2019 saw Australia’s mutual banks, building societies and credit unions (the ‘Mutuals’) perform well despite the challenging operating environment which featured sustained competition, increased scrutiny from regulators and increasing pressure on margins. This was coupled with increased investment in people and technology.

The financial services industry is facing unprecedented political, regulatory and media scrutiny. This is compounded by the economic pressures the sector is facing, through competition from the majors, neo-banks and non-bank lenders, impacts of low interest rates and the fall in housing prices in the earlier part of the financial year.

Front of mind for Mutuals in this challenging environment is how best to leverage their member and community-based trust and agility in order to remain resilient in the face of these headwinds, and how to transform the business with a focus on customers’ needs. Successful Mutuals will be those that can balance between, and adapt to, these priorities. This report explores these issues and a number of related topics, aiming to provide insight into what priorities are in the mix for a Mutual when it comes to ‘maintaining trust and transforming for the future’.

• Residential lending increased by 7.3 percent (2018: 6.6 percent)
• Deposits increased by 8.5 percent (2018: 5.0 percent)
• Net interest margin decreased by 5 bps to 1.99 percent (2018: increased by 1 bps to 2.04 percent)
• Non-interest income decreased by 3.2 percent (2018: decreased 2.3 percent)
• Impairment expenses remained steady at 0.04 percent of average gross receivables (2018: 0.04 percent)
• During the year, 2 mergers were completed (2018: 5 mergers completed)
• Return on equity decreased by 69 bps to 4.51 percent (2018: 5.20 percent)
• Capital levels decreased by 24 bps to 16.73 percent (2018: 16.97 percent).

1. Transformation and simplification – How can Mutuals transform and grow by simplifying customer experiences and focusing on core capabilities?
2. Preserving trust in Mutuals – Why does trust continue to drive the organisational context, and what framework can Mutuals utilise to demonstrate and foster trust? Can trust drive innovation and transformation?
3. Increasing focus on Environmental, Social and Governance (ESG) – How can a Mutual respond to emerging climate risks? How does a Mutual build sustainable finance models into their current offerings?
4. Member experience – How can a Mutual design products that are centred on customers and get these to market quickly? What are regulatory authorities focused on and how is it shaping the banking industry?
5. Open Banking – Open Banking deadlines in Australia are fast approaching. How is the sector approaching Open Banking regulation and what strategies can a Mutual utilise in their implementation journey?
6. Operational resilience – How do Mutuals remain operationally resilient in an ever-changing market?

Protecting the Mutuals industry from money laundering and terrorism financing – What are the observations and learnings from AUSTRAC's recent report on AML/CTF as it relates to the Mutuals? How can Mutuals respond to the report?

Regulatory Roadmap 2019 – How should Mutuals respond to the significant regulatory and compliance changes? Should they focus on maintaining compliance or innovate their capabilities in order to be a differentiator in the market?

Watch our report contributors speak to their respective observations on the Mutual sector and the broader banking sector overall.

• Download the Mutuals Industry Review 2019 (PDF 2.6MB)
• Download the key data sheet (PDF 199.4KB)
• Access our interactive Mutuals Insights dashboard which provides a visual comparative and trend analysis for the Mutual sector
• Read the media release