The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dropped by 4.86% in early trade after the Aussie bank reported a 48.8% slump in net profit after tax (NPAT).
Why is the Bendigo and Adelaide Bank share price falling?
Australia’s fifth-largest retail bank reported its earnings for the full-year ended 30 June 2020 (FY20).
While NPAT fell 48.8% lower to $192.8 million, cash earnings also slumped 27.4% to $301.7 million.
The group’s net interest margin (NIM) compressed 3 basis points (bps) to 2.33%. Total income on a cash basis climbed 0.9% from FY19 numbers to $1.61 billion.
Total lending climbed 5.1% to $65.3 billion with total deposits up 5.7% to $67.7 billion.
The bank’s consumer banking division outperformed with strong growth in retail lending totalling $3.1 billion. Lending applications jumped 50.3% with settlements up 18% on FY19.
Agribusiness lending climbed 1.3% despite a “challenging” year for Aussie agriculture with loan book growth supporting a higher NIM.
Bendigo’s business lending fell 6.7%, despite growing in the second half of the year thanks to Commercial Property Lending.
Operating expenses jumped 7.0% to $1.02 billion with a cost to income ratio up 350 bps to 62.7%.
Bad and doubtful debts (BDD) climbed to $168.5 million including a coronavirus collective provision of $127.7 million.
Excluding COVID-19 impacts, BDD comprised 8 bps of gross loans with the COVID-19 impact boosting that to 18 bps.
The Bendigo and Adelaide Bank share price has slumped following this morning’s announcement, which included a 33 bps increase in the bank’s common equity tier 1 (CET1) ratio to 9.25%.
The bank deferred its decision on a final dividend given the current uncertainty.
Managing Director and CEO Marnie Baker noted the impact of COVID-19, record low interest rates and investment costs. Those factors weighed on earnings and forced a strategy change in FY20.
Management said market conditions “remain challenging” and couldn’t provide meaningful guidance for this financial year.
The Bendigo and Adelaide Bank share price is down 31.49% for the year prior to this morning’s open. That’s a significant underperformance against the S&P/ASX 200 Index (ASX: XJO) which is down 8.4% in 2020.
The ASX bank share is worth watching as investors take in the latest results.