Bendigo on positive credit watch
The following media release, relating to Bendigo Bank's credit rating, was issued on 17 October by Standard & Poor's.
MELBOURNE, Oct 17 - Standard & Poor's today revised the outlook on Bendigo Bank Ltd. to positive from stable and affirmed its triple-'B'-minus long-term and 'A-3' short-term counterparty credit ratings.
The triple-'B'-minus/'A-3' ratings assigned to Bendigo Bank's US$500 million medium-term note programme also are affirmed.
In recent years, Bendigo Bank has successfully transformed itself from a geographically concentrated financial institution to one that currently has 28.6% of its lending book and approximately 26.4% of after-tax revenues outside its traditional Victorian markets.
"The acquisition of IOOF Building Society, Casa Commerciale Australia Ltd. and more recently, First Australian Building Society and its joint venture with Futuris Ltd. to form Elders Rural Bank have improved both its geographic and income diversity, which had previously constrained the rating," said Jason Hill, associate director, Financial Services ratings.
Bendigo Bank arguably has one of the more robust and unique franchises of all the Australian regional banks.
Its community bank concept has supported asset growth and geographic diversification. Bendigo's strategy of targeting discrete communities and regional centres has been consistent, and to date, soundly implemented.
"This has enabled Bendigo Bank to successfully build brand loyalty, attain asset growth, and increase funding from the relatively stable retail deposit market," said Ken McLay, director, Financial Services ratings.
This is in contrast with other regional banks that have sought growth outside their core geographic markets through the use of third-party intermediaries (for example, mortgage originators) and a relatively higher degree of funding from the wholesale markets.
"While Bendigo Bank's earnings for fiscal 2000 were adversely impacted by a large nonperforming loan that has now been fully written off, remaining asset quality and provisioning for bad and doubtful debts appears sound.
"Bendigo Bank's ability to source low-cost, stable retail deposits is a marked strength," said Mr. Hill. Its loan-to-deposit ratio of 88.4% is preeminent among its domestic peers and has assisted in keeping interest margins stable at 2.74%, despite an increasingly competitive environment.
Capitalisation remains sound, with the bank's adjusted common equity-to-adjusted assets ratio of 5.15% in fiscal 2000 an improvement on the 4.97% in fiscal 1999.
Bendigo Bank's business, credit risk profile, and profitability have improved, and this is expected to impact favourably on its rating over the medium term.
An operational strength has been the bank's ability to successfully integrate its acquisitions. First Australian Building Society is not expected to be fully integrated until June 2001.
"A future upgrade of Bendigo Bank is predicated on the successful integration of First Australian Building Society and realisation of integration benefits, as well as continued improvement of the bank's core operating ratios and maintenance of stable asset quality," said Mr. Hill.