Bank opts for cautious growth, prioritises risk management
In a year marked by tough economic conditions, Auswide Bank Ltd reported a significant decline in its annual profits, presenting a cautionary tale for insurers and businesses about the effects of market volatility.
For the fiscal year ending June 30, 2024, the bank's net profit after tax (NPAT) fell by over 55% to $11.231 million from $25.067 million in the previous year. This drop highlights the fierce competition in the deposit and lending markets, alongside rising wholesale funding costs and a shifting landscape for home loan retention.
Amid these challenges, Auswide adopted a conservative growth strategy, focusing on risk management over rapid expansion. This approach saw the bank's loan book increase slightly by 0.59% to $4.429 billion.
Despite the broader economic pressures, Auswide Bank managing director Doug Snell (pictured above) said the bank managed to grow its retail deposits by 8% and maintain a strong capital adequacy ratio, which would support future loan book growth.
Further complicating the year's financial landscape was the intense competition for low-cost deposits, which migrated towards higher-priced term deposits. Auswide Bank's net interest margin (NIM) was notably impacted, dropping 46 basis points to 1.42%.
The bank also announced strategic moves aimed at diversification and scale. Notably, Auswide entered into a binding agreement to merge with MyState Bank Limited, aiming to create a more robust financial entity with combined lending assets of $12.5 billion and customer deposits of $9.6 billion. This merger, subject to regulatory approval, is set to be finalised by December 2024.
Additionally, Auswide disclosed a binding agreement to acquire Specialist Equipment Leasing Finance Company Pty Ltd (Selfco), a move set to expand its offerings into the SME asset finance market. The deal, expected to close in September 2024, involves an initial consideration of $5 million and potential earn-out payments.
In another development, Auswide announced plans for a $12 million institutional placement to support these strategic initiatives. The placement will be complemented by a share purchase plan capped at $3 million, aimed at raising additional funds.
These moves come at a time when Auswide is navigating not only internal shifts but also significant market changes, particularly with 84% of its fixed-rate loans set to mature by mid-2025, potentially boosting interest revenue as these roll over to current market rates.
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