Bendigo and Adelaide Bank (ASX: BEN) has just agreed to acquire RACQ Bank’s retail loan and deposit book in a deal that will shift around A$5.2 billion in loans and deposits and more than 90,000 customers. At the same time, the regional lender is grappling with a major anti–money laundering (AML) review, a police probe and fresh job cuts.
For RACQ members, the transaction promises better digital banking and a bigger branch network. For investors, it creates a complex mix of earnings upside, regulatory risk and the possibility — but not the guarantee — of double‑digit returns if things go right.
This article is based on information available up to 6 December 2025 and is general news and analysis, not personal financial advice.
Inside the Bendigo–RACQ transaction
Deal size, structure and timing
Bendigo Bank has agreed to acquire RACQ Bank’s retail lending assets and deposits, subject to regulatory approval. As at 30 June 2025, the portfolio comprised: [1]
- A$2.7 billion in retail loans
- A$2.5 billion in retail deposits
- More than 90,000 customers, most in Queensland
Key financial terms disclosed to the market include: [2]
- The book will be acquired at book value, not at a premium.
- The deal is funded entirely from Bendigo’s cash reserves.
- It will consume about 35 basis points of CET1 capital.
- The assets are expected to generate A$50–55 million of net interest income per year based on the June 2025 book.
- Incremental costs to service the portfolio are put at A$12–14 million before tax.
- One‑off migration and transaction costs are estimated at A$25–30 million after tax, mostly incurred before completion.
Bendigo told investors the acquisition should be accretive to both return on equity and cash earnings per share, adding roughly 35–40 basis points to ROE and around 4–5 cents per share in cash EPS on an annualised basis once fully bedded down. [3]
On timing, there is a slight nuance:
- Bendigo’s public release and investor update say the asset and liability transfer is expected to complete in the first half of FY27 (1H27). [4]
- RACQ and several news outlets refer to completion in the second half of calendar 2026, with subsequent integration into Bendigo’s systems. [5]
Taken together, the guidance suggests customer migration will occur between late 2026 and early 2027, depending on regulatory approvals and technology milestones.
Why this book is attractive to Bendigo
Bendigo is buying more than just volume. The RACQ portfolio offers: [6]
- A “strong deposit franchise”, with retail deposits representing about 92% of the lending portfolio and a high share of low‑cost deposits.
- A largely prime, owner‑occupier mortgage book with conservative loan‑to‑value ratios.
- A clean integration path into Bendigo’s soon‑to‑be‑simplified core banking platform — the bank expects to reduce from eight core systems in 2019 to a single system by the end of 2025, enabling cheaper migration.
Strategically, the acquisition:
- Lifts Bendigo’s Queensland share of residential lending from ~15% to ~18%. [7]
- Modestly expands its loan book (about A$85.9 billion) and deposit base (A$72.9 billion). [8]
- Deepens ties with RACQ’s 1.7 million members via a long‑term referral agreement for savings and home loans. [9]
Crucially, Bendigo is not paying a control premium for the business. Banking Day notes that the RACQ Bank book has recently been in decline; the absence of a premium reflects both that weakness and a highly competitive market for deposits. [10]
The Australian’s DataRoom column reports headline deal economics “worth up to A$200 million”, but emphasises that pricing is ultimately tied to the book value at completion, consistent with Bendigo’s own disclosures. [11]
Why RACQ is exiting banking
For RACQ, this is the second major portfolio sale in 2025. Earlier this year, the motoring club sold its insurance business to Insurance Australia Group (IAG) for A$855 million, approved by the ACCC in May. [12]
The RACQ statement on the banking sale frames the deal as part of a wider strategic pivot: [13]
- RACQ has concluded that maintaining a competitive digital bank would require significant ongoing investment in technology, regulatory compliance and product development.
- As a relatively small bank (around 90,000 customers out of 1.7 million RACQ members), RACQ Bank struggled to cross‑sell heavily into the membership base. [14]
- Selling the banking book allows RACQ to:
- Focus on its 2032 strategy around mobility, road safety and insurance
- Invest in solar and battery offerings, automotive services and travel
- Pour at least A$100 million into a new community fund targeting road safety, electrification and resilience.
In short, RACQ is doubling down on being a membership and services organisation, rather than trying to keep pace with the escalating arms race in banking technology and regulatory capital.
What changes for RACQ Bank customers?
Day‑to‑day impact
Both organisations stress that, for now, it is “business as usual” for RACQ Bank customers: accounts remain open, new loans are still being written and the RACQ Bank brand continues to trade until completion. [15]
Once the transaction completes: [16]
- RACQ Bank customers will be migrated onto Bendigo Bank products and its core banking system.
- They will gain access to:
- More than 70–75 Bendigo branches in Queensland
- The bank’s national network of over 400 locations
- A broader suite of savings, transaction, credit card, home loan and personal lending products
- Digital services including Bendigo’s partnership with Up, its digital bank, and an expanded collaboration with Google for AI and cybersecurity capabilities.
- RACQ membership is retained for 12 months after the banking transfer, regardless of whether the customer keeps banking with Bendigo.
Courier‑Mail reporting suggests the move will affect roughly 100,000 RACQ banking members, and notes that the RACQ–Bendigo referral deal should maintain access to financial services for the wider 1.7 million RACQ membership base. [17]
What happens to the “old” RACQ Bank?
APRA data indicates that RACQ Bank had around A$2.4 billion in household deposits and A$2.6 billion in mortgages as of October 2025. After the transfer, Banking Day expects RACQ to be left with a rump banking entity of around A$1 billion in assets, which may ultimately be wound up or sold, with the authorised deposit‑taking institution (ADI) licence likely surrendered. [18]
AML storm clouds over Bendigo
The RACQ transaction is unfolding against a challenging regulatory backdrop for Bendigo.
Deloitte review finds system‑wide deficiencies
In August 2025, Bendigo engaged Deloitte to investigate suspicious activity indicative of money laundering at one of its branches, after the bank itself reported the matter to AUSTRAC and law enforcement. [19]
Deloitte’s review focused on transactions at the branch between 1 August 2019 and 1 August 2025, but concluded that the problems extended far wider. Key findings, as summarised by Reuters and Banking Day, include: [20]
- Deficiencies in Bendigo’s approach to identifying, mitigating and managing money‑laundering and terrorism‑financing risks.
- Weaknesses in:
- ML/TF risk assessment and enhanced customer due diligence
- Oversight and governance of ML/TF risk
- The transaction monitoring program, with poor coverage of many ML/TF risk indicators.
Bendigo’s board has described itself as “very disappointed” and has committed to fully funding an AML uplift program, though the final cost remains unknown. The bank has pledged to work constructively with AUSTRAC, APRA and ASIC as it responds to the findings. [21]
Police probe, branch closure and community model questions
Separate reporting from The Australian and other outlets shows that: [22]
- Suspicious activity was linked to the Pinewood Community Branch in Mount Waverley, Melbourne, part of Bendigo’s well‑known community bank franchise model.
- The branch’s franchise agreement has been terminated and the branch closed.
- Four people were arrested by Victoria Police in early September over alleged handling of criminal proceeds; they were later released pending further investigation.
- There is no suggestion that the local community franchise company or its staff were knowingly involved.
The episode has triggered a broader review of Bendigo’s community bank model, even as CEO Richard Fennell continues to defend it as a key differentiator for the group. [23]
Job cuts and AML costs
According to coverage summarising Australian Financial Review reporting, Bendigo is already reshaping its workforce to fund the AML uplift: [24]
- Since August, permanent headcount has fallen by about 3.6%, from 4,777 to 4,589.
- Use of contractors has been cut by around 30%.
- The bank is prioritising investment in financial crime teams, which are not part of the reductions.
- Executives have not disclosed a total AML program budget but suggest it will be below the roughly A$60 million spent by a rival bank facing similar issues, implying a still‑significant but potentially more modest bill.
Analysts caution that, beyond the internal uplift spend, there is still uncertainty about possible AUSTRAC enforcement action or capital penalties, which could affect earnings and dividends over the medium term.
Share price reaction
The market has responded sharply to the AML disclosures:
- On 25 November, following news of the Deloitte review, Bendigo shares fell around 6–8% intraday, trading near A$10.10–10.30, making the bank one of the worst performers on the ASX 200 that day. [25]
- The stock has since recovered some ground; data from MarketScreener on 5 December shows BEN trading around A$10.38, still well below levels seen earlier in the year. [26]
The AML issue is now the main overhang on the share price — and it colours how analysts view the otherwise strategically attractive RACQ acquisition.
How analysts see the RACQ deal and BEN shares
Valuation and consensus
Analyst and data‑provider snapshots as of early December show a cautious but not outright bearish stance: [27]
- MarketScreener’s compiled consensus (13 analysts):
- Mean rating: Hold
- Average target price: A$10.58, implying about 1.9% upside from A$10.38.
- Reuters / LSEG data via TradingView:
- 12 analysts: one rates BEN a Buy or equivalent, seven rate it Hold, four rate it Sell.
- Median target price: A$11, about 6% above recent trading. [28]
- Morningstar keeps its fair value estimate at A$11 per share, calling the RACQ deal strategically sound but not transformational. It estimates the acquisition adds nearly 4% to FY27 loan and deposit forecasts and around 5% to profit from FY28. [29]
- TipRanks notes the most recent broker research carries a Sell rating with a A$10.50 target, while broader sentiment screens as “Hold”. [30]
Separately, Macquarie is reported to have assigned BEN an “underperform” rating and A$10.50 target, implying only modest upside from current levels. [31]
In other words, most mainstream analysts see limited capital gains in the near term but acknowledge that, if AML issues are resolved and the RACQ integration goes smoothly, there is some scope for rerating toward the A$11 fair‑value area.
How the RACQ deal itself is viewed
Coverage of broker commentary collated by MarketScreener suggests a range of views on the RACQ transaction: [32]
- Citi: highlights that the deal could boost Bendigo’s cash earnings by 4–5%, thanks to added net interest income and the absence of a premium.
- Jarden: describes the deal as financially “immaterial” but strategically sound, adding diversification but not dramatically changing the bank’s trajectory.
- Jefferies and JPMorgan: stress that AML costs and potential capital consequences are likely to dominate the investment debate, with at least one broker flagging a possible 2% hit to EPS under a tougher regulatory outcome.
Overall, the RACQ acquisition is seen as incrementally positive, especially given the quality and funding profile of the book, but not enough on its own to offset AML uncertainty.
Dividend yield and income appeal
One reason BEN continues to attract attention from income‑oriented investors is its dividend profile.
Recent dividend data across several providers shows: [33]
- Bendigo paid A$0.63 per share in dividends in FY25 (A$0.30 interim, A$0.33 final).
- At a share price around A$10.40, that equates to a trailing yield of roughly 6%.
- Various data sets quote current or recent yields in the 5–7% range, depending on methodology, currency and whether franking credits or forecast cuts are considered.
For yield‑focused shareholders, this means that even if the share price goes sideways, the income component alone can potentially deliver mid‑single‑digit returns — assuming the bank can maintain its current payout and avoid material regulatory penalties.
Could BEN shares really deliver double‑digit returns?
A widely cited piece on Motley Fool Australia, headlined along the lines of “This bank’s shares could deliver double‑digit returns, analysts say”, uses Bendigo as a case study for how regional bank stocks might deliver robust total returns when dividends and modest capital growth are combined. [34]
Those sorts of headlines rest on scenarios like the following, using current data:
- Dividend income
- Trailing dividends of about A$0.63 per share on a roughly A$10.40 share price imply a yield near 6%. [35]
- Modest price appreciation to consensus targets
- If the share price moved from A$10.38 to the A$10.58 consensus target, that’s about 2% capital growth. [36]
- Rerating to Morningstar fair value
- If AML concerns subside and the market rerates BEN to Morningstar’s A$11 fair value, the capital gain from A$10.38 would be roughly 6%, and together with a 6% yield, you’re in ~12% total return territory. [37]
- Longer‑term compounding
- Morningstar and others see the RACQ deal adding about 5% to profit from FY28, assuming successful integration. [38]
- If earnings grow modestly and dividends grow in line (or even slightly ahead), multi‑year total returns could also compound into the high single digits or low double digits.
This kind of maths underpins the “double‑digit returns” narrative: a mid‑single‑digit to high‑single‑digit yield, plus modest re‑rating and earnings growth, can push total shareholder returns into the 10–12% zone under favourable conditions.
However, it is important to stress:
- These are scenarios, not guarantees.
- They assume no large AML fine or capital raising, and that the RACQ integration delivers the expected accretion on time.
- If AML outcomes are worse than expected or the economy weakens sharply, returns could fall well short of those optimistic cases.
Key risks to watch
For both customers and investors, several risk themes will shape how this story plays out in 2026–27.
1. AML enforcement and remediation uncertainty
- AUSTRAC has not yet announced any specific enforcement action against Bendigo.
- Past cases at other banks have involved substantial civil penalties and expensive remediation programs; markets are wary that a similar pattern could emerge here. [39]
- The final cost of Bendigo’s AML uplift program is unknown, and management has already begun cutting headcount and contractors to help fund it. [40]
2. Execution risk on the RACQ integration
- Success hinges on Bendigo’s ability to complete its core banking simplification and then migrate RACQ customers with minimal disruption. [41]
- Any major IT or customer‑service issues could erode the expected ROE and EPS benefits and damage Bendigo’s reputation in Queensland.
3. Competitive pressure in deposits and mortgages
- Challenger banks and digital players such as Macquarie and ING continue to compete aggressively on deposit rates, compressing margins. [42]
- Rising AML and regulatory costs for smaller and regional banks could narrow their ability to out‑price the major banks over time.
4. Macro and credit cycle risk
- Higher‑for‑longer interest rates or a sharp economic slowdown in Australia would pressure:
- Loan growth, particularly in housing
- Credit quality, raising bad‑debt charges
- Potentially capital ratios, if losses spike
The RACQ book is relatively prime and low‑risk, but Bendigo’s broader portfolio is still exposed to the usual banking cycle headwinds.
Bottom line: A strategically sound deal overshadowed by compliance questions
As of 6 December 2025, the Bendigo–RACQ transaction looks strategically logical for both sides:
- Bendigo gains a cheap, deposit‑rich, low‑risk book that fits neatly into its Queensland growth ambitions and leverages its ongoing technology transformation. [43]
- RACQ simplifies around its core strengths in mobility, insurance partnerships and member services, freeing capital and attention for its 2032 strategy and community initiatives. [44]
For investors, however, the story is more finely balanced:
- On the upside, the deal is ROE and EPS accretive, adds high‑quality assets, and could support mid‑ to high‑single‑digit total returns when combined with Bendigo’s substantial dividend yield. [45]
- On the downside, AML deficiencies, potential regulatory action and uncertain remediation costs remain the dominant drivers of sentiment and valuation. [46]
If Bendigo can satisfy regulators, quantify AML costs, and execute the RACQ integration smoothly, the share price may drift closer to the A$11 fair‑value estimates over time, making the double‑digit return scenarios more plausible. If not, the bank could find itself spending the next few years cleaning up past mistakes rather than capitalising on its new scale in Queensland.
Quick FAQ
Will RACQ Bank customers automatically become Bendigo Bank customers?
Yes. Once the deal completes (expected between late 2026 and early 2027), RACQ Bank accounts will be migrated to Bendigo Bank products and systems. Until then it is business as usual under the RACQ Bank brand. [47]
Is my money safe during the transition?
RACQ Bank and Bendigo Bank are both regulated Australian banks. Eligible deposits at both institutions are covered by the Financial Claims Scheme up to A$250,000 per account holder, per authorised bank, subject to standard government rules. Customers should still monitor official communications for any account‑specific changes.
Is this article financial advice?
No. This is general news and analysis based on public information as at 6 December 2025. It does not take into account your personal objectives, financial situation or needs. Consider speaking to a licensed financial adviser before making investment decisions.
References
1. www.bendigobank.com.au, 2. announcements.asx.com.au, 3. announcements.asx.com.au, 4. announcements.asx.com.au, 5. www.racq.com.au, 6. announcements.asx.com.au, 7. www.bendigobank.com.au, 8. www.businessnewsaustralia.com, 9. www.racq.com.au, 10. www.bankingday.com, 11. www.theaustralian.com.au, 12. www.businessnewsaustralia.com, 13. www.racq.com.au, 14. www.bankingday.com, 15. www.racq.com.au, 16. www.bendigobank.com.au, 17. www.couriermail.com.au, 18. www.bankingday.com, 19. www.bankingday.com, 20. www.reuters.com, 21. www.reuters.com, 22. www.theaustralian.com.au, 23. www.theaustralian.com.au, 24. theaussiecorporate.com, 25. www.reuters.com, 26. www.marketscreener.com, 27. www.marketscreener.com, 28. www.tradingview.com, 29. www.tradingview.com, 30. www.tipranks.com, 31. www.fool.com.au, 32. www.marketscreener.com, 33. dividendstocks.cash, 34. www.fool.com.au, 35. divvydiary.com, 36. www.marketscreener.com, 37. www.tradingview.com, 38. www.tradingview.com, 39. www.reuters.com, 40. theaussiecorporate.com, 41. announcements.asx.com.au, 42. www.theaustralian.com.au, 43. announcements.asx.com.au, 44. www.racq.com.au, 45. announcements.asx.com.au, 46. www.reuters.com, 47. www.bendigobank.com.au
