This morning healthcare giant Bendigo and Adelaide Bank Ltd (ASX: BEN) reported its profit result for the year ending June 30, 2017. Below is a summary of the result, with comparisons to relevant prior corresponding periods.
- Statutory profit of $429.6m for the full year
- Underlying cash earnings of $418.3 million, up 4.2%
- Cash earnings per share of 88.5 cents
- Final fully franked dividend of 34 cents per share (flat), total dividend of 68 cents
- Net interest margin of 2.22%
- Cost-to-income ratio down 2% to 56.1%
- Return on average tangible equity 11.6%
- Retail deposit funding mix increased to 80.2%
- Bad debts of $72m over year, with $32m in second half
The stock is up 6% in lunchtime trade to $11.95 as investors applaud the "above system" and cash profit growth, although the bank's CEO complained that APRA's lending caps have restricted lending growth to property residential buyers and third-party channels in particular.
The CEO also flagged that margin expansion was up 8 basis points half-on-half (despite the macro-prudential environment) in a strong result the bank put down to hire mortgage pricing rates and the funding mix.
Notably, 80.2% of the bank's funding is provided by retail depositors who earn low returns, while the bank lends out their funds at highly-profitable rates often to property speculators. Generally, if banks can source funds from retail depositors rather than wholesale funders, the net interest margin as a key measure of a bank's profitability will benefit.
The bank's capital adequacy ratio sits at 8.27%, with it boasting how its ability to "organically generate capital" will see it meet APRA's "unquestionably strong" capital reserve requirements "well within the required timeframe".
Bad debts also fell over the second half, as the bank conceded the credit environment was "benign" given low repayment rates and the robust strength of Australia's residential property markets.
Bendigo and Adelaide Bank is still at a competitive disadvantage compared to its big rivals like the Commonwealth Bank of Australia (ASX: CBA) and trades in line with historical multiples of trailing cash earnings at around 13.5x.
The trailing fully franked dividend is also attractive at 5.7% and income seekers could do a lot worse than buying Bendigo and Adelaide Bank shares.
But the below business looks to offer a big income payout and some genuine growth prospects….
