Investment in, and takeovers of, niche financial services businesses looks like being a key theme for Bendigo and Adelaide Bank over the next year or two.
Bendigo Bank profit table
With a return on equity languishing in the eight per cent range Bendigo needs something to brighten the bottom line, and new revenue streams are one of the options, alongside higher volumes, wider margins and disciplined control of costs, including the cost of capital.
One investment confirmed yesterday was the purchase of a 24 per cent stake in Linear Asset Management, a Melbourne-based provider of investment platforms that specialises in the emerging service of individually managed accounts.
Basic management levers are working for the bank following a period of subdued profitability in the wake of the financial crisis of 2008.
Net profit more than doubled to $243 million in the year to June 2010. Profit increased 34 per cent in the second half over the first to $139 million.
The short-term ROE target for the bank is to increase that return metric by one percentage point a year, though the bank is not then targeting any more specific number such as 15 per cent.
For small banks the average ROE was 7.3 per cent in 2009 on APRA data, and was 8.9 per cent before that.