The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dropped 17% after reporting its FY25 half-year result.
FY25 half-year result
Here are some of the highlights from the bank‘s HY25 result for the six months to 31 December 2024, compared to HY24:
- Residential lending increased 8.5% year on year to $65.2 billion
- Net interest margin (NIM) rose 6 basis points (0.06%) to 1.88%
- Cash earnings after tax fell 1.1% to $268.2 million
- Statutory net profit down 23.2% to $216.8 million
- Dividend per share flat at 30 cents
Bendigo Bank said that it has experienced significantly increased demand for both lending and deposit products from customers, which led to its strongest balance sheet growth that it has experienced for some years.
Total lending grew 3.4% over the six months, while residential lending increased 5.3%.
However, the ASX bank share said that both its income and expenses have been challenged. Income was impacted by margin pressures, driven by “higher funding costs to support accelerated lending growth”.
The bank’s expenses increased 5% due to continued investment to deliver its transformation program. Excluding the program, business as usual expenses grew by 3.8% with wage inflation, new digital asset assets, higher amortisation charges and price rises from tech vendors.
Compared to the second half of FY24, the NIM worsened by 6 basis point (0.06%) because of higher cost deposits and increased wholesale funding costs. The deposit mix was impacted by customers preferring to hold higher balances in their offset accounts and longer-dated term deposits.
Its gross (total) impaired loans increased by 6.1% to $127.4 million, representing 0.15% of gross loans.
Outlook for the Bendigo Bank share price
Bendigo Bank is expecting a more positive economic outlook with the prospect of interest rate cuts in the face of easing inflation.
It described its credit quality as “sound”, but it’s monitoring the portfolio carefully and it’s expecting residential arrears to gradually increase, while bad and doubtful debts could move towards longer-term averages.
Bendigo Bank said it’s committed to delivering returns above the cost of capital over the medium-term. The origination of lower loan to value ratio home loans is reducing its relative credit risk exposure.
Banks don’t seem like the sort of business to deliver impressive profit growth year after year, so it’s not the sort of investment I’m looking for amid the strong lending competition.
There are other ASX dividend shares I’d rather buy today, despite the decline.
