BEN –0.38%: The regional bank’s FY26 result landed broadly where the market expected, with improving margins and deposit funding helping cash earnings grind higher.
Key results:
- Revenue of $2.046bn, in line with $2.046bn consensus.
- Net profit (NPAT) of A$375.1m, in line with A$375m consensus.
- Net interest margin of 95%, up 7bps from 1.88%.
- CET1 ratio improved to 3%, from 11.0%.
- Final dividend of 33cps, unchanged.
- Regulatory provisions and associated costs of A$58.8m.
The standout was NIM, with BEN benefiting from growth in lower-cost deposits and better funding management. That’s important for a smaller bank that doesn’t enjoy the scale advantages of the majors. Credit remains well behaved, although BEN has prudently increased provisions given higher rates, softer property prices and geopolitical uncertainty. The bigger frustration is operating leverage: FY27 expenses are expected to rise another 4–5%, while remediation following Banking Act breaches is expected to run for around three years.
MM’s view: BEN is improving, but we’re not convinced it’s improving quickly enough. The 7bp margin expansion and stronger capital position are clear positives, and there are no major cracks appearing in the loan book, but persistent cost growth continues to absorb too much of the benefit. Management’s target of ROE above 10% by 2030 is achievable, but it’s also a long runway for investors to wait. BEN needs to turn better margins into stronger operating leverage; until that happens, we struggle to see a compelling reason to favour it over the other major banks.
MM remains neutral toward BEN
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