Bendigo and Adelaide goes for growth
In another sign small banks are ready to start taking back some of the market share they gave up to the big banks over the past year, Bendigo and Adelaide Bank yesterday reported that its focus was on growth in home lending through its own direct channels and third party distribution.
The bank was bullish in its presentation at the JP Morgan corporate access day. One reason for this bullishness is that the margin compression of the past year is starting to move in reverse.
Bendigo and Adelaide is 96 per cent retail funded. This time last year it was paying above 7.5 per cent on average for term deposits. Now it is paying around 4.7 per cent.
With rates on the way up again, lenders with retail funding will enjoy a boost to margins as they move loan rates ahead of deposit rates.
Bendigo announced a 25 basis point increase in home loan rates last week, which took effect yesterday. The standard variable rate on a home loan is now 6.15 per cent.
Term deposit rates are going up too. Last week the bank put its 12 month rate up from five to 5.3 per cent and its 24 month rate up from 5.85 to six per cent. But it will take some time before term deposit customers are re-set.
These changes are helping improve the bank's margin and encouraging it to go after new lending business.
This is a very different picture from the one painted when the bank presented its 2008/09 results. In the year to June the size of the bank's residential loan portfolio fell four per cent from $29.8 to $28.6 billion.
New residential loan approvals fell 1.8 per cent from $6.5 to $6.4 billion.
Third party mortgage distribution was "put on hold" because of disruption to the securitisation market. Pre-tax profit from the division fell from $85.9 million in the December half to $26.4 million in the June half.
The bank is also anticipating the re-opening of the securitisation market.
It said there was demand in the market for alternatives to the big four.