Defence Bank powers ahead with its best result yet

  • By Zilla Efrat

Defence Bank has recorded a 38 per cent rise in profit on the back of record lending in its 2020/21 financial year.

Net profit after tax of $13.9 million the year was up by 38 per cent over the previous period.

Lending growth grew 8 per cent while total loans were just under $2.5 billion at 30 June 2021.

Defence Bank’s total deposits were up 5.7 per cent to $2.3 billion while capital adequacy reached a four year high at 16 per cent.

Defence Bank CEO David Marshall attributes the results to the member-owned bank’s “people-led and technology-enabled strategy”.

“We’ve invested in our team and in digital advancement to foster effortless banking, allowing our people to deliver an authentic, easy-to-navigate, personalised banking service,” he says.

Marshall adds: “Our fundamentals are strong, our return on assets is 0.49 per cent, our return on equity sits at 7.11 per cent, and our net interest margin has lifted from 1.84 per cent in FY 2019/20 to 1.98% in FY 2020/21.

“Defence Bank is also extremely well capitalised, recording capital adequacy of 16 per cent, the highest for the bank since 2017. Our inaugural $15 million subordinated notes transaction and $300 million capital relief public RMBS transaction both added significantly to this result.

“Our cost to income ratio has also improved, moving from 73% to 69% in 12 months.”

Marshall says while uncertainty remains in the COVID-19 environment, Defence Bank is well placed for continued growth and refuses to use COVID-19 as an excuse not to do so.

“We expect continued demand for all of our products and services,” he says.

“This includes continued demand for home loans, particularly from younger members. We remain prudent lenders who want to get more Australians into homeownership but not by getting them in over their heads. Our overall loan delinquency remains very low, at just 0.08 per cent.

“As regulators take a renewed focus on serviceability, Defence Bank is well placed to easily meet these and any further requirements.

“Our focus continues to be on accelerating improvements in our member experience with more digital banking investment a key priority over the next 12 months.”

Marshall says members love the Defence Bank app, as shown by a rating of 4.8 out of 5 in both the Apple and Google stores, well ahead of our competitors.

Defence Bank also recorded an average Net Promoter Score of +40 and a Member Effort Score of 82 per cent during the year, well ahead of the big four.

During the 2020/21 financial year, Defence Bank reached $3 billion in assets and received a rating of Baa1 | Stable | P-2 from Moody’s Investor Services due to strong asset quality, good capitalisation and profitability.

The recognition from Moody’s provides a dual rating for the bank, with a rating of BBB |Positive|A2 re-confirmed by S&P Global Ratings during the financial year.

Defence Bank, which has operated for more than 45 years, now has 81,000 members around Australia and 33 branches.