Bendigo & Adelaide Bank said its full year cash profit rose 4.2 per cent to $418.3m against expectations of $423m driven largely by repricing of mortgages and higher margins.
Bendigo & Adelaide Bank CEO Mike Hirst said that the result was a strong one that was above system growth but somewhat hampered by the banking regulator’s macro-prudential intervention designed to cool the housing market and protect depositors.
“Recently APRA’s lending caps have somewhat restricted that strong lending growth across the retail, and third party channels, however, margin expansion was strong in the second half” Mr Hirst said.
A flash note from UBS said the result was reasonable and margins should improve as repricing benefits flow through however lending and deposit volume were subdued. At 11am Bendigo Bank shares were up 4.5 per cent to $11.77.
Mr Hirst also acknowledged the issues facing the banking industry as a whole, following Commonwealth Bank’s announcement that CEO Ian Narev wouldl be stepping down following the AUSTRAC scandal.
“There is no doubt the industry is challenged on the trust front and on the trust front we come up well” Mr Hirst said.
Return on equity at the bank was up 31 basis points on the second half, and by 10 basis points on the previous full year.
The bank announced a fully franked dividend of 34¢ a share in line with the second half bringing the full year dividend to 68¢ fully franked. The bank said a 1.5 per cent discount would apply to shares purchased under the dividend reinvestment scheme.
Cash earnings per share came in at 88.5c a share compared with consensus estimates of 91c a share.
The bank’s net interest margin (NIM), or the difference between the rate it lends money out and the rate it pays depositors, fell to 2.22 per from 2.23 per cent the previous year. The NIM was up 8 basis points from the previous half.
This reflects a change in the bank’s calculation of the NIM announced last week that brings the metric in line with the big four.
Earlier this year, chief financial officer Richard Flavell said the NIM was broadly stable in the first few months of the year because of repricing initiatives.
The bank reported a CET1 ratio of 8.27 per cent up 30 basis points, however the bank said that CET1 alone was not the only measure of capital strength.
“Until APRA announces the risk weights we really only know half the story about what unquestionably strong means” Mr Hirst said.
Mr Hirst said the bank was not seeing any stress on its mortgage portfolio with the exception of mining areas in Western Australia and QLD and its troublesome Great Southern portfolio. He also said the bank was committed to its branch and employee footprint contrary to industry trends.
“As we move into an environment when the regulatory environment and the oversight on institutions and the penalties for not doing the right thing became greater and greater owning your distribution will become more and more important” he said.
Chief financial officer Richard Fennell said while the result was pleasing bad and doubtful debts were a drag on the business. He also said the bank was managing its lending growth carefully.
“We remain below the 10 per cent credit growth cap on investors, we have made changes to ensure we are below the 30 per cent cap on interest only loans for the September quarter” Mr Flavell said.