17 August 2018 INVESTOR PRESENTATION FULL YEAR FY2018
AGENDA FY18 INVESTOR PRESENTATION 1. Highlights & strategy Melos Sulicich Managing Director & CEO 2. Financial results David Harradine Chief Financial Officer 3. Strategy & outlook Melos Sulicich Managing Director & CEO FY18 FULL YEAR INVESTOR PRESENTATION | 2
HIGHLIGHTS & Key highlights STRATEGY Results MELOS SULICICH FY18 FULL YEAR INVESTOR PRESENTATION | 3
KEY HIGHLIGHTS Growth across key financial metrics and underlying performance drivers Growing contribution from digital channels with increased customer adoption and advocacy Continued momentum in bank balance sheet and FUM growth and soundly capitalised for future growth High customer advocacy, disciplined strategy execution and increasing customer uptake of digital are underpinning MyState’s performance FY18 FULL YEAR INVESTOR PRESENTATION | 4
KEY METRICS AND PERFORMANCE DRIVERS Change on FY17 results except where otherwise stated Total income: Net interest income: +1.4% +3.1% $126.3m $90.8m Solid performance and growth across all Net profit after tax: Earnings per share: +0.93cps key metrics +4.6% $31.5m 34.97 cps Return on average equity : Fully franked dividend : +9bps +0.25cps 28.75 cps 1 10.1% Increased full year dividend of 28.75cps and final dividend Cost to income: Total capital ratio: +18bps -190bps steady at 14.5cps 64.0% 13.47% 2 fully franked Home loan book: Funds under management: +5.9% +6.9% $1.15b $4.4b 1.2x system 1. Final dividend of 14.5cps payable to shareholders on the register at the record date of 24 August 2018 2. 11.51% CET1 (FY17: 11.28%) FY18 FULL YEAR INVESTOR PRESENTATION | 5
FINANCIAL Results summary Credit profile Tasmanian economy RESULTS Performance Funding Shareholder returns Loan book Wealth DAVID HARRADINE FY18 FULL YEAR INVESTOR PRESENTATION | 6
IMPROVING OPERATING LEVERAGE DELIVERING GROWTH Change FY18 FY17 (v FY17) Total operating income ($m) 126.3 124.6 +1.4% Revenue growth Operating expenses (excl. BDD) and cost 80.9 82.2 -1.5% ($m) containment delivered positive Net Profit after tax ($m) 31.5 30.1 +4.6% jaws and a lower Earnings per share (cps) 34.97 34.04 +2.7% cost to income ratio Net interest margin (%) 1.89 1.93 -4bps Cost to income ratio (%) 64.0 65.9 -190bps Momentum in banking and Total capital ratio (%) 1 13.47 13.29 +18bps wealth with home loan book Return on average equity (%) 10.1 10.0 +9bps growing +2x system in 2HFY18 and wealth FUM and FUA Return on tangible equity (%) 13.7 13.4 +28bps growing strongly Dividend – fully franked (cps) 2 28.75 28.50 +0.25cps Dividend payout ratio (%) 83 84 -1.0% Credit performance – 0.47 0.51 -4bps 30 day arrears (%) 1. 11.51% CET1 (FY17: 11.28%) 2. Final dividend of 14.5cps payable to shareholders on the register at the record date of 24 August 2018 FY18 FULL YEAR INVESTOR PRESENTATION | 7
MARGIN COMPRESSION IN COMPETITIVE ENVIRONMENT BBSW Significant increase in BBSW during 2.20 2H18 impacted funding costs 2.10 2.00 BBSW (%) Net interest margin down -4bp on pcp 1.90 1.80 Lending market remains highly 1.70 competitive 1.60 1.50 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 BBSW 1M BBSW 3M NIM waterfall 2.30% NIM trend Origination costs Increase Decrease 2.10% 2.13% 1.94% 1.93% 1.89% 0.19% 1.84% 0.21% 0.07% 0.02% 0.02% 1.90% 0.02% 0.01% 1.93% 1.70% 1.89% 1.50% FY17 Asset price Origination Asset mix Funding Funding mix FY18 FY16 FY17 1H18 2H18 FY18 costs price FY18 FULL YEAR INVESTOR PRESENTATION | 8
CONTINUED DISCIPLINED COST MANAGEMENT Operating costs declined -1.5% below pcp Continued focus on re-shaping the cost base to enable investment in customer acquisition, marketing and digital capability Administration costs managed well below pcp Depreciation and amortisation increased on pcp as higher levels of investment in technology began to be amortised Operating expenditure 84 $ Millions $0.80 83 $0.23 $0.16 $2.48 $0.13 $0.10 82 $0.11 81 $0.09 $82.16 80 $80.90 -1.5% growth 79 78 FY17 Payment Personnel Technology Marketing Depn & Amort. Administration Occupancy Governance FY18 system and other FY18 FULL YEAR INVESTOR PRESENTATION | 9
NPAT UNDERPINNED BY NII GROWTH AND WEALTH Net profit before tax growth of 6.5% and NPAT growth of 4.6% Strong NII growth despite continued competition in lower risk, lower LVR lending Wealth growth across all business lines Operating expenditure managed below prior year; one-off benefits also assisted High quality growth leading to low bad debt outcomes NPAT waterfall $34.0 $33.0 $ Millions $0.24 $1.27 $1.37 $1.38 $32.0 $2.70 $31.0 $1.78 $1.37 $30.0 $29.0 $31.5 $28.0 4.6% growth $30.1 $27.0 $26.0 $25.0 FY17 Net profit Net interest Other income Banking non Wealth income Operating Net bad and Tax expense FY18 Net profit after tax income interest income expenditure doubtful debts after tax FY18 FULL YEAR INVESTOR PRESENTATION | 10
STRONG 2H LENDING GROWTH Home loan book – applications and settlements Loan book grew +2x system during 2HFY18 $2.0 1.79 1.68 Margin management remains key focus $1.8 $ Billion $1.6 1.42 $1.4 1.19 1.11 $1.2 Emphasis on maintaining quality lending 1.00 0.88 $1.0 0.79 growth amidst vigorous competition 0.65 $0.8 0.46 $0.6 $0.4 Growth targeted to Australian eastern seaboard; $0.2 $0.0 focus on lower LVR loans with high asset quality FY16 FY17 1H18 2H18 FY18 Applications Settlements Geographic home loan book spread Total book – composition ($m) $3,853 $4,269 $4,550 +7% +11% 100% NT $55 $63 $71 QLD 98% $72 $63 0.1% $50 14.1% $64 WA $66 96% $68 SA 1.7% 0.9% 94% NSW 21.4% 92% $3,663 $4,076 $4,358 90% VIC TAS FY16 FY17 FY18 15.6% Housing Loans Personal Loans 45.5% Business / Agri / Commercial Overdrafts Lower concentration Higher concentration FY18 FULL YEAR INVESTOR PRESENTATION | 11
CONTINUED HIGH CREDIT QUALITY 30+ Days S & P Arrears Data Impairments remain at historic lows (Majors and Regionals one month behind) 3.00% 30 and 90 day arrears well below peers and stable 2.50% 2.00% AASB 9 to be implemented July 2018 with 1.50% expected increases in provisioning 1.00% 0.50% 0.00% Home loan book LVR profile Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Year on year $5.0 growth $4.36 Group SPIN Majors SPIN Regionals $4.08 $4.5 >90% LVR 0.20 $3.66 0.26 $4.0 85%-90% LVR 90+ Days S & P Arrears Data -17% 0.31 (Majors and Regionals one month behind) 0.39 80%-85% LVR 0.30 1.40% $3.5 0.39 $ Billions 0.42 1.20% 0.32 $3.0 1.00% 0.45 0.80% $2.5 0.60% $2.0 0.40% <80% LVR +15% 3.51 0.20% 3.05 $1.5 2.51 0.00% $1.0 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 $0.5 Group SPIN Majors SPIN Regionals $0.0 FY16 FY17 FY18 FY18 FULL YEAR INVESTOR PRESENTATION | 12
IMPROVED FUNDING MIX Customer deposits ($m) Stable funding mix enhanced by growth $3,267 $2,988 +10% +9% $2,715 in customer deposits 1,717 1,527 1,397 Customer deposit growth supported by introduction of eSaver and Everyday 1,550 transaction accounts 1,461 1,318 Programmatic RMBS issuance continues FY16 FY17 FY18 to be well supported by broad investor- Customer at call deposits Customer deposits at term base Funding mix Moody’s Baa1/P2 stable investment grade rating 19.0% 21.2% 23.8% 14.1% 13.2% 8.2% 68.0% 66.9% 65.7% FY16 FY17 FY18 Customer deposits Wholesale funding Securitisation FY18 FULL YEAR INVESTOR PRESENTATION | 13
WELL CAPITALISED TO SUPPORT GROWTH Robust capital position supported by organic capital generation Capital base underpinning growth and investment in digital Well positioned to meet regulatory changes Total capital movements 1.51% 1.74% 1.46% 13.47% 13.29% 1.39% 0.13% 0.08% 0.02% 1.96% 2.01% Tier 2 11.51% Tier 1 11.28% FY17 Capital Securitised Profit Dividends paid Secured Capitalised Other asset FY18 initiatives assets mortgage intangibles growth lending FY18 FULL YEAR INVESTOR PRESENTATION | 14
GROWTH IN WEALTH BUSINESS Funds under management and funds under advice ($m) Wealth revenue growth +10.6% on pcp with 809 778 solid performance across all business lines 740 Trustee revenue +25% on pcp benefiting from +6% sustained focus on will writing 1,008 1,089 1,153 FUM growth of $64m +5.9% FY16 FY17 FY18 Funds under management Funds under advice FUA growth of $31m +4.0% Operating income ($m) Income fund strategy and investment focused $18.52 on the growing income needs of retirees $16.74 $ 17.48 3.45 3.07 3.19 Investment planned to grow wealth business 4.70 4.81 3.76 10.36 9.59 9.79 FY16 FY17 FY18 Funds Management* Trustees Financial Planning * including funds management mortgage fees FY18 FULL YEAR INVESTOR PRESENTATION | 15
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