Bendigo and Adelaide Bank Earnings: Economy Slowing, but Few Signs of Borrower Stress

No-moat Bendigo and Adelaide Bank’s AUD 562 million fiscal 2024 cash profit came in 2% above our forecast, with lower-than-expected bad debt expenses partly offset by higher operating expenses. Efficiency measures—including moving to one core banking system and consolidating brands—should eliminate cost duplication, but we think these take time to feed through to earnings. We forecast a gradual improvement in Bendigo’s cost/income ratio over the next five years, to 56% by fiscal 2029, roughly 200 basis points below fiscal 2024. Our long-term outlook is intact, and our fair value estimate lifts 3% to AUD 10.80 per share, mostly due to the time value of money. Shares in Bendigo screen as modestly overvalued.