Teachers Mutual Bank posts $27.9m profit

  • By Elizabeth Fry

Teachers Mutual Bank has logged a net profit of $27.9 million for 2017 on the back of strong growth in home loans, deposits, and memberships.

Earnings are slightly down on last year’s $30.2 million due to tighter margins, technology investment as well as cost associated with the merger of the lender with NSW Fire Brigades Employees’ Credit Union late last year.

The lender has grown loans by 20.6 per cent to $5.2 billion, which is above system, the mutual said in a statement.

Total loans to households grew by 19.23 per cent compared to system average growth of 6.03 per cent. 

Teachers Mutual achieved this growth despite the 10 per cent cap on investor lending imposed by the prudential regulator in a bid to dampen the red-hot property market.

Moreover, household deposits rose by 17.6 per cent net, well above system 6.82 per cent.

“Consequently, the bank is relatively matched, with the right amount of deposits to support loan growth, said chief executive, Steve James.

“The strong growth means better utilisation of our surplus capital, bringing capital adequacy down to 15.09 per cent within our targeted range,” he said.

“This was topped back up with a tier two capital raising of $20 million in September.”

Teachers Mutual, one of Australia’s largest mutual banks saw its asset base grow by 20.6 per cent to $6.7 billion.

Solid revenue

Net interest income rose to $132.5 million, from $123.4 million.

During the 2017 financial year, the lender grew its membership by over 7 per cent, half of which was achieved organically.   

“The membership growth reflects our strong customer service culture, adoption of innovations such as Apple Pay, and our competitive products,’ said James.

According to James, although the mutual bank’s cost to income ratio increased to 73.1 per cent – from 69.1 last year- the ratio still compares favorably with other mutual banks.

Expenses to average asset fell indicating continued efficiencies, however not sufficiently to fully offset the 20-basis point fall in net interest margin to 2.17 per cent. 

“We are delighted with these results, especially in a year when we undertook another merger and restricted investment lending in line with APRA requirements,” he said.

“Caps on interest-only and on investor lending don’t help margins especially as the owner-occupier market is so competitive.

A tougher market

The Teachers Mutual chief is expecting condition to get a whole lot tougher.

“We are going to lose some further margin - I can’t say how much - but I think margins will be squeezed even further in the next six months.”

In his view, the bank's “fantastic” loan growth will come off a bit too.

The mutual bank is budgeting for loan growth of around about 14 per cent next year.

The Teachers Mutual chief is seeing movement into mutuals generally as well as into Teachers Mutal because of its multi-brand strategy  which James says is "maturing sucessfully."

"The rebranded Firefighters and UniBank brands are being exposed to new audiences and gaining members, especially via the broker channel.”

“It’s especially pleasing that our customer service has never wavered during the merger process and regulatory restrictions during the last year.

James acknowledged the extra costs in having the three brands and said he would look at more mergers if the right opportunities came up

He highlighted the affinity factor.

“If you’re a fireman you want to join a firefighter’s bank rather than a teacher’s bank.”