CUA’s strong first-half profit delivers value and security for members

Australia’s largest customer-owned banking provider posted a Group consolidated NPAT of   $26.9 million, up 26.5 per cent, achieved through solid revenue growth and optimising lower funding costs.

• CUA Group NPAT increased 26.5 per cent to $26.9 million
• Consolidated assets increased 1.5 per cent to $16.4 billion
• Capital adequacy ratio increased 0.39 percentage points to 14.77 per cent
• Member deposits increased 3.4 per cent to $11.4 billion
• Loans under management decreased 1.5 per cent to $13.4 billion
• CUA Health NPAT decreased 28.7 per cent to $3.6 million
• Net growth of close to 11,000 new customers across banking and insurance.
• Customer advocacy remains strong and well ahead of the big four banks.

Net growth of close to 11,000 members is consistent with previous periods and advocacy has remained strong, with CUA’s net promoter score well ahead of the nearest big four banks.

“As we enter our 75^th year we’re pleased we have helped our members through some of the toughest economic times in Australia’s history while investing in products and services that support their financial security and home ownership aspirations,” CEO Paul Lewis said.

“Our focus on competitive products and a customer-friendly digital experience has underpinned our member growth despite an extremely challenging external environment. Interest rates are at historic lows and competition for mortgages remains strong.

“Continued tough external conditions and one-off investment costs are expected to constrain second half profits. However we’re well positioned to maintain our strategic investment in the product, service and digital improvements that will support our rebrand to Great Southern Bank, which we announced earlier this year.”

Investing to support Australians’ home ownership dreams

A prudent lending approach in the current climate and tough competition for mortgages saw a slight decrease in loans under management down 1.5 per cent to $13.4 billion. However investment in the broker network, new technology and a refreshed brand strategy are set to support future lending growth.

“We are excited to be rebranding later this year as Great Southern Bank, which will make it easier to reach more Australians who may not have understood what a credit union does,” Mr Lewis said. “Rebranding is part of our broader strategy to help more Australians achieve the dream of home ownership.

“We are rolling out a new lending origination system to enable faster decision making and a smoother home loan process for customers. We have launched our lowest ever three-year fixed rate mortgage and joined the Finsure lending panel, one of Australia’s largest aggregators.”

Mr Lewis said CUA was particularly proud to offer additional support for first home buyers.

“CUA helped more than 900 Australians achieve the dream of home ownership through the First Home Loan Deposit Scheme and we also supported the government-backed BuyAssist shared equity scheme,” he said.

Investing in security and more value for deposit holders

Deposit balances grew 3.4 per cent in the first half due to factors including the government stimulus, CUA consistently offering top 5 deposit pricing for savings accounts, and a continued focus on growing main banking relationships.

Deposit holders enjoyed improvements to CUA’s Youth eSaver account, which can now be opened through a seamless digital experience. CUA also launched ‘The Vault’ hidden savings account to help members save for a home deposit and other savings goals.

CUA continued to make significant investments in IT, completing the first phase of its cloud migration, and implementing ongoing cybersecurity and anti-money laundering controls.

“Our ongoing investment in IT and cybersecurity is paramount, ensuring the security of our customers’ data and money while safeguarding our business,” Mr Lewis said.

COVID-19 support measures

By December, 87 per cent of the 4,700 members offered a payment pause through our pandemic Financial Assistance Package had returned to loan repayments.

Taking a prudent position, CUA has not yet released the $11.6 million in COVID-19 provisions taken in FY20 and there were no additional COVID-19 provisions taken in the first half of FY21.

In line with industry wide impacts from delayed claims and deferred premium increases, CUA Health profit was down 28.7 per cent to $3.6 million. CUA Health has adopted a prudent approach to managing projected claims, with a $3.1 million increase in provisions for the period.

Banking operations

Total assets were up 1.5 per cent to $16.4 billion, largely through holding higher liquid balances as a result of the government stimulus.

ADI revenue growth increased 5.2 per cent largely through a disciplined approach to margin management. Net Interest Margin improved to 1.75 per cent (rolling 12 months) up 6bps from the prior corresponding period, with other income down 27.6 per cent through a reduction of fees designed to support vulnerable members as well as lower dividend income.

The benefits of strategic investments in CUA’s contact centre and digital technology and a focus on costs helped curb operating expenses, which rose just 1.6 per cent to $115.0 million.

Bad and doubtful debts after recoveries were $0.9 million, down $3.9 million from the prior corresponding period.