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MyState Limited last week announced a statutory after-tax profit of $15.2 million for the half year to 31 December 2016, up 0.7 per cent from $15.1 million on the previous corresponding half. During that time, it reached a new record for housing loan settlements, which increased to $671 million, up 26 per cent on the prior corresponding period.
Managing director and chief executive officer Melos Sulicich explained that the group is focused on building a “highly scalable” business and the increase in its loan book demonstrates its focus on “organic growth opportunity”.
“We are focused on our approach to low risk growth, and we continue to improve credit performance with low arrears and loan impairment. Impairment charges decreased to 2 basis points of gross loans,” he said.
The Tasmania-based lender’s risk management has evolved, which has resulted in an improved risk profile as demonstrated by S&P Global Ratings’ decision to raise its long-term credit issuer rating of the bank to ‘BBB+’ with a negative outlook from ‘BBB’.
Further, the group’s loan book grew at a rate of 2.4 times national system growth, surpassing $4 billion for the first time in October 2016 growing at an annualised growth rate of 14.3 per cent.
The group said it has focused on maintaining low risk growth and, during the first half of the financial year, its loan book growth came entirely from lending below an 80 per cent loan-to-valuation ratio.
Its net interest margins continued to reduce, which it said reflects the low interest rate environment and deposit rates being repriced less than lending rates.
“There is some evidence that market competition for new lending has eased in recent months, and higher margins are expected in the second half. At 31 December 2016, MyState Bank’s loan book comprised 86 per cent owner-occupied lending and 14 per cent investor loans, with the population of investor loans well below industry average,” it said.
The bank increased rates on its variable rate home loan book by 12 basis points on 3 January 2017.
90 per cent of loan book growth from third-party channel
MyState’s Mr Sulicich highlighted that its new record for housing loan settlements reflected its “strong broker and retail customer relationships” and emphasised that the lender’s growth strategy is “heavily reliant” on its continued relationships with its mortgage broker partners.
Speaking to Mortgage Business, Mr Sulicich elaborated that MyState maintains a strong relationship with many mortgage brokers throughout Australia, with approximately 60 per cent of its total loan book originating through the third-party channel.
He also noted that approximately 90 per cent of MyState’s loan book growth has come through its brokers.
“In terms of our mortgage originations strategy, we want to continue a very strong relationship with mortgage brokers. We've got a branch network in Tasmania, a branch network in central Queensland, the rest of our loan book growth in NSW and Victoria comes through the mortgage broker channel.
“We're very focused on creating good, strong and enduring relationships with our mortgage broker partners and to continue those relationships to build our book through mainland Australia. Our strategy is heavily reliant on those continued relationships with mortgage brokers.”
MyState confident that loan growth will remain above system
The bank pointed out that the Tasmanian economy remains “buoyant”, while the Australian economy overall continues to experience low growth and inflation.
“While the lending market continues to be highly competitive, MyState remains confident that its loan growth will remain above system,” the bank said.
Mr Sulicich said the group was concentrating on building a platform for continued organic growth: “We are focused on building a low risk, high-quality loan book. Our strategy to become a more customer-focused business, through technology investment and commitment to customer service, has helped us to exceed $4 billion in loans and our momentum is continuing.”
“Our prudent lending approach is underpinned by sound credit, risk, and capital management processes. MyState's business is highly scalable and well positioned to take advantage of our many organic growth opportunities. We remain optimistic about the future.”
[Related: Tasmania’s economy reaching new highs]