Proposal to merge two regional players aimed at building scale, synergies
Non-major regional banks Auswide Bank and MyState Limited have signed an agreement to merge, which is set to boost the strength and reach of their strong broker relationships, the organisations announced to the ASX on Monday.
MyState Limited is based in Tasmania but has been expanding its presence in mainland Australia through its broker network, particularly on the east coast. It includes MyState Bank, an ADI which offers home loans, personal and limited commercial lending and savings and insurance product. It has seven branches in Tasmania.
The company also includes financial services firm TPT Wealth, which operates managed investments, commercial lending and trustee services.
Auswide Bank originated in Bundaberg and is also an ADI – its products include home loans, personal loans, credit cards, saving accounts and insurance, and it also operates a digital bank and private bank. It has a corporate office in Brisbane and 16 bank branches from Brisbane to Townsville.
Both banks enjoy strong partnerships with mortgage brokers and have been focused on enhancing their third-party relationships.
In an ASX announcement on August 19, Auswide Bank said it had signed a binding scheme implementation agreement (SIA) to merge with MyState Limited to “combine two high-quality banks, significantly enhance scale”, with the potential to create shareholder value through synergy realisation.
The merger, which is subject to regulatory permissions and the approval of both banks’ shareholders and third party partners, is due to be complete by the end of December 2024.
Auswide Bank has also announced that it will enter into an agreement to acquire 100% of non-bank SME asset finance lender Specialist Leasing Finance Company Pty Ltd (Selfco).
Proposed Auswide Bank merger with MyState
In a statement to the ASX, Doug Snell, managing director and CEO of Auswide Bank (pictured above left), said the proposed merger with MyState Bank would create a bank that would span the eastern seaboard of Australia from Queensland to Tasmania.
It would also combine the organisations’ complementary strengths and resources, providing the opportunity for future growth and enhanced customer experiences.
“The merger just makes sense,” Snell said. “Both banks have the same DNA and have been putting customers first for a combined history of over 122 years. Together, we can do even more for our customers, with a wider range of competitive products and a greater capacity to invest in new technology.”
“The new merged entity will continue to provide outstanding customer service here in Queensland and through an expanded footprint, while our employees will find new opportunities for career development within the larger organisation.”
Speaking to MPA following the proposed merger announcement, Snell said there had been conversations between the two banks a number of years ago about merging but it didn’t go ahead.
“It’s always been in the back of everybody’s minds that this [a merger] is a good idea,” Snell said.
“The heavier cost environment we’re moving into with digital, with cyber, with fraud, regulatory requirements and competition, it just feels like to be really relevant for your customers, shareholders and staff you need to have presence and scale.”
Snell said both banks are listed entities – Auswide has about 92,000 customers, while MyState has double that, creating a combined customer base of more than 270,000.
While the banks similar in their offerings, there are some subtle differences, he said.
“The discussions were very fruitful and collaborative so we decided to enter in what we’re calling a merger of equals … we just think that the combined businesses will provide a better outcome for staff, customers and shareholders.”
MyState managing director and CEO Brett Morgan (pictured above right) said he was delighted to announce the signing of the SIA to progress the merger with Auswide Bank.
Morgan said the merger was consistent with MyState’s stated growth strategy and would bring significant scale advantages to the Group.
“We expect significant cost synergies from the merger, which we also expect to be EPS accretive for MyState shareholders from FY26 on a post synergies run rate basis,” Morgan said.
Strong broker relationships
Snell said between 70% and 80% of Auswide’s home loans came via mortgage brokers, and MyState’s broker-sourced loans would be even higher, given the broker BDMs and relationship managers it had working in NSW and Victoria.
He said Auswide Bank envisaged three key benefits from the merger. Firstly, a greater footprint and better penetration into the broker network by combining resources with MyState.
The second benefit involved looking at the possibility of creating a single lending platform across the two banks.
“Bot of us use a very similar origination platform which goes into a similar lending platform and we were both near the end of that life cycle and starting to consider investment to improve it , so by having a merged entity, we can probably get a better investment outcome.”
Thirdly, the focus is also on providing a great broker experience and competing effectively in a market against bigger banks, said Snell. “So how do we go fast and get a good result for the brokers – that’s a key attribute of this opportunity.”
The merger would provide a bigger loan book and the ability to fund more efficiently and be more competitive when it came to lending.
Asked if the merger would mean the creation of new lending products, Snell said Auswide Bank had been going through a simplification process when it came to its loans.
“By trying to meet everyone’s needs, we’ve probably opened up product diversity too much … so it’s how can we simplify to make it faster and more suitable [for brokers and their clients].”
Brand identity of the banks
With a growing number of bank mergers and acquisitions over the last few years, the most common strategy is for the merged entities to keep their own distinct brands and identities.
Asked what approach Auswide and MyState banks would take, Snell said it was a good question and no decision had been made yet.
He said Auswide Bank had invested a lot on its brand over the past five years, by sponsoring the Queensland State of Origin rugby league team, with the Auswide logo appearing on the team jumpers over the last five years.
This aimed to create brand awareness among the bank's broker network and brokers' clients.
MyState also sponsors a number of sports organisations in Tasmania, including NBL club the Jack Jumpers, Football Tasmania and is the naming rights partner for Hobart’s MyState Bank Arena.
“What’s really, really important for both banks – MyState is Tasmania-based and they spend a lot of time and effort supporting their communities in Tassie, and we have done the same supporting our communities in Queensland so we want to make sure that is a key focus for whatever the merged entity looks like going forward.”
Acquisition of Selfco
Auswide also plans to diverse its asset class, revenue streams and geography through the acquisition of non-bank SME asset finance lender Selfco.
The Sydney-based non-bank specialises in lending and leasing arrangements for small and medium-sized business for trucks, trailers, construction equipment and work vehicles.
Snell said Selfco had been in operation for quite some time but wanted the assistance of a bank to help it grow.
The leases and chattel mortgages are currently distributed via asset finance brokers, and the aim is to extend Selfco’s reach among brokers and become more competitive.
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