Bendigo and Adelaide Bank Limited research report updated

Key points:

1. Updated research report on Bendigo and Adelaide Bank Limited has been completed and can be accessed below
2. The planned acquisition of the Rural Finance Corporation of Victoria for $1.78bn is seen as credit neutral and relatively minor, adding around 2.8% to total assets
3. The Bendigo and Adelaide Bank Limited 29 January 2019 call (29 January 2024 maturity) subordinated issue paying a floating rate of three month BBSW plus an initial margin of 280bps continues to offer amongst the best value of all the AUD subordinated bonds with an expected yield to call of circa 5.65%. This bond is available to both retail and wholesale investors

We have completed an updated research report on Bendigo and Adelaide Bank Limited, including commentary on the plans to acquire the Rural Finance Corporation of Victoria for $1.78bn, as announced to the market on Monday. The executive summary from the research report is reproduced below:

Executive summary

• Bendigo and Adelaide Bank Limited (Bendigo Bank) is a regional bank that specialises in retail banking with a focus on rural communities. It also owns Rural Bank and Delphi Bank and operates the margin lending business, Leveraged Equities
• At the time of writing, Bendigo Bank had offered to purchase the Rural Finance Corporation from the Victorian Government, which would increase its rural loan portfolio by approximately 50% and total assets by around 2.8%. This is subject to APRA approval but is expected to be received and the transaction completed in July 2014
• Bendigo Bank offers a range of banking and wealth management services across all states and territories in Australia, with a particularly strong retail deposit franchise and community focus. Its largest operations are in Victoria and South Australia
• Bendigo Bank reported a solid net profit after tax of $180.7m in 1H14, a decrease of 4.7% compared to $189.4m the prior corresponding period. However, underlying cash earnings were $185.9m, an increase of 9.5% on the prior corresponding period. 
• Bendigo Bank’s capital position has improved with recent Tier 1, Tier 2 subordinated debt and equity raisings.   The Tier 1 capital ratio was 9.24% as at 31 December 2013 and total capital ratio was a solid 10.72%. Following the $300m subordinated bond raising in January 2014, the total capital ratio was an impressive 11.68% on a pro-forma basis
• Bendigo has a sound credit profile with strong earnings growth, low levels of bad debt and a high proportion of deposit funding. The bank is actively looking to increase its regulatory capital which will further solidify its financial position

Please click here to view the updated retail research report

Please click here to view the updated wholesale research report which includes references to credit ratings (clients will need a login and password to access wholesale reports)

The Bendigo and Adelaide Bank Limited 29 January 2019 call (29 January 2024 maturity) subordinated issue paying a floating rate of three month BBSW plus an initial margin of 280bps continues to offer amongst the best value of all the AUD subordinated bonds with an expected yield to call of circa 5.65%, and is available to both retail and wholesale investors. This is also our preferred investment of all the available Bendigo and Adelaide Bank Limited fixed income securities.

All prices and yields are indicative and a guide only and subject to market availability. FIIG does not make a market in these securities.