When Banking Day cranked into view at the beginning of 2003 there were more than 180 credit unions, no mutual banks and a few building societies. Today, on APRA’s register, 60 in total remain.  With some big mergers on the horizon, the count on the number of institutions will fall to 58.

Back when they were at their peak of popularity, mutuals were spawned by political radicals in the trade unions and spirited citizens at church parishes who could form a deposit-taking and lending institution on the vote of the activists alone; no licences were needed in the 1950s. Just a bit of hope, a social justice mission and a lot of hard, cautious work.

Back in the day the objective was to help their members buy a fridge and take the lead in financial education and savings habits for poorer and less affluent families. The boards and managers of the survivors of this bygone era are a methodical bunch in the main, and they appreciate it won’t take too many more mergers to cut the sector to 30 or fewer. 

How many mutual ADIs will be around in 2030?  Or 2070?

Not many at all.

This year, it feels like material steps are finally being taken to shake things around.

In August, it became clear things were moving seriously when Heritage Bank and People’s Choice announced a merger.

The merged mutual would have around 700,000 members and A$22 billion in total assets, and rank as the largest mutual bank, ahead of the mooted Newcastle Permanent and Greater Bank tie-up (announced two weeks earlier).

The latter is probably 20 years overdue. 

People’s Choice and Heritage Bank combining as industry leader: this is a product of the work of so many strategic thinkers and achievers right around the industry seeking above all, to stay in business, pool resources often, succeed and have a future. It’s worth applauding.

Renaming credit unions ‘banks’, and doing the same for building societies, is proving the easiest, and relatively cheapest, move the sector could make (beginning with persuading APRA).

But the tempo of mutual mergers has really fallen away, and the all too obvious underperformance of too many credit unions still will surely be the impetus for this to reverse.

In 2106 there were more than a dozen respectful credit union exits.

Then in 2017 there were three, in 2018 six, in 2019 four, followed by two in 2020 and four this year.

There are 11 mutuals earning a return of 10 basis points or less, and one credit union in the red.

So there's plenty of fodder for the other consolidators, basically 8 of the top 12 in the 2021 Mutual Bank rankings. 

Then there are the more drastic pathways to consider. As mutuals talk mergers with more energy than they have in years (as seems likely) the thorny question of demutalisations will inevitably rear its head.

Two of the top five mutual banks have gone close to demutualising in recent years.

One was in talks with Westpac.

The second was exploring (maybe even close to announcing) an IPO and ASX listing.

One definite, if patient potential