Bendigo & Adelaide Bank’s result was overshadowed by a large software expense impairment, a dividend cut and an announced capital raising.
Net interest margin surprised to the upside as the bank positioned itself for falling rates, but will not be sustained, the broker notes, given rates have stopped falling. Citi also expects bad debts to increase from here.
The bank is yet to reveal its transformation plan, but given a weak revenue outlook for the sector the broker foresees pressure on the level of transformation management might be prepared to undertake. Sell rating and $9.25 target retained.
Target price is $9.25.Current Price is $10.57. Difference: ($1.32) – (brackets indicate current price is over target). If BEN meets the Citi target it will return approximately -14% (excluding dividends, fees and charges – negative figures indicate an expected loss).