A Report of Finance


A lucrative business idea must consider some factors before a decision is made on whether to make an investment or avoid. For instance, business consultants often look at the market stability of specific ventures before they can advise clients on the expected outcomes in case an investment is made. Specific ventures may not be adequate in providing solid information to rely on when making an investment decision since other factors such as the general economic stability are also important. Other factors such as interest rates and competitiveness of the venture an investor targets are also very important. In developing this report, it is considered that the best interest of the client is prioritized in the sense the profit is the main desire. This paper will analyze some economic parameters in Australia that include the banking sector to determine the best bank to invest between Bank of Queensland or Bendigo and Adelaide Bank.

Australia’s Economy at a Glance

It is important to consider reviewing the Australia economy and understand the various trends that shape up this Asian economy. First, one would appreciate that the government main source of revenue is derived from the nominal income growth. According to Australian Government (2016), one of the most common trends in recent year is the fall of commodity prices that has contributed to increased concern as the Chinese economy continue to produce cheaper commodities.

In 2013, the Australian dollar recorded a gradual fall in value to record 16.2 percent decline compared to the USD and a massive 17.9 percent dollar compared to the Euro [ CITATION Hou13 l 1033 ]. The decline of the value can be traced back to the great global recession. However, it can also be acknowledged that many investors in the past have opted to invest in Australia branding the economy as a safe heaven. The increased investment has been linked to the support from the central bank to reduce the decline in the sovereign bond market. This makes the foreign investors experience increased risk tolerance, which implies that the Australian economy would be a good pick for any visionary investor.

The financial system in Australia

According to Porter (2014), the Australian Banking industry has recorded some critical issues that any investor would want to review before making a decision. Apparently, there have been some positive trends in the banking sector as far as asset performance is concerned. Asset performance in the banking industry has been consistent regarding growth. The same can be said the profitability linked to the growth of in asset performance. Many banks in Australia have managed to prove that they have high operational efficiencies, which is a good indicator for many investors. The operational efficiencies are evident when comparing the cost to income ratios of most banks. The banking industry seems to get much of the benefits from a unique situation termed as the wholesale fund, whose improvement is responsible for the reducing the competition in the deposit market.

As far as asset performance in Australia is concerned, it has been established that the asset performance is the primary indicator of the performance of the Banking sector in Australia [ CITATION Res14 l 1033 ]. The investors willing to invest in a Bank must pay keen attention to this area. The Australian banking sector has generally recorded positive results. In the Banking sector, it is of prime significance to consider the ration of the non-performing assets to that of the total loans. With a ratio of 1:1, it can be said that the banking sector is performing well. An investor must closely consider the non-performing assets as well as the total loans that bank has issued to its customers. One factor that have contributed to the reduced cases of impaired commercial property loans is the fact that there has been strong recovery from the property prices.

International exposure also presents a new dimension of viewing the Australian Banks and their performances. New Zealand is one of the economies where the Australian banks have ventured, and this increases the returns of the banks. It is a good indicator for the investors to invest in such a robust sector with enhanced transparency. The next step is to make a decision between two banks, Bank of Queensland or Bendigo and Adelaide Bank.

Bendigo and Adelaide Bank

The Bendigo and Adelaide Bank is one of the banks that one can undoubtedly consider making an investment. The bank recently recorded an after-tax profit of $423.9 in 2015, which was a 13.9 percent increase from the figures recorded in 2014. The figures indicate that the bank has made some positive steps, a situation that benefits all its shareholders. Some of the services that this bank used to make enhance the revenue are consumer lending, residential lending, and commercial lending. Most of its banking services are among the needed financial services to the Australian economy. Unlike most established, banks, Bendigo and Adelaide Bank has all its operations conducted in Australia.

As far as the returns in the main revenue balance sheet may have been high, Bendigo and Adelaide Bank significantly increased its wage bill. The total operating expenses went up by $66.9, which is a more advanced challenge regardless of the increased tax revenue [ CITATION Ben15 l 1033 ]. Comparing the increased operating expense of $66.9 million to that of the increased profit, $51.6 million, one would realize that the profit does not have sufficient numeric weight to solve the expense problem. It is, therefore, evident that the Bendigo and Adelaide Bank faces a challenge of managing its wage bill. The increase of staff was established as one of the major factors that resulted in the increased wage bill. An investor should find such figures worrying, thus weigh more options that are available.

In the same period, the Bendigo and Adelaide Bank recorded a positive figure regarding reducing the bad and doubtful debt from $81.9 million to $ 68.3 million. The bank has also recorded growth regarding customer deposit by 2.2 percent but also recorded a decline of wholesale deposit. One of the major ways that the company uses to solidify its financial base in 2015 was the option of selling shares to investors. Shares worth over $574 million were issued in 2015, and the bank intends to increase the selling of shares to the public.

Bank of Queensland

As in the case of the former Bank, Bank of Queensland also has figures on its side that would convince investors to buy shares. The recorded after statutory tax revenue was $318 million, which was an increase from of 22 percent from the year 2014 [ CITATION Ban15 l 1033 ]. Arguably, the positive results have been recorded after the acquisition of the company in 2014. Despite the changes in management, the bank still managed to maintain a 1.97 percent net interest margin. It has also been established from the bank’s annual report that the cost ad income ratio of the Bank of Queensland was 46 percent. The percentage of the ration is so alarming to investors given the fact that only a year has elapsed since the latest acquisition. One may have doubts about the stability of the bank. The bank has a large loan impairment amount of $74 million despite a 14 percent drop from the amount recorded in 2014. Currently, the bank is in the process of developing micro-policies that would help the bank cut down its debts. It is statistically true to admit that the financial shortages the bank faces from various fronts may take the time to shape up. For instance, assuming the impairment loan reduces at the same rate, the bank may take up to five years to reduce it to a reasonable amount. Despite the offer of 38 cents regarding dividends per share, the Bank of Queensland remains an option that requires an investor to think twice.

The investment choice

Enough evidence has been provided to confirm that the banking sector in Australia is performing well. It is an industry that any investor would love to venture but still ranks exist among the banks in the industry. Substantial information has been gathered concerning Bank of Queensland or Bendigo and Adelaide Bank. It is clear that the Bendigo and Adelaide Bank is more stable that the Bank of Queensland. The facts can be drawn from the statistical figures retrieved from the financial performance of the two banks across different fronts. For instance, the Bendigo and Adelaide Bank has a lesser value of the impaired loans compared to the Bank of Queensland. In addition, the cost income ratio for the case of Bank of Queensland is very high compared to that of the Bendigo and Adelaide Bank. It must also be noticed that the Bank of Queensland made a new acquisition in 2014, which still has to prove its stability. On the other hand, the Bendigo and Adelaide Bank has made several improvements, which might have increased their wage bill but will certainly contribute to the enhanced profits.


Opting to buy shares in the Australian banking industry can prove to be a lucrative business if a right decision is made. Only facts and figures can be used to ascertain if the option is potentially lucrative or risky in the long run. All financial and non-financial figures have established that Bendigo and Adelaide Bank is more safe that the Bank of Queensland. It is a recommendation that any lucrative investment is made in the Bendigo and Adelaide Bank that has proven to the stable and capable of yielding returns.


Australian Government. (2016). Why Australia?: Benchmark Report. Retrieved from Australian Trade Commission: https://www.austrade.gov.au/ArticleDocuments/3823/Australia-Benchmark-Report.pdf.aspx

Bank of Queensland. (2015). Bank of Queensland Annual Report. Retrieved from Annual Report.

Bendigo and Adelaide Bank Group. (2015). Bendigo and Adelaide Bank Group Annual Financial Report. Retrieved from Annual Financial Report.

Housing Industry Association. (2013). Decline of the Aussie Dollar: where to from here? Retrieved from Economics Group: https://hia.com.au/~/media/HIA%20Website/Files/IndustryBusiness/Economic/research/Decline%20of%20the%20Aussie%20Dollar%202013.ashx

Porter, R. (2014). 2014 Banking Industry Outlook Repositioning for growth Agility in a re-regulated world. Retrieved from Deloitte Australia: http://www2.deloitte.com/content/dam/Deloitte/au/Documents/financial-services/deloitte-au-fs-2014-banking-industry-outlook-0214.pdf

Reserve Bank of Australia. (2014). Financial Stability Review. Retrieved from Reserve Bank of Australia: http://www.rba.gov.au/publications/fsr/2014/sep/pdf/0914.pdf