MYSTATE LIMITED — AGM Information 2012

Oct 21, 2012

Annual General Meeting 23 October 2012

MyState Limited Annual General Meeting 23 October 2012

John Gilbert - Managing Director

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Disclaimer

This presentation contains certain forward-looking statements with respect to the financial condition, results of operations, business plans and objectives of management. All such forward-looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors many of which are outside the control of MyState Limited (MYS), which may cause the results or actual performance to be materially different from the future results or performance expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of presentation.

No presentation or warranty is or will be made by any legal or natural persons in relation to the accuracy or completeness of all or part of this document, or any constituent or associated presentation, information or material (collectively, the Information), or the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, the information or any part of it. The information includes information derived from third party sources that has not been independently verified.

To the full extent permitted by law, MYS disclaims any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.

Nothing contained in the information constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information and any action on the basis of the information.

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Our Current Group Structure

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Result Highlights FY 2012

• Record profit despite challenging market conditions

• Regional diversification strategy on track

• Acquisition of The Rock completed

• Group asset footprint now $5.3bn*

• Strong performance from MSF – above system loan & deposit growth

• Solid performance of The Rock post acquisition

• Continuing low arrears across Group loan books

• Stable TPT performance as market volatility continued

• Strong brands

• Higher staff engagement

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• Includes lending books, FUM and FUA

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MYS 30 June 2012 ‘Snapshot’

Other Key Metrics	30 June 2012	30 June 2011	June 12 v June 11 (movements)
Group Capital Adequacy – Tier 1	14.20%	15.38%	1.18
Net Interest Margin - MSF (%)	2.99%	3.23%	0.24
Net Interest Margin - ROK (%)	1.87%	1.60%(1)	0.27
Underlying Cost to Income Ratio(2)	70.34%	68.94%	1.40
Underlying Return on Equity (%)(2)	9.30%	11.35%	2.05

(1) As at 1 December 2011 - ROK acquisition date.

(2) Impacted by higher ROK cost to income ratio and lower ROE

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MYS Group ADI assets and liabilities mix

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Interest Bearing Asset Portfolio Interest Bearing Liability Portfolio
At Call Savings
Personal Loans
Accounts
3%
24%
Retail Term Deposits
13% Housing Loans
3% 6%
1% 6%
Business Banking loans 30% Corporate TermDeposits
80%
34% Negotiable Certificates
Revolving Credit Loans of Deposits
Securitisation
Short Term Investments Bonds/Notes
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Group Underlying Cost-to-Income

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MYS cost to income ratio
80.00%
70.30% 68.94% 70.34%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Jun-10 Jun-11 Jun-12
Includes The Rock for 7 months to 30 June 2012.
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MYS Cost Review Project

• Cost to income ratio flat, mainly due to net interest income pressures

• MYS response to this “flat” outcome in YEJ 12 – external benchmarking review undertaken May/June 2012

• Implementation of initiatives underway, full year annualised operational cost savings of $4.5 million* (underlying after costs to implement)

• Includes closure of 2 MSF branches in Hobart and 1 in Rockhampton

• Further productivity gains expected post core system replacement

• Expected to be achieved progressively during YEJ 2013

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MSF Home Lending as at 30 June 2012

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Lending - Balance Growth
10.91%
10.04%
5.53%
5.03%
6 Months 12 Months
MSF Household System
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• System data source : RBA, Lending and Credit aggregates, published on 30 June 2012.

• Six month growth is to 30 June 2012 annualised.

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MSF Household Deposits

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MSF $(m)
12.43%
11.85%
895
8.99% 761
7.51%
572 604
6 Months 12 Months
MSF Household System Jun-11 Jun-12
Transaction Deposits Term Deposits
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• System data source: APRA - Licensed bank deposit data published on 30 June 2012;

• Six month growth is to 30 June 2012 annualised.

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MSF Customer Satisfaction

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• MSF has the most satisfied customers of any FI operating in Tasmania.

• 96% of our customers are either satisfied, very satisfied, or extremely satisfied with 75% ‘very’ or ‘extremely satisfied’

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MSF Brand dynamics

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• MyState second most considered ‘brand’ in the market behind CBA – brand seen as “secure”

• consumers are far more likely to place their term deposits with MyState than with CBA (42% vs 27%).

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The Rock acquisition

• Acquisition completed 1 December 2011

• Acquisition costs of $2.1 million after tax

• Management restructure and new CEO appointed

• Cost synergy benefits are flowing as planned

• Revenue synergy benefits in FY 2013

• Business model re-configuration underway…

• Greater emphasis on retail sales

• Term deposit and insurance sales growth above expectations

• Reduced reliance on broker network

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The Rock Financial Performance

• 7 months contribution to NPAT $3.2M

• Excludes Rock initiated merger costs

• Includes contribution from interest management associated with fixed rate book

• NIM stabilised and improving after initial pressure from wholesale funding costs (warehouse utilisation and corporate deposits)

• Rate cuts have placed additional pressure on NIM, whilst liabilities reprice

• Lending growth weaker than expected from date of merger agreement, now improving with increased retail sourced loans

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The Rock Synergy Analysis

“ The Boards of MyState and The Rock anticipate that the combination of cost and revenue synergies will, on an annualised basis, result in potential pre-tax synergies for the Merged Entity of between $7.5 and $8.5 million per annum, within a three year timeframe(1). MyState expects that the majority of these synergies will be realised from year two onwards post merger”. The synergy components include:

• Revenue Benefits – commenced

• Treasury benefits expected through:

• Funding synergies – work-in-progress

• Cost savings derived from a proposed ADI licence consolidation – underway

• IT, operations and head office benefits – trapped

• An expanded product range – well progressed

• Distribution channels – well progressed

(1)In order to achieve the synergies referred to, the Merged Entity is expected to incur approximately $3.5m in one-off pre-tax integration costs over the first three years.

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TPT Wealth Management FUM & FUA

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2,500
2,000
547 879
567
1,500
766
743 737 698
1,000
1,379
1,307
1,211
500 1,006
934 930 931
0
2006 2007 2008 2009 2010 2011 2012
TPT - FUM TPT - FUA
($ Millions)
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MYS Group Strategy

• Strong presence in Tasmania

• Banking and Wealth Management

• Rural and commercial/SME growth

• ADI presence in Queensland – The Rock

• Successful integration

• •

• Rural and commercial/SME commencement

• Wealth offering required

• Merger or acquisition in Wealth Management

• Further mergers with like minded ADIs

• Intense focus on cost control

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MYS Group Outlook

• Market conditions remain challenging

• Subdued demand for credit – record consumer savings

• Competitive pressures – major banks and regionals  Falling interest rate environment impacts all ADI’s

• Maintain discipline in both asset and liability generation

 Conservative risk appetite –strong focus on credit worthiness  Focus on optimising ROK balance sheet structures

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Annual General Meeting 23 October 2012