Bendigo and Adelaide Bank to increase ERB stake
Key points
- Bendigo and Adelaide Bank to increase ownership of Elders Rural Bank from 50% to 60%
- ERB will be renamed Rural Bank Limited
- Reinforces Bendigo and Adelaide Bank’s commitment to rural and regional Australia
- Rural Bank products will continue to be distributed through both the Elders and Bendigo Bank branch networks
Bendigo and Adelaide Bank (BEN) has announced plans to acquire an additional 10% stake in the specialist rural lender Elders Rural Bank (ERB). The purchase, for approximately $33.9 million, will take BEN’s ownership to 60%, with the other 40% being retained by Elders Limited. The transaction is subject to regulatory approval1.
Under the change of ownership, ERB will change its name to Rural Bank Limited (Rural Bank) from July 1, 2009.
The Group Managing Director of Bendigo and Adelaide Bank, Rob Hunt, said today’s announcement was a further indication of BEN’s commitment to providing a real alternative banking option – particularly in rural and regional Australia.
“Through Elders Rural Bank’s comprehensive network we continue to work closely with our customer base and strive to provide them with the products and services needed to meet their unique financial requirements,” Mr Hunt said.
“We look forward to further developing what is already an award-winning banking alternative. The name change will allow Rural Bank to explore additional distribution arrangements throughout rural Australia, adding substantial growth prospects to a business which is already performing very strongly. And the bank will continue its strong relationship with Elders Limited, to further build and develop the unique and valued position that both enjoy within rural Australia.”
BEN’s purchase was funded through existing liquidity, and total capital will remain broadly unchanged. The purchase is also expected to be earnings per share accretive for BEN.
“Bendigo and Adelaide Bank has a conservative balance sheet and capital structure, and we will continue to explore opportunities that present themselves in this market,” Mr Hunt said.
“We have a strong and proud history of working with our partners to provide the best customer focussed banking experience in Australia. We see an increase in our commitment to Elders Rural Bank as sending a strong positive message to our existing and potential customers,” he said.
ERB’s net profit after tax for the six months to December 31, 2008 was $22.4 million. Loans under management at this time were $3.7 billion. Deposits were $4.0 billion, with more than 90% of these retail deposits. ERB’s ratio of net non-performing loans to gross loans under management improved to 0.35% (from 0.36%) for the period.
1 Including approval of the increase in BEN’s interest by the Treasurer under the Financial Sector (Shareholdings) Act 1998
