MyState profit dragged down by funding costs

MyState Bank has released its 2019 half-year (HY19) financial results, reporting a 9 per cent decline in its net profit after tax (NPAT) to $14.4 million, down from $15.8 million in HY18, despite above system home lending growth of 10.3 per cent ($4.6 billion) in HY19.

Managing director and CEO of MyState Melos Sulicich attributed the weakened performance to higher funding costs and the lender’s investment in a new platform designed to facilitate the growth of its funds management business. 

MyState was recently forced to reprice its mortgage book in response to funding cost pressure, with the lender announcing out-of-cycle mortgage rate hikes of up to 16 basis points.

The continued cost pressures were evidenced by a decline in the bank’s net interest margin, which dropped to 1.82 per cent in HY19.

However, Mr Sulicich said that the bank plans to build long-term growth in the profitability of the business by “gaining market share in both banking and mortgage funds management”.  

“To deliver on this objective, we have undertaken a number of key initiatives to support business activity, which we expect will provide a foundation for profit growth in FY20 and beyond. 

“Pleasingly, we continue to see ongoing growth in new customers, which provides further confidence in our value proposition.”

MyState has also reported deposit growth of 10.6 per cent to $3.4 billion, which, according to Mr Sulicich, was driven by the bank’s digital proposition.

“Our strategy of digitising services is benefiting customers, and we now offer a complete digital product suite, having recently introduced online origination for home loans, online deposit products and new payment technologies,” he said.

However, the MyState CEO said that he expects external market challenges to continue weighing on the bank’s overall performance.

“Given the external environment, our recent repricing initiative, volume and cost momentum, we expect the second half of FY19 to be broadly in line with the second half of FY18, and therefore the full year net profit after tax is expected to be around $30 million or 3 to 5 per cent below FY18,” Mr Sulicich concluded.

[Related: ANZ CEO rues ‘overly conservative’ lending policy]