Why the BNK Banking share price jumped 14% today

BNK Banking share price soared today after delivering earnings growth despite operating in a tough operating environment.

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The BNK Banking Corporation Ltd (ASX: BBC) share price closed 13.79% higher today after delivering strong FY20 results despite the challenging operating environment.

The company is a digital diversified financial services company with two key operating divisions in banking and broking aggregation. 

What did the company announce?

BNK Banking Corporation had growth in every business unit which delivered a statutory net profit after tax of $5.3 million, up 47.3% on the prior corresponding period (pcp). This represents a significant increase on the prior year on a statutory and pro-forma basis.

Earnings per share (EPS) was up 19% year-on-year (YoY) to 6.14 cents per share. 

Revenue from operations was up 53.8% to $315.59 million compared to $205.23 million in the prior corresponding period.

Additionally, the company delivered strong growth in its total loan book up 18% YoY to $48.1 billion. BNK Banking on balance sheet loans increased 33% YoY to $285 million. 

BNK Banking's aggregation division, operating as Finsure, had record settlement volumes of $15.6 billion in FY20 processed through its platform. It had a record month in June 2020 of $1.7 billion resulting in a run rate of over $18 billion going into FY21.

Net interest margin came in at 1.61% which is down from 1.95% in the prior corresponding period.

The capital adequacy ratio was 21.22% and deposit growth was up 20% YoY to $346 million.

Management comments

BNK Banking's Interim CEO, Don Koch said:

BNK is pleased to have delivered a sound result for FY20 in light of the impact of COVID-19 on the broader economy in FY20, underpinned by $16.1 billion of settlements across the year. FY20 represented the first full year of the merged group and the net profit of $5.3 million represents a significant increase on the prior year on a statutory and proforma basis.

He added:

Credit quality continues to be sound with the bank incurring nil loan losses in FY20, whilst credit losses provisions increased to 26 basis points reflecting prudent risk management, whilst the 5% of the bank's loans on repayment deferral arrangements is half of that experienced by the industry.

Outlook

BNK Banking Corporation is well-positioned for further growth in FY21 despite economic uncertainty. Additionally, the digital bank is focused on building stronger momentum across each of the businesses with continued investment in technology and scalability, whilst managing costs effectively.

The company says the completion of a capital placement of $7 million in February 2020 and the recent approval of a Tier 2 hybrid equity instrument, sets the bank up for strong growth targets in FY21.

At the time of writing, the BNK Banking share price is trading at 66 cents per share. The strong gains today have helped boost its market capitalisation to $63.65 million.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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