Bendigo profit at a glance

An impairment of A$95 million to the goodwill of the margin lending business of Bendigo and Adelaide Bank - a decision announced in December - severely dented the headline profit of the bank for the December 2011 half-year.

The headline profit, of $57.9 million, for the half is about two-thirds the profit reported six months ago.

Cash profit, the bank's preferred measure, fell 0.3 per cent over six months, to $162.6 million.

The profit from retail banking fell for the second half in a row. At $159.6 million, this profit was down by $19 million on the level a year ago. Most of this decline is a result of the lower value of properties that secure the bank's loans under its HomeSafe shared equity scheme.

Bendigo's interest margin fell to 2.13 per cent at December 2011, from 2.19 per cent at June 2011.

The return on equity on a cash basis fell to 8.5 per cent in the December half, from 9.5 per cent six months earlier. Measured as a return on tangible equity (which leaves out the goodwill, most of it tied to the Adelaide Bank takeover in 2007), Bendigo's ROE in the half was 14.8 per cent, down from 17.2 per cent in the prior half.

The bank said that once it repaid unsecured wholesale debt next month it would have no such debt on issue, though the bank hopes to sell term debt once wholesale pricing settles.

Mike Hirst, the bank's CEO, said the credit rating upgrade in late 2011 from Standard & Poor's "will certainly stand us in good stead. We've got capacity there and we know that there's capacity in the market for our name."