Thanks, Darcy, and good afternoon, and thanks for joining us today for our FY 2025 results briefing. I'm Brett Morgan, MyState Limited's Managing Director and CEO, and with me is Gary Dickson, our CFO. Turning to slide two, earlier today we launched our FY 2025 financial results with the ASX, and these are also available on our website. With respect to today's agenda, I will begin with an overview of the full-year result before Gary takes you through the financials in more detail. I will then end the presentation with a summary of our key business priorities before Gary and I welcome questions. Moving to slide four, FY 2025 is a landmark year for MyState . Our transformational merger with Auswide completed in February 2025, and we are pleased to report that the integration is going well.
In the four months since merger, we have already achieved annualised cost synergies of AUD 8.4 million. Importantly, we've continued to grow the business post-merger with loan book growth of 7.5% on an annualised basis. In addition to growing the loan book, we have maintained our high levels of customer advocacy, attracted new-to-bank customers, grown customer deposits, and accelerated growth of Selfco, our equipment finance business. Supported by the combination of Auswide for four months, in FY 2025 our underlying NPAT increased 17% to AUD 41.3 million. We are well capitalised, which gives us flexibility to invest and grow into the future. The board declared a final dividend of AUD 0.11 per share, fully franked, taking the full-year dividend to AUD 0.215 per share. Gary will talk more about the dividend later. Turning to slide five, the FY 2025 result reflects the transformational year we've had, driven by the merger and underlying business performance.
Turning to our key metrics, the merger and organic growth saw our home loan and deposit books increase by 62% and 71% respectively. Underlying NPAT was up 17% to AUD 41.3 million. Total capital ratio increased 109 basis points to 17.5%, providing us with the flexibility to continue to invest in and grow our businesses. Underlying EPS was AUD 0.307, which reflects the combination of Auswide and MyState Limited and includes AUD 0.01 per share in realised synergies in the first months post-merger. Importantly, the results were underpinned by continued strength in our service proposition. Moving to slide six, critically, our transformational merger with Auswide is on track and is already delivering value. In the first four months since the merger completed, we have delivered AUD 1.7 million in actual synergies. On a full run-rate basis, annualised synergies equate to AUD 8.4 million.
In the early stages of integration, we have successfully established a single Board and Executive Team, consolidated our group financial, our group services functions including risk, HR, technology, finance, and marketing, focused on our people and invested into new capability, rationalised our internal and external audit relationships, and negotiated a single corporate insurance arrangement. Turning to slide seven, during the year, we continued to invest in a range of strategic priorities across our four brands. MyState Bank successfully launched its new digital banking platform, delivering an improved digital experience to our customers. Pleasingly, MyState Bank's entire digitally active retail customer base is now using the new platform. We also enhanced our lending processes, which shortened time to decision, supported higher volumes, and delivered operating efficiency.
Auswide Bank launched a major new partnership with Rural Services Group Elders to distribute a range of our banking products to a new market through their network. Our TPT business is building significant momentum in the referral and conversion of trustee opportunities across new and existing segments. We have also reduced operating costs through a range of process enhancements. Selfco, our higher margin equipment finance business, has grown significantly since the merger, with loan book growth of 43% in just four months. I will now hand over to Gary, who will take us through the financials in more detail.
Thanks, Brett, and good afternoon, everyone. Slide nine contains a summary of this year's financial performance, which includes a full 12 months for MyState Bank and TPT Wealth, and a four-month contribution from Auswide, including Selfco. Our key financial metrics, including operating income, core earnings, and underlying NPAT, were all well above last year's standalone MyState result. Total operating expenses were also up, primarily reflecting the inclusion of Auswide. We continued to closely manage our underlying operating expenses, with cost growth across MyState Bank and TPT Wealth of only 3.7% for the year. Net interest margin increased two basis points year on year, with MyState Bank NIM stable and the inclusion of Auswide a positive to margin. We remain strongly capitalized with our total capital ratio increasing by 109 basis points to 17.5%, providing MyState with the capacity to drive future growth.
Slide 10 contains a high-level summary of the financial contribution from our banking and wealth businesses. The banking result is shown on a combined ADI basis, with further detail on the individual operating performance of both MyState Bank and Auswide Bank detailed in the appendix. Moving to slide 11, underlying NPAT of AUD 41.3 million was up 17% on the prior year, driven by higher net interest and other banking income, partly offset by increased operating expenditure due to the inclusion of Auswide. Underlying NPAT excludes merger-related transaction and integration costs and purchase price allocation adjustments, totaling AUD 5.7 million, which are all included in the statutory NPAT result of AUD 35.6 million. Net interest income increased 26% due to a larger average balance sheet and a small uplift in average net interest margin. Other banking income rose 24%, driven by higher lending and transaction fees and commission revenue.
Wealth management income fell, impacted by non-recurring commissions earned on some large estate values in the second half of FY 2024. Total operating costs were up 25.7%, driven by the higher merged group cost base. Slide 12 shows the combined net interest margin for MyState Bank and Auswide. Average NIM of 1.47% was up two basis points on FY 2024. Exit NIM was slightly lower than average NIM for the second half of 1.49% due to the impact of the reduction in the RBA's official cash rate in May, which flowed through to variable rate lending and deposit products in the month of June. NIM also continues to be impacted by home loan and deposit price competition, some customers switching to higher rate deposit products and home loan retention discounting, partly offset by Selfco's higher NIM.
Slide 13 provides a breakdown of operating costs for the year, which increased 25.7% to AUD 127 million. The inclusion of Auswide in the group added approximately AUD 22 million to the cost base, with MyState Bank and TPT Wealth limiting cost growth to 3.7% over the year, noting a portion of corporate overhead is now also allocated to Auswide. Underlying expense growth remains a focus and continues to be well managed. Key drivers of the uplift in expenses were personnel cost growth of AUD 12.2 million, reflecting increased FTE with the inclusion of Auswide staff. Technology costs increased AUD 8.5 million due to the addition of Auswide and higher software maintenance fees. Other expense growth of AUD 5.6 million reflected Auswide spend and volume-related lending and payment system costs.
Slide 14 includes financial information on a pro forma basis for FY 2025, comprising 12 months of earnings for Auswide Bank and 10 months of earnings for Selfco. The pro forma operating income and expenses in FY 2025 form a baseline for the merged group. The slide highlights the recovery in Auswide's earnings, with underlying NPAT of AUD 6.1 million in the four months since merger, being only 6% lower than the eight-month pre-merger period. Slide 15 provides a summary of the anticipated ranges and timing of synergies and the cost of integration on an annual basis through to FY 2028. For the outer years, these represent our current best estimates, and the actual timing may differ. At this point in time, integration and the realisation of synergies is proceeding as expected.
As we've previously disclosed, the merger is expected to yield annual pre-tax cost synergies of AUD 20-AUD 25 million over a three-year period. We've provided a range with respect to integration costs, noting that our best estimate remains AUD 29 million, with the majority of this anticipated to be spent in the next two years. Turning to slide 16, our home loan portfolio increased by 62% to AUD 12.9 billion at 30 June, following the merger with Auswide and underlying organic growth in the book. The group continued to actively manage the volume margin trade-off and focus on growth in low-risk owner-occupied lending. Loans with an LVR of less than 80% made up approximately 79% of the total book.
Both applications and settlements increased on the prior year, and as Brett highlighted earlier, we also made digital enhancements to our lending processes, which shortened the time to decision, supported higher volumes, and delivered operating efficiency. Home loan customers have continued to demonstrate resilience, with employment markets remaining stable across Australia, inflation now back within the RBA's target range, and house prices supported by recent cuts in the official cash rate, with the potential for further rate reductions. The chart at the top right of this slide highlights a blended 90-day arrears rate of 44 basis points, which comprises 54 basis points for MyState and 25 basis points for Auswide, both remaining below industry average. Moving to slide 17, primarily as a result of the merger with Auswide, customer deposits increased to AUD 10.1 billion and now represent nearly 71% of our total funding mix.
During the year, we saw growth in term deposits and both transaction and offset account balances. Post-merger, the group has a broader deposit gathering capability through MyState Bank's improved digital channel, Auswide's partnership model including the new Elders relationship, and a larger, more geographically diversified branch footprint along the Eastern Seaboard. Securitization remains an important source of funding, and in October 2024, MyState Bank issued its largest securitization term deal, which provided additional flexibility to run off more price-sensitive deposits. Slide 18 shows that the group remains strongly capitalized, with the total capital ratio increasing 109 basis points to 17.5%. This increase was supported by profit generated during the period and the issue of tier 2 eligible subordinated notes in May 2025, partly offset by the FY 2024 final and FY 2025 interim dividends.
The chart also includes the pro forma capital position at June 30, inclusive of the redemption of AUD 25 million of subordinated notes that occurred on July 10, the first call date for these notes. MyState's strong capital position provides us with the flexibility to continue to invest in key initiatives, including growing our home loan and asset finance books. Turning to slide 19, TPT provides MyState with income diversification, contributing AUD 14.6 million in fee revenue and other income to the group, while expenses were 3% lower than the prior year. The decline in FUM reflects the finalization of some large estates during the year. Looking forward, the business is expected to benefit from increasing momentum in the referral and conversion of opportunities in existing and new segments of the trustee services market.
Slide 20 provides a snapshot of our equipment finance business, Selfco, which was acquired by Auswide in August 2024. The asset finance market is estimated to be worth AUD 40 billion per annum. Selfco's target market is Australian small businesses seeking to purchase business-critical assets used to generate income. The majority of the book by asset type comprises trucks and trailers. Selfco originates loans nationally via the broker channel, supported by BDMs on the ground in key states. The loan book has grown 43% since the merger and 98% since it was acquired by Auswide nearly 12 months ago. The business is higher margin, and going forward, we will look to continue to scale a relatively fixed cost base to generate appropriate risk-adjusted returns. Finally, on slide 21, the board has declared a final dividend of AUD 0.11 per share.
This takes dividends for the full year to AUD 0.215 per share, representing a full-year payout ratio of approximately 88% of underlying NPAT. The board considered a range of factors when declaring the final dividend, including one-off merger-related transaction costs and integration costs, while also recognizing that Auswide only contributed to group earnings for a four-month period. The second-half payout ratio of 78.1% is within the board's target range on an underlying NPAT basis. The dividend reinvestment plan will be offered to shareholders at a discount of 1.5%. I'll now hand you back to Brett to summarize our key priorities as we look ahead.
Thanks, Gary, and turning to slide 23. In terms of integration priorities, we'll move to a single banking license, which will simplify many aspects of our banking business across treasury, finance, risk, compliance, product, and operations. We'll implement a new loan origination system to modernize our loan decisioning process and experience, select and consolidate the core banking system, and continue to consolidate the broader technology stack. We'll continue to consolidate our supply chain, we'll align our operating model, and we'll consider our future bank branding. In terms of business priorities, it is to profitably grow our home loan book, grow customer deposits directly and via partnerships, including the Elders partnership, continue to scale Selfco, our equipment finance lending business, accelerate the growth in our private trustee services business, continue to consider organic and inorganic opportunities where it makes sense.
Moving to slide 24, we believe MyState Group investment case is compelling. We now have a larger and more diverse home loan book, improved financial resilience, greater access to funding, increased operating leverage, and flexibility to pursue growth opportunities. As this result demonstrates, the merger is progressing well. We've made good early progress to extract cost synergies, we've continued to grow the business, and we've launched new initiatives to drive future value. We are well capitalized, have a track record of profitability, an attractive, fully franked dividend yield, and are targeting double-digit EPS growth based on full run-rate merger synergies. We have an experienced management team that have the proven ability to execute, and we look forward to profitably growing our retail banking, wealth, and equipment finance businesses into the future. Gary and I will now answer any questions you may have. Over to you, Darcy, to moderate.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Alastair Hunter from Ord Minnet. Please go ahead.
Thanks, Brett and Gary. We're down on first result incorporating Auswide . Just on the cost synergy slide, slide 15, note that you've sort of identified annualised cost synergies as of the end of June at AUD 8.4 million, but then we're forecasting on the 2026 number only AUD 9 million-AUD 10 million run rate. It seems like a very small uplift given you'll be spending AUD 12 million-AUD 14 million and obviously undertaking a fair bit of activity as you've outlined. I'm just trying to reconcile why that AUD 9 million-AUD 10 million looks low relative to an AUD 8.4 million run rate at the start of the period.
Yeah, hi Alastair, it's Brett. Thanks for the question. You're right, in terms of what we did in the first year was identify and execute on those quick win synergies, which included the one board management team, the rationalization of some auditors, insurance, and some other things. The next period is the lower, easier, I'll call it easier, the more straightforward synergies have been delivered. We will be investing into sort of one loan origination system, one ADI, and some other areas where we expect to extract the synergies towards the second half of FY 2026, early FY 2027. That's the reason for the timing and the jump in 2027 and not a significant uplift in 2026.
Of course, we're going to try and bring these forward and execute well and bring them forward as far as possible, but the next set of synergies we really see to take a little bit of investment to deliver.
Yeah, it's not just the timing. Push that a little bit.
It's the timing, it's just, it's almost on the edge of the financial year, to be honest.
Yep, understand. Cost growth, excluding the sort of merger synergy activity, looks like, again, based on what you've sort of disclosed, around about a 6% underlying business as usual cost growth for the new combined group. Is that about what you're flagging?
Yeah, on slide 14, with that pro forma information, which is hopefully helpful, we've got a baseline, if you like, of just over AUD 180 million. I think, as you correctly highlight, Alastair, the underlying cost growth is, call it sort of 5% per annum, so that's an uplift in the order of AUD 9 million. From slide 15, as you've highlighted, you can see that range of synergies, so net net, we're expecting that rate of underlying cost growth in FY 2026 to be broadly offset by the synergies that we realize, so a relatively flat cost base year on year.
Thank you. A question on your loan asset growth, building in a significant increase in Selfco. What do you see as your, this is a system housing credit growth of many of the other banks that come out of the 5% - 7% range? Where do you see your appetite for home loan growth versus that desire to make it profitable growth? What rates of growth would be realistic for 2026?
Yeah, you're right on the trade-off between growth and margin, Alastair. We think, based on our business and noting the larger base, we want to grow marginally ahead of the system. We're sort of thinking system's going to be 5%- 6%, so our expectation is slightly ahead of that. We see ultimately, we see that as the optimal rate between growth returns and operating leverage.
Understand. In terms of funding that growth, just interested in the sort of outlook for the Auswide Elders product, which really only got sort of launched and is being educated currently with the Elders sales team. What sort of scale would you see you could raise of deposits through the Elders channel? Secondary question really on capital in terms of where you sit at the moment, the 13.2% tier 1 ratio, noting you've got lots of headroom at the total capital ratio including the debt, but at the tier 1 level, how do you see that funding this asset growth versus continued use of, I suppose, more securitisation in the year ahead?
Yeah, Alastair, I'll answer the funding question and hand to Gary on the capital. At a high level, we're always targeting more than 70% of deposits through customer deposits, and we consider Elders part of the customer deposits. That's the first point. Secondly, you are right, the Elders partnership was only really rolled out post-merger, in the last three or so months, and it's about educating and helping each of the Elders outlets to be able to take on board customers. We have seen some nice momentum there, and we expect that to accelerate. It will form a decent part of our funding position going forward. It must be strategically important to us and also Elders to continue the partnership. We do expect that to grow considerably.
I think on the capital side, Alastair, clearly we are endeavoring to fund the majority of loan book growth through customer deposit funding. In line with the funding mix that's set out on slide 17, we'd expect that to be at a minimum of 70% as we look forward. In terms of more specifically on capital, as you can see on slide 18, as you've highlighted, the CET1 capital ratio is 11.88%. From a rating agency perspective, we've previously communicated we have a target of maintaining that at at least 11% in terms of those rating agency requirements, with effectively an internal appetite limit greater than 11.25%. There is a little bit of headroom there, or quite a bit of headroom there to grow. You mentioned tier 1, obviously we have AUD 65 million of additional tier 1 capital on issue.
That will ultimately roll through on January 2027 to be treated as tier 2 capital as part of the changes in the APRA capital framework. We have capacity to grow. Securitization, capital release securitization, will still remain an important funding source for us.
Thank you. On dividends, thank you very much for the extra dividends that came through. I suppose, looking through some of the costs that you've outlined that are related to the merger and timing from the first half, as we look into the 2026 dividend, can I just clarify whether the 60% - 80% is going to be based on the underlying NPAT or the statutory numbers, noting that you've probably got AUD 0.02 or AUD 0.03 on an after-tax basis in that adjustment between the statutory and underlying as a negative drag into the next 2026 year before it normalizes out in 2027 and 2028. Which way can you guide the market as to the denominator for your 60% - 80%?
Yeah, I think Alastair, as you saw this year, the board looked through to underlying effectively to consider the dividend to pay, and we're in a transformational period. Obviously, there's some investment and spend to deliver synergies and outcomes, all in the order to create shareholder value. I would say the board will take decisions relevant at the time with the future view in mind. I can't give you a definitive end pattern underlying, but just know that the board will consider the relevant factors at the time when taking the decisions about the dividend.
All right, if it's sort of a half by half.
I think over time it'll come back to status, but in the mean through the period we'll consider all factors.
Thank you. I'll pause there, let others ask some questions.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Nathan Zaia from Morningstar. Please go ahead.
Hi, Brett and Gary. I just had a couple of questions. The first one was obviously getting very good growth in Selfco. Do you have any sort of targets or ambitions of how quickly you want to, I guess, diversify away from what is a very heavy home loan book at the moment?
Hi Nathan, it's Brett. We're really pleased with the addition of Selfco, the Selfco team, and how that business is being run and grown. Really excited as part of the group and the diversification that it brings to the business, particularly in terms of asset class and higher NIM. You've seen since the merger, sorry, since Auswide acquired the business, Selfco had grown 98% since the merger, 43%. The nice thing is part of the larger group, we have more shared distribution, more shared capital, and opportunity to grow. You can expect to see that business continue to grow strongly for the foreseeable future.
The sort of dollar amounts that it's been growing, would that, can that keep, would you try to keep it up at that sort of rate? T he flowing loan growth
That is . No, we don't expect that business to slow down. The level that we've been growing at, we expect to continue that to grow into the future at that rate.
Now the other one I had was on the Auswide margins and book. I know you've put here the exit NIM lower than the second half average, or the second half of 1.57%, but the thing I was just interested in is how much of the book is still fixed and even the flow is, there's a lot of fixed compared to, you know, broader market and the rest of your loan book. Can you just explain why that is and why that's not switching to variable?
If you have a look at slide 38, we've got sort of stock and flow metrics for Auswide and MyState Bank on page 37 as well. To answer your questions, fixed is a percentage of the total book at 30 June. You can see on that slide, it's only 8%. From a flow perspective, for the six months to June 2025, it was around a similar level. You'll be aware across the market, it's certainly a variable rate market at the moment. I think the fixed rate exposure for Auswide peaked around that sort of 30% to 35% as a percentage of total book. We're well and truly through the majority of those, that maturity runoff.
Okay, got it. All right, thanks, guys.
Thanks, Nat.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a moment to allow for any final questions to register. Thank you. We have a follow-up question from Alastair Hunter from Ord Minnett. Please go ahead.
Thank you. Just wondering if you can talk to the competition you're seeing on front book, both at the deposit side at call TDs, but also on lending in the home loan front books, and whether that differs at all between your MyState product and Auswide Bank product.
I would say, Alastair, competition remains heightened on both sides of the balance sheet. There's no difference between Auswide and MyState. One of the interesting insights is that the market is aware of pricing and that we are a group. We are becoming aware of that. Heightened competition exists on both sides of the balance sheet. With rates moving around, we see that sort of positioning and jostling. Heightened competition is present, and one of the good reasons to have the diversification through the equipment finance business as well.
If we sort of pull together the fact we've had another rate cut post the comments included in terms of those exit margins and possibilities of further, should we, in terms of how the sensitivity is for your book positioning, should we assume therefore that we are going to see for the 2026 year versus 2025 a lower margin for the group versus perhaps the 1.48% that you've put out there as the pro forma lended for the group?
Yeah, always a challenge to forecast where net interest margin is going to go, Alastair. What we will say is, I think from a structural balance sheet perspective, we're still estimating the impact of a 25 basis point rate cut to have about a 2 basis point impact on margin. That's just the way the balance sheet is structured. The ultimate outcome from a NIM perspective will depend on a whole range of decisions around product pricing, the timing and quantum of pass-through on the variable rate home loan book and variable rate deposits. I think the best guidance we can give you is that sort of 2 basis point impact that we estimate, noting that there's a range of variables at play. The other thing to call out, of course, is the tailwind from Selfco's contribution.
Yes, much higher NIM, understand. I mean, just in terms of, I suppose, some of the regulatory front outcomes as you see them for MyState, looking forward, the small mid-bank review that was undertaken didn't, from our read, look like it had much in it. Is there anything from either Brett or Gary that you look at that industry have you undertaken and say, you know, there's some wins in it for you, the relative and absolute positioning of MyState?
Yeah, we welcome the government regulators' position that competition is really important and that they're moving towards smaller players. The announcement moves more towards having competition in the market and it's something that MyState, Auswide and our group brings to the market. That was welcome. In terms of the detail, Alastair, let's see what comes out. I think there have been a couple of shifts which have reduced the impost on us as a smaller player, but to be honest, it's marginal. We're looking forward to seeing what practically comes out of it and the support it provides. At this stage, I'd say good first step, looking forward to seeing the detail and then we can understand the benefit that it'll bring our business. Directionally, it's in our favor.
Yep, understand. Gary, the sort of covered bond area is not something that's been undertaken historically by smaller banks or yourselves. Is that something, the opening up there looked interesting or not really?
That's certainly something that we will have a look at once we get a little bit more detail. That's definitely a potential area of opportunity for us. We've probably traditionally been a little bit small. One of the potential advantages of now being a large merged group is that that type of market potentially opens up for us.
That's all my questions. Thank you very much, both of you again. Appreciate it.
Thanks, Alastair.
Thanks, Alastair.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Morgan for any closing remarks.
Thanks, Darcy, and thanks everyone for joining the call today. Gary and I look forward to catching up with some of you over the coming months.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.