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

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Chairman of MyState Limited, Miles Hampton, said the Board had come to the view that given the uncertainty of the present time, it was important to maintain continuity in the leadership team and had approached Mr Sulicich to request he delay his plans to return to Sydney.

Mr Hampton said the Board of MyState are delighted that Melos had agreed to stay on.

“Melos knows our business very well and his ongoing leadership will ensure we get through this challenging period as a strong bank, focused on our customers and our communities.”

Mr Sulicich will remain with MyState for at least 18 months. The terms of employment remain consistent with those disclosed to the market on 3 May 2018.

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Melos Sulicich

MyState Limited, the banking and wealth management group, has advised that it has taken action to protect customers and employees in light of the coronavirus situation.

Managing Director and CEO, Melos Sulicich, said: “We’ve prioritised the health and wellbeing of our customers and employees, introducing a range of measures to reduce the risk of contracting or spreading the virus. These include robust office and branch hygiene protocols, employee travel restrictions, and encouraging employees to work from home where possible. 

“We’re taking advice from federal and local government and health authorities so we can continue to serve our customers safely and effectively and reduce the risk of anyone contracting the virus.  

“Communities stick together in tough times and as we all do our best to navigate the challenges and uncertainties of COVID-19, we’d like to assure customers that we’re here for them.

“MyState continues to lend, take deposits, manage investments and service customers and clients with the same level of support, compassion, and understanding that we bring to banking every day. Our branches are open and will remain open in the current environment.”

MyState also provides the following advice to customers:

• Online services are recommended – both MyState Bank and TPT Wealth customers have access to their accounts and investments 24/7 from anywhere
• If you’re feeling unwell or have recently returned from overseas, instead of visiting our branches please call our MyState Bank Customer Care team on 138 001 or TPT Wealth Client Services team on 1300 138 044. 
• We ask that customers who do visit a branch maintain social distancing by keeping at least one metre from people, and our employees will do the same.
• Hand hygiene products are available at our branches, and we have further upgraded our cleaning regime across all branches
• Using online and electronic payment instead of cash is recommended to minimise contact

The Group also has a financial assistance package available to help customers if they are experiencing financial hardship as a result of the impacts caused by the virus. The assistance includes options including delaying loan repayments to help customers get back on their feet.

MyState thanks all customers for their ongoing support and understanding, and will continue to update them as the situation unfolds. We’re continuing to focus on protecting customers and employees during this difficult time.

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Mr Dickson was appointed acting CFO on 7 October 2019 and will permanently join MyState Limited’s executive team, reporting to MyState’s Managing Director and CEO, Melos Sulicich.

Mr Dickson has over 25 years of experience in senior financial roles. Prior to joining MyState Limited, he was CFO for ME Bank for six years and before that, CFO for AXA Australia for five years. He has also held senior positions with Colonial First State Group, Portfolio Partners and Commonwealth Bank.

MyState’s Managing Director and CEO, Melos Sulicich, said, “I am delighted to formally welcome Gary to the role of Chief Financial Officer for MyState. Gary has a wealth of experience in finance and treasury and has demonstrated his capability in the role of acting CFO. I look forward to working closely with him as we progress MyState’s ongoing strategy and growth plans.”

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Mr Dickson brings with him over 25 years of experience in a variety of financial roles, with 11 years of CFO experience. During his career, Mr Dickson has provided strong financial and strategic guidance and analysis as well as proven leadership and talent development capability.

Mr Dickson’s most recent role was at ME Bank where he held the position of CFO for 6 years, driving strong growth across the business.  During his tenure with ME, he led the Finance team through a core banking platform replacement program.

Prior to this, Mr Dickson was CFO for AXA Australia where he led the delivery of statutory, regulatory and management reporting, budgeting, forecasting and strategic planning for AXA’s Australian based subsidiaries.

Mr Dickson has also held senior positions with the Colonial First State Group Limited, Portfolio Partners Limited and CommBank where he was General Manager, Finance – Investment & Insurance Services.

In his role at MyState, Mr Dickson will be accountable for the finance and treasury activities of the company to ensure the long-term business strategies are supported by effective financial outcomes.

MyState’s Managing Director and CEO, Melos Sulicich, said, “We are delighted to welcome Gary to our executive team. Gary is a proven, high calibre CFO with unique and relevant experience that is important to the ongoing success of our organisation.”

Mr Dickson has a fixed term contract until June 30 2020 and holds a Bachelor of Commerce from the University of Melbourne.

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MyState Chairman, Miles Hampton, said: “We are very pleased to announce the appointment of Vaughn Richtor to the MyState Board.

Vaughn is the former CEO of ING DIRECT Australia where he led the successful establishment of arguably Australia’s pre-eminent digital bank.

He was subsequently appointed Managing Director of ING Vysya Bank in India where he led a successful turnaround.

This role was followed by appointment as Chief Executive Officer and Head of Retail Banking, Asia with ING.

He is currently Chairman of Ratesetter Australia and a Non-Executive Director of TMB Bank in Thailand.

Vaughn was named Executive of the Year at the 2016 Australian Retail Banking awards and will bring significant banking and digital experience to the MyState Board having worked extensively within the industry in Australia and overseas and we look forward to his contribution.”

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Melos Sulicich

MyState Limited (ASX: MYS) announced yesterday that it has entered into a sale agreement with Fiducian Group Limited (ASX: FID) for the acquisition of MyState’s retail financial planning business in Tasmania. Under the agreement, Fiducian will pay approximately $3.5 million to acquire the MyState financial planning client book with more than $340 million in funds under advice. The transaction, which is expected to be broadly NPAT neutral for MyState in future years, is expected to complete before 30 June 2019.

Fiducian is an ASX listed leading national financial services company with more than $2.7 billion funds under advice and 40 practices nationally.

MyState Limited Managing Director and Chief Executive Officer, Melos Sulicich, said: “We are very pleased to have reached this agreement with Fiducian. We believe its Tasmanian footprint and dedicated financial planning focus provide a great fit for our customers and staff. We look forward to working with Fiducian to ensure that the transition for our customers is smooth, simple and straightforward.

“This is a strategic move for the MyState Group which allows us to simplify our business and invest for growth in the areas where we can have a competitive advantage. Through our Tasmanian Perpetual Trustees (TPT) brand, we are building a simplified national and highly scalable wealth management business focussed on managed funds and trustee services.”

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Mr Viljanmaa brings TPT over thirty years of experience in the fixed income and mortgage space, most notably having worked for 20 years at Antares Capital, an arm of NAB Asset Management, as a highly regarded Fixed Income Portfolio Manager, with an exceptional track record during that time.

In this role, Mr Viljanmaa was responsible for the investment strategy and trading in liquid portfolio’s, along with primary market research and secondary market trading of RMBS securities, managing in excess of $30 billion in assets.

In his new Sydney-based role, Mr Viljanmaa will be responsible for all managed investment schemes within TPT and play an integral role in the expansion of TPT’s asset management business, as it looks to evolve its current investment funds suite by adding a range of income investment solutions for Australians striving for income in a low interest rate environment.

MyState Limited General Manager, Wealth Management, Craig Mowll says, “TPT has a rich 132-year history in building the wealth of Australians by protecting their assets and legacy through its specialist estate planning, asset management and advice business.”

“With over a 40-year performance track record in mortgage funds, TPT is now starting to evolve their managed investment schemes as well as investing in greater digital access for their investors.”

“Jukka’s has an enviable portfolio manager track record in the income space and we are proud to welcome him to our investment team at this significant yet exciting point in the business’ future.”

Mr Viljanmaa holds a Bachelor of Business, Finance from Charles Sturt University.

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Melos Sulicich

MyState Limited, the banking and wealth management group, has announced 1H FY18 net profit after tax of $15.8 million, a 4.0% increase on the previous corresponding period. Net profit before tax was $22.6 million, up 7.7%. Earnings per share increased to 17.6 cents per share (cps) from 17.3 cps in the previous corresponding period, up 0.3 cps.

The Directors have increased the fully franked interim dividend to 14.25 cps, up 0.25 cps, payable on 29 March 2018 to shareholders on the register at the record date of 5 March 2018, with a 1.5% discount for shares issued under the Dividend Reinvestment Plan.

Increased scale and technology transformation supports profit growth

Managing Director and Chief Executive Officer, Melos Sulicich, attributed the solid growth in profit and earnings to the group’s strategy and technology transformation, enabling MyState to provide better services to more customers.

“Our strategy of building a modern, scalable banking and wealth management business is delivering results. MyState is a more customer focused, agile organisation with sophisticated systems to target high-quality deposit and lending growth. Our digital platform offers modern customer services nationally and, at the same time, our business benefits from efficiencies and economies of scale.

“Total revenue was $64.0 million, up 3.6%, and the loan book increased to $4.3 billion, up 4.5% since December 2016, although its growth was constrained by the regulatory requirements imposed on interest-only and residential investor lending.

“Strong discipline helped maintain net interest margin at 1.94% and net interest income grew by 6.8%, which are outstanding achievements in a very competitive market where regulation has distorted competition, disproportionately impacting smaller banks.”

Return on average equity continued to perform strongly amongst regional peers, at 10.2% on an annualised basis. Expenses were contained to a modest 0.7% increase and, with productivity benefits across the group, the cost-to-income ratio reduced to 64.6%, an improvement of 182 basis points.

Strong customer deposit growth

Simplification of the Banking Division’s products and increased focus on service continued to drive customer growth. Customer deposits increased to $3.1 billion, up 5%, driven by uptake of MyState’s digital eSaver product. Retail deposits provide more than two-thirds of the group’s funding base (67.3%).

Mr Sulicich said that the group’s strategy of targeting Australia’s eastern seaboard had resulted in a significant geographic shift of the group’s loan book across Australia, with loans from NSW, Victoria and Queensland now exceeding loans in Tasmania. Annualised growth in NSW has exceeded 40% over the past two years and at the end of the half represented over 20% of MyState’s loan book.

MyState maintained industry-leading credit quality, with arrears well below the S&P arrears indices for major and regional banks. The group consistently targets low-risk, owner occupied lending with a loan-to-valuation ratio of less than 80%.

Funds under management growth

Following a disappointing year in FY17, the group’s Wealth Division showed strong momentum in the first half of FY18, with operating revenue up almost 11% and funds under management increasing to $1.2 billion at 31 December 2017 (up 10.7%), the highest level in almost a decade. Trustee services improved with significant growth in wills written and growth in the value of estates administered.

Strong capital position

MyState’s capital ratio at 31 December 2017 was 13.4%, increasing 43 bps. Mr Sulicich said the organisation’s CET1 ratio of 11.4% was extremely sound and that with a strong balance sheet and capital position, provides opportunity for further growth.

Outlook

Mr Sulicich said that while the lending market had become significantly more competitive as property prices eased in capital cities and credit growth continued to soften, MyState remained focused on quality lending growth and is expecting 2H18 to be much stronger than 1H18.

“We are using our new technology platforms and analytical capabilities to provide better products to more Australians. We are originating an increasing number of deposit and personal loan customers online and will introduce home lending later in the year. We remain firmly focused on customers as we continue to build a scalable, modern banking and wealth management business. We have already gone live with the New Payments Platform, which will provide faster, simpler and smarter payment options for our customers.

“The lending market remains highly competitive and we continue to urge the government to embrace regulations that promote competition and benefit consumers, including changes to the framework that will enable smaller banks to compete on a more balanced playing field with major banks.”

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Earnings per share were 34.0 cents, compared with 35.5 cents in FY16. The Directors have declared an unchanged final dividend of 14.5 cents per share, fully franked, payable on 13 September 2017 to shareholders on the register at the record date of 24 August 2017. A 2.0% discount for shares issued under the Dividend Reinvestment Plan will apply.

MyState Managing Director and Chief Executive Officer, Melos Sulicich, said: “The slight reduction in earnings reflected a competitive environment and a period in which we delivered a number of very significant transformational technology projects targeted at enhancing future performance. We expect to see operating cost reductions and revenue gains over the ensuing period, as efficiency gains are delivered and we derive benefits from enhanced market opportunities. It is particularly pleasing to note that we continued to grow our deposit and loan book ahead of system whilst maintaining strong credit quality.

“We have made significant progress with delivering a transformational technology program which is positioning MyState as a highly scalable, modern banking business. Consolidation of our core banking system has simplified our business, reduced business risk, and allows us to deliver better customer outcomes in a more efficient manner. Delivery of this outcome demonstrates the disciplined execution of our transformation strategy as we create a simpler, more customer-centric business.

“Our recently launched contact centre system allows us to co-ordinate phone, email and webchat services, and store information in a single customer contact history. Improved customer service and operational productivity have strengthened our brands, and staff are equipped to build relationships more effectively with customers’ banking history at their fingertips.

“We have consolidated data centres and implemented a new customer relationship management (CRM) platform. This shows the products that customers are using across our brands, improves marketing campaign management, and enables us to advise customers more effectively about our products and services when they can benefit most.

“Further improvements include completion of our ‘Apply’ project, which enables online origination for deposit accounts and personal loans with further product enhancements planned for the near future. This will become an increasingly important component of our strategy to grow through our digital offerings. We were among the first to launch mobile payments through Apple Pay, Samsung Pay, and Android Pay.

“We continued to increase our market share and at 30 June 2017 our loan book was $4.3 billion, up 10.8% from $3.9 billion at 30 June 2016. This is well above national system growth, and we have maintained very high credit quality.”

MyState’s capital adequacy ratio at 30 June 2017 was 13.3%, 25bps above FY16 and the CET1 ratio was 11.3%, which is well positioned to meet APRA’s ‘unquestionably strong’ CET1 ratio requirements by 1 January 2020. The cost-to-income ratio (excluding significant M&A project costs) increased 60 basis points compared to 63.2% at 30 June 2016, however was lower in the second half of FY17 than the first half.

In Wealth Management, funds under management grew at the fastest rate for many years, increasing 8% to $1,089 million.

Banking Division

Mr Sulicich said: “The banking division’s performance was sound in a very competitive environment. We continued with our strategy of growing the loan book and broadening our geographic coverage, and increased market share in order to improve the scale economies of the business.

“More customers are using our internet and mobile digital channels in preference to branches, and this was a significant factor in our decision to announce the closure of our agency channel and two branches in Central Queensland. We will continue to leverage our technology platform and roll out new products and services, in line with customer demand.

Net interest income remained steady despite heavy competition for home loans in MyState’s key market of lower risk, owner-occupied homes at a loan-to-valuation ratio of less than 80%. These loans comprise more than three-quarters of MyState’s total home loan book.

Net interest margin decreased to 1.93% for the year, 20 basis points below the previous year, reflecting increased competition for owner-occupied home loans and deposits. A strong focus on margin management and some selective repricing of the loan book delivered a flat net interest margin profile across the two halves of the year.

The group passed an important milestone as loans outside Tasmania increased to more than 50% for the first time. This followed strong growth in the NSW home loan book from $421 million to $754 million over the year, demonstrating the success of MyState’s growth strategy and improved home loan origination platform. This progressive geographic shift is positive for MyState as it helps to reduce the group’s concentration risk.

Customer deposits grew strongly to nearly $3 billion, up 10% from $2.7 billion a year ago. Particularly pleasing was the very positive uptake of MyState’s ‘eSaver’ product, which was launched in February this year. Combined with a simple and easy online account opening process, the flow of funds into this product has allowed us to start to build a lower cost deposit profile.

The group completed a $400 million Residential Mortgage Backed Security (RMBS) capital raising in May 2017, the largest such transaction to date, with strong and broad investor support. This followed a $300 million RMBS transaction in November 2016, supporting MyState’s above-system lending growth.

Credit quality remained exceptional. Arrears performance was exemplary with 30 day arrears of 0.51% and 90 day arrears of 0.28%, well below the SPIN index for both major and regional banks.

Wealth Management Division

Mr Sulicich said, “Wealth Management performance benefited from record growth across our investment business and improvement in our financial planning business. Our income funds outperformed their benchmarks and higher demand from retail and wholesale clients helped increase funds under management by 8% to $1.09 billion at 30 June 2017, up from $1.01 billion a year earlier.

“Our strengthened financial planning team helped increase revenue from new statements of advice and risk advice, and funds under advice grew from $738 million to $778 million at the end of the year.

Disappointingly, trustee services’ revenue reduced year-on-year as a result of a lower number of estates under administration. We consider that our trustee business has stabilised and, with renewed focus on writing new wills, anticipate a return to growth.”

Revenue from funds management, trustee services, financial planning and other services was $18.3 million, up 3.4% from $17.7 million. Net profit was $3.8 million, down by 4.5% from $4.0 million in the prior year.

Dividend Reinvestment Plan (DRP)

Directors have elected to maintain the DRP, with the price to be set at a 2.0% discount to the volume weighted average price of MyState shares calculated over the 5 trading days between 28 August 2017 and 1 September 2017. Shareholders will have until 25 August 2017 to elect whether they want to participate in the DRP. Prior elections by Shareholders to participate in the DRP will apply to the final dividend unless amended or terminated. Shareholders who wish to participate in the DRP who do not have a current election can record a new election. Elections can be made, amended or terminated online at www.investorcentre.com by 25 August 2017. Election forms may also be obtained from Computershare on 1300 850 505. A copy of the DRP rules may be viewed on the Investor Tools page of the Company’s website at www.mystatelimited.com.au.

Outlook

The Tasmanian economy recently reported 16 consecutive quarters of economic growth, and this positive trend is expected to continue, with the broader Australian economy also maintaining a healthy level of economic growth.

While MyState’s key target market of lower-risk, owner-occupied housing loans with loan to valuation ratios of less than 80% remains very competitive, MyState anticipates continued above-system loan book growth. Mr Sulicich said: “We have completed the main elements of our technology transformation program and continue to introduce further efficiencies in our business. Our digital offering is contributing to a more positive experience for our customers and, with branch services now well supported by digital products, we can support a broader customer base. Our new internet and mobile banking platform is proving popular with customers and our online origination capability for deposit accounts and personal loans is extending our customer reach.

“Our technology platform ensures we provide great service and we expect that, over time, this will increase loyalty and market share. Additionally, we are expecting to see productivity improvements flow through the business as we continue to refine, digitise and improve processes.

“MyState is participating in the launch of the New Payments Platform, which is intended to bring real time payments to customers at the end of 2017. As the dynamics of the banking landscape change, we remain focused on helping customers with simpler, more relevant and more accessible products.

“We welcome the recent moves by the Federal government that partially address the uneven playing field in the banking industry. MyState has been actively growing its customer base across Australia and is focused on delivering competitive banking products and services for all Australians. As a smaller bank, we continue to believe that further action is needed to reduce the regulatory capital advantage enjoyed by large banks, and urge regulators to consider the disparities in funding costs that are caused by the ‘too big to fail’ implicit guarantee that the larger banks continue to enjoy.

“We have a clear strategy of organic growth, responding to the changing needs of our customers while remaining true to our purpose of helping people achieve their dreams. MyState is well capitalised with sound credit and risk management processes, and we remain confident and positive about our prospects of cost and profitability improvements.”

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[1] FY2017 results are presented on a statutory reporting basis as no adjustments were made to report on an ‘underlying basis’. FY2016 underlying basis excludes $1.8m after tax M&A related costs and $1.0m after tax accelerated write down of intangible software assets.
[2] Unless otherwise indicated, all comparisons are to the prior full year ended 30 June 2016 which was reported on an ‘underlying basis’.

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