Despite all the challenges of 2020, ME Bank has managed a positive full year result with the bank determined to stick to its simple model.
The bank had a statutory NPAT of $80.8 million in 2020, up 20% on last year's results. Its underlying NPAT was up 24% to $123.9 million. The bank's portfolio of home loans grew by a modest 2% to $25.5 billion.
ME Bank acting chief executive Adam Crane told Financial Standard he expected the group of industry superannuation funds that own ME Bank to be happy with the results.
"We have a very clear relationship with our super funds on the level of return they would like to see. We're certainly achieving that on an underlying basis, we would have achieved that this year on a statutory basis, except we took a provision for the COVID-19 as is appropriate," he said.
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Crane said he would shortly be embarking on a roadshow to discuss ME Bank's results with the industry funds that own it and clarified that the bank targets an 8% return on equity per year for its super fund shareholders.
Asked whether the super funds were likely to sell out of ME Bank any time soon, Crane said that wasn't his focus.
"The shareholders will have to make their own decisions over time on what they want to do. If we deliver the returns, I see no reason why the current arrangement can't continue," he said.
Crane is acting in the top job after former ME Bank chief executive Jamie McPhee resigned suddenly in July after weathering scrutiny over the bank's adjusting of redraw facilities for mortgage customers earlier in the year.
The search for a permanent chief executive is ongoing.
As for the redraw scandal, Crane said an internal review into what went wrong at the bank is progressing.
"We did get it wrong and we acknowledge that. We got the communications in particular wrong, the intention was good. There's an internal review going on around what the key learnings are that we have to take from that, which is reasonably progressed now," Crane said.
"A lot of it comes down to ensuring a really strong customer voice is present in all conversations that concern customers. We have a customer advocate roll internally and they will play that role in discussions going forward. We're still learning the overall lessons in response to that, there are definitely learnings and we are committed to taking them on board."
Crane said the change to redraw balances came about because the bank was concerned that customers could get themselves into financial difficulty by accessing those extra redraw facilities on their loans.
When ME Bank reversed the decision on the redraw balances, Crane said only about 23% of those customers that could have their redraw balance reinstated chose to do so.
"We've been reaching out to each of those customers and having a conversation around their financial situation, just making sure it's clear if they do draw down what the implications are around repayment levels so that they don't get themselves into financial difficulty," he said.
And, ME Bank has no plans to diversify its business into areas like wealth management. Rather, Crane is focussed on keeping things simple.
"We're really comfortable to keep progressing a simple model. We've got five core retail products, most of our lending is home loans and we're increasingly funded by customer deposits," he said.
"We think that simple model is the right model. Increasingly, we're shifting to a truly digital bank - we that's the sustainable model for us."