Newcastle Permanent chair Jeff Eather
Newcastle Permanent Building Society and Greater Bank opened the voting on their proposed merger yesterday, with members able to vote using a ballot paper included in an information pack, online or using their mobile apps.
The process will culminate on November 2, at extraordinary general meetings to be held by both organisations, where the 600,000 members have their last opportunity to cast a vote.
Newcastle Permanent chair Jeff Eather said members had been polled and he was “quietly confident” of a vote in favour of the merger.
“We have taken two years to do this and members have comfort that there has been a thorough process,” Eather said.
Newcastle Permanent released its 2021/22 financial report yesterday, which illustrates the problem small financial institutions have in keeping up with the ongoing demand for regulatory and compliance spend, system upgrades and new services.
Net interest income rose 3.2 per cent to A$215.5 million in the year to June. The net interest margin fell 2 bps to 1.82 per cent
However, net profit fell 25 per cent from $42.7 million in 2020/21 to $32 million in 2021/22. The fall was due to a $3.9 million loss attributable to a non-controlling interest, the Newcastle Permanent Charitable Foundation, as well as increased spending on projects such as Apple Pay, Google Pay, a new mobile app, regulatory and compliance projects, and the planned merger.
Bank chief executives used to talk about compliance budgets as one-off or short-term imposts, but they don’t talk like that these days.
Eather said: “Ongoing investment in technology and compliance is the new normal. The way we look at it is it is good for customers.
“By coming together with Greater Bank we will spend that capital once, not twice, and we will have more capital for growth opportunities. This merger is a growth story.
“We are working on a digital mortgage product and when we come together we will look at expanding geographically.”
Newcastle Permanent’s home loan approvals were $2.6 billion - up 7 per cent on the previous year. The home loan portfolio grew 6.7 per cent to $9.8 billion. The increase included loan purchases from Athena Mortgage, which contributed 3.4 per cent of the increase in the portfolio.
Arrears were low and the building society released $1.3 million from its expected credit loss provision. The balance of $6.4 million represents 7 basis points of gross loans and acceptances, down from 8 bps the previous year.
Customer deposit grew 6.7 per cent to 9.5 billion.
The combined organisations will have assets of around $20 billion.