Bendigo and Adelaide Bank to Redeem A$125 Million Subordinated Floating Rate Notes on 14 October 2026 with APRA Approval

Insights into Bendigo and Adelaide Bank's Capital Framework and Subordinated Notes

Bendigo and Adelaide Bank Limited stands as a key player in Australia’s financial services sector, providing comprehensive banking, financial planning, and investment solutions to millions across the country. As with all Australian-regulated banks, BEN maintains a sophisticated capital structure incorporating various regulatory capital instruments designed to satisfy APRA’s prudential standards. Subordinated notes represent a form of debt capital ranking below senior debt in insolvency scenarios, making them a vital component of the bank’s regulatory capital base.

The Subordinated Floating Rate Notes scheduled for redemption were issued under the bank’s Debt Instrument Programme, with a maturity date set for 14 October 2031. These notes feature a floating interest rate, causing coupon payments to adjust periodically based on a reference rate. Issued on 6 October 2021 as per the Pricing Supplement disclosed in the company update, the A$125 million issuance constitutes a significant portion of the bank’s subordinated capital, reflecting the importance of this liability on its balance sheet.

Early Redemption Execution and APRA’s Regulatory Consent

Australian banks cannot redeem subordinated notes early without restrictions. The Terms and Conditions governing BEN’s Subordinated Floating Rate Notes specify early redemption rights that require APRA’s approval. APRA has confirmed its consent for the redemption on the first optional early redemption date of 14 October 2026. This regulatory endorsement is mandatory and affirms that the bank’s capital position remains sound following the redemption.

The bank clarified that redeeming these subordinated notes does not imply intentions to exercise early redemption rights on other regulatory capital instruments. Any such future redemptions would necessitate separate prior written approval from APRA. This assurance is crucial for investors in other BEN-issued capital instruments, indicating no broad capital restructuring but targeted management of this specific issuance.

Redemption Payment Details and Eligible Noteholder Criteria

On the Early Redemption Date of 14 October 2026, each noteholder will receive the full A$10,000 face value per Subordinated Note plus the final interest payment due on that date. Payments will be distributed as per previous interest payments under the note terms. The redemption amount covers principal repayment and accrued interest, consistent with market standards for subordinated debt instruments. Only noteholders recorded on the Record Date of 6 October 2026 will be eligible for payment.

The Record Date, set eight days before the redemption date, allows the bank to identify eligible holders and process payments efficiently. Noteholders who transfer their holdings after this date will not qualify for redemption payments. The company confirmed that capitalised terms in the update retain their definitions from the Subordinated Notes’ Terms and Conditions.

Capital Management Strategy within Australia’s Regulatory Framework

This redemption should be viewed within the context of Australian banking regulations and capital management practices. APRA enforces stringent requirements on the composition and adequacy of banks’ regulatory capital, with different instruments contributing to various capital tiers based on their features and subordination. Opting to redeem subordinated notes at the first optional date typically reflects considerations such as the bank’s capital position, interest rate outlook, and strategic preferences for capital structure.

Australian banks routinely manage capital through redemptions, replacements, and new issuances of regulatory capital instruments, all under regulatory supervision. These activities ensure banks maintain capital buffers above minimum requirements while optimizing capital costs and composition. APRA’s approval of this redemption confirms BEN’s capital remains robust and compliant with prudential standards post-redemption, demonstrating proactive capital management.

Documentation and Communication to Noteholders

The Subordinated Notes are governed by the Information Memorandum for the Debt Instrument Programme dated 20 October 2020, outlining master terms for all instruments under the programme. The specific Pricing Supplement dated 6 October 2021 details the terms for this A$125 million issuance. All redemption procedures comply with these documents, safeguarding noteholders’ legal rights and ensuring contractual adherence.

Alongside this formal company update, Bendigo and Adelaide Bank will issue a redemption notice in The Australian newspaper, following market conventions and Conditions requirements. This notice formally informs all noteholders of the redemption intent, dates, payment amounts, and the Record Date. The combination of the ASX announcement and newspaper notice guarantees clear, timely communication to all noteholders, including those holding notes via intermediaries.

Investor Relations and Media Contact Information

Bendigo and Adelaide Bank has designated contacts for media and investor inquiries related to this update. Sam Miller, Head of Investor Relations and ESG, is available for investor questions regarding the redemption, capital structure implications, or other investor matters. James Frost, Head of Public Relations, handles media enquiries. These contacts underscore the bank’s commitment to transparent communication on significant capital transactions.

Richard Fennell, Chief Executive Officer and Managing Director, approved the release of this update, highlighting the capital management decision’s importance. The CEO’s involvement confirms thorough governance and strategic review. Investors seeking further details on the redemption, capital strategy, or future regulatory capital instruments are encouraged to reach out via the provided channels.

Context of Subordinated Debt Redemptions in Australian Banking Sector

Redemptions of subordinated notes by major Australian banks are common and reflect standard capital management practices. As capital positions strengthen, regulatory requirements evolve, or interest rates fluctuate, banks often exercise early redemption options to optimize capital structures and reduce funding costs. Bendigo and Adelaide Bank’s decision to redeem indicates management’s confidence in the bank’s strategic position and capital adequacy.

Investors in these subordinated notes should recognize early redemption as an inherent instrument feature, posing reinvestment challenges upon redemption on 14 October 2026. The final interest payment will be calculated up to the redemption date per the floating rate mechanism. BEN’s assurance that this redemption does not signal a pattern of early redemptions should reassure holders of other capital instruments regarding investment stability.

Regulatory Compliance and APRA’s Oversight Role

APRA’s approval is a vital element of this capital management transaction. As Australia’s prudential banking regulator, APRA ensures early redemptions of subordinated capital instruments do not impair capital adequacy or bank soundness. Its consent confirms satisfaction with BEN’s capital position post-redemption, providing investors with independent assurance of creditworthiness.

APRA’s requirement for prior approval reflects the regulatory view that subordinated capital is critical for banking system resilience and should not be redeemed if it risks capital adequacy. By mandating approval, APRA prevents banks from undermining capital buffers through opportunistic redemptions. The regulator’s endorsement of this redemption assures investors that the transaction poses no threat to financial stability or the bank’s safety and soundness.