February 21, 2012 AFR 8th August 2011
REGIONAL lender Bendigo and Adelaide Bank has pledged to pass on to borrowers any drop in funding costs, but chief executive Mike Hirst
said pricing might not begin to ease until the end of the year.
Mr Hirst said ''balance'' needed to be restored in the banking sector, with scales being tipped too much in favour of borrowers as banks absorbed too much of the increase in funding costs.
Bendigo has become the latest bank to claim it has not been writing profitable mortgages in recent months due to the surge in funding costs. This was why it had raised its variable mortgage rate by 15 basis points last week, Mr Hirst said.
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''There are a lot of different stakeholders in a bank's business - there's the shareholder, the deposit holder and the borrower - and all of those have to have their interests balanced out,'' Mr Hirst told The Age.
''At any point, if one is not getting a fair deal, you run the risk of them withdrawing their services,'' he said.
His comments follow Bendigo yesterday delivering a flat first-half profit, with the regional lender buffeted by a drop in revenue and rising funding costs.
Bendigo's cash profit of $162.6 million for the six months to December 31 compared with $162.1 million in the first half last financial year.
Bendigo's headline profit for the half came in at $57.9 million, hurt by a previously flagged write-down in the value of its margin-lending business. The result was struck on a 2 per cent fall in revenue to $607.6 million, but the bank was tight on costs, with operating expenses falling 1.2 per cent in the period.
Despite its country roots, Bendigo is one of the biggest players in Australia's margin-lending market. This large exposure to stock lending caused headaches in the latest half as borrowers steered clear of equity markets.
Bendigo managed to slightly outpace the broader market in terms of lending growth, increasing the size of its mortgage book by 7.6 per cent. Its deposit book was up 9.7 per cent, although it gave up some market share amid fierce competition in the sector.
Significantly, Bendigo's net interest margin fell six basis points to 2.13 per cent, highlighting the squeeze from higher funding costs. The interim dividend of 30¢ a share was flat on last year.
Despite all the gloom, Mr Hirst took a more upbeat view on the longer term than his big bank rivals.
''In my experience in markets, when everyone has the one view, you're generally not far off the swing - and you're starting to see that right now where everyone is a bit bearish where things might be headed in most markets,'' he said. ''It might be that things are starting to turn around a little bit.''
Mr Hirst has ruled out a program of job cuts across the bank to lower costs. Such a move could hurt long-term growth, he said.