Bendigo and Adelaide Bank has highlighted the pressures of high funding costs and weak demand for loans as it reported a 43 per cent drop in full year profit.
The regional lender made a net profit of $195 million in the 12 months to June 30, down from $342 million in the previous corresponding period.
Contributing to the profit fall was a $95 million writedown on its margin lending operations and wealth management division.
Bendigo's cash profit, which excludes one-off financial items, was $323 million in the 12 months to June, down 3.9 per cent from the previous year.
"There's no doubt that it's been a very challenging 12 months for banks generally, with the issues in Europe meaning competition for deposits has been particularly strong since September," managing director Mike Hirst told analysts on Monday.
Adding to the increasing costs of attracting deposits was the Reserve Bank of Australia's 1.25 per cent reduction in the cash rate since November 2011, he said.
Bendigo has reduced its standard variable interest rates by 1.05 per cent in that time.
The rise in funding costs was reflected in the bank's net interest margin, a measure of the profit it makes on loans.
The margin was 2.1 per cent at June 30, down seven basis points from 12 months earlier.
Mr Hirst said funding cost pressures, plus the weak demand for loans, was likely to continue in the year ahead.
"We don't really see any reason why we shouldn't be able to continue to return a reasonable result, but the uncertainty that is around the market makes it difficult to provide any guidance," he said.
Bendigo increased the value of its loans by 4.5 per cent in the year to June, to $50 billion.
Its deposits grew by 11 per cent to $40.7 billion.
The bank declared a fully franked final dividend of 30 cents per share, in line with the previous year.
Its shares were down four cents at $8.65 at 1512 AEST.