BENDIGO and Adelaide Bank is tipped to deliver an upside earnings surprise driven by a recovery in interest margins when it reports its first-half profit for financial 2010 this morning.
The outlook for regional banks is improving, analysts say, and Bendigo should report fatter margins off a low base after repricing its retail term deposits.
Brokerage Citigroup said much of the bank's recent growth was a result of winning new term deposits despite having priced them less aggressively than rivals Suncorp Metway and Bank of Queensland.
''While Bendigo's large term-deposit book became a major drag to margin when cash rates fell rapidly in late 2008 and early 2009, this impact has reversed in late 2009,'' Citigroup's Craig Williams said in a client note.
Bendigo's success in attracting less-price-sensitive customers made it well positioned for continued growth, he said.
Citigroup has forecast Bendigo to deliver a cash profit of $135 million, while UBS expects an interim cash profit of $134.4 million.
This compares with an interim cash profit of $122.2 million for the same time last year.
Bigger rival Westpac will update investors with its first-quarter results tomorrow, with National Australia Bank to follow with its quarterly update on Friday.
Bendigo had a tough 2009 after its margins compressed as a result of falling interest rates while rising bad debts also cut its annual profit. The regional lender's cash profit for financial 2009 slumped 24 per cent to $182.2 million, prompting the bank to slash its annual dividend by 34 per cent.
Positive revenue momentum in 2010 was also expected from Bendigo's user-pays business model, which might insulate it from pressure to cut exception fees as other banks have done, said UBS brokerage.
As well, leverage to rising equity markets through its margin loan business - Australia's third biggest - and continued roll-out of additional branches will deliver upside potential.
AAP
