Mutuals outperform and offer better value than competitor banks, according to a report from KPMG Australia.
The firm’s annual Mutual Industry Review found strong asset growth of 7.8% for mutuals, compared to 5% for the overall banking industry.
KPMG said this strong performance by the customer owned banking sector was built on effective business strategies including growth in lending portfolios; effective credit risk management practices; and leveraging digital reach and third-party distribution channels.
The benefits from increased technology spend on new mobile platforms and servicing capabilities was critical. KPMG said technology change was reducing the need for costly back office support, origination and servicing processes with the advantage to smaller, nimble organisations to implement new technology solutions without the need to replace legacy business practices.
Melina Morrison, chief executive of Business Council of Co-operatives and Mutuals (BCCM), said the report is consistent with overall performance of co-operative and mutual enterprises (CMEs) in 2016, with the recently released National Mutual Economy Report showing growth of 4% per annum and 18% since 2011 across the sector.
“KPMG’s report confirms the sector’s strong value proposition for consumers and our economy – despite ongoing regulatory constraints which have created a very unlevel playing field,” Ms Morrison said.
“We welcome KPMG’s support for implementation of regulatory and legislative reform to promote competition in the banking sector, such as the recommendations around access to capital in the Senate Inquiry into Mutuals.”
Ms Morrison added that the sector overwhelmingly supported these reforms for a more diverse and inclusive economy: “The sector and the economy would benefit if regulations and legislation were reformed to give better access to capital for mutuals including mutual banks, credit unions and building societies, which would increase competition especially within the banking sector and give consumers more choice and value.
“The recommendations from the Financial System Inquiry, such as the account portability recommendations, are welcomed but these will not be enough in themselves to create a more level playing field and better customer choice.
“Consumers need to understand there are alternatives to the traditional banking sector which put people and community before profit.”
Ms Morrison said regulatory and legislative reforms, such as those proposed this month by the Australian Labor Party, were needed to promote competition in the banking sector, as well as help to better define mutual enterprises and director’s duties in the Corporations Act.