The MyState Limited (ASX:MYS) share price rose 0.4% to $5.13 after the company released its half year results this morning. Revenue grew 4% to $64 million and net profit after tax rose 4% to $15.8 million.
Earnings per share grew 1.6% to 17.3 cents per share. The company announced an interim dividend of 14.25 cents per share which, if doubled for the full year, works out to around a 5.6% dividend yield.
As a banking and wealth management business, MyState's 'book value' (the value of its assets) is important – this stayed flat at 243 cents per share.
Despite a competitive environment, MyState also reported stable Net Interest Margins (NIMs; a measure of profitability) at 1.94% – quite a feat in a highly competitive environment.
Based on management commentary of introducing "a more competitive product suite to deliver more value to customers" and "front book margin erosion" ('front book' = more recent loans) it is possible that margins will start to decline again next year.
The other half of this equation is the cost of deposits (remember, in simple terms, banks 'borrow' money from customer deposits at a low interest rate and lend it to people at a higher interest rate). MyState reported that the cost of deposits fell and that the Reserve Bank of Australia is keeping the cash rate low, which helped maintain margins.
MyState's loan book appears reasonably conservative, with lower loan-to-valuation (LVR) ratios and interest only loans working out to be approximately 27% of total loans in this half (page 12 of the presentation).
For the near future, management's outlook is for slower growth in the amount of credit in the banking system, a slowdown in property price growth, as well as an expectation that the mortgage market remains highly competitive.
