ME full year results

ME today announced its FY19 full year results, maintaining its recent track record of solid growth as it continues to capitalise on a values-based brand and a core set of simple, fair, transparent and competitively priced retail banking products.

ME CEO, Jamie McPhee, said:

“Despite experiencing one of the toughest years in banking, with record low credit growth, record low interest rates, a highly competitive environment, and increased regulation and compliance, ME has grown strongly in both home loans and household deposits and has increased its market share and customer base.

“Since it was established in 1994, ME has built a brand around the values of simplicity, competitive rates, and doing the right thing by customers.

“ME’s net promoter score, which averaged 30 in FY19, reflects ME’s excellent standing with customers and we forecast an increase to our market share in FY20.”

Business growth

ME maintained a healthy asset growth trajectory over the 12 months to 30 June 2019, increasing its home loan portfolio by 7.3% to $26.3 billion compared to market growth of 3%, a growth rate of 2.5 times system for the 12-month period.

In June 2019, ME had a 1.53% share of the home loan market, up from 1.46% 12 months ago.

Impressive growth in household deposits occurred across the full year as they reached $8.6 billion, an increase of 13.4% or a growth rate of 2.6 times system.

Market share of household deposits over the last year increased from 0.85% to 0.92%.

The quality of funding improved in 2019 with household deposits now funding 43% of ME’s loan assets (excluding securitisation), up from 39% in June 2018. Household deposits are forecast to fund the majority of the bank’s asset growth for the foreseeable future. The bank met its stable funding targets earlier than planned.

Customer numbers at 30 June 2019 were 517,868 (up 9% year-on-year) meaning one in 50 Australians now bank with ME.

ME continued to build a values-based employee culture that attracts talent and embraces diversity. ME’s annual employee survey had its highest participation rate on record – 94% – and reported an increase in overall employee engagement from 68% in 2018 to 69% in 2019.

Financials

Statutory net profit after tax of $67.1 million was down from $89.1 the previous year. This result included non-recurring items comprising realised and unrealised gains/losses on hedging instruments (-$3.1 million); IT system remediation and decommissioning costs, which are forecast to be completed in the next 12 months (-$15.1 million); as well as impairment losses on ME’s credit card business (-$14.4 million).

After excluding non-recurring items, ME’s underlying full-year net profit after tax (NPAT) was $99.8 million, up 3% on the previous year.

During the year ME took the strategic decision to stop its investment in a new credit card platform and associated new credit card products; among other factors, it was not economically feasible to continue due to the expectation the credit card market is undergoing significant disruption.

NIM fell three basis points to 1.59% due to ongoing intense competition for home loans. The lower NIM and increased regulatory and compliance costs caused a fall in ROE to 7.2%. On an underlying basis, the cost-to-income ratio increased 30 basis points to 64.8%.

ME’s credit quality remains healthy with 90+ day delinquent home loans remaining in line with the industry at 0.71%. Home loan credit losses remain low at $456,133.

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