Customer-owned banks continue growth in tough year for banking

author-avatar By on November 24, 2020
Customer-owned banks continue growth in tough year for banking

Photo by Ravi Roshan on Unsplash

Australia's mutual banks, or customer-owned banks, recorded another year of growth despite the challenges presented by COVID-19.

According to KPMG Australia’s Mutuals Industry Review for 2020, 47 of the industry's biggest mutual banks recorded a 3% increase in residential lending and a 7% increase in deposits from 30 June 2019 to 2020.

That's above the benchmark set by the majors, which grew respective lending and deposit books by 2.5% and 3.3%.

Comparatively, this time last year the mutuals' reported 7.3% growth in lending and 8.5% in deposits, highlighting the scope of the impact from the pandemic.

The table below displays some of the lowest-rate variable, owner-occupied home loans on offer from the top 10 customer-owned banks.

Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details

Budget Home Loan (Principal and Interest) (NSW and ACT only) (LVR < 80%)

VariableMore details

Basic Variable Home Loan (Principal and Interest) (New Customer) (LVR < 80%)

VariableMore details

Real Deal Variable Home Loan Special (Principal and Interest) (LVR < 80%)

VariableMore details

Great Rate Variable Home Loan (New Customers) (NSW, ACT & QLD only)

VariableMore details

& Basic Home Loan (LVR 60%-90%)

VariableMore details

Discount Variable Home Loan ($150k+) (LVR < 80%)

VariableMore details

Classic Home Loan

VariableMore details

Standard Variable Rate Home Loan (LVR < 90%)

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of October 19, 2021. View disclaimer.

"The 2020 financial year will be summarised as a challenging year for business, communities and individuals – and the Mutuals were no exception," KPMG Head of Banking Australia Ian Pollari said.

"The past year has also been categorised by low interest rates, and hence a flow-on impact to net interest margins – essentially the life-blood of the Mutuals’ financial performance, and increased levels of provisioning.”

However, he said the mutuals were well-positioned to meet the challenges.

"The success of Mutuals lies in their strong customer bond and affiliation as “purpose-driven organisations”, providing value to the community and members alike.”


Source: KPMG

Biggest mutuals see very strong growth

Some mutual banks recorded some above-average growth in terms of total assets under management, with the largest one, CUA, recording a 12% increase year-on-year.

P&N Bank, the 10th largest mutual bank, recorded a sizable 45% annual asset growth following a merger with credit union BCU, while Australian Mutual Bank, formerly Endeavour Mutual Bank, recorded the highest growth at 77.6% after a merger with Sydney Credit Union.


Source: KPMG

The 10 biggest mutual banks were unchanged from 2019, and all recorded positive annual growth.

Banks such as Newcastle PermanentHeritage Bank,Teachers Mutual Bank and Bank Australia were all included in the top 10.

Mutuals' mortgage deferrals down

The mutuals performed quite well when it came to home loan deferrals, although it should be noted they still account for a small portion of the market.

According to KPMG's report, customer-owned banks only had 5.52%, or $5.56 billion of COVID-related mortgage deferrals come June 2020, at a time when as many as one in 10 mortgages had frozen repayments.

While some banks,including majors like Westpac, still have as many as a third of loan deferrals being extended, one of the leading mutual banks by assets, Heritage Bank, reported that just 5% of loan deferrals continued past the initial assistance period.

"We take our responsible lending obligations very seriously and our arrears rates traditionally sit at around one third of the industry average, so we know the credit quality of our customer base is very strong," Heritage CEO Peter Lock said.

KPMG noted that the mutuals' 'customer bond' was a reason for its strength in terms of low deferral numbers.

"The ability of the Mutuals to respond quickly, and in a one-to-one manner with respect to loan repayment deferrals, has been, and continues to be, a strength of the sector in these challenging times," the report said.

"Clearly, prolonged exposure to deferrals is not sustainable and assisting customers return to a repayment plan will be an important focus for the Mutuals as the sector shifts from ‘response’ to ‘recovery’ following COVID-19."

KPMG's National Sector Leader, Mutuals, Brendan Twining said the pandemic escalated customers' need for such interaction with their bank.

"Without doubt, technological change that was originally thought to take two-three years to implement, was – in many cases – achieved in less than two-three months and at lower cost," he said.

“Going forward the challenge will be to continue to maintain this momentum, both with respect to the operational changes made, identifying and transforming additional aspects of the business, as well as cultural change."


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure,, Performance Drive and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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William Jolly joined as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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