Annual General Meeting Managing Director's Address 03/11/2010

145th ANNUAL GENERAL MEETING
ADELAIDE
By Managing Director Mike Hirst

Directors, Shareholders, Staff, Ladies and Gentlemen,

When I spoke at last year’s AGM, our Group – like most financial services companies globally – had come through a very testing period as we tried to navigate the Global Financial Crisis.

At that meeting I said that the future for Bendigo and Adelaide Bank was squarely placed in leveraging our key strength and point of difference, namely our engagement with our customers, partners and their communities. Our staff know that by embracing this ethos we will achieve our vision of becoming Australia’s best customer connected bank and, as a result, ensure the long term success of our company.

I am pleased to say that our staff continue to work tirelessly to make this vision a reality and the benefits of that effort are reflected in our 2010 results.

Net profit after tax of $242.6m was up 190 per cent on our 2009 result, albeit that result was heavily impacted by the ramifications of the GFC. Cash earnings per share climbed 32.4 per cent to 83.3c and our dividend returned to pre GFC levels with the full year payment of 58c, up 15c on the prior year.

Importantly, the 2010 result vindicates our approach in managing the business through unchartered waters, all stakeholders’ commitment to our vision and the values that underpin how we go about doing business.

Of course, this commitment is provided, in the first instance, by our staff. Their support goes far beyond what one would expect to see in any company and is epitomised by the high percentage of staff who volunteered to participate in the unpaid leave programme.

But it also goes far beyond that. For example, many of our retail and community staff are required to work outside standard hours to support our strongly growing Community Bank® network; our margin lending business, Leveraged Equities, experienced record volumes and many extra hours whilst also integrating the Macquarie Bank margin lending business we purchased; and, our Great Southern team have faced significant hurdles as they deal with the customer issues that have presented as a result of the now uncertain class actions.

Our partners also play a large role in our success. Whether that be the communities who partner us in the Community Bank® network, which has now seen $41.1 million in community dividends paid, or the many partners we have in our third party mortgage and wealth businesses all our partners are clearly committed to the Bendigo and Adelaide Bank’s promise of engaging with our customers.

How that engagement plays out varies from business to business – as it should. But it all starts in the same place – listening to what it is our customers are seeking to achieve and then helping them do that. If we are successful in those endeavours it will mean we become relevant to our customers and their ambitions. If we can execute properly on that increased relevance then we will establish an ongoing connection that will see us be the first port of call for our customer’s financial services needs. As a result, we will be truly valued by our customers and the flow on effect to the long term sustainability of the business is obvious, as is the impact on shareholder value.

Let me now turn my attention to the medium term. We know that there are still many challenges to be faced.

As we have already heard from the Chairman, the impact of the GFC will soon be felt through an increase in regulatory requirements for banks. We know both the capital and liquidity requirements that underpin depositor confidence will be increased.

The funding issue described by the Chairman is a structural savings issue that needs attention. It is not so much that we do not have a strong savings culture, our superannuation scheme is world class; it is more a matter of those savings finding their way to investment instruments that make our economy more efficient and resilient.

It is well documented that funding issues during the GFC depressed competition in Australia’s banking industry and, whilst some overhang remains, Government initiatives around sourcing funding for players such as ourselves are providing a platform for second tier players to take on the major banks.

In the context of all the above, Bendigo and Adelaide Bank is well placed to grow our business. The challenge we have set ourselves over the medium term is to make it easier for customers to do business with us.

To enable us to deliver on that, our focus is firmly set on becoming more efficient, securing the necessary funding we need to support our customers and growing the business.

I believe we have the strategic platform we require to take the business to that next level.

Our retail banking business, under the Bendigo Bank brand, has a network that is continuing to grow by some 20 branches each year. A large number of these branches are well short of maturity, many of them being less than five years old.

The staff who work in this business continue to build our brand by ensuring that the customers’ experience exceeds their expectations. The proof of this is there for all to see as we continually lead in measures of brand advocacy and our customer satisfaction rating has been at or near the top of the banking industry for well over a decade.

The major wealth and third party businesses, Leveraged Equities, Adelaide Bank and Sandhurst Trustees are well placed from a product perspective and they have emerged from the GFC as much stronger businesses. Whilst some of them are very much beholden to market conditions e.g. margin lending, others have been reshaped and are again strongly competing in the open market.

Our third party mortgage business is a clear example of the reshaping. Prior to the GFC the reward structures in that business had fallen out of line with the risks being undertaken, to the point where profitability was marginal. That is not the case today as commissions have been adjusted and relationships realigned.

We announced last week that we have reached agreement with Elders to purchase the 40 per cent of Rural Bank that we don’t currently own. I see this very much as underlining our commitment to rural and regional Australia and complementing our existing suite of separately branded businesses, all driven by the same motive of customer engagement. I have a very positive view of the opportunities that are before Rural Bank. The change in ownership allows Elders and ourselves to play to our strengths and I believe Rural Bank customers and staff can look to the future with a great deal of optimism.

Importantly we continue to invest in the areas that support the above businesses.

The completion of our Linx customer relationship system after almost four years of development is something that all staff involved with the project can be justifiably proud of. The feedback on the system from our customer facing staff gives us confidence that we will achieve the dual benefits of providing an even better customer experience and a more efficient workforce.

Our Risk management framework continues to develop and in many aspects is market leading for organisations of our size.

Today, I’m also pleased to announce our search for a new corporate head office in Adelaide has progressed, with a preferred site now identified.

The location under consideration is the existing Harris Scarfe site on Grenfell Street. Discussions with a developer will continue over the coming months in an effort to negotiate a suitable outcome for the bank and its Adelaide-based staff.

The planned site will accommodate about 1000 employees from three locations across this city, providing our staff with a well-designed and environmentally-friendly office environment which encourages greater productivity for our organisation and enhances a one team environment for our Adelaide employees.

The above are just some of the many examples of how your business is continuing to improve. In short, with our current focus on making it easier for customers to do business with us, improving access to funding and the continued support of our staff I believe we are well placed for the future.

In closing I would also like to thank the shareholders, partners and customers who continue to provide their support to this organisation. This support is never taken for granted and is greatly appreciated by all our staff.

Thank you.