(The following statement was released by the rating agency) Fitch Ratings-Sydney-September 10: Fitch Ratings has today affirmed the Long-Term Issuer Default Rating (IDR) of Australia-based Bendigo and Adelaide Bank Limited (BEN) at 'A-'. The Outlook is Stable. BEN's other ratings were also affirmed at the same time. Bendigo and Adelaide Bank Limited; Long Term Issuer Default Rating; Affirmed; A-; RO:Sta ; Short Term Issuer Default Rating; Affirmed; F2 ; Viability Rating; Affirmed; a- ; Support Rating; Affirmed; 3 ; Support Rating Floor; Affirmed; BB ----senior unsecured; Long Term Rating; Affirmed; A- ----subordinated; Long Term Rating; Affirmed; BBB+ ----senior unsecured; Short Term Rating; Affirmed; F2 Key Rating Drivers IDRS, VIABILITY RATING AND SENIOR DEBTBEN's Viability Rating is underpinned by its risk appetite, which is reflected in its slant towards residential mortgages and its underwriting standards. BEN has a higher proportional exposure to commercial and investor loans than its regional bank peers, but its loan mix is not dissimilar to the Australian major banks and we do not expect this to change.The challenging operating environment and low interest rates are likely to pressure profitability in the financial year ending June 2020 (FY20). We expect cost control to be a focus, although this may be difficult in light of continued investment in systems, potential remediation expenses and the likelihood of rising impairment expenses from current low levels.Fitch expects BEN to remain primarily deposit funded. However, the bank's reliance on wholesale funding sources, a common feature among most Australian banks, means its funding structure will remain weaker than that of similarly rated international peers. Its reliance on wholesale funding is nevertheless lower than that of its domestic peers and its wholesale funding maturity profile and sound liquidity management provide some offset to this risk.Fitch expects BEN's capitalisation to gradually increase in line with the sector and maintain adequate buffers to regulatory minimums. The bank has the ability to raise new common equity through shareholder participation in its dividend reinvestment plan or access capital markets directly if required.BEN has a modest market share and is unlikely to significantly improve its market position relative to the major banks in the short-to-medium term without an erosion in risk appetite. The bank operates a relatively transparent and stable business model and we expect earnings volatility to be modest through the cycle.BEN's Short-Term IDR of 'F2' is at the lower of the two options available at the 'A-' crossover point. This reflects Fitch's view that the funding and liquidity score is not sufficient to support the higher of the options under the Short-Term Ratings Criteria.SUPPORT RATING AND SUPPORT RATING FLOORBEN's Support Rating of '3' and Support Rating Floor of 'BB' reflect the moderate potential of government support should it be needed in light of the bank's modest market share and role in the banking system.SUBORDINATED DEBT AND OTHER HYBRID SECURITIESThe ratings of the subordinated debt issued by BEN are notched one level down from the anchor Viability Rating for loss severity. These instruments absorb losses through conversion to equity in part or in full, with write-off only occurring if the conversion cannot take place. No notching has been applied for non-performance risk. RATING SENSITIVITIES IDRs, VIABILITY RATING AND SENIOR DEBTBEN's IDRs and VR are sensitive to any weakening in its risk appetite, such as a loosening of underwriting standards or risk controls in the pursuit of growth. A weakening could result in a larger-than-peer deterioration in asset quality, profitability and capitalisation should there be a significant downturn in the operating environment. Positive rating action on the VR is unlikely as it would require a substantial improvement in BEN's franchise.SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating and Support Rating Floor are sensitive to changes in Fitch's assumptions about the propensity or ability of the Australian sovereign (AAA/Stable) to provide timely support. We expect Australia's resolution framework to continue to be strengthened, although a senior bail-in framework appears unlikely in the short-to-medium term. Negative action on the Support Rating and Support Rating Floor will not directly affect BEN's IDRs, which are currently driven by the Viability Rating.SUBORDINATED DEBT AND OTHER HYBRID SECURITIESBEN's subordinated debt ratings are sensitive to the same considerations as the Viability Rating. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.For more information on our ESG Relevance Scores, visit www.fitchratings.com/esg Contacts: Primary Rating Analyst Jack Do, Director +61 2 8256 0355 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Secondary Rating Analyst Tim Roche, Senior Director +61 2 8256 0310 Committee Chairperson Heakyu Chang, Senior Director +822 3278 8363
Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Bank Rating Criteria (pub. 12 Oct 2018) https://www.fitchratings.com/site/re/10044408 Short-Term Ratings Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073011 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10088568 Solicitation Status https://www.fitchratings.com/site/pr/10088568#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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