MyState Limited has delivered an upbeat earnings outlook for the current year after announcing plans to raise A$80 million in fresh capital from equity investors.
In a trading update filed to the ASX on Monday, the Tasmanian-based financial services group said its unaudited net earnings for the 10 months to the end of April were up 17 per cent on the corresponding period last year following strong loan growth and cost reductions that included six branch closures.
The company, which operates under the MyState Bank brand, posted a net profit of $30.2 million for the 10 months compared to $25.8 million for the same period last year.
Chief executive Melos Sulicich said the results update reflected the company’s focus on driving customer growth and investment in digital innovation.
"The momentum we have seen is expected to continue with many of the underlying drivers to remain for the full financial year," he said.
"Our digital transformation is delivering continuing improvement, further supporting our significant growth ambitions."
MyState shares were placed in trading halt before the market opened on Monday as the company began marketing an $80 million share issue to support a "significant acceleration" of its growth strategy.
The group's total regulatory capital ratio has tapered by 45 basis points to 12.79 per cent since the end of December as a result of the expanding loan book and the interim dividend payment.
Company chairman Miles Hampton indicated the capital raising would help underpin above-system loan growth in 2022, on the back of a home loan book that has increased by 43 per cent since 2016.
"MyState has built a modern, scalable technology platform, upgraded its systems and processes, and has established a high calibre and high performing team," he said.
"With the investments made in these areas we are targeting growth well ahead of system at reduced marginal cost, with the objective of creating significant incremental value for our shareholders."
Sulicich told Banking Day that MyState aimed to garner the majority of its next growth spurt by attracting customers in Melbourne, and Victoria more generally, through a "geographically concentrated" marketing push.
The aim is to attract enough retail deposits to fully fund increases to its mortgage book, which now sits at $5.3 billion.
The company is aiming to raise $60 million of the fresh capital through a one for 6.6 pro-rata non-renounceable entitlement offer to retail shareholders.
The entitlement offer will be priced at $4.30 - an 11.3 per cent discount to the last closing price of $4.85.
MyState is also tapping institutional investors for $20 million through a placement at the same price. Sulicich said he expected this offer to be finalised today (Tuesday 25 May).
The insto placement is fully underwritten by Merrill Lynch & Co Australia, a wealth management division of Bank of America. Merrill is also underwriting the entitlement offer to the tune of $30 million.
This puts MyState on track to boost its current issued capital by more than 20.2 per cent before the end of June.
(with additional reporting from Bernard Kellerman)