Brokers will be key if 2 mutuals merge: Summerland Bank CEO

It would be the second merger for Regional Australia Bank, which finalised its merger with Macquarie Credit Union in April. It currently operates head offices in Armidale and Port Macquarie and has 37 branches across regional NSW, including the New England North West, Central West, Mid North Coast, and Greater Newcastle regions.

Summerland Bank – a 60-year-old bank headquartered in Lismore (which recently rebuilt its Lismore head office and flagship branch after the 2022 floods) – currently employs over 120 individuals across its Lismore head office and 10 branches across the region.

The two lenders – both of which distribute home loans through the broker channel – are now moving towards undergoing due diligence to investigate the merger’s feasibility and benefits. However, the banks have said these could include more competitive pricing, more branches, more comprehensive online banking, and more choices. The banks have said there would be no branch closures should they join forces.

If the merger is approved (and shareholders vote in favour of it in late 2025), the two longstanding mutuals would increase their customer base to over 130,000 and have combined assets of $4.8 billion.

It is proposed that the merged organisation will continue to operate under both Regional Australia Bank and Summerland Bank brands in their respective locations until after the proposed merger date in “mid-2026”.

Both brands will continue to operate separately until a decision is made about future branding to ensure “a smooth transition and continued focus on member benefits”.

The CEO of the combined institution will be David Heine, the current CEO of Regional Australia Bank. John Williams, the current CEO of Summerland will be the Deputy CEO (Strategy). Michelle Edmonds will retain the role of Deputy CEO (Customers).

Commitment to brokers likely to continue

John Williams, the CEO of Summerland Bank, said that the proposed merger marks the next step to preserve and accelerate its purpose to offer “a braver kind of bank”.

Speaking to The Adviser, Williams said it would be “business as usual” for brokers using the two banks up until (and likely after) the proposed merger start date.

He told The Adviser: “There’s no change to our broker arrangements; that’s a really strong part of our distribution channel and how we go to market. There’ll be no changes in that channel for the next 18 months as we lead up to the proposed legal merger date of 1 July 2026.”

The Summerland Bank CEO went on to say that Regional Australia Bank also had “a strong commitment to the broker channel”, adding it was an area that the two lenders wanted to grow.

“I think together we’d have an expanded range and an enhanced product offering for the broker channel and our direct channel,” he told The Adviser.

Williams said the bank had “proactively initiated discussions” with Regional Australia Bank, given it shared “the same values of reciprocity, responsibility, community and sustainability as Summerland Bank“.

“This potential merger presents exciting opportunities for our members as we could expand our market share and increase our pricing efficiency and competitiveness,” he said.

“Together, we will have an increased ability to invest in infrastructure, compliance, security as well as new digital capabilities, products and services.

“A merger with Regional Australia Bank allows us to better serve our mission of supporting our members to realise their potential.”

David Heine, Regional Australia Bank’s CEO, said: “As we strive to fulfil our purpose of becoming the trusted bank for all regional Australians, we are pleased to begin merger discussions with Summerland Bank. Our commitment to investing back into our regions, responsibly and sustainably, remains unwavering.

“The team at Summerland Bank provide a shining example of regional community service. Our shared values and ambitions are sharpened through the union of two like-minded mutuals. This merger confirms our intent to empower all regional Australians through our customer-owned banking services.”

Mutual mergers continue apace

The number of mutual banks in Australia has dramatically dwindled in the past few decades, with the total of customer-owned institutions dropping from about 185 in 2004 to around 54 as of March 2024.

Bank Australia and Qudos Bank announced their intention to explore a merger earlier this year and other notable mergers in the mutual banking space include Greater Bank and Newcastle Permanent, G&C Mutual Bank and Unity Bank, Heritage Bank and People’s Choice Credit Union (now People First Bank), and Teachers Mutual Bank Limited and Pulse Credit Union Limited.

Williams also noted the ongoing consolidation of the mutual banking sector, which he said had been partly driven by “increased regulation, and particularly with digital provisioning of digital services that's been placing increasing pressure on organisations to be able to be relevant to the customer base to which they serve”.

He told The Adviser: “I do think that consolidation will continue, and it’s important for customer-owned organisations to consider their options now, because as we move further into the future, the number of options that exist become smaller. But to continue to maintain relevance and provide the benefits that you wish to for the customer communities which you serve, it’s important to maintain that relevance.

“It’s not so much about scale. It’s about relevance and the provision of the products and services that your customers expect.”

A recent report from credit market research group S&P Global Ratings has said that about 40 mutual banks will disappear in the coming years as consolidation continues to accelerate, potentially leaving just 10 mutuals in the field.

This is because it estimated that lenders need $20 billion in total assets to be competitive in the Australian retail banking market.

However, not all merger explorations have been fruitful, with Police & Nurses Limited (P&N) revealing last month that it had “decided not to proceed” with its proposed merger with Beyond Bank Australia. After its due diligence process concluded, the board “determined that progressing the merger would not be in the best interests of its members”. Details of the barriers to merging have not been released.

Find out more about the great wave of mutual mergers in the October edition of The Adviser magazine, out now!

[Related: Mutual mania: The great wave of mergers continues]