Perth-based P&N Bank has announced a profit after tax of A$16.7 million for the year ended June 2021, up from $3.2 million in the prior Covid-impacted year.
The profit translated to 0.25 per cent return on assets.
In its first full year since the 2019 merger with Coffs Harbour based BCU, P&N saw assets increase from $6.182 billion to $6.928 billion, with above system growth in both deposits (up 10 per cent to $5.47 billion) and lending (up 6 per cent to $5.36 billion).
Capital adequacy eased from 14.84 per cent to 14.20 per cent, whilst liquid funds increased from 13.1 per cent of assets to 18 per cent, as deposit growth outstripped lending growth in a common theme this reporting season.
In a mutual market where merger activity at the big end of town has been very active, P&N makes no secret of their desire to pursue more merger driven growth.
Chair Stephen Targett and CEO Andrew Hadley in their joint report noted that “banking is a scale game, with ever increasing investments required in specialist skills, sophisticated technology, cyber security, as well as digital and data solutions”.
In a plea to their targets, many of whom are more focused on parochialism than consideration of the bigger long-term picture, Targett and Hadley wrote that “With the merger of P&N Bank and bcu, we have built a unique multi-brand model and are actively looking for opportunities to bring more like-minded customer-owned banking partners into the Group.
“Our multi-brand solution respects the heritage, identity and community presence of our banking brands, provides localised decision making and optimises the shared services and systems of the Group in the back-office functions such as risk, finance and information technology.”
In a similar vein to People’s Choice and other top 10 mutuals, the Chair and CEO referenced their “ambitious transformation program that will deliver an even more contemporary and customer-centric banking experience for members, premised on delivering simple products, simple processes and simple policies”.
In this respect they are on the money, given the increasing demands on ADI’s to deliver seamless, cost-effective and user-friendly systems, which require the sort of investments that are beyond most smaller mutuals.
In a sign that the merger with bcu may have required a bigger technology investment than possibly first considered, the bcu general manager referenced a “23 per cent increase in the number of payments undertaken using the bcu Connect App during the last year”.
During the 20/21 year $3 million of system integration costs were incurred in relation to bcu.
P&N weren’t without their own issues at home either, with a further $3 million provided for the problematic Two Rocks property development, following on from a $3 million provision the prior year, a ‘non core’ asset P&N continues to seek to ditch should circumstances allow.
Valued on the books at $30.75 million, a $9.75 million provision now exists for credit losses on this sorry tale.
A release of $6 million in covid-related loan provisions from FY20 enhanced the profit, another common theme this reporting season, following a $9 million increase in provisions the previous year.
An increase in the net interest margin also aided the profit, up from 1.92 per cent to 2.06 per cent.
The asset sale of P&N Financial planning was also affected during the year, due to escalating regulatory obligations.
Consideration of $2.8 million was received, resulting in a profit of $1.9 million, albeit with $1.5 million of goodwill being impaired.