Why are customer-owned banks merging?

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on May 09, 2022 Fact Checked
Why are customer-owned banks merging?

Two big mergers are slated to happen soon - Heritage and People's Choice, and Newcastle Permanent and Greater Bank. So why is this happening?

Recently the two boardrooms of Newcastle-based banks Greater Bank and Newcastle Permanent agreed to merge

In April the boards of Toowoomba-based Heritage Bank and Adelaide-based People's Choice also agreed to merge.

Over the past decade, the number of mutual and customer-owned banks has reportedly halved, with fewer than 70 existing today.

Samuel Philipos, director of mortgage brokers Benevolence Financial Group (BFG), explained why these mergers are happening.

"For customer owned banks such as Newcastle Permanent, Greater bank, Heritage and People's Choice, mergers are a strategic avenue for banks to drive growth and reduce costs through economies of scale," Mr Philipos told Savings.com.au.

In 2021 NAB also acquired neobank 86 400, and the retail arm of Citi Australia, while Bank of Queensland acquired ME Bank and Virgin Money.

That said, the United States' Citigroup is leaving 13 countries, not just Australia.

"Citibank's acquisition may have been as a result of a similar target demographic to NAB's target market. Similarly with BOQ acquiring ME Bank and Virgin Money, this is enabling BOQ to compete more effectively with the bigger players," Mr Philipos said.

10 Largest Customer-Owned Banks Australia

Here's how Greater Bank, Newcastle Permanent, Heritage Bank, and People's Choice Credit Union compare to other customer-owned banks in terms of customer assets on the books.

Institution Assets (billion)
Great Southern Bank (formerly CUA) $20.554
Heritage Bank $14.339
Newcastle Permanent $13.932
People's Choice $11.913
Bank Australia $10.997
Teachers Mutual $10.199
Greater Bank $10.193
Beyond Bank $9.627
IMB $8.708
P&N Bank $8.692

Source: Australian Prudential Regulation Authority, March 2022 ADI Statistics

These figures pale in comparison to the largest banks in Australia - for example, Commonwealth Bank holds more than $900 billion in assets on its books. 


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      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.

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      Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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