Bendigo Bank shares jump on earnings boost

The bank, led by Marnie Baker, posts a 22 per cent jump in cash earnings over the five months through November.

Bendigo and Adelaide Bank boss Marnie Baker.

Bendigo and Adelaide Bank shares have jumped 7 per cent after the tier-two lender saw a strong uplift in cash earnings over recent months and tipped further margin tailwinds for the rest of the year.

For the five months to November 30, Bendigo’s unaudited cash earnings leapt to $245m, a 22 per cent rise on the prior corresponding period, amid a decline in lending and a boost in deposits.

Net interest margin post-revenue share arrangements over the same period stood at 1.85 per cent, with an exit NIM of 2.01 per cent, the lender said in a trading update on Tuesday. Year-to-date, NIM pre-revenue share arrangements came in at 2.30 per cent.

Bendigo’s shares were up 6.9 per cent at $9.66 by the day’s close after earlier rising to as high as $9.72.

The bank delivered the earnings boost as residential lending fell 0.2 per cent between July and the end of November, while business lending tumbled 3 per cent over the same period. Deposits increased 2 per cent.

Looking ahead, Bendigo expects further NIM tailwinds in the second half of fiscal 2023 and expects the official cash rate to rise to as high as 4 per cent by mid next year, up from the current 3.1 per cent.

Operating expenses are expected to increase modestly on 2021-22 levels, reflecting higher non-lending losses and a greater mix of investment spend being expensed, the lender said.

Managing director Marnie Baker put the recent NIM improvement down to the bank’s management of volume growth and margins.

“At our full year results in August, we outlined our intent to sharpen our focus and concentrate our efforts on better returns, and to date in the first half of fiscal 2023 we have delivered strong growth in cash earnings and an improved return on equity,” Ms Baker said.

“Our NIM has continued to rise as we carefully manage our volume growth and margins, while continuing to prudently manage costs in an inflationary environment.

“We remain committed to our strategy and vision, and we are united in our purpose of feeding into the prosperity of the community and not off it.”

Separately, Ms Baker on Tuesday hit out ANZ’s proposed $4.9bn acquisition of Suncorp’s banking operations, warning the move would hinder competition.

“If successful, this acquisition will concentrate market share and hand a commanding position in the Queensland market to a big four bank. It will further entrench Australia’s banking oligopoly which invariably leads to sub-optimal outcomes for customers and communities,” Ms Baker warned.

Her comments come a day after the Australian Competition and Consumer Commission said it had received ANZ’s merger authorisation application and would seek submissions by January 18, ahead of making a determination on June 12.

Providing his take on the update, UBS banking analyst John Storey said it had surprised on the upside, driving the share price higher.

“Overall, this year-to-date five-month update is strong, in line with UBS estimates but 15 per cent ahead of consensus estimates,” Mr Storey said in a note to clients.

“NIM has surprised on the upside, with Bendigo’s level of rate sensitivity greater than the market expected.

“Sizeable earnings upgrades for FY23 are likely … Despite our central scenario of increased competition, higher funding costs and slowing volume growth we continue to see a clear path for Bendigo to generate a return on tangible equity above 13 per cent over our forecast period.”