Two lenders announce merger - 2021

Victorian-based Pulse Credit Union Limited and Teachers Mutual Bank Limited (TMBL) have announced they have signed a memorandum of understanding to enter merger discussions and begin due diligence.

Pulse Credit Union Limited largely provides banking services to members in the healthcare industry. However, it expanded to members in the tertiary education sector following its 2011 merger with La Trobe University Credit Union and Melbourne University Credit Union.

Under the Pulse-TMBL merger, the credit union’s members working in that sector would access TMBL’s services through the Health Professionals Bank division, while Pulse Credit Union Limited members working in the tertiary education sector would access the Teachers Mutual Bank Limited’s services through the UniBank division.

The proposed deal is not expected to impact the composition of the TMBL board.

The two institutions said that they were united in their work to support essential workers and provide them with the highest level of service. 

According to the credit union, the merger comes following “growing challenges” in the banking arena.

Pulse Credit Union Limited chief executive, Stuart Neave, said: “In the past 12 months the mutual banking industry has faced growing challenges in an era of digital disruption, reducing margins, increasing regulatory change and challenges from the COVID-19 pandemic. The strategy driven by our board has been to search for opportunities to achieve the size and scale that will support outstanding and sustainable service for our members.

“We have chosen Teachers Mutual Bank Limited as our preferred partner as we are united by our support for the healthcare and education industries, our dedication to members and strong values. We believe the proposed merger with one of the largest mutual banks in Australia will provide a greater opportunity to enhance member value through improved product and service offerings.”

Teachers Mutual Bank Limited CEO, Steve James, said: “Throughout the disruptive conditions of the past year, our Board of Directors has focused on maintaining the strength of the Bank and meeting the evolving needs of our members. We are proud of the growth we have experienced in this time and our success in enhancing our member value proposition with an emerging digital-first approach.

“The proposed merger with Pulse Credit Union Limited creates an opportunity for us to grow further and provide exceptional service and value to additional loyal mutual banking members based in Victoria.”

Over the coming months, the two lenders will undertake a due diligence process, after which regulatory approval from the Australian Prudential Regulation Authority will be sought before the lenders seek approval from Pulse Credit Union Limited’s membership.

More mergers in the mutual bank sector

The move is the latest in a string of acquisitions and mergers undertaken by TMBL in the recent past. In August 2020, Firefighters Credit Co-operative Ltd (FCCL) signed a memorandum of understanding to merge with Teachers Mutual Bank Ltd (TMBL) – which already comprises Teachers Mutual Bank, UniBank, Health Professionals Bank and Firefighters Mutual Bank.

The announcement comes following predictions that players in the mutual bank sector would need to consolidate to survive.

In a speech delivered to the Customer Owned Banking Association (COBA) 2020 Convention in December, the deputy chair of the Australian Prudential Regulation Authority (APRA), John Lonsdale, suggested that it would be “prudent” for smaller banks to “consider the preparatory steps required for a merger or transfer of business” should they face a severe financial stress.

In his speech, Mr Lonsdale outlined that 2020 had been “a very challenging year for everyone, confronting the Australian community with firstly a health crisis and then testing the financial system with a resulting economic crisis”. 

He warned that a large number of the small banks – and not only mutuals – have “business models that are challenged”, which could be exacerbated by the fact that consumers increasingly expect a strong digital banking offering (with relevant cyber security), which might be hard for cash-constrained mutuals to provide.

“Therefore, it is prudent that such ADIs consider the preparatory steps required for a merger or transfer of business, including criteria to identify potential partners at an early stage rather than wait for a deterioration in financial position,” he told the COBA conference.

“Hopefully, recovery plans never need to be enacted, but it is important for all APRA-regulated entities, even smaller ones, to ensure they have an effective plan in place if needed – and it is APRA’s role to supervise that.”

[Related: Mutuals may need to prepare for mergers: APRA]