Bendigo has new mergers appetite

BENDIGO and Adelaide’s elevation of Gary Tucker to head of strategy signals a ­return of the bank’s ­appetite for M&A opportunities.

A Bendigo Bank branch: the bank has emerged as one of the biggest rural lenders.

BENDIGO and Adelaide’s elevation of Gary Tucker to the role of head of strategy has signalled a ­return of the regional bank’s ­appetite for merger and acquisition opportunities as it considers options for growth in a subdued banking market.

At the same time, the lender is pushing ahead with its new credit unions venture, with about $550 million of loans and more than $600m of deposits from its joint Alliance brand expected to move on to its balance sheet by next month.

Under the Alliance venture, Bendigo handles all the loans and deposits of its credit union partners. Four credit unions initially signed up to the program last ­November, with Bendigo set to ­assume responsibility for compliance, banking systems and balance sheet. The credit unions maintain pricing and loan approvals and continue to retain their branch network.

Mr Tucker, who until now had been overseeing Bendigo’s long-running Great Southern plantation settlement, will move into a strategy role at the regional lender. While Bendigo is often linked to a tie-up with Bank of Queensland, it is expected the Victorian-based bank is mulling an expansion of its Alliance program.

Bendigo last year emerged as one of the biggest rural lenders, with the $1.78 billion acquisition of Victoria’s state-owned Rural Fin­ance. Bendigo undertook a share placement to help fund the deal.

Bendigo is this morning scheduled to deliver its first-half result, with analysts tipping the bank to report cash earnings of $217.5m for the six months to end December. This is up from $185.9m for the previous corresponding period.

The latest earnings are expected to be boosted from a full-year contribution of Rural Finance, ­acquired early last year.

Excluding acquisitions, Bendigo’s interest margin is expected to fall slightly, while lending growth is likely to come in at a subdued 3.5 per cent.

Deutsche Bank analyst Andrew Triggs said much of the focus for Bendigo would be on the outlook for the bank’s interest margins in the face of a falling interest rate environment.

Also under scrutiny will be returns from the bank’s Homesafe reverse mortgage business and collection of outstanding loans from the Great Southern agribusiness scheme.

Last week, Commonwealth Bank chief Ian Narev painted a ­benign outlook for the banking market, saying the economy ­remained pressured by low levels of confidence.

Meanwhile, Bendigo has renewed its business banking push, appointing former NAB veteran Stephen Gorman to the role of head of business banking.

Mr Gorman takes over the reins of Bendigo’s $12.4 billion business bank after four years of lacklustre credit growth.

But momentum is picking up and in December outstanding business credit finally surpassed the November 2008 peak, hitting $778bn, according to UBS.

It has seen all banks position for the uptick, leading to greater competition for customers confident enough to borrow as the economy continues a challenging transition away from mining investment-led growth.

Small business is a key battleground given the big end of town can access cheap debt through capital markets.

Shares in Bendigo have added 11.4 per cent over the past year, outperforming rivals including yield play Commonwealth Bank. Bendigo last traded at $14.38.