Bendigo and Adelaide Bank Ltd (ASX: BEN) shares are edging higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed on Friday trading for $11.86. In afternoon trade on Monday, shares are changing hands for $11.89 apiece, up 0.3%.
For some context, the ASX 200 is down 0.1% at this same time.
Today's modest outperformance will come as welcome news to stockholders, who've watched Bendigo Bank shares slip 9.3% this calendar year.
Longer-term, the ASX 200 bank stock remains up 8.1% over 12 months. And that's not including the 63 cents a share in fully franked dividends the bank paid eligible shareholders over the year.
At the current share price, Bendigo Bank trades on a fully franked trailing dividend yield of 5.3%.
But with the ASX 200 bank reporting falling third-quarter profits in an update on Friday, is the stock worth buying for its passive income and potential share price gains?
Here's what the analysts at Macquarie Group Ltd (ASX: MQG) had to say in a research report out earlier today.
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Should I buy Bendigo Bank shares today?
On Friday, Bendigo Bank reported that its total income declined by 2.2% to $475.7 million for the three months ended 31 March.
While the bank's net interest margin (NIM) remained in line with the prior quarter, cash earnings were down 7.8% to $122.2 million.
Commenting on the third-quarter results that saw Bendigo Bank shares close up 0.8% on Friday, Macquarie said, "Pleasingly, margins showed stabilisation, broadly flat QoQ, with headwinds from rate cuts and mortgage growth offset by deposit repricing."
The broker added, "While balance-sheet growth continued to outstrip cheaper deposit funding, notably, it appears to have moderated in March, in line with management guidance."
However, with margins under pressure and a ramp-up of investment spend, Macquarie's analysts forecast a 5% decline in earnings growth in FY 2025 and FY 2026.
On the plus side, Macquarie said it had revised the forecast sensitivity of Bendigo Bank shares to interest rate cuts from the RBA.
Macquarie said:
We have revised BEN's sensitivity to rate cuts. We previously forecasted larger headwinds for BEN, but like other banks, BEN's willingness to cut savings rates has reduced and delayed these headwinds.
We reduced our sensitivity on the first 100bps of rate cuts to 7bps for unhedged deposits and mix. This is partly offset by 4bps of tailwinds from the replicating portfolio, for a total drag of 2bps.
The broker noted that this is worse than most of the bank's peers, with the exception of Westpac Banking Corp (ASX: WBC).
Macquarie also highlighted that Bendigo and Adelaide Bank's credit impairment charges "remained very low".
In light of these tailwinds, the broker increased its 12-month target price for Bendigo Bank shares to $10.25 per share, up from the previous $10 per share.
Still, that's almost 14% below current price levels.
And indeed, Macquarie has a sell, or 'underperform', recommendation on the ASX 200 bank stock.
The broker concluded:
While BEN's result [on Friday] was broadly in-line, it lacked positive catalysts for a re-rating. On our forecasts, BEN generates a sustainable ROE [return on equity] of only ~6-7% and would see little earnings growth over the next 3-5 years.
