Customer-owned banks are uniquely positioned to grow during the current economic environment, according to one of the leading analysts on the sector.
KPMG recently released their annual report into the customer-owned banking sector, which found that mutuals made 38.6% more in FY21, topping out at $685 million.
KPMG’s Hessel Verbeek, who heads up their mutuals division, told Australian Broker that the closeness of their customer relationship, allied with their agility, helped mutuals to thrive during the pandemic and positioned them well for growth moving forwards.
READ MORE: CBA makes third rate rise in six weeks
“First of all, because the mutuals are much closer to their customers and know them all, what we have seen is that through the pandemic there was a much lower need for loan deferrals,” he said. “Also, there were fewer loan loss provisions.”
“If you’re looking at the mutuals’ loan books, they’ve performed really well in the last two years. The balance sheets have been strong from a capital position, so when the market picked up this year, they were able to jump into it, which is a big explanation for their above-market growth. They’ve had the appetite and ability to grow.”
“They’re relatively simple banks. Even though they don’t have all the automated credit decisioning, or the digital systems, they are able to approve most loans at decent speeds. They’ve got strong brand customer trust and sharp pricing, and that serves them well.”
“Some of the larger banks, from a broker perspective, have approval times that are well beyond ten days. The mutuals have been able to put on extra staff and typically approve in five to ten days, which is playing out well in the current market.”
Regional areas have continue to drive the housing market, which naturally plays into the mutual sector, as customer-owned banks often command more market share in regional Australia.
“The increase in house prices in regional areas has obviously played out,” said Verbeek.
“Traditionally, mutuals were writing much smaller average mortgages than banks operating in capital cities, which is still the case, but if we’re seeing 20% house price increases, that really reflects in the performance of the mutuals.”
“There’s a couple of mutuals that have posted very high levels of loan growth by being positioned in the right markets.”
