The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has returned from its trading halt and is sinking lower.
In morning trade the regional bank’s shares are down 6% to $9.94.
Why is the Bendigo and Adelaide Bank share price sinking lower?
On Monday Bendigo and Adelaide Bank announced its half year results.
Australia’s fifth-largest retail bank reported a 1.4% increase in total income on a cash basis to $814.7 million and 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.
Though, it is worth noting that this statutory 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.
The soft performance led to the bank cutting its dividend. It reduced its interim fully franked dividend by 11% or 4 cents to 31 cents per share.
But that wasn’t the only thing it announced. The bank also announced plans to raise $300 million through a capital raising.
Bendigo and Adelaide Bank launched a $300 million capital raising on Monday, comprising a fully underwritten $250 million institutional share placement and a non-underwritten share purchase plan aiming to raise approximately $50 million.
The institutional share placement has now successfully been completed at $9.34 per new share. This represents a 9% discount to the adjusted last close price of $10.26 on February 14.
Managing Director, Marnie Baker, was pleased with the interest in the placement. She said: “We are pleased by the high level of interest and demand from both our existing shareholders and new investors wishing to participate in the Placement. The successful Placement demonstrates strong investor support in our business and our strategy as we continue to evolve our business for the future.”
The bank intends to use the funds 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 believes the latter will give additional capacity to respond to industry wide APRA capital changes.
In addition to this, it will give Bendigo and Adelaide Bank the flexibility to invest in technology and regulatory related change initiatives.