ME Bank aims for aggressive growth

admin | 杭州桑拿
7 Jun 2019

ME Bank chief executive Jamie McPhee.Super fund-owned ME Bank is pushing ahead with an aggressive plan to more than double the value of home loans it writes, despite the rapid growth coming at a cost to returns.

Chief executive Jamie McPhee said the bank wanted new mortgage settlements to increase from $3.8 billion last financial year to $8 billion in three years’ time. It plans to sell more loans by using technology and targeting a wider range of customers.

The ambitious plan comes after the bank’s loan book grew by 19 per cent in the year to June, mainly due to quick growth in home lending. Profits were also up 28 per cent to $47 million.

However, return on equity remains low at 6.5 per cent, while its cost-to-income ratio is high at 71.1 per cent. These are two areas where Mr McPhee is eyeing significant improvements.

ME Bank is owned by 30 industry super funds and was established in the 1990s as an alternative lender to the big banks. It has never paid a dividend.

Mr McPhee acknowledged that the rapid growth in lending was coming at some cost to return on equity, but said there were moves under way to make the bank more efficient and ultimately pay a dividend to its shareholders in “about four years”.

“We need to get that [return on equity] into the double digits into the not-too-distant future to give our shareholders the appropriate return,” he said.

Part of the improvement is set to come from lower costs, with Mr McPhee saying he planned to drive a reduction in the bank’s cost-to-income ratio to “industry standards” of around the “mid-fifties” for a regional bank, and ultimately even lower.

While ME Bank lacks the economies of scale held by the big four, he argued that it could reduce its expenses substantially because it did not have the costs of running a branch network, which it has closed. Partnering with industry super funds would also allow it to distribute more loans, he said.

It is hoping to achieve the rapid growth through a heavy emphasis on digital distribution channels and by opening itself to more potential customers.

Until August the bank only served customers who were members of a union or an industry super fund, but this policy has been scrapped, and it is also making greater use of brokers to sell mortgages.

The bank has also in recent years spent $70 million on a technology overhaul and closed all its branches in 2012.

ME Bank’s plan comes as the big four and several smaller lenders such as Macquarie eye rapid expansion in the mortgage market – sparking repeated warnings from the financial regulator over lending standards.

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