What: Australia’s fifth-largest bank, Bendigo and Adelaide Bank Ltd (ASX: BEN) has today reported its half yearly results. Here are some of the highlights:
- Underlying cash profits increased by 10.9% to $217.9 million on the prior corresponding period (pcp)
- Underlying earnings per share were up 3.4% to 48.1 cents per share (cps) on the pcp
The board has declared a 33 cps fully franked dividend which is up 2 cps on the pcp
So what: The interim results shows that Bendigo and Adelaide Bank was able to maintain its net interest margin and strengthen its balance sheet including a boost in Common Equity Tier 1 capital from 7.9% to 8.1%. It also reduced loan impairments from $336.5 million to $257.4 million and grow its position in agri-business banking thanks to the group’s acquisition of Rural Finance and growth of Rural Bank.
Despite the solid numbers, the results haven’t impressed investors with the share price sinking around 4% by early afternoon in an otherwise flat day of trading on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
The negative reaction to today’s results does need to be considered in the context of the mid-term outperformance of the bank’s share price which has rallied around 18% over the past year, thereby significantly outperforming the 10% return from the index.
Now what: With many investors owning bank stocks for their juicy fully franked dividend yields, Bendigo and Adelaide’s dividend is obviously a key factor. According to data provided by Morningstar a final dividend of 34.6cps is forecast; assuming this forecast is accurate it implies an investor buying shares in Bendigo and Adelaide Bank today is set to receive a yield of 4.9%.
This yield is a little lower than the forecast rate currently attainable from other bank stocks such as National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ), which suggests investors would be hoping for a faster rate of capital appreciation to compensate.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.
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