Bendigo and Adelaide Bank has defended its decision not to warn the market earlier that its earnings would be far worse than expected, a disclosure that sent shares sharply lower this week.

The regional lender told investors on Monday that margins had fallen despite more loans being written because it had been forced to raise money in more expensive wholesale markets. That, and a fall in cash profits to $265.2 million for the six months to December 31, sent shares tumbling 17 per cent. They fell 3 per cent on Tuesday.