sydney australian banks will continue to see their margins squeezed amid an environment of ultralow rates and an ongoing mortgage market competition but bendigo and adelaide bank ltd believes cash rate increases may give it some relief the australian regional lender on monday said its halfyear net profit rose 32 to 3213 million australian dollars us2293 million for the six months through december as its residential lending book grew faster than its peers but its net interest margin a measure of the difference between what a bank pays to get deposits and funds and what it charges to lend money was 14 basis points lower than the second half of fiscal 2021 at 209 bendigo said this drop reflected the increase in its liquidity position fierce competition across most lending categories and consumers continued strong preference for fixedrate loans marnie baker bendigos chief executive told the wall street journal that the outlook for nims was absolutely challenging but the potential for the reserve bank of australia to increase its cash rate earlier than anticipated could help the lenders balance sheet weve seen nims under pressure right across the sector for the last couple of years i think what were seeing now is signs of a rate environment changing that is actually going to give an opportunity to improve that nim moving forward she said were already seeing the signs of customers moving from fixed rates to variable rates for the second half of fiscal 2022 bendigo expects continued margin pressure with headwinds expected to moderate by the end of the second half of fiscal 2022 australian bank nims have been hurt by the low interestrate environment which fueled a surge in house prices this spurred competition for mortgage market share between lenders while also squeezing margins in the current reporting season westpac banking corp reported its nim was down eight basis points to 191 when measured against the quarterly average for the second half of fiscal 2021 the countrys largest lender commonwealth bank of australia said its nim for the first half of fiscal 2022 was 14 bps lower on year at 192 cba said this was partly due to increased switching to lowermargin fixed home loans market expectations of higher interest rates and ongoing home loan competition ms baker said that bendigos plans to boost its business banking was an opportunity for growth after business lending was challenged in the first half with a focus on driving growth and earnings that are higher margin while residential lending grew at 11 times the systems rate and was up 84 on an annualized basis for the first half business lending slumped 83 this saw total lending for bendigo grow 43 compared with the systems growth of 83 we already have quite a unique opportunity from a business banking perspective we play in the small to medium enterprise part of the market said ms baker its not a part of the market that tends to be overly serviced by financial institutions and the fact that we are represented in over 500 communities right across australia gives us an opportunity with our relationship style of banking to be banking most not all small to medium business in those communities where we operate after announcing this month that it was bringing its business banking and agribusiness divisions together with a clear focus on growth for the second half of fiscal 2022 bendigo said it expected a seasonal increase in its agribusiness credit growth it said this would drive nearterm lending growth while residential lending growth would continue to exceed system growth