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.

Lender

Variable
More details
$0 APPLICATION FEE
$0 APPLICATION FEE

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

    Variable
    More details
    NO UPFRONT OR ONGOING FEES
    NO UPFRONT OR ONGOING FEES

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

      Variable
      More details

      Purple Basic Variable Home Loan (Special Offer)

        Variable
        More details

        Basic Home Loan (LVR 60%-70%)

          Variable
          More details

          Discount Variable Home Loan ($150k+) (LVR 80%-90%)

            Variable
            More details

            & Introductory Home Loan

              Variable
              More details

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

                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 be 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. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. 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.”

                Mutualloans

                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.

                Mutualgrowth

                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."




                Disclaimers

                The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

                Latest Articles

                author-avatar
                William Jolly joined Savings.com.au 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.

                Be Savings smart.
                Subscribe for free money newsletters.

                By subscribing you agree
                to the Savings Privacy Policy