Wide Bay stretches lending targets

A diversification into personal loans and commercial loans by Wide Bay Australia is among the elements of the "higher-risk strategy" cited by Standard & Poor's last week as grounds for a cut in its outlook on Wide Bay's rating to negative from stable.

Bundaberg-based Wide Bay, a listed building society, has a long-term credit rating of BBB and a short-term rating of A2.

Wide Bay Australia recently hired Martin Barrett as its new chief executive, to replace Ron Hancock, who is retiring after more than 40 years.

Barrett, in an interview late last week, provided some perspective on the company's revised strategy. Barrett was formerly the state manager for Queensland and Western Australia for Westpac's St George brand.

"It's no secret that Wide Bay over the last couple of years has had a fairly challenging time. The home loan book has come back [now], not at rapid rate, but it did slide. That led to a fall in revenue.

"[You can] overlay some additional costs [on that] with acquisitions that did not play out."

Barrett said Wide Bay incurred A$700,000 in costs chasing two home loan books, one reverse mortgage and one standard.

"From my perspective, there remains the option of acquisition.

"[But] the acquisition market is competitive and is not going to be the panacea for Wide Bay. The panacea for Wide Bay is our core business and investment in our people."

"[We have to] make sure we are competitive. For the last couple of years we were not as competitive as we could... [have been]. It led to some impact on returns," said Barrett.

"So [we have put] strategies in place to make sure we are far more competitive."

Barrett said Wide Bay was introducing personal loans and commercial loans.

He said S&P was making the assumption that Wide Bay was moving along the risk curve.

"They make the assumption on the basis of introducing the personal loans, which is a standard product.

"Also, part of the strategy is a move into business banking later this year."

He said the SME lending would be "fully secured. We're talking residential and commercial security."

Asked about his interest in shifting to Wide Bay - which had the same CEO, Ron Hancock, for more than 40 years - Barrett said: "It's a job with a lot of upside to it, other than running a listed company.

"A lot of these types of organisation have not necessarily been doing the latest thing.

"There's a focus on education and training."

Before taking the job, he said, "I went into a number of Wide Bay shops - lovely service, lovely people, but not the edge to capitalise on that."

Asked if Wide Bay had received overtures from other ADIs, Barrett said: "Nope, no we haven't. In my time [so far] it's not something we have had to deal with.

"Our position is we will continue to look at home loan books as and when presented, up to a range of A$60 million dollars.

"But we are also happy to talk to other ADIs, credit unions [and] building societies, if they have any interest in a conversation with us.

"There's potentially room for us to acquire more. But we're not out there chasing them down."