Is the Bendigo and Adelaide Bank share price a buy?

Year to date, the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has declined by 8.5%.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With the Federal Budget being handed down on Tuesday night, and looming uncertainty about Australia's economy, I've seen a lot of coverage about whether ASX bank shares are a buy right now.

While the big four banks Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp  (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) might have what it takes to ride the wave of economic uncertainty, it's the smaller banks that have me curious and a bit worried.

How has the Bendigo and Adelaide Bank share price performed in 2019?

Year to date, the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has declined by 8.5%. A large part of this decline came from it's high for the year to date of $11.33. This was driven by changes to the bank's reverse mortgage product, Homesafe, in February.

Bendigo and Adelaide Bank's Homesafe product allows homeowners to dip into their home equity without losing their home.

In the six months to December 2018, Homesafe had a revaluation that poorly affected the bank's statutory profit to the tune of $5.4 million. Compared to the positive contribution of $39.6 million from Homesafe for the six months to June 2018, things aren't looking good for the bank's Homesafe portfolio.

At the time of writing, the Bendigo and Adelaide Bank share price is trading at $9.88.

What do brokers think of Bendigo and Adelaide Bank?

Many brokers including Morgan Stanley, Deutsche Bank, Credit Suisse, and Ord Minnett all agree there are challenging times ahead for the regional bank. Upon the release of Bendigo and Adelaide Bank's half-yearly earnings in February, these brokers all cited interest margin pressure and the risks of Homesafe as big risk factors.

On a positive note, the bank had an 18% increase in new customers in the first half of the financial year while customer turnover was flat. This is good news for the bank, but still not enough to warrant buying Bendigo and Adelaide Bank shares at this time.

Foolish takeaway

With the level of uncertainty in Australia's housing market and broader economy continuing, I'd be steering clear of banking shares right now and focusing on recession-proofing my portfolio with utilities and healthcare stocks.

Looking for high-growth stocks to add to your portfolio? This stock is at the cusp of what could be the next booming industry in Australia.

Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Investor sitting in front of multiple screens watching share prices
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave the thumbs up to these ASX shares last week. Why are they bullish?

Read more »

Jessica Amir
Investing Strategies

6 ASX shares to buy and hold until the next leap year

These are the stocks to store in the portfolio until the next February 29 rolls around in 2028, according to…

Read more »

A woman ponders a question as she puts money into a piggy bank with a model plane and suitcase nearby.
Share Market News

If I invest $10,000 in Qantas shares, how much passive income will I receive in 2024?

Here's what analysts are predicting from the airline operator.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Big returns could be on the cards according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Value Investing

Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example…

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
Opinions

Will I be buying Zip shares now the company has turned a profit?

Is now the right time to buy this BNPL stock -- or not?

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
Opinions

1 ASX dividend stock down 55% to buy right now

Here's why I think this beaten-up stock could be an opportunity.

Read more »

Three analysts look at tech options on a wall screen
Share Market News

Here's how the ASX 200 market sectors stacked up this week

ASX tech shares are on fire, leading the 11 market sectors for a third consecutive week.

Read more »