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Mortgage lending up 6.6% among mutuals

The underlying profits of Australia’s mutual banks, credit unions and building societies have increased as competition in the mortgage market intensifies.

According to KPMG Australia’s Mutuals Industry Review 2018, the balance sheets of mutuals have grown 5.6 per cent to $8.9 billion, with overall operating profit before tax increasing by 4.6 per cent to $634.8 billion.

Ian Pollari, national head of banking for KPMG Australia, commented: “The 2018 financial year saw the mutuals record slower growth compared to previous years in a challenging operating environment for the banking industry as a whole.

“In the face of industry-wide headwinds, the mutuals continue to perform strongly and, looking ahead, will seek to differentiate the home loan experience through better member service and mobile product offerings, underpinned by investment in digital technology.”

KPMG noted that the key financial results for the mutual sector for the year are:

  • Residential lending increased by 6.6 per cent to $89.5 billion
  • Deposits increased by 5.0 per cent to $91.9 billion
  • Technology spend increased by 5.7 per cent to $182.9 million
  • Net interest margin increased by 1 basis point to 2.04 per cent
  • Non-interest income decreased by 1.9 per cent to $555.9 million
  • Impairment expenses remained steady at 0.04 per cent of average gross receivables
  • Capital levels increased slightly to 16.36 per cent.

KPMG claimed that the performance has been underpinned by the continued effort from mutuals in streamlining operations, enhancing products and services, investing in technologies to enhance the customer experience, maintaining pricing discipline, and in some cases, merging to gain economies of scale.

When questioned about the best way to continue this improvement, the three biggest opportunities identified by the mutuals were improving efficiency (27.7 percent), more collaboration with alliance partners (23.4 percent) and more collaboration with peers (17.0 percent).

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Brendan Twining, KPMG national sector leader, mutuals, added: “Going forward, mutuals must continue to take ownership of their customer advocacy and branding efforts and own the trust narrative through their interactions with all stakeholders.

“The success of the mutual sector lies in their ability to retain their strong branding as ‘community focused’ and providing clear solutions that are aligned to members’ interests.”

The Customer-Owned Banking Association (COBA) has welcomed KPMG’s findings.

COBA CEO Mike Lawrence said that the data reflected a difference in the culture of the mutual sector.

“As customer-owned institutions, mutual banks, credit unions and building societies have always existed to put people before profits.  

“We are not trying to squeeze our customers to please shareholders.

“Our model does not make us immune from trust issues, but it certainly gives us an advantage on our shareholder-return focused competitors.”

[Related: Major banks' assets continue to rise]

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