Bendigo & Adelaide Bank earnings results

CommSec CommSec

 

12 August 2019

Results 

Full Year 2019

Full Year 2018

Change

Net Profit After Tax ($m)

376.8

434.5

-13.3%

Cash Profit ($m)

415.7

445.1

- 6.6%

Bloomberg Consensus ($m)

421.7

 

 

Earnings per share ($)

0.85

0.92

-7%

Cost to Income (%)

59.2

55.6

+6.5%

Net Interest Margin (%)

2.36

2.36

Unch

Final Dividend ($)

0.35

0.35

unch

Bendigo & Adelaide Bank (BEN) profits fall as costs rise and demand for credit moderates 

Results

  • Bendigo & Adelaide Bank (BEN) – Australia’s fourth largest lender reported a 6.6% fall in full year cash profit to $415.7 million from $445.7 million – a result that was below $421.7 million, the average of analysts’ estimates according to Bloomberg. On a statutory basis, net profit fell 13.3% to $376.8m compared to $434.5m in June 2018

Drivers

  • The fall in underlying earnings for BEN reflects a general theme facing most domestic lenders at present where earnings are being hindered by remediation costs stemming from the Royal Commision into Misconduct in the Banking, Superannuation and Financial Services Industry, margin pressures reflecting falling interest rates and headwinds to revenue growth as a result  of increased competition among lenders as demand for credit moderates.
  • Total lending grew by 1.1% to $62.1 billion, with stronger growth of 3.6% in the second half – compared to system lending growth of 2.6 percent. In the second half, residential lending was up 4.3% and agribusiness showed growth influenced by seasonality up 12.8%, whilst small and medium-sized business lending grew 9.5%. Significantly the net interest margin was steady at 2.36% in year-on-year terms, although in half-on-half terms the measure increased by 2 basis points from 2.35% to 2.37%.
  • The result was hampered by higher expenses, which rose by 5.9% to $954.5 million compared to the prior year. This included $16.7 million in remediation costs and $11.9 million in redundancy costs. Remediation costs primarily related to insufficient documentation to demonstrate that services had been provided to Bendigo Financial Planning customers in accordance with their service contracts and products not operating in accordance with their terms and conditions.
  • The cost to income ratio rose by 3.6% to 59.2% for the period. Excluding remediation and redundancy costs, the cost to income ratio was 57.4% up from 55.4% in prior year.

Dividend

  • BEN declared a final dividend of 35 cents per share, taking the total fully franked full year dividend to 70 cents per share.

Outlook

  • There was no specific outlook guidance provided, although given the cost headwinds faced in the last year BEN reaffirmed its focus on lowering costs with the intention of lowering the cost to income ratio towards 50% compared to the full year result of 59%.

Share price

  • Investors have responded positively to BEN’s result. Whilst cash earnings were below consensus forecasts, the positive reaction share price reaction reflects caution in the lead up to the result and lowered expectations that weren’t realised.

 


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