There are no signs of a rise in bad debts for regional lender, Bendigo and Adelaide Bank, despite a challenging environment, its boss Mike Hirst says.

In a sombre presentation to shareholders at the bank’s annual general meeting, Mr Hirst said banks would struggle to grow revenue as long as consumer and business sentiment remained weak.

New regulatory requirements for banks to hold more capital are also making it challenging for the sector to increase profits.

“These imposts, combined with the lower level of absolute interest rates, will ensure lower returns from banks than those experienced in the years prior to the global financial crisis,” Mr Hirst told shareholders in Adelaide.

Bendigo’s cash profit for the 2011/12 financial year of $323 million was down 3.9 per cent on the previous year, reflecting the impact of weak demand for loans.

ANZ chief executive Mike Smith warned last week that the sector could soon face rising costs from unrecoverable loans, but Mr Hirst on Monday said Bendigo had so far had no sign of a rise in bad debts.

“Not at this stage,” he told AAP after the meeting.

“I think as interest rates are coming down that will ensure that doesn’t become entrenched.

“But conditions are challenging for everybody.”

Employment would be the main factor for bad debts, he said.

“Employment is really the key to all of this, and employment is pretty good,” Mr Hirst said.

“Sure, we’ve seen some different things pop up from time to time in areas that are predominantly challenged by the strong Australia dollar, but compared to the rest of the world, things are pretty good in that area.”

The unemployment rate rose to 5.4 per cent in September, from 5.1 per cent in August, but 14,500 jobs were added to the economy in September.

Mr Hirst said Bendigo was focused on achieving long-term growth through the current economic turmoil, primarily by strengthening its relationship with its customers.

“Long-term research on companies shows that the best performed firms are those that invest, innovate and grow through periods of difficulty – and that is what we plan to do,” he said.

The bank’s long-term approach meant it would not be driven solely by price, Mr Hirst said, hinting Bendigo would continue to reduce its interest rates at a slower rate than the cash rate.

All resolutions at the meeting, including a vote on the company’s executive pay report, were overwhelmingly supported by shareholders.

Bendigo shares closed one cent down at $7.97 on Monday.