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Victoria-based lender Bank Australia and NSW-based lender Qudos Bank have announced their intention to explore a merger.
The two entities have signed a memorandum of understanding and will now undertake due diligence to assess the benefits of the potential merger for customers.
However, they have flagged that a merged entity would benefit from economies of scale, give members a wider range of products and services (including digital banking technology and increased investment in cyber security and fraud/scam prevention), provide greater investment capability, and help create “Australia’s leading purpose-driven bank”.
The two lenders said that they would do this through “increased scale investments in impact for people and the planet”.
If merged, the new entity would have more than 300,000 customers, more than $17 billion of assets, and almost 900 employees.
Bank Australia’s mortgage book totalled $8.4 billion as at 31 December 2023, while Qudos Bank’s owner-occupier and investor book totalled $2.3 billion.
What would a merged entity look like?
Should both boards agree to proceed following the completion of the due diligence, members would be asked to vote on the proposed merger later in 2024 or early 2025 (once all the appropriate regulatory reviews and approvals have been completed).
Both brands would be retained in market in the period following the merger, with an intention for future review (as was the case for Heritage Bank and People’s Choice Credit Union, which is now known as People First Bank).
Head office operations would be split between Collingwood, Victoria, and Mascot, NSW and there would be lending and contact centre teams across Brisbane, Sydney, Canberra, Melbourne, and the Latrobe Valley.
Bank Australia’s chief executive Damien Walsh would become the CEO and MD of the merged entity, while Brendan Wright, the CEO of Qudos Bank, would “ have the opportunity to continue with the merged entity in an executive capacity”.
The proposed board would include Qudos Bank’s Jennifer Dalitz as inaugural chair and Bank Australia’s Steve Ferguson as inaugural deputy chair, with equal representation from both banks.
All non-executive employees will reportedly be offered (or have the opportunity to apply for) roles within the merged entity, including redeployment opportunities where appropriate.
The two banks have said that current branches would be retained and reviewed by the merged entity to support customer service requirements.
Creating a ‘purpose-driven bank’
The two lenders both have strong ties to their member communities and both have ethical ethos. Bank Australia is a certified B Corp and focuses its lending and investments in areas that “do good, not harm, for people and the planet” while Qudos Bank said that it exists “for the benefit of our customers and the community, not for making profit for the benefit of shareholders”.
They also have aligned commitments to achieve net-zero carbon emissions and to create positive impact for customers and their communities.
The two banks said they identified a “strong cultural and values alignment” and that – by merging – they would create one of Australia’s largest customer-owned banks and form an “enduring commitment to customer ownership that puts customers’ best interests at the heart of their operations”.
Qudos Bank chair Ms Dalitz said: “Bank Australia and Qudos Bank make ideal merger partners with their shared focus on values-led, customer-first banking. The opportunity to bring two financially strong and growing customer-owned banks together to create Australia’s leading purpose-driven bank is an exciting one for our employees and customers.
“Through increased size and scale, we’ll build on the already strong foundations of each bank to deliver even greater experiences for our customers, and increase our reach bringing purpose-driven banking to more Australians.”
Bank Australia chair Mr Ferguson added: “Both banks have long and proud histories through their credit union origins which lay at the heart of our modern customer-owned banks. We both recognise the value of cooperative principles that have helped us create real benefit and positive impact for our customers over many years.
“We’re excited by the opportunity to jointly build on our commitments to people and the planet, including our 2035 net-zero target.
“A merger will enable Bank Australia and Qudos Bank to create an even stronger and enduring bank that continues to support its customers and the broader community well into the future.”
Members of both banks will reportedly be “kept informed of progress”.
Mutual merger extravaganza
The Bank Australia-Qudos Bank merger is the latest in a long line of mutual bank mergers and acquisitions in recent years, as the customer-owned entities moved to unite to share resources and budgets in an increasingly competitive and expensive lending market.
Beyond Bank and First Choice Credit Union also recently announced their intention to merge, while Greater Bank and Newcastle Permanent merged to form the Newcastle Greater Mutual Group (with both brands still in the market).
Heritage and People’s Choice unveiled their new name – People First Bank – in September following their merger.
In December 2020, the mutuals sector was warned by APRA that it may need to prepare for mergers, should banks face severe financial stress. Since that time, several mutual lenders have consolidated or merged forces to stay competitive and share cost efficiencies.
A final decision from the Australian Competition Tribunal is expected no later than 20 February 2024.
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