Bendigo and Adelaide Bank will pay a steady final dividend of 35 cents a share (for a steady full-year payout of 70 cents) after revealing a weak 6.6% slide in cash earnings to $415.7 million for the year to June.
The bank blamed the profit dip on the cost of redundancies, customer refunds and a soft property market both and management warned there could be more job losses ahead at the regional lender.
Bendigo said 84 staffers were made redundant over the 12 months to June 30, while six branches and 15 agency outlets were closed as operating expenses increased by a “disappointing” 5.9% to $954.9 million.
This figure included a total of $16.7 million in remediation costs related to its financial planning arm’s involvement in the fees for no service scandal, as well as other product failures.
Managing director Marnie Baker said she did not expect any further remediation charges following the sale of financial planning to IOOF in March, but noted that employee numbers would always be subject to review.
“Whilst we’re continuing to invest in our capability and total income was steady, we maintain our ongoing focus to sustainably reduce our cost base,” Ms. Baker said in Monday’s release.
Bendigo’s income fell by 4.6% to $1.57 billion thanks to weaker housing markets, weak demand for finance generally and weak consumer confidence.
Net interest margin was flat at 2.36% but ended the year at 2.41% which was a good result seeing its larger competitors have been battling to keep this key measure stable. The cuts to interest rates in June and July will put pressure on Bendigo’s net interest margin, as will any other cuts (at least one more, perhaps two) in the coming year from the Reserve Bank.
Chief financial officer Travis Crouch said the two recent RBA cash rate cuts would bring it down to about 2.36% or 2.37% which will place added pressure on costs and staffing levels, especially if demand for loans does not improve in reaction to the cuts.
Ms. Baker was upbeat in her commentary yesterday, “During the 2019 financial year we began our multi-year journey to reshape our business for the future.”
“Earnings for the year were impacted by remediation and redundancy costs. Despite this, we delivered total income of $1.6 billion, in line with the prior year, in an environment of low growth, political uncertainty, subdued consumer confidence, and increasing competition.
“Net interest margin was steady year-on-year, and, half-on-half, increased by 2 basis points, reflecting the active management of margin and volume for both lending and deposits. We achieved positive momentum from the implementation of our new strategy, with a strong uplift in performance in our key priority markets, particularly half-on-half,” the CEO said.
Despite the weaker cash result, investors liked the maintained dividend (a similar move to that of the larger Commonwealth Bank last week) and the shares rose 3.3% to $11.11.