Tasmania’s MyState Bank and the Queensland-based Auswide have revealed their plans to merge, with the regional banks already confirming the signing of shares distribution agreement for the proposed new bank.
The merged entity would boast a collective customer base of more than 272,000 (over 180,000 from MyState and 92,000 from Auswide), a lending book of more than $12 billion ($8.0 billion from MyState and $4.3 billion from Auswide) and a deposit book of nearly $10 billion (with $5.9 billion from MyState and $3.7 billion from Auswide), as well as more than $14.5 billion in assets.
The pair estimate that the merged entity would deliver an NPAT of $45 million, and hold a combined market cap of $638.6 million – cementing its spot as the 11th biggest publicly listed bank in Australia, on the tails of Heartland Group and Judo.
The proposed ‘merger of equals’ would see MyState acquire a 100 per cent stake in Auswide, with the SIA delivering a share ownership split of two-thirds (66 per cent) to MyState shareholders and one-third (34 per cent) to Auswide group shareholders.
The challenger banks argue that the merger would “significantly enhance [their] scale and value proposition”, boosting their earnings and growth potential, while delivering increased funding flexibility through a combined balance sheet.
“MyState and Auswide have quality loan books evidenced by their low arrears and loyal customer bases. The Proposed Merger will also further diversify loan balances by geography and support deposit generation,” MyState wrote in a statement.
Though rarer amongst ASX-listed institutions, MyState and Auswide are far from the only challenger banks in recent years that have sought to combine forces, as smaller, regional-focused brands seek to keep pace with resource might of the bigger banks. Last year saw the formation of NGM Group (a merger of Newcastle Permanent and Greater Bank) and People First Bank (combining People’s Choice Credit Union and Heritage Bank), while this year Bank Australia and Qudos Bank, and Beyond Bank and P&N have proposed separate unions.
MyState and Auswide have mooted a December 2024 completion date for their scheme implementation agreement (SIA), including regulatory and government approvals for the merger, with the full integration and consolidation of technology systems expected by year three of the marriage.
“The merger just makes sense”, said Auswide Bank managing director Doug Snell.
“Both banks have the same DNA and have been putting customers first for a combined history of over 122 years. Together, we can do even more for our customers, with a wider range of competitive products and a greater capacity to invest in new technology.”
Snell added: “The new merged entity will continue to provide outstanding customer service here in Queensland and through an expanded footprint, while our employees will find new opportunities for career development within the larger organisation”.
MyState managing director and chief executive Brett Morgan said: “The combination of two high-quality and complementary businesses is consistent with our stated growth strategy and brings significant scale advantages to the group.”
Morgan said the bank will realise “significant cost synergies from the merger”, with estimated savings of up to $20-25 million per annum from the consolidation of staffing resources and technology.
Tech savings costs alone – with the consolidation of core banking systems, security operating controls, treasury and payments systems – will slash around $6 million to $7 million from the combined entity’s expenses, the pair estimate. Already, the pair say they are “well-progressed to determine [the] IT architecture” of the newly merged entity.
MyState reported mixed results in its latest full-year report, with a five per cent drop in operating income, hitting $152 million, an 8.3 per cent drop in NPAT, totalling $35.3 million. Customers deposits were also down by nearly five per cent.
However, losses were offset with a 1.6 per cent decline in operating expenses to $101.0 million, and a two per cent increase in the bank’s loan book, hitting $8.0 billion. New-to-bank customers also increased by more than 14,000 over the year.
Auswide also announced a big boost to its SME loan book, with the acquisition of specialist equipment leasing finance company Selfco for $6.5 million.
Selfco, based in Sydney, counts a loan book of $81 million.
Auswide said the buyout would “facilitate its entry into asset finance, providing portfolio diversification and driving scale by expanding Auswide’s service offering into the large addressable SME funding market”.
