BENDIGO and Adelaide Bank hopes more strong profit results will prompt a credit ratings upgrade as the regional lender seeks to source 20 per cent of its funding from wholesale markets.
The regional bank reported today a lift in first half profit by 67.1 per cent to $173.9 million.
Managing director Mike Hirst said the bank is looking to diversify its funding sources so it is less reliant on retail funding and the residential mortgage-backed securities (RMBS) market, which together fund 93 per cent of its business.
"We're looking at a domestic retail bond issue as another avenue for funding," he told analysts and reporters after announcing the profit lift.
"I think if we continue on with these sorts of results, we'd be hopeful of an upgrade in our rating in the not too distant future, which would open up more wholesale opportunities for us."
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Bendigo is currently rated A2 by Moody's and triple B-plus by rival ratings agencies Fitch Ratings and Standard & Poor's.
Ideally, Bendigo would like to source 20 per cent of its funding from wholesale markets, and 20 per cent from retail markets, Mr Hirst said.
Bendigo expects to make two or three RMBS, chief financial officer Richard Fennell added.
He said the bank will structure them in a similar way to the $1 billion transaction completed on December 10 which offered investors both fixed and floating rate bullet notes.
Mr Hirst said the RMBS market had yet to return to normal after it closed down during the height of the credit crisis in late 2008, and the market would become stronger once more issues were made without the assistance of funding from the Australian Office of Financial Management (AOFM).
The acquisition of a 40 per cent stake in Rural Bank that it did not already own pushed Bendigo's first half profit 67.1 per cent higher, but the regional lender now has impaired loans on its books from Queensland farmers battling floods.
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