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