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Bendigo and Adelaide Bank share price: interim results examined

A dividend cut, a $300 million capital raise and overall weaker earnings were the key takeaways from Bendigo and Adelaide Bank’s just-released interim results.

Bendigo and Adelaide Bank results Source: Bloomberg

Bendigo and Adelaide Bank share price: the broad strokes

The front-line figures from Bendigo and Adelaide Bank’s (ASX: BEN) interim results – though likely disappointing to investors – were hardly surprising given the current climate.

Australia’s banking sector, after all, is facing numerous headwinds: from ultra-low rates, ongoing regulatory issues and a subdued growth outlook. And though CBA – now far-and-away Australia’s largest bank – has mostly shrugged off these issues, for the other banks it’s been tougher going.

Even so, the Bendigo and Adelaide Bank share price has performed modestly in the last year, rising ~7% in that period. The shorter-term paints a weaker picture though: with the stock down 1.77% in the last six months.

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Interim results: a dividend cut & lower profits

An impairment charge of $87.1 million and accelerated amortisation of $19.0 million brought down the bank’s statutory interim profit by 28.2%. Earnings per share (EPS) and cash earnings after-tax also came in weaker.

BEN reported H1 cash earnings after tax of $215.4 million – representing a decline of 2%.

Adding to this, BEN announced a capital raise and a dividend cut as part of their H1. Though often necessary to shore up a firm’s balance sheet: the dilutive effect and loss of yield is typically not well-received by investors.

All up, the bank announced that it would reduce its Interim Dividend by 4 cents. BEN will now pay an Interim Dividend of 31 cents per share.

Lamenting this decline, the bank's management said:

'We feel this reduction was required given the capital raising to ensure sustainability of the dividend, retain funds for growth and to enable us to continue to deliver our strategy.'

In saying all this, the regional bank did reveal growth in some key areas during the half: net interest margins (NIMs) hit 2.37 percent (+ 2 basis points), bad and doubtful debts fell 9% to $23.2 million, total lending grew 2.8% to $62.9 billion and BEN's all important CET 1 ratio hit 9% (+24 basis points).

Details of the capital raise

BEN today revealed that it’s looking to raise $300 million – made up of a fully-underwritten $250 million placement to sophisticated and institutional investors; as well as a non-underwritten share purchase plan, where the bank will aim to raise $50 million.

'The proceeds of the capital raising will be used to support the growth the Bank is experiencing in its residential mortgage lending, further strengthen our balance sheet and provide an increased buffer above APRA's 'unquestionably strong' CET1 capital ratio requirements,’ the bank said.

The new shares will be offered at a fixed price of $9.34 per share. If successful, ~26.8 million new BEN shares will be issued. In the lead up to the capital raise, Bendigo and Adelaide Bank’s stock was put in a trading halt this morning.

Bendigo and Adelaide Bank’s last traded share price was $10.57 per share.

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