Bendigo Bank posted a 1.96% drop in Net Profit after Tax (NPAT) compared to the 2015 financial year. This result was also driven by a contribution from the Home Safe (reverse mortgage product) due to strong increases in residential property markets of Melbourne & Sydney. The group experienced a flat Net Interest Margin (NIM) over FY16 as the competitive lending environment and increased liquidity requirements continue to pressure margins. This was highlighted by Bendigo cutting its standard variable rate by just 0.10% following the Reserve Bank of Australia’s August rate cut (the major banks passed on 0.10% – 0.14%). We expect these themes to continue during FY17.   As Bendigo Bank is a second tier bank, their credit risk is considered innately higher than the major banks. This is largely due to a less diversified loan portfolio by sector, geographic location as well less access to broader funding channels. Fortunately, Bendigo Bank had less exposure to the mining & energy sector that had negatively impacted the major banks. This resulted in lower bad and doubtful debt expenses, falling from $68.3m to $44.1m.   Click here for updated research.