RACQ chews up bank capital

Decent growth on both sides of the balance sheet is proving a bother for RACQ club members, with their newly-owned sibling - the former QT Mutual Bank -running up losses as it embraces a member organisation with no background in banking.

RACQ Bank in May called on the club for A$25 million in new capital, an injection sufficient only to minimise a slump in its capital ratio over the last year.

RACQ Bank is now a for-profit operation, following a demutualisation to merge with the Royal Automobile Club of Queensland in November 2016.

This marks the first exit from the "mutual bank" sector in Australia. On the other hand RACQ remains a traditional automotive club, so the bank is owned by a co-op.

The bank's annual report for the year to June 2018 shows an entity enjoying some of the lofty ambitions behind the merger. But paying a price while RACQ - club and bank - figure out a viable operating model.

RACQ Bank has been trading in the red. The net loss was $9.2 million in 2018 from a profit of $1.4 million in 2017.

Non-interest income of $6.5 million is down $2 million over the year.

Expenses at RACQ Bank were $56 million last year, a whopping $14 million or one third more than in 2017.

There is, however, an uplift in deposits of eight per cent arising from marketing by the club to its one million plus members. There is more use of wholesale funding, a fourfold lift in term notes to $95 million.

The RACQ loan book is up 9.5 per cent over 2018, roughly twice system. Loans to teachers, its former core market, represented 60 per cent of lending, down from 65 per cent a year ago.