Bendigo Bank's $290m Southern Finances offer

THE Bendigo and Adelaide Bank has signalled it will buy the bulk of Southern Finance’s assets for about $290 million.

The bank said it had entered into a non-binding heads of agreement to acquire the “loan book, certain investments, equipment finance assets and financial planning business of Southern Finance Group Limited ... totalling approximately $290 million”. 

That figure is the same value that Southern’s general manager Ashley King placed on his company’s assets on Monday.

A Bendigo Bank spokeswoman said its purchase plan did not involve buying the whole company, only the assets listed in the agreement.

“We would be looking to incorporate that (the assets listed) as part of our business,” the spokeswoman said.

The bank said the proposed sale would give it the opportunity to increase its support in western Victoria and south-east South Australia where Southern Finance operated.

Southern has branches at Warrnambool, Hamilton, Casterton, Ballarat, Geelong and Mount Gambier while Bendigo has more than 35 branches, including 15 community banks in the region.

Mr King declined to comment on Monday on whether the proposed sale would lead to redundancies among Southern’s 37 staff, saying no plans had been made at this stage. 

A Bendigo Bank spokeswoman said details on the future operations of the branches were still to be worked through. 

Professor of accounting at Deakin University’s Warrnambool campus, Graeme Wines, said if the entire Southern business was bought by Bendigo Bank it could be assumed that all of Southern’s present staff would not be needed.

Professor Wines said the move to sell Southern appeared to have been caused by a run of redemptions of funds by investors following Banksia’s collapse.

“Depositors are very nervous about debenture structures,” he said.

Professor Wines said Banksia’s collapse had made it very obvious that some non-bank debenture issuers were not following the guidelines set by the Australian Securities and Investments Commission (ASIC) about having adequate equity ratios to protect against bad loans.

ASIC had not done anything about non-compliance, which meant “it could be argued the guidelines were not worth the paper they were written on”, he said.

Southern Finance’s equity ratio at March 31 this year was 1.99 per cent — well below the 20 per cent recommended by ASIC when more than 10 per cent of the debenture funds were invested in property development.

Bendigo Bank’s proposed purchase of Southern Financial Group’s financial planning business in particular aligns with the bank’s plan to double the size of its wealth management business over the next three years.

Bendigo Bank’s wealth creation division — Bendigo Wealth, which offers financial planning — is on a three-year plan to lift its present $4.5 billion in funds under management and advice to about $10 billion.

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