Okay, can everybody hear me at the back? Is that okay? Okay, good morning, everybody, and ladies and gentlemen, welcome to the 2023 annual general meeting of MyState Limited. My name is Vaughn Richtor, and I'm the Chairman of the Board. On behalf.
Can I ask you to talk a little bit louder?
Yeah, can you turn this up a little bit? Sorry, I thought everybody could hear me. Can you hear me now? Okay. Thanks. On behalf of the board, I would like to acknowledge the ancient history and culture of Lutruwita, Tasmania, and acknowledge the Muwinina people who owned and cared for the lands we are meeting here on in person today. Now, we have people joining us from many different locations, so I'd also like to acknowledge the traditional owners of these many lands and pay my respects to all elders, past, present, and emerging.
This year, our AGM is again using online technology, which allows those shareholders, proxies, and guests who are unable to be here in person to attend the meeting virtually. Shareholders and proxies have the ability to ask questions and submit votes, and I'll explain how this is done shortly. If for any reason there should be a break in the broadcast, please remain online, and we will overcome the issue and resume as soon as possible.
Now, I note that there is a quorum of not less than 25 members present in person or by proxy, and therefore, I declare this annual general meeting of MyState Limited open. Present in person here in Hobart are the following board members: Deputy Chair, Bob Gordon; Managing Director and Chief Executive Officer, Brett Morgan; Stephen Davy, Sibylle Krieger , Warren Lee, and Andrea Waters. We also have present in Hobart, Mr. Nick Carter, the signing partner for our external audit, which has been conducted by Wise Lord & Ferguson. I'd also like to welcome our shareholder, Mr. Ian Day, who is also representing the Australian Shareholders Association. Ian, thank you. We have apologies received from Mr. Brian Faulkner and Mrs. Wendy Faulkner.
Now, the notice of meeting governing this meeting was distributed in accordance with the Corporations Act and also published on the ASX and MYS websites. In accordance with our usual practice, it has been determined to take the notice of meeting as read. Now, before we commence the presentations and items of business, I'd like to take a moment to provide a quick explanation of how questions and voting will be managed during the meeting. Voting. In accordance with the company's constitution, Section 43, it has been determined that voting on all business before today's meeting will be conducted by poll, which will be opened shortly. Cristina Piccolo from Computershare Investor Services has been appointed the Returning Officer.
Proxies which have been lodged by shareholders prior to the proxy submission deadline of 48 hours before the meeting, will be displayed on the screen for each item of business and will be incorporated in the poll on each resolution. Any undirected proxy votes given to the chairman will be voted in favor of the relevant resolutions. You can cast your vote on any resolution at any time during the meeting until the poll is declared closed. You can also change your vote on any resolution during the meeting, regardless of whether your vote was initially cast at this meeting or cast before the meeting.
Time will be provided at the end of the meeting to finalize votes before the poll is closed. To cast your vote, click the Vote icon, which is highlighted on the screen once the poll is formally opened. When you click on the Vote icon, the resolution will be displayed. Simply select your choice of for, against, or abstain for each resolution. There is no need to submit your vote as the system will automatically update. For those voting shareholders who are physically in the room with me today, you would have received a voting card upon registration.
Please either scan the QR code with your own mobile device and vote electronically or complete the reverse of the voting card. Should you require assistance to do this, we have Computershare staff available to assist you. When the poll is closed, your final selection will be recorded. Question process. The notice of meeting invited shareholders to submit questions prior to the meeting. We have received a small number of questions about the dividend, the share price, and cost management, which have been addressed in the upcoming presentations.
Questions on this meeting's business may be asked during the meeting, in writing or verbally, and will be addressed during the relevant item of business to which they relate. At each item of business, I will respond to questions from the floor first, and then address written and verbal questions from the meeting platform. Please note that written questions may be submitted through the meeting platform at any time during the meeting, and we encourage early submission of questions.
I will shortly explain how to ask questions through the meeting platform. Depending on the volume of questions raised during the meeting, we may not be able to answer each question individually. However, time will also be allocated prior to the poll being closed to answer any late questions that are raised. Questions of a personal nature are not appropriate to be discussed during the meeting. However, after the meeting closes, directors or members of our executive team in attendance will be happy to field any such questions.
Written questions. To ask a question in writing on the meeting platform, select the Q&A icon, then select the topic your question relates to, type your question into the chat box at the bottom of the screen, and press Send. To help facilitate the orderly running of the meeting, if you have a written question, we encourage you to lodge it now. There is no need to wait until the particular item of business is being considered to lodge a written question. Verbal or audio questions. For those online shareholders who wish to verbally ask a question, an audio question facility is available.
To use this service, please pause the broadcast on the meeting platform and dial in via a phone using the dial-in number as displayed under the broadcast window. You will be granted access, where you will listen to the meeting until you are introduced to ask your question. Opening of the poll. I now declare the poll open for all resolutions. You may now cast your votes by selecting the Vote icon. Ladies and gentlemen, I am pleased and proud to present my AGM address. The 2023 financial year has been remarkable for the industry and for MyState. The reemergence of inflation and the fastest increase in interest rates in more than 30 years tested both our customers and the business.
The RBA's war on inflation, coupled with supply chain issues, created a cost-of-living crisis for households and challenging conditions in equity markets. There was pressure on both mortgage and retail deposit pricing, wholesale funding, and asset values. These conditions have stress-tested the MyState growth strategy that started two years ago and demonstrated that it is the right strategy. I'm proud to say the business ended the financial year in good shape.
MyState delivered strong growth in mortgages, deposits, and new-to-bank customers. That growth came while at the same time maintaining our very high advocacy rate, as measured by the Net Promoter Score, which is a key measure of our customer focus. Our transformation into a modern financial services company with a strong digital focus continues, while at the same time ensuring that our products and services are easy to use and provide good value. The digital transformation is improving our efficiency, as reflected in our lower cost-to-income ratio, making growth in customers and the balance sheet sustainable.
I congratulate the team at MyState for continuing to serve the Tasmanian community and maintaining our customer focus. Tasmania is our traditional and historical heartland, and we continue to leverage our strong brands in the state, while at the same time increasing our East Coast footprint. In FY 2023, the total loan book grew by 13.5% to AUD 7.9 billion, while home lending grew at almost three times system growth. Customer deposits also grew at twice system growth to a figure of AUD 6.2 billion. Net interest margin eased by 4 basis points to 1.63% due to intense competition for both mortgages and retail deposits, with wholesale funding costs increasing significantly. Earnings per share increased by 16.8% to AUD 0.365 per share.
TPT's wealth result was more subdued in FY 2023, as we refocused our energies on Tasmania and cut costs interstate. In the 2023 fiscal year, the board determined to pay a final dividend of AUD 0.115 per share, fully franked, equivalent to a payout ratio of 64.9% of after-tax earnings. Now, this decision is in line with the current dividend guidance range, and we believe strikes a balance between pursuing our growth strategy to deliver operating leverage and rewarding shareholders. During the year, MyState issued for the first time AUD 65 million of additional Tier 1 capital, which provided ongoing diversification of the capital base. An AUD 400 million term RMBS transaction was completed in December 2022, and a new committed warehouse facility was established.
These transactions ensure that MyState remains well capitalized, support the growth strategy, and provide flexibility to MyState's capital management. At the heart of the growth strategy is prudent, sustainable, and profitable growth. The current Australian banking market is highly competitive, and credit growth is slowing. MyState's robust growth in mortgages over the past two years is expected to ease to near 2x system growth for full-year FY 2024. As I said, MyState has a proud Tasmanian heritage that gives us a competitive advantage in our home market, as well as targeting growth on the east coast of Australia as a challenger brand. I would like to briefly comment on MyState's share performance.
Over the past 12 months, the share prices of the smaller listed ASX banks has declined by more than 17% on average, due in part to broader negative sentiment surrounding small cap financial stocks in a highly volatile and challenging macroeconomic environment. The board and management team remain focused on executing the MyState growth strategy with the objective of delivering sustainable returns for our shareholders. To that end, as I noted earlier, FY 2023 has been a strong operating year, with above-system growth delivered. Our focus remains on sustainable growth while focusing on our customers. I would like to thank shareholders for not only supporting the business, but also being loyal customers. I will now hand over to Managing Director and CEO, Brett Morgan, for a closer look at the numbers and the operating environment and outlook.
Just checking everyone can hear me okay? Thank you. Good morning, everyone, and welcome. My name is Brett Morgan, and I'm the Managing Director and CEO of MyState Limited. As Vaughn mentioned, it's been a remarkable year, and the challenging macro conditions has tested our growth strategy. We, we embarked on the strategy in 2021. The goal is to provide better and more sustainable returns for our shareholders by scaling our business. Since the commencement of the growth strategy, the home loan book has increased by 43% and customer deposits by 40%. We have the people, systems, and processes to scale business. We're very well placed to grow our bank and wealth businesses and build further operating leverage. The benefits of scaling our business are evident in our FY 2023 results.
Our key portfolios of mortgages and household customer deposits had strong industry growth, 14.1% and 12.3%, respectively. At the same time, the bank's cost-to-income ratio reduced 641 basis points to 60.8%. Our strong growth and operating leverage saw earnings increase 30% to AUD 57.7 million, and we delivered a net profit after tax of AUD 38.5 million, up 20%. Return on equity grew to 8.7%. Great people and teams at MyState delivered the results. We know people want to work at places where they can connect with the organization's purpose. The launch of our new purpose in December 2022 sharpened our focus on making it easier to serve customers, helping our people be their best, and investing in our communities.
Our purpose was created by our people and has been a source of pride for our team. To help our people develop and perform to their potential, we continue to invest in learning and leadership programs, focusing on training and development to support our growth ambitions. We also created a well-being program to enhance resilience and provide more opportunities to engage with our foundation grant recipients here in Tasmania.
Pleasingly, we've seen a rise in successful internal promotions as well. We also improved our staff engagement, and the score year-on-year rose to 73%, which places MyState well within the high-performing band. Given the challenging external environment, MyState mortgage customers have shown resilience, having built up savings when rates were low. Approximately one in three mortgage customers are more than six months ahead in their repayments, and the level of those in arrears tracks below the industry average.
We proactively attempt to contact every customer coming off a fixed low-rate interest home loan to offer assistance as they transition to higher repayments. Over the year, we also helped customers save by substantially increasing our award-winning Bonus Saver and term deposit rates. We attracted many new customers, grew household deposits at double the industry rate. TPT Trustee Services distributed cash and transferred assets valued at more than AUD 83 million to more than 3,000 beneficiaries. We were able to achieve all of this while maintaining our high level of customer advocacy with a Net Promoter Score of +35. Our customers continue to shift towards digital banking, with more than 77% of customers registered for internet mobile banking, and more than 96% of transactions completed digitally.
We continue to invest in next-generation digital technology with the development of an improved banking experience, including online application forms, to make it easier for new and existing customers to engage with us. Our digital products are helpful and intuitive, and timely reminders about upcoming bills and personal notifications about moving money into and out of accounts. Staff in branches are increasingly helping customers use digital services and tools as well.
In 2023, we saw a significant increase in concern around cybersecurity and scams. Australians lost more than AUD 3 billion through the year to scammers. Everyone's a target, and the types of scams are consistently evolving. Protecting our customers from scams is a top priority for us, and we do this by preventing, detecting, and responding to scam threats and working with the industry, government, and other sectors of the economy.
It's going to take a team approach, including the active involvement of our customers, to shut down the scammers. To support scam prevention, we educate customers on scam threats through our website, customer updates, social media. Customer education includes information on protecting passwords, double-checking new billers, and being wary of unsolicited calls and clicking on links. Two-factor authentication and PayID are effective barriers to scammers when passwords and codes are kept secure and not shared.
We've invested in artificial intelligence capability to better detect and prevent scams as well. We're also part of an industry drive to strengthen intelligence sharing on scams. Looking ahead of the macro environment, whilst inflation, cost of living, and higher loan repayments are biting, employment and house prices are remaining resilient. It is well documented that higher rates, slower credit growth, and the repayment of the RBA's term funding facility is maintaining near-term pressure on revenue and margins across the retail banking industry.
At MyState, we have the people, processes, and systems to scale our business and extract operating leverage. We will continue to grow MyState Bank in Tasmania and across the Eastern Seaboard in our core product segments of mortgages and customer deposits. TPT Wealth will focus on growing in Tasmania, where we have a competitive advantage. While these are uncertain and challenging times for many, we remain focused on improving customers' digital and human experiences across both MyState Bank and TPT, and we'll continue to simplify our products, processes, and systems to reduce risk and drive efficiency.
In addition, while we'll continue to focus on organic growth, we are open to opportunities to accelerate scaling the business where it makes sense. On a personal note, I would like to thank our customers and our clients for choosing us, for their support. This report marks my first full year as CEO of MyState, and I would like to thank everyone for the way my family and I have been welcomed to Tasmania. I'll now hand back to the chairman.
Thank you, Brett. Now, before we commence the formal items of business, I would like to invite questions to myself or Brett arising from our addresses again, noting that any questions of a personal nature may be directed to us after the end of this meeting. Are there any questions? I can't hear you, sorry. Okay, you'll have to shout. I think I can hear you, yeah. Did you want to take that, Brett?
Can you hear me? Yep. You're right in saying that, the next month's RBA meeting is live and depends on, probably most likely, the inflation number that prints later this month. Our borrowers have been incredibly resilient, and we've built up a-- our customer base is lower risk, owner-occupied, principal and interest type borrowers, so they're the lowest risk, type when you lend money. But it's been incredibly resilient. We have seen an increase in customers, in arrears, and that has gone up over the whole of last year as rates have risen. But what we have seen is incredible resilience. We have, five customers out of our 30,000 loans, we have five where we're mortgagee in possession. And we'll be down to, most likely, all things going well, one at the end of the month.
So, what we're seeing is that in general, borrowers are holding up well. They remain well ahead in their repayments, and those falling behind, it's relatively small compared to those ahead. We think another rate rise will have a minor impact, but overall, our Dynamic LVR is around 56%. Borrowers are in a pretty good position on average, so there'll be marginal impact, but if their rates rise. So we feel like we know we have a really good quality lending book. So from an industry perspective, we're well below... We're below the industry in terms of customers behind. So it's a good, good customer base.
Thank you for the question. Thank you. Another one here, please.
As banking fraud and cyber scams continue to increase. When I have updated my changes with this bank. This bank needs to aim for customers' experiences to be no less than exceptional, and problems need to be dealt with immediately. My family has a term deposit with this bank of some AUD 400,000, and I have personal investments of around AUD 4 million.
We deserve more respect than to be sent a letter from this bank saying, "You won't discuss our issues any further." Does a culture exist within this bank, that if there is a problem, a cover-up will occur? All we want from this bank is a bank that can show us it knows what it's doing, and a bank we can trust. The bank's share price continues to head south, so a much greater effort is needed from management and the board to turn this around. Thank you.
Thank you for your comments. As I said earlier, Ron, if there's any issues of a personal nature, you can take them up with us afterwards. Thank you. Thank you for your comment.
You won't speak to me about it.
We've discussed it with you, again.
We have.
Thank you. Thank you very much.
Thank you.
Any other questions from the floor? Are there any written questions from the meeting platform, Company Secretary?
No.
Okay, there's no questions. Any verbal questions from the meeting platform? Okay, if there's no more questions, we'll now move to the formal items of business, and we'll also address any questions in respect of each item which have been submitted during the meeting. The first item of business is to receive and consider the financial statements and reports. No resolution is required on this item.
The directors have prepared and have approved the financial statements included in our 2023 annual report. The auditor's report is unqualified. Questions are invited relating to the annual accounts, the directors' statement and reports, or about the conduct of the audit and preparation and content of the auditor's report. Questions may be directed to the company or the external auditor, Mr. Nick Carter. Are there any questions from the floor? Any written questions on the meeting platform?
Any verbal questions from the meeting platform? Thank you very much. Let's move to item 2, which is for the meeting to consider, and if thought fit, pass the following ordinary resolution: That Andrea Waters, who retires from the office of director by rotation, in accordance with Clause 62 of the Company's Constitution and ASX Listing Rule 14.4, being eligible and offering herself for re-election, be re-elected as a director of the company. I note that the board, in the absence of Mrs. Waters, has voted unanimously to endorse Ms. Waters' re-election. I will now ask her to present to the meeting.
Thanks, Vaughn, and good morning, fellow shareholders. It's been a pleasure to be able to serve you as a director since I joined the board in October 2017. I joined the MyState board because I'm passionate about the important role that regional and smaller banks play in providing an alternative to the Big 4 banks. My background as an auditor at KPMG, specializing in banking and wealth management, has enabled me to bring a depth of industry experience to my role as a director.
During my time on the board, I have served as chair of the Group Audit Committee and as a member of the Group Risk Committee and the Group Digital and Marketing Committee. I've sought to bring my experience of financial services, audit, and business more broadly to bear to the many complex judgments and decisions we have had to make. I hope that I have helped to contribute to the strong position MyState is in today, and I remain excited by the opportunities the company has for further growth. If re-elected today, I commit to continuing to serve in the interests of you, our shareholders, and all MyState stakeholders. Thank you.
Thank you, Andrea. Are there any questions from the floor? Any written questions from the meeting platform?
No.
Any verbal questions from the meeting platform?
No questions.
Thank you. The proxy votes received prior to the meeting will now be displayed on the screen. Thank you, Scott. Now turn to item three, which is the re-election of Warren Lee. Ordinary resolution that Warren Constitution and ASX Listing Rule 14.4, being eligible and offering himself of the company. I note that the board, in the absence of Mr. Lee, has voted unanimously to endorse Mr. Lee's re-election. I will now ask Mr. Lee to present to the meeting.
Thank you, Vaughn. Good morning, shareholders, and thank you for being involved in this year's AGM. My name is Warren Lee, and I was appointed to the MyState board in October 2017, and therefore I'm up for re-election at this meeting of shareholders. I'm a chartered accountant and had an extensive executive career in financial services, both here in Australia and also in Asia. At MetLife Limited, which is the Australian business of the global insurer, MetLife, and Warrakirri Asset Management, an asset manager with a focus on agriculture as well as traditional asset classes.
In addition to my position as a non-executive director on the MyState board, I'm also a member of the audit committee, a member of the risk committee, and I chair TPT Wealth. The MyState Bank business has developed significantly over the last six years with a focused digital strategy that will deliver better outcomes for our customers, and I fully support our long-term growth goals. We've also completed significant upgrades to our offer, capability, and platform in our wealth business, and I look forward to improving performance there.
Brett and the executive are well-positioned to deliver on our goals, and this will deliver value for you, our shareholders, and our other stakeholders. I'm very pleased to be involved with MyState, and look forward to working with the other board members and the executive as the MyState business continues its successful transition into a leading digital bank and wealth provider in Australia. So thank you for your attention and your support.
Thank you very much, Warren. Are there any questions from the floor? Any written questions from the meeting platform? Verbal questions from the meeting platform? If there's no questions, the proxy votes received prior to the meeting will now be displayed on the screen. Thank you. We'll move to item four. Item four is to consider, and if thought fit, pass the following 250R(2) of the Corporations Act 2001, and for all other purposes, the remuneration report, which forms part of the directors' report for the year ended 30 June 2023, be adopted. The remuneration report is set out on pages 35-52 of the 2023 annual report. The vote on this resolution is advisory only.
The relevant voting exclusions and details about the outcome of this vote are included in the notice of the meeting. Are there any questions from the floor? Are there any questions, either verbal or written, from the meeting platform? No questions. The proxy votes received prior to the meeting will now be displayed on the screen. Thank you, Scott. We'll now move to item five, which is to consider, and if thought fit, pass the following ordinary resolution.
That for the purposes of ASX Listing Rule 10.14, and for all other purposes, the issue by the company of up to 162,540 unlisted performance rights to the company's Managing Director and Chief Executive Officer, Mr. Brett Morgan, as part of Mr. Morgan's remuneration for the financial year ended 30 June 2024, on the terms set out in the explanatory memorandum to this notice of AGM, be approved. In accordance with the Corporations Act and ASX listing rule requirements, the company will disregard any votes cast in favor of this resolution by the company's key management personnel or closely related parties, as described in full in the voting exclusion statement set out in the notice and explanatory memorandum for this meeting.
Are there any questions from the floor? Are there any verbal or written questions from the platform? The proxy votes received prior to the meeting are now displayed on the screen. Thank you, Scott. Now move to item six, which is to consider, and if thought fit, pass the following ordinary resolution. That for the purposes of Clause 65 of the company's constitution and ASX Listing Rule 10.17, the maximum aggregate annual remuneration that may be paid or provided by the company to non-executive directors, be increased by AUD 250,000 per annum, from AUD 950,000 to a maximum of AUD 1.2 million per annum.
In accordance with the Corporations Act and ASX Listing Rule requirements, the company will disregard any votes cast in favor of this resolution by or on behalf of any director of the company or any of their associates, as described in full in the voting exclusion statement set out in the notice and explanatory memorandum for this meeting. Are there any questions from the floor? Are there any questions, written or verbal, from the platform?
The proxy votes received prior to the meeting will now be displayed on the screen. Ladies and gentlemen, there are no further items for the business of this meeting, but before we close the poll, are there any final questions? No questions from the floor. Any final questions from the meeting platform, written or verbal? Okay, we'll just pause for a minute to allow any shareholders to finalize their voting before closing the poll. Okay. I will now declare the poll closed. Please note that the results later today, and you can access these results by going to the ASX or indeed, the MyState Limited website. There being no further business for this annual general meeting, I thank you all for attending today and declare the meeting closed. Thank you very much.