The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dropped around 9% after delivering its FY22 result.
Bendigo Bank is one of the regional banks on the ASX. It had a market share of 2.37% as at June 2022.
Bendigo Bank share price suffers after FY22 result
Here are some of the highlights from the report:
- Total income up 0.4% to $1.71 billion
- Total lending up 7.7% to $77.8 billion
- Residential lending growth of 11%, which was 1.4x the system
- Net interest margin (NIM) fell 0.21% (21 basis points) to 1.74%
- Cash earnings after tax up 9.4% to $500.4 million
- Cash earnings per share (EPS) up 4.9% to 89.8 cents
- Statutory net profit after tax down 6.9%
Bendigo Bank said that the result showed what the bank can deliver in a challenging and competitive environment. It reduced its costs and improved its cost to income ratio while maintaining a “strong” balance sheet and preserving its credit quality.
The bank’s common equity tier 1 (CET1) increased by 11 basis points to 9.68%. That essentially says how much capital the bank has, compared to its loan book.
Bendigo Bank boasted that it’s Australia’s most trusted bank and that it “stands out” with its leading customer advocacy and satisfaction scores.
The bank wants to become a “bigger, better and stronger bank”. It has reduced the number of core banking systems and technology applications, while its new digital mortgage offering, Up Home, has taken its first applications.
What happened to the NIM?
Bendigo Bank said that variable and fixed rate residential loan competitive pressure contributed around 15 basis points (0.15%) over the previous half, partially offset by improved funding costs.
The regional bank said that the positive impact of rising rates is flowing through to the NIM and will have a more significant impact in FY23.
Loan book in a good position
Bendigo Bank said that impaired loans have continued to fall. The ‘credit’ expense was a net positive as it recorded a $27.2 million write-back. In other words, it reduced its provision for bad debts because things weren’t as bad as expected.
Bendigo Bank dividend
The board declared a final dividend of 26.5 cents per share, bringing the full year dividend to 53 cents per share.
It said that the level of dividend supports its “strong capital position and business outlook”, while balancing its commitment to supporting shareholders with a fair return.
Thoughts on the Bendigo Bank share price and outlook
Management noted that higher interest rates are hurting property prices, and it’s expecting credit growth to “moderate and competition to remain intense”.
Keeping inflation headwinds in mind, Bendigo Bank wants to keep its costs “broadly flat” in FY23.
It’s expecting its impairment expenses to return to “historical averages over the medium-term”. In other words, it’s expecting bad debts to rise in the coming years.
Despite the plunge of the Bendigo Bank share price, it’s still up 5% in 2022 to date. However, I’m not looking to buy shares of the bank. I think there could be ASX dividend shares that are able to achieve more growth over time.
