Tuesday 06 May 2014 by FIIG Research Legacy

Bendigo Bank full research report May 2014 - retail

Executive Summary

  • Bendigo and Adelaide Bank Limited (Bendigo Bank) is a regional bank that specialises in retail banking with a focus on rural communities. It also owns Rural Bank and Delphi Bank and operates the margin lending business, Leveraged Equities
  • At the time of writing, Bendigo Bank had offered to purchase the Rural Finance Corporation from the Victorian Government, which would increase its rural loan portfolio by approximately 50% and total assets by around 2.8%. This is subject to APRA approval but is expected to be received and the transaction completed in July 2014
  • Bendigo Bank offers a range of banking and wealth management services across all states and territories in Australia, with a particularly strong retail deposit franchise and community focus. Its largest operations are in Victoria and South Australia
  • Bendigo Bank reported a solid net profit after tax of $180.7m in 1H14, a decrease of 4.7% compared to $189.4m the prior corresponding period. However, underlying cash earnings were $185.9m, an increase of 9.5% on the prior corresponding period. 
  • Bendigo Bank’s capital position has improved with recent Tier 1, Tier 2 subordinated debt and equity raisings.   The Tier 1 capital ratio was 9.24% as at 31 December 2013 and total capital ratio was a solid 10.72%. Following the $300m subordinated bond raising in January 2014, the total capital ratio was an impressive 11.68% on a pro-forma basis
  • Bendigo has a sound credit profile with strong earnings growth, low levels of bad debt and a high proportion of deposit funding. The bank is actively looking to increase its regulatory capital which will further solidify its financial position