Creating customer value

Key Highlights

Goal six: grow its assets to $3.6 billion by 2017

Sustainable growth - Overview

Scale

bankmecu grew its assets by 7.23% during 2012/13. This growth came mainly from growth in deposits of 5.55%. Loan growth of 4.42% for the year exceeded the forecast of 3.98% and reflects a falling demand in credit across the Australian marketplace.

Annual balances

Capital reserves increased by 10.00% (2011/12: 8.27%) as a result of profit achieved in 2012/13.

Our capital consists solely of customer owned reserves. The Bank does not pay shareholder dividends. As a customer owned bank, we provide a customer benefit through competitive products and services which is delivered in addition to the Bank’s return-on-equity. Bank profits build wealth on behalf of customers by building prudential capital to support future growth, serving current and future generations.

As at 30 June 2013, the reserves/assets ratio stood at 11.27%.

bankmecu’s capital adequacy ratio – a measure of the percentage of a bank’s adjusted capital to its risk weighted assets – remained strong at 19.83% as at June 30, 2013.

Sector consolidation

While bankmecu seeks to capitalise on the opportunities for organic growth provided by its new bank designation, it continues to investigate and pursue strategic merger opportunities where these are consistent with strategic objectives. Fitzroy & Carlton Community Credit Cooperative Limited (FCCC) transferred its operations to bankmecu on 15 June 2013, while past merger synergies were consolidated further.

Balance sheet

  2013
$’000
2012
$’000
2011
$’000
What we own      
Property, plant and equipment 21,533 18,682 19,871
Cash and investments 662,429 566,271 449,483
Loans to customers (net of provision) 2,307,598 2,210,139 2,114,835
Other assets 49,696 41,702 40,620
Total assets 3,041,256 2,836,794 2,624,809
What we owe      
Customers’ deposits 2,608,075 2,471,018 2,231,840
Amounts payable and provisions 90,459 53,894 105,153
Total liabilities 2,698,534 2,524,912 2,336,993
Leaving customer owners’ funds      
General reserves 338,248 307,520 282,424
Asset revaluation reserve 4,474 4,048 5,392
  342,722 311,568 287,816

Tax

Year 2012/13 2011/12 2010/11 Difference b/w
11/12 & 12/13
Income tax $9.4m $10.0m $10.4m -6.33%
Fringe benefits tax $0.1m $0.1m $0.1m -0.33%
Goods and services tax $1.1m $1.0m $1.0m 0.11%
Payroll tax $1.2m $1.3m $1.1m -0.06%

Annual tax paid contributes towards government activity and citizen wellbeing

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Sustainable growth - In depth

Scale

bankmecu recognises the importance of economies of scale to maintaining financial ratios consistent with best performance in the customer owned banking sector in Australia.

We aim to achieve organic growth at a minimum level that is equivalent to banking system asset growth, subject to profitability targets being met by:

  • accessing new target markets
  • building relationships with the families and friends of customers
  • growing existing customer relationships

We aim to remain a significant participant in and supporter of the Australian customer owned banking sector.

Balance sheet

  2013
$’000
2012
$’000
2011
$’000

Balance sheet

 

   

What we own

 

   

Property, plant and equipment

21,533

18,682

19,871

Cash and investments

662,429

566,271

449,483

Loans to customers (net of provision)

2,307,598

2,210,139

2,114,835

Other assets

49,696 

41,388

40,620

Total assets

3,041,256

2,836,480

2,624,809

What we owe

 

   

Customers deposits

2,608,075

2,471,018

2,231,840

Amounts payable and provisions

90,459

53,894

105,153

Total liabilities

2,698,534

2,524,912

2,336,993

Leaving customer owners’ funds

 

   

General reserves

338,248

307,520

282,424

Asset revaluation reserve

4,474

4,048

5,392

 

342,722

311,568

287,816

Total assets

Key performance indicator Mutual ADI average @Jun ’13 Target 2012/13 2012/13 2011/12 2010/11 2009/10 2008/09 2007/08 2006/07 2005/06 Difference b/w 2011/12 & 2012/13

Increase in total assets

5.42%

5.93%

7.22%

8.07%

7.85%

31.68%

21.97%

11.95%

10.41%

6.50%

-10.41%

Source: Mutual ADI average provided in APRA quarterly report.

bankmecu experienced an increase in total assets of 7.22% in 2012/13. Asset growth can be attributed to deposit growth during the year at 5.53%. On-Call, Cyber Saver and Cash management saw modest growth with the bulk of the increase ($84m) attributable to Fixed Term Deposits. Growth in deposits led to additional funds flowing into liquid investments. The implementation of the Negotiable Certificates of Deposit (NCD) program also saw an additional $25m raised in liquid funds. Loan growth was 4.42% for the year. 

Annual balances

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Capital growth

bankmecu is commtted to ensuring it maintains its reserves/asset ratio at above 10 per cent.

bankmecu will grow its customer owned capital in the Bank per customer as measured annually as part of the Bank’s demutualisation defence strategy.

Capital reserves – customer owned funds

Year ended Customer owned funds Capital/customer

30-Jun-13

$342.7m

$2,732.59

30-Jun-12

$311.6m

$2,406.14

30-Jun-11

$287.8m

$2,149.93

30-Jun-10

$259.8m

$1,818.35

30-Jun-09

$209.9m

$1,833.67

30-Jun-08

$181.3m

$1,704.11

30-Jun-07

$162.9m

$1,518.17

30-Jun-06

$145.6m

$1,329.19

30-Jun-05

$128.4m

$1,093.38

Change between 11/12 & 12/13

9.98%

13.57%

The Bank’s capital consists solely of customer owned reserves and the Bank does not pay shareholder dividends. As a customer owned bank, bankmecu endeavours to retain a customer benefit through demonstrated competitive products and services. We also build wealth on behalf of customers by retaining profits to build prudential capital.

Capital reserves are predominantly retained profits. These funds belong to all customers. They form the prudential capital underwriting the business and are reinvested back into the core business for the benefit of all customers. Capital reserves increased by 10% (2011/12: 8.27%) as a result of profit made in 2012/13.

As at 30 June 2013,  the reserves/assets ratio stood at 11.14%.

Capital adequacy ratio

Capital adequacy measures the percentage of a Bank’s adjusted capital to its risk weighted assets, as per Prudential Standard APS110.

Capital adequacy

Key performance indicator Domestic bank industry average Jun ’13 Target 2012/13 2012/13 2011/12 2010/11 2009/10 2008/09 2007/08 2006/07 2005/06 Difference b/w 2011/12 & 2012/13

Capital adequacy ratio

12.79%

20.07%

19.83%

18.50%

18.94%

19.16%

20.25%

20.56%

20.60%

22.50%

7.21%

Source: Domestic bank industry average provided in APRA quarterly report. 

The capital adequacy ratio remained strong at 19.83% and well above the domestic bank industry average of 12.79%.

Tax

Year

2012/13

2011/12

2010/11

2009/10

2008/09

2007/08

2006/07

2005/06

Difference b/w 11/12 & 12/13

Income tax

($m)

9.4

10.0

10.4

7.5

7.2

7.4

7.0

6.9

-6.33%

Fringe benefits tax

($m)

0.08

0.1

0.1

0.1

0.1

0.0

0.0

0.1

-0.33%

Goods and services tax

($m)

1.11

1.0

1.0

1.1

0.9

0.9

0.9

1.0

0.11%

Payroll tax

($m)

1.18

1.3

1.1

1.2

0.7

0.6

0.5

0.5

-0.06%

Income tax paid in 2012/13 decreased by 6.33% due to the decrease in profits this year.

Subsidies

In 2012/13 bankmecu did not receive any subsidies.

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Sector consolidation

The Bank continually pursues organic growth while also looking out for possible merger options. Without mergers, ongoing efficiencies provided by increased scale will be difficult to achieve over the long term.

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Stakeholder value

bankmecu aims to bring success and prosperity to customers and other key stakeholders, including staff, suppliers and partners, in effect creating shared value and wealth.

We aim to demonstrate sound and responsible stewardship of the material wealth of the Bank by delivering enhanced customer value as determined by the established processes for valuing the business as part of the Bank’s demutualisation defence strategy.

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Demutualisation defence

bankmecu aims to protect its mutual ownership structure.

We aim to control the Bank’s destiny during any hostile takeover or demutualisation attempt.

We also aim to maximise customer benefit (access to reserves and profits) in the event of any corporate restructure.

If scale becomes critical to achieving necessary efficiencies, and capital constraints restrict growth opportunities bankmecu will consider putting options for a corporate restructure before its customers who own the bank.

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