Bendigo and Adelaide Bank's first-half cash profit has remained steady at $224.7 million amid competitive pressure on interest rates and strong lending growth.
Competition for both savers and borrowers helped push net interest margin - the difference between interest earned on loans and interest paid to fund those loans - down by 0.6 percentage points to 2.10 per cent against the backdrop of two Reserve Bank rate cuts,
Nonetheless, the bank approved $8.7 billion of new residential home loans in the six months to December 31 - compared to $5.3 billion in the prior corresponding period - and grew retail deposits by 10.5 per cent to $50.6 billion.
"Our industry leading funding position continues to be a particular strength for our bank, providing flexibility for executing on organic and inorganic growth opportunities," managing director Mike Hirst said.
"Solid growth in at-call and term deposits sees 80.2 per cent of funding provided by retail customers."
That customer cash in the bank should give Bendigo more flexibility when it comes to setting rates and possible mergers and acquisitions, chief financial officer Richard Fennell said.
"We have a business that's very good at gathering deposits and in the environment that we're currently in, where the next move in rates might be going up, that's a valuable proposition," Mr Fennell said.
Net interest margin was also depressed by the extra liquidity the bank required following last year's purchase of $1.35 billion of mortgage debt from the West Australian government.
Mr Hirst said loan repricing had helped the margin recovered by the end of the year to 2.14 per cent, and that Bendigo expected to maintain that margin for the first two months of the current half-year.
"The strong growth in our balance sheet and improved margin in the second quarter has really allowed us to produce this solid half-year result despite the average margin over the six months being down," Mr Hirst said.
That loan repricing means the bank is also confident of investor home loan growth remaining below the Australian Prudential Regulation Authority's 10 per cent annual limit.
Cash profit for the six months to December 31 was just $1 million higher than in the prior corresponding period, while net profit also stayed flat at $209 million.
Bad and doubtful debts nearly doubled to $39.8 million - still lower as a percentage of its loan book than both the majors and Bendigo's regional rivals - while impaired assets fell 15.8 per cent to $300.7 million.
At 1215 AEDT, Bendigo shares were down 61 cents, or 4.83 per cent, at $12.02.
BENDIGO FIRST-HALF RESULTS:
* Cash profit up 0.4pct to $224.7m
* Net profit up 0.1pct to $209m
* Total income up 1.5pct to $795.3m
* Interim dividend flat at 34 cents, fully franked
Share
