MYSTATE LIMITED — AGM Information 2014

Oct 15, 2014

ASX Code: MYS

16 October 2014 MyState Limited Annual General Meeting

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.

==> picture [103 x 33] intentionally omitted <==

Managing Director’s Address Melos Sulicich

==> picture [199 x 72] intentionally omitted <==

==> picture [103 x 33] intentionally omitted <==

FY2014 results

A sound result providing a platform for growth

==> picture [567 x 338] intentionally omitted <==

----- Start of picture text -----

FY2014 FY2013 Change (%)
Revenue ($m) 119.3 122.3 � -2.5%
29.6 28.5 � 3.9%
Net profit after tax ($m)
Earnings per share (cents) 33.91 32.68 � 3.8%
Final dividend – fully franked (cents) 14.5 14.0 � 3.6%
Total dividends for the year – fully
28.5 28.0 � 1.8%
franked (cents)
Cost-to-income ratio (%) 64.5 65.7 � -120bps
Net interest margin –
MyState Financial 2.74 2.79 � -5bps
The Rock 1.71 1.58 � +13bps
Group 2.43 2.40 � +3bps
Return on average equity (%) 10.5 10.4 � +8bps
----- End of picture text -----

• FY2014 a difficult year.

• Modest growth in profit and EPS overshadowed by an absence of revenue and portfolio growth.

• Momentum building in broker channel; however more is required.

==> picture [103 x 33] intentionally omitted <==

3

MyState Limited AGM Presentation 2014

Strong balance sheet, sound capital base, and capacity to grow

==> picture [567 x 215] intentionally omitted <==

----- Start of picture text -----

FY2014 FY2013 Change (%)
Total assets ($m) 3,558.8 3,629.7 � (2.0)
Total liabilities ($m) 3,270.1 3,350.0 � (2.4)
Net assets ($m) 285.6 279.7 � 2.1
Capital base ($m) 187.3 185.6 � 0.9
Risk weighted assets ($m) 1,356.0 1,322.6 � 2.5
Capital ratio (%) 13.8 14.0 � (1.4)
----- End of picture text -----

• High level of capital adequacy.

• Tier 1 capital 13.5%, well above regulatory requirements.

• Well placed to meet capital and liquidity requirements under Basell 111 accords.

• Strong risk management procedures.

==> picture [103 x 33] intentionally omitted <==

4

MyState Limited AGM Presentation 2014

Banking business

hampered by poor first half loan growth…

…benefits from the second half recovery in the portfolio will flow into FY15

● Profit constrained by 1.3% contraction of loan portfolio during the first half.

● Significant improvement in fourth quarter settlements recovered the lost ground, and resulted in positive portfolio growth for the year.

● Margins slightly higher despite competitive environment due to improvement in The Rock’s net interest margin as a result of securitisation program.

Banking Business NPAT

==> picture [238 x 358] intentionally omitted <==

----- Start of picture text -----

30
25.2
25.0
25 24.4
19.9
20
15
10
5
0
2011 2012 2013 2014
$ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

5

MyState Limited AGM Presentation 2014

Re-engagement with broker channel driving uplift in new settlements

44% growth in fourth quarter settlements Total settlements by quarter – actual

Upward trajectory in monthly settlements

Broker Retail

Broker Retail

==> picture [523 x 361] intentionally omitted <==

----- Start of picture text -----

250 80
Substantial fi nal
quarter lift
� [44%] 70 45 42
200 114
60
28
25
50
150
23
24
69
60
57
60 40
34
33
100 39
30
31
30 29 30
90
27
80 81 79 81
74 24
71 20
68
50
10
0 0
Sept 12 Dec 12 Mar 13 Jun 13 Sept 13 Dec 13 Mar 14 Jun 14 Jan14 Feb 14 Mar 14 Apr 14 May 14 Jun 14
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
$ Millions $ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

6

MyState Limited AGM Presentation 2014

Arrears bottomed out in 2013…

… although still below majors and well below regional banks

90+ day arrears

==> picture [362 x 206] intentionally omitted <==

----- Start of picture text -----

S & P SPIN – Prime S & P SPIN – Regional Banks MyState Group
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 14 Nov 14 Jan 14 Mar 14 May 14 Jun 14
%
----- End of picture text -----

30+ day arrears

==> picture [362 x 210] intentionally omitted <==

----- Start of picture text -----

S & P SPIN – Prime S & P SPIN – Regional Banks MyState Group
2.20
1.70
1.20
0.70
0.20
Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 14 Nov 14 Jan 14 Mar 14 May 14 Jun 14
%
----- End of picture text -----

Number of 90+ day loans has increased from average 44 in H1 to 67 in H2. Remains very small percentage of 25,000 total loans, and well below peers.

Lift is in line with regional banks’ trend, although MyState still remains at half the level of the regional ADIs.

==> picture [103 x 33] intentionally omitted <==

7

MyState Limited AGM Presentation 2014

Tight cost control in 2014 mitigated the effects of the slow growth environment…

…4.3% cost deflation achieved

Personnel costs

==> picture [248 x 139] intentionally omitted <==

----- Start of picture text -----

45.0
38.422 38.489
40.0 � 35.659
35.0 0.2% �
30.0
7.4%
25.0
20.0
15.0
10.0
5.0
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Right-sizing the business delivered a 7.4% cost reduction in 2014, in spite of a 4% EBA rise.

Admin costs

==> picture [248 x 138] intentionally omitted <==

----- Start of picture text -----

25.0
19.128 18.527 19.431
20.0 � �
3.1% 4.9%
15.0
10.0
5.0
0.0
2012 2013 2014
$ Millions
----- End of picture text -----

• Increase relates to new securitisation and additional customer communications from system and fee changes.

Technology costs

Technology costs Software Amortisation

==> picture [249 x 374] intentionally omitted <==

----- Start of picture text -----

12.0
10.042
9.726
10.0
8.196
�
8.0 3.1% �
15.7%
6.0
4.0
2.0
0.0
2012 2013 2014
● Savings in software maintenance,
hardware and network costs; 7 months
core banking system amortisation.
Marketing costs
4.0
3.545 3.467
3.5 � 3.171
3.0
�
2.2%
2.5 8.5%
2.0
1.5
1.0
0.5
0.0
2012 2013 2014
$ Millions
$ Millions
----- End of picture text -----

• Savings in software maintenance, hardware and network costs; 7 months core banking system amortisation.

• Marketing costs reduced by limiting support to targeted sales activities.

==> picture [103 x 33] intentionally omitted <==

8

MyState Limited AGM Presentation 2014

Wealth

management provides increased

contribution through cost reductions and backoffice integration

● Revenue flat due to lower income from estate planning and commission.

● Solid full year NPAT of $4.6M up $1.5M / 46.4 % on previous year. ● Wealth management revenue remains flat overall, with increased management fees from FUM negated by a decline in estate planning revenues.

● FUM growth of 5.8% to $1.007b the healthiest improvement since 2004 – FUM greater than $1b for the first time since 2010.

• Sound 4.4% growth in FUA to $0.766b.

• ● MyState Wealth Management platform FUM up 29%.

Wealth Management NPAT

==> picture [238 x 358] intentionally omitted <==

----- Start of picture text -----

50
4.6
45
40
35
3.1
30
25
20
1.6
1.5
15
10
5
0
2011 2012 2013 2014
$ Millions
----- End of picture text -----

==> picture [103 x 33] intentionally omitted <==

9

MyState Limited AGM Presentation 2014

==> picture [780 x 443] intentionally omitted <==

==> picture [103 x 33] intentionally omitted <==

MyState Limited AGM Presentation 2014 10

Summary

1. A sound financial result

• Increased NPAT + dividend

• Return on average equity +8 basis points

2. Tight cost control

• Cost-to-income continues to fall to 64.5%

• Future improvements through revenue growth

3. Firmer platform

• Core banking system implemented in MyState Financial

• MyState Financial acquires banking licence

• Improvement evident in Wealth business

4. Fit for growth

• New organisation structure provides focus on sales + process improvement

• ● A new loan origination system to improve service + efficiency

==> picture [103 x 33] intentionally omitted <==

MyState Limited AGM Presentation 2014 11

Key immediate focus areas

==> picture [36 x 36] intentionally omitted <==

Simplify

Grow

● core business processes by through sales investing in and channel technology management and process improvement

• be prepared to participate in industry rationalisation

Strength

in cost control, balance sheet, and credit risk management

==> picture [61 x 64] intentionally omitted <==

Transform

Relationships

enhancing through continuous staff, customer and community improvement engagement and innovation

==> picture [103 x 33] intentionally omitted <==

MyState Limited AGM Presentation 2014 12

Outlook

1. New organisational structure to provide improved sales management with most growth to come from the broker channel.

Low growth environment to continue

2. Recovery in Tasmanian economic fundamentals provides a strong platform for continued improvement in the direct channel.

Need to direct channel. continue to get better at 3. Investment in new loan originations system to provide a what we do platform for greater service and processing efficiency.

4. Fierce competition resulting in margin pressure and need to be nimble.

5. Focus on above system growth supported by disciplined cost and process management.

==> picture [103 x 33] intentionally omitted <==

13

MyState Limited AGM Presentation 2014