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CUA half-year financial performance highlights innovation focus

project management meeting photo

Australia’s largest credit union, CUA, will continue to grow its investment in innovation to improve member experience and choice of digital channels, after today announcing a solid  first-half financial result.

CUA Group posted a consolidated Cash Profit of $35.31 million for 1H-FY18, and Net Profit after Tax (NPAT) of $28.76 million. CUA Chief Executive Officer Rob Goudswaard said the result reflected that CUA was delivering on its ‘anytime, anywhere’ digital strategy through an increased investment in innovation and digital activation during the six-month period. While profit was down slightly on the prior first half, this was largely due to upfront costs in joining international banking collaboration, Pivotus Ventures, on 1 July 2017 and a pilot of the first initiative to come out of the Silicon Valley based innovation studios.

“As a member-owned organisation, CUA’s profits are reinvested into our business and we are always looking for opportunities to invest that into initiatives and projects which benefit members and support them through different stages of their lives,” he said.

Focus on innovation

Mr Goudswaard said the significant investment CUA had made in innovation by joining global banking innovation collaboration Pivotus Ventures has supplemented CUA’s continued involvement with the Australian fintech and start-up communities.

“The Pivotus collaboration has allowed us to tap into international banking expertise. We’ve already rolled out a pilot of the first innovation, the iM CUA instant messaging app, much faster than we would have been able to develop this kind of innovation on our own,” he said.

While it’s early days, CUA is already seeing positive outcomes on the pilot, with close to 2,000 registered users on the iM CUA app who are benefitting from the convenience of having their own personal banking adviser. The success of the app has been reflected in positive Net Promoter Scores.

“We’re also working closely with Australian-based fintechs, which has seen us announce new collaborations in the past few months with online mortgage lending platform LoanDolphin and an artificial intelligence pilot with Flamingo AI and CUA Health. And we are working with domestic partners to leverage new technologies, like Australia Post’s new online identity verification service, Digital iD™, which is assisting members to quickly open an account online without the need to visit a branch,” Mr Goudswaard said.

“In addition to what we’ve already delivered, CUA members will continue to benefit from other new innovation and digital offerings in the second half of FY18. That will include a new mobile banking app, the ability to register a PayID and make faster payments using the New Payments Platform following the rollout to CUA members this week, and the expanded rollout of iM CUA to members with both iPhones and Android devices.”

CUA’s banking operations (ADI)

CUA lending volumes were impacted by the very competitive owner-occupier lending market, which fuelled a high level of refinancing activity across the sector.

CUA’s pause on investor lending, implemented in March 2017 to ensure CUA stayed within regulatory benchmarks, also contributed to lower lending volumes in the first few months of FY18. This was consistent with the Productivity Commission’s observations that investor lending restrictions, or macroprudential measures, were negatively impacting smaller lenders.

Although CUA has since made a phased return to investor lending, CUA was not able to consistently support all of its investor members’ lending needs during the period, which adversely impacted lending growth and retention of investor members. Loans being refinanced from CUA to other lenders in July 2017 were 33 per cent higher than the same time a year earlier.

CUA did however see lending pick up pace in the final few months of 1H-FY18 after launching its competitively priced Advance Variable Home Loan for owner-occupiers and ‘Good move’ home loan marketing campaign. This brought the total loans issued for the period to $1.28 billion, up 9.1 per cent on the same time the previous year. Net Interest Income (NII) was also higher at $126.16 million, up 6.3 per cent on the prior first-half. The stronger momentum on lending has continued into the second half.

CUA also continued to see strong growth in the volume of new personal loans with $121.1 million issued over the six months, up 13.8 per cent from $106.4 million for the same period in FY17.

Overall, the banking business or ADI (Authorised Deposit-Taking Institution) posted a first-half NPAT of $31.20 million, up 5.1 per cent on the previous corresponding period.

And despite the challenging external environment, Mr Goudswaard noted that CUA’s banking business had seen strong member growth of 8,248 additional members during the half-year, taking CUA’s banking membership to more than 460,000. He attributed this member growth to a combination of factors including the visibility of CUA through its sponsorship of Queensland Cricket and the Brisbane Heat Big Bash League (BBL) and Women’s BBL teams, its successful ‘Good move’ home loan campaign and the continued focus on enhancing CUA’s digital capabilities.

CUA’s focus on member-experience is also translating to greater advocacy from members. CUA’s Net Promoter Score increased from 32.9 in the June 2017 quarter to 44 in the December quarter, with CUA improving its ranking among other financial institutions from 5th to 3rd and narrowing the gap to the market leader.

Mr Goudswaard said despite CUA maintaining a strong capital adequacy ratio of 14.3 per cent, improved access to capital remained a high priority for CUA and the mutual sector more broadly.

“We’re really encouraged by the bipartisan government support for the recommendations which came out of the Hammond Review into access to capital for mutuals. CUA is currently working with our industry bodies, the Customer Owned Banking Association (COBA) and Business Council of Cooperatives and Mutuals (BCCM) to respond to requests from government agencies for information to assist in drafting capital reforms for mutuals. We are eager to see these reforms implemented in 2018, as they will be a game changer for mutuals and will significantly boost our ability to compete with larger financial institutions.”

CUA Health

Mr Goudswaard said CUA Health had contributed strongly to the CUA Group result, posting a $5.39 million Net Profit after Tax (NPAT), an increase on the prior first-half result. The contribution to the consolidated CUA Group result helped offset a challenging six months for lending, demonstrating the advantages of a diversified business across both banking and health.

“The strong performance of CUA Health is allowing us to return even more benefits back to our loyal members. This year we are passing on our lowest average premium increase in almost two decades, while also rewarding loyal members with a new 4 per cent health insurance discount for those who combine both their banking and health insurance with CUA,” Mr Goudswaard said.

“We’re also investing in improved digital capabilities, like the new CUA Health app launched recently and the trial of Flamingo AI chatbot ROSIE, which aims to create a more streamlined digital experience for consumers shopping around for health insurance, while also increasing sales conversions.”

CUA Health insured 77,993 Australians as at 31 December 2017. Premium revenue for the six months was $73.42 million, while the insurer returned $60.50 million in benefits to policy holders, or around 82.5 cents in the dollar. The result reflected lower claims volumes over the period, consistent with the industry-wide trend.

Credicorp Insurance

Credicorp Insurance posted a half-year NPAT of $0.56 million, down 2.3 per cent from the FY17 first-half result. This subsidiary now provides insurance to 13,573 members. Credicorp’s growth during the period was impacted by slower lending activity in the early part of 1H-FY18, with lending only picking up towards the end of the half-year.


Financial & member highlights for half-year ended 31 December 2017:

  • CUA Group consolidated Net Profit after Tax (NPAT) of $28.76 million. The result is down by 7.54 per cent on the prior first-half result, reflecting additional investment in innovation activities
  • Cash Profit for CUA Group of $35.31 million, down 4.9 per cent on the previous first-half result of $37.14 million.
  • Retail deposits up 3.0 per cent for the period to a record $9.02 billion
  • $1.28 billion in new loans settled during the six month period, up 9.1 per cent
  • Loans under management flat at $11.49 billion
  • Consolidated assets of $13.42 billion, down 2.4 per cent for the half-year
  • 8,248 additional CUA banking members, taking total members to 461,370

Key achievements for 1H-FY18:

  • CUA joins a group of leading banking providers from around the globe in a new collaboration, as the exclusive Australia and New Zealand partner of international banking innovator Pivotus Ventures.
  • CUA begins trialling the first innovation to come out of the Pivotus Ventures collaboration - an Australian first instant messaging app called iM CUA, which connects new or existing members with their own personal banker through their smart phone.
  • CUA launches a trial of Australia Post’s new digital identity verification service Digital iD™, after being the first Australian banking provider to sign up to trial the platform.
  • CUA launches eftpos on Android Pay (now known as Google Pay) in November 2017, giving CUA rediCARD holders access to their own money in real-time via a digital wallet. (CUA has since also rolled out eftpos for Apple Pay in February 2018.)
  • The new Advance Variable Home Loan launches in market in August 2017 for
    new-to-CUA owner-occupier loans repaying Principal and Interest.
  • CUA expands its choice of channels for home loan borrowers, joining the uno Home Loans panel and online mortgage finance platform LoanDolphin.
  • CUA enters the second year of its partnership with the Queensland Cricket Association and Brisbane Heat. CUA also repeats its support of the Ponting Foundation with donations made to the childhood cancer charity for every ‘6’ hit by the Brisbane Heat during BBL07 and WBBL03, raising a total of $84,500.
  • CUA supports the Women’s Legal Service Queensland to launch the Penda App, Australia’s first financial empowerment mobile app for women experiencing domestic and family violence.
  • CUA hosts Treasurer Scott Morrison at CUA Burwood branch in November 2017, where he announced that the Federal Government will give mutuals improved access to capital by adopting all 11 recommendations of the inquiry into Reforms for Cooperatives, Mutuals and Member-owned Firms, conducted by Greg Hammond OAM.