Why is the Bendigo Bank (ASX:BEN) share price having such a tough time of late?

Bendigo Bank shares haven’t done much in recent months.

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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has been falling in recent times. It has dropped more than 10% over the last three months.

It was in August that the regional bank reported a mixed set of numbers in FY21.

If you didn’t catch the result, here are some of the highlights:

Bendigo Bank’s FY21 numbers

Total income on a cash basis were up 4.5% to $1.7 billion. Statutory net profit increased by 172% to $524 million.

Cash earnings after tax grew by 51.5% to $457.2 million. On a per-share basis, earnings went up 43.4% to 85.6 cents.

The balance sheet also strengthened, with the common equity tier 1 (CET1) capital ratio improved by 32 basis points to 9.57%.

However, the net interest margin (NIM) fell by 7 basis points to 2.26%. Bendigo Bank explained that this happened due to significant growth in fixed lending and competitive new business rates. The funding mix and deposit repricing benefits provided a tailwind throughout the year, according to the bank.

Bendigo Bank pointed out that it was successful in achieving growing customer numbers and increasing market share in both lending and deposits. It has been working on a transformation which has helped its efficiency, productivity, speed to market and the customer experience. Its net promoter score (NPS) of 27.3 was “well in excess” of the industry average of 25.7 points and the average of the major banks (29.8 points).


Investors sometimes decide that an outlook can be very important how to value a business, which could impact the Bendigo Bank share price.

The regional bank noted that the historic low interest rate environment continues to place pressure on its margins. However, it’s taking advantage of “strong” customer lending demand across its consumer, business and agribusiness divisions.

It’s expecting its lending to grow quicker than the overall loan system, whilst maintaining a focus on costs, improving productivity and preserving a “strong and resilient” balance sheet.

Annual general meeting (AGM)

Bendigo Bank is holding its AGM today. The managing director and CEO, Marnie Baker, had a few more comments about the outlook, who said:

The depth of the economic contraction through the pandemic has not been as severe as initially expected, which has improved the forward outlook…I’m encouraged by the recent rise in consumer and business confidence, the reopening of domestic and international borders and the resilience demonstrated by the Australian economy in the last financial year.

With that said, the operating environment for the banking industry has its challenges, with net interest margins experiencing continued compression and the lending environment remaining highly competitive.

We continue to manage our cost base relative to revenue expectations, delivering on our commitment to further reduce our cost to income ratio and lift shareholder returns.

Is the Bendigo Bank share price a buy today?

The brokers at Macquarie Group Ltd (ASX: MQG) think that it is worth a buy, with a price target of $11. Macquarie believes the low valuation makes up for the difficulties that the bank is currently seeing. The broker is expecting margins to remain challenged by the current environment, though it thinks revenue can keep rising.

Macquarie thinks that Bendigo Bank is valued at under 14x FY22’s estimated earnings with a forward grossed-up dividend yield of 8.5%.

Should you invest $1,000 in Bendigo Bank right now?

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bendigo and Adelaide Bank Limited and Macquarie Group Limited. 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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