Bendigo Cuts Dividend, Launches Cap Raising

Trading in Bendigo and Adelaide Bank shares should resume today and will fall sharply after the regional financial group yesterday revealed plans for a big capital raising and slashed the interim dividend.

The shares ended at $10.57 last Friday and the $300 million would normally see the price dip with the issue being made at $9.34 a share (big holders were offered $250 million of shares yesterday after the trading halt was imposed).

The 9% discount for the issue price would have seen the share price fall to just under $9.70.

But the surprise cut to the dividend will see some investors sell-off today because that moved generated some raised eyebrows among investors and analysts, especially with what was seen as a weak interim result.

The share plan offer to retail shareholders will see existing shareholders the opportunity to purchase $15,000 worth of shares at the same discount, or even lower if the average price leading up to March 23 is lower. The new shares will not be entitled to the interim dividend-paying on March 31.

CEO Marnie Baker blamed low-interest rates and rising regulatory pressure at the release of its half-year results on Monday, adding that ongoing technology investment and compliance costs were also impacting the lender.

The bank’s statutory net profit was down 28.2% to $145.8 million and the company has trimmed its interim dividend from 35¢ to 31¢. The company also reported a 2%drop in cash earnings to $215.4 million.

Net interest income increased by $17.9 million, or 3.2%, to $676.4 million, while the bank’s net interest margin before revenue share arrangements increased by two basis points to 2.37%.

“We feel this reduction was required given the capital raising to ensure sustainability of the dividend, retain funds for growth and to enable us to continue to deliver our strategy,” Ms. Baker said in yesterday’s release to the ASX.

Ms. Baker pointed to the growth in the bank’s total lending that was up 2.8% from the same time last year, with losses in agricultural lending caused by drought offset by strong demand for residential lending.

“Our Consumer Banking division performed strongly, driven by investment in processing capacity, to support settlement growth, new mobile relationship and business development managers and new and enhanced third party white label partnerships,” Ms Baker said.

Ns Baker warned however that the bank’s spend on technology and digital would increase before it began to ease (some of the new capital raised in the issue will go to help finance this business).

Bendigo said its digital bank Up, launched in partnership with Melbourne software firm Ferocia, added 165,000 customers during the half, an increase of 57%.

The app-based bank had $172 million in deposits, up four-fold from the prior half.

Bendigo’s total operating expenses were 5.0% higher overall, with the bank’s cost-to-income ratio rising 2 percentage points to a high 59.3%.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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