The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is on watch after the regional bank announced an acquisition.
Bendigo buys investment lending business
The ASX bank share announced that it’s buying the Australia and New Zealand Banking Group Ltd (ASX: ANZ) investment lending portfolio.
Bendigo is looking to grow its margin lending business called ‘Leveraged Equities’. It’s reportedly one of the longest-established margin lenders in Australia.
The size of the portfolio that Bendigo is buying is approximately $715 million, with approximately 11,900 customer facilities at 31 May 2022.
With this acquisition, it’s expected to take the total value of Bendigo Bank’s margin lending portfolio to more than $2 billion. It’s expected to complete the deal in the first half of the 2023 calendar year.
How much will this cost?
Bendigo Bank explained that it will pay a small amount above the book value for the portfolio. Due to the “relatively small size” of the acquisition, it will be funded through the “ordinary course” of business operations.
What are the benefits of this acquisition?
Bendigo Bank said that the acquisition of this high-returning portfolio is aligned with its objective of growing its return on equity – making more profit for how much shareholder money is invested in the business – and it will add to earnings when the deal is done.
Management comments
The Bendigo Bank managing director and CEO Marnie Baker said:
In line with our vision to be Australia’s leading bank of choice, the acquisition will strengthen Leveraged Equities’ position as an industry leader in margin lending and enhance the scale of our existing operations.
The portfolio we are acquiring is well established and primarily comprises retail customers which will complement Leveraged Equities’ client base of professionals and clients under advice. We believe there is a strong future for margin lending in Australia, and this acquisition will create further opportunities for growth.
Summary thoughts on this deal
Bendigo Bank may see a slowdown of growth in the mortgage segment with the rising interest rates. However, margin lending could be a good way to grow profit and diversify its earnings.
The Bendigo Bank share price is down more than 10% in a month, so I think for people interested in shares, it could be an interesting time to buy. It is likely to pay a big dividend, particularly when including the franking credits.
