The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has fallen 13% in a month. Will it keep falling?
BEN Share Price
As can be seen above, over the past year the Bendigo and Adelaide Bank share price has outperformed the broader market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), and Commonwealth Bank of Australia (ASX: CBA).
However, in recent weeks it has been nothing but falls for long-term shareholders.
So what's going on?
Looking back over the bank's recent market updates one thing that jumped out to me was the long-term credit rating downgrade. Standard & Poor's (S&P) downgraded Bendigo Bank's long-term credit rating to BBB+/Stable.
The bank said it was not just Bendigo but 23 other financial institutions were downgraded on concerns over Australia's high household debt and property prices.
Why is a credit rating a big deal?
Typically, banks get money from two sources: deposits from customers, and debt markets. Pleasingly, Bendigo Bank says it draws 80.2% of its funding from deposits. That's good because it is generally a stable and longer-term type of credit. The rest comes from wholesale debt markets or securitised debt.
However, Bendigo Bank's regulatory capital buffer as a percentage of risky assets is lower than some other banks, following strong growth in new loans.
Personally, I get a little concerned when banks grow their loan portfolio at a fast pace, especially when asset prices (read: housing) are high.
Will it stop falling?
Investors are a little concerned about the Australian banking and housing markets with recent data suggesting property prices could be coming back to earth. Given Bendigo Bank's exposure to property, some investors may fear that it is exposed to the peak in house prices.
I don't know how or when its share price will stop falling, but I know that bank profits are cyclical. And with the recent and sharp rise in house prices, I'm not a buyer of Aussie bank shares at today's levels.
