CUA has booked 78.9 per cent growth in new lending in the first half of the 2019 financial year, while net profit slipped 3.6 per cent due to absorption of higher wholesale funding costs.
Credit Union Australia Group has reported 78.9 per cent year-on-year growth in new loans, or $960 million, to $2.29 billion in the six months to the end of December 2018.
The credit union’s total value of loans under management is now $13.26 billion, up 7.8 per cent.
CUA attributed the triple-system-rate growth in new lending in a “challenging external operating environment” to customers increasingly gravitating towards member-owned alternatives to the major banks in light of banking royal commission findings.
The credit union recorded net member growth of 16,996, taking total members to a record 490,126, as at 31 December 2018.
As chief executive Rob Goudswaard stated: “In the context of the royal commission and the cultural behaviors it highlighted, Australians are clearly looking for an alternative that empowers them by placing the control of their finances back in their hands.
“Our member-owned structure means we are committed to generating sustainable profits that allow us to invest in the initiatives that lay a foundation for future growth and the long-term benefit of members, rather than maximising short-term gains.”
However, the growth in lending outpaced retail deposit growth, which rose 5.5 per cent over the year to $9.73 billion, increasing the credit union’s need to seek “more expensive” wholesale funding sources, according to the CEO.
“While strong growth in lending and deposits is positive, it does have a ripple effect in terms of increasing operational costs,” Mr Goudswaard said.
CUA admitted that “elevated wholesale funding costs” had dragged down its banking division’s net profit after tax in H1 FY19 by 3.6 per cent year-on-year to $30.08 million, along with “prolonged volatility in the investment and equity markets” and “heightened market competition on interest rates particularly for new lending”. The broader group’s net profit after tax dropped 19.8 per cent to $23.07 million.
The CEO acknowledged that the passage of the Treasury Laws Amendment (Mutual Entities) Bill 2019, which was introduced into Parliament last month, would provide CUA and others in the mutual banking sector the flexibility to raise capital when strategic opportunities arise, and in turn would allow it to “future-proof and grow [its] business, rather than relying solely on retained earnings”.
Other achievements in the first half of the 2019 financial year include the roll-out of CUA’s messaging app iM CUA, which enables members to choose a “dedicated personal banker”.
“iM CUA is a key aspect of CUA’s focus on delivering technology with a human touch, and member demand has been strong, with close to 10,000 users in its first few months,” the credit union’s financial results announcement states.
It also said the integration of the New Payments Platform – which was developed by a consortium of 13 financial institutions to facilitate instant, cross-institutional transfer of funds on a 24-hour basis – into CUA’s mobile banking app in December resulted in a 220 per cent increase in total NPP payments compared to the previous month.
“We take great pride in being an early adopter of banking innovations like Apple Pay, Google Pay and the NPP. Our members have embraced these technologies as a way to access their money and conduct their banking at a time and place that suits them,” Mr Goudswaard said.
The credit union said that alongside boosting its digital capabilities, it has been working to improve the branch experience by “incorporating space for community use”.
After the launch of the first Community Hub branch in Toowoomba in June 2017, CUA opened its second Community Hub in October 2018, in Brisbane’s North Lakes region.