefully watch trends in the industry and within our book. Through the half, we booked a credit expense of AUD 28 million.
Breaking that down, we increased our collective provision by around AUD 6 million, specific provisions booked totaled AUD 22 million and were related to factors specific to a small number of customers. Gross impaired loans continue to track downwards, representing just 0.14% of gross loans. Arrears across the book remain low but are increasing. 90-plus days arrears in residential lending are currently 46 basis points, up from 41 basis points as of December 2022.
Business arrears have increased from 2.1% to 2.52%, with the spike that you can see in the chart reflecting the temporary impact of some expired loan facilities. Agri arrears are stable. Asset quality remains sound and arrears are at historic lows, we do expect bad debts to trend upwards and move towards longer-term averages over time.
This next chart is the one we showed you at the half year. Starting from the top right-hand side, you can see that 31% of our customers are at least two years ahead of scheduled repayments, and that has come down from 34% 12 months ago. At the other end of that chart, you can see that 16% of customers have no buffer, and that proportion has remained stable on the half.
Breaking down that 16% of customers with no buffer, 88% of those customers have an LVR of less than or equal to 80%. On the bottom left-hand side, you can see the conservatism in our underwriting standards, where the proportion of our lending customers above 6 x Debt-to-Income remains well below the major banks and continues to fall as a percentage of our new originations.
On the bottom right-hand side, you can see around one-third of our portfolio has been originated in the last two years and is sitting at a dynamic LVR in the low 60s. Overall, our residential lending portfolio is holding up well. Moving now to provision coverage. In this half, the chart on the left shows that we've increased our provisions by around 2% on half.
The main change is an increase in the Collective Provision and a small increase in Specific Provision. On the right-hand side chart, we show the split of our Collective Provisions between modeled scenarios and overlays. On modeled outcomes, our scenario weightings have been changed from 31 December, and we have increased the base scenario weighting from 50%-55% and reduced the downside scenario.
At the same time, we've taken a more conservative economic outlook as it relates to interest rates, GDP growth, and unemployment. The net effect of this has been to increase our model Collective Provision by around AUD 10 million in the half. On overlays, the aggregate amount we're holding is largely unchanged, but we have made some changes to the composition of those overlays. We've removed the farmland values overlay, but picked this up in our model downside scenarios.
We've also increased the fixed to variable conversion overlay and have increased the construction industry overlay. Overall, we remain comfortable with the level of provisions that we're carrying, and we continue to keep a close eye on credit conditions across the economy and our exposures. Our funding and liquidity metrics remain strong and well-diversified.
With continued growth in customer deposits over the half, the proportion of customer deposits to overall funding were stable at around 73%. Our coverage of deposits to loans is at 69%, is well above the industry average. Our Community Bank partnerships importantly provide us with a net AUD 11 billion of funding, which further provides further diversification and a relatively cheaper funding source than wholesale funding.
During the half, we further diversified our sources of funding, completing our second Covered Bond issuance in June 2023. We also announced on ninth August that the LCR overlay has been removed by APRA. At 30 June, we had repaid AUD 725 million of our total of AUD 4.7 billion of Term Funding Facility, and as of today, 34% of borrowings have been refinanced or are in the 30-day LCR window.
With our expanded funding facilities, strong deposit franchise, and the recent adjustment to our LCR, we are well-placed to refinance the remainder of the Term Funding Facility over the next 12 months. Turning now to capital and dividends. Our CET1 ratio increased 112 basis points to 11.25% over the half. The increase reflects a few factors.
First, the benefit from the introduction of the new capital framework reforms added 111 basis points. This is higher than our initial estimate and has come through from a combination of credit and operational risk-weighted assets. Second, organic capital generated was marginally positive for the half, and over the year, was 53 basis points.
Directors have declared a fully franked dividend of AUD 0.32 per share for the second half, which represents a 60% payout ratio for the year and is a 15.1% increase on the prior year. Given our strong capital position, we intend to again neutralize the DRP as we did for the first half dividend. In summary, we find ourselves in a strong capital position going into financial year 2024.
Finally, our focus on continuing to lift our return on equity above the cost of capital will continue. There are four key building blocks to get us there: Continuing our disciplined approach to competing in home lending and taking advantage of our multi-channel approach, including digital. Diversifying our balance sheet as we look to rebuild our business and agri division, and there are some early signs of momentum in this result.
Investing in our strong deposit gathering franchise, and in particular, the strength of our Community Bank partnership, and a continued focus on cost management and targeting of ongoing improvement in our Cost to Income ratio. These four factors in combination provide a credible path for us to achieve our aspiration of a Return on Equity above Cost of Capital. With that, I'll now hand back to Marnie to make some final comments.
Thanks, Andrew. As you can see, we have a defined program of work to deliver on our stated objectives. We will continue to leverage our unique points of difference, multi-channel experience, and core assets to grow at or better than system. As part of our transformation program, we will launch in November our new lending platform, which will initially be made available to our third-party originators before being rolled out to our proprietary channels.
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. This, along with a further reduction in core banking systems and brands, and a disciplined approach to cost management commensurate with the revenue environment, is key to achieving our cost to income target of towards 50% in the medium term.
The other major program is the rebuild of the business and agribusiness proposition, realizing significant latent opportunity, particularly given our deep regional roots and community presence. Enhancing the customer experience through key technologies will move Bendigo's offering to a more comparable position in the market, and over the medium term, make a more substantial contribution to shareholder value. Our outcomes to date give us confidence for the future.
Our purpose-driven and customer-focused organization is simpler and more streamlined. We continue to build capability in digital, data, and risk, which will reduce complexity for our people, deliver efficiencies for our business, and create improved experiences for our customers. Our demonstrated focus on returns, execution, and sustainability is delivering benefits for our customers, people, partners, communities, and shareholders.
We remain committed to our strategy and the qualities that make Bendigo and Adelaide Bank unique by staying true to our connection with communities, our regional roots, and our position as Australia's most trusted bank. I will now hand back to Sam to manage the Q&A.
Thanks, Marnie. Just to remind everyone, if you'd like to ask a question, it's star one, one. We might go to our first question, please. We have Minh Pham from Barrenjoey on the line. Min, please fire away.
Thanks, Sam. Hi, Marnie, Andrew, appreciate the opportunity to ask a question. Just one from me. We've seen all of the major banks have struggled to reduce Cost-to-Income Ratios because of rising inflation, additional investments, as you mentioned today, required in cybersecurity and financial scams, and, and some of them are struggling to meet their Cost of Capital.
While I appreciate that you've made some investments that have improved the non-lending losses in the fourth quarter, and you may be a little bit less complex than the majors, there's very little economies of scale in the investments. As a smaller player, that is a disadvantage. So how do you, one, meet your Cost-to-Income Ratio target towards 50%? And then, two, generate an ROE that covers your Cost of Capital in a challenging revenue environment and in light of the investments required?
Min, thanks very much for the question, and great to hear you on the call. A couple of components to what you've said. Let's talk about the cost-to-income component of the story first, and then we'll come to return on equity. On our cost-to-income ratio, what we've shown through this year and over the course of the year, is an ability to manage our costs, cognizant of the income environment.
There is no doubt we'll see a slowing income environment into next year, and we know, and economists will talk about slowing credit growth, slowing deposit growth. We'll talk about NIMs, no doubt, on the call. The way that we think about cost, though, and cost-to-income ratio is we will manage our costs for the environment in which we find ourselves.
We have productivity programs and initiatives already underway. We've made some significant changes in some of our operating models through this year, and we'll look to also continue, really importantly, the investment in our transformation. Some of that benefit will play through in, in this year. Some of that benefit will play through in future years.
We, as we've shown through this result, we will flex investment depending on the income environment. If things slow down, we may well take a different view on investment spend. We've said today, very deliberately, two components to guidance on cost. One is that medium-term cost guidance, but also, the shorter term into this year, we're looking to improve our Cost-to-Income Ratio.
It's all about balance, we, we believe, Min, both productivity, but also making sure we continue to invest for long-term benefit. On return on equity, your second question, it's something that, that we are very, very focused on, and we've been talking about it now, for quite a period of time. We've done a lot of work around our businesses to, improve our, our calculators, to improve the way that we think about our investment cases. One of the great things about having a multi-channel approach is we can think very carefully about where we get best economics. We've said, as it relates to growth, that we are looking to grow above system, but only where the economics make sense.
I think it's, it's fair to say that as, as we've seen, particularly in this last quarter, that competition has eased somewhat in lending, particularly with cashbacks coming out of the system and some, repricing activity. That gives us the ability to, to manage, return on equity to the levels that we want.
Thank you.
Thanks, Min. Go to our next question, please. It's from Sally Hong, from Morgan Stanley.
Thanks, Sam. Good morning, Marnie and Andrew. Sally Hong from Morgan Stanley. We noticed that you moved your standard online savings account rate by 1.5% during the June quarter, and your bonus saver rate by even more. Can you explain why you did that, and whether it means your margin was down a lot in the month of June and will fall materially in the September quarter?
Thanks very much, Sally. Great also to hear you on the call. Look, we- we're not giving our r- we're not, we're not talking about our exit margin for the month of June, very deliberately, and that's because, as I said earlier, it's a volatile environment. We, we know through the course of the year that interest rates have risen sharply. We know there's been competition on both sides of the balance sheet, so it's far more instructive to look at quarterly NIM and average NIM rather than a monthly NIM. We won't comment on, on, on NIM. What, what I will say on, on deposit pricing is, you're right, we made some significant changes in our savings accounts and to an extent, in our term deposits as well.
That was partly because we had been a little out of market in respect of our competitiveness. Others were moving through the half. We felt it was important as we started to see opportunities to lend, to make sure that our deposits were also equally competitive.
Thank you.
Thanks, Sally. Our next question comes from Brendan Sproules, from Citi.
Good morning, Marnie and team. Look, my question's just on your fourth quarter revenue performance. You show us in the quarterly NIMS that it sort of fell 5 basis points, obviously, as you suggested, that you had grown faster than system, at least in the mortgage market. Would you describe the, the fourth quarter performance, you know, as trying to manage this volume versus margin equation throughout the year? Would you say that the fourth quarter, actually grew the revenue in an overall sense, when I sort of weigh off the, the, the, the stronger lending growth versus the margin decline?
Oh, we're, we're not giving the, the, the actual number for, for the fourth quarter revenue, Brendan, but I think your observations are right. As, as we, in the fourth quarter look to, to grow, we saw opportunities in lending. We, we also needed to make sure that we were competitive enough in deposits. Our deposit pricing had to move at a faster rate than our, than our lending pricing. That's what caused the, the reduction in our fourth quarter average NIM.
Just like a second question, just on, on your cost slide, on, on slide 25. When I look at the comments that you made, are we actually going to see a material reduction in the overall cost level of, of 6%, given that, you know, inflation's quite strong, and you're continuing to invest in the transformation program?
Well, as I, as I said, Brendan, earlier, there are three key components to our cost growth. The, the, the increase in, in scams and frauds, as I talked about, was a factor in our overall cost growth for the year. That added 1.7% to our overall cost growth. What we have seen as a result of a substantial increase in our financial crimes team, and also with some investment that we've made through the year, and frankly, that we'll continue to make into next year, is we, we feel like that, that cost is, is much more in control in the last quarter. We've seen a substantial reduction in those costs in the final quarter. That gives us some confidence going into next year.
In addition to that, as I talked about, we, we increased our investment spend through the year in response to the income environment. To the extent that income growth is not there next year, it is, it is a lever that we will pull. I also mentioned earlier that we continue our work on productivity and cost management. We have a number of productivity programs underway right now across a number of our different teams. I absolutely acknowledge your point, that inflation will stay elevated, but we think in combination, with, with that ability to flex our investment spend, with non-ending losses, we hope having peaked through this year, and with those ongoing productivity programs, we, we should be in good shape to meet that cost-to-income guidance.
All right. Thank you.
Thanks, Brendan. Our next question comes from Josh Freiman from Macquarie. Oh, no, sorry, Mike Hodges, John Storey from UBS. Sorry, John.
John?
John, are you on the line? Operator, we might go to Josh and come back to John, if that's okay.
Hey, can you hear me?
Yes.
Okay, cool. Hey, guys, thanks for the opportunity. Just a couple of questions from me. I might start on the deposit side. Some of your peers have mentioned that deposit mix shift has actually slowed over this half. Are you guys able to provide, I guess, some further color just on your deposit mix shift trends over the half, and how you sort of expect that to tend from here?
Yeah, thanks. Thanks, Josh. We. I, I mentioned this earlier. We, we've certainly seen over the course of the year, a shift into term deposits, unsurprisingly, with the rate environment, going the way that it is. What we've seen in the second half is there's continued to be a shift, but it has slowed, particularly in the last quarter. That, that is certainly something that we've observed.
Understood. Thank you. Second question, just, just on your, your, I guess your, your cost base there, we're still seeing capitalized balances sort of remain stable despite the, the accelerated amortization you guys put through. We're still seeing quite a lot of capitalization on the investment spend. How do you guys see that moving going forward?
It's an asset-by-asset proposition, Josh. We, we look very carefully at the nature of spend that we're incurring, and we then make decisions about whether we believe there's an enduring benefit or not. We also think very carefully about the useful life of those assets, and we'll make then judgments inside our accounting policies, which are very strict on this, about what is able to be capitalized and what is not. What I'd also say is, as we, as we thought about and then announced the impairment earlier, and this will be a factor going forward, we, we have looked very closely at the range of software assets that have been built over time.
The extent to which any of those assets in, at a very granular level, are no longer in use, so in effect, are obsolete, we would, we would move to either accelerate the, the amortization period, or if they've been completely shut down, to write those off. That, that will be an ongoing balance that we'll need to strike.
Thank you.
Thanks, Josh. Our next question comes from Ed Henning at CLSA. Ed?
Oh, sorry. You cut, you cut out there. Thanks for taking my questions. Can I just start with a question? Today, you don't call out the LCR benefit you're gonna get in your margin walk for 2024. Is this just a timing thing that it'll come through in 2025? Can you talk, talk about what the, the reduction here is? I've got a second question, please.
LCR benefit. Sorry, Ed, just so I'm clear, you're referring to the announcement we made on the ninth of August, that APRA made, in removing the NTO overlay. Is that right?
Yes.
Yeah. That, that adds 12-14 percentage points to our LCR. Now, we, we deliberately gave a range a couple of days ago, because at the time, we hadn't printed our quarterly LCR number. That's in our Pillar 3 that was released this morning. The 61-day average was 131 basis points. You can add on roughly 13% to that, and you get to the right number. Look, we've-- Ed, we've got the Term Funding Facility in front of us. We're very focused on making sure that we're carrying sufficient liquidity to meet that comfortably. We have a lot of capacity in respect of wholesale funding. I talked about our Covered Bonds program earlier.
We will carry probably a higher level of liquids, therefore, through, through the year, but we'll, to the extent we can look to invest those appropriately. 325, very, very different propositions, so I'll, I'll kind of park that for now in respect of where, where NIM dynamics might go. You had a second question?
No, just on that, before we go on to the next one, can you just give us any clarity on, you know, if you were to reduce it, what the benefit would be? Just so we can think about the impact for 25.
Reduce the NIM benefit back down to 130 odd. Is that what you're suggesting?
Well, look, just you, you've got an excess of 10% in liquids there. You know, maybe you don't take it all out, but just give us some sort of indication on how much of a benefit or a tailwind that could be for margin, when you do look to reduce it.
I think it's sort of up and down, Ed. We would typically run our LCRs around the 130s anyway. What the removal of the NTO overlay has given us is additional liquidity. That liquidity will be helpful as we think about prepaying the Term Funding Facility over time. We will normalize our LCR back down to that sort of mid-130s level once we're through the Term Funding Facility.
Okay. Okay, thank you. Then just a second question on return on equity and capital. You talked about today about improving your return on equity. Can you just in line with the, above your cost of equity, can you just talk about what one, what your cost of equity is? Then, two, you know, you're sitting 75 basis points above the top end of your core, core equity tier one range, I know you wanna be prudent. If you do improve your cost of equity, that should improve your organic capital generation. Can you just talk about, you know, what level is too prudent, or do you expect to grow really fast and use that capital to grow? How should we think about that going forward?
Yep. Couple of, couple of good questions. On, on your latter question, how much is too much capital, I think, is the summary of the question you've asked. As, as it stands right now, it is a pretty uncertain environment in front of us. We are well above our board target range of 10%-10.5%. We think it's prudent to, to stay at that sort of level for the time being. We do think it's important, though, that we give shareholders a fair return for the profit that we've made, and so we increase the dividend very specifically to be broadly in line with Cash Earnings.
I think as we see this, this part of the cycle improve, that will give us more clarity as to where capital, will settle over time. Clearly, with some excess capital, that, that gives us some opportunities to continue to invest in our business. I've talked about some of those, investments today. For the time being, Ed, we'll, we'll stay above the range, which we think is the prudent thing to do. Sorry, can you just remind me of your first question?
Just the, the cost of equity. You talked about obviously targeting a higher return on equity, but what's your Cost of Capital, Ed?
Yeah. It's not dissimilar to what we talked about last year, Ed.
10%?
That's about right.
Okay. Thank you.
Thanks, Ed. Our next question comes from Matt Dunger, from Bank of America.
Yes, thank you for taking my questions. Just if I could touch on the on the costs. You've moved away from the broadly flat on FY 2022 medium-term target. Just wondering if you could talk to what's what's changed here. Andrew, you talked about some flexibility on costs, but what's changed in the in the half?
Morning, Matt. Nice, nice to talk to you. Look, the, the, the key thing that's changed, Matt, is the stickiness of the inflationary environment, I think is, has been quite, quite interesting. Inflation's stuck at around six, as it was at, it was at seven, I think, at the half, and it's come down a little bit. I think it's fair to say that the combination of wage and price inflation has caused us to reconsider that broadly flat cost guidance. However, what we, what we are saying today is that we want to continue to improve our Cost-to-Income Ratio, very deliberately, we've talked today about looking to improve that Cost-to-Income Ratio, into 2024.
Thank you. If I could just ask on the around the credit quality and the provision coverage. You're citing higher arrears across the portfolio, but CP coverage is flat. You've even reduced the weightings to the downside scenarios. Why are you more comfortable around the deterioration scenarios not playing out anymore?
What we've done is we've increased the base case weighting, but the severity, if you like, we've, we've increased. We've been, I think, quite conservative in respect of unemployment, GDP, and inflation. Kind of one thing balances off against the other, and in fact, our CP, our modeled CP has increased by about AUD 10 million over the half. We think that's prudent.
As, as we talked about in our slide on, on residential lending, at the moment, our, our residential lending portfolio is in good shape. Our customers on average, continue to be well ahead of scheduled repayments, and our business and agri customers as well, continue to be well ahead of their scheduled repayments.
At the same time, it is a very dynamic environment, and so whilst as we sit here right now, we think our provision coverage is adequate, we are keeping a very close eye on how the economy develops over the next six to 12 months.
Thank you very much.
Thanks, Matt. Our next question comes from John Storey at UBS.
Morning, guys. Thanks so much, Sam. Just slide 42 I think is pretty interesting. Just on your resi lending portfolio, particularly just looking at the flow rates. 1 thing that stands out for me is you're writing quite a lot of fixed rate business. It's obviously not that consistent, I guess, with some of the comments that you're saying around clients that come off fixed rolling into variable. Basically get a sense of, you know, why, why kind of 22%? That is, seems, seems like quite a big number. Then particularly kind of in, in the context of how margins potentially could move around with Bendigo still expecting 1 more rate increase. Maybe if you just give us some insight on that. That, that's the first one.
We, we have a, a very good fixed rate product, John, and it's attractive, particularly, to our third-party partners, and so we've, we've seen opportunities i n, in that area to write good business. I would stress that the way that we think about writing business is all about making sure that we, we generate the, the appropriate level of return. That's our first comment. On margins more, more generally look, we're not giving guidance overall on, on direction of margin, but it's fair to say that we see both headwinds and tailwinds.
One of the tailwinds, in particular, that, that I wanted to, to make sure you're all aware of, is our replicating portfolio, which, which has a slide on page 48. If, if you have a look at that slide, what you can see there is the, the exit yield on that portfolio is significantly higher than the average yield for the year, and so that, that is a, that is a pretty meaningful tailwind for us.
I talked about the variable to fixed rate dynamic, John, just to clarify what I meant by that, as we're seeing customers refinance out of their fixed rate loans, they're typically choosing to go into variable rate, but some are still choosing to go into fixed rate. That number's about 70/30 today. In other words, 70% of those materials are going into variable. That's the dynamic I was talking about earlier.
Yeah, just a, just another one quickly, a point of clarification. Third party, bank lending, 66% of the flows, does the digital product sit within third party lending, or is that really just a broker channel?
some, John. The way that we, we.
Yeah
We, the, the components is Tic:Toc and-
Qantas.
Qantas, sorry, just clarifying.
Okay.
Tic:Toc, Qantas sit in third party, and then BEN Express and Up sit in retail.
Got you. Okay, that's perfect. Thanks so much.
Thanks, John. Our next question comes from Andrew Triggs from J.P. Morgan.
Thank you, Sam. Morning, Marnie and Andrew. First question, please. The removal of the exit NIM chart you say is due to there being significant volatility in the month of June. Could you elaborate, please, on what that volatility is, knowing that liquidity impacts are becoming negligible for the bank and basis risk also looked to be fairly stable in the period? Can you give us some reassurance, I guess, that the volatility wasn't just negative volatility given that very late repricing of online and reward saver products very late in the, around the, the start of the June period, June month?
Thank, thanks, Andrew. As you've noted, one of the components of volatility was the repricing that we did in our deposit book, and there was a, a timing difference, if you like, between when we repriced deposits and when we repriced some lending, and so that, that's what caused some of that volatility.
Would you, would you call that volatility? I mean, that's, that's gonna stay in the base, Andrew. That I think other banks would sort of regard that as just, Business As Usual.
It's volatility in the sense that we've moved on rates at different times to deposits. It was particularly, I think, exacerbated in June. Again, we felt that that wasn't instructive to show on exit NIM. Instead, we think the quarterly average is more reflective of where things are right now.
Okay. Thank you. Second question, just on your target for an improvement in the Cost-to-Income Ratio in FY 2024. Can I ask, does that rely on absolute cost reduction for that year, please?
It relies on productivity programs. It assumes that there's a certain degree of inflation. We've made some assumptions around where we think credit growth will go, where we think deposit growth will go, where we think other income will go. We've clearly made some assumptions about margin, and what we've then said is, well, we need our cost growth to be slower than that number. I'm not gonna tell you what that number is.
Inside that number, we've assumed that we'll continue to invest. We've assumed that there's some productivity, and as I mentioned earlier, to the extent that things need to flex, we'll flex our investment spend to make sure that we put ourselves in a good position to hit that cost to income target.
Thanks, Andrew. Can you just, maybe provide a commitment that, you know, one of the flex points won't be a further write-off of capitalized software balances? I mean, I think that's a bugbear of the market generally. I know all banks do it, but that has significantly helped your cost growth for the second half.
Andrew, what I'd say about that is we are really following accounting rules here. The accounting rules very clearly state that when assets are obsolete, that they should be impaired. That's really all we've done here. Technology is moving at a fast pace. The extent to which assets that we built, say, five, six years ago are now no longer in use, then under the accounting rules, that's what we have to do. What we are doing very clearly here, Andrew, is we're making sure that we're complying with the accounting rules. We also have internal policy notes that guide this. We have board committees that oversee it. What we're doing is conforming with all of that.
Andrew, most banks wouldn't take it below the line. Most banks these days would treat it as an adjustment to Cash Earnings, and hence, would feed directly into ex-executive remuneration, for instance.
Yeah, we, we have, very specific policies and, and guidance notes around what goes above the line and what goes below the line. That, that is something that we have followed and done consistently through this year.
Yeah. Thank you.
Thanks, Andrew. Our next question comes from Jeff Cai from Jarden Group.
Good morning, can you? Just a question on, on deposits. Look, about 45% of your savings deposits is paying, you know, less than 2% to savers. How, how do you think about the pace of adverse deposit mix shift going forward? Is there a risk of a bit of a big step change going forward?
Well, Jeff, thank, thanks, Jeff, thanks for the question. What, what we talked about earlier was, was in particular what we've seen in, in term deposits and, and some switching out of transaction accounts. I think it was Josh that asked the question. We have seen something of a slowdown there. I think it's fair to say that some of that shift has been driven by the pace of rises in interest rates. One, one would expect that as the pace of rate changes slows, the, the rate of switching would slow.
All right. Thank you.
Thanks, Jeff. Our next question comes from Azib Khan.
You've been adamant that you would try not to write new business below the Cost of Capital. Nonetheless, there's been an 8 basis points margin drag from lending pricing. In light of that, is it fair to assume that the bulk of that 8 basis points drag has come from retention discounting? I've got a follow-up.
It's over the course of a half, and what it reflects is that, our ability to reprice, has not kept pace with rising cost of funds in the way that we, we transfer price. That's the dynamic that you're seeing. We, we've not been in, in cash backs, and we, we are trying to stay as disciplined as we can. As I talked about a couple of times through other questions, we've spent a lot of time improving our pricing calculators. Our frontline teams know, know what their targets are, and they stick to those targets.
Of that 8 basis points flow, Andrew, is the bulk of that retention discounting as opposed to front book?
It is, it is more so front book.
It's more front book than retention discounting?
Yep.
Okay. And what %, what % of your mortgage back book has repriced? Can you please tell us what has been the trend in monthly, monthly mortgage back book repricing volumes?
We might take that question offline. That's quite a detailed question for this call, so we'll, we'll follow up with you after.
No worries. Thank you.
Thanks, Azib. Our next question comes from Nathan Zaia from Morningstar.
Hey, good morning, Marnie and Andrew. I had another question on deposits. Like, you, you noted the, the trend in switching has slowed, but is there any comment you can make, particularly in recent months, around transaction balances or offsetting or any types of savings account really falling as people, you know, try to meet higher mortgage repayments?
we've seen a little bit of a slowdown, in, in offset, in, in offset accounts through the year, but I wouldn't say it's a, a particularly meaningful slowdown. I, I think the other way to think about that is to look at the amount of buffers that, that residential lending customers are holding. So through the course of the year, on average, our, our residential lending customers are at 29 months ahead of schedule repayment. Last year, that was 36. That's still well ahead of schedule repayments, but it has been dropping, and so that's partly reflected through our set of accounts being utilized.
Okay. Is there any differences between a Bendigo branded customer versus a customer in Up in terms of that resiliency in those savings they have?
We might take that question offline. Thanks, Nathan.
Okay, just one other one on digital settlements. Could you make any comment around how much human interaction there is for Bendigo compared to a loan written in a broken channel? Like, how many hours might be spent, for example?
Without getting into the exact numbers, it really depends on how many of the decision rules, if you like, a customer passes as they put their details into an application. Typically what happens is a customer will put in their details, they'll pass through this decision engine. If all of the rules are met, then the turnaround time could be minutes.
If there's any exceptions that pop out, then it will depend on the volume and the nature of those exceptions. If there are lots of exceptions, then clearly that stretches out the number of minutes or hours taken. What it's fair to say, though, is that a loan that goes straight through is in the minutes, whereas a loan today, settled through normal channels, is in the hours.
Okay. Any... That's helpful. All right. Thank you.
Our next question comes from John Storey.
Yeah. Hi, guys. Just want to piece together a bit of information that you've given us today. You were saying that you want the cost to income to improve into 2024, although the revenue environment looks pretty challenging. Then you also talked about you'll slow down the investment spend, if need be. One of the other pieces of information is that scams and fraud losses are up a lot, and the major banks are now talking about spend on scams and frauds and cyber, their investment spend in the hundreds of millions of AUD per annum and, and not slowing down. There's very little economy to scale here.
What I'm trying to understand is, if you're going to have to keep spending on risk, on fraud, on cyber, and the revenue environment gets pretty tough, it really means that you're going to have to crack down pretty aggressively on your investment spend on growth. What are you thinking about? Is that possible? How much flexibility do you have, and are you really prepared to pull back aggressively just to hit the CTI target?
Yeah, good question, John. Can I ask, there's a lot of background noise on the call. If someone's not asking a question, if you could go on mute, please. Yeah. John, as I mentioned earlier. We have a number of productivity programs that are underway at the moment. We've been doing a lot of work through this year. We've announced through the some of the restructuring provisions that we talked about a couple of weeks ago, that there's been some significant restructuring in some of our teams. On investment spend, we've set aside an amount of money through next year. Some of that is actually going to go towards continuing to uplift our capability around detecting scams and frauds.
Pleasingly, what we've seen in the last quarter of the year is a dramatic slowdown. Whilst, whilst we saw a jump into the second half, in the first few months, things have improved in the last few months. Now, we're not getting complacent at all. That's why we've put significantly more operators into our financial crimes team. In combination, we hope that we have gotten in front of the issue, and it won't be a repeat into next year. Again, we're not complacent, we'll continue to invest. We're at a different scale, though, to the majors, while CBA's talked about hundreds of millions of dollars, our cost base is a fraction of theirs. The complexity of our business, I think, is significantly less than theirs.
As it relates to the fungibility of our investment spend, will we make tough calls to meet our Cost-to-Income Ratio? Look, as we stand right now, based on what we know, we'll make the right sort of trade-off calls as we need to. This business is not about, though, just managing to the short term, we've got to manage for long term as well. Some of the investment programs that we've talked about, particularly in our residential lending transformation and in our business and agri work, is gonna set us up for the long term. We will look carefully at investment decisions we need to make, and we'll, and we'll respond to the environment as it plays out through the course of the year.
Can I ask just 1 follow-up question on the monthly margin? I know you've been trying to avoid it, and said there's some implications around timing in the month of June. It's a slide that you've provided since 2016, and there's always volatility around the end of months, and we, we've known that for a lot of time. Can we get a commitment to reinstate that slide at some stage? Because it is something that a lot of people do use. Given that there was timing between asset and liability repricing in the last month, can you give us some indication, did that normalize out in the month of July?
Because it's a very big indication when your margin's down 5 bits in the quarter, and there was some repricing at the end of the period, which would suggest that that would be ongoing.
Well, John, on, on your first point, we'll certainly take that under consideration. I appreciate the feedback that you've provided, so, we'll certainly consider that. On the second point, talking about monthly NIMs for July is not appropriate, but what I will say is, we have been very deliberate in talking about our quarterly average NIM, which we think is the more instructive number.
We should be looking at the 5 basis point reduction in the quarter as a good indication on where the NIMs are tracking?
As I said, we've put that number into the slide very deliberately.
Thank you.
Thanks, John. We have our last question of the morning from Sally Hong from Morgan Stanley.
Hi, Marnie and Andrew, I have one more question. What are your expectations for the revenue share of margin? Will that continue to go up, or will deposit price competition mean revenue share also goes down?
Sally, there are plenty of moving parts in the revenue-sharing arrangement. Just, just to briefly reiterate the way it works, it's all dependent on the volume of business that our Community Banks write, and it's, it's also dependent on the individual product margins of that business that they write. Our, our Community Banks are typically heavier writers of deposits than assets.
And, and so that's part of the driver why the revenue share was up year-on-year. What I'd also, though, emphasize here is the benefit that that net funding that our Community Banks provide, provides Bendigo. AUD 11 billion of net funding actually provides a NIM benefit to us, because that net funding is typically more expensive than a retail deposit, less expensive than wholesale funding.
Great. Thank you.
Thanks, Sally. I'll hand back to Marnie to close.
Thanks, Sam. Thank you to everyone on the call, this morning for attending, our presentation, and for your ongoing interest and support in our company. We do look forward to seeing many of you over the coming week. Thank you.