Bendigo and Adelaide Bank reported net profit of A$192.8 million for the 12 months to June 2020 – a fall of 49 per cent from the previous corresponding period. Most of that fall came in the June half, when profit fell 68 per cent. On a cash basis, profit was down 27 per cent to $301.7 million. The fall in earnings was due to the big increase in credit impairments.
Income: Net interest income of $1.3 billion was up 2.9 per cent compared with the previous year. Other operating income fell 8.1 per cent to $267.8 million. Total income was up 4.3 per cent to $1.6 billion. The bank attributed the drop in other income to the impact of the sale of Bendigo Financial Planning and changes to customer behaviour.
Expenses and cost to income: Operating expenses rose 6.9 per cent to $1.02 billion (22 per cent to $1.2 billion after specific items). The cost-to-income ratio rose 350 basis points to 62.7 per cent.
Impairment charge: The bank added a COVID-19 collective provision overlay of $127.7 million. The total charge for bad and doubtful debts was $168.5 million – up from $50.3 million in 2018/19. The bad debt charge was 26 bps of gross loans and acceptances. Excluding the COVID-19 collective provisions, it was 8 bps.
Credit quality: Total impaired assets fell from $310.9 million in June last year to $240.5 million.
Margin: The bank’s net interest margin fell 3 basis points to 2.33 per cent. The bank said margin pressure would continue and NIM would fall by as much as 7 bps in the current financial year.
Return on equity: ROE fell from 10.7 per cent in 2018/19 to 7.4 per cent for the year to June.
Earnings per share: On a cash basis, EPS fell 29.8 per cent to 59.7 cents a share.
Dividend: The bank deferred a decision on declaring a dividend for the June half. The total dividend payout for the year was 31 cents a share, compared with 40 cents a share in 2018/19.
The divisions: The bank’s biggest division, consumer banking, reported a cash profit of $404.8 million – up 5.2 per cent on the previous corresponding period. The business banking division’s cash profit fell 9.2 per cent from $150.1 million in 2018/19 to $136.3 million in the year to June. Agribusiness cash profit rose 16.9 per cent to $70.6 million. The COVID-19 overlay of $127.7 million was included in the corporate segment result.
Market share: The residential loan balance increased by 7.9 per cent to $48.6 billion. Business loan balances increased by 0.9 per cent to $14.5 billion. Customer deposit balances grew 6 per cent to $50.9 billion.
Capital: At June 30, the bank’s common equity tier 1 capital ratio was 9.25 per cent – up 33 basis points compared with June 2019. Total capital rose from 13.1 per cent to 13.6 per cent. Total risk weighted assets rose 2 per cent to $38.2 billion.
Liquidity and funding: Growth in customer deposits through the year meant that the proportion of deposit funding rose from 75 per cent to 75.2 per cent. Wholesale funding accounted for 19.6 per cent and securitisation 5.2 per cent. The average liquidity coverage ratio through the year was 139 per cent and the net stable funding ratio was 116 per cent.