Bendigo and Adelaide Bank is aiming to keep its investor home loan rates steady in a bid to attract borrowers despite increases by the big lenders and pressure on its interest margin.
The regional bank on Monday unveiled a 13.1 per cent rise in annual cash earnings to $432.4 million, despite increased competition in the mortgage market.
But low mortgage interest rates meant Bendigo's interest margins contracted by four basis points.
While the results were in line with analysts' expectations but, Bendigo shares fell as investors expressed disappointment at the bank's refusal to follow the big banks and hike home loan rates for property investors.
The stock fell 34 cents, or 2.6 per cent, to close at $12.63.
Morningstar analyst Nathan Zia said Bendigo's stance on pricing was a surprise and may not hold.
"We've seen nearly all the other banks raise their interest rates and Bendigo seems to be taking the path that they'll keep them where they are to try and draw volumes a little bit," he told AAP.
"If they stick to this for three months and they're not getting the volume that they expected, they might just turn around and change their pricing anyway."
Bendigo managing director Mike Hirst warned that home loan rates were now so low there was no scope for further reductions even if the Reserve Bank opted to cut.
"We just can't continually pass on every cut that comes along," he said.
"There is a certain equity that needs to be considered between self-funded retirees and other savers who are relying on earnings through their savings accounts to be able to live and where borrowers are at, and the absolute low level of rates for borrowers at the moment is a reasonable positive for them."
Australia's fifth largest retail bank welcomed recent regulatory moves requiring major banks to increase their capital buffers, saying they would help Bendigo compete more strongly with the big four lenders in the mortgage market.
Bendigo increased its total capital 1.18 per cent to 12.57 per cent during the year.
Chief financial officer Richard Fennell said the bank was looking to strengthen its position through acquisitions in NSW but said it "won't be aggressive about it".
Mr Zia said it was reassuring that the bank had no plans to be a hostile acquirer.
"Wealth management would be a logical fit, just the advantage of being able to cross sell different products to all your customers," he said.
BENDIGO'S BALANCE
* Full year cash earnings up 13.1pct to $432.4m
* Net profit up 14pct to $423.9m
* Revenue up 7.4pct to $1.548b
* Fully-franked final dividend of 33 cents, unchanged
Share
