When it comes to bank shares, we all naturally turn to the big four. However, there is a regional bank that provides another option for our investment dollars, and it’s not Bendigo and Adelaide Bank Ltd (ASX: BEN).
The Undiscovered Bank
MyState Limited (ASX: MYS) is a diversified financial services business that has been operating for over 50 years with 135,000 customers, and officially became a bank in 2014. MyState is headquartered in Hobart, Tasmania and offers banking, asset management and trustee services.
MyState is a minnow in the banking world with a market capitalisation of just $425 million. For the sake of comparison, the smallest of Australia’s big 4 banks is the Australian and New Zealand Banking Group (ASX: ANZ) with a market capitalisation of $77.7 billion, around 180 times larger than MyState.
MyState’s loan book grew by 18% in FY19 and is dominated by housing loans which make up more than 95% of all lending.
Being a very small bank, MyState is able to remain nimble and adapt quickly to a changing banking landscape. This could prove crucial as we enter into a new phase post the banking Royal Commission.
The company’s loan book appears to be very solid with impairments at record lows, and 30 and 90 day arrears well below that of its banking peers.
Lucrative Dividend
Over the past 12 months, MyState has paid out 28.75 cents per share in fully franked dividends, which at the current share price translates to a trailing dividend yield of 6.2%.
For those unfamiliar, the Rask Finance video below explains dividends:
MyState’s dividend yield stacks up favourably against its more popular banking peers Commonwealth Bank of Australia (ASX: CBA) and ANZ, with dividend yields of 5.5% and 5.8% respectively.
Much like all of Australia’s banks, growth is likely to be only moderate but with a stable loan book supporting a strong dividend, MyState may provide investors with diversification away from the usual ASX banking and financial stocks.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
