KEY POINTS
Aggregation Segment Continues to Drive Loan Book Growth: The Aggregation segment
experienced strong settlement and loan book growth in the December quarter. Loan
settlements were at the highest quarterly levels to date of $5.3 billion, seeing the loan
book close above $50 billion. A key driver of loan growth in the Aggregation segment is
the increased number of loan writers, which has grown at a faster rate than we forecast.
At 31 December 2020, the Aggregation segment had a network of 1,910 loan writers. This
represents growth of 9.8% in 1H’FY21. In addition to this, the average size of the settlement
per broker has increased in 1H’FY21.
The Company’s total loan book grew 5.2% over the December quarter to $52.6 billion. On
the back of buoyant lending conditions, we are forecasting the total loan book to grow to
$57.3 billion in FY21.
Banking Segment Sees Strong Settlement Demand: The Banking segment recommenced
on-balance sheet lending in the December quarter with strong settlements of $35.7 million.
The loan book closed above $300 million at December-end, up 8.9% over the quarter and up
14.4% Year-on-Year (YoY). The bank is well positioned to continue to grow the loan book with
solid growth in the deposit base and the Tier 2 subordinated note issue.
Funding Mix Continues to Improve: The funding mix of deposits continued to improve
in the December quarter with transaction accounts increasing 50.4% to $245.6 million.
Transaction accounts now account for 65% of the deposit mix. Transaction accounts drove
the growth in the deposit base with the bank having deposits of $391.3 million at Decemberend.
This is an increase of 20.5% increase Quarter-on-Quarter (QoQ) and a 13.2% increase
for the 1H’FY21.
$8.75m Raised Through a Subordinated Note Issue: In February 2021,the company
completed a Tier 2 subordinated note issue raising $8.75 million. The notes were issued
to sophisticated and wholesale investors and have a maturity date 10 years from the
settlement date with a call date 5 years from the settlement date. The notes will pay interest
on a quarterly basis at a floating rate of 90 day BBSW + 5.40% p.a. At the current 90 day
BBSW of 0.015%,the interest payment would equal 5.415% p.a. The capital raised from
the subordinated notes puts the Company in a strong capital position from a regulatory
perspective.
Price Target: We have upgraded our price target from $1.12 to $1.19 per share. This
represents a 63% premium to the share price of $0.73 at 22 February 2021. The upgrade
is driven by two key factors: (1) Faster than expected growth in the Aggregation segment
in 1H’FY21 has offset a reduction in forecast net interest income due to a reduction in
forecast settlements in the Wholesale segment and declining interest rates; and (2) We have
amended the price target calculation to be based on normalised earnings to better reflect the
value of the continuing operations of the Company.
19 May 2021
BNK Banking Corporation Limited (ASX: BBC)
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BNK Banking Corporation Limited (ASX: BBC)
BNK Banking Corporation Limited (BBC:ASX) | 0 0 0.0%
- Published:
19 May 2021 -
Author:
Independent Research -
Pages:
8
KEY POINTS
Aggregation Segment Continues to Drive Loan Book Growth: The Aggregation segment
experienced strong settlement and loan book growth in the December quarter. Loan
settlements were at the highest quarterly levels to date of $5.3 billion, seeing the loan
book close above $50 billion. A key driver of loan growth in the Aggregation segment is
the increased number of loan writers, which has grown at a faster rate than we forecast.
At 31 December 2020, the Aggregation segment had a network of 1,910 loan writers. This
represents growth of 9.8% in 1H’FY21. In addition to this, the average size of the settlement
per broker has increased in 1H’FY21.
The Company’s total loan book grew 5.2% over the December quarter to $52.6 billion. On
the back of buoyant lending conditions, we are forecasting the total loan book to grow to
$57.3 billion in FY21.
Banking Segment Sees Strong Settlement Demand: The Banking segment recommenced
on-balance sheet lending in the December quarter with strong settlements of $35.7 million.
The loan book closed above $300 million at December-end, up 8.9% over the quarter and up
14.4% Year-on-Year (YoY). The bank is well positioned to continue to grow the loan book with
solid growth in the deposit base and the Tier 2 subordinated note issue.
Funding Mix Continues to Improve: The funding mix of deposits continued to improve
in the December quarter with transaction accounts increasing 50.4% to $245.6 million.
Transaction accounts now account for 65% of the deposit mix. Transaction accounts drove
the growth in the deposit base with the bank having deposits of $391.3 million at Decemberend.
This is an increase of 20.5% increase Quarter-on-Quarter (QoQ) and a 13.2% increase
for the 1H’FY21.
$8.75m Raised Through a Subordinated Note Issue: In February 2021,the company
completed a Tier 2 subordinated note issue raising $8.75 million. The notes were issued
to sophisticated and wholesale investors and have a maturity date 10 years from the
settlement date with a call date 5 years from the settlement date. The notes will pay interest
on a quarterly basis at a floating rate of 90 day BBSW + 5.40% p.a. At the current 90 day
BBSW of 0.015%,the interest payment would equal 5.415% p.a. The capital raised from
the subordinated notes puts the Company in a strong capital position from a regulatory
perspective.
Price Target: We have upgraded our price target from $1.12 to $1.19 per share. This
represents a 63% premium to the share price of $0.73 at 22 February 2021. The upgrade
is driven by two key factors: (1) Faster than expected growth in the Aggregation segment
in 1H’FY21 has offset a reduction in forecast net interest income due to a reduction in
forecast settlements in the Wholesale segment and declining interest rates; and (2) We have
amended the price target calculation to be based on normalised earnings to better reflect the
value of the continuing operations of the Company.