A statement to the ASX says Rural Bank products will continue to be distributed through both the Elders and Bendigo Bank branch networks.

The purchase costs amount to about $34 million. The other 40pc will be retained by Elders Limited.

The group managing director of Bendigo and Adelaide Bank (BEN), Rob Hunt, said today’s announcement was a further indication of BEN’s commitment to providing a real alternative banking option – particularly in rural and regional Australia.

“We look forward to further developing what is already an award-winning banking alternative,” Mr Hunt said.

"The name change will allow Rural Bank to explore additional distribution arrangements throughout rural Australia, adding substantial growth prospects to a business which is already performing very strongly.

"And the bank will continue its strong relationship with Elders Limited, to further build and develop the unique and valued position that both enjoy within rural Australia.”

BEN’s purchase was funded through existing liquidity, and total capital will remain broadly unchanged.

The purchase is also expected to be earnings per share accretive for BEN.

“Bendigo and Adelaide Bank has a conservative balance sheet and capital structure, and we will continue to explore opportunities that present themselves in this market,” Mr Hunt said.

“We see an increase in our commitment to Elders Rural Bank as sending a strong positive message to our existing and potential customers.”

ERB’s net profit after tax for the six months to December 31, 2008 was $22.4 million.

Loans under management at this time were $3.7 billion.

Deposits were $4.0 billion, with more than 90pc of these, retail deposits.

ERB’s ratio of net non-performing loans to gross loans under management improved to 0.35pc (from 0.36pc) for the period.

The transaction is subject to regulatory approval.