The MyState Limited (ASX: MYS) share price is higher today after the company released its earnings report for financial year 2021 (FY21).
Right now, the MyState share price is 3.89% higher than it was at yesterday's close. Shares in the bank and funds management company are currently swapping hands for $5.34 apiece.
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MyState share price jumps on $36.3 million NPAT
Here's how MyState performed in FY21:
- Net profit after tax increased by 20.9% to $36.3 million
- $138.5 million of income, up by 7.5%
- Customer deposits for the period equaled $4.5 billion, 13.2% more than during FY20
- Return on equity increased by 116bps to 10.3%
- Increase of 10bps in net interest margin (NIM) to 1.96%
- 13-cent final dividend
MyState's increased NIM was underpinned by more customer deposits, lower funding costs, and favourable deposit interest rates.
Net interest income for the period grew by 12.5% to $112 million. This was mainly driven by growth in lending and lower funding costs.
The bank saw 3.4% more funds under management for FY21. They were worth $1.105 billion as of 30 June 2021.
However, MyState's operating income dropped 12.9% due to lower management fee income. Its operating costs also increased by $3.9 million, or 4.9%, in FY21.
Additionally, mortgage lending fees were down $200,000 on lighter TPT Wealth lending volumes, while trustee services income was down $920,000 due to lower capital and income commissions.
What happened in FY21 for MyState?
FY21 was a busy time for MyState and its share price.
The bank's loan book grew by $320 million – or 6% – during FY21. The market for owner-occupied home loans remained competitive, but MyState's home loan book still grew by $349 million.
Home-loan growth for FY21 was 6.8%, equivalent to 1.3-times system growth. Home-loan applications also increased by 13.3% and settlements were up by 20.9%.
Additionally, MyState didn't see a major shift in its portfolio or underlying credit quality due to COVID-19.
As of 30 June 2021, around 35 of MyState's customers were on COVID-19 assistance. That represents just 0.2% of MyState's home loan portfolio.
Notably, six of the bank's branches closed in FY21. Two of the now-closed branches were in Tasmania and four were in Queensland. Seven branches remain in Tasmania to support the local customer base.
As the bank reported in its first-half results in February, the restructure of its TPT Wealth business and the branches' closure led to a $2.6 million restructuring charge.
MyState stopped providing personal loans in May after the growth of monoline personal loans, and consumer preferences shifted to buy now, pay later services.
MyState saw its customers' deposits grow by 13.2% in FY21.
What did management say?
MyState's managing director and CEO Melos Sulicich commented on the results driving the bank's share price higher. They said:
Notwithstanding the frequent outbreaks of the coronavirus, the Australian economy is in very good condition, underpinned by comparatively high levels of business and consumer confidence. However, with ongoing lockdowns there is some uncertainty, and this will continue to impact the pace and shape of recovery over the coming year.
The banking sector has been in a lower growth, lower rate environment for a period of time now and is experiencing a significant increase in regulation as well as seeing the introduction of the Consumer Data Right (open banking).
The key to succeeding in this environment is ensuring you are a trusted brand, being customer-centric and agile enough to service changing customer needs, being digitally enabled to scale appropriately, having simple products and simple easy processes and having a strong balance sheet to manage it all. MyState has been actively working on all of these aspects for many years and as a consequence is very well positioned for the future.
What's next for MyState?
Here's what might drive the MyState share price in FY22:
MyState is currently investing in its distribution capacity and is expecting further growth in FY22. Additionally, its FY21 performance and recent capital raising will let it begin its 2025 growth strategy.
The strategy will build on its financial position, capability, and leading customer Net Promoter Score to grow through a digital and distribution offering.
Sulicich commented on MyState's growth strategy, saying:
[Our] growth strategies across both banking and wealth management enhances our evolution as a digital bank and funds management business. Our ability to undertake this digital transformation means that our growing customer base across the Eastern seaboard finds we are easier, more trustworthy and intuitive to deal with…
Just as importantly, it allows us to scale more efficiently as the competition for home lending intensifies. We are better able to refine our products and services to ensure they continue to suit our customer's evolving needs, and harness resulting business opportunities to ensure they provide maximum benefit to shareholders.
Additionally, MyState will work on providing artificial intelligence-enabled capability. It will also replace its internet and mobile banking platform in 2022.
MyState share price snapshot
The MyState share price has gained 10% year to date. It is also 41% higher than it was this time last year.
