MyState Ltd has announced a capital raising, which it said aims to raise approximately $80 million to “rapidly accelerate” its growth strategy.
MyState managing director and CEO Melos Sulicich said the lender’s home loan book has expanded by 43 per cent since 2016. With this capital raise, MyState is aiming to accelerate growth not only through its enhanced digital channels, but through the broker channel, he added.
Details of the capital raise
According to the ASX-listed lender, it is undertaking a $20-million fully underwritten institutional placement and a partially underwritten one for 6.6 pro rata accelerated non-renounceable entitlement offer to raise gross proceeds of around $60 million. The entitlement offer is underwritten to $30 million.
The offer price for the placement and entitlement offer of $4.30 per share represents a 9.6 per cent discount to the theoretical ex-rights price (TERP) of $4.76, and an 11.3 per cent discount to the lender’s last closing price of $4.85 on 21 May.
The placement and entitlement offer will result in the issue of up to around 18.6 million new fully paid ordinary shares (new shares) equivalent to 20.2 per cent of current issued capital. The new shares issued under the placement and the entitlement offer will rank equally with existing shares as at their date of issue, according to MyState.
The entitlement offer is non-renounceable and rights are not transferrable and will not be traded on the ASX or other exchange.
MyState shares have been placed in a trading halt to enable the placement to be completed, with trading expected to recommence tomorrow (26 May).
Commenting on the capital raise, MyState chairman Miles Hampton said, “The capital raising will support the business to pursue a significant acceleration of its growth strategy. We now see an opportunity to build on that success and substantially increase our growth trajectory.
“This is important as it helps us to remain competitive and provide the services that our customers expect while improving shareholder value.”
MyState to grow broker business
Speaking further about the capital raise and MyState’s growth strategy, Mr Sulicich said the strategy is underpinned by priorities including distribution (with products distributed through expanded digital and third-party channels), operations (digitising and automating processes and improving productivity), customer experience and acquisition (delivering a digital and intuitive banking and wealth services).
He told Mortgage Business that the capital raise is aimed at growing the lender’s retail funding book and having the balance sheet capacity to distribute more home loans, principally through the broker channel.
The lender currently writes 80 per cent of its home loans through the broker channel, and only originates loans through its branch network in Tasmania, Mr Sulicich said.
“The broker network is really what we’re aiming to write more loans through,” he said.
“We’re a relatively small bank in the scheme of things. What we’re looking to do is to increase our share of the broker business.”
Mr Sulicich added that MyState is in the process of doubling the number of business development managers on the ground in the near future to communicate with more brokers and increase the number of home loans originated through the broker channel.
In addition, Mr Sulicich said that MyState is seeking to increase its presence in mainland Australia, particularly across the eastern seaboard, which would see the proportion of total loans written through the broker channel increase (while loans written through branches would decrease) over a period of time.
MyState looks to cut days to unconditional approvals
It currently takes two days for conditional approval across both the broker and direct channel, and around eight to 12 days to unconditional approval, Mr Sulicich said.
“We’re really focused on being able to improve our time to unconditional approval,” he said, but added that the lender has not set specific goals around how many days it should take to secure unconditional approval.
MyState home loan book up 6.0 per cent
MyState also provided an investor update, in which it said that housing loans rose by 6.0 per cent between April 2020 and April 2021, from $5.0 billion to over $5.3 billion.
Overall, its lending book grew by 5.4 per cent from $5.2 billion to $5.5 billion.
However, the lender’s personal loans portfolio shrank from $50 million in April 2020 to $35 million in April 2021. Mr Sulicich said that MyState has ceased originating personal loans, adding that the personal loans market has been disrupted by personal loan providers and buy now, pay later providers.
MyState also reported that home loans with loan-to-value ratios (LVR) of 90 per cent and over grew from $270.0 million to $520.0 million between April 2020 and April 2021, which it said has reflected strong support of the First Home Loan Deposit Scheme (FHLDS).
Commenting on this trend, Mr Sulicich told Mortgage Business that first home buyers (particularly owner-occupiers), would continue to be a primary focus for MyState.
MyState had previously reported that the high demand for the FHLDS had driven it to pause intake of applications in 2020 due to a backlog that caused turnaround times to increase from two days to over 10 days.
With the government extending the FHLDS (New Homes) – also known as the New Homes Guarantee, which will include another 10,000 positions for first home buyers from the next financial year, Mr Sulicich said that MyState has recruited staff in underwriting and loan processing roles to focus on slicing turnaround times.
He concluded: “We’re focused on turnaround times and industry norms as best as we possibly can.”
Underlying net profit after tax (NPAT) increased by 18.2 per cent between April 2020 and April 2021 to $31.5 million, while pre-provision operating profit increased 18.3 per cent to $45.1 million, MyState reported.
Find out more about turnaround times and how they’re impacting the mortgage experience at the Better Business Summit 2021. Places are limited, so make sure you secure your place at the five-state event asap!
[Related: MyState settlements up 24% in 1H21]