2001/2002 interim profit announcement

Bendigo Bank today announced a 25 per cent increase in its interim net profit in line with the strong growth in its business.

Chairman Richard Guy said operating profit after income tax was $19.5 million, compared with

$15.6 million for the corresponding period last year.

Mr Guy said the result had been achieved on the back of unprecedented demand for the "Bendigo style" of banking.

"During the half-year we welcomed 51,000 new customers - excluding our Queensland merger - and saw net growth of 80,000 accounts.

"Our lending approvals surged by 76 per cent, to $1.9 billion, and retail deposit growth continued to be strong, resulting in the Bank being 90 per cent retail-funded.

"The growing number of communities we serve are responding very positively to the customer and community focus Bendigo brings to banking and we have observed no diminution in demand, whether from within our current markets or from potential new markets.

"In response, we have accelerated both our Queensland rollout and other development programs. While this has impacted on performance ratios, we believe we are tracking in line with our original expectation to improve return on equity by the order of one per cent over the full year."

Mr Guy said shareholders registered at 12 April would on 30 April receive an interim dividend payment of

12.0 cents per share, fully franked (an increase of 0.5 cents per share on the 2000/01 interim dividend).

Detailing the result, Managing Director Rob Hunt said profit before tax was $30.7 million, up by 19 per cent from $25.9 million in the corresponding period last year.

This figure included a full six-month contribution from Queensland, compared with just three months in the corresponding period last year, and a doubling of Elders Rural Bank's pre-tax contribution, to $5.92 million.

Banking revenues grew sharply, with total net operating income up by 29.8 per cent, to almost

$140 million. This increase was offset by a 33.4 per cent increase in operating expenses.

"It is important to place these numbers in perspective," Mr Hunt said.

"We have spent six years positioning this business as a customer and community-focused bank. Right across Australia, communities have responded to our style of banking and this is now producing unprecedented opportunities to grow our business.

"It is essential that we strike while the iron is hot and develop those propositions which help build success for customers and communities and therefore develop sustainable growth in value for our shareholders.

"The rollout of Community Bank branches has been accelerated. In Queensland, we brought forward the completion of conversion to full banking capacity, including branding, systems, business banking and a complete overhaul of our ATM network.

"In the first half, we have also expensed all new initiatives currently under development. These include our new wealth management division, new computing capacity and other strategic initiatives.

"This accelerated development program has impacted heavily on costs during this first half.

"On the revenue front, Elders Rural Bank is now beginning to generate the expected returns on our investment, as is Community Bank.

"Lending growth has been tremendous and we note that a substantial proportion of loans approved during the first half are yet to settle and begin generating revenues.

"The quality of business we are writing is excellent and our margins are standing up well.

"It is also worth noting that more than half of our branches - 101 of the 194 - have been in the Bendigo network for less than two years and are expected to generate strong earnings growth as they mature as individual businesses.

"All of these factors augur well for future earnings and we expect to continue the strong profit progression we are now seeing in the business.

"In the short term, we expect further profit improvement in the second half."

Highlights (July-Dec. 2001 compared with July-Dec. 2000)
Profit
Operating profit after income tax was $19.5 million, up 25% from $15.6 million
Profit before income tax was $30.7 million, up 19% from $25.9 million
Earnings per share 16.8 cents, compared with 16.2 cents (3.7% increase)

Lending
Total bank lending approvals were $1.9 billion, a 76% increase

Deposits
Retail deposits grew by 10.3 per cent during the half, to $6.07 billion, and comprise 90% of total bank deposits

Assets and capital
Group assets grew by $539 million during the half to $7.5 billion (8% increase)
A further $238 million of loans were sold on a commercial basis during the half
Total risk-weighted capital adequacy ratio at 31 December 2001 was 11.39%
Shareholder equity increased by 10% to $465 million

Dividends
Interim dividend is 12.0 cents per share, fully franked (up by 4.3% from 11.5 cents interim 2001)

Bad and doubtful debts
Bad and doubtful debts expense for the half-year was $6.4 million, an increase of $0.74 million
Provision for doubtful debts at December 2001 totalled 0.58% of gross loan balances (0.52% at December 2000; 0.55% at June 2001)
General provisions were increased by $2.1 million and now total $23.8 million, or 0.55% of risk-weighted assets

For further details of the interim results, click here.