Announcement PDF August 2015 Investor Presentation MyState is proud to continue its principal sponsorship of the Australian Wooden Boat festival, estimated to have contributed $80 million to the Tasmanian economy in 2015. Agenda 1 Overview Melos Sulicich CEO & Managing Director 2 Financial Results David Harradine Chief Financial Officer 3 Outlook Melos Sulicich CEO & Managing Director The Rock proudly supports the CQ NRL bid. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 2 Overview of FY2015 Financial Performance • • • • • Statutory NPAT $32.5m, up 10% on prior year. Underlying NPAT $29.7m, up 0.3% on prior year. Underlying revenue $119.5m, up 0.2% on prior year. Record settlements $1bn, up 75% on prior year. Loan book $3.6bn, up 16.3% on prior year and growth of 2.3x system. • Capital adequacy ratio 12.7%, further enhanced through issue of $25 million Tier 2 notes post year-end. • Underlying cost-to-income ratio down 10bps to 64.4%. • Final dividend 14.5 cps steady on prior year. • Full year dividend 28.5 cps steady on prior year. Dividend payout ratio of 77%. A sound underlying result which positions the Group well for the future. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 3 Continued focus on strategic priorities GROW SIMPLIFY Growth in our revenue drivers • Record settlements – up 75% on prior year. Simplifying processes for third party and direct channels • Enhanced systems will further improve service and turnaround times. • Restored loan book growth of 16.3% (at 2.3x system). • Product simplification and rationalisation is continuing. • Easy to sell, easy to buy, easy to administer. STRENGTH RELATIONSHIPS Capital ratio and arrears levels maintained • Sound capital ratio at 12.7%, further enhanced through issue of $25M Tier 2 notes post year-end. Better broker and customer engagement • Continued investment in third party channel relationships and systems to support growth and profitability. • Credit quality remains a cornerstone with BDD and arrears at continuing low levels. • Renewed focus on the customer, with engagement improving from already high levels. TRANSFORM Transforming capability • A new, experienced, and capable executive team. • Technology transformation underway. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 4 Loan book growth accelerated through the year Settlements reach $1bn for the first time in the Group’s history Continued acceleration in settlements with 2H 2015 ~50% above 1H 2015 FY15 settlements grew at 75% above prior year GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 5 Agenda 1 Overview Melos Sulicich CEO & Managing Director 2 Financial Results David Harradine Chief Financial Officer 3 Outlook Melos Sulicich CEO & Managing Director MyState and Tasmanian Perpetual Trustees partnered to showcase the very best in local Tasmanian produce at 2015’s Agfest. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 6 Revenue increases despite competition and RBA rate cuts Underlying earnings maintained 2014 2015 (Statutory) 2015 (Underlying) Revenue ($m) 119.3 125.1 119.5  0.2% Earnings ($m) 29.6 32.5 29.7  0.3% Net interest margin (%) 2.43 2.28 2.28  -15bps Cost-to-income ratio (%) 64.5 62.7 64.3  -20bps Capital adequacy ratio (%) 13.8 12.7 12.7  -110bps Earnings per share (cps) 33.9 37.3 34.1  0.6% Return on equity (%) 10.5 11.2 10.3  -20bps Final dividend – fully franked (cents) 14.5 14.5 14.5 – – Total dividends – fully franked (cents) 28.5 28.5 28.5 – – Dividend payout ratio (%) 84 77 84 – – Credit performance – >30 day arrears (%) 0.75 0.72 0.72  GROWTH – INVESTMENT – PERFORMANCE Change (Underlying v 2014) MyState Limited Investor Presentation -3bps 7 Reconciliation of underlying earnings with statutory profit Underlying earnings after tax Profit on sale of Cuscal shares 1 1. Cuscal share sale - Sale of non-strategic asset to support growth and reinvestment 2. Restructuring costs – Recruitment, termination and related costs to invest in new, experienced and capable Executive Leadership Team and selected positions. FY 2015 FY 2014 $29.7m $29.6m $3.9m – Restructuring costs 2 ($1.1m) – Statutory profit after tax $32.5m $29.6m GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 8 Economic conditions continue to improve in Tasmania The Tasmanian economy continues to improve: • Business confidence high, with private investment spending posting solid gains during the financial year after a period of weakness. • The major project pipeline is healthy and conditions are favourable. • Household consumption has continued to record strong improvements and dwelling approvals posted strong gains through FY15. • The labour market recorded further improvement in FY15 and this is expected to continue. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 9 Mixed economic conditions in Queensland The Queensland economy is mixed: • Falling mining investment representing a challenge. • Major areas are benefitting from an increase in dwelling approvals. • The labour market remains soft. • Low interest rates and a lower Australian dollar are providing some support, and improvement is broadly expected in the short to medium term. • No signs of stress in The Rock loan book. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 10 Sound underlying result and building for FY16 Revenue improves despite competitive intensity and NIM compression Lending book velocity to underpin future growth and profitability • Earnings stable, laying the foundations for FY16 earnings growth. • RBA rate cuts and loan book growth presented hurdles to net interest income. • Pleasing performance in Banking and Wealth non-interest income. • Operating expenditure contained through focused cost management. • Bad & doubtful debts benefitting from sound credit quality and conditions. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 11 Net Interest Margin Competition, RBA rate cuts and business growth impacting margin Targeted asset repricing to ease NIM pressure Funding costs expected to continue to ease in FY16 GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 12 A targeted strategy and commitment to execution deliver record organic growth Housing loan growth at 2.5x system GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 13 Product and pricing strategy successful in attracting quality lending business GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 14 Sound loan book growth with investor loans below APRA ADI average Investor loans comprise 13% of the loan book …well below the APRA ADI average of 35% 1 1. APRA banking statistics June 2015. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 15 Diversified funding base supports loan growth Successful RMBS transaction completed in 1H 2015 provides further support for growth 1. APRA banking statistics June 2015. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 16 2H 2015 acceleration of retail deposits increases share of system growth Source: APRA Banking Statistics June-15 (MYS = MSB + ROK) GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 17 Delivering on our strategy to further diversify the loan book and achieve lower geographic concentration GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 18 Wealth continues to deliver consistent, stable returns to the business GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 19 Tight operating cost management continues • Cost to income ratio (underlying earnings) improves by 20bps to 64.3% GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 20 Strong credit quality and conditions reflected in the continued decline in bad and doubtful debts GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 21 Strong asset growth contributed to a decline in the Group’s capital ratio 13.94% • Capital further enhanced through $25 million Tier 2 medium term notes issue post balance date. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 22 Agenda 1 Overview Melos Sulicich CEO & Managing Director 2 Financial Results David Harradine Chief Financial Officer 3 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 23 Employee Connectivity and Customer Engagement both increase 2014 2015 Analysis of the Employee Connectivity Survey points to the following factors: • • • Customer Engagement strength driven by: • Improvement in new customers’ experience of on-boarding Strong internal communications • Culture building centred on ‘The MyState Way’ Continued strong customer service experienced across all channels • Reduction in reported errors New leadership and company direction • Staff benefits and rewards and recognition programs • Employee/community recognition GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 24 Pending Regulatory Reform Regulatory Developments Implications for MyState GROWTH – INVESTMENT – PERFORMANCE • Higher capital and mortgage risk weighting • Potential for federal government deposit tax (Financial Claims Scheme) • MYS Tier 1 capital position remains well above industry average • Levelling of competitive landscape between major banks and smaller ADIs • Changing competitive landscape in mortgage pricing MyState Limited Investor Presentation 25 Sustained growth… Foundations for sustained growth …targeted, transformative investment …leading to enhanced performance • • • • • Clear vision, strategy and commitment to execution Restored third party relationships and systems and sales culture Record settlements and loan book growth Capital and credit quality as a cornerstone of sustainable growth M&A pipeline (core, aligned, adjacent businesses) Targeted transformative investment • • • • • • New, experienced and capable leadership team Merged ADIs and aligned core systems Enhanced digital, online, internet, mobile and back-office capability Digitising and streamlining back-off functions Product rationalisation and alignment Analytics and CRM for improved customer service and profitability Enhanced performance • • • • Further improved sales culture and customer focus Contributing to our local communities A connected, committed and diversified workforce Momentum delivering enhanced profitability and performance 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-statement s 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 an y investment decision in relation to MYS. GROWTH – INVESTMENT – PERFORMANCE MyState Limited Investor Presentation 27