Bendigo and Adelaide Bank has announced plans to acquire the Australian unit of Bank of Cyprus Group for $130 million, according to local media reports.

Bank of Cyprus Australia caters mostly to the Greek and Cypriot communities in the region and has 14 branches in Victoria, New South Wales and South Australia. The bank records around $1.4 billion in assets under management. 

To prepare for the acquisition, Bendigo announced an equity raising that includes a $120 million fully-written placement that prices new shares at $8.45 each. The shares will be initially available to institutional investors; retail shareholders will be able to participate in a non-underwritten share placement plan in early 2012.

At the same time, the regional lender declared a $95 million writedown in goodwill associated with its wealth management unit, owing mostly to a contraction in its lending margins amid volatile markets. Bendigo was reportedly quick to clarify, however, that while this will affect its first-half bottomline profit, it will not impact on its regulatory capital levels or cash earnings. 

"We remain convinced that margin loans are appropriate products. The impairment testing required under current accounting standards is prescriptive of how this goodwill should be accounted for, thus the decision to announce a writedown. Ironically, this will provide a moderate boost to our ongoing return on equity," Mike Hurst, group managing director for Bendigo and Adelaide Bank, was quoted as saying.