Key facts about Auswide Bank's financial performance for H1 FY24

Auswide Bank Ltd (ASX: $ABA) has reported a 15.88% decrease in income from operations, with net profit for the period attributable to shareholders down by 45.70% to $7.663m for the half-year ending 31 December 2023. The bank's net interest revenue reduced from $46.512m to $37.311m, marking a 19.78% decline. The financial period saw a decline in the loan book by 2.11% to $4.310 billion, and an increase in arrears past due 30 days from $4.232m to $6.168m. Despite the challenging market conditions, the bank's capital position remains strong with a capital adequacy ratio of 15.34% and a tier 1 capital ratio of 12.82% at 31 December 2023.

Executive commentary on financial performance and outlook

The market conditions during the first half of FY24 were challenging, with intense competition for home loans and deposits, resulting in a contraction in the net interest margin. However, the bank has signalled new growth aspirations for the second half of the financial year and has effectively recovered the losses in the loan book balance. It is predicted that loan book growth will exceed $250m with projected growth of 5.80% across the second half. The bank has also targeted growth in retail deposits, which provide a more cost-effective funding channel than wholesale funding such as securitisation. The repayment of the final $21m of the RBA TFF will be completed in March of 2024, reducing the pressure to replace this low-cost funding source with the more expensive funding lines. Cost management remains a firm focus of the Board and management, with a program of work aimed at ensuring capital and operating outlays are based on essential regulatory compliance, critical roles for productivity, risk, customer experience, and key investment programs. The expenses (excluding expected credit losses) remained static in comparison to the prior corresponding period with a marginal increase of 0.2%. The Board constantly reviews opportunities to drive scale through acquisition and partnerships, and will continue to investigate and pursue opportunities to achieve further growth in the loan book through M&A activities. The strength of the capital base will assist the planned loan book growth and provide opportunity for M&A and partnerships.

Summary of the ASX announcement and outlook

The ASX announcement by Auswide Bank Ltd (ASX: $ABA) for the half-year ending 31 December 2023 reflects a challenging financial period with a decline in net profit and net interest revenue. Despite this, the bank has outlined its ambitions for growth in the second half of the financial year, focusing on loan book growth, retail deposits, and cost management. The bank's capital position remains strong, providing capacity for growth and reassessment of investment opportunities. The Board has resolved to maintain the Dividend Reinvestment Plan for the interim dividend payable on 22 March 2024. The Directors have assessed that the going concern basis of accounting remains appropriate, supported by improving home loan growth and strong liquidity. The financial results indicate a period of growth, cost control, and an abatement of rising deposit costs that should lead to a steadily increasing net interest margin.