Nigel Ampherlaw, chair, Great Southern Bank
A hectic program of investment is taxing the profits and resilience of Great Southern Bank, still (nominally) the largest mutual bank in Australia.
The bank’s profit from continuing operations fell to A$12.5 million over the year to June 2022, down from $40.6 million in 2021.
The group profit of $70.5 million was assisted by the sale of the CUA Health insurance arm, to HBF. This was sold for $155 million, in September 2021, leading to a gain on sale of $57 million.
Like many large mutual banks, GSB is scrambling to fulfil a complex strategic agenda.
Underlying expenses for the bank increased by $30.5 million or 13 per cent over the year, “primarily driven by strategic investments in technology systems and software, fulfilling compliance obligations as well as increasing costs to support volume growth,” GSB told members in its annual report.
Investment during the year included the delivery of a new home loan origination system (Lendfast) which the bank said “has already halved approval times while doubling the number of applications processed”.
Other investments included the implementation of the Open Banking regime, the migration of technology infrastructure and data to the cloud and the completion of rebranding activities.
These explain the 17 per cent increase in the group’s personnel expenses to $147.7 million, “as well as funding volume growth and customer-focused support across operations, product and marketing”.
“Our profits, including those from the sale of our Health subsidiary, are enabling new growth and partnering opportunities, so we can scale our business and achieve greater efficiency,” a bank spokesperson said.
“Like most financial services businesses, we saw continued pressure on margins in FY2022, driven by a low interest rate environment and competitive market, and a strong consumer preference for fixed rates earlier in the year.”
With the benefit of the Health sale, the bank’s return on assets picked up over FY2022 to 0.40 per cent from 0.25 per cent in 2021. However, on a “continuing basis” the ROA was around 0.10 per cent, a slender profit for a large mutual bank.
The ROE, on the same basis, was a mere 1.0 per cent.
GSB’s cost to income ratio worsened to 93 per cent, from 80 per cent.
“Rebranding as a bank is broadening our appeal and helping attract new generations to bank with us,” the chair and CEO wrote in their introduction to the annual report.
“We continued to see strong growth in new customers and are now helping more than 382,000 active customers.”
This is down from 420,000 customers in 2021. Allowing for the Health sale, this suggests customer growth for the bank last year in the order of 30,000.
Total assets increased by 10 per cent over 2022 to $17.9 billion.
If the board of Brisbane-based Great Southern Bank is wanting to reclaim its decades-long status as the largest mutual ADI, it will need to hunt in the top 10 for a suitable merger partner, or partners.