Announcement PDF February 2016 Investor Presentation Agenda 1 2 3 Overview Melos Sulicich CEO & Managing Director Financial Results David Harradine Chief Financial Officer Outlook Melos Sulicich CEO & Managing Director The MyState Community Foundation is proud to support Second Bite, an organisation focused on improving the nutrition of Tasmanian students. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 2 Overview of 1H 2016 Financial Performance • Record 1H NPAT of $15.1m, up 1.5% on prior corresponding period (pcp). (1H NPAT growth of 4.1% on underlying pcp NPAT post divestment of Cuscal shares.) • Interim dividend 14.0 cps maintained. • 1H 2016 revenue of $61.3m, up 1.5% on pcp. • Settlements of $533m, up 32% on pcp. Loan book $3.8bn, 13.1% annualised growth 2.0x system. • Customer deposits increased to $2.7bn, 16.2% annualised growth. • NIM compressed by 6bp in 1H16 to 2.12%; margin pressure eased by 20bp loan book repricing late in 1H16. • Sound capital adequacy ratio at 13.0%. • Cost to income ratio 64%, down 50 bp on pcp; revenue growth outpaced cost growth, delivering positive JAWS. • Dividend Reinvestment Plan (DRP) activated with a 3% discount. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 3 Key performance metrics heading in the right direction *1H15 and prior periods include Cuscal dividends; 1H15 Cuscal dividends were $0.4 million. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 4 Applications maintained at higher levels Strong broker flows and retail focus. Settlement momentum continuing, with 1H 2016 settlements exceeding the pcp by 32%. Home loan book growing at 2x system.1 1. Source: APRA banking statistics December 2015. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 5 Delivering on our strategic goals GROW Growth in our revenue drivers SIMPLIFY Simplifying processes for third party and direct channels STRENGTH RELATIONSHIPS TRANSFORM Capital ratio and arrears levels maintained Better broker and customer engagement Transforming capability • • • • Record settlements, with growth achieved in both retail and broker channels. Record loan book size. Continued revenue growth in 1H 2016, with further upside into 2H 2016. Profit growth achieved in both banking and wealth divisions. • Deployed new loan origination system. • Product and process simplification to enhance customer experience. • Easy to sell, easy to buy, easy to administer. • Sound capital ratio at 13.0%, with inaugural MTN program successfully launched in August 2015. • Dividend reinvestment plan to support continued book growth. • Credit quality remains a cornerstone with BDD and arrears at continuing low levels. • S&P rating of BBB with a positive outlook. • Enhanced risk management capabilities. • Continued investment in third party channel relationships and systems to support growth and profitability. • Focus on the customer and local community. • • • • Considerable IT investment underway to simplify and modernise systems. Internet banking & mobile platforms underway. Investment in talent and systems to manage today and deliver the future. Significantly improved capacity with new leadership team, including new CRO started 1 December, new GM Wealth Management commences 22 February. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 6 Agenda 1 2 3 Overview Melos Sulicich CEO & Managing Director Financial Results David Harradine Chief Financial Officer Outlook Melos Sulicich CEO & Managing Director The MyState Australian Wooden Boat Festival celebrates Tasmania’s rich maritime history and $70 million wooden boat building industry. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 7 Strong revenue and NPAT performance… with further uplift expected in 2H 2016 * 2H 2015 underlying result excludes profit from sale of Cuscal shares and one-off restructuring costs. ** 1H 2015 NPAT includes $0.4 million in Cuscal dividends; if this was excluded from the 1H 2015 result, 1H 2016 NPAT growth would have been 4.1% on the pcp. 1H 2015 2H 2015* 1H 2016 Revenue ($m) 60.4 59.1 61.3 Net Profit after tax ($m) 14.9 ** 14.8 15.1 Net interest margin (%) 2.36 2.18 2.12 Cost-to-income ratio (%) 64.5 64.2 64.0 Capital adequacy ratio (%) 13.3 12.7 13.0 13.2 12.4 11.4 Earnings per share (cps) 17.0 17.0 17.3  Return on equity (%) 10.4 10.3 10.4 – – 14.0 14.5 14.0 – – 82 85 81 0.78 0.72 0.49 Common Equity Tier 1 ratio (%) Dividend – fully franked (cents) Dividend payout ratio (%) Credit performance – 30 day arrears (%) GROWTH – INVESTMENT – PERFORMANCE Change (v 1H 2015)         Change (v 2H 2015) 1.5% 1.5%..** -24bps 50bps -30bps -180bps 1.8%  3.7%  1.9%  -6bps  20bps    30bps -100bps   1% 29bps   MyState Limited Investor Presentation 1.8% 10bps 0.5cps 4% 23bps 8 Australian credit growth still healthy Credit growth in Australia remains sound. Since June 2015: • • • Credit growth across the Australian economy increased marginally driven by improvements in business and personal credit growth. Housing credit continues to grow at a rate of over 7%. Home loan Investor lending slowed to 8.5% from 11.0%, whilst owneroccupier lending has increased to 6.8% from 5.2% with competition in the market still fierce. Source: RBA Growth in Selected Financial Aggregates December 2015 GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 9 Continued improvement in the Tasmanian economy The Tasmanian economy continues to show improvement: • Unemployment rate at 6.6%. • Retail spending growth continues. • • • • Construction work remains strong. Population growth at 0.4%. Drought impacting agribusiness activity. Regional variations remain in economic performance. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 10 Sustainable dividend performance Key dividend considerations • Seek to maintain or increase nominal dividend whilst being alert to capital generation needs. • Maintain payment ratio that is sustainable in the long term. • Pay fully franked dividends given high franking credit surplus. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 11 Record 1H NPAT achieved through income growth Strong loan book growth and margin improvement underpinned revenue growth. Competition for both lending and deposits is intensifying. Revenue growth outpaced costs, delivering positive JAWS. • 1H earnings growth with momentum continuing. • Banking non-interest income remains challenging. • • • Strong loan growth has underpinned 1H 2016 Net Interest Income performance. Operating expenditure contained through focused cost management. Bad & doubtful debts steady on the prior corresponding period, with conservative management overlay offsetting the unwinding of provisions. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 12 Net Interest Margin NIM compression has eased subsequent to loan book repricing late in 1H 2016. Funding costs have improved but wholesale markets continue to experience some volatility. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 13 Growing sustainably is a strategic imperative 72% of home loan growth achieved from <80% LVR lending. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 14 Investor lending well below industry average… Competition for owneroccupied business has increased. Despite the competition, MyState has continued its above system growth, with housing loan growth at 2x system.1 1. Source - APRA banking statistics December 2015. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 15 Continued geographic diversification with Tasmanian concentration below 60% GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 16 Credit performance continues… Impairment charges 3bps of gross loans. Impairment charges continue to fall reflecting sound credit quality. Management overlay applied as a prudent measure as loan book continues to grow. With arrears still well below peers. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 17 A stable funding mix supported by growth in customer deposits MTN program provides further funding diversification and tenor. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 18 Wealth continues to deliver consistent, stable returns to the business Appointed new General Manager Wealth Management in February 2016. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 19 Tight operating cost management continues, with cost growth restricted to 0.85% on 1H 2015 Cost to income ratio improves by 50bps to 64.0% on pcp. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 20 Increased capital diversity through MTN issue… ...with a range of capital options to support continued lending growth. S&P review resulted in a reassessment of MyState’s prospects, with a BBB positive outlook and likely to move to BBB+ within 12 months. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 21 Dividend Reinvestment Plan Details • • • MyState has announced activation of the DRP for shareholders. • Shareholders will have until 3 March 2016 to elect whether they want to participate in the DRP. Allows existing MyState shareholders to invest further in MyState. DRP pricing will be based on a 3% discount to the volume weighted average price (VWAP) calculated over the 7 trading days between 7 March 2015 and 15 March 2015. How to participate? • • • Dividend Reinvestment Plan (DRP) election forms were recently sent to shareholders. Complete this form and return to Computershare. A DRP election can also be made online via the Computershare Investor Centre at www.computershare.com.au. If you have not received a DRP election form, or have any questions in relation to the DRP participation, contact Computershare on 1300 538 803. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 22 Indicative DRP Timetable Announcement of DRP activation 22 February 2016 Dividend Record date 02 March 2016 Ex dividend date 29 February 2016 Deadline for shareholder election to participate in the DRP DRP pricing period Dividend payment & DRP share issue date GROWTH – INVESTMENT – PERFORMANCE 03 March 2016 07 – 15 March 2016 24 March 2016 MyState Limited Investor Presentation 23 Agenda 1 2 3 Overview Melos Sulicich CEO & Managing Director Financial Results David Harradine Chief Financial Officer Outlook Melos Sulicich CEO & Managing Director The MyState Student Film Festival showcases young Tasmanian talent to Australia – and the world. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 24 Pending regulatory reform and industry developments International developments • • • Domestic developments • • • Implications for MyState GROWTH – INVESTMENT – PERFORMANCE Investor lending to attract higher risk weighting. Lower LVR lending to benefit. “Basel 4” – higher capital and mortgage risk weighting. Higher level of industry oversight by regulator. Regulatory changes favour regional and smaller banks. Industry wide repricing eases pressure on margins. • • Capital position remains strong. • Competition for owner occupied business to remain fierce. Levelling of competitive landscape to benefit MyState. MyState Limited Investor Presentation 25 The journey so far… What we’ve achieved: • Loan growth 2x system through improved sales culture. • New loan origination system. • Continued to manage costs well • Significantly improved leadership capability • Merged ADIs to provide efficiencies. • MTN program to diversify funding. What we’re currently working on: What’s to come: • Product • Potential M&A • Process • Enhanced rationalisation and aligned core systems. simplification. • Internet banking, mobile and digital platform upgrades. • Analytics and CRM improvements. opportunities with like-minded businesses. customer value propositions. • Group wide customer centric sales and service framework. • Implemented DRP Underpinned by Credit, Risk & Capital Management GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 26 Important notice and disclaimer The material in this presentation contains summary background information about the business of MyState Limited (MYS) as at the date of this presentation. The information contained in this presentation is in summary form and is not, and does not purport to be, complete. This presentation contains certain forward-looking statements including statements regarding MYS’ current belief, intent or expectations with respect to the financial condition and performance, results of operations, business plans and objectives of management, capital adequacy, risk management practices and specific or general provisions. Forward looking-statements may be identified by words such as “should”, “expect”, “estimate”, “likely”, “believe”, “ anticipate”, “planned” and similar expressions. All such forward-looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors many of which are outside the control of MYS which may cause the results or actual performance to be materially different from the future results or performance expressed or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on such forward-looking statements , which speak only as of the date of the presentation. No presentation or warranty is or will be made by any legal or natural persons in relation to the accuracy or completeness of all or part of this document, or any constituent or associated presentation, information or material (collectively, the Information), or the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, the information or any part of it. The information includes information derived from third party sources that has not been independently verified. To the full extent permitted by law, MYS disclaims any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions, any events occurring after the date of the presentation or any unexpected events or circumstances. Nothing contained in the presentation constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information and any action on the basis of the information. In particular, this presentation is not intended to be relied upon as advice to any person and does not take into account the financial situation, objectives or needs of any person. These matters should be considered and appropriate financial advice obtained, before making any investment decision in relation to MYS. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 27