Bendigo and Adelaide Bank cuts its dividend and announces $300 million capital raising

The Bendigo and Adelaide Bank Ltd (ASX:BEN) share price is a trading halt after announcing its results and a $300 million capital raising…

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Bendigo Bank shares

Bendigo bank

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price won’t be going anywhere on Monday.

This morning the regional bank released its half year results and requested a trading halt pending the completion of an institutional placement.

How did Bendigo and Adelaide Bank perform in the first half?

For the six months ended December 31, Australia’s fifth-largest retail bank reported a 1.4% increase in total income on a cash basis to $814.7 million.

On the bottom line, the company revealed a sharp decline in its statutory profits. The bank reported a statutory net profit of $145.8 million, down 28.2% on the prior corresponding period.

This result includes a pre-tax software impairment of $87.1 million and accelerated amortisation of $19 million. Cash earnings after tax came in at $215.4 million, down 2% on the same period last year. On a per share basis, cash earnings were down 3.1% to 43.7 cents per share.

As with its larger peers Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) last week, Bendigo and Adelaide Bank reported an improvement in its net interest margin. It increased 2 basis points to 2.37%.

Other metrics heading in the right direction include its lending, deposits, CET1 ratio, and bad debts.

Total lending increased 2.8% to $62.9 billion. This was driven by a 7.7% increase in lending in the Residential market, which outperformed system growth. Total deposits grew 5.1% to $66.6 billion and bad and doubtful debts dropped 9% to $23.2 million. At the end of the period the bank’s CET1 ratio was 9%, up 24 basis points.

However, this wasn’t enough to stop the Bendigo and Adelaide Bank from cutting its dividend. It has reduced its interim fully franked dividend by 4 cents to 31 cents per share.

Capital raising.

This morning Bendigo and Adelaide Bank launched a $300 million capital raising. This comprises a fully underwritten $250 million institutional share placement and a non-underwritten share purchase plan aiming to raise approximately $50 million.

The placement will be undertaken at a fixed price of $9.34 per new share. This represents a 9% discount to the adjusted last close price of $10.26 on February 14.

These funds will be used to support the growth it is experiencing in its residential mortgage business, further strengthen its balance sheet, and provide an increased buffer above APRA’s unquestionably strong CET1 capital ratio requirements. It will also give it the flexibility to invest in technology and regulatory related change initiatives.

The offer is expected to add approximately 67 to 81 basis points to the bank’s CET1 ratio.

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Motley Fool contributor James Mickleboro 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.

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