Banking and funds management group MyState Limited has generated a record first half result for 2021/22.
In an ASX announcement last Friday, MyState reported 18.8 per cent growth in core earnings to A$26.4 million (1H20: $22.2 million) and an increase of 12.6 per cent in net after-tax profit to $17.0 million (1H20: $15.1m).
MyState's half-year results also disclosed that over 14,500 new customers joined the bank in the 2020 calendar year, boosting deposits by 5.1 per cent. This allowed the bank to increase lending by 5.5 per cent, with home loans up by 6.2 per cent on last year (or 1.7 times system).
Other highlights from MyState's ASX announcement and its investor presentation:
• net interest margin increased from 1.82 per cent (1H20) to 1.94 per cent;
• cost to income ratio dropped by 3.4 per cent for 61.5 per cent, on the back of strong revenue growth;
• at 15 February 2021, less than 200 customers remained on some form of COVID related assistance, representing about 1.6 per cent of total home loan balances, down from a peak of 10.9 per cent in June 2020;
• net funds under management in the TPT Wealth business arm of the group grew 3.2 per cent for the first half, to a total of $1.1 billion as at 31 December 2020, although operating income was down 6.8 per cent on 2H20, due to lower trustee fee and fund management revenue.
The company said its result was underpinned by above system lending growth, continued efficiency gains, benefits emerging from technology investments and further improvements in the cost of funding.
Falling cost of funding – for example a sharp increase boost in low-paying customer deposits, and a 0.25 per cent Reserve Bank term funding facility – also contributed.
Melos Sulicich, MyState's managing director and chief executive officer, attributed the result largely to the company's aggressive marketing and successful use of digital technology.
"Our decision to increase the momentum of our evolution into a digital bank and funds management business is paying off," he stated to the ASX on Friday.
He went into more detail afterwards in an interview with Banking Day.
"We have a 72 per cent deposit to loan ratio, which is the highest we've ever been. This is because we've digitised the business, digitised the front end, digitised the back end and we've taken the savings out of that and reinvested them in into marketing," Sulicich said.
This equated to a 15 per cent boost to the bank's marketing spend of $400,000 for the six months to 31 December 2020 over 1H19.
In particular, MyState made a heavy push into Melbourne through what Sulicich said was "an entirely integrated above the line campaign spending", through "some very cost-effective advertising deals – TV spots, tram wraps, outdoor furniture ads at tram stations and train stations and radio ads."
"We've grown the number of customers, and with those customers comes an increase in deposits – so when we talk about customer growth, it is all about deposit growth," Sulicich said.
MyState, flush with cash from customer deposits, with a $109 million low cost wholesale funding term funding facility from the RBA locked in at 0.25 per cent, and another $79 million to come in at 0.1 per cent, is looking to pick up a swathe of disaffected customers from rival banks large and small.
Sulicich said his bank intended to take advantage of the "air that's been disturbed in the market" by neobanks "not getting started and ending quickly". That is, where neobanks created demand among customers for a fully digital bank, then folded, MyState is preparing to step in and pick up those disappointed customers.
He also said that "potentially some other medium-size regional banks ending up under ownership somewhere else" will "disturb" yet more customers.