MyState Achieves Strong Loan Growth in Fiscal Year 2022; Now Focus Needs to Be on ROE Improvements

No-moat MyState’s fiscal 2022 profit fell 12% to AUD 32 million, slightly weaker than our forecast of AUD 34 million. Loan growth of 26% was strong, outpacing system growth of 8% over the year. This was expected, though, as the bank deployed capital after raising equity in June 2021. Earnings and ROE should improve as the bank gets the annualized benefit of the larger loan book. Despite solid loan growth, net interest income was down 1.6% from fiscal 2021, the result of a sharp fall in net interest margins, or NIM, of 29 basis points to 1.67% over the year. With higher marketing and distribution costs required to support the growing loan and deposit books, operating costs increased 13%. We had already expected growth to come at the cost of lower margins and higher operating expenses, and while the result was a little weaker than expected, it is not material enough to have an impact on our AUD 5.50 fair value estimate.