The Auswide Bank Ltd (ASX: ABA) share price is up 2% today after the market reacted positively to the company's half-year results.
Auswide Bank is a deposit-taking institution and licensed credit and financial services provider. The company is located principally in regional and metropolitan Queensland, Sydney and Melbourne.
Strong profit growth and loan book growth
For the six months to 31 December 2019, the bank increased its net interest revenue by an impressive 10.9% to reach $34.516 million. Meanwhile, consolidated net profit after tax (NPAT) was also higher, increasing by 9.3% to $9.256 million.
Earnings per share increased 1.8 cents during the period to reach 21.9 cents, while a fully franked interim dividend of 17 cents per share (cps) was declared, up 1 cps.
Auswide delivered strong annualised loan book growth of 5.4% during the first half, well ahead of system growth of 2.4%. At 31 December 2019, the company's total loan book had increased from $3.019 billion in the prior corresponding period (pcp) to $3.216 billion. Auswide commented that these results were achieved despite a challenging lending environment.
Customer deposits now represent 73% of Auswide's total funding mix, driven mainly by strong growth in at call savings accounts which were up 24% on an annualised basis.
The financial service provider commented that South East Queensland and NSW markets remained strong. Auswide has benefited from improved brand awareness from its partnership with the Queensland Rugby League (QRL), which is now in its second year of operation.
Lending arrears were noted by the company to be continuing to trend downwards, which it accredits to the sound credit quality of its loan book. Current arrears of $12.2 million were down more than 54% compared to $26.6 million back in 30 June 2016. Auswide believes that this achievement reflects its ongoing focus on strong governance and risk management.
Auswide further commented that its home lending book remains mature with 74.3% of loans having a loan to value ratio (LVR) of 80% or less.
Strong net interest revenue
Net interest revenue of $34.516 million was achieved, up 10.9% up by on the pcp on the back of the company's strong loan book growth.
Auswide recorded a 7 basis point net interest margin expansion from 188 basis points in December 2018 to 195 basis points in the current half, with an expected upward trend in the next half.
Additionally, ongoing cost discipline delivered a reduction in the cost to income ratio from 64.8% to 62.9%.
Technology to combat cyber threat
Auswide commented that technology will be a key focus area going forward as it remains vigilant against the increasingly sophisticated cyber risks that face both the bank and its customers.
The financial service provider further added that it will take considered steps to improve its digital offering to clients, enhance its processes and ensure its security continues to meet industry standards.
