Auswide Bank (ASX:ABA) talks loan growth


by Rachael Jones

Auswide Bank Limited (ASX:ABA) Managing Director and CEO, Martin Barrett discusses the company's strategy and outlook, and the future of banking.

Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Auswide Bank (ASX:ABA) is Managing Director, Martin Barrett. Martin, thanks for coming down to Sydney, Australia today.

Martin Barrett: Pleasure, Rachael. Nice to be here.

Rachael Jones: Now, Auswide is a bank that started in Queensland, Australia. Could you give us a quick introduction and tell us your point of difference?

Martin Barrett: We commenced our journey as a building society back in 1966, listed on the exchange in the mid-90s, and we've been through a very strong modernisation program over the last five years. Our point of difference is that we are small but we see ourselves as being big enough to make a big difference in the Queensland, and now national, market of Australia.

Rachael Jones: Thanks, Martin. Now, last time we spoke you mentioned your growth in the loan books and personal lending. Can you talk to me about that?

Martin Barrett: It's been a pretty exciting time for us, Rachael. Our 2018 financial results backed up, which was a strong performance back in 2017, so our loan growth has been growing and it grew at 5 per cent over the course of last year. But importantly, we then managed to bring that to the bottom line, so a strong net profit after tax performance as well.

Rachael Jones: Now to the bigger picture, to the financials. Can you remind the audience of your share price?

Martin Barrett: So, share price now is around about AUD $5.60. It's increased by around about 10 per cent over the course of the year. That's off the back of our net profit after tax (NPAT) increasing by 18 per cent on a statutory basis and 9 per cent on an underlying basis. So a really strong year, and an interest margin was maintained, and we kept our cost-to-income ratio on the slide, which is a really, really positive thing, and has helped us, again, for a really strong year.

Rachael Jones: Can you talk us through your results?

Martin Barrett: We've just been on the roadshow, around to investors, and also to fund managers and to stock brokers, and I think we've got a really, really good hearing because the results have been strong. Across every single metric we measure, we have improved. We've seen customer growth, we've seen loan growth, we've seen net profit after tax improving, we've seen cost-to-income ratio coming down, and the benefit of all that for our shareholders is that we've seen dividends increasing. So we're now in a position whereby the dividend's really strong, so we're providing a yield which is fully franked above 6 per cent, which I think in this market is pretty positive.

Rachael Jones: Excellent news. Now, the Banking Code of Conduct is due to be enforced by ASIC next July, 2019. What does that mean for business?

Martin Barrett: For our business it doesn't mean a great deal, Rachael. We've seen, I think, a fairly disappointing level of revelation that's come out of the Royal Commission, and also in terms of some of inquiries that ASIC have been undertaking. We see ourselves as being a small player, we ensure that we're looking after the best interests of our customers, and whilst we will take notice of what the ABA findings and changes might be, they don't necessarily apply to us because we're not a member of ABA. We do, however, see some fairly significant opportunity for growth in the period ahead, as larger organisations are perhaps distracted and also working hard to improve their reputations that have been damaged over the course of the period we've been through.

Rachael Jones: Looking out to the horizon, Martin, what will it take to get AUD $5 billion in assets under management?

Martin Barrett: We're currently sitting at just over AUD $3 billion, so get to AUD $5 billion, I think it'll be a combination of two things. It'll be a combination of our organic growth, that we continue to perform well. But also, I think over the period ahead, we're likely to see a little bit more consolidation in the industry. Some of the very small players are likely to need to buddy up to some larger players, and I think we feel that we're in a good position to be able to potentially take some advantage of that, should that occur. Obviously, that would be the quickest way for us to get to AUD $5 billion worth of assets, and importantly, again, help us with some of the cost-to-income ratios and improvement in services to customers.

Rachael Jones: Last question, Martin, what can investors look out for, in terms of news flow over the next year?

Martin Barrett: Yeah, well, we continue our strategy, and our strategy is to continue to grow our loan book, push hard in terms of our personal loans and our consumer lending. We've introduced our own credit card last year, which we see big things with. Business banking is improving for us. So we're seeing another journey of growth, and we're seeing that in an environment, I think, which perhaps gives us some advantages, as the big banks are distracted and maybe consumers in the Australian market start to think about alternatives as opposed to banking with the big four.

Rachael Jones: Excellent. Martin Barrett, thanks for the update.

Martin Barrett: Thanks very much, Rachael.


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