Bendigo and Adelaide Bank shares lashed over profit slump

Disappointed investors have hammered Bendigo and Adelaide Bank shares as much as 18 per cent lower after higher funding costs and other expenses savaged the lender’s first-half profit.

The bank on Monday said net earnings for the six months to December 31 slumped 23.2 per cent to $282.3 million, with cash earnings off 1.1 per cent at $265.2m.

“We have experienced significantly increased demand for both lending and deposit products from our customers, which has led to the strongest balance sheet we have experienced in some years,” Bendigo Bank chief executive Richard Fennell said.

“However, our earnings have been challenged on the income and expense lines.

“Income was impacted by margin pressures, driven by higher funding costs to support accelerated lending growth.

“Expenses have also increased due to continued investment to deliver our transformation program.”

Bendigo Bank shares were 17 per cent lower at $11.15 as at 8.45am.

The bank’s directors have held the interim dividend flat at 30¢ a share.

Total lending was up 3.5 per cent, with residential lending growing 5.3 per cent. However, Bendigo Bank’s net margins were six basis points lower at 1.88 per cent because of higher cost deposits and increased wholesale funding costs.

Customer deposits grew 5.4 per cent, with customer number up 4.9 per cent to 2.7 million.

The bank echoed other banks by revealing that despite cost-of-living pressures, home loan customers had increased their home loan repayments over the half. Some 42 per cent were now one year ahead on payments, with 86 per cent maintaining a buffer.

However, Mr Fennell also joined Commonwealth Bank of Australia in calling out tougher trading conditions in its home State.

“We are also mindful of the challenges facing the Victorian economy, specifically, where arrears are slightly higher than in other States, though we note there has been no material impact on credit costs,” he said.