Strengthened loan provisions, new investment grade credit rating and potential Tier 2 capital issuance

From

Melos Sulicich

MyState Limited (ASX: MYS), the banking and wealth management group, has announced that it has strengthened its level of loan provisioning for the potential impact from the COVID-19 pandemic. In addition, Moody’s has assigned an investment grade issuer credit rating to

MyState Limited of ‘Baa2/P-2’ (long term/short term). All ratings are under review for possible downgrade, in-line with the credit ratings of MyState Bank. Finally, MyState Limited today will be conducting a fixed income debt investor call with a potential Tier 2 Capital Instrument issuance to follow, to further improve regulatory capital efficiency.

MyState anticipates an increase in the collective provision and general reserve for credit losses of approximately $3.0m to $4.0m.

Managing Director and Chief Executive Officer, Melos Sulicich said “Most of the increase in the collective provision is based on our view on the impacts of COVID-19 and does not reflect any significant deterioration in our underlying credit quality.

“We are assuming a slow economic recovery and the increased provision reflects significant changes to the economic outlook impacting growth in the economy, unemployment and assumptions in respect to residential property prices.

“MyState Bank’s loan book predominantly consists of high-quality housing loans, the vast majority of which are owner-occupied with a loan-to-valuation ratio of less than 80%.

“We are fully committed to supporting our customers through this unique time and have provided more than 1,700 personal and business customers with a comprehensive range of support measures, including the option to pause loan repayments for up to six months to help them through the COVID-19 disruption. It is pleasing to note that some customers are already electing to move back to their normal repayments at the three month check in interval.

“We remain well placed to continue to provide credit to both new and existing customers, recognising the role we play in supporting the economy, our customers and the communities we operate in.”

MyState’s capital is well above regulatory benchmarks with a pro-forma Common Equity Tier 1 (CET1) ratio of approximately 10.93% as at 31 May 2020 and a total capital ratio of approximately 12.87%.

Also announced on Monday, Moody’s Investor Services has assigned an investment grade issuer credit rating to MyState Limited of ‘Baa2/P-2’ (long term/short term).

MyState will conduct a debt investor call in preparation for a potential Tier 2 subordinated note issue to be launched in the coming days, subject to market conditions. The subordinated notes are expected to be rated Baa3 by Moody’s.

All ratings are under review for possible downgrade.

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