FHLDS, refinancing drive up MyState book

Speaking at MyState Bank’s annual general meeting this week, the company’s managing director and CEO, Melos Sulicich, revealed that the lender had seen a record rise in loan settlements between July-September 2020, marking a new record for the first quarter of a financial year.

The bank celebrated a 43 per cent rise in loan settlements in the first quarter of the financial year when compared with the prior corresponding period.

Speaking to Mortgage Business, MyState’s general manager, banking, Tony McRae, noted that a “key component” of the increase was the First Home Loan Deposit Scheme (FHLDS). The first tranche of the scheme opened in January of this year, with the second instalment opening on 1 July 2020 (and additional 10,000 places are now being made available for this financial year under the New Home Guarantee).

Mr McRae said: “We had very strong participation in that scheme for the first two tranches, and we’re now seeing those flow through the pipeline and starting to settle.”

The general manager, banking, noted that demand for the FHLDS had been so great that the bank had to pause intake of applications earlier this year due to a backlog that caused turnaround times to increase from two days to over 10 days.

Mr McRae told Mortgage Business: “On the FHLDS, we did pause taking new applications, largely a result of balancing the offers that we had in the market and ensuring that we’ve continued with a strong service proposition.

“The volume that came through that scheme did impact our service levels a little, so we wanted to make sure that we got service levels at the right level for our brokers. They were over 10 days at one point, which wasn’t the level we pride ourselves on, and it certainly wasn’t the level that brokers were able to embrace... But now I’m happy to say that they are now back to two days or under, and the view is to keep managing to that level. “

He continued: “Moving forward, we will be reopening the FHLDS [New Home Guarantee applications] in our heartland, Tasmania, first. And we’ll watch how that goes and how our service levels manage before making any decisions, as appropriate.  

“But the reality is, we want to make sure that we continue to provide the right level of service to our brokers, and we need to monitor that closely and ensure that we don’t overload ourselves.

“Two days is our published service level agreement, and that’s very much our focus to keep that turnaround times to within that two days.”

Mr McRae added that the bank’s cashback offer for refinances, which was extended to cover mainland Australia in August, had also helped lift flows in the first quarter of FY21.

“We’re just only seeing some of the flow through that. But we’ve certainly seen applications in the refinance space pick up,” he added.

Indeed, Mr McRae noted that for some periods in 1Q2021, 50 per cent of all applications coming into the bank were for refinances. This follows a similar trend that is being seen nationally, according to new PEXA data.

Combined, the banking GM said that the uptick in FHLDS and refinance activity had increased the loan book by 4.5 per cent in the first quarter (on an annualised basis). 

This followed the loan book’s 4.7 per cent growth in FY20, which reached $5.3 billion.

Overall, the bank reported increases of 20.6 per cent in core earnings (pre-provision operating profit) and 21.7 per cent in net profit after tax (before restructuring charges) in 1Q2021, compared with the previous corresponding period.

Customer deposits had increased by 1.5 per cent compared with the first quarter of FY20, helping net interest margin grow to 1.91 per cent for the quarter up from 1.76 per cent in the same quarter last year.

“These are clearly a good set of financial metrics,” Mr Sulicich said.

“Six years ago, we adopted a strategy to transform MyState into a highly scalable digital banking and funds management business, attracting a growing number of retail customers across Australia’s eastern states. 

“The operational efficiencies and the improvements we have made since then are now flowing through to the bottom line and setting us up for a very bright future. 

“If the trend seen in the first quarter continues for the balance of the year, the full year result will likely be materially ahead of last year.”

The bank is expected to announce its half-year results at the end of February 2021.

The board outlined that it anticipates resuming dividend payments after the end of the first half of FY21. 

[Related: MyState becomes latest to join cashback trend]