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Bendigo And Adelaide Bank COVID-19 Update With Withdrawal Of HY20 Financial Outlook

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Bendigo and Adelaide Bank (ASX: BEN) is the 5th largest retail bank in Australia. Bendigo has around A$71.4 billion of assets under management and around 1.7 billion customers. Bendigo has a market capitalisation of A$3.4 billion.



What has Bendigo announced today?

Bendigo announced today (16 April 2020) withdrawal of its 2H20 financial outlook commentary because of COVID-19. Bendigo management notes that this decision is based on the level of uncertainty created by the COVID-19 pandemic, the difficulty this presents in providing future guidance and, like other banks, Bendigo’s inability to make a reasonable assessment in the current environment of the impact on credit provisions under the recently implemented accounting standards.

Bendigo’s management notes that the company’s balance sheet is strong and has a capital position well above APRA’s benchmark target. This should allow Bendigo to navigate through this challenging environment.

In some positive news, Bendigo’s launch of a A$300 million capital raising in February 2020 that was successful. This comprised a fully underwritten A$250 million institutional share placement and a non-underwritten share purchase plan under which Bendigo is targeting to raise approximately A$50 million. The successes of this equity raising should allow Bendigo additional liquidity to operate in this challenging environment to deal with future short-term challenges of COVID-19.

What has the RBA to help the economy and the banks in this challenging environment?

The RBA has used its full range of policy tools to assist the economy and the banking sector in this troubled time. Most notably, this includes reducing the cash rate to 0.25%, an asset purchasing plan (Quantitative Easing) to purchase Australia government bonds to target the 3-year bond rate at 0.25% (in line with the current cash rate) and the RBA has injected substantial liquidity into the financial system through its daily open market operations and the term funding facility to support the flow of credit through the economy.

What is the overall assessment of the Australian banking sector?

The banking sector face significant headwinds including the economic impacts of COVID-19, slow credit growth (also reflecting weak economic growth), pressures on net interest margins (which could lower profitability) and increased regulatory requirements (both capital and lending requirements). That is, in the short term at least, the banks may have lower growth prospects than other sectors of the market and there is a significant risk that bank dividend payments could fall over the next year or so.

What is the market reaction to Bendigo’s announcement?

The market reaction to Bendigo’s announcement is negative. Bendigo share price is down around 3%. However, this could be partly attributed to the Australian market being down today around 1.3%.




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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