Mutuals could total less than 10 in the coming years

Mergers are expected to drive this change, as the mutual sector is expected to consolidate considerably over the next two years, according to an S&P Global Ratings report.

“A$20 billion in total assets is emerging as the new scale to be competitive in the Australian retail banking market. If this is the new ante to play, the magic number for Australian mutual lenders could be less than 10. That means that about 40 mutual banks will disappear in the coming years as consolidation continues to accelerate,” said S&P Global Ratings analyst Lisa Barrett.

So, is this good or bad for consumers and brokers? S&P said that this will drive greater price competition and allow for cost reductions.

“Merging provides smaller lenders greater economies of scale and eliminates material duplication costs. This should make them more efficient and able to price competitively,” said Barrett.

“Mergers between larger mutual lenders will deliver a bigger bang for your buck by eliminating the disruption and costs associated with integrating many small institutions. Historically most mutual mergers involved large mutuals gobbling up smaller players. This has changed since mid-2021.”

Impact on consumers

Randy Araya-Bishop, Sufficient Funds director and broker, said that constant mergers result in the elimination of choice for consumers.

“A consolidation from over 40 mutuals to under 10 would significantly reduce the number of options available to consumers. This could lead to less competition, which might result in higher interest rates, fewer product options, and less favorable terms for borrowers,” he said.

“Mutuals are often known for their personalised customer service and community focus. With consolidation, there’s a risk that the unique customer-centric approach of smaller mutuals could be lost as they merge with larger entities. Smaller mutuals often serve niche markets or communities that larger banks might overlook. Consolidation could make it harder for these groups to access credit, as the new larger entities might not prioritise their needs.

“Mutuals tend to be more flexible and innovative in their lending practices. Consolidation could reduce this flexibility, leading to more standardised products that may not cater to the specific needs of certain consumer segments.”

Ashley Fisher, broker at Hello Funding, said that more mergers would stand to disadvantage consumer choice.

“As the number of mutual banks decreases, the variety of products and services available may also decrease, making it essential for us brokers to guide clients through these more limited options. Mutual banks are known for their personalised service, but the remaining institutions might find it challenging to maintain this level of service as they grow larger,” said Fisher.

“With fewer institutions in the market, the remaining banks could gain more market power. This might lead to higher fees or lower interest rates for consumers, as reduced competition may limit the drive for better terms.”

Impact on brokers

Similarly, with fewer options for clients, so too do brokers have fewer avenues for delivering outcomes for clients.

“Brokers might find themselves with fewer institutions to work with, limiting their ability to offer a wide range of products to clients. This could reduce their ability to negotiate better deals or find niche products that meet specific client needs,” said Araya-Bishop.

“As mutuals consolidate, the commission structures and relationships brokers have with these institutions could change. Larger entities might streamline their broker partnerships, potentially leading to less favourable terms or more stringent requirements. With fewer mutuals to work with, there could be increased competition among brokers to establish and maintain strong relationships with the remaining institutions. This could lead to a more competitive environment where only the most connected or high-performing brokers thrive.

“Brokers may need to adapt to new processes, technologies, and requirements imposed by the larger consolidated entities. This could mean investing in new training or systems to stay competitive and compliant.”

Barrett said that mutuals don’t rely on brokers like traditional banks do. Broker-originated loans among mutuals are much lower than other banks.

“Margin pressure is likely to remain for Australian mutual lenders. This will be more evident for those mutuals that chose to increase lending via brokers. The use of brokers can reduce the return on a mortgage by as much as 40 basis points. In general, mutual lenders rely less on brokers than the major Australian banks. As of March 31, 2024, mutuals originated an average of 47 per cent of lending via brokers, up from 25 per cent in 2019. This compares with 57 per cent for the Australian major banks,” said Barrett.

It’s not all bad, however. According to Araya-Bishop, the more mergers we see, the more competition the major banks will have, potentially making way for more competitive policies.

“Consolidation could lead to the creation of stronger, more resilient institutions that are better able to compete with larger banks. This could ultimately benefit consumers if these entities pass on efficiencies in the form of better rates or services. Larger entities might offer more streamlined and efficient processes, which could benefit brokers and consumers by reducing the time and complexity involved in securing loans,” Araya-Bishop said.

“While consolidation might lead to stronger institutions, it could also result in reduced choice, less flexibility, and increased challenges for both consumers and brokers. The key will be how these new entities choose to engage with the market, whether they maintain the values and customer focus of mutuals or operate more like traditional banks. Brokers will need to be proactive in adapting to these changes, ensuring they continue to provide value to their clients in a shifting landscape.”

According to S&P, the current mutual mergers underway are:

• G&C Mutual Bank Ltd. ($2.2 billion) and Unity Bank Ltd. ($2.1 billion), March 2025, $4.3 billion.
• Illawarra Credit Union Ltd. ($0.9 billion) and Community First Credit Union Ltd. ($1.9 billion), January 2025, $2.8 billion.
• Bank Australia Ltd. ($13.8 billion) and Qudos Mutual Ltd. ($6.2 billion), July 2025, $20.0 billion.
• Police & Nurses Ltd. ($10.2 billion) and Beyond Bank Australia Ltd. ($13.6 billion), January 2026, $23.8 billion.

[Related: Are mergers keeping mutual banks alive?]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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