MyState turns Auswide integration into $11.8 million of annual synergies

Profit growth and dividend increase

MyState Limited (ASX:MYS) has put numbers behind its post-Auswide merger strategy, reporting underlying net profit after tax of $58.3 million for FY26, up 41.2% on the prior year. Statutory NPAT rose 58.0% to $56.2 million, while underlying earnings per share increased 11.7% to 34.3 cents.

The result supported a fully franked final dividend of 12.5 cents per share, taking the full-year distribution to 24.5 cents and producing a 74.1% payout ratio. MyState’s reported total shareholder return was 14.25% for the year to 30 June, compared with 6.16% for the ASX 300 including dividends.

Auswide integration reaches its first financial milestone

The central operational story is the merger integration. MyState completed 158 initiatives during the year and delivered $11.8 million in pre-tax run-rate synergies, ahead of its original FY26 target of $10 million to $11 million. The group continues to target $20 million to $25 million in annual synergies by the end of FY28.

The move to a single banking licence on 1 December 2025 delivered what management described as operational, funding and capital benefits. Yet the integration is far from finished: a single loan origination system is expected by the end of calendar 2026, while the single core banking program began in July 2026 and is expected to take about two years.

Technology investment raises the execution stakes

MyState now expects total integration costs through 30 June 2028 to reach $32 million, up from $29 million. The additional spending is predominantly tied to a modern, AI-enabled core banking platform being delivered with Tata Consultancy Services, with part of the investment expected to be capitalised. The anticipated impact on profit and loss over the three-year program has been revised from $29 million to $26 million.

That creates a familiar banking tension: the merger is already producing measurable savings, but the largest systems project still lies ahead. The company says the end-state model will simplify operations and support growth, but the timing, cost and delivery of the migration remain material variables for future earnings.

Loan growth improves while capital remains sound

Total loans grew 7.2% to $14.0 billion, with the home loan book up 5.8% for the full year and growing at a 10.8% annualised rate in the second half. Selfco’s equipment finance portfolio expanded 134% to $371 million, contributing $3.9 million to group NPAT, while TPT Wealth’s NPAT rose 12.5% to $2.7 million.

Those businesses increased their combined contribution to underlying group profit to 11.3%, from 6% in FY25. MyState’s net interest margin improved three basis points to 1.50%, although the report flags continuing competition for new mortgages, customer switching and retention discounts as pressures on future margins.

Credit quality and climate disclosures add caution

Asset quality remained favourable on the reported measures, with 30-day-plus arrears falling to 0.68% and 90-day-plus arrears to 0.32%. However, impairment expense increased to $4.1 million from $0.5 million, and the forward-looking economic overlay rose to $4.6 million from $3.0 million. The group’s CET1 ratio was 11.57% and total capital was 15.83% at year-end.

MyState also published its first mandatory AASB S2 climate-related disclosures. It identified acute weather events and higher housing insurance premiums as risks to the mortgage portfolio, but reported no material current impact on the carrying value or performance of that portfolio. The analysis projects greater exposure under a high-temperature scenario over the long term, while the company has not yet set climate-related targets or developed a transition plan.

The immediate question is not whether MyState has captured the low-hanging merger savings; the report suggests it has. It is whether the much larger core-system transition can deliver the remaining synergy target while preserving margin, capital strength and the currently benign arrears profile.