AAP Sydney Morning Herald October 30, 2012
BENDIGO and Adelaide Bank chief executive Mike Hirst says the regional lender has yet to see a rise in bad debts even amid signs of a slowing economy.
Speaking to shareholders at the bank's annual meeting, Mr Hirst said banks would struggle to increase revenue as long as consumer and business sentiment remained weak.
New regulatory requirements for banks to hold more capital were also making it challenging for the sector to return to the boom-time level of profitability seen before the financial crisis.
''These imposts … will ensure lower returns from banks than those experienced in the years prior to the global financial crisis,'' Mr Hirst told shareholders in Adelaide.
Bendigo's cash profit for the 2012 financial year of $323 million was down 3.9 per cent on the previous year, reflecting the impact of weak demand for loans.
While other banks, including bigger rival ANZ, have warned of rising bad debts, he said this had yet to play out across Bendigo's lending book.
''Employment is really the key to all of this, and employment is pretty good,'' Mr Hirst said. A lower interest rate environment was helping to keep mortgage stress low.
ANZ chief Mike Smith warned last week that a slowing Australian economy was likely to again see bad debt charges shift higher, with small and mid-sized business customers feeling the pain. Signs of stress were already emerging in pockets of rural Australia, he said.
For its part, the bulk of Bendigo's lending book is made up of mortgages, although it has a sizeable small and mid-sized business book.
Mr Hirst also told shareholders he was confident that Bendigo's strategy to strengthen its relationship with customers and improve the way it met their needs would result in long-term growth.
''When the economy enters a low-growth phase such as this, markets reward companies that drive bottom line improvement through cost cutting at both the operating and investment level,'' he told the meeting.
The bank's willingness to take a long-term approach meant it would not be driven by price, or cut costs at the expense of long-term value, Mr Hirst said.
That suggests Bendigo will continue to reduce its interest rates at a slower rate than any cuts to official cash rates.