Bendigo and Adelaide Bank has opened a $300 million capital raise as the company has recorded a 28.2 per cent drop in profit year-on-year for the interim.
Bendigo Bank is aiming to invest the raised funds in technology and regulatory-related change initiatives, as well as raising capital above APRA requirements.
The organisation posted a net profit after tax of $145.8 million for the six months leading up to December, including a pre-tax software impairment of $87.1 million.
Its cash earnings had slipped by 2 per cent from the prior year to $215.4 million, despite there being a 4.9 per cent hike in new customers joining the bank.
However, income from operations was up by 5.6 per cent to $834.2 million. And the consumer segment, which includes the bank’s wealth services, produced a statutory profit of $157.8 million for the half, a 78 per cent increase year-on-year. The division produced cash earnings of $143.2 million, up by 24.8 per cent.
Total managed funds at the end of the half were $6.6 billion, a 10 per cent increase on the year before. Assets under management (AUM) were $2.5 billion, up by 6.3 per cent, while other managed funds, including products and super funds managed by Sandhurst Trustees and Adelaide Managed Funds increased by 12.9 per cent to $4.1 billion.
Earnings hit by tech investments
Bendigo managing director and chief executive Marnie Baker reported the bank’s earnings were hit by ongoing technology investment, regulatory and compliance costs and staff investments to support mortgage growth.
During the first half, $16.9 million had been invested in systems and process simplification, automation, and boosting digital services and capability, including open banking, compliance and regulatory initiatives.
Operating expenses weighed in at $487.4 million for the half, up by 5 per cent on the prior corresponding period.
“Despite this [earnings downfall], we delivered total income of $814.7 million, up 1.4 percent on the prior corresponding period, in a challenging environment comprised of low rates, increasing regulatory pressure, low consumer and business confidence and growing competition,” Ms Baker said.
“As we continue our growth trajectory, we will accelerate the level of investment in technology and digital initiatives to boost scale, further remove complexity and cost from our business and deliver the banking experience of the future.”
“Our focus on digitisation and investment in future capability has seen the average age of our customers continue to decrease. The average age of new customers continues to be more than 10 years younger than the average age of the consumer base.
“The net growth in the number of millennials choosing to bank with us increased 349 per cent on the prior corresponding period and we also saw an uptick in small business customers.”
She added the bank is aiming to have its cost-to-income ratio, which was 59.3 per cent, decline towards 50 per cent in the medium term.
The interim dividend, fully franked, was 31 cents, down by 4 cents per share.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].