2001/2002 profit announcement
* Bendigo Bank’s profit presentation will be webcast LIVE today from 10.30am AEST and will later be archived. Enter from Bank’s home page at www.bendigobank.com.au
Bendigo Bank today announced a 2001/2002 operating profit after tax of $48.8 million, an increase of 47 per cent on the previous year.
Shareholders will receive a final dividend of 17.0 cents, payable on 31 October and fully franked to 30 per cent. Dividends for the financial year totalled 29 cents per share, an increase of three cents (excluding 2001’s special dividend of 15.0 cents). The payout ratio of 69 per cent is within our preferred range.
Chairman Richard Guy said the bank had improved its key performance ratios, achieving its forecast of a one per cent increase in return on equity, which was up from 9.4 per cent to 10.6 per cent. Earnings per share increased by 9.6 cents, to 41.1 cents, a rise of 31 per cent.
“The result we announce today is a significant one for Bendigo Bank because it is clear evidence that our community-focused strategy, and the investments we have made in the past five years, are beginning to return sustainable earnings improvements.
“We said when embarking on this strategy that our success would be dependent on creating a banking environment which helped our customers and their communities to improve their prospects.
“This has required a heavy investment program, which has constrained our short-term performance in order to establish the footings for long-term growth.
“We have built systems and upskilled our staff, as well as investing in an array of both traditional and innovative delivery structures which enable us to serve a range of discrete communities.
“Community Bank, Elders Rural Bank and Tasmanian Banking Services are all just four years old or less. Half of our 216 branches have been in the network for less than two years.
“In recent years we have expensed the costs of most of those developments, from which we are now starting to generate significant revenue streams.
“Today’s result contains increased profit contributions from each sector of our business and we expect this trend to continue. We are aiming to improve ROE by a further one per cent next year.
“Our aim is to achieve a position where we are generating fair and sustainable returns for our shareholders through delivering on our commitment to help improve the prospects of our customers and communities. This will strengthen our base of buyers and their commitment to us.”
Detailing the result, which is subject to audit, managing director Rob Hunt said operating profit before tax and significant items was $74.8 million, compared with $60.0 million for 2001. This is a 25 per cent increase.
Mr Hunt said total Group deposits grew by 12 per cent to $7.0 billion. Retail deposits increased by $868 million, or 16 per cent, and now represent 91 per cent of the bank’s funding. Funds managed by subsidiary Sandhurst Trustees grew by $244 million, to $1.21 billion.
Total bank lending approvals were $3.64 billion, a 46 per cent increase, while $708 million in loans were securitised or sold.
“This sale constrained growth in on-balance sheet assets to a billion dollars, taking total assets to just under $8 billion,” Mr Hunt said. “Managing our balance sheet in this way helps improve our performance ratios and puts us in a very healthy capital position. Risk-weighted capital adequacy of 11.69 per cent includes Tier 1 of 9.28 per cent, providing flexibility going forward.
“Total Group-managed assets increased by $1.42 billion, or 16 per cent, to $10.37 billion.”
Mr Hunt said Bendigo’s margin had been maintained despite intense competition for lending and reductions in official interest rates. “Net interest margin rose by two basis points, to 2.68 per cent, which reflects the strength of our strategy to ensure we are relevant to our customers and communities rather than just another price/volume trader.”
Mr Hunt said the Bank’s asset quality remained sound. Impaired loans net of specific provisions had been reduced by 40 per cent, to $11.9 million, representing just 0.19 per cent of gross loans.
Looking forward, Mr Hunt said Bendigo had now established a unique style of banking and position in the market place.
“Next year we expect to further increase the profit performance and improve key ratios such as return on equity, cost to income and earnings per share.
“We expect to maintain or improve our margin revenue performance, given our strong retail base.
“Community Bank will continue to expand quickly and by June 2003 will approach 100 branches. Our alliances Elders Rural Bank and Tasmanian Banking Services are expected to improve their contributions, and we will continue a reasonable level of new developments to secure continued growth of revenues.
“We are in a strong position to maintain our growth rates in both revenues and profitability, while developing a strong and loyal customer franchise.”
Mr Hunt said key initiatives would include:
Thirty-plus new company and Community Bank branches, including four key hub branches in Sydney to support Community Bank branches.
The further development and marketing of Wealth Management products and expansion of Bendigo’s advisory network to service its growing retail base.
A continuation of community enhancement activities to reinforce Bendigo’s relevance to its markets.
Development of the recently-launched Community Sector Banking initiative.
“We will also see the further maturing of a number of initiatives undertaken over the past few years.”