2003/2004 profit announcement

Bendigo Bank's profit presentation was webcast live from 10.30am AEST and is now archived.

Bendigo Bank today announced a 2003/2004 operating profit after tax and specific items of $79.8 million, an increase of 35.3 per cent on the previous year.

Excluding specific items – primarily the sale of Cashcard Australia Limited shares in April – the normalised profit was
$73.2 million, a 24.1 per cent increase.

Earnings per share increased by 13.4 cents, or 28.5 per cent, to 60.2 cents (normalised 55.2 cents). The final dividend increases by 3.0 cents to 23.0 cents, payable on 30 September. The total dividend for the year is up by 6.5 cents, to 40 cents per share fully franked, a 19.4 per cent rise. The payout ratio is 65 per cent (71 per cent on normalised profit).

Chairman Richard Guy said the result confirmed the Bank's earnings momentum. “Even excluding the Cashcard shares sale, this year's result reflected the ongoing improvement in revenue, profitability and performance in line with solid growth across the Group.

“We are seeing the results of our consistent and unique strategy – to grow our capacity to help our customers achieve their goals and to improve the prospects of our communities,” Mr Guy said.

“Today's result is a significant one for Bendigo Bank because it clearly shows that the investment program undertaken to support this strategy over the years is paying off with earnings progression.

“During the past three years our profit has more than doubled and normalised return on equity has grown from nine per cent to almost 12 in line with our stated aim to grow it by about one per cent per annum.

“Shareholders who have supported our customer and community focus are now being rewarded with consistently strong growth in earnings and the prospect of further improvement as our branch network matures and our newer businesses gain momentum,” Mr Guy said.

He said progression would continue as Bendigo enters its 10 th year as a bank.

“We have opened 100 new branches in the past three years and demand for our brand tells us that they will continue to grow rapidly for some time yet, augmenting the continued steady growth in our mature branches.

“And investment hasn't stopped, with a further 30 Community Bank® branches to open this financial year and new company owned branches for the NSW regional towns of Coffs Harbor, Port Macquarie and Griffith.

“Overall our results indicate that we are achieving our aim of positioning the company to generate fair and sustainable returns for shareholders through delivering on our commitment to customers and communities across Australia.

“A good proportion of the communities that have joined our Community Bank® program are generating good returns and are reinvesting money into local development and payment of local dividends. That is essential to our long-term prospects because successful customers and successful communities create a successful bank, and in that order.”

Detailing the normalised result, which is subject to audit, managing director Rob Hunt said operating profit before tax and specific items was $106.6 million, breaking through $100 million for the first time in the Company's history.

Total Group deposits grew by 23 per cent to $10.2 billion, the first time the Company has exceeded the $10 billion mark in deposits.

Retail deposits increased by $1.5 billion. The ratio of retail deposits to total deposits remains high at 90.1 per cent, down slightly from 92.5 per cent. Funds managed by subsidiary Sandhurst Trustees grew by $425 million, to $2.2 billion.

“Our Wealth Solutions division, of which Sandhurst is the linchpin, grew its profit contribution by 80 per cent,” Mr Hunt said. “We also saw excellent growth in the contributions from Community Bank and from our joint venture bank Elders Rural Bank.”.

Mr Hunt said the cost-to-income ratio had decreased to 69.4 per cent (normalised). “This is trending in the right direction, but we feel it is important to maintain a healthy investment program while demand for the Bendigo brand continues to run so strongly and there is clear prospect of generating increasing revenues.”

Mr Hunt said the consistent strategy during the past 10 years was paying dividends with four consecutive years of strong earnings growth. “Bendigo Bank's strategy is based on its strengths as a community based financial institution with a strong service culture.

“Australians have a healthy respect for those qualities and we have developed distribution strategies that enable us to reach more communities without getting ahead of our capacity to deliver the brand experience. This is evidenced by our extremely strong showings in independent customer satisfaction and reputation surveys.

“This measured approach has delivered excellent growth in customer numbers and business, which has translated into strongly improving performance as our branch and electronic networks mature and grow their customer bases.

“And because we have expensed these investments, our balance sheet is not encumbered by past expansion activities, positioning us to take advantage of future opportunities and enabling us to invest in initiatives to continue to build our relevance and new revenues.

“Today, there are 276 communities throughout Australia which carry the Bendigo Bank name and a net 88,000 new customers opened accounts with the bank in 2003/2004.

“We plan to open a further 33 new branches this year and we will continue to expand our Wealth Solutions, e-bank and payment card options, all of which have the capacity to further grow revenue.”

“We are, however, conscious of where we are in the economic cycle. We are cautious about the future environment and we have positioned the business accordingly, having largely paid for development of our distribution business and strategic initiatives. Nonetheless, we still expect to deliver growth above the banking industry average and to generate improvement in normalised earnings by 15 to 18 per cent depending on market conditions.”

Financial highlights
June 04
$m June 03
$m % increase/
(decrease)
Headline result
Interest income

615.5 500.6 23.0
Interest expense

361.9 278.3 30.0
Net interest income

253.6 222.3 14.1
Other operating income

157.5 125.6 25.4
Total net operating income

411.1 347.9 18.2
Total operating expenses

295.8 258.6 14.4
Profit before tax

115.3 89.3 29.1
Income tax expense

(35.8) (30.3) 18.5
Profit after tax

79.8 59.0 35.3
Expense to income

68.6% 69.9% (1.9)
Earnings per share

60.2 cents 46.8 cents 28.5
Return on average equity

12.99% 11.06 % 17.5
Dividends per share 40.0 cents 33.5 cents 19.4
Normalised*
Profit after tax

73.2 59.0 24.1
Expense to income

69.4% 69.9% (0.7)
Earnings per share 55.2 cents 46.8 cents 17.9
Return on average equity 11.91% 11.06% 7.7
* Normalised figures are calculated by excluding specific income and expense items.
Other key data
Total equity

676.4 552.7 22.4
Loans & other receivables

9,372.6 7,504.0 24.9
Total assets

11,284.5 9,256.6 21.9
Deposits 10,148.9 8,241.1 23.1
Lending approvals 6,077.8 4,822.8 26.0