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ISCOVER
Steven Cross
The mutual sector has shot down claims that credit unions and building societies do not provide a viable alternative to the majors.
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Last week, FirstMac owner Kim Cannon told The Adviser that the government’s fifth pillar concept had been an abject failure.
“I prefer to refer to the fifth pillar as the fifth pillow,” he said.
“Credit Unions and building societies are not challenging the big banks in any way.”
But the mutual sector has slammed the comments and said the lending sector offers things the big banks simply cannot.
“Credit unions have been around for 60 years, so we’ve well and proven our viability. One in five Australians are a credit union member so we’ve got penetration of the population,” Gateway credit union chief executive officer Paul Thomas said.
“Why we are a viable alternative is because we have a mutual structure, and people are attracted to that. Credit unions can provide a level of service that the big guys just can’t do.
“Plus, because credit unions are neutral, you tend to find the credit union is in the best interest of the members, so our rates on both sides tend to be sharper than the big four banks.
“The bottom line is if you’ve got a robust offering in customer value and proposition is right then you will attract new members and you will grow.”
But while Mr Thomas remains bullish about the future, he does expect the lending sector to experience greater consolidation.
In the last 10 years, the number of credit unions in Australia has halved in size.
In 1998, there were 234 credit unions with assets of $19 billion. Today there are 91 unions with assets amounting to $54.4 billion according to Abacus.
And while the industry continues to consolidate, Mr Thomas said he isn’t concerned.
“I’m very relaxed about consolidation. Yes there are less credit unions today than a decade ago. But I believe there will be less credit union in five years than today,” he said.
“The credit unions that are here are larger in size, and also are managing a greater number of assets. So while the number of credit unions is falling, the mutual sector is growing.”
The Adviser also discovered that growth in credit unions was stifled in 1995 when they were no longer tax exempt. But when we raised the issue with Mr Thomas, he didn’t believe it was the reason for increased consolidation and mergers.
“It just became another expense we have to cope with. I’ve been here seven years and I’ve learnt to live with the tax, and all credit unions have to do that. So for me personally it’s a null event.”
And despite the US credit unions currently being tax exempt, according to Abacus’ chief executive Louise Petschler, Australia’s fifth pillar is still a strong alternative.
“The fifth pillar, as our sector is sometimes referred to, is a significant success and independent assessment backs us up.
“Let’s look at the latest APRA quarterly figures. Our asset growth remains strong recording 10.3 per cent over the past 12 months.
“For the past year our home loan growth has exceeded 13 per cent.”
