Why does the Bendigo Bank share price often fare worse than the ASX big four in downturns?

The regional bank’s shares had a tough time for much of the day.

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Key points

  • Bendigo Bank shares closed 0.87% lower on Tuesday to $10.28
  • The company's shares were down as part of a broader hit on the ASX today following heavy Wall Street losses
  • Interest rate hikes, the Russian war, and an economic slowdown in China have caused investors to flee global markets

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price finished 0.87% lower to $10.28 at market close today.

In comparison, shares in National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) gained 0.31% and 0.20% respectively.

Meanwhile, Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) fell 0.93% and 0.92% respectively.

The Bendigo Bank hasn’t released any price-sensitive news since its half-year results in mid-February. However, we take a look at what could be impacting the bank’s shares along with the latest broker notes.

Why did Bendigo Bank shares end up lower?

With heavy losses on Wall Street impacting the ASX today, the Bendigo Bank share price has not been spared.

It’s feared United States interest rate hikes to curb inflation could trigger a slowdown in global economic growth.

The US Federal Reserve is trying to limit inflation that is soaring at multi-decade highs.

Last week, the Federal Reserve announced its sharpest interest rate rise, 0.5%, in more than 20 years. It came on the back of a 0.25% hike in March.

In addition, the Russian war in Ukraine, as well as a Chinese slowdown, is piling on more pressure.

Bendigo Bank is much smaller in terms of market capitalisation compared to the big four. It can mean the company’s shares are more susceptible to wild price swings.

Indeed, shares in the regional bank spent much of the day faring worse than those of the ASX big four, trading as low as $10.03 at one stage, 3.28% lower than yesterday’s close.

However, Bendigo’s share price rallied later in the day to finish mid-pack among the big four today.

It’s also worth noting that in the company’s half-year results, management pointed to the following outlook:

Challenges in the form of margin compression and non-recurring other income are expected to drive revenue lower in the second half. Costs will need to decline for us to continue driving the cost-to-income ratio lower. Delivering positive jaws remains the intent of our executive team.

With the Reserve Bank of Australia also raising its interest rates, this could put pressure on costs for the regional bank.

What do the brokers think?

Following its results, a number of brokers weighed in on the Bendigo Bank share price.

The team at Goldman Sachs lifted its price target by 5.1% to $10.53 for the company’s shares.

Morgan Stanley upgraded its outlook to “equal-weight” from “underweight”. Furthermore, the broker improved its rating on Bendigo Bank shares by 1.1% to $9.60.

The last broker note came from Citi. Its analysts raised the Bendigo price target by 13% to $11. Based on the current share price, this implies a potential upside of around 7%, according to Citi’s assessment.

Bendigo Bank share price snapshot

Since the beginning of the year, the Bendigo Bank price has risen by almost 13%.

The bank’s shares were heavily sold off from August 2021 after reaching a 52-week high of $11.27. Since then, its shares hit a 52-week low of $8.43 in December 2021 before surging back up again.

On valuation grounds, Bendigo Bank commands a market capitalisation of around $5.8 billion.

Motley Fool contributor Aaron Teboneras 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 has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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