MyState Earnings: Margins Likely Near the Bottom After Another Step Down

MyState’s first-half fiscal 2024 cash net profit after tax fell 5% on the prior half, with net interest margins dropping nine basis points to 1.46%. The small bank is feeling the pressure of intense price competition for customer deposits and loans. Focused on low loan/value ratio, home loan management is tempering loan growth, up just 1% in the half, but does aim to increase loans in line with the market in fiscal 2024. Lending into the first home buyer scheme market resuming and an appetite to lift investor loans (where MyState is underweight peers) should support growth. The bank is highly dependent on the mortgage broker channel, and in this market, price is likely taking precedence over the speed of approval. With higher funding costs and less scale, it’s understandable that MyState needs to pause its ambitions to quickly expand the loan book, at least until more rational pricing, to prevail. The bank also responded by lowering staff and marketing costs, bringing operating expenses down 1.5%. However, the bank cost/income ratio increased to a weak 64.4%.