company profile september 2013 investor …2013/09/06 · september 2013 investor presentation...

September 2013Investor Presentation

Company Profile

MyState Financial is a retail financial services ADI, regulated by the Australian Prudential Regulation Authority (APRA), operating predominately in Tasmania. MyState Financial was established on 1 July 2007 and is the result of a number of credit union consolidations; the most recent being the merger of islandstate and connectfinancial. MyState Financial, which demutualised in August 2009, provides financial services to approximately 120,000 customers and holds an Australian Financial Services Licence (AFSL) issued by the Australian Securities and Investments Commission (ASIC).

The MyState Financial Group also includes:

• MyState Financial Foundation Limited, which provides annual grants to charities to educate and nurture the young people of Tasmania; and

• Connect Asset Management Pty Ltd, which manages four securitisation programmes under the name of ConQuest: ConQuest Mortgage Trust, ConQuest 2007-1 Trust; ConQuest 2010-1 Trust and ConQuest 2010-2 Trust.

MyState Limited (MYS), a non-operating holding Company, is a diversified financial services group listed

on the ASX and provides a broad range of financial services through three wholly-owned subsidiaries,

MyState Financial (MSF) and The Rock Building Society Limited (The Rock) authorised deposit-taking

institution’s (ADI), and Tasmanian Perpetual Trustees (TPT) a trustee and wealth management company.

Headquartered in Tasmania, its diverse business operations cover:

Banking Services Trustee Services Wealth Management

Transactional and internet banking Estate planning Financial planning

Insurance and other alliances Estate and trust administration Managed fund investments

Savings and investments Power of attorney Portfolio administration services

Business banking Corporate and custodial trustee Portfolio advisory services

Agribusiness Private client services

Personal and business lending

The Rock Building Society Limited is a retail financial services ADI, regulated by APRA, operating predominately in Queensland. The Rock became a wholly owned subsidiary of the Company following a successful acquisition by MyState Limited on 1 December 2011. The Rock provides financial services to approximately 40,000 customers. The Rock holds an AFSL issued by ASIC.

The Rock also owns and operates the Rockhampton Custodial and Management Company Limited, a securitisation trust management and custodial company.

Tasmanian Perpetual Trustees was established in 1887 and is a major Tasmanian based provider of financial products and trustee services. Tasmanian Perpetual Trustees is a trustee company authorised under the Tasmanian Trustee Companies Act 1953 and the Corporations Act.

Tasmanian Perpetual Trustees holds an AFSL issued by ASIC.

Tasmanian Perpetual Trustees has over $930 million in funds under management on behalf of personal, business and wholesale investors in Tasmania. Tasmanian Perpetual Trustees also has a further $700 million of assets under advice, through the Company’s role as financial adviser, attorney or trustee on behalf of various trusts, estates and other clients.

02 COMPANY PROFILE

Company Profile






















02 COMPANY PROFILE

Company Profile






















02 COMPANY PROFILE

ASX Code: MYS

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2MyState Limited Investor Presentation

This presentation contains certain forward-looking statements with respect to the financial condition, results of operations, business plans and objectives of management. All such forward-looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors many of which are outside the control of MyState Limited (MYS), which may cause the results or actual performance to be materially different from the future results or performance expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of presentation.

No presentation or warranty is or will be made by any legal or natural persons in relation to the accuracy or completeness of all or part of this document, or any constituent or associated presentation, information or material (collectively, the Information), or the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, the information or any part of it. The information includes information derived from third party sources that has not been independently verified.

To the full extent permitted by law, MYS disclaims any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.

Nothing contained in the information constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information and any action on the basis of the information.

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A strong result in a challenging business environment

Good cost management

Achieved further integration benefits for both MyState Financial and The Rock

Transitioning to a more sales-focused model for The Rock

Excellent risk management and strong credit quality

Efficient platform for further growth

Highlights

30

25

20

15

10

5

0

NPAT

17.3

22.0

28.5

2010

Millions $

20122011 2013

23.4*

* 23.4 reported + 2.1 merger costs

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FY2013 FY2012 Change (%)

Revenue ($m) 248.1 241.1 2.8

Normalised net profit after tax* ($m) 28.5 25.5* 11.8

The Rock acquisition costs ($m) – 2.1 N/A

Statutory net profit after tax ($m) 28.5 23.4 21.7


Earnings per share (cents) 32.7 29.9 9.3

Final dividend – fully franked (cents) 14.0 14.0 –

Total dividends for the year – fully franked (cents)

28.0 28.0 –


Cost-to-income ratio (%) 68.3 70.3* 2.8

Net interest margin – MyState Financial (%)

– The Rock (%)

2.78

1.78

2.99

1.86

7.0

4.0

Return on equity (%) 10.2 9.3 9.7

* FY2012 figures after adding back The Rock acquisition costs.

FY2013 results

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Balance sheet, capital strength and asset quality


Total assets ($m) 3,629.7 3,658.6 (0.8)

Total liabilities ($m) 3,350.0 3,384.7 (1.0)

Net assets ($m) 279.7 273.9 2.2

Risk-weighted assets ($m) 1,322.0 1,285.5 2.8

Capital adequacy (%) 14.0 14.1 0.7

Funds under management ($m) 952.0 931.0 2.2

Funds under advice ($m) 733.0 698.0 5.0

Loans 30+ days in arrears (%) 0.5 0.9 40.0

Banking asset growth flat due to lower broker channel broker originations

Strong capital adequacy (Tier 1 – 13.7%)

Modest growth for FUM and FUA

Credit quality of loan book amongst industry best with low arrears

Ratings – MyState Financial BBB (stable) – The Rock BBB- (positive watch)

Basel III ready

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Earnings summary

Earnings Waterfall

NIM

Fee Inco

me

Comm

issio

ns

Personnel C

osts

Mark

eting C

osts

Governance

Costs

Technolo

gy Costs

Occupancy

Costs

Admin

istra

tion C

osts

Net Bad &

Doubtfu

lsTax

2013 NPAT

2012 NPAT

25.5

28.5

6.0 0.8 0.1

0.7 0.6 0.4

0.1 0.3

1.1

2.2 1.1

$15.00

$17.00

$19.00

$21.00

$23.00

$25.00

$27.00

$29.00

$31.00

$33.00

Mil

lio

ns

2013 first full year of The Rock

NIM impacted by margin pressures and lower broker origination

Investment in branch refurbishment, Head Office consolidation and technology, delivering efficiencies and growth platform

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Net interest margin

NIM 2012 Full Year 2013 1st Half 2013 2nd Half 2013 Full Year

MyState Financial (%) 2.99 2.80 2.77 2.78

The Rock (%) 1.86 1.79 1.76 1.78

Slight deterioration in net interest margin across the Group

MyState Financial reduction a result of lag in repricing fixed deposit book, mitigated somewhat by moving away from higher priced retail funding to cheaper wholesale funding

The Rock margin impacted by delibrate strategy to lift retail funding mix. Other impact was rolloff of low margin RMBS issued pre-GFC

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Cost-to-income ratio

Group

80.0%

75.0%

70.0%

65.0%

60.0%2010 2011 2012 2013

Cost-to-income ratio continues to improve

Rock integration and Tasmanian cost reduction program working with branch consolidation and 10% staff reductions

Absolute cost reduction through last three half years demonstrating integration benefits and efficiency drives

Expect zero operating cost inflation for 2014 yearFor

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Operating expenses

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010 2011 2012 2013

2.52.9

3.6 3.5

Marketing costs $m

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2010 2011 2012 2013

32.9 32.8

38.4 38.5

Personnel costs $m

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2010 2011 2012 2013

3.44.1

5.2

7.3

Occupancy costs $m

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2010 2011 2012 2013

5.9 6.3

8.49.5

Technology costs $m

Technology cost increased following continued investment in improving systems, infrastructure and communications across the Group

Occupancy costs impacted by investment in revamping branches and consolidation of Tasmanian Head Office sites

People costs reduced through centralisation of back office document processing and corporate functions

Marketing and community engagement programs prioritised to support only key business activities and sales channels

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Asset mix and funding profile

2013 – MyState Financial

Overdrafts 5.0%

Housing Loans 88.3%

Overdrafts 5.0%

Personal Loans 4.0%

Commercial Loans 2.7%

Home Loans 100%

2013 – The Rock

Home Loans 100%

2013 – MyState Financial

TDs 48.2%TDs 48.2%

At Call Accounts 30.9%

CMT Notes 6.5%

2007-1 5.8%

NCDs 5.5%

2010-2 3.0%

2013 – The Rock

At Call Accounts 41.5%

TDs 38.3%

NCDs 14.6%

RBS 2007-1 3.4%

CMT 2.2%

Low risk balance sheet

• Quality home loan portfolio represents 92% of receivables

• Dominant retail funding with increased retail base at The Rock

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$477.8M

16.8%

$2.3M

0.1%

$69.6M

2.5%$21.1M

0.7%

$252.7M

8.9%

$144.1M

5.1%

$1,873.0M

65.9%

Loan distribution by state

The Rock acquisition diversifies portfolio

Broker channel origination adds further diversification and increases focus on nationally diversified portfolio

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Arrears 30 day+ arrears %MyState Financial mortgage loan arrears by units

The Rock mortgage loan arrears by units

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

S & P Spin MyState Financial arrears ROK

0

10

20

30

40

50

60

70

80

90

90+ days

100

30

50

70

90

Apr ‘12Feb ‘12 Jun ‘12 Aug ‘12 Oct ‘12 Dec ‘12 Feb ‘13 Apr ‘13 Jun ‘13

Apr ‘12Feb ‘12 Jun ‘12 Aug ‘12 Oct ‘12 Dec ‘12 Feb ‘13 Apr ‘13 Jun ‘13 Apr ‘12Feb ‘12 Jun ‘12 Aug ‘12 Oct ‘12 Dec ‘12 Feb ‘13 Apr ‘13 Jun ‘13

60+ days 30+ days

90+ days 60+ days 30+ days

Asset quality: 30+ day arrears

The RockMyState Financial

1.8%

1.6%

1.4%

1.2%

1.0%

0.8%

0.6%

0.4%

0.2%Dec ‘11 Mar ‘12 Jun ‘12 Sep ‘12

S&P Mortgage Performance Index

Dec ‘12 Mar ‘13 Jun ‘13

Integration of The Rock into MyState Financial operations management

Efficient and early engagement with problem loans

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Bad and doubtful debts

Specific loan

Write offs (RHS)

Overdrafts

Unsecured lending

Provisioning and write offs

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0

0.5

1.0

1.5

2.0

2.5

3.0

Apr ‘12Feb ‘12 Jun ‘12 Aug ‘12 Oct ‘12 Dec ‘12 Feb ‘13 Apr ‘13 Jun ‘13

Wri

te o

ffs

Pro

visi

on

ing

Mill

ions

Mill

ions

FY 2010 FY 2011 FY 2012 2013

Bad debts recovered ($m) (0.3) (0.8) (1.1) (1.5)

Bad debts written off ($m) 3.5 4.6 4.8 4.1

Increase (decrease) in provisioning ($m)

0.2 (0.6) (1.4) (0.9)

Net charge to P&L ($m) 3.3 3.2 2.3 1.6

Tighter credit managment continues to drive provisions lower

Debt recoveries have benefited from earlier direct action on problem loansF

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Company Profile






















02 COMPANY PROFILE

MyState Financial provides retail and business banking, agribusiness and insurance services to 120,000 customers in Tasmania.

“ “

HOBART AND SURROUNDS

BURNIE

DEvONPORT

LAUNCESTONKINGS MEADOwS

HOBART

GLENORCHYNEw TOwN

NEw NORFOLK

ROSNY

KINGSTON

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02 COMPANY PROFILE

Tasmania: economic environment

FY2013:

Poorest performing State economy

Minority government to face election in March 2014

Private and public demand declined through FY2013

Consumer sentiment weak

Dwelling approvals low

FY2014

Interest rate sensitive sectors (e.g. housing) lagging mainland lead, but some early signs positive

Confidence lifting as commercial building works to commence/ramp up

• Hospital ($364m), Parliament Square development ($100m), MONA ($20m), Toll freight terminal ($24m), Midlands Irrigation ($100m), University of Tasmania (UTAS)

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02 COMPANY PROFILE

MyState Financial – performance summary

NPAT $22.3m, up by 8.5% on previous corresponding period reflecting:

• 4.1% increase in loan portfolio to $2.1bn

• Further fall in non-performing assets

Low 30-day+ secured loan arrears demonstrate high credit quality

Net interest margin 2.78% (FY2012: 2.99%)

Level 1 capital adequacy of 13.46%

High quality liquid assets (HQLA) of 15.6%

Average loan to value ratio (LvR) of 67.2%

Branch refurbishment and consolidation program progressed

0.0

5.0

10.0

15.0

20.0

25.0$ millions

2010 2011 2012 2013

3.3

15.7

19.920.6

22.3

Tasmanian Banking – MSF

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02 COMPANY PROFILE

MyState Financial: high customer satisfaction 43%

17%

37%

30%

8%8%

32%Extremely Satisfied

Average

Very Satisfied

Satisfied

Neither

Dissatisfied (B3B)

21%

1%3%

41%

17%

32%

4%7%

35%

7%

37%

12%

9%

33%

14%

33%

11%

8%

24%

13%

35%

7%

19%

Source: Independent quantitative brand research conducted by specialist brand research firm Millward Brown – August 2012

Enjoys the highest level of customer satisfaction in this category at 96%

75% of customers are either extremely satisfied or satisfied

Second most considered brand in the State

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New core banking platform on track

Build phase completed

Testing well underway including implementation of customer-focused system modifications

Project completion on track for November 2013 – extended slightly from October to allow for further testing of customised functions

Capital expenditure of project remains on budget

Project is on track to achieve synergies post go-live in the form of:

• Reduced ongoing software maintenance costs

• Reduce data centre hosting costs

• Increased productivity

Implementation represents a low risk and low cost conversion relative to many other core banking conversionsF

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02 COMPANY PROFILE

The Rock provides retail banking and insurance services to 40,000 customers in Queensland and around Australia.

“ “

rockhaMpton

yeppoon

Gladstone

eMerald

Mackay

toWnsVIlle

caIrns

BIloela

GraceMere

BlackWater

BaralaBa

eMU park

MoUnt MorGan

theodore

Morra harVey Bay

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Central Queensland: economic environment

Strong population and employment growth

Favourable demographics

Diverse mix of industries to sustain growth, alongside mature, well-established businesses

Global demand for local commodities – particularly LNG – underpinning export potential

Pipeline of major projects continues to stimulate further growth

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The Rock performance summary

NPAT of $2.9m (pcp – 7 months only: $3.3m)

Contributed $1.6m to group overheads (pcp: nil)

Loan portfolio reduced by 9.7% to $0.9m due to less activity through broker channel – initiatives taken to reverse this decline

Increase of 32% in direct loan sales

Funding structure changing with more retail deposits and less wholesale/channel-introduced funds

Cost efficiencies through centralising functions in group head office

Net interest margin 1.78% (pcp – 7 months: 1.86%)

Capital adequacy of 13.43%

High quality liquid assets (HQLA) of 14.3%

Average loan to value ratio (LvR) of 68.5%

Significant increase in general insurance sales

New products and services introduced including new card products

Branch and refurbishment consolidation program progessed0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011

$ millions

2012 2013

3.3

2.9

Central Queensland Banking – The Rock

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Tasmanian Perpetual Trustees is a major provider of estate planning, wealth management, investment and trustee services in Tasmania

“ “

HOBART AND SURROUNDS

BURNIE

DEvONPORT

LAUNCESTONKINGS MEADOwS

HOBART

GLENORCHY

ROSNY

KINGSTON

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Tasmanian Perpetual Trustees – performance summary

NPAT of $3.1m, up 108.4% from previous corresponding period

• Cost reductions through integration of business units and centralisation of back office systems

• Higher commission income from estates under advice

Improved inflow to FUM and FUA

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013

1.71.6 1.5

3.1

Trustee and Wealth Business – TPT

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Tasmanian Perpetual Trustees – funds under management and advice

Total FUM up 2.2% to $952m

Good fund flow into strongly performing income funds and into growth funds

Investors moving away from cash

Some flow coming via new ‘platform’ distribution

Funds under advice up 5% to $733m

Fee-for-service model with salaried planners, compliant with FoFA procedures

80% of fees recurring through service packages

Referrals from retail and estate channels

Opportunity to offer increasing range of products to existing group clients

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

30/06/10 30/06/11 30/06/12 30/06/13

Cash Funds

Income Funds

Growth Funds

TPT - FUM

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MyState Limited – group strategy

Maintain and grow strong presence in Tasmania:

• Banking, wealth management and asset management

Capitalise on The Rock growth opportunities including:

• Enhanced product, service and channel offerings

• wealth offering

Continued focus on enabling technologies – core platform; loan origination; accounting system

Opportunities for further mergers with like-minded ADIs

Participation in industry rationalisation in trustee and wealth management sector

Ongoing focus on cost containment

Retain strong balance sheet quality and capacity for both organic and inorganic growth opportunitiesF

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Outlook FY2014 will be another challenging year for the banking and wealth management industries

Signals from Australian businesses and the Reserve Bank’s interest rate reductions over the past two years infer lack of confidence in the economy’s growth

Despite this challenging environment, the Group’s diversified businesses – MyState, The Rock and Tasmanian Perpetual Trustees – should continue to grow their assets and profitability in FY2014

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company profile september 2013 investor …2013/09/06 · september 2013 investor presentation...

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