Should you buy, hold, or sell this ASX 200 bank stock?

Does Goldman Sachs think investors should be buying this bank share? Let's find out.

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Bendigo and Adelaide Bank Ltd (ASX: BEN) shares have been on form in 2024.

Since the start of the year, the ASX 200 bank stock has risen almost 13%.

To put this into context, a $10,000 investment at the end of last year would now be worth approximately $11,300.

As a comparison, the benchmark ASX 200 index has climbed 1.8% over the same period.

But can this strong run continue or have its shares peaked? Let's see if Bendigo and Adelaide Bank's shares are now a buy, hold, or sell.

Where next for this ASX 200 bank stock?

According to a note out of Goldman Sachs this morning, its analysts are calling time on this bank stock's rise.

The note reveals that the broker has reiterated its neutral rating and $10.51 price target on its shares.

Based on the current Bendigo and Adelaide Bank share price of $10.89, this implies potential downside of 3.5% over the next 12 months.

What did the broker say?

Goldman notes that the ASX 200 bank stock recently held its investor day event.

At the event, the bank reiterated its target of improving its return on equity (ROE) to above its cost of capital. The broker said:

While quantitative detail was lacking in relation to how BEN would seek to improve its ROE to being above its cost of capital, management believes i) improvements would be driven both by higher revenues and lower expenses, and ii) operating expenses will be managed at or below inflation levels.

Our Macro team currently forecasts average annual inflation of 2.8% over the four years to Jun-27. Assuming cost growth in line with inflation, FY27E GS revenues would need to be 13% higher than current GSe to reach a 50% CTI, and would translate to a 31% rise in PPOP. For Visible Alpha (VAe) consensus, FY27E revenues would need to be 17% higher, and would translate to a 41% rise in PPOP.

Neutral rating

Overall, the broker hasn't seen anything in the investor day update to justify a more positive recommendation on the ASX 200 bank stock. It summarises:

Until we see more evidence that the company can deliver a sustained improvement in its ROE, we are reticent to capitalise the material upside to PPOP that a 50% CTI would deliver to shareholders. Therefore, with the stock implying -3% downside to our A$10.51 target price, in the middle of our A&NZ coverage, we reiterate our Neutral recommendation.

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 positions in and has recommended Goldman Sachs Group. 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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