25-Sep-2018 • Corporate

Industry super fund-owned bank ME achieved underlying earnings of $96.5 million for FY18, up 13% on last financial year and continuing a strong run of annual growth. 

Statutory profit after tax – which includes a realised gain on hedging instruments ($3.6 million), and spending on IT projects ($10.9 million) – was $89.1 million, up from $61.9 million in FY17.

In announcing the result ME’s CEO, Jamie McPhee, said “it is vitally important to have a bank directly aligned with the interests of customers performing strongly, particularly in the current environment.”

“ME is owned by industry super funds and is charged with helping all Australians get ahead. Realising that mission is about growing our business and reaching more customers.”

Mr McPhee said earnings growth reflected a 7% increase in the bank’s asset portfolio to $28.3 billion and higher net interest margin, up 12 basis points to 1.62% on the previous financial year. 

“Underlying earnings have grown at an annual compound rate of 19% since June 2014.”

“Our home loan portfolio grew 1.3 times the industry average due to $6.2 billion in new home loan settlements.”

“Customer deposits grew 17% to $14.8 billion while household deposit growth topped the industry, up 27% or nearly five times the industry average, and provided improvements to the quality of ME’s funding profile while ensuring consistently high rates of return for customers.”

“Customer numbers grew 13% to 474,000 and have increased at an annual compound growth rate of 11% since June 2014.” 

“Underlying return on equity of 8.1% was in line with target. The cost-to-income ratio was 64.5%, a slight increase due to accelerated amortisation of legacy software systems.”

Mr McPhee said ME had performed strongly in tough operating conditions, including a softening home loan market, macroprudential restrictions on home lending, rising funding costs, and ongoing regulatory imbalances. 

“We expect to increase market share in FY19 despite challenging conditions by investing in digital experiences for customers and continuing to develop our suite of retail banking products and services.”

“One area of focus is credit cards, particularly migrating to a new credit card platform, which will enable ME to expand its suite of credit cards.”

“We are also planning further improvements to home loan products and services.”

“Increased operational efficiency and profitability will come by continuing to build out the use of robotics.”

Mr McPhee said “ME will stay true to its core purpose of helping all Australians get ahead, ensuring customers’ interests are not subservient to shareholders’ interests.”

“Our Net Promoter Score, which tracks customers’ willingness to recommend the bank, averaged 34 during FY18, the third highest across the industry.”

“We look forward to the opportunities inherent in open banking and the new payments platform, which will make it easier for customers to switch and will foster greater competition across the market.” 
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