Bendigo and Adelaide Bank has reported the first damage to its balance sheet from its exposure to the collapse of the Great Southern agricultural investment scheme with an earnings downgrade yesterday.
"A total of $20.2 million has been raised at June 30, 2009 in specific and collective provisions relating to loans which form the Great Southern portfolio," the bank said yesterday.
"BEN’s exposure to borrowers in Great Southern Managed Investment Schemes is approximately $550m, spread across 8,200 growers.
“These loans are full-recourse to each individual borrower, with an average exposure of less than $70,000 and are spread across every state and territory of Australia. The Great Southern portfolio represents less than 1.5 per cent of the total Bendigo and Adelaide Bank asset base.
"The Board has raised the provisions as a prudent response to the likely credit performance of the portfolio, the bank said in a statement separate to the update."
That update revealed the damage to the bottom line was a 10% drop in earnings (roughly) per share, to 63 cents from 70 to 75 cents.
Bendigo expects its full-year cash profits to be $190 million, or 63c a share, compared with previous expectations as high as $226 million or 75c a share.
The effect on the bottom line will be a fall in its second-half dividend, which could be as low as 10c a share.
As well as making a dollar-for-dollar provision against money owed by some of the Great Southern investors who are unable, or are refusing, to make repayments, Bendigo will also take a $14.4 million hit in specific provisions from souring commercial property loans.
That was after the 27% drop in first half earnings reported in February.
The shares fell almost 2.5% or 25 cents to $8.35 yesterday.
"The impact represents approximately 8 cents per share, with forecast cash earning per share for the 2009 full year now approximately 63 cents," the bank said in a statement this morning.
The bank said it had also completed its impairment review, and does not expect any goodwill impairment in the 2009 full year.
Bendigo and Adelaide Bank is scheduled to release its annual results on August 10.
The bank also said that net interest margin continued to improve in line with April forecasts.
"Following the dislocation of global financial markets last year, the bank moved to restructure its balance sheet such that it is now predominantly funded through retail deposits," the bank said.
"Consequently, while securitisation costs remain high, they represent a relatively lower proportion of the bank’s funding."
