Bendigo & Adelaide Bank profits fall 67% amid higher funding costs

Larry SchlesingerDecember 8, 2020

Bendigo & Adelaide Bank has blamed rising funding costs for a 67% slump in net profits for the six months to the end of December 2011.

The bank, which will start charging variable rate borrowers an extra 0.15% in interest from tomorrow – the highest increase of all lenders to date – posted interim profits of $57.9 million, down from $173.9 million in the previous corresponding period.

Bendigo & Adelaide Bank managing director Mike Hirst says the “cost of all funding channels have increased markedly over the past six months, including retail term deposits, senior unsecured and secured debt markets”.

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The net interest margin declined two basis points compared with the previous corresponding period, and fell six basis points when compared to the half year ending June 30, 2011.

“The contraction in margin, coupled with slowing credit growth and market sentiment moving investors away from higher margin wealth and equities products, has resulted in flat earnings,” Hirst says.

Over the past six months the bank has grown its mortgage book by 7.6% compared with the industry average of 7.3%.

Its total loan book stands at $46.8 billion, with 65% of this residential lending. First-home owners make up just under one in 10 mortgage holders.

During the year, the bank acquired the Bank of Cyprus (Australia), which has a loan book of $1.4 billion and 14 branches, eight of which are in Victoria.

Hirst says the economic outlook for the remaining six months of the financial year is difficult, with significant market volatility and revenue challenges facing all banks. Funding costs, changing asset mix and demand for credit are all currently problematic.

"While the future impact of these factors is difficult to predict, there is much about our business that should provide comfort to our investors," Hirst says.

"We continue to generate customer satisfaction and brand advocacy measures that are materially higher than the major banks and we are committed to ensuring we have the capacity to meet the needs of our customers.”

 

 

 

 

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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