Tag: Bendigo

Bendigo and Adelaide Bank Full Year Cash Earnings Up 13.1%

In the just released results, Bendigo and Adelaide Bank has announced a profit of $423.9 million to June 30 2015.  However, this is more from efficiency and provision adjustment than underlying business momentum, in our view, in a tough market. Nevertheless, they do have a good core franchise, with a relatively high customer satisfaction rating.

Underlying cash earnings were up 13.1%. Net interest margin was squeezed by 4 basis points to 2.20%, reflecting competition in the low interest rate environment. It dropped further in 2H15 to 2.17%. Common equity tier 1 ratio increased 15 basis points to 8.17%. Total capital increased 118 basis points to 12.57%. They continue to focus on achieving advanced capital accreditation, but are not there yet.

Lending growth at 5.3% was below system (7.5%), whilst business lending was 10%, above system, of 8.3%. Home lending was also slower than system growth, and they noted a 20% increase in excess repayments.

Great Southern specific provisions were reduced from $323.8m to $257.7m since December 2014.

They have been focussing on efficiency management, with the expense to incomes ratio down, though overall operating expenses rose 6.6% to $878m.

Looking at the segmentals, retail banking and rural were up, whilst wealth and third party banking were down.

BendigoFy15SegsBad and Doubtful debt provisions were down 16.6%, to $68.1m. However, 2H15 were higher due to $15.9m provision for Great Southern. We note that 90 day+ arrears were up for residential to  (~1.3%) and business to (~1.7%). Rural, their highest growth sector, had highest arrears around 5.5%.

Bendigo Bank Results Show Signs Of Home Loan Competition

Bendigo and Adelaide Bank (BEN), Australia’s fifth largest bank, today announced an after-tax statutory profit of $227.3 million for the six months ending 31 December 2014. The results were in line with the consensus expectations. Underlying cash earnings were $217.9 million, a 10.9 per cent increase on the prior half year result. Bad and doubtful debts expense was $30.1 million, down 29.5% on the prior corresponding period. NIM was maintained at 2.24%. Cash earnings per share were 48.1 cents, an increase of 3.4 per cent.

The interim fully franked dividend of 33 cents per share is up 2 cents on the 2014 interim dividend.

Basel III CET1 ratio increased by 12bps half on half to8.14% and an $292m additional Tier 1 capital issued in October. $600m RMBS was issued in December 2014. Total capital increased 80bps half on half to 12.19%.

Looking at the segmentals, Retail banking was up 14.2% from Jun 2014 ($128m to $146m), Third party banking was down 4.6% from Jun 2014 ($95.8m) to $91.4m, Wealth fell 37.5% from $19.5m to $12.0m and Rural rose 73.3% from $24.3m to $42.1m including the Rural Finance acquisition – in In July 2014, Bendigo finalised its $1.78 billion acquisition of Rural Finance Corp. from Victoria’s state government which has grown its agricultural lending. Overall, home lending grew at just 3.2% compared with system growth of 7.1%, whilst arrears were around 0.5%. There was strong competition through the broker originated channel.

BendigoHomeLendingDec2104They grew business lending by 19.7% compared with system of 7.4%. Business loan arrears were around 1.4%. Deposit growth was 1.5%, compared with system of 9.1%. Bendigo had an 8 basis point squeeze on lending margins thanks to competitive pressures and as a result they reduced term deposit pricing to help partly offset this so the net interest margin remained unchanged. Customer satisfaction remains higher than the majors, highlighting their unique position in the market.

The market reacted negatively to the results, because the growing business lending sector may imply higher loss rates, pressure on home lending margin and share, and reduced provisioning.

 

Bendigo, Credit Unions Launch New Banking Alliance

Bendigo and Adelaide Bank and an Alliance of Australian credit unions today co-launched a new banking model that secures the independence and identities of the participating credit unions.

The Alliance model was developed by Bendigo and four credit unions – AWA, BDCU, Circle and Service One.

Under the Alliance model:

  • The loans and deposits of the participating credit unions will be transferred to Bendigo Bank, while reserves remain 100 per cent member-owned.
  • Alliance members continue to be serviced by their local branch staff.
  • In time, they willhave access to new products and technology from Bendigo, with theAlliance credit unions retaining pricing and loan approval discretions.
  • Bendigo will become the approved deposit-taking institution and will assumer esponsibility for compliance, systems and balance sheet management, with thisdelivering improved economies and cost savings.

The Agreement with Bendigo requires approval from 75 per cent of members voting at the respective credit union AGMs on 10 December 2014 and final approvals from APRA and the Federal Treasurer. The four credit unions combined have 39,000 members, $640 million in assets and $550 million in deposits.

The results from the recent DFA channel usage surveys highlights that players need to be able to move faster to take advantage of the emergence of the digital channels. Many smaller players, especially Credit Unions are hamstrung by their current technology portfolios, so this new model may offer new growth and service paths to the sector.