BankVic juggles margins and members

Ian Rogers

BankVic CEO Anthony De Fazio

For the third time this year Victorian mutual bank BankVic has elected to lift home loan rates by less than the move in the Reserve Bank’s cash rate. 

BankVic is now absorbing 15 basis points of the 125 bps RBA hike in the cash rate, in a tightening cycle that commenced in May.

That month, when the RBA lifted the cash rate by 25 bps, BankVic moved by only 20 bps. The member-owned bank took the same stance in each of June and July, moving its standard variable rate by 45 bps rather than 50 bps, as has been common across almost all mortgage lenders (including all of the biggest).

Anthony De Fazio, BankVic’s CEO relied on the age-old mutual ADI prop of “member benefit” to explain the rationale for the bank’s stance on mortgage pricing. For now, anyway.

“We’re a member-owned bank. Our members come first.

“We want to minimise the cost of living,” De Fazio said, thinking of the police and emergency services and also health workers in Victoria, whose banking needs the bank was founded (in 1974) to serve.

From next week, the variable rate on a BankVic owner-occupied home loan will be 5.02 per cent. This compares with variable mortgage interest rates in a range from 5.64 per cent (at ANZ) to 5.80 per cent (at CBA).

The bank has lifted savings rates (this month) by 30 bps (for its SMSF Saver), by 40 bps (on its basic and Bonus Saver accounts) and by 45 bps for pensioner’s and children’s accounts. Even so, BankVic is a long way behind on deposit rates, at least to the extent it may want to harvest some of the hot money.

Bank of Queensland is paying a maximum rate of 3.00 per cent on its premium savings product and comparison site Infochoice lists nine more banks promoting bonus rates of 2 per cent or more.

“When we look at our rates, we look at all competitors, mutuals as well as the Big Four - we are always in the middle,” De Fazio said. 

In 2013, the then Police Credit Co Operative (one of several Police Credit Unions in Australia) rebranded as BankVic.

It has assets in the vicinity of A$3 billion and in FY2021 reported a net profit of $10.5 million. Its return on assets, at 0.43 per cent, is toward the higher end of its mutual bank and credit union peers.

Last financial year the bank, like many of its mutual banking peers reported a sturdy net interest margin; in the bank’s case this was 1.89 per cent.

De Fazio said in FY2022 the NIM will be a little in excess of 2 per cent. When the bank reports to members in a couple of months’ time, the profit will be “a bit higher”, he said.

Given the ructions in the money market, yesterday especially, BankVic’s idealistic and member-friendly mortgage pricing (and its profit ratios) may prove tough, even impossible to sustain.

Against the backdrop of the elevated data on US inflation and an in-your-face lift in short term rates by the Bank of Canada, Australian interest rate markets repriced radically yesterday, motivated on the home front by the unexpectedly low ABS data on the unemployment rate.

“This clear strength in today's unemployment number saw the bond market push three-year yields 11 bps higher, whilst front end OIS rates and bank bill yields raced to bring forward much more RBA tightening into this calendar year,” Credit Suisse commentator Sean Keane wrote in a bulletin last night. 

“The front month bill futures contract traded as much as 38 tics lower in price, closing with an implied 90-day yield of 3.03 per cent by mid-September. That level is 88 bps above where Australia's three-month bill rate was fixed today,” Keane concluded.