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The credit union industry is under pressure to build scale through mergers after reporting deep cuts to interest margins this year.
According to KPMG’s annual performance survey of credit unions and building societies, the institutions have shown resilience in what has been a tough year, but their failure to move into the space vacated by second-tier banks after the St George and Bankwest takeovers had resulted in a loss of profit.
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The net interest margin for credit unions was slashed by 42 basis points from 2.91 per cent to 2.49 per cent.
KPMG financial services partner Martin McGrath said this slash in margin, combined with the ever increasing regulatory burden facing all mutuals, was contributing to the business case for mergers.
All up there were 16 credit union mergers in 2009, resulting in a 12 per cent contraction in the number of credit unions to 117.
Mr McGrath said the case for mergers was further strengthened by the costs associated with the expanded liquidity requirements proposed by APRA and the added administrative burden of the new national consumer credit legislation, due to be implemented next year.
