CUA posted an 8 per cent rise in annual net profit to $55.87 million for the year to June 2017 on the back of strong member numbers and record growth in the lender’s personal loan book. Cash profit for the country's biggest credit union was $68.09 million compared to $62.14 million last year.
The member-owned lender said the financial result also reflected higher net interest income and a health business kicking in $7.51 million, which helped offset a hit to the bank from stiffer competition in the home loan market.
CUA's banking business delivered full year net earnings of $49.65 million, down 6.4 per cent from last year’s $53.03 million. Net interest income of $239.22 million was up 2.9 per cent although the mutual settled 2.81 billion of new loans in the year, down 4 per cent on 2016.
However, in line with the recent spate of bank results, CUA’s lending volumes improved in the second half of the financial year, with $1.64 billion in new lending in the six months to 30 June 2017. This was up on the $1.17 billion in lending for the first half.
Net interest margin dropped from 1.81 per cent to 1.77 per cent for the period although chief executive Rob Goudswaard (pictured) confirmed second half margins were flat as volumes came back.
Active refinancing market
The CUA chief also said the result also reflected an active refinancing market.
“While owner occupier and investor home loans accounted for $2.53 billion of the new lending, CUA’s personal loan book growth was a standout with a record $256.58 million in personal loans issued over the period – a 37.9 per cent increase on 2016 personal lending of $186.1 million.”
Capital adequacy increased slightly from 14.24 per cent to 14.28 per cent over the year, reflecting CUA’s strong capital position. Goudswaard puts the solid profit down to a big increase in awareness of CUA.
"When people get to know who we are, we see a stronger membership consequence of that. One of the outcomes of having the higher awareness is that we also have the digital capabilities to open accounts online which is an attraction," he told AB+F.
Goudswaard has no empirical evidence that new customers are switching to CUA from a major bank but, in his view, the stronger member growth - up 70 per cent in twelve months - is a direct result of what CUA stands for in terms of being a mutual, an alternative lender and strong community-orientated organisation.
On the home loan front, Goudswaard said from June to September 2016 he saw very hot competition from a price point of view and the volumes flowed from that.
"We saw it again this year for the June to September period with one minor difference. That is, we are not seeing the same level of system growth and even statistics don’t really bear out that view," he said.
Goudswaard's sense is that the numbers through to the end of September will show system growth is down.
“Our view is that the system is somewhat dampened to what it was a year ago in terms of growth volume but that competition is still very strong."
While all banks have a 10 per cent cap on investor lending, CUA is now looking to do more investor lending after holding investor loans down earlier this year.
Separately, CUA said it has cut its fixed rate investor home loan rate by between 10 and 20 basis points as investor growth slowed.
These changes are a further step in CUA’s phased return to investor lending and follow an earlier September announcement that removed the requirement for investor loan applicants to have been a CUA member for 12 months or more.