Bendigo and Adelaide Bank has doubled first half profit as the regional lender remains cautiously optimistic about future financial performance.
Net profit rose to $104.1 million for the six months to December 31 compared with $50.6 million in the prior corresponding period, the Bendigo-based bank said in a statement today.
In early trading, the bank's shares were up as much as 37 cents, or 3.7 per cent, to $10.27.
Cash earnings, the bank's preferred measure of profitability because it removes unrealised gains or losses related to asset values, gained 24.4 per cent to $139.7 million.
Cash earnings per share rose to 41.2 cents, returning to pre-global financial crisis levels, Bendigo said.
The bank declared a first half dividend of 28 cents a share, unchanged from a year ago.
Bendigo said it remained cautiously optimistic about future financial performance and asset growth would continue to be dictated by broader economic conditions.
The bank said it expected to deliver strong financial results in the coming reporting period, supported mainly by a stable net interest margin and sound credit conditions.
Bendigo’s net interest margin recovered to 2.09 per cent from 1.66 per cent, as forecast.Chief executive Mike Hirst said the bank’s actions early in the financial crisis helped it recover quickly.
‘‘Our early action to de-risk the balance sheet and prepare ourselves for a period of market dislocation has paid dividends over the period, as evidenced by the significant and sustainable recovery in net interest margin and profit,’’ he said.
‘‘Our ability to compete for retail deposits on the basis of customer service and value has provided the company with an effective and affordable funding source.
‘‘This, combined with emerging opportunities in the wholesale and securitisation funding markets, should provide our shareholders with continued reason for optimism.’’
Continued strong competition for retail deposits is expected to constrain any margin expansion driven by increasing official interest rates, Bendigo said.
Despite the war for retail deposits, Bendigo continues to roll over more than 80 per cent of term deposits at maturity, the bank added.
Gross impaired loans rose 0.01 per cent to 0.5 per cent of total assets, with overall credit quality remaining sound.
A reported rise in non-performing loans was due mainly to the consolidation of Rural Bank’s accounts during the last six months.
Outstanding exposures to the bank’s $555 million Great Southern Ltd loan portfolio have remained ‘‘relatively steady’’ since August 2009, the bank said.
Bendigo said term funding costs remain expensive, but there are promising signs that securitisation markets are on the road to recovery.
Bendigo has kept its target of being 80 per cent retail funded (on balance sheet) but is monitoring alternative funding sources.
Its tier one capital ratio stands at 8.27 per cent, and total capital is running at 11.97 per cent.
‘‘These capital levels allow for significant flexibility as economic conditions improve, and will trend towards the board’s (tier one) target ratio of between seven to 7.5 per cent,’’ the bank said.
Costs were flat over the six months to December 31.Bendigo said its margin lending portfolio grew in line with the broader share market, and strong margins combined with climbing equity markets, make it optimistic for this business going forward.
Bendigo’s shares closed six cents higher at $9.90 on Friday.
AAP
