CUA steered a more careful course over its 2019 financial year, reporting a rare reversal in profit, and is framing its budgets for 2020 on a revenue haul from investments in digital and novel services.
The net profit for Credit Union Australia fell 31 per cent to A$37.8 million, a result overwhelmed by two “non-recurring items”; the bulk of the remediation of a “legacy issue” relating to the former CUA Financial Planning business (sold to Bridges) and an impairment charge on superseded technology for home loan processing.
CUA put its cash profit at $49.5 million, down 10 per cent, with a decline in the net interest margin from 1.84 per cent to 1.74 per cent accounting for much of this.
“In the first half of this year we were running hard,” Rob Goudswaard, CUA’s CEO told Banking Day.
“In the second half of 19, we did deliberately slow down; account growth was a bit better last year.
“Why the pull back? Because the cost of funds went through the roof.
“Look at the degradation in the NIM over three years. So how do you adjust to a lower interest rate environment?”
Goudswaard’s team are finessing the pressure on each lever that produces the ultimate profit, though it’s clear CUA may have less strategic leeway than some large mutual banks to shape the upcoming wave of ADI industry consolidation that Goudswaard foresees.
“We outpaced with a reduction in operating costs versus a reduction in the NIM, but at some point you can’t do that.
“By 2020 we should be able to change that, via digital investment benefits – revenue – on the other side.”
Asked to stretch this theme to the choices facing the wider customer-owned banking sector, Goudswaard said “all mutuals will adapt. They all have very strong capital now, and then they will have a less strong capital adequacy.
“So outsource your cost base,” he added, a plug for Mutual Marketplace, a shared servicing platform now used by half a dozen mutual ADIs.
And how many merger discussions are front of mind at CUA?
“Zero,” he said, an answer that’s a tad surprising for an entity that’s aggregated more than 100 credit unions over the decades and tops the rankings in the mutual sector.
“We need to finish off our loan origination system and lending platform. These are all things we need to have in place before a merger.
“And to do anything more lateral,” – such as a mutual equity instrument – “needs 12 to 18 months to get the right constitutional [changes],” he said.
Goudswaard’s 40 years of service as a banking industry executive winds up at the end of October. CUA’s chief sales officer, Paul Lewis, takes his place.
Goudswaard is preparing a final stage in his career as a non-executive director, and is heading for INSEAD Business School in France to reskill. He said he planned to seek a couple of board positions.