Members Equity retains big ambitions
Members Equity Bank still retains ambitions to provide an effective alternative to the big banks, with the board seeking to adapt the strategy and aiming to fund as much as half its lending from retail deposits.
The bank will do so under new leadership, however, with the board of Industry Superannuation Holdings late last week resolving to separate the position of managing director of Members Equity Bank from Industry Funds Management.
This in effect restores the management lines that were in place prior to the merger of MEB and IFM, a merger worked out in 2006 and implemented in 2007.
It means, though, that Anthony Wamsteker, the long serving managing director of MEB will leave the group late this year once the bank recruits a new CEO. Damien Moloney, CEO of IFM, will now report directly to the board.
The management changes follow a period of introspection by key shareholders, rather than the board, over the merit of their investment in the bank.
Members Equity Bank was formed in 2001 as a joint venture with Axa and was built on the mortgage funding business Super Members Home Loans that Wamsteker established within National Mutual (later Axa) in the early 1990s.
The 2007 credit crunch strained the business model of the then six-year-old bank that was more dependent than any other lender on securitisation to fund its home loans, while home loans represented most of the bank's income streams.
That event in turn triggered a group of industry fund shareholders in mid 2008 to commission a review from consultancy LEK to inform a decision as to whether to sell their holding in the bank. AustralianSuper, Cbus, HESTA and Host Plus commissioned the review. (AustralianSuper, the largest industry fund, owns about 30 per cent of the bank.)
LEK finally produced the review for the funds in February this year, with the board providing a commentary on the review.
The review's findings do not appear to have been radical - sell, hold or grow appears to be the gist of the report's recommendations. The LEK review also did not address the bank's management, according to ISH chair Bernie Fraser.
The ISH and MEB directors continue to pursue the vision that informed the investment in the bank in the first place.
Garry Weaven, chair of Industry Funds Management, said the aim remained to provide a competitive alternative.
"The big four are very strongly entrenched now, the market has become far less competitive and in a way, notwithstanding the strength of the big four banks, that gives us an opportunity - there are a lot of people out there who would really value a true alternative."
Weaven says MEB will continue to gradually roll out a branch network over time but that growth can be achieved without physical shop fronts.
"We have demonstrated in the past you don't have to have branches to achieve growth, but as you get bigger you obviously do have to have branches.
"But we have achieved very good customer satisfaction ratings without branches."