Funding diversity suits Bendigo
Bendigo and Adelaide Bank is hoping that banks will finally get the opportunity to sell covered bonds, partly to help moderate pricing in the term deposit market.Asked about margin trends at yesterday's investor briefing, Mike Hirst, the bank's managing director, said, "A lot of it will depend on what happens in the [term deposit] market. "And there's a few things working in our favour there, one is the recovery of fixed interest markets generally, two is RMBS and three, I think, is covered bonds."We were originally against covered bonds. We felt that they would give the major banks an advantage similar to what they had with the government guarantee, whereby they could hoover up a lot of funding and then use that to grab market share. "However, over time, I think we've come to the view that the ability of the majors to access other funding opportunities should see some normalisation around retail term deposits and, as a result of that, we hope that we've seen the worst in that market and that going forward that will underpin the continued strength of the margin."The bank said its net interest margin improved by only one basis point over the six months to December 2010, to 2.15 per cent, but put the current "NIM run rate" at 2.23 per cent on a gross basis (before allowing for sharing of margin income with owners of Community Bank franchises).