Beyond Bank, P&N hit merger accelerator

The announcement yesterday that Beyond Bank Australia and Police & Nurses Limited have signed a Memorandum of Understanding to investigate a merger of equals is another whopper in the fast consolidating world of mutual banks.

This merger would create a mutual with close to $20 billion in assets, making it the fourth largest. The enlarged mutual bank will have around 450,000 members, which will be the second ranked by member numbers.

P&N’s foothold is in greater Perth and northern NSW (via its BCU Bank brand) while Beyond’s is in Adelaide and ACT and parts of NSW. Beyond also has seven branches in Perth.

Jake Bromwich, 41, the still newish CEO of Beyond Bank, will be appointed the inaugural chief executive. Before joining Beyond, Bromwich was general manager of Westpac’s RAMS brand.

Gary Humphreys, chair of P&N (and also not long in the job), would be appointed as the inaugural chair.

Andrew Hadley will remain with P&N until the merger is formalised. Then, after 12 years with P&N “I will simply take a break” he said last night.

“I’ve been through two five year strategies. I’m fully devoted to the merger.”

The merged board would be made up of equal representation from the existing boards of Beyond Bank and Police & Nurses.

While for now the agreement is being styled as an MOU with an “intention to explore a merger” this merger is highly likely to proceed, subject to a three months due diligence period, and then a vote by both banks’ members in the second half of 2025.

“It’s full steam, we’ve negotiated a lot of the difficult issues up front” Hadley said.

A merger of P&N and Beyond (as with every mutual ADI merger) is informed by plenty of strategic sense, centred on a pursuit – in the long run – of economies of scale.

“Scale in banking is important. We’ve been looking for the right partner for us” Hadley said.

“There’s lots of complementary capability.”

Except that, in keeping with every other mutual bank merger the two boards have made undertakings around “maintaining a strong branch network across the existing regions.”

All employees will be offered roles in the merged entity.

Synergies “will be focussed on the back office, not the customer facing roles,” Beyond’s Bromwich said.

“There are many ways how you generate synergy efficiencies. Our intention is to use our people and to invest them back into the customer relationship.”

Both Beyond and P&N share the same core banking system, Data Action, which will facilitate integration.

P&N’s Hadley said the bank enjoyed “an influx of new customers” on the back of Commonwealth Bank’s decision, announced in early March, to shut 45 Bankwest branches in greater Perth by the end of the year and convert 15 more (all in regional areas) to the main CBA brand, and he anticipates a second wave as the branches progressively close.

This is the second mutual bank merger at scale announced this year, and the third all up.

Bank Australia and Qudos Bank plan to merge, as do Community First Bank and Illawarra Credit Union.

With this merger, the top five mutual banks will account for more than 58 per cent of mutual ADI sector assets.

This dynamic can only propel the remaining 49 mutual ADIs to buddy up.

In an analysis this week Fitch Ratings argued “we expect … further consolidation among smaller banks.

“Banks, particularly those focused on retail banking, face a number of cyclical and structural headwinds. 

“These include increased competition for both loans and deposits, ongoing digitisation of service offerings and the related investment requirements, and the commoditisation of products that is likely to reduce customer loyalty.

“Fitch Ratings expects these challenges to manifest primarily in reduced competitiveness for certain smaller banks.

“Reduced competitive standing could lead to persistently slower growth in deposits and loans relative to the system, continued net interest margin attrition due to competitive pricing, or a prolonged deterioration in the loan/customer deposit ratio. 

“These may prompt smaller players to increase their appetite for riskier exposures, which could result in greater losses, earnings volatility and pressure on capitalisation through the cycle.”