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.

| More on:
a hand reaches out with australian banknotes of various denominations fanned out.

Image source: Getty Images

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).

Outlook

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?

Before you consider Bendigo Bank, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bendigo Bank wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

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.

More on Bank Shares

A woman looks shocked as she drinks a coffee while reading paper.
Dividend Investing

Hoping to bag the next Westpac dividend? Read this

Westpac shares will be one to watch out for over the coming days...

Read more »

A man in business pants, a shirt and a tie lies in the shallows of a beautiful beach as he consults his laptop on the shore, just out of the water's reach.
Dividend Investing

How does the Bank of Queensland dividend compare to the other ASX 200 banks?

We dive into how the Bank of Queensland dividend ranks against the big banks.

Read more »

Group of thoughtful business people with eyeglasses reading documents in the office.
Bank Shares

How has the Bank of Queensland share price travelled since the company’s half-year results?

Are Bank of Queensland shares in sync with the company's financial performance? Let's take a look.

Read more »

Gold piggy bank on top of Australian notes.
Dividend Investing

How does the ANZ dividend compare to the other ASX 200 banks?

ANZ is expected to pay a large dividend in FY22. How big will it be?

Read more »

A businessman keeps calm in the face of inflation
Economy

Inflation to ‘peak shortly’: CBA boss says markets have priced in too many rate rises

The big bank forecasts fewer rate hikes from the RBA than consensus expectations.

Read more »

Two brokers pointing and analysing a share price.
Bank Shares

Broker says the CBA share price is expensive and a sell

CBA's Q3 update smashed expectations but one leading broker remains bearish...

Read more »

a young boy dressed in a business suit and wearing thick black glasses peers straight ahead while sitting at a heavy wooden desk with an old-fashioned calculator and adding machine while holding a pen over a large ledger book.
Bank Shares

The ASX bank share with ‘most direct leverage to rising rates’: fundie

Higher interest rates enable banks to increase their lending margins.

Read more »

a woman drawing image on wall of big fish about to eat a small fish
Bank Shares

NAB share price lifts amid Suncorp rumours

NAB shares are up amid acquisition rumours.

Read more »