Sustainable growth –

creating customer value

Goal seven: grow it assets to $3.6 billion by 2017.

Scale

bankmecu recognises the importance contribution from the economies of scale to maintaining financial ratios consistent with best performance in the mutual banking sector in Australia.

bankmecu aims to achieve growth at a minimum level that is equivalent to banking system asset growth via organic business, subject to profitability targets by:

  • accessing new target markets,
  • building family relationships, and
  • growing existing relationships with individuals.

Subject to market constraints bankmecu aims to grow on-balance sheet assets at a compounding rate of 6.0 per cent per annum.

Growth target for on-balance sheet assets 
30/06/2012 $2.8b (estimated starting point)
30/06/2013 $2.968b
30/06/2014 $3.146b
30/06/2015 $3.335b
30/06/2016 $3.535b
30/06/2017 $3.747b

bankmecu aims to remain a significant participant in the Australian mutual banking sector.

Balance sheet 

   2012
$’000
   2011
$’000
BALANCE SHEET      
What we own      
Property, plant and equipment  18,682    19,871
Cash and investments  566,271    449,483
Loans to customers (net of provision)  2,210,139    2,114,835
Other assets  41,702    40,620
Total assets  2,836,794    2,624,809
What we owe      
Customers deposits  2,471,018    2,231,840
Amounts payable and provisions  54,208    105,153
Total liabilities  2,525,226    2,336,993
Leaving customer owners’ funds      
General reserves  307,520    282,424
Asset revaluation reserve  4,048    5,392
   311,568    287,816

Total assets

Key performance indicator Domestic bank industry average @ Dec 2011 Target 2011 / 12 2010 / 11 2009 / 10 2008 / 09 2007 / 08 2006 / 07 2005 / 06 Difference b/w 2010/11 & 2011/12
Increase in total assets –4.00% 6.31% 8.07% 7.85% 31.68% 21.97% 11.95% 10.41% 6.50% 0.03%

Source: Domestic bank average provided in APRA quarterly report.

bankmecu experienced an increase in total assets of 8.07 per cent in 2011/12. Asset growth can be attributed to strong deposit growth mainly in fixed term deposits, which attributed to additional funds flowing into liquid investments. Loan growth of 4.49 per cent was less than expected for the year of 5.89 per cent.

Capital Growth

bankmecu will manage its after-tax profit to ensure it maintains its reserves/asset ratio at above 10 per cent.

bankmecu will grow its customers’ wealth or capital in the Bank per customer as measured annually as part of the Bank’s demutualisation defence strategy.

Capital reserves – customer-owned funds 

Year ended Customer-owned funds Capital/customer
30 June 2012 $311.6m $2,406.14
30 June 2011 $287.8m $2,149.93
30 June 2010 $259.8m $1,818.35
30 June 2009 $209.9m $1,833.67
30 June 2008 $181.3m $1,704.11
30 June 2007 $162.9m $1,518.17
30 June 2006 $145.6m $1,329.19
30 June 2005 $128.4m $1,093.38
Change between 2010/11 and 2011/12 8.27% 11.92%

bankmecu’s capital consists solely of reserves and the Company does not pay shareholder dividends. As a customer-owned organisation, bankmecu endeavours to pay a customer benefit through demonstrated competitive products and services. bankmecu also builds wealth on behalf of customer owners by retaining profits to build prudential capital.

Capital reserves are predominantly retained profits. These funds belong to all customers. They form the prudential capital underwriting the business and are reinvested back into the core business for the benefit of all customers. Capital reserves increased by 8.27 per cent (2010/11: 10.91 per cent) compared to 2010/11 as a result of profit achieved in 2011/12.

As at 30 June 2012, bankmecu’s reserves/assets ratio stood at 10.98 per cent.

Capital adequacy ratio

Capital adequacy measures the percentage of a bank’s capital to its risk weighted assets, as per Prudential Standard APS110.

Capital adequacy 
Key performance indicator Board minimum 2011 / 12 2010 / 11 2009 / 10 2008 / 09 2007 / 08 2006 / 07 2005 / 06 Difference b/w 2010/11 & 2011/12
Capital adequacy ratio 12.00% 18.50% 18.94% 19.16% 20.25% 20.56% 20.60% 22.50% –2.33%

The ratio reduced marginally in 2011/12 from 18.94 per cent to 18.50 per cent. The reduction was predominantly due to a change in the mix of the Company’s assets during the year as the Company entered into some longer-term investments, which carry a higher risk weighting under the prudential standards. It is important to note that net profit, which supports capital adequacy, remained strong during the year and that the Company’s overall capital ratio of 18.50 per cent remains industry leading and is well in excess of the prudential minimum of 8.00 per cent and the Board’s minimum target of 12.00 per cent.

bankmecu’s capital adequacy ratio remains well above average.

Tax 

Year 2011 / 12 2010 / 11 2009 / 10 2008 / 09 2007 / 08 2006 / 07 2005 / 06 Difference b/w 2010/11 & 2011/12
Income tax
($m)
10.0 10.4 7.5 7.2 7.4 7.0 6.9 –0.40
Fringe benefits tax
($m)
0.12 0.10 0.11 0.07 0.04 0.04 0.08 0.02
Goods and services tax
($m)
1.00 1.01 1.1 0.91 0.92 0.94 0.95 –0.01
Payroll tax
($m)
1.25 1.14 1.17 0.71 0.56 0.53 0.52 0.11

Income tax paid in 2010/11 increased by 38.91 per cent due to the increase in bankmecu’s profits this year. Annual tax paid contributes towards government activity and citizen wellbeing.

Subsidies

In 2011/12 bankmecu did not receive any subsidies.

Sector consolidation

Whilst bankmecu strives to explore the opportunities provided by its new bank designation to explore organic growth it will continue to use its established merger skill set to investigate and pursue strategic merger opportunities that are consistent with its strategic objectives.

Without mergers, the achievement of ongoing scale efficiencies will be difficult over the long term.

Stakeholder value

bankmecu aims to bring success and prosperity to its customers and its other key stakeholders, including staff, suppliers and partners, in effect creating shared value and wealth.

bankmecu aims to demonstrate its stewardship of the material wealth of the Bank by delivering enhanced customer share value as determined via the established processes for valuing the business as part of the Bank’s demutualisation defence strategy.

Demutualisation defence

bankmecu aims to protect its mutual structure unless a systemic shift occurs in the mutual banking sector.

bankmecu aims to control the Bank’s destiny during any hostile takeover or demutualisation attempt on it.

bankmecu aims to maximise customer benefit (access to reserves and profits) in the event of any corporate restructure.

If scale becomes critical to achieving necessary efficiencies, and capital constraints restrict growth opportunities bankmecu will consider.

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