MyState Limited

The Business

MyState is a Tasmania-headquartered regional bank formed by the 2025 merger with Auswide Bank, which took combined assets to roughly $16 billion. Retail mortgages make up over 95% of the loan book and are sourced almost entirely (around 90%) through third-party mortgage brokers rather than a proprietary branch network. Selfco, an equipment finance unit acquired in the merger, contributes a smaller but faster-growing lending line. Unlike broker-dependent challengers reliant on wholesale funding, MyState's deposit franchise (a net promoter score of +60, roughly 70% deposit-funded) gives it a structurally lower cost of funds, though it still competes in a market where pricing power is limited.

Recent Performance

Revenue grew 37.1% in FY26 to $255.9m, but that figure is flattered by consolidating a full year of Auswide earnings; on a comparable basis, growth was closer to 7%. Net profit rose to $58.3m as cost-to-income improved to 66.5% from 68.0% on early merger synergies. The stock has since re-rated to 1.37 times net tangible assets, well above the roughly 0.95 times peer median, as the market has priced in continued integration success.

Outlook

Earnings growth is expected to stall over the next two to three years, with net profit essentially flat despite ongoing synergy delivery. The reason: credit costs are normalising from a cyclically low 3.3 basis points toward a through-cycle level closer to 10 basis points, an increase that broadly offsets the remaining synergy gains from the merger. Net interest margin is likely to compress modestly from 1.50% as broker competition persists, while cost-to-income should continue improving toward the mid-60s as the remaining integration synergies land.

Key Risks

Further RBA rate cuts would compress net interest margin without an obvious offset, given brokers originate roughly 90% of new lending and leave the bank with limited pricing power over the back book. Credit cost normalisation is a separate and near-certain pressure over the next 12-24 months: impairment charges sit at a cyclically low level today, and management's own decision to lift provisioning overlays suggests it expects this to reverse, a shift that would largely cancel out the earnings benefit of remaining merger synergies. A third risk sits in the share price itself. MyState trades at a meaningfully higher price-to-book multiple than either of its closest regional bank peers, despite running the least efficient cost base of the three; if that premium narrows toward peer levels, the multiple has further to fall than the underlying earnings would suggest.

What to Watch

The thesis-defining event is the February 2027 half-year result, which will show whether impairment charges have started stepping up toward through-cycle levels.

• October 2026 H1 FY27 trading update — an early read on margin and volume trends ahead of the full result.
• Q1 2027 RBA rate decision cycle — further cuts pressure margin but could also lower the market's required return on the stock.

Company Description

MyState Limited is a Tasmania-based authorised deposit-taking institution formed by the February 2025 merger between MyState Bank and Auswide Bank, creating a combined loan book of roughly $14 billion and total assets near $16 billion. Retail mortgage lending drives more than 95% of the loan book, sourced overwhelmingly, about 90%, through third-party mortgage brokers rather than a proprietary branch network. Selfco, an equipment finance business acquired in the merger, adds a smaller but faster-growing lending line with a $371 million book. The bank funds itself predominantly through customer deposits (around 70% of funding), supplemented by securitisation. A core banking system migration is underway over roughly two years, following a single post-merger banking licence achieved on schedule.

Where the Growth Is

Selfco, the equipment finance division, is the standout growth line. It contributes just 2.6% of total lending today but has grown 134% year-on-year, admittedly off a small base. The addressable market is roughly $40 billion nationally, and MyState holds under 1% of it, leaving room to scale before competitive intensity or funding constraints bite. Equipment finance also carries higher margins than mortgage lending, providing modest structural support to group net interest margin as the mix shifts over time.

Competitive Position

MyState's core advantage is its deposit franchise: a net promoter score of +60 and roughly 70% deposit funding give it a lower and stickier cost of funds than lenders reliant on wholesale markets. That advantage is real but narrow. The mortgage book is originated 90% through brokers, a channel that commoditises pricing and leaves MyState as a price-taker rather than a price-setter; system-wide, the broker channel has eroded the pricing power that used to accrue to relationship-based regional lenders. National mortgage market share sits at roughly 1% and has been stable rather than organically growing, with the FY25 merger being the primary source of scale gains. Cost-to-income of 66.5% is the highest among the three main regional bank peers we track, meaning MyState's competitive position depends on closing that efficiency gap rather than on any structural pricing or distribution edge.

Management & Capital Discipline

Management has delivered on the basics of integration: a single banking licence achieved on schedule, and $11.8m of a targeted $20-25m in merger synergies captured in the first year. Capital allocation has been disciplined, with a 70% dividend payout policy funded through an active dividend reinvestment plan rather than debt. Total integration costs have crept up from an initial $29m estimate to $32m, disclosed transparently rather than buried, which supports management's credibility on the numbers it does report. The more uncomfortable observation: disclosed management share ownership is modest, meaning incentives are not strongly tied to the share price outcomes shareholders actually experience, worth watching as the integration matures.

Financial Position

Capital adequacy is solid. The bank's core equity capital ratio (CET1, the primary regulatory buffer against losses) sits at 11.6%, roughly 360 basis points above the regulatory minimum, providing headroom to absorb a credit downturn without needing to raise capital or cut the dividend. The loan book itself is conservative: an average loan-to-value ratio of 64% and 80% owner-occupied lending limit the severity of any single default. Arrears (loans more than 90 days overdue) sit at 0.32%, below where they were a year ago, though management has been building provisioning buffers ahead of an expected cyclical turn.