Why the Bendigo and Adelaide Bank (ASX:BEN) share price is storming 8% higher today

The Bendigo and Adelaide Bank Ltd (ASX:BEN) share price is on the move on Monday following the release of its half year results…

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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is on the move on Monday morning.

At the time of writing, the regional bank’s shares are up a sizeable 8% to $10.25.

Why is the Bendigo and Adelaide Bank share price storming higher?

Investors have been buying Bendigo and Adelaide Bank shares this morning following the release of its half year results.

According to the release, for the six months ended 31 December, the bank reported total income growth of 3.3% to $849 million and statutory net profit growth of 67.3% to $243.9 million. The latter was predominantly attributable to software impairments and software accelerated amortisation adjustments recorded in December 2019 and not repeated in the current period.

The bank’s cash earnings after tax increased 1.9% over the prior corresponding period to $219.7 million. This was driven by growth in its lending portfolios and an increase in hedging revenue, which offset a 7 basis points decline in its net interest margin to 2.30%.

The Bendigo and Adelaide Bank board declared a fully franked dividend of 28 cents per share. This comprises 4.5 cents per share relating to the deferred FY 2020 final dividend and 23.5 cents per share relating to the FY 2021 interim dividend.

At the end of the period, the company’s CET 1 ratio had improved 36 basis points to 9.36%.

What about bad debts?

Possibly supporting the Bendigo and Adelaide Bank share price today was news that its bad and doubtful debts fell 15.9% to $19.5 million.

The bank’s Managing Director and CEO, Marnie Baker, commented: “Our bad and doubtful debts of $19.5 million, comprised six basis points of gross loans. We reviewed our COVID-19 collective provision overlay at 31 December 2020, resulting in a modest reduction to manage ongoing uncertainty around the future impact of the pandemic. The increase in specific provisions primarily relates to existing impaired loans and reflects limited recovery action and asset sales due to COVID-19.”

Outlook

Also supporting the Bendigo and Adelaide Bank share price today will have been comments regarding the future.

Marnie Baker said: “With business confidence and consumer sentiment up, an ongoing low-rate environment, a growing housing market, an improving jobs market, continued growth in regional Australia, and our customers showing remarkable resilience and adaptability, we are buoyed by the outlook.”

Though, Baker remains cautious, advising that the bank always takes “a long-term view, and we remain mindful of the global and local impacts of the pandemic, international trade sentiment, decisions on government support measures and the ongoing reality of natural disasters and climate change.”

Nevertheless, the CEO is aiming to win market share from rivals.

“Looking ahead, supported by our growth and transformation strategy, we continue to target above system residential lending and further growth in small business and agribusiness sectors, whilst reducing our cost base, and maintaining a strong and resilient balance sheet,” she added.

“Our advantages and market opportunities lie in the strength of our purpose, values, strategy, and customer commitment – which remains central to who we are – as we continue our journey to be Australia’s bank of choice,” concluded Ms Baker.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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