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Banking on an opportunity: Auswide Bank (ASX:ABA) CEO Martin Barrett

Bell Direct
July 2, 2020

In this instalment of our From the helm series, Bell Direct’s Jessica Amir speaks to Auswide Bank’s (ASX:ABA) Managing Director and CEO Martin Barrett.

Auswide Bank is a classic Aussie success story – starting as a regional bank and growing to national status. Auswide Bank’s nimble nature has seen it grow half-year profits over 9% as it broadens the competitive landscape.

In this video, Martin discusses what to expect from its second-half results due in August, what the challenges are for the bank amid COVID-19, and how the State of Origin is boosting its brand.

Read Transcript

Jess: When you think of a bank that’s been growing its profits unlike most banks, which bank do you think of?

Well Auswide Bank (ASX:ABA) comes to my mind.

It’s the 10th listed bank on the ASX and has outperformed its peers at Suncorp and the Bank of Queensland year-on-year.

Over the past five years based on share price performance it’s also backed by Bell Potter as a buy.

I’m Jessica Amir with Bell Direct and joining us today from Auswide Bank is the company’s CEO Martin Barrett.

Martin, thank you so much for your company.

Martin: Thank You Jessica, great to be here.

Jessica: So let’s start with the introduction to Auswide Bank, what sets you apart from the other regional banks?

Martin: Auswide Bank started as a regional bank but over the years it’s grown to be a national bank with its products and services supporting customers all over Australia, either by a broken network, via partnerships or by customers that find their way to us and like the services and the products that we offer.

We see ourselves as being small but nimble and we see that as being something of a strategic advantage, particularly at a time when organizations can be so complex, so big and customers can find that really really difficult to sort of navigate.

We pride ourselves on that simplicity and that ability to be able to get to opportunities quickly.

We look at partnerships, we look at ways that we can improve our broker experience, our customer experience, we jump on opportunities like first homeowners scheme very quickly and take advantage of those offers in the marketplace where we can perhaps excel, grow our business whilst supporting customers.

Jess: And you mentioned the business is quite nimble.

That nature saw you announce first-half results that were quite strong, net profit up 9.3%, you’ve just wrapped up the full 2020 financial year results but we aren’t expecting your results until August, but given the ASX disclosure limits, what can you tell us?

What can we expect?

Martin: We entered into this second half with a great deal of momentum and despite the fact that there have been some obvious challenges we’ve COVID-19, that momentum is carried forward through the half year, so that’s quite pleasing for us.

We put out a series of outlook statements at the end of our first half and those outlook statements were really four things, we expected our net interest margin to be improving over the second half.

We expected that we would see above system loan growth, albeit system loan growth is quite low given the environment.

We also expected that our return on that tangible assets would continue to improve and in the medium term we were working towards a 10% return on their tangible asset goal and we were targeting a cost to income ratio of 60% again over the medium term.

We have no reason to change any of those outlook statements so Jessica, so we continue to be on target to achieve both those statements.

Jess: And you mentioned COVID-19’s impact, we know the big four banks have been significantly impacted by COVID-19, increasing their write downs, provisions and increasing costs because of loan impairments, but what are you seeing?

Martin: Yeah similar to pretty much everyone in the banking sector.

We’ve extended to our customers a range of support packages, to ensure that our customers can kind of get through this very difficult sort of period.

We’ve seen a range of different take ups, some customers that want payments waived for a period of time, some they just want to go to interest only or some form of hybrid in between.

I will say the period is very very uncertain and will be interesting to see what future government arrangements are put in place.

However, we like others have needed to increase our provisioning to ensure that we can cover off on any uncertainty that may exist for the future.

Having said that, out of all of this there comes some opportunity as well and we’ve seen funding costs come down quite materially, the bank bill swap rates fallen, at the same time we’ve seen the Reserve Bank of Australia provide opportunities for organizations like ours to take hold of some term funding at very cheap rates, at 0.25%.

So whilst we have some negatives in there, we’ve also got some some positives.

So uncertain, but we I think are navigating it okay.

Jess: I guess things are still uncertain because of COVID-19, but let’s just focus on the opportunities and future growth.

How can Auswide grow in this current tough climate?

Martin: So we were very successful with the first Home Owner Grant scheme, which the government put in place to encourage new purchases, young people to buy new houses, actually not always young people, sometimes  older people buy their house for the first time.

So we’ve been very successful on that and have enjoyed a good level of support through that particular package, we understand it that will also be renewed into the new year, so we’re still waiting to get that confirmation but we believe it will be renewed, so we’ll be part of that again for the year ahead.

We’ve also seen a stronger uptake about home lending products via broker, as we’ve continued to improve our service to brokers and to bear customers, we’ve done a lot of work in terms of improving our turnaround times and our consistency and the support of those brokers, which seems to be attracting more brokers to consider Auswide which is great.

We’ve also been investing in our brand and for some of your listeners they may know that we are the main sponsor for Queensland Rugby League and the Maroons which has lifted our brand awareness quite significantly, particularly in Queensland.

So we’ll continue to work with QRL (Queensland Rugby League) on a range of initiatives there as well.

Finally, we have a range of partnerships that we’ve been building platforms and also others that want to take advantage of our capital and our funding capability and our products and that’s providing some exciting growth opportunities for us as well.

Jess: Well good luck with the state of origin, but just finally investors are flocking to companies who remain able to pay their dividends and you’ve been growing your dividends for some time now.

So how does Auswide stand in regard to APRA changing the capital management and dividend guidelines?

Martin: That’s a great question Jessica because unlike any time that I can recall in my banking career, we’ve seen the regulator for banks write to all the banks and say look you need to be prudent with your capital which we agree with, but you need to consult with us in relation to any dividend payments that you expect or want to make over the period ahead.

So all I can say there is that we remain strong from a capital perspective and we believe that we have a case for dividend payments.

So we’ll work with the regulator to try to make sure that we can pay a dividend out to our shareholders this year, but that will ultimately be a decision for the regulator will need to make.

Jess: Auswide’s CEO Martin Barrett thank you so much for your time.

Martin: Thank you very much Jessica.

Jess: Thank you for watching.

For more information about Auswide Bank (ASX:ABA), head to Bell Direct’s or contact your advisor.

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