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Mutuals growth slows but profit up as margin squeeze abates

Mutuals growth slows but profit up

2018 saw Australia’s mutual banks, building societies and credit unions (the ‘Mutuals’) continue to grow in an environment characterised by low interest rates, increased competition, a new wave of technological innovation and evolving customer preferences.


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KPMG Australia’s Mutuals industry review 2018 finds that Mutuals’ balance sheets grew 5.6 percent (2017: 7.3 percent) to $8.9b, while overall operating profit before tax grew by 4.6 percent (2017: fell 4.3 percent) to $634.8m (2017: $606.7m) as the squeeze on net interest margins (NIM) has started to stabilise.

Ian Pollari, National Head of Banking for KPMG Australia, commented: "The 2018 financial year saw the Mutuals record slower growth compared to previous years in a challenging operating environment for the banking industry as a whole."

"In the face of industry-wide headwinds, the Mutuals continue to perform strongly and looking ahead will seek to differentiate the home loan experience through better member service and mobile product offerings, underpinned by investment in digital technology" he said.

Key financial results for the Mutual sector for the year are:

  • Residential lending increased by 6.6 percent (2017: 10.4 percent) to $89.5b
  • Deposits increased by 5.0 percent (2017: 10.8 percent) to $91.9b
  • Technology spend increased by 5.7 percent (2017: 16.4 percent) to $182.9m
  • Net interest margin increased by 1bp (2017: dropped 11bps) to 2.04 percent
  • Non-interest income decreased by 1.9 percent (2017: increased by 1.1 percent) to $555.9m
  • Impairment expenses remained steady at 0.04 percent of average gross receivables (2017: 0.04 percent)
  • Capital levels increased slightly to 16.36 percent (2017: 16.06 percent).

The Mutuals’ performance has been underpinned by their continued effort in streamlining operations, enhancing products and services, investing in technologies to enhance the customer experience, maintaining pricing discipline, and in some cases, merging to gain economies of scale. When questioned what about the best way to continue this improvement, the three biggest opportunities identified by the Mutuals were improving efficiency (27.7 percent), more collaboration with alliance partners (23.4 percent) and more collaboration with peers (17.0 percent).

Brendan Twining, KPMG National Sector Leader, Mutuals, commented: "Going forward, Mutuals must continue to take ownership of their customer advocacy and branding efforts and own the trust narrative through their interactions with all stakeholders."

"The success of the Mutual sector lies in their ability to retain their strong branding as 'community focused' and providing clear solutions that are aligned to members interests," he added.

About KPMG’s Mutual industry review 2018

The survey examines the performance and trends of Mutuals in Australia’s financial services industry for the financial year ended 30 June 2018. The Mutual sector covers Australia’s mutual banks, building societies and credit unions. The survey also considers the responses to a qualitative questionnaire covering the risks, challenges and opportunities facing the industry.

Further information

Ash Pritchard
T: 0411 020 680

Kristin Silva
T: 0411 110 953

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