Bendigo & Adelaide Bank slips in afternoon trade despite earnings beating expectations
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More news: Shares in Bendigo & Adelaide Bank fell in afternoon trade even after reporting first-half earnings that exceeded market consensus expectations.
At 3:55pm AEDT, shares in Bendigo & Adelaide Bank had fallen 2.5% to $11.16, outpacing the losses in the financials sector, which had only slipped 0.1%.
UBS analyst John Storey said first-half FY26 results exceeded VA consensus and UBS forecasts “in terms of [pre-provision operating profit] and cash NPAT by 1.7% and 3.6%, respectively”.
However, he noted Bendigo “outlined a comprehensive action plan to address AML/CTF compliance requirements, with projected costs of $70-$90 million spread over up to three years”.
“These expenses have not yet been factored into UBS or consensus estimates, and AUSTRAC has not issued a decision on the matter.”
Bendigo & Adelaide Bank profit hits $256 million as lending stalls
The news: Bendigo & Adelaide Bank has recorded a $256.4 million cash half-year profit, 3.3% lower than the same period last year, as lending growth stalled.
The numbers: It was a mixed result for Bendigo with the first half cash profit still up 2.8% higher than the second half last year as the bank managed the strategic exit of its mortgage partner business.
As a result residential lending stalled at $65.1 billion, down 2.3% on the previous half and total gross loans contacted 1.9%. Deposits grew 1.1% to $73.7 billion as the bank focused on improving its funding mix, raising lower cost deposits from 52.4% to 53.8%.
The bank managed to increase its profitability as it focused on sustainable growth. The bank lifted its net interest margin (NIM) by four basis points to 1.92% and cash return on equity rose 63 basis points on the previous half, beating consensus expectations according to Visible Alpha (VA).
Total operating expenses grew 4.2% on the back of higher software charges, additional workdays and creeping remediation costs, while the bank said it expected to spend an extra $15 million on its anti-money laundering and counter-terrorism financing (AML/CTF) remediation. A further $10 million would be spent on the migration of the RACQ portfolio but would be absorbed into the current expense guidance.
Bendigo said the overall health of its portfolio had improved, as gross loan impairments fell 3.1% to $125.6 million, with 45% of mortgage customers one year or more ahead of their repayments.
What they said: Chief executive Richard Fennell said the result reflected the progress of its deposit-led approach as it looked for sustainable lending growth.
"This improvement was largely driven by the growth in lower cost deposits benefitting margins, as well as a reduction in costs int he second quarter," Fennell said.
"We remain confident that our residential lending book will return to growth over the second half of the financial year."
The context: In January APRA applied a $50 million operational risk capital charge to Bendigo Bank, hitting its common equity tier one ratio. It followed news that AUSTRAC had identified serious potential contraventions of the AML/CTF act, with the financial watchdog yet to decide its regulatory response.
Our journalists are working to update this briefing. We will publish more shortly.
The source: ASX
