iscover
iscover 
G&C Mutual Bank and Unity Bank have signed a memorandum of understanding, which sets out the timeline of their proposed merger next year.
“G&C and Unity have a long history of working together cooperatively and sharing resources to build a stronger and more sustainable mutual banking alternative. A merger between our two organisations will deliver further benefits to members, while harnessing our shared values and our absolute commitment to providing fair, ethical and competitively priced banking services,” the banks said in their announcement.
The merger would result in a combined balance sheet of about $2.5 billion, a network of 35 branches, and “a full suite of digital payment services”.
“The increased scale and cost synergies from the merger will allow the merged organisation to fund further innovative products and community support initiatives,” the banks’ announcement stated.
The customer-owned banks said there will be “no forced redundancies”, with all staff to be offered roles suited to their skills and experience.
While there are no plans to change trading names, the banks said the intention is for Unity Bank to become the merged entity’s “predominant” trading name.
The merger remains subject to both member and regulatory approval.
Members will have the opportunity to vote on the proposed merger in a special general meeting to take place in the second half of the year.
Moody’s Investors Service said the proposed merger “highlights the pressures facing the mutual sector, in the form of lower credit growth, intense competition for lending, low interest rates and ongoing technology and compliance costs.”
“We expect to see further consolidation in the sector, which will support the mutual banks’ credit profiles amid such business challenges,” Moody’s added.
Fellow ratings agency Standard & Poor’s said the merger would increase in “a stronger franchise” and provide “some scope to improve operational efficiency”.
S&P said it expects the merger to be complete by September 2020.
Numerous mergers are currently being considered or in progress, such as between Regional Australia Bank and Holiday Coast Credit Union, which is expected to be “one of the largest” in the customer-owned banking sector, as well as between P&N Bank and bcu and between Sydney Credit Union and Endeavour Mutual Bank.
S&P released a report this week saying that continued consolidation is needed to “neutralise” some of the disadvantages mutual banks face – such as higher funding and operating costs – and compete on a more level playing field with the big four and regional banks.
The report noted that while the margins of mutual lenders continue to remain higher than those of the major banks, they have shrunk faster than the big four over the last 10 years as competition in the mortgage market heated up.
“Substantially higher operating and funding costs have materially impeded mutuals’ ability to compete with the major and regional banks,” the S&P report stated.
“Enhancing the scale of operations through mergers is one obvious way for the mutuals to neutralise some of these comparative disadvantages, particularly in the face of rising regulatory and compliance costs.”
[Related: Consolidation ‘inevitable’ for mutuals to compete]
ISCOVER 
