2019 CEO Survey: Marnie Baker, Bendigo and Adelaide Bank

Bendigo Bank chief executive Marnie Baker in Melbourne. Picture: David Geraghty for The Australian.

Every year The Australian’s John Durie asks some of the biggest names in Australian business five key questions about what’s coming in the year ahead.

Here, in his own words, is what Marnie Baker, the chief executive of Bendigo and Adelaide Bank, sees ahead in 2020.

You can read more from the CEO Survey.

How is your company affected by low-interest rates and what is needed to boost the

economy?

With rates so close to zero per cent, many deposit and transaction accounts across not just

our bank, but all banking institutions are now at or close to zero per cent. This impacts all

savers and in particular retirees. Our organisation prides itself in finding the right balance,

not just for borrowers but also for depositors, as well as our shareholders.

As well as carefully considering diverse interests of stakeholders, we also factor in the

performance of our business, our market competitiveness and our deep connection with, and

responsibility to, communities right across our national network.

The utilisation of traditional monetary and fiscal policy levers to stimulate economic activity

have had a limited positive impact to date, so the country finds itself in previously uncharted

territory.

Recent cuts to the official cash rate and once-off tax refunds, rather than strengthening

confidence in the minds of consumers and businesses are having a limited effect.

Consumers are choosing to pay off debt rather than spend their additional funds and

businesses while needing funding to grow, are finding credit harder to access. We can

probably attribute this response as a logical consumer response to uncertainty. Whenever

there is uncertainty, be that political, geopolitical, regulatory or environmental, people tend to

keep their hands in their pockets and become more conservative. What we need is decisive

leadership from both political and business leaders, with less point-scoring and more

partisanship.

Like Bendigo and Adelaide Bank, the government must find the right balance and carefully

consider the diverse interests of stakeholder groups and communities. A greater focus on

fiscal policy can help stimulate the economy. Certainly, within my memory, there has never

been a better time for governments to borrow money for well-targeted, major infrastructure

projects.

What is the impact of government regulations on your company, including those

applying to the financial sector?

We have always welcomed any initiative that puts customers’ interests first, raises

professional standards in the industry, encourages responsible remuneration practices and

delivers better outcomes for everyone.

A good example, in our view, is industry obligations such as Responsible Lending, which

play an important part in protecting the customer as well as the bank. Our bank has a history

of lending prudently to ensure consumer and business loans that are written are appropriate

from a risk perspective, but also sensible and maintainable from a customer perspective.

The financial sector is one of the most highly regulated and inquiry laden sectors in

Australia. Regional and smaller banks, in particular, face a disproportionate level of

regulatory pressure relative to their size and stability risk. Our competitive position is further

challenged as the non-banking sector is held to substantially lower regulatory standards

meaning they can operate a lower cost, leaner business model.

We have already made the case – over many years – that a better response is to ensure a

level playing field to empower customers by ensuring different organisations with different

customer relationship propositions can effectively compete on individual products.

What percentage of company revenues are spent on research and development, and

how is your company using technology to improve performance?

We invest strongly in this space, and our development effort is embedded through much of

our business and because of this, we have a long and proven history of innovation.

We were the first to market with Visa debit and credit cards, arguably the first to offer internet

banking, and first with all the Pays: Apple, Samsung, Garmin, Fitbit and Google. We helped

launch Tic:Toc, a world-first in instant home loan technology, – and we now leverage this

technology to offer our own instant home loan product, Bendigo Express; a world first. We

launched Up in October 2019, the first and largest next-gen digital bank, which amassed

more than 130,000 customers in its first 12 months of operation. We have been continually

investing year-on-year as our offerings have evolved to meet our customers’ needs. This

focus will continue.

Our innovative and purpose-driven culture, and our size combined with our strategy, enables

us to be nimble and adopt industry-leading practices to decide and then act on decisions

quickly – ultimately benefiting customers. We focus on developing customer innovations

based on what makes sense for their needs, and we also have a very strong partnering

strategy.

This strategy means we can provide the best solution to our customers by selecting the right

partner to offer the right services to meet our customers’ needs while also making it easier

for them to do business with us. For example, we consider relationships with fintechs as a

mutually beneficial opportunity. Fintechs are shaking the system by working to solve

previously unsolved or unthought-of customer challenges in the value chain, delivering more

choice and convenience. Through our partnership model, we harness this and provide more

benefits for our customers which in turn brings benefit to the bank and our fintech partners.

Finally, ongoing investment in large banking systems is still required. As part of our strategy

to reduce complexity, we are working on streamlining these systems to better improve staff

processes and our customer experience. As we enter a new decade, we will need to keep

building on this success to further accelerate the reshaping of our business for the future to

ensure our long-term relevance and sustainability.

What are the three major policy issues facing the country and what should be done

about them?

● Sustainable access to credit for social and other economic initiatives is an essential

factor in ensuring our nation’s prosperity. We see strong demand for credit from the

small business sector with a solid pipeline of opportunities, but the industry has

witnessed the flow-on effects from the tightening of lending standards in recent times,

coupled with a psychological impact due to a historical lack of clarity around what

responsible lending means.

● We also see strong demand from people wanting to own their own home, particularly

first home buyers. Bendigo and Adelaide Bank was created 161 years ago for this

purpose, and we remain committed to it to this day. That is why we’re pleased to be

selected in the Federal Government’s First Home Loan Deposit Scheme.

● The community-building issues highlighted by our Community Bank network include;

unemployment, youth services, aged care, mental health, community connection,

drug and alcohol abuse, small business support and regional population. A

sustainable approach, with smart urban and regional investment, is important to

ensure we can improve the lives of Australians – as our population continues to grow

– no matter where they live. We want to see continued investment in initiatives that

make it easier for people to stay or move to regional Australia. This means

developing good social infrastructure – especially healthcare – education and retail

services to underpin regional economies. We also support the further nurturing of

cultural vibrancy. That investment in human capital shouldn’t be overlooked; it’s an

important attractor and differentiator for communities.

What are the major impediments to long term growth facing your company and what

can or is being done about them?

We’re in an environment that is facing weak consumer sentiment, flat retail sales, a housing

market that has been very slow until recently and increasing red tape and regulation. Also,

when it comes to the regional banks, the playing field is not level. Healthy and fair

competition will always lead to better customer outcomes, and it needs to be easier for

customers to move their banking to providers like Bendigo and Adelaide Bank.

While regulators are making it easier for start-ups and fintechs to obtain banking licenses

with a view to improving competition, they too will come up against the same structural

features that entrench an uneven playing field that non-major banks like us contend with

today. Giving more power to customers by ensuring different organisations with different

customer relationship propositions can compete on a level playing field will encourage

competition.

The risk-weightings required by the regulator for smaller banks mean that we must hold

more capital against the money we lend. We have seen some movement towards a

lessening of the restrictions on the treatment of risk-weighted assets at the Big Four, but

treatment for advanced banks has still not been finalised. We may be Australia’s fifth largest,

most trusted and most decorated retail bank for customer service excellence, but the rules

say we must use different risk weightings than our larger competitors. A level playing field

requires the system to encourage a degree of dynamism