Bendigo and Adelaide Bank (ASX:BEN)
is on track to grow its margin lending book after inking a deal with ANZ investment lending portfolio to buy Leveraged Equities.
The portfolio value is worth around $715 million and has 11,900 customer facilities which is expected to lift Bendigo's margin lending portfolio to more than $2 billion.
The forecasted value is earmarked for July next year when the deal is set to be complete.
Given the relatively small size of the acquisition, it will be funded through the ordinary course of business operations. The acquisition of the portfolio is aligned with the Bank's objective of growing its return-on-equity and will be earnings accretive upon completion.
Margin lending allows an investor to borrow cash to hold a larger position in a stock by using their own funds or existing shares as security. The use of debt to fund trades can amplify returns, however, on the flipside, it can magnify losses if the share price falls, leading to investors to receive a margin call. This means that it could force further selling and drag the share price lower.
The move comes after the banking sector has been assessed by analysts around the impact of rising interest rates. In the short term, Australian banks are set to be beneficiaries of rising interest rates, but looking longer-term, concerns of lower credit growth and impairment charges are likely to weigh.
Shares closed at $9.27 yesterday.