SA credit unions merge 14 August 2009 4:33PM Ian Rogers Two credit unions in South Australia, Australian Central and Savings & Loans, plan to merge by the end of the year, creating an entity with around $7 billion in assets. The merged mutual will be the second largest in the sector.Partly thanks to the efforts of Australian Central and Savings & Loans, credit unions have better market penetration in South Australia than in any other regional market bar Tasmania. S&L estimates that one in three people in South Australia is a credit union member.The two credit unions last talked about a merger five years ago. Talks over cooperation between the two resumed earlier this year, leading the boards to finally agree on the current plan.There are no specific savings targets mentioned so far. However, savings in the core banking platform, in head office staffing and premises and through the elimination of some branch duplication are areas where they can expect to cut costs.Australian Central operates on the FiServ ICBS system. The credit union is an investor in the company that supports and markets this version of FiServ in Australia.Savings & Loans operates on the Phoenix system sold by Data Action, a South Australian firm in which S&L and some other credit unions are investors.The last year has proved a tough one for the mutual banking sector, with sharply lower interest margins believed to have dragged down profits, not that any of the larger credit unions have published financial statements for the financial year yet.S&L reported residential loans of $1.8 billion and retail loans of $690 million at June 2009, in its quarterly disclosure document published in recent days. Australian Central reported $1.7 billion in residential loans and $220 million in retail at March 2009.The two credit unions combined will have assets under management of about $7.5 billion, 355,000 members and 1080 staff.Their recent financial performance is very similar. Both reported a return on net assets of around seven per cent in the year to June 2008 and a return on assets of around 0.4 per cent.Australian Central reported a capital ratio of 12.1 per cent at March 2009 and S&L a capital ratio of 11.4 per cent at June 2009.Peter Evers from Australian Central will be chief executive of the new entity and Bill Cossey from Savings & Loans will be the chair.The merged entity is yet to decide on its trading name.Assuming members endorse the merger, the boards plan for it to take effect from the end of this year.