MyState Finalizes Auswide Merger, Targets $25m Annual Cost Savings by FY27

Merger Completion and Strategic Impact

MyState Limited has officially completed its merger with Auswide Bank as of 19 February 2025, marking a significant milestone in its growth strategy. The combined entity now boasts a market capitalization of approximately $765 million and a shareholder base nearing 65,500. This merger substantially increases MyState's scale, capital base, and geographic footprint, particularly diversifying its home loan and deposit portfolio across Australia's eastern seaboard.

The transaction is expected to deliver pre-tax cost synergies ranging from $20 million to $25 million annually, with more than half of these savings anticipated within the first 18 months post-merger. These synergies primarily arise from governance and people efficiencies, technology consolidation, and other operational optimizations. Importantly, the merger is forecasted to be double-digit earnings accretive by FY26 on a post-synergies basis, signaling significant shareholder value creation.

Financial Performance and Operational Highlights

In the half-year ended 31 December 2024, MyState reported underlying earnings per share of 15.8 cents, slightly down 0.7% compared to the previous corresponding period, while statutory net profit after tax stood at $15.9 million, inclusive of $1.6 million in merger-related transaction costs. The bank demonstrated resilience with growth in new-to-bank customers up 32%, modest increases in home loan balances (+0.3%) and customer deposits (+2.2%), and a strong Net Promoter Score of +55, reflecting high customer advocacy.

Operating costs rose 5.8%, driven mainly by higher personnel and technology expenses, including investments in digital banking platforms and cyber risk initiatives. Despite inflationary pressures, cost management remained disciplined, with a group cost-to-income ratio of 68.5%. Net interest margin held steady at 1.45%, supported by a diversified funding mix and stable asset yields.

Capital Strength and Dividend Policy

MyState's capital position remains robust, with a total capital ratio improving by 60 basis points to 17.0% as of 31 December 2024. This strong capital base provides flexibility to support lending growth and strategic investments. The board declared an interim fully franked dividend of 10.5 cents per share, consistent with the company’s payout policy and reflecting confidence in the merged group's financial outlook.

Integration and Future Outlook

The integration process is planned over three years, with pre-tax integration costs estimated at $29 million, mostly incurred in the first two years. The phased approach focuses initially on simplifying operations and realizing immediate cost synergies, followed by transformational initiatives including core banking platform consolidation and embedding process efficiencies. The management team, led by CEO Brett Morgan, emphasizes a cultural integration plan and leveraging the strengths of both organisations to maximize value.

Looking ahead, the merged MyState aims to capitalize on its enhanced scale and diversified portfolio to navigate a challenging economic environment. The company’s prudent credit management, reflected in low arrears and stable provisioning, alongside digital enhancements and wealth management growth, positions it well for sustainable performance.