Bendigo posts smaller half year profit
(21 February 2012 – Australia) The first-half profit of Bendigo and Adelaide Bank has dropped by 67 percent, attributed to higher funding costs and weak demand for loans.
Bendigo reported a net profit of A$57.9 million on Monday in the six months to December 31, down from A$173.9 million in the previous corresponding period.
The result was hurt by $95.6 million in write-downs on intangible assets.
The bank’s cash earnings in the six months to December 31 were $162.6 million, up 0.3 percent on $162.1 million in the previous corresponding period.
Chief executive Mike Hirst said the cost of all the bank’s funding had increased markedly in the first half of the financial year, including retail term deposits and debt markets.
The economic outlook for the remaining six months remained difficult, with funding costs, a changing asset mix and demand for credit ‘‘all currently problematic’’, he said.
The Bendigo-based bank is among the nation’s lenders battling the weakest demand for credit since 1977, eroding earnings at larger rivals including Westpac.
The outlook for the current half-year remains difficult with "significant market volatility and revenue challenges facing all banks," Hirst said.
"The cost of all funding channels have increased markedly over the past six months, including retail term deposits, senior unsecured and secured debt markets," Hirst said in Monday’s statement.
"The contraction in margin, coupled with slowing credit growth and market sentiment moving investors away from higher margin wealth and equities products, has resulted in flat earnings."
A recent interest rate rise would address some of that margin fall but higher funding costs were yet to be fully recouped, Bendigo said.
Bendigo had A$48.1 billion in loans under management at 31 December, up 0.6 percent from six months earlier.
It said credit quality was sound, with 90-day arrears in residential mortgages improving in the first half of the financial year to 0.74 percent.
Business lending arrears increased marginally over the first half to 2.2 percent.
The result was hurt by $95.6 million in write-downs on intangible assets.
The bank’s cash earnings in the six months to December 31 were $162.6 million, up 0.3 percent on $162.1 million in the previous corresponding period.
Chief executive Mike Hirst said the cost of all the bank’s funding had increased markedly in the first half of the financial year, including retail term deposits and debt markets.
The economic outlook for the remaining six months remained difficult, with funding costs, a changing asset mix and demand for credit ‘‘all currently problematic’’, he said.
The Bendigo-based bank is among the nation’s lenders battling the weakest demand for credit since 1977, eroding earnings at larger rivals including Westpac.
The outlook for the current half-year remains difficult with "significant market volatility and revenue challenges facing all banks," Hirst said.
"The cost of all funding channels have increased markedly over the past six months, including retail term deposits, senior unsecured and secured debt markets," Hirst said in Monday’s statement.
"The contraction in margin, coupled with slowing credit growth and market sentiment moving investors away from higher margin wealth and equities products, has resulted in flat earnings."
A recent interest rate rise would address some of that margin fall but higher funding costs were yet to be fully recouped, Bendigo said.
Bendigo had A$48.1 billion in loans under management at 31 December, up 0.6 percent from six months earlier.
It said credit quality was sound, with 90-day arrears in residential mortgages improving in the first half of the financial year to 0.74 percent.
Business lending arrears increased marginally over the first half to 2.2 percent.
Subscribe