Newcastle Permanent has logged a net profit of $38.9 million for 2017 with home loan and deposit growth way above that achieved by the major banks.
Annual profit was flat on last year’s earnings although a one-off increase of $2 million - due to the recovery of an impaired asset - boosted net earnings for 2016 to $40.9 million.
Australia’s second biggest customer-owned lender saw its home loan portfolio grow by 8.5 per cent to $8.5 billion - 1.3 times the industry growth rate of 6.6 per cent and significantly higher than the four major banks, which achieved 6.4 per cent average growth.
Deposits also grew by an impressive 11.1 per cent, boosting total funding to $9.9 billion. Net interest income was $177.3 million, up from $171.2 million last year.
Slower credit growth - coupled with ferocious competition for deposits and historically low interest rates - slashed net interest margins from 1.85 per cent to 1.73 per cent.
Margins did rise in the second half to 1.76 - from 1.71 per cent in the first half - as Newcastle Permanent repriced interest-only mortgages and investor loans along with the rest of the industry, although according to the mutual’s chief executive Terry Millett the rate hikes were not as high as the major banks.
“Although net interest margins have been compressed in the short term, we have been able to consistently deliver better value for our customers, on both sides of the balance sheet, whilst maintaining our tier one capital ratio of 18.7 per cent which is significantly above regulatory requirements and far superior to the four major banks,” he said.
“We refinanced almost half a billion dollars in home loans from the four major banks and their subsidiaries and now have almost $2 billion in home loans in the Sydney market.
"We also received more of the highest five-star ratings from Canstar for our home loans than the four major banks combined.”
According to Millett, the conduct issues facing the big four lenders definitely delivers an advantage to the customer-owned sector.
“Our business generates the same products at better prices and produces happier customers with none of the conduct issues," he said.
“These results show the strength of our customer-owned banking model which delivers better outcomes for our customers and communities, without the negative consequences of the profit-maximising culture of the four major banks.”
The customer-owned lender this year generated $92.7 million in long-term value for its customers - net profit added to a $53.8 million ‘mutuality dividend’, which calculates additional product value delivered to customers compared to the equivalent products at one of the four major banks.