Bendigo and Adelaide Bank’s first-half cash earnings have exceeded expectations, according to Citi analyst Thomas Strong. The bank reported cash earnings of $256 million, surpassing forecasts by 3.5 per cent. This positive result was attributed to modest revenue growth and strong asset quality. Bendigo and Adelaide Bank provides a range of banking and financial services to retail, business, and rural customers. The company operates primarily in Australia.
Despite the positive earnings figures, Strong cautioned that balance sheet expansion is emerging as a significant challenge for the regional lender. Additionally, while the bank’s net interest margin of 1.92 per cent slightly exceeded forecasts, concerns remain about the bank’s overall financial strategy.
Strong highlighted potential market concerns regarding increased Anti-Money Laundering (AML) costs and changes to the bank’s capital positioning. “Balance sheet growth continues to be an issue for Bendigo Bank, and the market has to digest initial guidance for AML costs, as well as the shift in capital positioning from neutralising the DRP to discounting and underwriting it,” Strong said. The analyst anticipates a negative market reaction as investors absorb the implications of the increased AML costs and the capital raising through the Dividend Reinvestment Plan (DRP).
Following the report, shares in Bendigo Bank experienced a decline. The stock was last trading down by 1.8 per cent, reflecting investor apprehension regarding the identified challenges.
