mecu finds the sweet spot

The Victorian credit union mecu has issued a statement saying it expects its 2008/09 earnings to be higher than last year's result.

With 110,000 members and $1.8 billion of assets, mecu made a net profit of $17.5 million last financial year. Recent monthly net profit figures are running five to 10 per cent ahead of last year's numbers.

While the big banks are being hit by bad debts and the regionals are having to revise their business models, mutuals are reporting good trading conditions.

General Manager Development at mecu, Rowan Dowland, said the group was funded entirely by deposits and the bulk of its assets were home loans.

The group's delinquent loans are a low 0.13 per cent of total loans.

Last year member deposits were up by 12.7 per cent and the group has maintained that rate of growth this year.

Even though it does not raise funds in the capital market it has a credit rating (BBB/A-2 from Standard & Poor's) so it can demonstrate its financial strength to large depositors.

Dowland said mecu had its biggest month for home loan sales in December, when it wrote $50 million of new business. Since then things have slowed but it is still writing about $40 million of loans a month.

mecu cut its standard variable home loan rate by 20 basis points in April, making it one of only a handful of lenders to pass on more than 10 basis points in response to the 25 basis point cut on the official cash rate in April.

Dowland said its move was in line with its business model as a mutual. "We always like to be price competitive."