Mutuals lend $83.4bn in 2017

KPMG data highlights strong growth for customer-owned mutual banks in 2017, despite challenging market conditions.

KPMG Australia’s Mutuals Industry Review 2017 reported a balance sheet growth of 6.8 per cent for customer-owned banks.

Residential lending increased by 9.8 per cent to $83.4 billion, mirroring the previous year’s percentage growth, while deposits increased by 10.5 per cent to $87.3 billion.

Technology spending increased by 12.4 per cent to $168.2 million and reflects broader industry commitments to invest in emerging technologies.

The net interest margin dropped by 11 basis points to 2.03 per cent, while non-interest income rose by 2.1 per cent, countering the previous year’s 5.0 per cent decrease.

Impairment provisions remained stable at 0.07 per cent, but capital levels dropped by 3 basis points from the previous year to 17.2 per cent.

“It has been another solid year for mutuals, with continued asset growth in an increasingly challenging operating environment,” national head of banking at KPMG Australia Ian Pollari said.

“They have demonstrated that, even faced with difficult market conditions, they can offer customers a compelling alternative.

“Looking ahead, they will need to balance profitability with expansion, as well as creating capacity to invest in digital technologies.”

Moreover, the Turnbull government has recently supported 11 recommendations made in a Reforms for Cooperatives, Mutuals and Member-owned Firms report, which were designed to “improve access to capital, remove uncertainties currently faced by the sector, reduce barriers and enable cooperatives and mutuals to invest, innovate, grow and compete”.

KPMG’s national sector leader of mutuals, Tim Aman, endorsed the government’s decision and believes that the reforms will drive further growth for customer-owned banks.  

“The support of these recommendations is exciting for the sector,” Mr Aman said.

“They [regulatory changes] will help mutuals fund growth, take on new opportunities, invest in new technologies, and better position themselves as a competitive choice in the Australian market.”

Acting CEO of the Customer Owned Banking Association (COBA) Dominic Dunn welcomed KPMG’s analysis and also believes that new reforms present mutuals with new growth opportunities.  

“The review notes our strong performance in a challenging operating environment,” the COBA acting CEO said.

“Importantly, it found that banking competition reforms will help the customer-owned sector continue to grow and offer more products and services to more Australians.”

As a whole, mutual banking institutions have four million customers and assets that total $108 billion.

[Related: Bank CEO confident about Turnbull’s banking reforms]

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Charbel Kadib

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