The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price will be on watch on Monday.
That's because the regional bank has just released its full-year results for FY 2023.
Bendigo Bank share price on watch following FY23 results
- Total income up 14% to $1,932.8 million
- Net interest margin up 20 basis points to 1.94%
- Return on equity up 90 basis points to 8.62%
- Cash earnings up 15.3% $576.9 million
- Dividends per share up 15.1% to 61 cents
What happened in FY 2023?
For the 12 months ended 30 June, the regional bank reported a 14% increase in total income to $1,932.8 million. Management advised that this was driven by a measured approach to deposit pricing, lending margins, and volumes.
On the bottom line, Bendigo and Adelaide Bank's cash earnings rose 15.3% to $576.9 million. The bank revealed that this reflects margin management through a disciplined response to lending competition, continued growth in deposits, and a measured approach to cost management.
This ultimately allowed the company's board to declare a fully franked final dividend of 32 cents per share. This took its fully franked full-year dividend to 61 cents per share, which represents the lower end of its dividend payout ratio target range of 60% to 80% of cash earnings. The bank advised that this decision reflects its desire to maintain a strong capital position given the uncertain business outlook.
How does this compare?
According to a note out of Goldman Sachs, its analysts were expecting FY 2023 cash earnings of $567 million (consensus: $591.2 million) and a final dividend of 31 cents per share.
So, while Bendigo and Adelaide Bank has beaten Goldman's estimates, its cash earnings have fallen a touch short of the consensus estimate.
This could potentially be bad news for the Bendigo Bank share price on Monday.
Management commentary
The bank's CEO, Marnie Baker, was happy with the company's performance. She said:
This is another strong result. Our momentum in delivering improvements in shareholder returns continues with our return on equity up 90 basis points to 8.62 percent. This has been achieved through managing our costs and reinvesting back into value enhancing areas of our business. This financial result demonstrates the progress we have made to deliver on our strategy.
We continue to focus on driving profitable growth with sustainable returns, supported by our unique Community Bank model. Our focus on returns and execution is paying off and can be seen with our prudent approach to competing in key lending markets and the return of lending growth over the last quarter. Our transformation strategy is on track with key milestones reached as we execute on our strategic imperatives of reducing complexity in our business and investing in capabilities to meet the growing and changing expectations of our customers and other stakeholders.
Outlook
No real guidance was given for the year ahead and the bank has just made general statements about the Australian economic outlook. It said:
The Australian economy is likely to outperform its peers and over time we expect unemployment levels to normalise. Economic growth is likely to be modest in financial year 2024 before showing improvement in financial year 2025. Notwithstanding these challenges, we expect the shortage of housing stock and forecast population growth to be supportive of property prices.
Ms Baker adds:
While our asset quality remains sound and arrears are at historic lows, we do expect bad debts to trend upwards and move towards longer term averages of 10 to 12 basis points over time. Borrowers remain in good shape with 41 percent of loans at least one year ahead on repayments and 31 percent of loans two years ahead on repayments. Pleasingly, we have seen very little deterioration in these numbers with 84 per cent of home loans maintaining a financial buffer.
