Auswide Bank Limited (ASX:ABA) Managing Director and CEO, Martin Barrett talks FY18 results, key metrics and how the company's strategy of moving beyond its QLD base and embracing technology is delivering.
Rachael Jones: Hello I’m Rachael Jones for the Finance News Network. Joining me from Auswide Bank Limited (ASX:ABA) is Managing Director and CEO, Martin Barrett. Martin, welcome back.
Martin Barrett: Thank you Rachael, great to be here.
Rachael Jones: Auswide Bank is a Queensland based bank with a national footprint. Can you tell me more?
Martin Barrett: We’re an organisation that is over 50 years of age. We converted from a building society to a bank about three years ago; we changed our name with new vibrancy. We have assets now, which is over $3 billion. Our home loans have been growing very strongly and we’ve been growing our business banking, out of the business as well. So we are on a pretty strong growth path in an industry that’s remaining relatively subdued, given the environment the banks been operating in, for some years now.
Rachael Jones: Now to your financial year 2018 results. What were the highlights?
Martin Barrett: It was a great year for us Rachael. We had a very strong net profit after tax growth, coming in at about $17.9 million, which was up just over 18 per cent. We had some good loan growth; loan growth was above five per cent. We have very strong consumer loan growth, strong business banking growth. And really very importantly, we were able to maintain our net interest margin over that period of time as well, which helped with that bottom line result. The combination of all that of course, is that we have seen improved return to shareholders and our dividend result for the year. So we’re now returning a yield that’s over six per cent, fully franked.
Rachael Jones: What do you think contributed to that result?
Martin Barrett: As I said, we had good loan growth, I think that was a big contributor. We were able to grow our funding and keep our costs down on our funding over the course of the year, which is a critical component to it. We had diversification of our revenues, so that home loan growth, that consumer loan growth, as well as that business banking growth, all contributed as well. And we’ve had really really pleasing customer growth, over the course of the year as well. So the combination of all of that has led to a really pretty good result.
Rachael Jones: What was the dividend for the half-year and the full-year?
Martin Barrett: Our dividend for the half was up by one cent, to 18 cents. And our dividend for the full-year increased to 34 cents, whereas it was 31 cents in the prior year. So there has been good dividend growth for our shareholders.
Rachael Jones: Residential real estate markets are softening. Where is the loan to valuation metric sitting?
Martin Barrett: Our loan evaluation ratios have continued to fall, which basically means that we are strengthening the quality of our loan book. We have seen valuations starting to fall in the two markets that are perhaps the strongest markets, being Melbourne and Sydney. But conversely some of our regional Queensland markets, which Auswide is a big part, actually are starting to show some level of strength. So we’re actually quite encouraged about what the home loan markets will look like for regional Queensland, over the course of the year ahead. Which ultimately means that we think we’ve got some good growth opportunities, from those particular improving markets.
Rachael Jones: It would be remiss if we didn’t ask for a comment on the opportunity provided by the Banking Royal Commission?
Martin Barrett: We think that there will be some good opportunity for us, as a result of what’s been disclosed from the Royal Commission. Without doubt, the big banks are suffering from some fairly significant reputational challenges. As a result of that, we have started to see some level of improved consideration for Auswide Bank. We’ll be upping our marketing efforts over the course of this year, so that we can take advantage of that and spread the word, if you like. Increase the brand awareness of Auswide Bank, so that we can capture some more of that market, over the year ahead.
Rachael Jones: Last question now Martin. What’s your guidance for the first half of 2019?
Martin Barrett: We’re expecting another strong year Rachael. We have already had some pretty strong loan growth, which is I think, a positive start for us for the year. We will continue on the path of our disciplined cost management. We will continue to grow, both our personal lending, as well as our business banking lending. And we’ll continue to manage those cost of funds quite strongly, as well. So momentum in the business is good and we expect that to carry forward to some good growth, over the course of the year ahead.
Rachael Jones: Thanks for the update.
Martin Barrett: Thank you Rachael.