Lender closes branches in all but one state
A non-major bank has announced that it is closing all of its branches outside its home state as it prioritizes brokers and digital channels.
Tasmania-based lender MyState Bank has confirmed it is closing its four branches in central Queensland and two branches in Tasmania following a sharp decline in in-person transactions and strong performance in digital channels and brokerage.
In announcing its full year results for FY20, MyState Bank revealed that two-thirds of its customers now use internet banking.
Branch transactions have reportedly declined by 29% over the past two years, with the vast majority of these occurring last year and accelerating particularly during the coronavirus pandemic.
Meanwhile, digital transactions have grown 27% over the past two years, with numbers holding steady last year.
More and more customers have also signed up for online banking since the onset of COVID-19, the bank said.
MyState Bank Managing Director and CEO Melos Sulicich said: “Over time more and more people will want to do their banking digitally. It’s just the way it is.
“What we are seeing in the current period is that COVID has really accelerated this. In-branch transactions fell 30% between March and June, which is a huge change. And we also find that we are not bouncing back. So despite the fact that the Tasmanian economy opened up within … many people saw that [digital banking trend] Carry on. “
He continued, “I think the whole world is moving, in different ways, towards more internet content. Transactional banking is no different. And we’re just taking the opportunity – with the huge reduction in traffic – to close those six branches.“
In view of the abandonment of physical transactions, the bank has announced that it will close all of its Queensland storefronts: Gladstone, Rockhampton, Stockland Rockhampton and Yeppon.
This means that its only branches will be in its home state of Tasmania. However, two of the nine branches in that state will also close – one in New Town and one in Kings Meadows.
The lender said it is also closing its TPT Wealth Devonport branch and “streamlining” some corporate offices in Tasmania as more customers turn to online banking and wealth services, and the lender staff continue to embrace remote working.
These changes will result in a one-time restructuring cost of approximately $ 2.4 million pre-tax in 1H21.
“We have no plans to close the other branches at this time, and we will continue to assess this as people change their habits,” Sulicich said.
As the bank is closing its branches on the Australian mainland, he added that brokers would remain his go-to channel for mortgages.
Recognizing that approximately 80 percent of his loan portfolio comes from brokers, Mr. Sulicich told The Adviser, “We have had a strong brokerage strategy over the past 10 years. From MyState and The Rock merged about 10 years ago, we have made most of our loans through brokers, and we don’t see any change in that regard.
“Mortgage brokers are a very important part of the Australian economy. They are a very important part of the Australian home loan economy. We do not expect this to change and we plan to continue distributing home loans on the mainland through brokers and in Tasmania through brokers and through the branch network.
He continued, “We want to invest as much money as possible in marketing and advertising our business to tell Australians how good we are so they can open bank accounts and join us. We want to tell Australian brokers [how good we are] so that they can get a loan from their clients with us.
“Our goal is to develop this business and grow as quickly and as successfully as possible. And we think we have a great opportunity to do so right now. “
In the last fiscal year, MyState increased its mortgage portfolio by 5.1 percent, bringing its total loan portfolio to $ 5.3 billion (up 4.7 percent from last year). ).
The bank’s owner-owned loan portfolio represents 79 percent of the total portfolio, with an emphasis on loans with a loan-to-value ratio of less than 80 percent.
Net operating income before provisions and taxes increased 12.9% to $ 47.9 million from $ 42.4 million in FY19. After provisions of $ 4.9 million for possible credit losses, statutory net income after tax was $ 30.1 million, compared to $ 29.8 million for continuing operations during the year. year 2019, down 3% compared to last year.
The bank’s board has said it has decided not to pay a final dividend (barring unforeseen circumstances, the directors plan to resume dividends for the first half of FY21).
In light of the current economic uncertainty, the board of directors has decided to modify its dividend policy for the time being in favor of a payout ratio of 60 to 80% of profit after tax, compared to the previous range. from 70 to 90%.
He added that the board of directors has also reduced the attendance fees of non-executive directors by 20% for a period of six months from May 2020 and that the management team has chosen to waive any incentive payment to short term. The CEO of the bank also said that there would be no salary increase in the usual cycle in 2020.
The regional bank also revealed that it had “Suspended” its applications for the first home loan deposit program while dealing with the backlog that would be caused by high demand.
[Related: Bank lowers DTI cap for FHLDS loans]
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Annie Kane is the editor-in-chief of The Adviser and Mortgage Business.
In addition to writing about the Australian brokerage industry, mortgage market, financial regulation, fintechs and the broader lending landscape – Annie is also the host of Elite Broker and In Focus podcasts and The Adviser Live webcasts. .