ME Bank reports loan growth but margins bite
ME Bank reported a 25 per cent fall of $67.1 million in its full-year profit results.
The result was after the bank stripped $15.1 million in costs relating to hedging instruments, IT system remediation and decommissioning costs – forecasted to be completed in the next as well as impairment costs of $14.4 million relating to ME’s credit card business.
The bank did manage to increase its home loan portfolio by 7.3 per cent to $26.3 billion – compared to the system growth of 3 per cent.
In a statement, the bank said that the quality of funding improved in 2019 with household deposits now funding 43 per cent of ME’s loan assets (excluding securitisation), up from 39 per cent 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
However, the net-interest-margin fell three basis points to 1.59 per cent due to ongoing intense competition for home loans.
The lower NIM and increased regulatory and compliance costs caused a fall in return-on-equity to 7.2 per cent. On an underlying basis, the cost-to-income ratio increased 30 basis points to 64.8 per cent.
ME’s credit quality remains healthy with 90+ day delinquent home loans remaining in line with the industry at 0.71 per cent. Home loan credit losses remain low at $456,133.
Deposits were up by 13 per cent to $8.6 billion.
Market share of household deposits over the last year increased from 0.85 per cent to 0.92 per cent.
Customer numbers at 30 June 2019 were 517,868 (up 9 per cent year-on-year) meaning one in 50 Australians now bank with ME.
“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,” ME Bank CEO Jamie McPhee said.