The Bendigo and Adelaide Bank Ltd (ASX:BEN) share price is under the spotlight after announcing it has bought RACQ’s bank book. It’s currently up 0.25%.
Bendigo Bank is one of the largest banks in Australia outside of the big four ASX bank shares.
RACQ acquisition
Bendigo Bank announced to the ASX that it’s buying RACQ Bank’s retail lending assets and deposits, as long as it’s approved by regulators.
The acquisition is priced at book value and will be funded from the ASX bank share’s cash reserves and will use 35 basis points (0.35%) of common equity tier 1 (CET1) capital.
This will add $2.7 billion of retail loans and $2.5 billion of retail deposits, as of 30 June 2025. The business is generating $50 million to $55 million of net interest income, based on the book value as at 30 June 2025.
According to Bendigo Bank, the acquisition comes with more than 90,000 customers. It also said the deal aligns with its strategy and is expected to contribute positively to its 2030 return on equity (ROE) target.
But, it’s also expected to come with between $12 million to $14 million of extra costs before tax to service the RACQ customers, which includes transferring some employees.
There will also be migration and transaction costs of between $25 million to $30 million after tax, with the majority of this to be incurred before completing the transaction. Customers will transfer to Bendigo Bank products and the core banking system when the deal is completed.
What are the benefits of this deal?
Bendigo noted four key aspects of the move.
First, RACQ has an optimised and strong deposit base, with retail deposits representing 92% of the lending portfolio, with a high proportion of lower cost deposits.
Second, Bendigo Bank believes it will be able to deliver productivity improvements to deliver efficient integration, minimising incremental costs and leveraging existing migration and integration capabilities.
Third, this will increase the ASX bank share’s Queensland exposure to 18% of its residential lending portfolio, up from 15%.
Fourth and finally, the bank believes the acquisition will add to return on equity (by 35 basis points to 40 basis points (0.35% to 40%) and earnings per share ((EPS) between 4 to 5 cents per share on an annualised basis).
Final thoughts on the Bendigo Bank share price
It’s down more than 20% in the last month, so this could be an opportunistic time to look at the bank, though the recent news involving AUSTRAC could be a cloud over the bank for a while.
I think there are other ASX dividend shares out there with a more certain growth outlook which deliver stronger total returns.
