Bendigo and Adelaide Bank shares jumps 7pc after it books full-year profit lift

Bendigo & Adelaide Bank shares leapt over 7pc after higher home-loan rates helped bolster its full-year cash earnings.

Bendigo Bank chief executive Mike Hirst outside his office in Docklands Melbourne. (David Geraghty/The Australian)

Shares in Bendigo and Adelaide Bank have jumped after the lender reported a 4.2 per cent lift in full-year cash profit, driven by improved margins and higher home-loan rates.

Cash profit rose to $418.3 million in the 12 months through June, up from $401.4m the year before.

Managing Director Mike Hirst said the bank had experienced strong growth in the year and, while APRA’s lending caps had somewhat restricted that growth, higher mortgage rates saw margins expand in the latter half.

“Margin expansion was strong in the second half … In part this was driven by the need for mortgage repricing to respond to those regulatory caps on interest only and investor growth,” Mr Hirst said.

For the year, the bank’s net interest margin — a profit measure based on the difference between the rate at which a bank borrows and lends — fell by 1 basis point to 2.22 per cent, partly due to continued strong competition for deposits. But in the second half it rose 8 bps to 2.26 per cent.

In the latest round of adjustments to mortgage rates, Bendigo in early July increased rates on loans to property speculators for new and existing customers but trimmed variable rates for new loans where the borrower pays off the principal and interest by a smaller increment. The move was aimed at meeting regulatory targets restricting riskier loans to investors and interest-only mortgages that in recent years have jumped even as household debt in Australia has hit record levels.

Mr Hirst said arrears were at historical lows, and the bank was not seeing stress on its balance sheet, though he acknowledged certain pockets in WA and Queensland were showing slightly higher arrears than other areas.

“Bad and doubtful debt is the one disappointment that has dragged earnings back on a year-on-year,” CFO Richard Fennell said.

Bendigo (BEN) will pay a final dividend of 34 cents a share, steady on a year earlier.

Bendigo bank shares closed up 7.46 per cent, or 84 cents, at $12.10.

With Dow Jones