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ME Bank FY12 - Major transitional period

by William Arnold | Nov 07, 2012

ME Bank is currently in the process on transitioning to a conventional banking structure.   The bank has moved most of its mortgages onto its balance sheet, switched from a securitisation only funding model to take deposits and closed all of its branches in favour of a workplace distribution model.  As a result, its profit metrics don't bear much comparison with prior periods.

A full review of this bank will be undertaken once further information is available.

Key points

  • Underlying profit was $24.4m and net profit was $4.7m (down 82%)
  • Return on equity was 5% and the cost-to-income ratio was a high 78%
  • ME spent $6.2m on branch closures during the year. Face-to-face banking is now conducted though a network of 35 workplaces
  • The Bank plans to have 60 workplace banking sites in operation by the end of the year with some having permanent physical structures
  • The Bank also spent $1.5m closing down decentralised credit operations. The credit department is now located in Melbourne
  • Another part of the business plan is for the Bank to capitalise on relationships with the superannuation funds that own it. ME has won mandates with a number of super funds to be the term deposit provider on their investment platform. It is also aiming to be their provider of cash management services
  • Deposits have increased from around $2bn in 2009, to more than $7bn FY12.  In 2008, 95% of funding came from securitisation, 4% from customer deposits and 1% from the wholesale funding. At FY12, customer deposits made up 30%, securitisation 57% and wholesale funding 13%
  • The CFO said the cost-to-income ratio and revenues were moving in the right direction, and would continue to improve as the business transformation progressed