MyState and Auswide to merge in regional bank push for scale

MyState CEO Brett Morgan says a merger with Auswide will offer scale to the combined regional bank.

MyState CEO Brett Morgan is set to lead a merger with rival lender Auswide. Picture: John Feder

The tie-up between Tasmanian lender MyState and Queensland bank Auswide has been pitched as a bid for scale as the challengers confront a banking sector increasingly squeezed by the heavyweight players.

The $445m MyState on Monday said it would merge with the $202m Auswide in a deal which would leave control of the new bank largely in the hands of the Tasmanian lender.

The deal would combine the nearly $8bn lending book of MyState with Auswide’s almost $4.5bn in loans, leaving the new bank with almost $9.6bn in deposits.

The deal also sees Auswide purchase Selfco, an equipment leasing finance company, in a deal undewritten by a $15m placement.

MyState chief executive Brett Morgan said the deal with Auswide helped with scale, allowing the combined lender to spread the rising cost of technology and systems investments across its customer base.

“It gives you an opportunity to invest in key areas,” he said.

MyState said it expected the deal would deliver $20-25m in cost synergies by the end of 2027.

The deal comes as MyState revealed a $35.3m full year profit, down 8.3 per cent on last year.

While Auswide ruled off a 55.2 per cent profit collapse to $11.2m for the year amid margin pressure in its lending and funding markets.

The deal for MyState, which started life as a Tasmanian bank, comes as the second time the lender has made a foray into Queensland after snapping up Rockhampton lender The Rock Building Society in 2011, which saw it close multiple branches across the region.

However, MyState has grown its business outside of Tasmania writing loans across the Eastern states supercharged by the Reserve Bank of Australia’s Term Funding Facility throughout the Covid-19 pandemic.

The deal also comes hot on the heels of ANZ’s $4.9bn acquisition of Suncorp Bank, in a deal opposed by the Australian Competition Commission before being waived through by the Australian Competition Tribunal on appeal.

Mr Morgan said the Auswide deal would help grow the mainland footprint due to the limited overlap in geographies.

He noted MyState was still a small lender compared to its heavyweight rivals.

“Being small, it does create some opportunity for us to be closer to the customer and provide better products and services,” he said.

But Mr Morgan said being small also had a cost for borrowing.

The combined bank will be almost 71 per cent customer deposit funded, leaving the bank to fill the gap with wholesale funding or through residential mortgage backed securities.

Mr Morgan said MyState’s recent investment in digital mobile banking had helped it attract more customers.

“It’s relatively more expensive to run a smaller bank, but for us staying focused is key and not having too many products,” he said.

Clime Investment Management chief investment officer Will Riggal backed the deal, noting the fund had supported Auswide’s $15m placement.

“Scale is the main game in banking,” he said.

“They should get benefits from funding costs.”