Bendigo Bank share price lower despite APRA boost

APRA has given this regional bank a boost.

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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is trading lower on Wednesday.

In morning trade, the regional bank's shares are down 1% to $9.00.

Why is the Bendigo Bank share price falling?

Investors have been selling down the Bendigo Bank share price despite the bank being given some good news. This news may have been offset by a poor night of trade for US regional banks after Moody's downgraded a large number of them.

In respect to today's update, APRA has announced the removal of a 10% overlay to the net cash outflow component of the Liquidity Coverage Ratio (LCR) calculation for the bank.

This was put in place in October 2020 in response to the bank's identification of a historic error in its calculation of the LCR and Net Stable Funding Ratio (NSFR), impacting its compliance with APS210.

At the time, the bank advised that the error was in relation to the incorrect system coding of three business rules used to categorise certain deposits for the purposes of the LCR calculation. This resulted in an understatement of the expected net cash outflow and consequently an overstatement of the LCR since January 2015.

Bendigo and Adelaide Bank has now rectified its error and the regulator appears pleased with what it has seen. This morning, APRA has confirmed the bank has satisfactorily addressed the conditions for removal of the overlay.

This change is effective from 9 August 2023, with management expecting the removal of the overlay to contribute approximately 12% to 14% to its LCR.

Following today's decline, the Bendigo Bank share price is now down a disappointing 15% over the last 12 months.

Motley Fool contributor James Mickleboro 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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