Profits and strategies emerge for rural bankers

Emerging triumphant amongst recent debate and government rhetoric on rural banking services is rural and community banking specialist Bendigo Bank which has announced a net profit of $11 million, representing a 30% increase in the interim six month period to the end of December. A notable achievement was the rise in lending to new borrowers with approvals rising 16%.

Whilst the major banks grapple with the problems associated with maintaining quality service through extensive, although reduced branch networks, Bendigo Bank continues to enhance its standing as a regional and community bank.

Managing Director Rob Hunt confirmed that new business operations including the acquisition of Victorian Securities Corporation and IOOF Building Society, plus the addition of new community bank branches to the network, were ‘strategic investments’ with the potential to generate income and grow those income streams. They were also responsible for a rise in total deposits of over 8 per cent to $4.1 million.

Bendigo continues to turn competitor reluctance into a competitive advantage – it sees no reason to shy away from it’s ongoing belief in the traditional branch network. Expect to see a further 30 branches in Victoria and other states by year end. Bendigo has never been afraid of it’s high cost to income ratio but it must have been delighted that that figure fell from 76.9% to 71.1% – a response shared by investors.

Bendigo’s next task is to make good its current joint venture undertaking with Elders Rural Services which has begun selling Bendigo products and services. It must also keep an eye on its return on equity (8.5%).

Interestingly the Australian Financial Review revealed last week that Westpac is currently indiscussion with Elders with a view to provide face to face banking facilities in regional Australia. Just how the parties plan to operate around the existing arrangement Elders has with Bendigo Bank is not known.

For its part, Bendigo Bank can only improve given plans to expand internet banking facilities and electronic banking services which will handsomely complement its banking operation. Mr Hunt expects to see more ‘community banks opened in regions where there is clear consumer support for such a style of banking’ – which continues to offer the classic win-win scenario for both the bank and the community.