Bendigo and Adelaide Bank Limited(BEN)

Team Veye | 11 Feb 2020 ASX - BEN
Bendigo and Adelaide Bank Limited(BEN)
Call Buy
Investment Duration Long Term

Bendigo and Adelaide Bank Limited (ASX: BEN) is engaged in the provision of banking and other financial services. The Company's segments include Local connection, which includes all distribution channels, including branch and community banking, business banking, Delphi Bank, financial markets and network support; Partner connection, which includes all partner distribution channels, including mortgage brokers, mortgage managers, mortgage originators, alliance partners, home safe, leveraged, portfolio funding, financial planning, wealth management, responsible entity activities, other trustee services and custodial services, and Agribusiness, which includes the provision of banking services to agribusiness in rural and regional Australia. Rural bank and rural finance are included within the agribusiness segment. The partner connection segment is a combination of the third party and wealth cash-generating units. Its Bendigo Bank has a network of approximately 400 branches and agencies. (Profile source: Reuters)

From the Company Reports

Bendigo and Adelaide Bank Full Year 2019 Result

Bendigo and Adelaide Bank (ASX: BEN), Australia’s fifth-largest retail bank, on 12 August 2019 announced results for the year ending 30 June 2019.

(Graphic Source – Company Reports)

  • Statutory net profit: $376.8 million, down 13.3 percent, as a result of remediation and redundancy costs and unrealised losses relating to Homesafe due to the decline in property valuations in Melbourne and Sydney 
  • Cash earnings after tax: $415.7 million, down 6.6 percent, primarily attributable to remediation and redundancy costs 
  • Underlying earnings: $435.7 million, down 2.5 percent, excluding remediation and redundancy costs 
  • Net interest margin: 2.36 percent, steady year-on-year, increasing 2 basis points (bps) in the second half, compared to the first half 
  • Total income: $1.6 billion, steady 
  • Bad and doubtful debts: $50.3 million, down 28.8 percent 
  • CET 1: 8.92 percent, up 30 bps 
  • Cash earnings per share: 85 cents per share (cps), down 8 percent 
  • Total fully franked dividends: 70.0 cps, steady 
  • Total lending: $62.1 billion, up 1.1 percent, with residential lending above-system, at 3.5 percent 
  • Total deposits: $64.0 billion, up 1.5 percent, with retail deposits up 3.3 percent


(Graphic Source – Company Reports)

Key metrics

Total lending grew by 1.1 percent to $62.1 billion, with noticeably stronger growth of 3.6 percent in the second half – well above system growth of 2.6 percent. In the second half, residential lending was up 4.3 percent and agribusiness showed growth influenced by seasonality up 12.8 percent, both well above system; whilst small and medium-sized business lending grew 9.5 percent.

During the year, the Bank divested Bendigo Financial Planning which serves to further simplify and de-risk the business and deliver cost savings.

The Board declared a final dividend of 35 cents per share, taking the fully franked full-year dividend to 70 cents per share, continuing our history of rewarding shareholders with a high yield and long-term returns

(Graphic Source – Company Reports)

Business highlights

Commenting on the Bank’s business highlights for the year, Ms. Baker said, that the changing banking environment was creating an opportunity for them, as was the reshaping of their business and focus on reducing complexity and investing in new capabilities, particularly in customer experience and digitisation.

Bendigo and Adelaide Bank is consistently ranked as one of Australia’s most trusted brands and the top-rated company for customer experience. This sets them apart and was reflected by the commitment and focus of their staff and their capability to continue to attract new customers.

New customers were up by almost two-thirds for the full year, and retention increased to 93.5 percent, resulting in net new customers rising four-fold compared to last year; with equivalent growth half-on-half at 239 percent.

Their focus on and investment in future growth had produced a 145 percent increase during FY19 in the number of new Millennials choosing to bank with them. This has resulted in a five-year decrease in the average age of new customers across their entire customer base to 35 years. Consequently, the average age of their new customers was below the median age of the Australian population at 37 years.

This was important because as they continue to accelerate the digitisation of their offerings and focus on their priority markets, where they have a clear competitive advantage, establishing and fostering lasting relationships with this younger demographic will deliver significant long-term growth opportunities,

During the year, the Bank launched Australia’s first and largest next-gen digital bank, Up, which has exceeded initial customer growth expectations. BEN also became the first lender globally to offer a digital home loan application and assessment process under its own brand, Bendigo Express, using Tic: Toc’s instant home loan technology.

A commitment to delivering better and seamless customer experiences was reaching all the Bank’s customer channels, including the ‘smart’ retrofitting of branches designed with the future customer and community in mind. The success of the first pilot at Norwood (SA) had seen a 64 percent increase in foot traffic and a significant uplift in business, with more branches to follow.


(Chart source: TradingView)

(Chart source: TradingView)

The Bank is also optimising its physical distribution network based on customer demand. During the year, the Bank closed six branches and 15 agency outlets. Their valued Community Bank® partners opened four new Community Bank® /Customer Service Centres

Additional investment in Mobile Relationship Managers (MRM) had taken the Bank’s total number of MRMs to 101. This year, MRMs have written in excess of $1 billion in residential loans. Eighty-seven Elders agrifinance managers were also brought into the Rural Bank network. The expected benefits of this new distribution structure include increased growth, stronger operational alignment, greater customer reach, and lower costs.



The company currently offers an annual dividend yield of 6.92%. The company has a P/E ratio of13.1. The EPS stands at $0.771. The stock has a market cap of $4.99 billion and a Share volume of 492.84 million. The stock has a 52-week price range of $9.37-$11.74 Data Source – Company Reports).


Veye’s Take

Earnings for the year were impacted by remediation and redundancy costs. Despite this, the Bank delivered a total income of $1.6 billion, in line with the prior year, in an environment of low growth and increasing competition. Net interest margin was steady year-on-year, and, half-on-half, increased by 2 basis points, reflecting the active management of margin and volume for both lending and deposits. BEN achieved positive momentum from the implementation of its new strategy, with a strong uplift in performance in its key priority markets, particularly half-on-half. Bank’s total lending grew by 1.1 percent to $62.1 billion, with noticeably stronger growth of 3.6 percent in the second half – well above system growth of 2.6 percent. In the second half, residential lending was up 4.3 percent and agribusiness showed growth influenced by seasonality up 12.8 percent, both well above system; whilst small and medium-sized business lending grew 9.5 percent. The bank delivered a step-change in customer growth with a four-fold increase in net new customers, taking it to a new milestone of more than 1.7 million customers choosing to bank with BEN. Their long-term focus and prudent risk management saw Common Equity Tier 1 improve by 30 basis points to 8.92 percent. This strong capital position reflects a stable balance sheet and the continuing movement to lower risk exposures. Bank’s continued focus on credit quality is reflected in bad and doubtful debts being down 28.8 percent to $50.3 million. The Board declared a final dividend of 35 cents per share, taking the fully franked full-year dividend to 70 cents per share. The stock was undergoing correction on the longer time frame. But in the shorter time frame, it has tried three times to breach the upper trend line. Above $10.25 the stock can have the potential to move higher. Veye recommends a "Buy" on “Bendigo and Adelaide Bank” at the current price of $10.20


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