MyState CEO Melos Sulicich on how it went from Tassie credit union to bank that customers love more than the Big 4
When MyState (ASX:MYS) first listed on the ASX in 2009 it was a recently demutualised Tasmanian credit union. Now it’s a bank with a customer satisfaction rate higher than the Big 4.
Like its peers the bank has benefited from record low interest rates and the faster recovery of the Australian economy. But it has benefited further from several trends making it easier to switch banks such as open banking and digitisation.
It also emerged unscathed from the Banking Royal Commission and while it has a significant portion of Tasmanian customers, it is also growing its base on the mainland too.
In FY21 it reported a 20.9% increase in NPAT to $36.3 million and has a net promoter score of 45 – well ahead of any of the major banks.
Since 2014 it has been led by CEO Melos Sulicich, who will only be in the role for another fortnight before passing on the baton.
Sulicich was originally going to stand down at the start of 2020 before agreeing to stay on to help the bank through COVID-19.
We caught up with him before his transition to different pastures, asking him about COVID-19 and if the good times will go on.
“It’s been a pretty tough couple of years, we’ve had a lot of customers that’ve been on COVID assistance so we’ve helped through COVID assistance to enable them to get to right themselves and at the same time trying to manage the business as we didn’t have an idea what was going to happen in the property market,” he said.
“So [we were] working through a whole host of scenarios, working through a period where we picked our staff up in a week and moved them out of the office and working from home.
“So it’s been a busy couple of the years, but the business has come through unbelievably well.
“All the fears we had of defaults and delinquencies didn’t happen and all those people who were on some sort of COVID assistance righted themselves and [went] back to paying off their loans.
“The business grew its deposit base by over 13% in a year, which is unprecedented for us.
“And now according to the latest APRA statistics for the FY to date we’re the fastest growing bank in home loans in the country, so growing at about 11% on an annualised basis for the first four months of the financial year.
“So business is going incredibly well, we’ve got a very, very clean book, amongst the lowest delinquencies in the country of any bank and one of the fastest growing banks of deposits and lending.”
“The business is in a great spot, so we took the opportunity in June to raise $50 million worth of capital, and that capital was to support balance sheet growth.
“Our aim is to try and double the business in as short a period of time that we possible can.
“With the cost of regulation going through businesses at the moment – particularly banks and financial services businesses, the cost of technology – we just have a view we need to be a lot bigger. We’re one of the smallest banks on the ASX.
“We’ve got a view we have to be bigger to support those costs coming down the pipeline, so we raised $50m to support the balance sheet.
“And it’s going according to plan so we’re really happy with the way the business is.”
“We’ve got a lot of support from our Tasmanian customers. We were a mutual credit union up until 2008-09 and the board decided that they needed to list on the ASX.
“It was the height of the financial crisis, they were just concerned about access to capital and the like. So they demutualised and listed on the ASX and of course all the members of the mutual became shareholders – we have 50,000 Tasmanian shareholders who support the business.
“We have 90,000 Tasmanian based customers that support the business really well and we’ve got a workforce of 300-odd people in Tasmania that support the business.
“But we have more of our loan book outside Tasmania than in Tasmania, 40% of deposit book outside Tasmania, so we’re growing quickly outside Tasmania and our aim is to continue to be strong in Tasmania.
“We’re not the biggest bank in Tasmania so we have room to grow in Tasmania but our aim is also to grow more quickly on the mainland and we’ll continue to do that.
“The workforce we’ve got are a fabulous group of people who are very loyal to work for a Tasmanian-based bank in Tasmanian – we have loan processing in Tasmania, all our IT staff are based in Tasmania, all of our call centre is in Tasmania.
“So it’s nice when someone from mainland Australia rings a call centre and it’s based in Tasmania, based in Australia – it’s part of what we are, part of our DNA.
“And we must be doing something right as we have a customer NPS score of +45 or +47 on any given day.
“Our customers that we’ve got like us and the new customers we’ve got are a subset of that and their NPS is as high and sometimes even higher than the rest of the customer base.
“Anyone that’s becoming a customer of MyState whether a new or long term business tends to have faith in the business, likes the business and advocates for the business.
“I think being based in Tasmania is part of that – our staff are focused on customer needs, customer issues and building things for customers.
“And when they answer the phone, they answer with a cheer in their voice, they’re happy to work in the call centre in Tasmania and they do a fantastic job and it shows in the way customers feel about us.”
“We weren’t ourselves impacted by the Royal Commission – we weren’t called to give evidence – and so for us it was business as usual, just get on with the business.
“But obviously for many other players in the industry it did have quite a big impact and they’ve got some large mediation programs. We don’t have many of that going on inside the business.
“Hence the reason of being able to raise capital only to grow the business because the business is very clean and it’s simple business. Our technology is fabulous and very simple and easy to use not only from a customer point of view but business point of view. There’s no complexity about our technology.
“So for us the Royal Commission created an opportunity to grow our business, to grow the brand into mainland Australia and that’s what we’re focused on doing.
“10 years ago we had a branch-based credit union. Now we have fully fledged digital bank – you can open accounts in real time and do whatever you want with us online or over the phone if you need to. There’s no need to call into a bank branch and anything like that.
“And I think Australians are up for banking with different banks than they have in the past; it’s easier to go to a broker and get a loan with MyState than it has been in the past.
“And people are flocking to us, we’re looking like we’re the fastest growing bank in Australia and we’re going to continue and push it hard.
“I think the ability to do that was created by issues raised in RC and so other banks are having to focus on fixing up some of the problems they created. We didn’t have any of those issues to address.”
“Interest rates are at historic lows, even when they go up they’re going to go up to what would have been historic lows before they got to the current historic lows.
“We’re not expecting rates to rise sharply and we’re expect rates to rise in a way to allow people to accommodate those rate rises.
“So someone borrows from us at the moment they might be paying 3% interest on their home loan. When we calculate the servicing on that home loan before we issue the documents we assume that they’re paying 5.5% interest so there’s a lot of buffer in there for rates to go up and people being able to service loans.
“Most are paying down their loans faster than they ever have in the past so their loan balances are lower than they otherwise would be.
“Rates will eventually go up but they’re not going to cause people to get into trouble. I think it might cause some of the house price growth to slow which I don’t think is a bad thing.
“If you’re a young kid buying your first home it’s tough having to think about borrowing $1 million just to buy a relatively small home in a capital city in Australia.
“What we are doing about it internally? Our focus is on people who live in their own houses, so we have a very low investor book, a very low interest only book, we focus on principal and interest and owner occupied lending because from a delinquency point of view it’s best to focus on.
“And we’re happy to keep lending into the market. The government’s first home loan deposit scheme, we’ve been a beneficiary of as it’s our bread and butter, we’re a first home buyer’s bank.
“People who borrow from us stay with us for a long period of time. We’re promoting our brand significantly not only in Tasmania with MyState Arena and Football Federation Tasmania, that we support, but also in Melbourne.”
“I’m bullish on the economy, I think the economy next year is going to grow well.
“There will be speed bumps along the way – we’re seeing supply shortages and things like that – but those sort of things are short term, transitory and will find their way through the economy quickly.
“I think the Australian economy is in for a pretty good time over the next few years, and that’s always good for a bank.”
“I finish on 31st of December so I look forward to taking January off – January is always a quiet month.
“I’m going back to uni to finish a law degree I started but never got to finish so I’ll have an unusual thing of being on one hand a pensioner, on the other hand a student. Not many of those around.
“I look forward to finishing that and some non-executive director opportunities I’m discussing.
“I don’t have desire to take up an executive role again. Seven and a half years as CEO of a listed company which is growing like MyState has been growing is enough to finish anyone’s career.
“So I look forward to a different phase of life.”