Bendigo Bank share price tumbles on half-year earnings slump

Here's how this regional bank performed during the first half.

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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is tumbling on Monday.

In response to the regional bank's half-year results, its shares are down 4% to $9.46.

Bendigo Bank share price tumbles on half-year results

Here's how the bank performed compared to the second half of FY 2023:

  • Total lending down 0.7% to $78.2 billion
  • Net interest margin (NIM) down 15 basis points to 1.83%
  • Net interest income down 3.6% to $813.6 million
  • Cash earnings after tax down 5% to $268.2 million
  • Statutory net profit up 13.8% to $282.3 million
  • Fully franked interim dividend up 3.4% to 30 cents per share

What happened during the half?

Bendigo and Adelaide Bank's total lending was down 0.7% during the six months ended 31 December. This was driven by competitive market pressures, which weighed on residential lending volumes. Business lending was up 0.2% and Agribusiness was down 3.9% due to seasonal run-off in the Agribusiness book.

Also heading in the wrong direction was the bank's NIM, which was down 15 basis points to 1.83%. It was impacted by price competition in both lending and deposits and a higher level of liquid assets.

This ultimately led to the bank's cash earnings after tax falling 5% to $268.2 million. And while its statutory profit was up by a solid 13.8%, this reflects the benefits of Homesafe revaluations.

Management commentary

The company's CEO, Marnie Baker, revealed that its consumer business was the main drag on its performance. She said:

Cash earnings for our Consumer division decreased 9.9% to $250.8 million due to intensity in competition on both sides of the balance sheet. The challenges outlined in our full year results remain. We have seen heightened competition across the mortgage portfolio and consequently slowing growth relative to system.

Baker also advised that she is optimistic the bank's cost to income ratio will improve after a difficult half. The CEO adds:

Our cost to income ratio was challenged during the half, increasing by 230 basis points impacted by the lower income environment. We continue to work on our medium-term objective of a cost to income ratio towards 50%.

No guidance has been given for the second half.

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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