The total assets of Australia’s mutual banks grew 9.8 per cent throughout 2017 despite a “highly competitive banking environment”, according to KPMG.
Research compiled in KPMG’s Mutuals Industry Review 2017 revealed that growth in total assets under Australia’s credit unions, building societies and mutual banks (mutuals) increased by 9.8 per cent in the year ending 30 June 2017, compared with 8.2 per cent the previous year.
This growth was “despite the pressures of a low interest rate environment, declining mortgage affordability and a strong, competitive market”, the report said.
Despite strong growth in total assets, the mutuals industry had been challenged by a “highly competitive banking environment” with operating profit before tax decreasing by 4.3 per cent to $605.7 million before tax since 2016.
This decrease was contrasted with the profit of major banks, which grew 7.6 per cent in the same period.
Commenting on the results, KPMG Australia national head of banking Ian Pollari said it had been “another solid year” for the industry, despite headwinds.
“They have demonstrated that, even faced with difficult market conditions, they can offer customers a compelling alternative,” Mr Pollari said.
“Looking ahead, they will need to balance profitability with expansion, as well as creating capacity to invest in digital technologies.”
The report highlighted regulatory changes and the adoption of digital as key areas for the mutuals industry moving into the future.
KPMG national sector leader, mutuals Tim Aman added that the government’s support for all 11 recommendations made by Greg Hammond in the ‘Reforms for Cooperatives, Mutuals and Member-owned Firms’ review came at a “pivotal time”, whereby more than half (59 per cent) of survey participants pinpointed profitable and sustainable growth as a priority for the next three years.
“These recommendations looked to ‘improve access to capital, remove uncertainties currently faced by the sector, reduce barriers and enable cooperatives and mutuals to invest, innovate, grow and compete’ through proposed regulatory and legislative changes,” Mr Aman said.
“The support of these recommendations is exciting for the sector.
“They will help mutuals fund growth, take on new opportunities, invest in new technologies, and better position themselves as a competitive choice in the Australian market.”
The report acknowledged that the mutuals industry had already made steps to transition to digital, with technology spend rising by 12.4 per cent to $168.2 million this year.
Significantly, six out of 10 of the industry’s top mutual banks had already embraced Apple Pay, Android pay and Samsung pay, while only one of the major banks had done so, Mr Aman said.
“Mutuals have already demonstrated a willingness and ability to rapidly integrate new technologies into their product offerings,” he said.
“New opportunities for collaboration, the arrival of the New Payments Platform, and the growth of Australia’s fintech sector will open up new doors for mutuals as they concentrate on attracting the next generation of consumers.”
Customer Owned Banking Association (COBA) acting chief executive Dominic Dunn said the review noted customer-owned banks’ “strong performance in a challenging operating environment”.
“Importantly, it found that banking competition reforms will help the customer-owned sector continue to grow and offer more products and services to more Australians,” he said.
“Our sector was also acknowledged in the report for its investment in new mobile offerings, refreshed web design and improved digital experience.
“Today’s annual review from KPMG is further evidence of why consumers should consider switching to a customer-owned banking alternative.”