The news was upbeat from the first of the banks to report results or trading updates this week – Bendigo and Adelaide Bank (BEN) revealed a 9.9% rise in annual cash after tax profit, and will pay a higher final dividend to go with the increased interim payout.
The market took note and pushed the shares up 2.3% to $12.46.
Brokers said the net cash profit of $382.3 million for 2013-14 beat analysts forecasts for growth of around 8%.
The result sets up the Commonwealth tomorrow and Suncorp on Thursday and the ANZ and its third quarter update on Friday to surprise investors.
The regional bank said it would pay a final fully-franked dividend of 33c a share, 2c a share up on the final in 2012-13. It means the bank will pay a total dividend for the year to June of 64c, up 3c on the 2013 financial year.
Managing director Mike Hirst said in the statement accompanying the profit figures that Bendigo had managed to increase its net interest margin by five points to 2.26% (or 2.26c in every dollar of income).
“A five basis point increase in net interest margin is testament to the Bank’s value proposition in what is a highly competitive environment,” he said.
“We do not pursue growth for growth’s sake.”
Mr Hirst said the profit increase was built on “disciplined management of our margin and the balance sheet”.
The bank has launched several securitisations of its loan book in Australia and overseas to take advantage of favourable borrowing conditions.
The lower wholesale funding costs have also allowed reductions in term deposit rates. This helps Bendigo which funds 80% of its lending from deposits.
BEN 1Y – Bendigo lifts full-year earnings
Mr Hirst said the bank had taken further significant steps to strengthen its capital base and funding capacity. “Our capital raisings were well supported by institutional and retail investors. Investors recognise that our strategy is consistent and focused, and we are intent on growing the business profitably,” he said
The Managing Director said Bendigo’s focus on writing quality business was evident in the Group’s credit performance. “We have a few large exposures we have needed to provision, but our arrears are trending downwards.
"Nevertheless our collective provisions have increased year on year,” he said in yesterday’s statement.
