Post-pandemic bounce back for Australia’s mutuals

Australia’s mutual banks, building societies and credit unions (the ‘mutuals’) have reported a 38.6% increase in the overall operating profit to $685 million and total assets have risen by 7.4% to $148.2 billion for the 2021 financial year, according to KPMG Australia’s Mutuals Industry Review 2021.

 The review is based on the financial performance and results of 46 mutuals that represent over 98% of the sector by total assets and profit before tax and a qualitative survey, where mutuals shared their views on the risks, challenges and opportunities they see facing the financial services industry.

The survey highlighted the renewed growth by the mutuals was a reflection of Australia’s strong economy and housing market in the aftermath of the COVID-19 pandemic, as well as a reversal of the COVID-related loan loss provisions from 2020.

“The 2021 financial year was a test of resilience for business, communities and individuals, and the results of the mutuals tell a story of purposeful growth in turbulent conditions,” Hessel Verbeek, National Sector Leader, Mutuals at KPMG, said.

“The mutuals have felt the ongoing impact of the COVID-19 pandemic, however the high growth in the Australian residential housing market in combination with the strong balance sheet position of the mutual sector has boosted mortgage lending performance.”

Key results from the survey for the mutuals sector also included a 5.5% increase in residential lending to $105.7 billion, an 18.2% increase in technology spend to $274.6 million and an 8.1% increase in deposits to $117.2 billion.

The survey also reflected the positive outlook of mutuals as they continue to face market and economic uncertainty, with 78% of respondents saying they feel confident in their three-year growth prospects. The top three priorities were maintaining profitable and sustainable growth, digitising their business and keeping up with the pace of external change including regulations and technological developments.

Almost 50% of respondents also said they expect to initiate an end-to-end transformation of their business, which highlights a sharp increase from 2020 as only 26% held such expectations.

“The mutuals in Australia have a great legacy as a collective, but face a number of strategic and financial challenges including stiff competition, the rapid evolution of customer expectations, low interest margins, and high costs of operation and regulatory compliance,” Verbeek said.

“How you grow matters, and the mutuals are seeking to address these challenges head-on as they continue to evolve and leave a positive impact for their members and the wider society.”