In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline. At the time of writing the benchmark index is down 1% to 6,064.8 points.

Four shares that are falling more than most today are listed below. Here’s why they are dropping lower:

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is down 5.5% to $6.60. Investors have been selling the regional bank’s shares following the release of its full year results. Bendigo and Adelaide Bank reported a 27.4% decline in cash earnings after tax to $301.7 million. In light of this, the bank deferred its final dividend. Management warned that market conditions were expected to remain challenging in FY 2021.

The Kogan.com Ltd (ASX: KGN) share price has fallen almost 4% to $21.02. This follows the release of the ecommerce company’s full year results this morning. Kogan reported a 39.3% increase in gross sales to $768.9 million and a 57.6% increase in adjusted EBITDA to $49.7 million in FY 2020. This was driven by the accelerating shift to online shopping which underpinned a 35.7% increase in active customers to 2,183,000. Investors may have been expecting an even stronger result.

The National Australia Bank Ltd (ASX: NAB) share price is down over 2.5% to $17.73. This morning analysts at Macquarie retained their underperform rating and $17.50 price target on the banking giant’s shares. Macquarie believes the next 12 months will be difficult for the bank given the limited cost reduction opportunities in the current environment.

The Treasury Wine Estates Ltd (ASX: TWE) share price has tumbled almost 5% to $12.23. This appears to have been driven by profit taking after some strong gains by the wine company last week. Treasury Wine’s shares raced 17.5% higher last week following the release of its full year results. Although that result was weak, cost cutting plans and news that sales in China have rebounded strongly appeared to get investors excited.

More reading

• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%
• Kogan share price lower despite stunning FY 2020 growth
• These were the highlights of ASX reporting season last week
• Take a look at last week’s worst performing ASX shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why Bendigo and Adelaide Bank, Kogan, NAB, & Treasury Wine are dropping lower appeared first on Motley Fool Australia.

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When a company director or insider buys shares in their own business, does that mean it’s a good time to buy in? We take a look at two ASX industrial shares with recent director buys. 

What is insider buying?

Insider buying is when an executive, such as a director, buys shares in their own company. Insiders usually have exclusive insight into the companies they manage and are more likely to buy shares they view as undervalued.

A share purchase by a company insider can be seen as a vote of confidence in a business. And the signals are stronger with multiple insider buys and larger share purchases.

Let’s look at 2 ASX industrial shares that have seen multiple insider buys recently.

Phoslock Environmental Technologies Ltd (ASX: PET) 

The Phoslock share price dropped sharply at the end of July when the water treatment company revealed a substantial decline in first half revenues due to project delays.

Flooding and COVID-19 impacts affected progress on key projects, although the company says it is well-positioned to restart when circumstances improve. Two directors took advantage of the downturn to top up their shareholdings, purchasing 150,000 shares in the ASX industrial share in early August. 

While projects in China and Europe have been delayed, Phoslock believes they will continue in due course. The company says the pipeline remains strong with a current contract value of $380 million. Many projects have been unaffected by the coronavirus pandemic and Phoslock has confidence in developing US activity.  

Downer EDI Limited (ASX: DOW)

Downer EDI launched a $400 million equity raising at the end of July after warning of an expected $150–$160 million statutory loss for FY20. The company attributes the loss primarily to impairments, remediations, and historical claims adjustments. Downer EDI’s share price fell to a low of $4.02 in early August, prompting one director to buy 10,470 shares on-market. 

The ASX industrial share reported that cash performance improved materially in 2H FY20 despite the impacts of COVID-19. Underlying EBITDA is expected to be $410–$410 million, and underlying net profit after tax adjusted $210–$220 million.

Downer is conducting a takeover bid for Spotless, which is a key part of its urban services strategy. Funds from the equity raising will help pay for the acquisition. 

More reading

• Take a look at last week’s best performing ASX shares
• Brokers have upgraded 3 ASX shares to the buy zone. Here’s why
• Downer share price edges higher on takeover bid
• These were the worst performing ASX shares last week
• Phoslock share price collapses on poor results

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Insiders are snapping up these ASX industrial shares appeared first on Motley Fool Australia.

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Investing in gold and silver has always been considered a safe-haven in times of economic uncertainty. The silver spot price has been storming higher this year and companies like Silver Mines Limited (ASX: SVL) are reaping the rewards.

Recently this month, the spot price for gold hit an all-time high. Silver reached its peak back in April 2011. However, the white metal has been gaining a lot of traction. Could this be the start of something bigger for the silver industry?

Silver Mines in a nutshell

Silver Mines is Australia’s largest pure play silver company with expertise in exploration and development of quality silver projects. Its portfolio consists of the Conrad and Webbs projects, the Tuena Project and its recently acquired Bowdens Silver Project. The latter of which is said to have substantial resources as one of the world’s largest undeveloped silver sites – a mineral resource of 275 million ounces of silver equivalent.

What is fuelling the Silver Mines share price rise?

The Silver Mines share price raced higher last Friday, up 6.3% to close last week’s trade at 25 cents. It has since pulled back slightly in today’s trade, sitting at 24 cents at the time of writing.

With no new announcements to the market, last week’s surge is most likely due to the demand for the white metal. At the time of writing, the spot price for silver is $36.07 per ounce.

Over the past few months, silver has risen sharply compared to its more expensive cousin, gold (50% vs. 8% in the last 60 days).

The explanation for this is historically silver has higher beta than gold. In layman’s terms, if the spot price of gold moves up by 5%, silver will increase by 10%.

However, the same is to be said for the reverse scenario, i.e. if gold falls 5% for the day, silver will fall 10%.

What is the outlook for Silver Mines?

The metals mining outfit has strategically positioned itself for future growth. In May, the company announced it had raised $12 million through capital raising to primarily fund its pre-development progression on the Bowdens Project. Drilling has expanded up to 10,000 metres, targeting high-grade silver mineralisation below the current proposed pit and in multiple new areas. Drilling is expected to continue at least until the end of 2020.

Furthermore, Silver Mines submitted a development application to the NSW Department of Planning, Industry and Environment for an open-cut mine and processing plant with a conventional milling circuit at the Bowdens Project.

Silver Mines released its activities report for the quarter end in late July. This saw the company end the quarter with $1.61 million in total outgoings and $12.1 million cash on hand.

Should you buy?

While past performance is no guarantee for future results, I believe that the Silver Mines share price could be a risky buy.

As a long-term investor, I think it would be prudent not to jump in and buy Silver Mines shares for the time being.

Instead, I’ll be keeping a close eye on the Silver Mines share price at this time and wait for further results on its Bowdens Project.

More reading

• The Silver Mines share price is up, so is now a good time to buy?
• The Silver Mines share price has hit a 52-week high. Here’s why.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The GWA Group Ltd (ASX: GWA) share price has fallen 10.47% today after the company released its results for the year to 30 June 2020. At the time of writing, the GWA share price has slumped to $2.48 from Friday’s closing price of $2.77.

What was in the announcement?

According to the company, revenue was up 4% in the year to 30 June 2020 to $398,704,000. This was against revenue of $381,730,000 in the year to 30 June 2019.

Earnings before interest and tax from normal activities were down 41% to $70,297,000 in the year to June 30 from $119,440,000 in the year to 30 June 2019.

Net profit after tax was down 53% to $43,886,000 in the year to 30 June 2020, compared to $94,044,000 in the year prior. Net profit in the year to 30 June 2019 included profit from the sale of the company’s door and access systems business, which contributed $50.8 million to net profit after tax in that year.

GWA announced a final dividend of 3.5 cents per share, taking dividends for the full year to 11.5 cents, fully franked. The company also resumed its dividend reinvestment plan with shares offered at a 1.5% discount under the plan.

GWA Group CEO and Managing Director, Tim Salt, commented on the results stating;

“In a very challenging year, with significant uncertainty and a strong focus on the health and wellbeing of our people, GWA delivered a disciplined result in FY20.

Our top line was significantly impacted by lower construction activity, merchant destocking in the first half, and the impact of the COVID-19 pandemic and lower than expected merchant restocking in the last quarter of the year.

Our continued focus on operational and cost discipline across the business resulted in a resilient EBIT margin of 18.0 per cent compared to 18.5 per cent in the prior year.

While markets were challenging and compounded by the unforeseen impact of COVID-19, our focus continues to be on controlling those elements within our control.”

About the GWA share price

GWA Group is a supplier of fittings and fixtures to households and commercial premises in Australia and New Zealand. It has been listed on the ASX since 1993.

The GWA share price is up 10.22% since its 52-week low of $2.25, however, it has fallen 26.63% since the beginning of the year. The GWA share price is down 27.06% since this time last year.

More reading

• These were the best performing shares on the ASX 200 last week
• Latest ASX stocks upgraded by top brokers to “buy” today

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The S&P/ASX 200 Index (ASX: XJO) has started the week on a disappointing note. In late morning trade the benchmark index is down 0.9% to 6,070.1 points.

Four shares that have not let that hold them back are listed below. Here’s why they are charging higher:

The Altium Limited (ASX: ALU) share price is storming 4% higher to $34.80. This follows the release of the electronic design software company’s full year results. Altium delivered revenue growth of 10% to US$189 million and a 13% lift in EBITDA to US$76.63 million. This result was in line with expectations. Looking ahead, management continues to target revenue of US$500 million by 2025. Though, it warned the pandemic could push this back 6 to 12 months.

The Beach Energy Ltd (ASX: BPT) share price has jumped 7% to $1.58 following the release of its full year results. The energy producer posted underlying EBITDA of $1,108 million for FY 2020. This was down 19% on the prior corresponding period and driven by a 21% decline in its realised oil price. Looking ahead, Beach advised that it is on track to deliver production of 37 to 43 MMboe by FY 2025. This is up from 26.7 MMboe in FY 2020.

The JB Hi-Fi Limited (ASX: JBH) share price has surged 5% higher to $49.71. This morning the retail giant released its full year results and revealed an 11.6% increase in total sales to $7.9 billion and a 33.2% lift in underlying net profit after tax to $332.7 million. This led to JB Hi-Fi increasing its final dividend by 76.5% to 90 cents per share. Which means its total FY 2020 dividend is up 33.1% year on year to 189 cents per share.

The Starpharma Holdings Limited (ASX: SPL) share price is up 4.5% to $1.08. This follows news that the dendrimer products developer has signed a new research partnership with leading Chinese pharmaceutical company Tianjin Chase Sun Pharmaceutical. The deal will see the development of several dendrimer enhanced product (DEP) nanoparticle formulations for an anti-infective drug.

More reading

• Beach Energy share price on watch as production misses guidance
• JB Hi-Fi share price on watch following 33% increase in profits
• Altium share price on watch after FY 2020 result
• 5 things to watch on the ASX 200 on Monday
• 3 five-star ASX shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Mesoblast limited (ASX: MSB) shares rocketed 39.1% higher on Friday to pare back last week’s losses. But after roaring back to life, is the Mesoblast share price back in the buy zone?

What happened to the Mesoblast share price last week?

It was a rollercoaster ride for investors last week as regulatory approvals dominated Mesoblast’s share price movements.

That kicked off on Tuesday with a briefing note from the United States Food and Drug Administration (FDA). The regulator noted concerns about the effectiveness of the company’s remestemcel-L treatment, Ryoncil, for paediatric steroid-resistant acute Graft Versus Host Disease (aGVHD).

It was an important signal ahead of the company’s pivotal meeting with the US Oncologic Drugs Advisory Committee (ODAC) on Thursday.

The disappointing note from the FDA triggered a sell-off that saw Mesoblast shares fall 37.0% lower in just two days.

However, contrary to expectations, ODAC voted 8 to 2 in recommending the treatment’s approval. That’s a good sign for the Aussie biotech company with a decision on the final FDA approval expected by the end of September.

The decision took many investors by surprise and triggered a 39.1% rally in the Mesoblast share price to $4.70 per share at Friday’s close.

Is the Aussie biotech in the buy zone?

Clearly, speculators who rolled the dice after the heavy share price falls have done well.

However, if you’re a long-term investor like myself, you should really be buying and holding for decades to come.

I personally like Mesoblast shares and their future prospects. The company has some promising treatments in Phase 3 trials including Ryoncil for aGVHD.

I think Friday’s share price rally just puts Mesoblast shares back to their initial intrinsic value.

If you’re a big believer in the biotech industry, I think Mesoblast is a good option. The key with biotech companies is a strong research and development pipeline coupled with positive momentum.

Mesoblast appears to have both of these factors which makes the future outlook strong. Of course, there will be more speed bumps along the way.

If you’re looking for less growth and a more mature company profile, I think CSL Limited (ASX: CSL) shares could be another strong biotech buy.

More reading

• Take a look at last week’s best performing ASX shares
• ASX 200 rises 0.6%, Mesoblast soars
• Why I’d buy today’s CSL share price over Mesoblast
• Why Baby Bunting, Evolution, Mesoblast, & Xero shares are zooming higher
• ASX 200 up 0.3%: NAB Q3 update, Mesoblast rockets, Newcrest guidance disappoints

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Santos Ltd (ASX: STO) share price has been hit hard in 2020 while Woodside Petroleum Limited (ASX: WPL) shares have also slumped.

An oil price war and coronavirus pandemic have hammered the ASX energy shares lower. However, there are a couple of reasons why I prefer one big producer over the other.

Why I like the Santos share price over Woodside

For starters, the relative valuation metrics seem to point to Santos over Woodside right now. I’m particularly interested in the price-to-earnings (P/E) ratio.

Given the current market conditions, a P/E ratio can be a little misleading or unreliable. However, I think it still has some value when comparing two companies in the same industry.

The Santos share price trades at a P/E of 12.9 compared to 39.9 for Woodside. That to me says there’s a chance of more bang for your buck with Santos.

Both of these companies are enormous independent oil and gas producers, with Woodside ranked first and Santos ranked second.

That means we should see a large earnings hit for both producers in August. Woodside has already announced a record A$4.37 billion after-tax impairment loss thanks to falling energy prices.

Santos also announced a non-cash impairment charge of US$700-800 million (A$975-1,115 million).

That means the relative August earnings strength could be the key to deciding which ASX energy share to buy.

The Santos share price has slumped 29.4% in 2020 and is down 36.1% from its 52-week high.

It’s a similar story for Woodside with the ASX energy share falling 40.7% in 2020. Woodside shares are now down 43.6% from their 52-week high.

I think Woodside is arguably more of a speculative buy than Santos given the heavier falls. The fundamentals remain similar but Woodside could have more upside given its larger operations.

Given the expected volatility, I still think the Santos share price could be a better relative value buy as it currently stands.

Foolish takeaway

With travel and manufacturing activity remaining muted, I still see pain ahead for the Woodside and Santos share prices.

However, long-term investors willing to ride the storm could benefit to the upside when energy demand returns.

More reading

• 5 things to watch on the ASX 200 on Monday
• AGL share price fall a warning for the LNG sector
• 5 things to watch on the ASX 200 on Friday
• Woodside share price edges lower on half year results
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Viva Energy Group Ltd (ASX: VEA) share price is up by 4.14% this morning after a reported 32.6% fall in profits for the half year ending 30 June 2020.

COVID-19 restrictions have had a significant impact on demand for fuel, which has impacted Viva’s bottom line. Viva supplies approximately one quarter of Australia’s liquid fuel requirements and travel restrictions mean demand for both automotive and aviation fuels has been in decline. 

What did Viva Energy report? 

Viva Energy reported fuel sales were impacted by border closures and ‘stay at home’ restrictions. Total sales volumes were down 10.5% on 1H2019, although did improve in May and June as restrictions eased. During 1H2020, sales of jet fuel have fallen by as much as 75% due to closures of domestic and international borders. Diesel sales were less affected throughout this period as a result of continued economic activity and a strong agricultural season. 

Despite these significant impacts, non-refining earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by more than 14% over the half due to improvement in retail fuel margins and relatively strong performance in non-aviation commercial segments.

CEO Scott Wyatt said, “The diversity of our retail and commercial business has provided resilience in extraordinary circumstances and we are well positioned to deliver further growth as restrictions continue to ease and the economy recovers.” 

Refining business struggles 

The refining business has been challenged in 2020 with oil markets and refining margins impacted by global events. As a result, the Geelong refinery moved to reduce production and bring forward major planned maintenance in April. While Viva believes this produced a superior outcome compared to a full shutdown over the period, the refinery nonetheless recorded losses of $49.4 million in 1H2020.

Refining margins are expected to remain uncertain as demand recovers over the remainder of 2020 and 2021. Viva has acknowledged that the operating losses of this part of the business are unsustainable. It is assessing the short and long term viability of this part of the business and has vowed to provide regular updates on refining performance. 

Profits and dividends 

The drop in sales volumes flowed through to profits, with underlying net profit after tax (NPAT) falling 32.6%. Nonetheless, the balance sheet remains robust with a net cash position of $480.9 million. This follows the divestment of the company’s stake in the Viva Energy real estate investment trust (REIT) earlier this year.

Taking this into account, Viva has maintained a dividend for 1H2020 with a payout ratio of 60% of distributable NPAT. It also intends to return all remaining proceeds from the divestment of the Viva Energy REIT to shareholders via a capital return and special dividend. 

At the time of writing, the Viva Energy share price is up 4.14% to $1.88 per share.

More reading

• Viva Energy share price surges 5% following business update

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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There have been a few interesting pieces regarding ASX shares in the news lately. One of them in The Australian is about companies paying dividends while receiving JobKeeper payments. The payments were to be passed onto employees to preserve their jobs. Thus, helping companies to press pause during the coronavirus pandemic.

In most cases, without the pandemic payments, thousands, if not millions, of people would have lost their jobs before dividends would have been sacrificed. This is part of a director’s fiduciary responsibility in Australia, punishable by law. However, and more importantly, it has highlighted just how fragile the economy is, and how close to the precipice we are.

Counter-intuitively, I believe this makes August is a great time to invest, before the subsidy finishes in September. However, investments need to be chosen with care. Consequently, if I were entering the market with $10,000 in August, these would be my carefully targeted choices.

An ASX share for short term credit

Managing cash flow is going to become more important for Australia’s small to medium enterprises (SME). As JobKeeper fades away in most parts of Australia, the impact of reduced revenues is likely to bite. While this may see unemployment lines grow, many companies will seek to smooth out cash flow as they return to normal.

One ASX share I have been watching in the short term credit space is CML Group Ltd (ASX: CGR). CML Group provides SME debtor funding via a range of mechanisms. The largest revenue earner for this company is invoice finance. This is where a company takes an invoice as security, and then provides funding for 80-90% of the invoice. It then receives the full amount of the invoice when it is paid.

It has other financing mechanisms, some of which are quite innovative, but this is of greatest interest to me. The company recently acquired a software as a service (SaaS) website, Skippr. This platform allows CML to develop a closer and more long term relationship with its SME customers.

I would invest $2,000 in CML Group. It is a small cap company worth only $76.15 million. At the time of writing it pays a trailing 12 month dividend of 6.86%.

SME Business loans

Another ASX share in a similar space is Tyro Payments Ltd (ASX: TYR). Although Tyro payments is generally known as an EFTPOS provider, it also provides short term credit solutions. The company has a business loan facility for up to $100,000 for first time SME’s, and $120,000 for subsequent loans. 

Moreover, Tyro has been selected as a loan provider under the SME Guarantee Scheme. This means the government will guarantee 50% of new loans issued by eligible lenders. The initial phase of the scheme remains available until 30 September 2020. Then, the second phase will run until 30 June 2021.

I would invest a further $4,000 in Tyro Payments. The loan capability is only one element of this company. I believe it has a long runway in front of it.

ASX shares in real estate

I have become increasingly focused on REITs to build larger income streams in my portfolio. One of these I have been researching a lot is Abacus Property Group (ASX: ABP). This REIT invests in real estate sectors that fortunately have little exposure to the coronavirus. Moreover, it is likely to remain prosperous as JobKeeper is reduced. 

The Abacus portfolio consists of 50.6% in office buildings, 34.4% in storage space, 6.8% in small convenience shopping centres, and about 8.2% in non-core assets. All of these have proven resilient. For example, offices have long leases and are leased by blue chip companies. Furthermore, convenience retail stores largely stayed open during the lock down. 

However, it is the self storage sector that I find interesting. Abacus has begun to show a growing interest in accumulating storage assets. Recently it increased its holding in rival ASX share National Storage REIT (ASX: NSR) to 8.09%.

What this means is that it has a more predictable, annuity style revenues. Offices and retail centres always require value adding to retain customers. Self storage does not. This market is dominated by small businesses and lone entrepreneurs. Hence, there is a lot of room for a focused company to consolidate assets. 

I would invest the last $4,000 in Abacus Group. With a low price-to-earnings (P/E) ratio of 10.5, the company has the potential to grow further. Moreover, Abacus has a very healthy trailing 12-month dividend yield of 6.8%.

Foolish Takeaway

Now is the time to prepare for a world with diminishing support from JobKeeper. While it will remain in selective circumstances, it will start to be withdrawn. In my view, the ASX shares that will benefit will be those that can stand alone without it, and those providing short-term credit.

More reading

• 3 excellent ASX dividend shares you can buy right now
• MoneyMe share price surges, but is it sustainable?
• 3 dirt cheap ASX real estate shares
• 3 ASX shares that could make you rich
• Why Adairs, Coles, Kogan, & Tyro shares are storming higher

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dropped by 4.86% in early trade after the Aussie bank reported a 48.8% slump in net profit after tax (NPAT).

Why is the Bendigo and Adelaide Bank share price falling?

Australia’s fifth-largest retail bank reported its earnings for the full-year ended 30 June 2020 (FY20).

While NPAT fell 48.8% lower to $192.8 million, cash earnings also slumped 27.4% to $301.7 million.

The group’s net interest margin (NIM) compressed 3 basis points (bps) to 2.33%. Total income on a cash basis climbed 0.9% from FY19 numbers to $1.61 billion.

Total lending climbed 5.1% to $65.3 billion with total deposits up 5.7% to $67.7 billion.

The bank’s consumer banking division outperformed with strong growth in retail lending totalling $3.1 billion. Lending applications jumped 50.3% with settlements up 18% on FY19.

Agribusiness lending climbed 1.3% despite a “challenging” year for Aussie agriculture with loan book growth supporting a higher NIM.

Bendigo’s business lending fell 6.7%, despite growing in the second half of the year thanks to Commercial Property Lending.

Operating expenses jumped 7.0% to $1.02 billion with a cost to income ratio up 350 bps to 62.7%.

Bad and doubtful debts (BDD) climbed to $168.5 million including a coronavirus collective provision of $127.7 million.

Excluding COVID-19 impacts, BDD comprised 8 bps of gross loans with the COVID-19 impact boosting that to 18 bps.

The Bendigo and Adelaide Bank share price has slumped following this morning’s announcement, which included a 33 bps increase in the bank’s common equity tier 1 (CET1) ratio to 9.25%.

The bank deferred its decision on a final dividend given the current uncertainty. 

Managing Director and CEO Marnie Baker noted the impact of COVID-19, record low interest rates and investment costs. Those factors weighed on earnings and forced a strategy change in FY20.

FY21 outlook

Management said market conditions “remain challenging” and couldn’t provide meaningful guidance for this financial year.

Foolish takeaway

The Bendigo and Adelaide Bank share price is down 31.49% for the year prior to this morning’s open. That’s a significant underperformance against the S&P/ASX 200 Index (ASX: XJO) which is down 8.4% in 2020.

The ASX bank share is worth watching as investors take in the latest results.

More reading

• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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