The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price could be in the buy zone.
That's the view of analysts at Goldman Sachs, which have just upgraded the regional bank's shares.
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What is Goldman saying about the Bendigo and Adelaide Bank share price?
According to a note out of the investment bank, its analysts have upgraded the company's shares to a buy rating from neutral with an improved price target of $11.89.
Based on the current Bendigo and Adelaide Bank share price of $10.67, this implies potential upside of 11% for investors over the next 12 months.
But it gets better. Goldman is forecasting a 54 cents per share fully franked dividend in FY 2022 and then 62 cents per share in FY 2023. This represents dividend yields of 5.1% and 5.8%, respectively, for investors over the next couple of years.
Why is Goldman bullish?
Goldman is bullish on the Bendigo and Adelaide Bank share price for a few reasons.
This includes the bank's strong and improving volume momentum and exposure to rising rates. In fact, the broker thinks it is the best-placed bank for the latter.
Its analysts explained:
BEN provides the best exposure of the banks to rising rates, given its overall higher exposure to deposit funding, and higher exposure to rate inert deposits. Furthermore, BEN does not replicate its exposure to higher rates, which will mean the more aggressive cash rate hikes will flow through its P&L quicker than peers. Furthermore, we highlight that to date, BEN has exhibited better discipline than its regional peers on deposit repricing in the face of higher cash rates, which should also support its NIM performance.
Goldman also believes the bank is well-positioned to cope with an economic downturn and a spike in bad debts should would occur.
Our assessment of mid-cycle losses has BEN's exposures as one of the most conservative of the banks we cover, with an estimated over-the-cycle loss rate of just 15 bp, versus 22 bp on average for the major banks. This leaves it well-placed should the macro environment deteriorate more than what is currently implied by our forecasts.
All in all, the broker sees Bendigo and Adelaide Bank as a great option for ASX investors looking for exposure to the banking sector.
