Returns will be lower, says IMB board

The IMB board yesterday warned shareholders to expect lower returns as the group prepared itself for higher capital and liquidity requirements under Basel III. This saw the Wollongong-based building society cut its dividend.

With this cut to its dividend, IMB declared a final payout of 15 cents a share for the year to June, compared with 19 cents for the same period last year.

The building society reported yesterday that at June 30 its regulatory capital stood at 12 per cent, which is above current regulatory requirements.

Net profit of A$31 million contributed a 1.7 per cent increase in the capital ratio. However, dividend payments reduced the contribution by almost half.

"The residual increase was almost fully eroded by regulatory treatment of past securitised assets and by movements in risk weighted assets," the IMB board said in a statement. It added that capital levels would need to increase. The group has a $200 million commercial mortgage-backed securities issue on the market that will add one per cent to capital.

"The potential return for shareholders investing in banks has changed post-GFC. The reduced level of gearing required to operate banking businesses will result in lower returns on equity," the board said.

Net profit was up seven per cent on the previous year. The return on equity was 13 per cent.

The interest margin fell from an average of 2.11 per cent in 2009/10 to 2.05 in the year to June.

Loan approvals of $826 million were 14 percent higher than the previous year. The group's loan portfolio increased by 1.6 per cent to $4.2 billion.

The impairment loss was $3.6 million, unchanged from the previous year.