MyState (MYS) – Macro headwinds to impact loan growth

MyState provides banking, trustee, equipment finance, and managed fund products and services in Australia. It operates in three segments: MyState Bank, Auswide Bank, and a wealth management division. The company was incorporated in 2008 and is based in Hobart, Australia.

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Changes to the taxation of investment property in the latest federal budget are negative for the banking sector. MyState is less exposed than peers to investor loans by product mix (circa 20%), but it has a high lending exposure to housing overall (97%). Headwinds for housing loan growth will flow through to MyState earnings in FY27 and FY28. The bank retains strong income attractions relative to the sector and the market, so we continue to recommend the stock as a Buy, but we trim our target price to $5.29 from $5.42.

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The retail banking sector faces two specific headwinds that will impact the FY27 and FY28 outlook for housing loan growth: 1) rising interest rates in a weakening macro environment is slowing borrower demand; and 2) the budget’s taxation changes for investment property, which makes up circa 20% of MyState’s housing book versus 33% for the broader sector, will materially slow investor housing lending. The budget changes will specifically lower new investor loan demand from current annual growth of 9.6% to between 0–2% for FY27 and we estimate total housing credit growth for the banks will slow to 3–4% from 5–6. Meanwhile, a secondary risk is that a weaker credit growth environment will see increased competition in the larger owner-occupied segment and a return to margin pressure on front-book lending,i.e. new loans.

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Ord Minnett has left its EPS estimate for FY26 unchanged, but we downgrade our FY27 and FY28 forecasts by 2% and 1%, respectively, to incorporate lower loan growth assumptions. Nevertheless, we still forecast a compound annual growth rate (CAGR) of 15% over three years.

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