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Message subject : BANK ON THE MOVE

This message was posted by gail on August 15, 2000 :

BANK ON THE MOVE ... On the face of it Bendigo Bank is no bargain with a price/earnings ratio of 18 times. This is higher than the big four banks, which range from 13 (National Bank) to 17 (CBA). But the investment fundamental becomes more "competitive" if an investor accept the bank's view. Also, the price probably reflects a premium for takeover potential.

Managing director Mr Rob Hunt said last week that earnings a share for the past financial year were 27.5c, down from 32.6c in 1999, but if the abnormal provision for doubtful debts was excluded from calculations the EPS would have been 36.5c. Bendigo Bank has climbed from $4.79 to $5 on the back of the result, which compares with a year high/low of 6.22/$4.58. At $5, and using the 36.5c figure, the p/e ratio falls to just 14 times, putting it in the same p/e league as comparable banks, BankWest and Suncorp Metway.

In the year to June 30 Bendigo's operating profit before tax and before abnormal items was $47.9 million, up 62 per cent from $29.6 million in 1999. After tax and an abnormal loss of $6.9 million Bendigo's bottom-line result was $21.3 million, up 8.2 per cent. The bank will pay a fully franked final dividend of 13.5c (books close on October 13, so there's plenty of time to get set). It lifts dividend for the year to 24c (up from 23c). At latest prices dividend yield is 4.8 per cent. The bank says revenues rose 27.6 per cent as Bendigo began to see the results of significant investments in distribution networks, technology, product and skills in recent years.

"The gross profit increase was very solid and while profit available for distribution to shareholders was reduced by a large one-off abnormal item, the group is well-positioned to continue to improve its performance," the bank says.

Its Community Bank network continues to expand rapidly and is on course to meet its target of 50 plus branches by the end of next year. The bank plans to merge with First Australian Building Society, enabling an entry into the Queensland retail banking market. This will result in the issue of about 27 million new Bendigo shares, an increase of almost one-third in the current share base. Because Bendigo expects revenues to continue to increase strongly, it does not expect the First Australian merger to have a negative impact on earnings per share.

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