Bendigo and Adelaide Bank beats out profit growth

The bank’s shares surged 10 per cent as it managed to grow customer numbers and market share, while reducing costs.

Bendigo and Adelaide Bank managing director Marnie Baker. Picture SIMON CROSS

Bendigo and Adelaide Bank has been a beneficiary of Australians swapping cities for the country life due to COVID-19 and is “very comfortable” it can maintain its above-system lending growth in the coming year, according to managing director Marnie Baker.

Speaking to The Australian after handing down a better-than-expected first-half result, Ms Baker said she was not concerned about the heat in the property market in recent months and was optimistic on the nation’s economic outlook.

“We have a representation across both metro and regional, but, of course, we have a really strong connection into regional, especially through our network and our community bank network. So I expect that we are very much picking up on on that migration sentiment.

“From a property and pricing perspective, what we’re seeing is it’s predominantly owner occupiers: around 85 per cent (of loans being written) are owner occupiers with principal and interest. If it was investors, that’s when you might be more cautious about property blowout movement,” she said.

Over the six months through December, the the nation’s fifth largest lender grew its loan book well above system, with total lending jumping 9.2 per cent to $68.3bn. This compared with 0.1 system growth over the same period.

Residential lending grew 14 per cent, or 3.6 times system, and was further strengthened by a 26.3 per cent increase in applications on the prior half, the bank said.

Over the six-month period it also saw a $5bn increase in customer deposits.

It posted cash earnings of $219.7m, up 1.9 per cent on the prior corresponding period, as total income grew 3.3 per cent to $849m. Net profit surged 67.3 per cent to $243.9m

Shares in the lender closed up 11.3 per cent at $10.56 on the back of the news.

“We feel very comfortable that we can continue to grow above system. And I have that confidence because we’re growing at the right pricing,” Ms Baker told The Australian.

“It is highly competitive out there, and a number of organisations have cashback features to their products. We don’t; we haven’t been providing that. So (the growth) is really based on our executional ability, our close relationships with our customers and communities, she said.

While voicing her optimism on the economic outlook, Ms Baker cautioned on the “two-speed economy” as the federal government prepares to wind up JobKeeper payments next month.

“We are seeing some really encouraging economic indicators, but there are still some industries that are more exposed and have been more impacted through COVID-19.

“So we do support the extension of the right level of stimulus for the health of the economy and we do want to make sure that there’s sufficient support for those more vulnerable members of society and the unemployed,” she said.

As the bank looks to keep up its pace of lending and deposit growth, it is also intent on reducing its cost base, and maintaining a strong and resilient balance sheet, Ms Baker said.

The lender declared a 28c per share dividend, comprising a 4.5c per share payout relating to the full year 2020 final dividend and 23.5c per share relating to the interim dividend.

It also announced a fully underwritten dividend reinvestment plan, which raised eyebrows among analysts.

“A strong result, with a positive read-throughs for the sector from liability pricing and low bad debts,” Citi analyst Brendan Sproules said.

“Material dividend beat will be well received by the market, although the underwritten DRP will raise strategic questions of capital requirements and uses as the sector is largely speculated for capital return,” he added.

Net interest margin decreased seven basis points on the prior corresponding period and increased one basis point on the prior half to 2.30 per cent.

This reflected active pricing and volume management for lending and deposits, despite lower lending rates due to a mix of growth and competitive new business rates, Ms Baker said.

Providing an update on deferred loans, Ms Baker said 3,087 customer accounts were still on repayment holidays as at December 31. This is down 86 per cent from the peak in May.

The value of the deferred payments is around $1.1bn, down 84.2 per cent from a peak of $6.9bn.