IMB Bank First Half 2021-2022 Financial Results

Highlights for the half year to 31 December 2021

• Net profit after tax: $14.4 million - a solid result reflecting effects of COVID on the economic environment, head office relocation and technology transformation costs
• Capital adequacy: 17.4% - with regulatory liquidity also strong at 19.5%, both are above regulatory requirements and well positioned for the current economic environment
• Net interest margin: 2.11% - consistent with net interest margin at 31 December 2020 and slightly lower than 2.13% at 30 June 2021
• Retail Deposits increased by $224 million – reflecting our focus on maintaining our competitive position as an alternative to the major banks
• Total assets at 31 December 2021: $7.13 billion - up from $7.0 million at 30 June 2021
• Interim dividend: 8 cents per share, fully franked - compared to 9 cents per share for the half year to 31 December 2020

Commenting on the results, Chief Executive, Robert Ryan said: “This was a solid performance in fluctuating economic conditions as the challenges associated with the pandemic prevailed. Our strategy of transforming services for members continued, with the launch of IMB Bank’s mortgage products on our digital platform being achieved during the half.

“We sustained IMB Bank’s strong underlying financial position, increasing the asset base while building digital capability, enhancing fraud prevention, keeping our people safe and continuing to support our members and communities through lockdowns and in difficult times.”

Financial overview

Mr Ryan continued, “Net profit of $14.4 million for the half year to 31 December 2021 was in line with management expectations, reflecting costs associated with responding to the pandemic, our operation from a new head office premises and the implementation of new technology.

“We achieved loan approvals of $690 million, continuing the momentum of the previous half to 30 June 2021 (loan approvals: $676 million). This was an improvement of 8.3% compared to loan approvals of $637 million for the corresponding half year to 31 December 2020.

“We maintained focus on margin management with an average net interest margin of 2.11%, a strong outcome in a highly competitive environment and consistent with the two preceding half year periods.

“The competitiveness of our products and services was reflected in a $224 million increase in retail deposits, providing funding for our growth. Total assets increased to $7.1 billion from $7.0 billion at 30 June 2021.

Capital adequacy was 17.4% and regulatory liquidity was 19.5% at 31 December 2021, well above regulatory requirements. IMB bank is well positioned for the proposed changes to the bank capital framework under APRA’s prudential standard APS111. A small improvement in total regulatory capital is expected when the new framework becomes effective on 1 January 2023.

IMB Bank has a strong balance sheet and prudent buffers are in place to manage the risks of the uncertain environment.

Mr Ryan said, “We have supported members throughout the pandemic which is our priority. It is pleasing that the rate of financial hardship assistance needed by members represents a very low 0.9% of the loan portfolio. We acknowledge ongoing uncertainty associated with the pandemic and have therefore maintained the provision of $2.9 million set at 30 June 2021.”

Dividends and capital management

The Board has declared an interim dividend of 8.0 cents per share, fully franked, payable to IMB Bank shareholders on 25 February 2022 to shareholders registered on that date. This represents a dividend payout ratio based on shareholders’ interest in contributed funding of 77%.

In making this decision, the Board considered a range of factors including the interim profit result,  prudential guidance, the economic outlook and ongoing challenges for the full-year profit outcome. The Board continues to believe that a share buyback would not be an effective use of capital in the current environment.

Strategy and operations

Mr Ryan said thatthe bank’s strategic agenda aims to deliver balanced outcomes for all members.

“Capitalising on last year’s introduction of a new lending system, we were pleased to launch IMB Bank’s digital mortgage platform in November. Members are demanding high-quality, faster and convenient digital services which our strategy is delivering. Our mortgage products are now easily accessible across Australia.

“This expands our addressable market and will allow us to compete more cost effectively. We are also progressing the upgrade of our mobile app and online personal lending and deposit platforms to increase the efficiency and convenience of our services to members, as well as strengthening our team of business bankers to support growth in small business.

Supporting the community

“We have worked hard to minimise disruption and to keep our members and employees safe. Our employees have been extremely flexible and resilient, allowing members to bank with confidence.

“Many not for profit and community groups have been adversely affected by the pandemic. We are pleased to continue to offer support through the IMB Bank Community Foundation funding program which in late 2021, provided $550,000 to 64 local community groups and projects in NSW and the ACT. Since its establishment, the Foundation has provided funding of over $11 million to more than 800 community groups and we are proud of this longstanding contribution.

Outlook

The resilience of the Australian economy will continue to be tested by the impacts of the pandemic, as increasing numbers of people are affected by the Omicron variant, workforce shortages are experienced, and reduced consumer spending constrains the expected economic recovery.

Continued pressure on margins and the ongoing effects of the pandemic on credit outcomes will challenge our ability to maintain profit at the same level as in the 2020-21 financial year.

However, the underlying strength and sustainability of IMB Bank’s business ensures it is well positioned for growth. Lending activity is expected to remain solid in core markets and we also anticipate growth through our digital channels in new markets. We have a strong and sustainable business model and are confident in IMB Bank’s ability to continue to deliver for all our stakeholders.

Date: 25 January 2022