North Ryde based Laboratories Credit Union has announced a profit after tax of A$705,000 for the year ended June 30, up from $590,000 in the prior year. The profit translated to a 0.32 per cent return on assets.
In a market where $20 billion seems to be the new norm for long term sustainability, Laboratories saw its assets increase from $211 million to $231 million, barely 1 per cent of this benchmark, placing LCU in the bottom third of mutuals by size.
Deposits grew 10 per cent to $213 million and balance sheet lending increased 9 per cent to $154 million; though in her Chair’s report Allison Smart noted that loan growth of 12.3 per cent was achieved.
The Chair’s report said the net interest margin fell 10 basis points to 1.58 per cent, “the lowest in our cohort”, adding that LCU’s “successes are modest and have been significantly supported by government assistance and rental assistance from CSIRO”.
These totalled over $345,000 in the year; without these, profit would have fallen from the prior year.
Smart also noted that “for efficiency reasons, the Board made the decision that LCU would become cash free, like many other modern businesses, at the end of the 2020–21 financial year.
“With such a small proportion of members utilising the cash services, and cash deposits still being available through the credit union network and such a large amount of cost and compliance associated with managing cash, it was a necessary modernisation move.”
LCU had a capital adequacy ratio of 15.23 per cent at balance date, and a minimal provision for impaired loans of only $61,300.
Notwithstanding the profitability impacts of technology and compliance facing all ADI’s, but particularly impacting smaller members of the mutual sector, Smart noted the benefits of membership of SAM (Small Australian Mutuals) – and industry group catering mostly for those institutions with assets under $500 million.
Benefits noted included working together on the introduction of Open Banking, and growing loans through the shared loans project which “allows use of some of our excess liquidity but also gives us the benefit of being able to offer larger loans where required, should the need arise in the expensive Sydney property market”.
The Chair also wrote that “we have other projects on foot with the SAM group that we expect will assist us in managing some other costs, such as compliance.”