Announcement PDF ASX Code: MYS MyState Limited A Growing Banking & Wealth Management Group Melos Sulicich Managing Director & CEO David Harradine Chief Financial Officer November 2015 AGENDA 1. MyState Overview 2. Financial Position and Performance 3. A Strong Platform for Growth and Transformation MyState Limited Presentation 2 MyState Overview MyState Limited Presentation 3 Evolution of the MyState Group MyState Limited Presentation 4 Our core businesses Banking Business The Rock (Queensland) 7 branches 14 mini branches MyState Bank (Tasmania) 10 branches Principal Activities Banking Services • • • • • • MyState Limited Presentation Transactional and internet banking Insurance and other alliances Savings and investments Business banking Agribusiness Personal, residential and business lending Wealth Business Trustee Services • • • • Estate planning Estate and trust administration Power of attorney Corporate and custodial trustee Tasmanian Perpetual Trustees 4 branches Wealth Management • • • • • Financial Planning Managed fund investments Portfolio administration services Portfolio advisory services Private client services 5 FY2015 results A sound underlying result which positions the Group well for the future MyState Limited Presentation 2014 2015 (Statutory) 2015 (Underlying) Change (Underlying v 2014) Revenue ($m) 119.3 125.1 119.5  0.2% Net profit after tax ($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 Total dividends – fully franked (cents) 28.5 28.5 28.5 – – • Statutory earnings include $3.9 million profit from sale of non‐strategic asset, Cuscal shares, to support growth and re‐investment; less $1.1 million restructuring and related costs • Capital further enhanced post year‐end through $25 million Tier 2 medium term notes issue, which if excluded at 30 June would have resulted in a capital ratio of 13.98% 6 Loan book growth accelerated through the year Settlements reached $1b 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 Sound loan book growth; investor loans 13%, well below APRA ADI average of 35% 1Q 2016 loan book momentum well above system growth MyState Limited Presentation 7 2H 2015 acceleration of retail deposits increased share of system growth 1Q 2016 deposit growth exceeds system growth MyState Limited Presentation 8 Continued focus on strategic priorities Stronger executive team with wealth of talent and experience 9 Financial Position and Performance MyState Limited 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 MyState Limited Presentation • 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. 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 MyState Limited Presentation 12 Tight operating cost management continues • MyState Limited Presentation Cost to income ratio (underlying earnings) improves by 20bps to 64.3% 13 Strong asset growth contributed to a decline in the Group’s capital ratio • MyState Limited Presentation Capital further enhanced through $25M Tier 2 medium term notes issue post balance date. 14 Product and pricing strategy successful in attracting quality lending business Sound LVR levels maintained year on year with declining >90% LVR Sound loan book growth with investor loans below APRA ADI average MyState Limited Presentation 15 Delivering on our strategy to further diversify the loan book and achieve lower geographic concentration June 2014 home loan book $2,837.7M June 2015 home loan book $3,310.3M Increasing diversification through growing mainland home loan book MyState Limited Presentation 16 Strong credit quality and conditions reflected in continued decline in bad and doubtful debts No signs of stress in loan book MyState Limited Presentation 17 Diversified funding base supports loan growth Customer deposit growth driven by focus on retail banking basics and continues into FY16 Successful RMBS transaction completed in 1H 2015 provides further support for growth MyState Limited Presentation 18 Wealth continues to deliver consistent, stable returns to the business MyState Limited Presentation 19 Economic conditions continue to improve in Tasmania The Tasmanian economy continues to improve: • Business confidence high, with private investment spending posting solid gains during the financial year after a period of weakness • The private investment pipeline is strong and dwelling approvals also performed exceptionally well • The labour market continues to improve Australian economic growth remains subdued but confidence returning: • • • • • MyState Limited Presentation The economy is adjusting to the decline in resources investment and commodity price weaknesses A lower AUD has supported a rebalancing of the economy with a lift in inbound tourism and export orientated sectors Recent improvements in job advertisements and labour market conditions has seen gains in consumer‐related and business services sectors offsetting contractions in mining and resources Business confidence has proven to be more robust Housing outlook remains positive with some contraction in credit growth foreshadowed in the coming years 20 Group 40.0 Performance Statutory NPAT ($ millions) Statutory earnings per share (cents) 32.5 28.5 22.0 29.6 29.9 32.7 33.9 2013 2014 20 0.0 2011 2012 2013 2014 2015 Underlying cost to income ratio (%) 70 69 68 67 66 65 64 63 62 0 15 68.7 2011 2012 2015 Return on average equity (%) 10.9 9.7 10 66.7 10.4 10.5 2013 2014 11.2 65.7 2011 MyState Limited Presentation 37.3 32.7 23.4 20.0 Stable, consistent earnings performance and returns 40 2012 2013 64.5 64.3 2014 2015 5 0 2011 2012 2015 21 Dividend Performance Dividends (cents per share) Dividend Yield (%) 6.65 6.6 6.6 30.0 6.6 28.0 28.0 28.5 28.5 14.0 14.0 14.5 14.0 14.0 14.0 14.0 14.5 FY12 FY13 FY14 FY15 Half Year Full Year 6.55 20.0 6.5 6.45 Market value of $380 million1 6.4 6.4 10.0 6.4 6.35 0.0 6.3 FY12 100 FY13 FY14 FY15 Key dividend considerations Ordinary dividend payout ratio (%) 95 92 90 86 86 85 85 84 84 • 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 84 80 77 Payout Ratio (cash earnings basis) 75 Effective payout ratio 1 Based on last sale price of MYS as at 9 November 2015 70 FY12 MyState Limited Presentation FY13 FY14 FY15 22 A Strong Platform for Growth and Transformation MyState Limited Presentation 23 Employee Connectivity and Customer Engagement both increased Analysis of the Employee Connectivity Survey points to the following factors: • • • MyState Limited Presentation 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 24 MyState in the community MyState is committed to being a pillar of the local communities in which we live and work The MyState Foundation donated $106,000 in grants to 14 organisations across Tasmania in FY2015 Sponsorships include the MyState Wooden Boat Festival, MyState Student Film Festival and Central Queensland NRL Bid Junior Development Program We are proud to sponsor the Hobart Hurricanes in Cricket’s 2015‐2016 Big Bash MyState Limited Presentation 25 Pending regulatory reform Regulatory Developments Implications for MyState MyState Limited Presentation • Higher capital and mortgage risk weighting • APRA continued focus on the major banks to be “unquestionably strong” • Basel IV reforms to take shape later in 2015 • MYS Tier 1 capital position remains well above industry average • Levelling of competitive landscape between major banks and smaller ADIs • Asset repricing providing tailwinds for future earnings 26 Summary and outlook Foundations for sustained growth Well positioned for the future Strong balance sheet and capital position Increased momentum to deliver enhanced profitability and performance Regulatory change provide earnings tailwind • • • • • 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 • • • • MyState Limited Presentation Further improved sales culture and customer focus Contributing to our local communities A connected, committed and diversified workforce Momentum delivering enhanced profitability and performance 27