Why Bendigo Bank today withdrew its 2H20 guidance
Bendigo Bank shares have fallen further than the ASX 200 index today, after management pulled the bank's 2H guidance due to the coronavirus, potentially implying more trouble ahead for Australian banks.
Bendigo and Adelaide Bank share price: H2 outlook update in focus
Bendigo and Adelaide Bank (BEN) shares have fallen 4.7% today, after the lender withdrew its second-half guidance as a result of ongoing uncertainty from the coronavirus.
In a statement to the ASX on Thursday, the bank said it would be ‘prudent’ to withdraw its guidance for the six months ended 30 June because it was too difficult to make accurate financial predictions in the current, highly uncertain environment.
The guidance, issued as part of the bank’s interim results on 17 February, forecast a ‘steady recovery’ in the Australian housing market and only a slight increase in bad and doubtful debts.
Steady or not, shares in the regional lender finished the session down 29 cents at $5.90 per share, against a broader slide in the benchmark ASX 200 index of 0.9% to 5,416.3 points.
Within that, investors were possibly digesting what the Bendigo announcement could mean for the broader banking sector. For example, Australian mortgage holders impacted by the coronavirus have been granted a six-month repayment holiday as a million people are forced from their jobs.
The bank nonetheless stressed:
'We are open for business and as an essential service, it is vital we provide our customers with the dedicated and necessary support they need. We have been actively engaging our customers to support them during this challenging period.'
Highlighting those potential concerns, all of the big four banks were down more than the ASX 200 benchmark today. These losses were led by Westpac Banking Corporation which saw its share price declines 2.3%, followed by the National Australia Bank which fell 2.2%, ANZ Banking Group dropped 1.6% and Commonwealth Bank of Australia, which ended out the session 1.3% lower.
Fellow regional lender Bank of Queensland, which also recently withdrew its guidance, finished out the session down 3.4%.
Other bits and pieces
Taking a step back, Bendigo has been the worst share price performer of the major and regional banks in Australia since it’s H1 interim profit announcement.
Bendigo shares have lost 42.2% since February 17. At the time Bendigo management expected steady employment growth and an Australian cash rate below 1%.
Since then, the Reserve Bank of Australia has cut interest rates twice more to a record low of 0.25% and conducted a quantitative easing bond-purchasing program to bring down long-term interest rates and boost the domestic economy.
As interest rates approach zero, smaller lenders come under more margin pressure than their larger rivals. There has been talk that Australia’s scattered mutual lending sector at the bottom of the market is ripe for consolidation. Adding to that, there have even been suggestions that Bendigo should merge with Bank of Queensland to reduce back office costs.
In February for example, the Australian Financial Review ran an article titled: Why a Bendigo-BOQ merger makes sense; Brambles' inflation problem.
Finally and as a positive, Bendigo also said in its H1 guidance that it expected stronger than industry mortgage growth, ongoing growth for its small business portfolio and its commercial real estate unit. It added bad and doubtful debts would not rise too much, despite the impact of Australia’s devastating bushfires over the summer.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.