MyState Reports 1.6% Revenue Rise, 8.9% Profit Fall; Declares 10.5c Dividend

Financial Performance Overview

MyState Limited has released its half-year results for the period ending 31 December 2024, revealing a nuanced financial picture. Revenue from operations edged up by 1.6% to $76.996 million, reflecting steady income streams amid a competitive banking environment. However, statutory net profit after tax declined by 8.9% to $15.919 million, impacted primarily by merger-related transaction costs of $1.6 million and inflationary pressures on operating expenses.

Underlying net profit after tax, which excludes these merger costs, remained flat at $17.48 million, underscoring the resilience of MyState's core operations despite a challenging macroeconomic backdrop. The company’s return on equity (ROE) slipped to 6.9% from 7.7% in the prior corresponding period, while the cost-to-income ratio rose to 68.5%, signaling ongoing cost management challenges.

Loan Portfolio and Asset Quality

The total loan book held steady at approximately $8 billion, with a focus on low-risk, owner-occupied lending. MyState’s conservative loan-to-valuation ratio (LVR) profile, with most loans below 80% LVR, and limited exposure to interest-only and investor loans, continues to underpin asset quality. Despite a slight uptick in 30- and 90-day arrears linked to rising interest rates, these remain below industry benchmarks, and actual loan losses were negligible.

Net interest margin (NIM) remained stable at 1.45%, supported by a larger average balance sheet, though competitive pressures and higher funding costs persist. The funding mix improved with increased retail and third-party term deposits, reflecting customer preference shifts amid a competitive deposit market.

Wealth Management and Non-Interest Income

TPT Wealth, MyState’s wealth management arm, reported a 6.1% increase in income driven by trustee and investment services, despite a slight decline in funds under management. Non-interest income from banking activities was largely flat, with minor decreases in transaction and loan fees.

Capital Position and Dividend

MyState remains well capitalised, with its Common Equity Tier 1 (CET1) ratio rising to 12.58% and total capital ratio to 17.02%, supported by organic capital generation and securitisation activities. The Board declared a fully franked interim dividend of 10.5 cents per share, consistent with the prior year’s interim payout, reflecting confidence in the company’s cash flow and capital management.

Strategic Outlook: Auswide Bank Merger

A major highlight is the imminent completion of MyState Bank’s acquisition of Auswide Bank Limited, scheduled for 19 February 2025. This merger is poised to create a larger, more diversified banking group with enhanced scale advantages. Pro forma ownership will see existing MyState shareholders holding 65.8% of the combined entity. The integration is expected to be earnings accretive from FY26 on a post-synergies basis, signaling a strategic growth trajectory.

The new Board will expand to eight members, including three directors from Auswide, with Sandra Birkensleigh appointed Chair and Brett Morgan continuing as Managing Director and CEO. This leadership continuity alongside fresh perspectives aims to steer the combined group through integration and growth phases.

Navigating Challenges and Opportunities

MyState’s results reflect a balancing act between managing inflationary cost pressures and investing in strategic initiatives such as digital banking enhancements and cyber risk mitigation. The company’s customer net promoter score of +55 underscores strong customer advocacy despite sector-wide challenges.

Looking ahead, the successful merger execution and integration will be critical to unlocking value and improving profitability. Meanwhile, maintaining asset quality and navigating competitive pressures in lending and deposits remain key operational priorities.