ME full-year results: underlying profit up 14% to $85.2 million

14 September 2017

Industry super fund-owned bank ME today reported a full year underlying net profit after tax of $85.2 million, up 14% on the previous Financial Year.

ME CEO, Jamie McPhee, said “it was another strong performance and continued ME’s strong profit growth over the past five years”.

McPhee said NPAT growth largely reflected a 12% increase in ME’s home loan portfolio, with net interest margin falling 5 basis points to 1.50% and total expense growth of 3%. ME’s NPAT has grown at an annual compound rate of 28% since 30 June 2012.

“Growth has been the main story for ME in FY17 with home loan settlements up 36% to $6.2 billion, an increase in total assets of 7% to over $26.5 billion, customer deposits up 20% to $12.6 billion, and customer numbers up 15% to 420,000.”

McPhee said “the Bank’s performance is particularly positive in light of the external operating environment – softening credit growth, macro-prudential restrictions on home lending, regulatory imbalances that give the major banks a competitive advantage, and a banking industry ratings downgrade by S&P in May.”

Underlying return on equity increased 10 basis points to 8.3% continuing the trend towards the medium-term target of 10%, while the cost to income ratio reduced further from 65.8% to 63.5%.

ME’s statutory profit after tax, which includes the amortisation of realised losses on hedging instruments ($7.3 million), loss on sale of the business banking portfolio ($6.2 million), transition costs associated with a significant new technology partnership with Capgemini ($6.4 million) and legacy IT decommissioning costs ($3.4 million), was $61.9 million (FY16: $76.8 million).

ME’s commercial partnerships with its industry fund owners continue to bear fruit: ME’s member benefits program, which it uses to market directly to members of industry super funds and unions, is now generating 13% of the Bank’s home loan settlements.

ME’s brand overhaul in FY16 is supporting growth with awareness hitting a record high 55% in July 2017, up 15 points since the change was implemented.