Bendigo Bank’s Profit Slump Sends Shares Tumbling
Bendigo and Adelaide Bank has had a rough day on the stock market, with its shares taking a major hit following disappointing financial results. Investors reacted sharply after the bank reported a significant drop in profit margins, despite an increase in lending and customer deposits. The stock plunged nearly 18% at one point, marking one of its worst trading days in recent history.
The bank’s first-half earnings report revealed that net profit for the six months ending December 31 fell by 23.2% to $282.3 million. Cash earnings were also down slightly, dropping 1.1% to $265.2 million. CEO Richard Fennell acknowledged the bank’s strong loan and deposit growth but pointed to rising costs and tighter margins as key challenges. He noted that higher funding costs, driven by increased competition and market conditions, had put pressure on income.
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One of the biggest concerns for investors was the bank’s net interest margin, which dropped by six basis points to 1.88%. This decline suggests that while Bendigo Bank has been successful in growing its loan book—particularly in residential lending, which rose 5.3%—it is earning less on each loan due to higher funding expenses. Additionally, the bank has been investing heavily in its transformation program, increasing operational costs.
Despite the challenges, Bendigo Bank highlighted some positives. Customer deposits grew by 5.4%, and total customer numbers increased by 4.9% to 2.7 million. Interestingly, amid the rising cost of living, many home loan customers have managed to stay ahead on their repayments, with 42% of borrowers now at least a year ahead.
However, concerns about the Victorian economy added to the uncertainty. The bank noted that arrears in Victoria were slightly higher than in other states, although credit costs had not been significantly impacted yet. This, coupled with the broader pressures in the banking sector, weighed heavily on investor sentiment.
Bendigo Bank’s disappointing performance also dragged down other financial stocks, including Westpac, AMP, and the Bank of Queensland. The market’s reaction underscores the tough environment banks are operating in, with rising funding costs and tighter margins putting pressure on profitability.
For now, Bendigo Bank is holding its interim dividend steady at 30 cents per share, but the road ahead looks challenging. Investors will be watching closely to see how the bank navigates these headwinds in the coming months.
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