Bendigo Bank profit announcement 1999/2000
Strong revenue and asset growth boosted Bendigo Bank's profit after tax and abnormals by 8.2 per cent to $21.3 million, Chairman Richard Guy announced today.
Mr Guy said revenues had risen by 27.6 per cent as the Bendigo began to see the results of significant investments in distribution networks, technology, product and skills in recent years.
"We are reaping increasing revenue and profit contributions from our subsidiaries, our investment in technology, Community Bank, our joint venture company Elders Rural Bank, and, of course, our own Bendigo Bank branch network," Mr Guy said.
"The gross profit increase was very solid and while profit available for distribution to shareholders was reduced by a large one-off abnormal item, the Group is well-positioned to continue to improve its performance."
Mr Guy said the Group saw "no shortage of new markets - there are plenty of markets wishing to deal with us".
"Our Community Bank network continues to expand rapidly and we are on course to meet our target of 50-plus branches by the end of next year.
"Tasmanian Banking Services is about to commence trading and we are heartened by the welcome we have received from the Tasmanian community.
"Likewise, we are confident our proposal to merge First Australian Building Society into our Group will win approval, providing Bendigo with a strong base upon which to enter the Queensland retail banking market.
"These measures, and the gradual introduction of banking product through our joint venture company Elders Rural Bank, will give Bendigo Bank and its associates a growing national presence and customer base.
"Given the wide awareness and acceptance of our customer and community-focused style of banking, we are buoyant about our prospects."
Detailing the 1999/2000 result, Group Managing Director Rob Hunt said the $10.5 million abnormal charge related to provisioning of a single exposure to a large Asian multi-national.
"At the time this credit facility was committed, the borrower was a large, well-respected and well-rated international company. There was no suspicion that this company would subsequently suffer difficulties which now jeopardise repayment of its liabilities.
"Whilst we continue to pursue this debt, we have determined to provide this year for the maximum amount assessed as unrecoverable.
"The credit facility was committed through an acquired entity, Monte Paschi Australia, (now Cassa Commerciale Australia) and having inspected the group's entire commercial portfolio in the wake of this default, we are satisfied that this credit facility was the only loan of its type."
Mr Hunt said earnings per share for 1999/2000 was 27.5 cents, compared with 32.6 cents for 1998/99. "However, if the effect of the abnormal provision for doubtful debts is excluded from 99/00 earnings the EPS would have been 36.5 cents.
"Tier one capital (8.77%) is strong and we will not need to seek more share capital in the short to medium term. This will contribute to what we believe will be a strong recovery in our earnings per share."
Mr Hunt said the Bank would seek to increase its capital base through raising further tier 2 capital (subordinated debt).
The acquisition of First Australian shares in a one-for-two arrangement would result in the issue of approximately 27 million new Bendigo shares, an increase of almost one-third in the current share base.
"But given that we anticipate revenues will continue to increase strongly, we expect the First Australian merger to have no negative impact on earnings per share," Mr Hunt said.
A final dividend of 13.5 cents will result in shareholders receiving a one-cent increase in the full-year dividend, to 24.0 cents per share.
"This resulted in a higher payout ratio than normal, but the Board felt the dividend should reflect the strong underlying profit performance which was masked by the abnormal item.
"Strip that away and profit before tax and abnormals jumped by more than 60 per cent, to almost $48 million.
"That says we are beginning to reap the benefits of the disciplined approach we have taken over the past five years to positioning our brand and investing in the distribution networks, systems and skills we needed to fully service the markets attracted to us."
Mr Hunt said the balance sheet growth was derived from strong performance in lending (approvals 15 per cent up at $1.85 billion) and deposit-raising (retail deposits up 22 per cent to $3.7 billion, or 83 per cent of the Bank's deposit base).
"Those are excellent figures in a highly competitive environment, particularly for retail deposits. Community Bank played a leading role in our deposit-raising, which is greatly assisting our cost of funds."
Mr Hunt said the Bank had increased its general provision by $3.9 million, reaching APRA's preferred level of general provisioning, 0.5 per cent of risk weighted assets.
Mr Hunt said increasing revenues and cost containment had continued the "slow but steady" improvement in cost ratios, with the cost-to-income ratio slipping below 70 percent for the first time.
"There will obviously be pressure on costs as we bed down the merger of First Australian, but our aim is to continue to improve the underlying trend."
For a detailed Financial Summary of the results, click here...