February rate hike may not be enough

by Adam Smith21 Feb 2012

Bendigo and Adelaide Bank boss Mike Hirst has tipped that the bank's recent rate hike has yet to make up for higher funding costs.

The bank has announced its half-yearly results, taking a 67% hit to headline profit. Hirst put the result down a $95m goodwill writeoff in the bank's margin lending portfolio, Hirst also pointed to rising funding costs.

"The cost of all funding channels have increased markedly over the past six months, including retail term deposits, senior unsecured and secured debt markets," Hirst said.

Bendigo and Adelaide lifted its standard variable rate by 15bps following February's RBA meeting, but Hirst has indicated the rise may not have been enough. He argued that the rate hike would "go some way to addressing" declining net interest margins, but said higher funding costs had "yet to be fully recouped".

"The contraction in margin, coupled with slowing credit growth and market sentiment moving investors away from higher margin wealth and equities products, has resulted in flat earnings," Hirst said.

In spite of this, Hirst said the bank had seen above system mortgage growth, was able to fund 77% of its lending through retail deposits and had provided more than $88m in community grants and dividends.

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