MyState Ltd (ASX:MYS) (FY 2026) Earnings Call Highlights: NPAT Surges 41% to $58. ...

Negative Points

• Statutory NPAT of $56.2 million was impacted by $2.1 million in merger-related integration costs and fair value adjustments.

• Total integration costs are now expected to be $32 million, up from previous estimates due to the new core banking platform and higher inflation.

• Retail banking competition remains robust, putting pressure on net interest margin in the retail segment.

• Home loan application volumes in June and July were down approximately 7% following federal government budget announcements.

• The group's capital ratio was managed down to 15.8% following Tier 2 capital redemptions of $52 million.

• Selfco's growth was deliberately slowed in certain sectors, such as transport and logistics, due to geopolitical challenges.

• The new core banking platform will not be operational until before the end of FY 2028, with benefits not included in current synergy targets.

• The full year dividend payout ratio of 71.5% is close to the midpoint of the target range, limiting potential for higher payouts.

• Deposit growth of 4% lagged loan growth of 7%, potentially increasing reliance on wholesale funding.

• The rebranding of the Auswide business to MyState is not expected to be completed for approximately 12 months.

Q & A Highlights

Q: Can you give us a feel for when you expect the go-live date for the new core banking platform, and what quantum of benefits we would expect once you do hit go-live with the common core new system? A: Brett Morgan (CEO): We're targeting to be operating on our new core banking platform before the end of FY 2028, with no change to when we think the integration will be completed. We haven't considered additional benefits from moving to a more modern AI-enabled core banking platform as part of the synergies. Those long into the future will be more productive business, able to serve our customers better, and have a better platform for growth. We see that separate to the delivery of the synergies through the integration.

Q: In terms of the current operating environment from a risk-return perspective, are you moderating growth rate for Selfco, or are you still pursuing profitable growth? A: Brett Morgan (CEO): With the geopolitical challenges that exist in the market today, we took a deliberate decision to slow it down a little bit, particularly in the transport and logistics sectors. We put in additional controls for new customers, which meant we missed some business, but that is okay. Going forward, our appetite is to broadly grow at about the same absolute pace that we have been growing it at to date. We think it is going to be a very good part of our business, but we are conscious of growing it at about the same absolute rate.

Q: In terms of your forward risk adjustment overlay, you have increased your overlay, but your change in forward outlook seems to be an improvement in economic recovery. Can you explain the bucket allocation? A: Gary Dickson (CFO): The forward overlay as a total has increased by $1.7 million, from $2 million to $3.7 million, and as a percentage of the total collective provision, that is an increase from 17% to 26%. Our base case assumptions are more pessimistic relative to what we had assumed in June 2025. For example, the base case assumptions for house prices are now minus 5% and then flat, whereas last year we had that as either zero and up 5% or 5% and 5%. We have certainly taken a more cautious approach in terms of the way we have thought about the overlay.

Q: What is your macro settings and where would you guide us in terms of the head and tailwinds around a full year NIM for 2027? A: Gary Dickson (CFO): We are broadly aligned around system growth of 4%, and what we are endeavoring to do is to grow sort of around system, maybe slightly quicker than system. From a NIM perspective, our exit NIM in the month of June was higher than our average NIM for the second half. Retail banking competition remains robust, and on the retail side, I think margin remains under pressure. One of the offsetting tailwinds that we will see is the increase in contribution from the Selfco business. Exit NIM in June has also benefited from the full month effect of the increase in the official cash rate in May.

Q: In terms of competitive conditions on the deposit side, what dynamics do you expect to see in terms of competition on the margin of what is one of the higher growth lines or channels of deposits at the moment? A: Brett Morgan (CEO): On the basis that credit slows a little bit, we expect competition for deposits to become a bit softer as well, given the demand for money will be a bit less. We are pretty excited by the momentum we have got in our Hello Saver, the digital part of the business. We have also got partnership channels and our branch network, so we have got a nice amount of distribution which supports our deposit gathering. If competition on lending strengthens a little bit, we expect the competition on deposits to loosen a little bit given the demand for money.

Q: Can you provide an update on the appetite for securitization and whether you have started to see momentum in the Elders partnership channel with deposit flows? A: Gary Dickson (CFO) & Brett Morgan (CEO): Securitization remains an important funding source for us, and we also use it as a capital management tool. We will continue to be a programmatic issuer into the RMBS market, which historically has meant one term transaction per annum, normally around the September, October, November timeframe. In terms of the partnerships business, we have about 10 different partnerships, and the partnership with Elders has continued to grow that part of the portfolio. Most importantly, our branded deposit growth has been stronger and with great momentum.

Q: When are you kicking off the change in branding to the MyState across the Auswide business? A: Brett Morgan (CEO): We've been slowly introducing the MyState brand to the Auswide customers and broader business across a number of fronts. We're moving quickly towards using solely a MyState brand for our broker distributed mortgages. On other parts, like the branches in Queensland that are Auswide branded, we will only rename the business when we move the customers over onto the new core banking platform. The shorter answer is, it's probably 12 months away for the whole business to rebrand.

Q: The original $20 million to $25 million synergy target included $6 million to $7 million of technology savings identified. Is that still your expectation of the consolidation of two to one systems? A: Brett Morgan (CEO): Yes, that's correct. The $6 million to $7 million of technology savings identified as part of the original $20 million to $25 million synergy target remains our expectation for the consolidation of two to one systems. The longer-term benefits from the new AI-enabled core banking platform are separate to the integration synergies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .