People’s Choice lifts lending, embraces business transformation
People’s Choice will be committed to investing $90 million in technology and business transformation as it shifts to a digital banking model for both its customers and workforce.
On Tuesday, the credit union announced its full year results. Net profit grew by 12 per cent to $54 million.
Statutory profit was also up 5.4 per cent to $22 million after taking into account an additional $9 million expense relating to technology.
COVID-19-related costs of $7.18 million were incurred during the reporting period relating to increased credit provisioning, staffing needs and regulatory requirements.
Residential lending grew by nearly 4 per cent – 1.5 times systems growth.
This resulted in total member loans and advances reaching $7.896 billion, a rise of 2.9 per cent.
Total member deposits rose by 6.4 per cent with 16,939 new members joining the credit union – a net gain of 5,699.
Despite the challenged market, People’s Choice CEO Steve Laidlaw said the organisation remains committed to technology investment.
People’s Choice invested $43.1 million - $15.6 million operating expenses and $27.5 million capex- across the financial year to further progress improvements in technology and enhance the total member experience.
For Laidlaw, People’s Choice will be investing $90 million dollars over several years “which will help us shift towards 100 per cent in digital capability.”
“There is definitely a preference particularly from the millennials for strong digital interaction. The shift towards digital has been in part due to the [COVID]lockdowns but I suspect some of that shift will be permanent,” Laidlaw said.
According to Laidlaw, the last four months has pushed the organisation to adopt what would have been 10 years of change as it prepares for a post COVID world.
This investment will also include spend in initiatives like cloud technology as it aims to be fully agile from being a cloud-based organization.
“We have around 90 per cent of our staff working remotely, which was in part facilitated by the investments we already made.
Around 90 per cent of our origination was through the direct channel. With the broker channel accounting for 60 per cent of market share, this result has been very pleasing
“Cloud will certainly be the norm. It provides both security and agility. We don’t have any competitive advantage in holding software on our premises or maintaining serves.
“Like most organisations, adopting cloud-based technology will be key to moving forward.”
A key positive of the full year result was the lift in home lending which was achieved via direct channels rather than through the broker channel.
“Around 90 per cent of our origination was through the direct channel. With the broker channel accounting for 60 per cent of market share, this result has been very pleasing.”
According to Laidlaw, People’s Choice has been experiencing above market years for a number of years but picked up pace post the royal commission.
“It was a combination of the reputational damage for some of the larger banks but also our service offering and our net promotor score – which sits at 39, well above the majors. “
Since the onset of COVID-19, People’s Choice has provided hardship assistance to almost 3,000 members.
Its financial planning team also increased their workload by approximately 50 per cent to support clients.
Around 8 per cent of its mortgage book is on mortgage deferrals which is around 3,000 members which is less than per cent of total membership.
People’s Choice has been engaging with its borrowers on deferred payments and now 40 per cent of those on deferrals are now starting to make some for of repayments.
The credit union also finalised a $650 million wholesale funding deal through the Light Trust transaction, however, that was completed earlier in the year.
People’s Choice be looking at tapping Reserve Bank’s Term Funding Facility’s second tranche, which will give it around $160 million in extra inexpensive funding.
Laidlaw applauded the regulators and RBA’s initiative in moving swiftly to address liquidity concerns when the health pandemic hit, describing the TFF as a “great initiative”.
With access to cheap funding and solid deposit book, liquidity is not an issue for People’s Choice.
Laidlaw believes People’s Choice will remain well positioned post COVID.
The organisation has already informed its staff that its shift to remote working will be permanent – requiring people to only come into the office 2 to 3 days a week.
“I am an optimist. We we're in a very strong financial position, as are many of our mutual peers. Our growth has been strong over the last couple of months and we expect that to continue.