The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is under the spotlight after reporting its FY23 result.
FY23 result highlights
Here are some of the main numbers from the bank‘s report for the 12 months to 30 June 2023:
- Total income up 14% to $1.93 billion
- Total lending up 1.2% to $78.7 billion
- Cash earnings up by 15.3% to $576.9 million
- Statutory net profit up by 1.8% to $497 million
- Net interest margin (NIM) improved by 20 basis points (0.20%) to 1.94%
- Cost to income ratio improved by 420 basis points (4.20%) to 54.9%
- Dividend per share up 15.1% to $0.61
Other highlights
Bendigo Bank’s customer base is now much bigger, rising by 9.9% to 2.4 million, while customer deposits grew by 2.8% to $66.1 billion.
It boasted that it’s Australia’s most trusted bank, with a net promoter score (NPS) 28.4 points above the industry average.
Shareholders are now seeing a stronger profit for their retained money within the business – the ASX bank share’s return on equity (ROE) improved 90 basis points to 8.62%.
The NIM improvement showed that the bank earned a higher margin on its lending, which compares the loan rate to the funding rate (eg term deposits).
Management commentary
The Bendigo Bank CEO Marnie Baker said:
We continue to focus on driving profitable growth with sustainable returns, supported by our unique community bank
model. Our focus on returns and execution is paying off and can be seen with our prudent approach to competing in
key lending markets and the return of lending growth over the last quarter. Our transformation strategy is on track with
key milestones reached as we execute on our strategic imperatives of reducing complexity in our business and investing
in capabilities to meet the growing and changing expectations of our customers and other stakeholders.
Outlook for the Bendigo Bank share price
The ASX bank share said that inflation pressures are “difficult to extinguish” and are not expected to return to the RBA’s target until 2025. The economy is proving “resilient”, shown by the 50-year low unemployment rate, which “may extend the length of restrictive interest rate settings.”
The bank thinks that economic growth will be “modest” in FY24, but a housing shortage and population growth are expected “to be supportive” for property prices.
It’s expecting bad debts to “trend upwards” and move towards longer-term averages of 10 basis points to 12 basis points. The bank noted that 84% of home loans have a financial buffer, with 41% at least one year ahead on repayments.
The shorter-term outlook looks cloudier for banks as arrears and bad debts return to a more normal level. Due to that, I wouldn’t want to buy Bendigo Bank shares at this stage.
