Bendigo and Adelaide Bank announces full-year profit and increases dividend
Bendigo and Adelaide Bank (BEN) has announced an after tax statutory profit of $352.3 million for the 12-months ending June 30, 2013. Underlying cash earnings were $348.0m, an increase of 7.7 per cent on the prior corresponding period1. Cash earnings per share were 85.4 cents, an increase of 1.4 per cent.
BEN's Board of Directors has also announced an increase in the final dividend to 31 cents per share - an increase of 3.3 per cent on the prior half - taking the full-year dividend to 61 cents per share2. The increase reflects BEN's strong capital position and improved earnings performance.
Bendigo and Adelaide Bank managing director Mike Hirst said the bank had produced a solid result in difficult trading conditions.
"Consumer confidence and demand for credit remains low, and competition remains very strong for retail deposits," Mr Hirst said.
"Despite this we have been able to produce a result that shows improvement in a range of profitability and efficiency measures - including net profit, cash earnings, net interest margin, dividend, earnings per share, return on equity and cost to income ratio.
"We continue to enjoy the fantastic support of our customers, and of the communities we operate in. This has again been reflected in above-system asset growth across a range of portfolios. Our business operates with a conservative funding and balance sheet structure, and a highly engaged staff. Together these factors place Bendigo and Adelaide Bank in an ideal position to benefit from any improvement in market sentiment and demand for credit," Mr Hirst said.
Net interest margins continue to come under pressure from a combination of vigorous competition for retail deposits and the natural compression caused by low official cash rates. Notwithstanding this, BEN managed to increase net interest margin to 2.21 per cent for FY13, up 10 basis points on the prior corresponding period.
While retail deposits continue to make-up approximately 80 per cent of BEN's total funding, there has been a material improvement in the cost and availability of wholesale funding options for the bank. This was evidenced by two successful senior unsecured wholesale funding offers during the 12-month period, marking the first senior unsecured raisings by BEN since the start of the global financial crisis.
BEN continues to invest in its distribution footprint and capability. This, combined with industry leading customer satisfaction and brand advocacy, has allowed the business to grow total lending at an annualised rate of 4.8 per cent over the past 12-months. This compares favourably with system growth of just 3.4 per cent over the same period.
BEN has reported its third consecutive six-monthly improvement in its cost to income ratio, which now sits at 56.2 per cent for the June half-year. The group continues to grow revenues faster than costs, with revenue growing at 3.5 per cent for 2H13, versus -0.4 per cent for cost growth. However, the group expects an increase in costs during FY14 as the Basel II Advanced Accreditation project continues, and we open our new office accommodation for approximately 1100 staff in Adelaide.
There was a material improvement in capital ratios over the period, with Core Tier 1 increasing 15 basis points to 7.82 per cent, Tier 1 capital up 86 basis points to 9.25 per cent, and total capital up 30 basis points to 10.71 per cent. Under Standard & Poor's ratings methodology BEN's risk adjusted capital ratio is 11.5 per cent, which is more than 25 per cent higher than any of the four major Australian banks. BEN continues to manage a conservative capital management program that reflects the low risk, highly secured nature of its lending portfolio.
Credit costs continue to be impacted by seasonal and trade disruptions to the north Queensland cattle sector, and an increase in the number of bankruptcies from investors in the portfolio of Great Southern managed investment schemes. Despite this, 90-day arrears rates in our residential, business, consumer and Rural Bank portfolios are all better than at the same period last year, and this augers well for the coming financial year.
Mr Hirst said while historically low interest rates were providing comfort to existing borrowers, the full effects of recent cash rate reductions were yet to be reflected in a broad return of consumer confidence.
"While we expect to see relatively subdued credit growth in the coming 12-months, we remain confident that the unique Bendigo and Adelaide Bank business model will continue to resonate with customers," Mr Hirst said.
"Our industry-leading retail and business customer satisfaction levels and the maintenance of an efficient business model becomes even more important in this environment. You can expect BEN to continue to invest in its people and distribution footprint as we prepare for an eventual improvement in business conditions.
"At Bendigo and Adelaide Bank we will continue to leverage our unique strengths to take advantage of the significant opportunities that exist for our business," he said.
1 Unless otherwise stated, all comparisons are with the prior corresponding period (12-month period to June 30, 2012)
2 Ex-dividend date is 23 August 2013, record date is 29 August 2013, and payment date is 30 September 2013. The 2.5pc discount for participants in the dividend reinvestment plan will also be removed.