IMB Bank has reported a significant fall in profit, due in part to additional loan loss provisioning, and has warned investors to expect more of the same in the current financial year.

IMB’s net profit was A$26.3 million – down 17 per cent compared with the prior year. While net interest income rose 3.8 per cent to $129.7 million, the impairment expense rose from $1.5 million to $5.2 million.

Fee and commission income was down and expenses rose from $91.6 million to $100.6 million. The net interest margin was 2.09 per cent.

Deposits grew 11.5 per cent to $5.9 billion. The lending book grew 10.2 per cent to $5.4 billion. However, excluding the impact of a merger the loan portfolio grew 3.9 per cent.

In May, IMB and Hunter United Employees Credit Union completed their merger. Hunter United has 9000 members and $355 million of assets. The combined group will have 207,000 members, $6.3 billion of assets, 53 branches and more than 600 employees.

At the peak of the pandemic, 4.8 per cent of the bank’s loan portfolio was receiving some form of hardship assistance. After a three-month review 44 per cent of residential borrowers who had received some form of loan repayment deferral returned to normal repayment arrangements.

The financial report said: “However, we are cognisant that the current economic conditions will prevail for some time. This means a significant level of loan provisioning is expected to be carried in the 2010/21 year, which will constrain our ability to significantly lift profit above the 2019/20 result.”

The growth in expenses was due to accelerated implementation of a digital strategy and merger costs.

IMB sold its financial planning business, Bridges Financial Services. The deal was completed in April and all IMB Financial Planning clients were moved across to Bridges. IMB will use Bridges as a referral partner.