Newcastle Permanent gears up for merger with 41.6% rise in profit

by Mike Wood15 Oct 2021

Newcastle Permanent has geared up for its merger with Greater Bank by posting a NPAT of $42.7 million, a 41.6% rise year-on-year.

In what has been a stellar reporting period for customer-owned banks, Newcastle Permanent was able to grow its home lending division by $9.2 billion, a 3.7% rise on 2020, while maintaining a customer satisfaction score of 92% and being named as the best Australian-owned bank by Forbes.

“As a customer-owned bank, our purpose is really important,” said Newcastle Permanent chair Jeff Eather. “Our purpose is to provide lending for people to get into homes, and we did that at a record level.”

“Our yearly home lending of $2.5 billion is a record and materially up 50% on last year. For us, in difficult conditions and a difficult economic climate of lockdown, and primarily operating in regional markets where housing demand can often be a little under what it is in capital city markets, the result is excellent.”

“We’re really pleased, and for us, it’s our core purpose. You’ll hear that from other mutuals: for us, achieving profit, and the right level of profit, is important. Increasing profit each year is important as it can be used to generate the capital that we need to reinvest.”

“It has to be the right level, and achieving that is done by providing our deposit customers with better deposit rates and our lending customer with better lending rates. That’s the balance that we try to strike to ensure that our members receive the benefits.”

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Customer-owned banks are well positioned in today’s market, as they can be agile and small but also use their outsized cultural impact that comes from more than century of brand awareness.

“There’s a major point of difference that comes from not having shareholders,” said Eather. “Having your customers as your member, the whole focus and DNA of the organisation is on providing a high quality product and service, as well as interest rates to your customers.”

“That’s the focus, rather than maximisation of profits. Having that mindset is a completely different one to the Big Four and public companies, who are trying to maximise their product and services around the return that they get on it.”

“To be able to do that in the geography in which we are based, we have to expand and move into the digital domain, because that’s where the customers are heading. We have to meet our customers needs and recognise the changing demands of our customers.”

“An important part of strategy going forward is making sure that we are able to deliver a good, strong, competitive, compelling business case on digital mortgage origination.”