The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is down more than 50% after the regional bank announced its FY20 result.
Bendigo Bank’s FY20 report
Bendigo Bank announced that its cash earnings after tax was down 27.4% to $301.7 million and its statutory profit after tax was down 48.8% to $192.8 million.
Total lending increased by 5.1% with residential lending growth of 9.4%. Residential lending growth was 3.6 times faster than the overall system’s growth.
Part of the profit decline was down to a reduction of its net interest margin (NIM) down 3 basis points to 2.33%. The NIM is important because it shows what profit (in percentage terms) it makes from the money it lends out compared to the cost of those funds (eg deposits).
A big reason for the profit decline was COVID-19 provisions. Bendigo Bank reported bad and doubtful debts of $168.5 million with a COVID-19 collective provision of $127.7 million.
However, Bendigo Bank remains in a strong financial position with a CET1 capital ratio of 9.25%, up 0.33% (33 basis points).
During the year Bendigo Bank increased its customer base by 9.9% to 1.88 million customers. This growth came whilst achieving a net promoter score of 32.1, which is 33.1 higher than the industry average.
Dividend
Due to the difficult result and COVID-19 uncertainty, Bendigo Bank decided to defer its dividend decision.
Summary
Management weren’t able to provide any meaningful guidance for FY21. Its focus is to maintain a solid balance sheet.
The Bendigo Bank share price is down by around a third from its pre-coronavirus price. I’m not sure I’d want to buy shares today – it may take some time before the bank’s earnings can fully recover. There are plenty of other ASX dividend shares I’d rather buy like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
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