Customer-owned banks make up 5.6% of mortgage lending

The research, commissioned by the Customer Owned Banking Association (COBA) and conducted by KPMG, entitled Sector Impact Assessment of Customer-Owned Banking in Australia, found that customer-owned banks are considered the primary financial institutions for over 10 per cent of the adult population, along with making up 5.6 per cent of mortgage lending. This is “well above” the 3.5 per cent share of overall market assets, according to the report.

COBA commissioned KPMG to measure the contribution of these banks to their local communities. Reportedly, three-quarters of the customer-owned industry participated in the research.

The report stated that customer-owned banks “punch above their weight” in terms of the contributions they make to people and communities, despite their small share of market assets when compared to the major banks ($158.8 billion compared to $4,370 billion).

Furthermore, the report found that the 61 customer-owned banks represent 70 per cent of ADIs while having around 5 million customers in the Australian market.

COBA CEO Michael Lawrence said: “Credit unions, building societies, and mutual banks are well known for putting customers first and giving back to communities, however, we wanted to go beyond anecdotal evidence to truly quantify the impact our members are making.”

“These findings provide strong empirical evidence of the extent to which our members put people before profits.

“Our sector has a large and growing footprint in Australia, as customers realise the benefits of banking with purpose,” Mr Lawrence added.

KPMG Australia partner and chief economist Dr Brendan Rynne said customer-owned banks occupy a “unique position” in Australian banking.

“While collectively relatively small when measured by customer numbers, assets, total loans and revenue, Australia’s mutuals sector is large when measured by a number of banks, branch footprint, and its presence in regional locations.”

Calls for a regulatory roadmap

COBA urged the federal government last month (February 2023) to use its pending budget to develop a regulatory roadmap to assist member-owned banks in managing rapid regulatory change.

In its submission, COBA stated that customer-owned banks are particularly affected by regulatory changes due to the lack of risk and compliance resources available to them and, as a result, find it difficult to keep up.

Mr Lawrence commented at the time: “Collectively, Australia’s customer-owned banks have more than $150 billion in assets, serve 5 million customers, and punch above their weight when it comes to delivering competition and market-leading service.

“Yet, the relatively small size of these individual organisations compared to their ASX-listed counterparts means that existing risk and compliance resources are stretched, leading to a disproportionate burden through the increased costs of regulation.

“This makes it harder to keep up with the tsunami of regulatory change we are seeing in the financial services sector, in turn impacting their ability to compete.”

[RELATED: Treasury urged to prioritise regulatory roadmap: COBA]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.