Bendigo and Adelaide Bank Ltd (ASX: BEN) has seen its share price under-perform the majors over the past year with the stock falling 17% compared with falls in the 'Big Four' ranging from less than 6% to 12.5%.
The falls come despite reporting a reasonable set of full year results.
The regional bank reported a 13.1% rise in cash earnings to $432.4 million; a slight dip in the net interest margin (NIM) to 2.2% and maintained its final dividend year-on-year at 33 cents per share.
Amongst the highlights from the result was a growing agribusiness offering; offsetting this positive was a decline in profits from the wealth management unit.
While the full year results may have been subdued compared with Commonwealth Bank of Australia (ASX: CBA) which also reports on a June 30 year, arguably the share price fall has been overdone.
Investors will get the opportunity to scrutinise the rest of the sector shortly when the other majors report their results for the year ending September.
Relative Value
On a comparative basis, looking forward two years, some investors will be drawn towards Australia and New Zealand Banking Group (ASX: ANZ) which is trading on a forecast price-to-earnings (PE) ratio of just 10.4 times according to Morningstar. This is the lowest PE of not just the 'Big Four' but also lower than Bendigo and Adelaide Bank's PE of 10.5 times.
When it comes to fully franked dividend yields however, Bendigo and Adelaide Bank comes in ahead with a juicy forecast yield of 7% which is above the next highest, ANZ Bank, with a yield of 6.8%.
What's more, Australian Prudential Regulation Authority (APRA) recently announced regulatory changes to banks which will see risk weights on mortgages shifted – this is a positive for Bendigo and Adelaide Bank and will lead to the group's Tier 1 funding lifting 15 basis points to 8.17% and creating a more even playing field to compete with the majors. In the medium term this change by APRA could put pressure on the 'Big Four's' dominance and increase the competitiveness of Bendigo and Adelaide Bank as well as Bank of Queensland Limited (ASX: BOQ).
