Bendigo Bank share price volatile amid 50% profit boost

The ASX 200 bank reported making progress towards significant reductions in its cost-to-income ratio.

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Key points

  • The Bendigo Bank share price is on a bit of a rollercoaster today
  • The ASX 200 bank reported a 49.3% increase in half-year profits
  • The 29 cents per share fully franked interim dividend is up 9.4% from 1H FY22

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dipped into the red.

Shares in the S&P/ASX 200 Index (ASX: XJO) bank share closed on Friday trading for $9.61. Shares are currently changing hands for $9.56 apiece, down 0.5% after posting gains of more than 3% in early trade.

This comes following the release of the company's half-year results for the six months ending 31 December (1H FY23).

Read on for the highlights.

Bendigo Bank share price volatile as profits rocket

  • Statutory net profit of $249 million, up 49.3% from 1H FY22
  • Cash earnings after tax of $295 million, up 22.9%
  • Net interest margin (NIM) of 1.88%, up 0.19%
  • Fully franked interim dividend of 29 cents per share, up 9.4% from the 26.5 cents per share paid in 1H FY22

What else happened during the half year?

Atop higher profits and dividends, the Bendigo Bank share price should be receiving some tailwinds from the company's progress towards significant reductions in its cost-to-income ratio. That's fallen from 59.3% in 1H FY22 to 54.6% in the half year just past.

Bendigo's Common Equity Tier 1 (CET1) ratio increased by 0.45% year on year to 10.13%.

While the bank saw total lending decline 1.1% to $77.0 billion, total deposits increased 2.5% to $76.5 billion.

Total funding also increased to $88.9 billion up 1.5% from 1H FY22, with Bendigo reporting customer deposits represented 73.9% of its total funding during the six-month period.

For interested investors, management has announced a dividend reinvestment plan (DRP). The board noted that with APRA's approval, it intends to "neutralise the impact of the DRP by arranging for a third party to purchase the shares on market rather than issue additional shares".

What did management say?

Commenting on the results that look to be sending the Bendigo Bank share price on a bit of a wild ride this morning, CEO Marnie Baker said:

Bendigo and Adelaide Bank has delivered on all key metrics with cash earnings, return on equity and capital ratios all improving over the half…

Our digital bank Up has continued to drive growth with 613,000 customers and over $1.3 billion in deposits at the end of the half. Its flagship lending product Up Home was soft launched and settled $38 million in home loans.

Our digital home loan product BEN Express reached $100 million in lending during the half with continued strong levels of enquiry expected. Pleasingly, more than 80% of Up Home and BEN Express customers are new to bank.

What's next?

Looking ahead at what could impact the Bendigo Bank share price down the road, Baker said, "Our business is well positioned to perform in this environment and we are targeting growth at or better than system whilst generating appropriate returns on equity."

However, Baker noted that while the bank expects interest rates to peak in 2023, housing prices are likely to continue to moderate, leading to lower system credit growth.

"We are seeing a continued contest for market share play out primarily amongst the big four banks, using incentives in the form of cash back offers for housing loans," Baker added.

Bendigo Bank share price snapshot

As you can see in the chart below, the Bendigo Bank share price is down 5% over the past 12 months. As for 2023, shares are right about where they started the year.

Motley Fool contributor Bernd Struben 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. 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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