The scene has been set for the Commonwealth Bank’s (CBA) interim result tomorrow to either confirm the weaker trend in banking, or show that it can again outperform the rest of the sector.
Yesterday’s flat interim from Bendigo and Adelaide Bank (BEN) has set the scene for the CBA to work its magic, or confirm the lacklustre conditions.
Several times in the past few years other banks have reported average to weak results, only for the CBA to provide a trading update or a full or half year result that is much better than the trend and which investor sentiment is about the banks – the local market’s biggest sector.
This time concerns about the health of bank profit growth have been driven by last week’s flat update from the National Australia Bank and the tiny $1 million rise in the half year result from Suncorp’s Metway Bank in the December half.
Yesterday’s flat interim from Bendigo and Adelaide Bank has added to those fears as it reported what was essentially flat first-half cash earnings of $224.7 million.
The bank says cash earnings for the six months to December 31 were just $1 million higher than in the prior corresponding period, while net statutory profit was also flat at $209 million.
Bendigo will pay an unchanged fully franked interim dividend of 34 cents a share.
The steady performance (and a sharp rise in bad and doubtful debts – up $16.3 million to $39.8 million for the half year), saw the shares sold down 5% yesterday. The closed nearly 5% lower at $12.
The net result just topped edged market expectations, which came in a range of $215 million-$223 million. That hardly set the world on fire yesterday on the ASX.
Net interest margin weakening six basis points to 2.1% for the half, while the NAB said its was stable in the December quarter.
But repricing of loans late has Bendigo and Adelaide Bank believing it is on track to see this figure recover in the second-half, with its net interest margin seen at 2.14% at the end of December.
“Our desire to provide our customers with the best overall experience in financial services led to strong lending growth across retail and partner channels, which has resulted in the bank delivering growth above system, despite competition remaining intense,” chief executive Mike Hirst said yesterday.
“Pressure on net interest margin, following the May and August cash rate reductions and holding additional liquidity for the Keystart portfolio acquisition, resulted in a six basis point contraction over the half.
“However, as the market repriced loans in August and December in response to increased funding costs, our margin recovered,” he added.
