MyState Limited (ASX: MYS) today announced its financial results for the 2016-17 financial year.
The highlights of the result include a statutory net profit of $30.1 million, up 6% on the prior corresponding period's (pcp's) statutory profit, but down 3% on an underlying basis (if adjustments for one-off costs related to M&A and its accelerated write down of intangible software assets are excluded).
Total revenue for the company came in at $124.6m which is 1% higher than the pcp and its net interest margin fell almost 10% to from 2.13 to 1.93 basis points.
Its final dividend is flat and remains at 14.5 cents fully franked which is expected to be paid on 13 September 2017 for those shareholders holding the shares prior to the ex-dividend date of 23 August 2017.
At first glance, it looked to be a fairly unexciting result for a company that has experienced declines in its net interest margin whilst attempting to grow its customer base away from its Tasmanian roots.
But growing nationally is exactly what it's doing with loans outside of Tasmania now making up more than 50% of the total. Its total loan book is up almost 11% to $4.3 billion, and its deposits are also growing strongly totalling almost $3b.
For shareholders who can take a longer-term view, there's a lot to like despite the competitive environment it operates in.
With one-off expenses related to a number of technology projects out of the way, management are expecting to see further cost reductions and revenue gains as they grow their market share which will help to offset any further margin decline.
Its lending criteria appears to remain very robust despite the growth its achieving outside of Tasmania. Loans 30 days in arrears fell 27% to 0.51% and its loans 90 days in arrears have been kept at 0.28%, well below that of National Australia Bank Ltd. (ASX:NAB) which reports the same metric at 0.80%.
Capital adequacy remains outstanding at 13.3% and well above the Australian Prudential Regulatory Authority's 2020 CET1 ratio target of at least 10.5%.
Its wealth management arm has exhibited good progress too with funds under management growing 8% to $1,089m despite a fall in revenue from its Trustee Services division.
Its outlook is positive given it's been able to combine its core banking platforms into one and offer its customers a contemporary digital offering. This should include its New Payments Platform by the end of the year which is intended to allow customers the ability to transfer money in real time. Customer service, therefore, will be a key competitive advantage in the future and MyState looks well placed as long as it can stabilise its net interest margins.
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