The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is having a very strong day on Tuesday.
In morning trade, the regional bank's shares are up 7% to $9.71.
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Why is the Bendigo Bank share racing higher?
Investors have been bidding the Bendigo Bank share price higher today following the release of a trading update.
According to the release, for the five months ended 30 November, Bendigo and Adelaide Bank delivered a 22% increase in unaudited cash earnings after tax to $245 million.
This was driven by a 5.2% increase in lending balances, an 8.9% lift in deposit balances, and improvements in its net interest margin (NIM).
Bendigo and Adelaide Bank advised that its NIM post revenue share arrangements year to date was 1.85% with an exit NIM post revenue share arrangements of 2.01%.
The bank's year to date NIM pre revenue share arrangements stood at 2.30%.
Another positive was the major improvement in its return on equity (ROE) metric, which year to date is up 110 basis points from FY 2022's ROE to 8.82%.
Outlook
Also giving the Bendigo Bank share price a boost was management's outlook commentary.
Thanks to the positive outlook for interest rates, the bank expects its NIM tailwinds to continue into the second half of FY 2023. Management notes that this reflects the strength of its deposit gathering network.
One slight but not unexpected negative is that operating expenses are expected to increase modestly on FY 2022's levels, reflecting higher non-lending losses and a higher mix of investment spend being expensed.
The bank's CEO, Marnie Baker, commented:
At our full year results in August, we outlined our intent to sharpen our focus and concentrate our efforts on better returns, and to date in the first half of FY23 we have delivered strong growth in cash earnings and an improved return on equity. Our NIM has continued to rise as we carefully manage our volume growth and margins, while continuing to prudently manage costs in an inflationary environment. We remain committed to our strategy and vision, and we are united in our purpose of feeding into the prosperity of the community and not off it.
