Bendigo Bank: Reverting Higher

On March 16th, the ALGO engine flagged a buy sign for Bendigo Bank (BEN) at, or near, the $11.00 level.

BEN shares have reached $11.68 in early trade today.

Looking from a broader perspective, we believe the chart reflects a mean-reversion pattern, as opposed to the beginning a protracted trend higher.

On January 12th, BEN posted a high of $13.40 before reversing lower. On March 24th, BEN traded as low as $11.20 and then began to move higher.

Taking into account the high valuation of the domestic banking sector, we would expect the upside in the current move to be capped at or near  $12.30, which is the 50% reversion level of the move from $13.40 to $11.20.

Prudent money management on this trade would be to work a sell stop at last week’s low of $11.20.


Bendigo Bank

Bendigo Bank announced that they will keep its dividend steady at 34 cents per share, but a rise in bad and doubtful debts has pressured the stock 4% lower at the open of trade.

The bank posted a net profit of $209 million , up 0.1% from the previous period, and cash earnings were up 0.4% to $224.7 million. These results were pretty much inline with expectations.

However, after the bank reported bad and doubtful debts increased by $16.3 million to $39.8 million, the share price broke down through the recent support level at $12.25.

We believe that increased bad debts and loan provisions may be a recurring theme in the banking sector and limit share price appreciation across the big four banks.

Chart – BEN