MyState turns to digitisation, brokers for growth

The bank posted its 2021 financial year results on Friday, revealing its profit had rocketed by a fifth from the year before, bolstered by lending and deposit growth.

The group’s net profit after tax came to $36.3 million, 20.9 per cent more than in FY20, while group total operating income rose by 7.5 per cent to $138.5 million.

The banking business was the dominant contributor for profit, with it rising by 32.5 per cent year-on-year to $34.9 million. The wealth business, on the other hand, plunged by 59.8 per cent, to $1.5 million, reflecting higher investment expenses, a slashed management fee and low interest rates.

The total lending book had grown by 5 per cent year-on-year, closing June 2021 at $5.6 billion. Home loans, which made up the bulk of the total book, were up by 6.8 per cent, totalling at $5.4 billion.

Of the $349 million in new home loans during FY21, the majority (79 per cent) had come from the broker channel, compared with 21 per cent from retail.

MyState’s total mortgage book reflected similar proportions, with 73 per cent comprising broker loans and the remaining 27 per cent coming from its retail channel.

The bank had seen a 13.3 per cent rise in home loan applications, to $2.6 billion worth, and a 20.9 per cent increase in settlements, to $1.6 billion.

Meanwhile, the bank closed six branches during FY21, including its remaining four branches in central Queensland and two branches in Tasmania in late 2020. MyState has retained seven branches in its home state of Tasmania.

MyState chief executive and managing director Melos Sulicich told Mortgage Business the bank doesn’t see any upcoming changes for the remaining Tasmanian branches, but the group is doubling down on its digital strategy and seeking growth on the mainland.

MyState is set to replace its internet and mobile banking platform in 2022, with the new app to include more servicing and origination capability, according to the CEO.

“About 40 per cent of our funding comes now from mainland Australia. [The] customer funding comes from mainland Australia as a result of customer acquisition that we’ve done over last few years, given the technology we’ve put in place,” Mr Sulicich told Mortgage Business.

“We’re very comfortable with our ability to start to grow – in a quicker sense – our customer acquisition in mainland Australia, based on a digital bank philosophy, while keeping our branch network going in Tasmania going as well.”

MyState has also invested in growing its home loan segment, including distribution via the broker channel.

Mr Sulicich said the company had doubled its broker business development managers on the ground, with more staff to be recruited.

Acknowledging a shift to buy now, pay later products in the consumer finance space, the bank also stopped giving out personal loans at the end of May – with resulting efficiency savings to be reinvested into accelerating home loan and deposit growth.

The bank managed to attract 17,000 new customers during FY21, but Mr Sulicich hinted at troubles with the major banks releasing them. He referred to previous claims he had made about customers transitioning their loans out from the major banks.

“I won’t go into the dynamics of why, but [the home lending market] is very competitive, I think it’s going to stay that way for a long period of time,” Mr Sulicich said.

“You’ve seen some of the majors perform quite well, in terms of home loan volumes and market share, other ones performing not so well and those ones performing not so well will be wanting to claw back that market share.”

“There’s still quite some delays in getting refinance discharges out of some of the majors, which is disappointing. But you know, that’s the way it is, we can’t do a lot about that,” Mr Sulicich later added.

While the bank is looking to scale up rapidly, the CEO noted that any future mergers would be unlikely.

“There’s not a lot that we would be comfortable with doing a merger in this space at the moment,” Mr Sulicich noted.

“So, we’re comfortable with our strategy, which is to build out a digital bank and grow and scale it rapidly. And our view we have is, we can do it, we’ve got the brand to do it, we’ve got the technology to do it, and we’ve got the team to do it.”

Mr Sulicich will depart MyState at the end of the year, after he delayed his exit to steer the bank through the pandemic. The CEO tipped that he could pursue a non-executive career post-MyState, potentially outside of financial services.

[Related: Why this digital bank is backing brokers]