Bendigo and Adelaide Bank Ltd (ASX: BEN) shares are down 5% after reporting its half year report to 31 December 2018.

Bendigo and Adelaide Bank is the largest ‘regional’ bank in Australia, it is Australia’s fifth largest retail bank with 1.6 million customers. Bendigo Bank can trace its history back to 1858 when the Bendigo settlement was going through the gold rush.

Why Bendigo’s Shares Are Down 3%

Compared to the December 2017 half year result, statutory profit fell by 12.3% to $203.2 million and cash earnings dropped by 2.4% to $219.8 million. On a per-share basis, statutory earnings per share (EPS) dropped 13.3% to 41.7 cents and cash EPS fell 3.6% to 45.1 cents.

Consensus analyst expectations were for net profit to be $222.50 million, so it appears Bendigo Bank slightly missed expectations.

A key cause of the fall in profit was the $11.5 million decrease $11.5 million to $656.5 million because the net interest margin (NIM) fell by 1 basis point (0.01%) to 2.35% before revenue share arrangements. The decrease of the NIM was due to higher funding costs.

Expenses also increased by $18.7 million due to higher legal costs, salary increases and software licence fees,

Bendigo Dividend and CET1 ratio

Bendigo decided to maintain the dividend at 35 cents per share.

The bank reported that its CET1 ratio, which measures how much capital it has in reserve, had improved by 15 basis points (0.15) to 8.76% compared to a year ago.

Management comments

Managing Director Marnie Baker said: “While our strategy to reduce complexity, invest in capability and tell our story has delivered solid results and strong growth in customer numbers, the lack of fair competition of Australian banking continues to inhibit true customer choice.”

Here, Ms Baker is criticising the Royal Commission Report for not going far enough on recommending that competition be increased in the sector.

Is Bendigo A Buy?

The market doesn’t seem to think so with the share price down over 5% so far.

Bendigo seems to be the most ‘ethical’ of the ASX-listed banks, but it’s up to each investor to decide if that’s enough of a positive reason to buy shares.

Bendigo Bank has a fully franked dividend yield of 6.55%

If I had to buy an ASX bank focused on the domestic economy it could well be Bendigo compared to shares like Australia and New Zealand Banking Group (ASX: ANZ) or Commonwealth Bank of Australia (ASX: CBA).

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).