Bendigo & Adelaide Bank earnings results

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12 February 2019

Results

Half Year 2019

 Half Year 2018

Change

Net Profit after Tax ($m)

203.2

231.7

-12.30%

Bloomberg Consensus ($m)

222

 

 

Cash Profit ($m)

219.8

225.3

-2.24%

Net Interest Margin (%)

2.35

2.36

-0.01%

Cost to Income Ratio (%)

57.3

54.2

+3.1%

Total Income ($m)

790.2

842.9

-6.3%

Interim Dividend ($)

0.35

0.35

Unch

Bendigo & Adelaide Bank’s (BEN) earnings fall as cost rise 

 

Results

  • Bendigo and Adelaide Bank reported a statutory net profit of $203.2 million for the first half of 2019, a fall of 12.3% from $231.7 million in the previous corresponding period (pcp). Underlying cash earnings, which removes factors such as one-off events, fell 2.4% from $225.3 million to $219.8 million compared to the pcp. 

Drivers

  • One of the factors creating headwinds for BEN over the period was higher funding costs, which meant the Group’s Net Interest Margin (NIM) – the difference between where the bank raises money and lends it to customers - fell 1 basis point to 2.35%, compared to the same time last year. The decrease in NIM was mainly attributed to higher funding costs in both term deposits and wholesale funding markets.
  • Another factor that constrained earnings was higher than expected costs. Expenses increased by $18.7 million or 4.2%, in part reflecting an increase in staff costs. Staff and related costs increased by $10.6 million or 4.3%, which includes wage and salary increases during the half. At the same time redundancy costs incurred were $2.2 million compared to $0.5 million in the pcp and $1.8 million in the period to the end of December 17.
  • BEN’s mortgage momentum moderated over the period. Residential home loan growth rose 1.0% compared to the previous half year period to be up 3.3% compared to the pcp. Business lending was weak, with the measure falling 4.7% compared to the pcp. 

Dividend

  • The Bank announced a fully franked interim dividend of 35 cents per share, which was 2 cents above market expectations according to Bloomberg, and in-line with the same period last year. It will be paid on 29 March, with an ex-dividend date of 1 March. 

Outlook

  • No explicit earnings guidance was provided, although BEN has taken an optimistic view saying that “even though lending markets remain highly competitive and we operate in an uneven playing field, our housing loan growth is tracking towards system, with a 2.7 percent annualised increase in 1H19.”

Share price

  • BEN shares retreated in the aftermath of the result reflecting lower than expected cash earnings, in addition to the modest pace of growth in residential mortgages and non-home loans. In year-to-date terms BEN shares are down 5%, having fallen 7.5% in 2018.   

Tags:

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