Bendigo Bank reviews money laundering breaches ahead of RACQ acquisition
Bendigo Bank’s chief says it fell short on money laundering controls, as it launches a major review and announces a deal to acquire RACQ's banking arm.
Bendigo Bank has launched a review into money laundering breaches in the wake of a criminal investigation, with the bank’s chief saying he was concerned not enough had been done to fight financial crime.
Speaking as Bendigo Bank revealed plans to buy RACQ’s banking book with $2.7bn of loans and $2.5bn in deposits, chief executive Richard Fennell told investors Bendigo Bank had “fallen short” on anti-money laundering controls.
He said work to improve financial controls would not dominate the bank in the years ahead, but would be a focus.
“We expect this is going to be a pretty significant project that’s going to need a fair bit of focus,” he said.
He said the bank had accepted the findings of a Deloitte review in full, with the lender now to undertake an expensive anti-money laundering (AML) and counter terrorism project.
Mr Fennell said Bendigo Bank had “come out earlier” in the process than its rivals who had also faced similar AML issues.
The Bendigo Bank boss said the transactions core to the AML probe were “still subject to law enforcement activities”.
Mr Fennell said Bendigo Bank’s review did not identify major issues beyond one branch, which he declined to name and has been closed, but it did highlight issues in the lender’s money laundering controls broadly.
He also said its 28-year-old community branch model was not a key risk factor.
“We have not done a review of all branches and all transactions,” he said.
“There’s not been a particular skew of community banks versus company-owned branches from a risk perspective.”
On top of its AML project, Bendigo Bank will now also be focused on rolling up RACQ’s banking arm.
The RACQ acquisition is expected to add nearly 98,000 customers to Bendigo Bank customer base.
The cost of the acquisition will be priced on the final value of the banking book when the deal completes in the first half of 2027.
Bendigo Bank has priced in the deal with some attrition and will not be paid at a premium.
The lender said the new RACQ banking book will deliver $50m to $55m in new earnings, with plans to migrate customers on to Bendigo’s core banking platform.
Mr Fennell said the migration and transaction costs from buying RACQ will total $25m to $30m after tax, with much of this cost to be incurred prior to completion.
Migration efforts to roll up RACQ’s banking arm will kick off next year.
The deal will be funded from existing capital.
Mr Fennell said customers will be migrated to Bendigo Bank’s core system, noting this would not be possible without the work undertaken to improve the bank’s technology systems.
The Bendigo Bank boss said the RACQ banking book would significantly boost the exposure to Queensland, with a large number of owner occupier loans.
Many of these are low loan to value loans.
The cost will be topped off with an additional $12m to $14m cost to service the transfer of the book, which also covers the cost to transfer RACQ staff to Bendigo Bank.
However, Bendigo Bank staff levels are their lowest since 2022 after a series of redundancies.
Consultant levels are also down 30 per cent on levels at the start of the year.
Bendigo Bank will also enter into a referral agreement with RACQ which has 1.7 million members.
RACQ’s insurance operation was bought by Insurance Australia Group in September.
Mr Fennell said he was attracted by RACQ Bank’s “strong deposit franchise and member focus” but the lender was not scoping out other smaller banking acquisitions, noting RACQ initiated the talks.
“We’re not out there knocking on doors looking for more active acquisitions,” he said.
“If other opportunities come up where we think there’s a good fit strategically and economically, and it’s a really good outcome for shareholders, then we’ll consider it.”
More Coverage
Originally published as Bendigo Bank reviews money laundering breaches ahead of RACQ acquisition
Taxi operator shuts down after airport, road bans
