There aren’t too many S&P/ASX 200 Index (ASX: XJO) shares that have sunk at least 25% over the past two months, despite the huge amount of volatility that investors are seeing right now. But, the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is one of those unlucky few.
At the time of writing, Bendigo Bank shares are down around 26% in just two months.
Losing a quarter of the value in quite a short amount of time shows a sizeable loss of confidence. It now has a market capitalisation of $4.4 billion according to the ASX.
This heavy sell-off is an attractive opportunity, says one leading analyst.
Citi rates Bendigo Bank share price as a buy
The regional bank could benefit from rising interest rates, more so than other ASX 200 bank shares according to Citi, as reported by The Australian.
The broker said:
Bendigo Bank has significantly underperformed the banks index since its fiscal 2022 result.
We view this largely reflects Bendigo Bank’s management’s net interest margin (NIM) guidance where it guided to replicating portfolio returns and increased share to Community Bank partners, but not overall NIM leverage from unhedged deposits.
We think Bendigo Bank has rates leverage in spades, and see the sell-off from management’s poor outlook statement as a buying opportunity.
Bendigo Bank outlined in its FY22 result that it’s expecting a benefit of 46 basis points over the next three years from the impact of higher interest rates on replicating portfolio yields. A 27 basis point benefit is expected in FY23. However, the ASX 200 bank share cautioned that actual outcomes will be determined by a range of factors including, but not limited to: competition, future interest rates, capital and low rate sensitivity deposit volumes, AIEA volumes and investment strategy.
Citi noted that this would represent a stronger improvement than what other banks are expecting and what Citi thought Bendigo Bank would be able to achieve.
Another bullish point for the Bendigo Bank share price and profitability is that $50 billion of customer deposits are unhedged. The NIM leverage on the $50 billion of customer deposits is “very real, and playing out larger than what we expected” according to reporting by The Australian on Citi’s comments.
Citi wrote:
Bendigo Bank is leading the pack in growing margin on deposits, pricing well below all peers on savings and term deposit rates.
Price target
Citi has a price target of $9.75 on the Bendigo Bank share price. That suggests that Bendigo Bank shares could rise by around 25% over the next year.
The post Down 27% in 2 months, this ASX 200 bank share is a ‘buying opportunity’: expert appeared first on The Motley Fool Australia.
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More reading
- The Bendigo Bank dividend is being handed out today. Here are the details
- The Bendigo Bank share price just hit a new 52-week low. What’s going on?
- Down 20% since mid August, are Bendigo Bank shares in the buy zone right now?
- What could rising interest rates mean for the Bendigo Bank share price?
- Why rising rates are a ‘sugar hit’ for ASX 200 bank shares: Macquarie
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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