Bendigo and Adelaide Bank Limited(BEN )

Team Veye | 31 Mar 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 operates through three segments: consumer, business and agribusiness. The Consumer division is focused on engaging with and servicing consumer customers and includes its branch network (including Community Banks and Alliance Banks), mobile relationship managers, third party banking channels, Wealth services, Homesafe, and customer support functions including call and processing centers. The Business division is focused on servicing business customers, particularly small and medium businesses who are seeking a relationship banking experience, and includes Portfolio Funding, Delphi Bank and Community Sector Banking and Great Southern. The Agribusiness division includes all banking services provided to agribusiness, rural and regional Australian communities through its Rural Bank brand, with a focus on family corporate segment of Australian farm businesses (Profile source: Reuters)

From the Company Reports

Bendigo and Adelaide Bank Limited (ASX: BEN) on 16 March 2020 provided the following update in relation to its Share Purchase Plan (“SPP”), following the closing of the SPP at 5:00pm (Melbourne time) on 13 March 2020.

The SPP was well supported, with BEN receiving applications totaling approximately $45m. Applications remain subject to final reconciliation and clearing of payments.

Bendigo and Adelaide Bank 2020 Interim Financial Result

Bendigo and Adelaide Bank (ASX: BEN), Australia’s fifth-largest retail bank, on 17 February 2020 announced interim results for the half-year ending 31 December 2019.

(Graphic Source – Company Reports)

  • Statutory net profit: $145.8 million, down 28.2 percent, including a pre-tax software impairment of $87.1 million and accelerated amortisation of $19.0 million 
  • Cash earnings after tax: $215.4 million, down 2 percent 
  • Net interest margin: 2.37 percent, up 2 basis points (bps) 
  • Total income on a cash basis: $814.7 million, up 1.4 percent 
  • Bad and doubtful debts: $23.2 million, down 9 percent 
  • CET 1: 9 percent, up 24 bps 
  • Cash earnings per share: 43.7 cents per share (cps), down 3.1 percent 
  • Total fully franked dividends: 31 cps, down 4 cps 
  • Total lending: $62.9 billion, up 2.8 percent 
  • Residential lending: above system at 7.7 percent 
  • Total deposits: $66.6 billion, up 5.1 percent, with customer deposits up 3.8 percent


Managing Director and CEO, Marnie Baker, said that its interim results, underpinned by its market-leading trust ratings, strong growth, above system lending, margin management, asset quality and growth in new and existing markets, affirms Bank’s multi-year strategy to be Australia’s bank of choice.

Earnings for the half were impacted by ongoing technology investment, regulatory and compliance costs and staff investment to support mortgage growth. Despite this, BEN delivered total income of $814.7 million, up 1.4 percent on the prior corresponding period, in a challenging environment comprised of low rates, increasing regulatory pressure, low consumer and business confidence and growing competition.

(Graphic Source – Company Reports)

Strong customer growth continued with the total number of customers choosing the Bendigo and Adelaide Bank increasing 4.9 percent in the half. This sustained growth set a record of more than 1.8 million customers.  net promotor score is 27.2 higher than the average of the major banks.

Business highlights

Bank’s strategy, combined with high trust, innovative products, technology investment, deep community connection and consistently leading customer experience, continues to deliver positive business and customer growth.

Its focus on digitisation and investment in future capability has seen the average age of its customers continue to decrease. The average age of new customers continues to be more than 10 years younger than the average age of the customer base. The net growth in the number of millennials choosing to bank with it increased 349 percent on the prior corresponding period and the Bank also saw an uptick in small business customers

The Bank continues to modernise its physical distribution network based on customer demand. This includes branch rationalisation where appropriate, continued investment in mobile relationship managers and clustering specialist capability and management resources to more efficiently manage operations. During the half, the Bank closed five branches and one agency outlet and opened two new agencies. The total number of national points of presence is more than 700.

(Graphic Source – Company Reports)

As part of a commitment to offer tailored customer experiences, the Bank also launched two additional innovative concept branches in Carlton, Victoria and Leichhardt, New South Wales. This follows the success of Norwood, South Australia, which launched in November 2018 and has seen average foot traffic increase 56 percent. Since opening, two and four months ago, foot traffic in Carlton and Leichhardt has increased 56 percent and 188 percent respectively.

Supporting its commitment to reduce complexity and deliver the highest levels of service and outcomes, the Bank has: 

  • Successfully completed the transfer of Bendigo Financial Planning to Bridges Financial Services. 
  • Automated its scheduled review process, improving customer experience and productivity in Business Banking by reducing time spent on administration, allowing relationship business bankers to focus on delivering customer value. 
  • Transferred Rural Bank to Bendigo and Adelaide Bank’s authorised deposit-taking institution (ADI) licence, delivering cost savings and efficiencies.

Operating expenses 

Operating expenses were $487.4 million, up 5 percent on the prior corresponding period. This excludes pretax software impairments ($87.1 million) and software accelerated amortisation charges ($19.0. million), following reviews of the Bank’s software assets. 

(Chart source: TradingView)

The Bank continues to progress towards meeting the requirements for advanced accreditation for credit risk. Whilst there is uncertainty around the potential capital benefits, which have undoubtedly contracted significantly over the last few years given the regulatory changes, the Bank views maintaining its program as important. This will enable the Bank to fully assess its options once the prudential standards for credit risk under both the standardised and IRB approaches are finalised.


Stock Overview
Sector Banking
Risk Low
Market Cap 3.4bn
Daily average Volume 3,345,525
EPS (FY) 0.650
PE RATIO 9.910
Yearly Dividend Yield  10.25%
Target Price (s) $8.600-$9.600
Stop Loss 5.600
Recommendation Buy
52 weeks High $11.740
52 weeks Low $5.320
Directors Ms Marnie Baker
Non-executive Directors Ms Vicki Carter
Mr David Foster 


Veye’s Take

Bendigo and Adelaide Bank delivered solid results underpinned by strong growth, margin management, and credit quality. It delivered a total income of $814.7 million, up 1.4 percent on the prior corresponding period, in a challenging environment comprised of low rates, increasing regulatory pressure, low consumer and business confidence and growing competition. The Bank continued strong customer growth with the total number of customers choosing it, increasing 4.9 percent in the half. This sustained growth set a record of more than 1.8 million customers. BEN’S net promotor score is 27.2 higher than the average of the major banks. Total lending continued to grow to $62.9 billion, up 2.8 percent on the prior corresponding period and above system. In the half, residential lending was well above the system at 7.7 percent. Agribusiness lending was down 6.8 percent due to seasonality and the ongoing multi-year drought. For small business customers, focused relationship banking strategies delivered growth and margin improvement, with small business lending up 15.6 percent. Net interest margin increased 2 basis points on the prior corresponding period to 2.37 percent, reflecting the active management of margin and volume for lending and deposits. Bendigo and Adelaide Bank’s bad and doubtful debts are down 9 percent to $23.2 million due to its ongoing focus on credit quality. All business divisions are well secured, and portfolio performance remains sound. The stock has halted correction on the longer time frame. MACD just had a crossover after the fall losing its intensity. Above $6.75 the stock can have the potential to move higher. Veye recommends a "Buy" on “Bendigo and Adelaide Bank” at the current price of $6.27


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