Bendigo Bank FY24 Earnings Call Highlights

Bendigo & Adelaide Bank (ASX: BEN) shares experienced a volatile session on Monday, closing nearly flat after swinging between gains of 2% and losses of 3.9%. Despite the company's FY24 results surpassing analyst expectations, the stock's muted reaction may be attributed to its strong year-to-date performance, having already climbed almost 30%.

FY24 Earnings Summary

• Statutory net profit after tax up 9.7% to $545m

• Cash earnings after tax down 2.7% to $562m

• Net interest margin down 4 bps to 1.90%

• Total FY24 dividend up 3.3% to 63 cents per share

• Customer deposits up 3.4% to $68.3bn

The cash net profit figure was 1.4% ahead of Macquarie forecasts (23-May) while the total dividend for FY24 was marginally ahead of analyst expectations (62 cents).

Earnings Call Highlights

The below topics have all been answered by CEO Marnie Baker and CFO Andrew Morgan.

FY24 results: "Cash earnings for FY 2024 was down 2.6% year-on-year off the back of a weaker first half."

Net interest margin trends: "Our third quarter NIM rose strongly, up 9 basis points, reflecting the benefit of pricing activity post the cash rate rise in November last year. Importantly, our fourth quarter NIM was stable compared to third quarter."

Term deposit mix: "Over the last half, the strength of our digital EasySaver proposition has seen savings accounts as a proportion of deposits increased 160 bps to 37.1% of deposits, whilst term deposits have reduced by 90 bps."

Digital transformation: "Digital mortgage settlements increased in the half by 3% now making up 19.3% of all settlements.

Digital investments: "We expect to increase cash investment spend for both FY25 and FY26 by approximately $30 million to $40 million on FY24 levels."

Margin outlook: "On balance, based on what we know today, we expect more stability in margins compared to what we've seen in the last few years."

Deposit growth: "Across both our proprietary network and our community bank partners, we delivered growth of 2% on the prior half. We continue to see good momentum in digital deposits. In our Up business, digital deposits increased 18% over the half, while Bendigo digital deposits grew 38%."

Credit quality: "Our key credit metrics remain sound, and we continue to carefully watch trends in the industry and within our book. Through the half, we booked a net write-back of $0.9 million, which brought our full year expense to $9.9 million."

Market competition: "The unknown factor remains the degree of price competition on both sides of the balance sheet. We are seeing that competitive intensity is stabilising."

Analyst Q&A Highlights

On NIM outlook: "Look, I think what we would say is there are certainly some known tailwinds and there are some known headwinds. But what we've seen play out through the last six months is more stability... We think more stability is likely the outcome through 2025."

On deposit mix and competition: "We've never had to compete too hard to gather deposits. It's part of the strength of our physical network, whether that's through the community banks or through our proprietary network."

On moving to one core system: "It's really about more scale. So we've got a very high fixed cost base today. And the work that we're doing to simplify the core will have some costs coming out. The bigger benefit is actually our ability to grow much faster without necessarily having to put on a lot of incremental cost."

On channel shift in deposits: "On the community banks, the story is very consistent here where our community banks are phenomenal deposit gatherers. And really importantly for us, the mix of the deposits that they're writing is typically two-thirds, one-thirds. So two-thirds call accounts, which is transaction and savings accounts and one-third term. And so that does provide us with benefit."

On funding strategy: "Well, one of the reasons why we didn't grow in our deposits was because we had maintaining excess liquidity at the time. So there wasn't a requirement to do that. As we run our liquidity levels off and we're back to a more of a more normalised liquidity level at the moment, then of course our first preference is always to look towards customer deposits funding and we've got a number of channels and a number of options available to us."

This article was generated with the support of AI and reviewed by an editor.