19 October 2017

Annual General Meeting

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Miles Hampton

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Melos Sulicich

FY2017 results

Above system lending and deposit growth

Full year dividend of 28.5cps and final dividend steady at 14.5cps fully franked with DRP discount of 2.0%

Total income: $124.6m 1.0%	Home loan book: $4.08b 1.6x system 11.3%
Customer deposits: $3.0b 1.8x system 10.1%	30-day arrears: 0.51% -19bps
Capital adequacy ratio: 13.3% 25bps	Net profit after tax: $30.1m -3.2%
Earnings per share: 34.0cps -1.5cps	Net interest margin: 1.93% -20bps
Cost-to-income ratio: 65.9% 270bps2	Return on equity: 10.0% -62bps

1: FY2016 results presented on an underlying basis with removal of $1.0m post tax software write down and $1.8m post tax significant due diligence project costs

2: 60bps increase on FY16 excluding significant M&A project costs

Strategic overview

Our industry is being disrupted by changing customer expectations and our strategic agenda is targeted at meeting and exceeding customers’ needs

MyState’s strategy

MyState’s strategy is underpinned by 5 strategic goals , focused on how MyState plans to:

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The needs and expectations of customers are changing and technology is opening opportunities to attract and serve new customer segments across Australia.

MyState is making significant investments in technology and changing the way we think and operate to thrive in this future.

This combination of customer centricity and technology investment and continued improvement is the key to MyState’s future success.

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Grow

To improve scale economies

Simplify To improve productivity

Strengthen To invest and grow

Build Relationships To improve customer outcomes Transform the business To embrace the new world

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Loan book

Total book – composition ($m)

Total loan book growing at 1.8 times system

Improved service proposition driving higher conversion to settlement

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$3,544 $3,853 $4,269
100%
$79 $71 $63
98% $63
$50
$51
96% $68 $66 Overdrafts
$71
Business/agri/commercial
94% +11% Personal loans
+10%
+18%
Home loans
92%
$3,343 $3,663 $4,076
90%
FY15 FY16 FY17
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Total Personal Loan Applications FY17

Home loan book – applications and settlements

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$1.8 1.68
100% 1.57
1.42
$1.5
32%
80%
1.19
$1.2
60% 0.97 0.88 Applications
100% $0.9 Settlements
40%
68% $0.6
20%
$0.3
0% $0.0
1H 17 2H 17 FY15 FY16 FY17
Billions
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Retail Digital

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Funding

Customer deposits ($m)

Moody’s rating Baa1/P-2 with stable outlook

eSaver product successfully launched in 2H17 enabling customers to open accounts and deposit money from anywhere

Multiple RMBS issuances with further issuance of sub-debt supported by broadened investor base

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+10% $2,988
+9% $2,715
$2,493
1,527
1,397
1,345
1,318 1,461
1,149
FY15 FY16 FY17
Customer at call deposits Customer term deposits
Funding mix
21.3% 19.0% 21.2%
12.0% 14.1% 13.2%
66.7% 66.9% 65.7%
FY15 FY16 FY17
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Wholesale funding Securitisation

Customer deposits

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Credit quality

Credit quality remains excellent

Historically low impairments

30 day arrears performance improved in FY17 and remains well below industry

Impairment charge ($m)

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0.33
0.90
0.60 0.54
(0.33)
2015 2016 2017
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30+ Days S & P arrears data
(Majors and regionals two months behind)
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
MyState Limited SPIN majors SPIN regionals
90+ Days S & P arrears data
1.20% (Majors and regionals two months behind)
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
MyState Limited SPIN majors SPIN regionals
Jun-15 Dec-15 Jun-16 Dec-16 Jun-17
Jun-15 Dec-15 Jun-16 Dec-16 Jun-17
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Impairment charge

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Wealth Division

Funds under management and funds under advice ($m)

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Funds under
Management
growth of
$81m (+8%)
Trustee revenue
Challenged but
improved
in 2H17
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$778
$782 $738
$1,017 $1,008 $1,089
FY15 FY16 FY17
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FY15

FY16

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Funds under management Funds under advice
Operating income ($m)
$17.64 $17.48
$16.74
$3.21 $3.07
$3.19
$4.86 $4.81 $3.76
$9.57 $9.59 $9.79
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Investing in systems, processes and people to modernise the business

FY15 FY16 FY17 Funds Management Trustee Services Financial Planning

Capital

Total capital movements

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1.90% 1.56%
0.57%
1.40%
1.96%
0.29% 13.3%
13.0% 1.33%
1.61% 2.01%
Tier 2 Tier 2
Tier 1 11.43% 11.28% Tier 1
FY16 Capital initiatives Profit Dividends paid Capitalised Securitised assets Secured mortgage Other asset FY17
intangibles lending growth
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Capital initiatives in FY17:

Strong and effective capital strategy underpinning growth and digital banking platform investments

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$10m sub-debt issuance in September 2016

$300m RMBS issuance in November 2016 Partial DRP underwrite in February 2017 $400m RMBS issuance in June 2017

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MyState in the community

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$1.6m distributed through the MyState Community Foundation since 2001

$225,000

three-year commitment to The Smith Family

220,000

People attended the MyState Australian Wooden Boat Festival

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1,000

students participated in the MyState Student Film Festival

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AGM Presentation 2017 | 11
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Tasmanian economy

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17 consecutive quarters of growth

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Household spending remains solid Tourism continues to be a key driver

Leading wage growth (2.2%)

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Property prices, rental yields high Population growth beginning to climb

Sector overview

Changing $ industry dynamics

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Regulatory change and oversight still high

Additional regulation is not the way to improve competition

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System credit growth moderating

Historically low interest rate environment continues

Competition is fierce particularly in lower LVR owner occupied household lending

Financial system stability concerns and international issues influencing regulator and government actions

Government needs to address the unbalanced competitive marketplace arising from:

Funding cost advantage to big banks
Risk weighted asset differentials
Macroprudential regulation skewing competition in the sector
Lack of transparency in vertical integration of mortgage brokers
Disproportionate impact of regulatory burden on smaller banks

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Platform for continued growth

What we’ve achieved

What we’re working on

What’s to come

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Digital transformation

Internet and mobile banking
Contact centre system replacement
Single core banking system; new CRM
Origination system
Apply Pay, Android Pay, Samsung Pay launched

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Deposit and loan book growth

Well above industry

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Capital optimisation

MTN program and sub-debt issuance
Multiple RMBS issuances in FY17

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Leadership

Strong leadership team and capability

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Cost efficiencies

‘MyExcellence’ productivity and process program
Closed Rock agency network and 2 main branches

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Digital

transformation

New Payments Platform
Analytics and CRM campaigns
Online originations for savings, transaction and loan accounts
Systems development to accelerate growth

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Banking products

Retail deposit growth
Basic home loans

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Wealth

Exploring systems and product development for organic growth
Wealth business product and distribution growth strategy

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Simplification

MyExcellence program to streamline processes and utilise technology to enhance services and reduce cost

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Channel

optimisation

Broaden digital for growth

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Marketing

Build out marketing analytics and CRM capabilities

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