CUA committed to long-term focus on delivering member benefits
Australia’s largest credit union, CUA, has unveiled record member growth and a solid first-half financial result, as the mutual continues to invest in innovation and member initiatives to deliver long-term growth and improved member outcomes.
Although CUA had faced a challenging external operating environment during 1H19, CEO Rob Goudswaard said the lower $23.07 million Net Profit after Tax (NPAT) for the CUA Group aligned to the mutual’s long-term focus on members and growth.
“Our member-owned structure means we are committed to generating sustainable profits that allow us to invest in the initiatives that lay a foundation for future growth and the long-term benefit of members, rather than maximising short term gains,” Mr Goudswaard said.
“In the first-half, this included the delivery of an Australian first innovation in how members interact with CUA via digital channels, the continued rollout of faster payments using the New Payments Platform (NPP) and a second Community Hub branch that brings banking and a shared space for community use together under one roof.”
Highlights for the half included:
- Just under 17,000 additional banking members, more than double the net member growth for the same time last year;
- A standout period for lending, with loans under management growing to $13.26 billion, an increase of $0.96 billion for the half, representing growth of three times the system rate;
- New lending of $2.29 billion was almost 79 per cent higher than the $1.28 billion issued for the same period last year.
CUA Chief Executive Officer Rob Goudswaard said the result was a clear vote in favour of a modern member-owned organisation and reflected the changing financial services climate.
“In the context of the Royal Commission and the cultural behaviors it highlighted, Australians are clearly looking for an alternative that empowers them by placing the control of their finances back in their hands. CUA is owned by our members, not shareholders, so we put the interests of our members at the heart of everything we do,” Mr Goudswaard said.
Challenging external environment
CUA Group NPAT was down on the same time last year, primarily as a result of elevated wholesale funding costs which were largely absorbed by CUA for the benefit of members, prolonged volatility in the investment and equity markets which impacted the CUA Health result, and heightened market competition on interest rates particularly for new lending.
CUA also recorded higher operating costs, driven by wage inflation and the investment in building capacity in CUA’s workforce to deliver on its 2023 strategy for the benefit of members. In particular, CUA strengthened its leadership team with the appointment of a new Chief Marketing Officer and Chief Technology Officer.
Mr Goudswaard said it was a sustainable result, aligned to CUA’s strategy to continue investing in members and delivering them a simple, competitive and effortless banking experience.
Investing in foundations for growth
Following a successful pilot program in FY18, CUA rolled out its messaging app iM CUA to members during November-December. The app - the first in Australia to enable members to choose a dedicated personal banker - is the first initiative delivered from CUA’s international collaboration with leading banking providers including US West Coast bank Umpqua and the Netherland’s de Volksbank. iM CUA is a key aspect of CUA’s focus on delivering technology with a human touch and member demand has been strong, with close to 10,000 users in its first few months.
Meanwhile, the integration of NPP fast payments into CUA’s Mobile Banking app in December resulted in a 220 per cent increase in total NPP payments made over the previous month. 75 per cent of all NPP payments in December were made from the Mobile Banking app.
“We take great pride in being an early adopter of banking innovations like Apple Pay, Google Pay and the NPP. Our members have embraced these technologies as a way to access their money and conduct their banking at a time and place that suits them,” Mr Goudswaard said.
CUA also continued to invest in modernising its branch experience, reflecting the changing needs of members and their communities.
“For many of our members, branches remain an important channel in building the personalised relationship, service and trust that is core to our identity and heritage as a credit union.
“With Australian and international banking trends shifting to digital, CUA has taken an innovative approach to its physical branch presence, incorporating space for community use in what we consider to be the branch of the future.”
Following the launch of the first Community Hub branch in Toowoomba in June 2017, CUA opened its second Community Hub in October 2018, in Brisbane’s growing North Lakes region.
Investment in strengthening CUA’s positive culture
Culture remains a key strength for CUA, has and is an area where there has been considerable investment since 2015, pre-dating any measures resulting from the Financial Services Royal Commission.
“Our investment in culture supports a commitment from our Board to the front line to entrench behaviour that provides the best possible experience for our members,” Mr Goudswaard said.
“The focus on culture and providing a good member experience to build trust and advocacy from members is reflected in CUA’s strong Net Promoter Score (NPS) of 36.5, placing CUA 5th overall amongst financial institutions in Australia.
CUA’s banking operations (ADI)
Underlying performance for CUA’s banking business was boosted by record member growth for the half, with a net increase of 16,996 CUA banking members taking total members to 490,126 at 31 December 2018. This member growth was achieved as the business faced the external headwinds of elevated wholesale funding costs and margin pressure in the competitive lending market. These external factors contributed to a fall in first-half NPAT to $30.08 million, down 3.6 per cent from 1H18.
New lending of $2.29 billion for the six months to 31 December was up 78.9 per cent on the period in FY18 and saw CUA achieve lending growth of three times the system rate. The Spring home loan campaign delivered considerable lending momentum, particularly lending to owner-occupiers and those with lower Loan to Value ratios. The strong lending growth will have a positive impact on net interest income in subsequent periods.
In addition to strong credit growth, retail deposits also grew to finish the half at $9.73 billion, up 5.5 per cent for the six months.
“While strong growth in lending and deposits is positive, it does have a ripple effect in terms of increasing operational costs, Mr Goudswaard said.
“The strong lending growth, particularly in Q1, outpaced retail deposit growth, increasing our reliance on more expensive wholesale funding sources. We don’t anticipate the pressures of the external operating environment will abate, particularly with the anticipated rise in the cost of regulation and compliance.”
Mr Goudswaard also reiterated the importance of improved access to capital, for both CUA and the broader mutual sector, following the introduction of the Treasury Laws Amendment Bill to the Federal Senate last month.
“The flexibility to raise capital when strategic opportunities arise will enable us to future-proof and grow our business, rather than relying solely on retained earnings,” he said.
Volatility in the investment and equity markets contributed to a difficult 1H19 for CUA Health. After particularly strong performance in investment funds drove a record first-half profit for CUA Health in 1H18, the health business posted a fall in NPAT for the current period to $2.73 million.
CUA Health achieved a strong retention rate of 89 per cent and member growth. Its focus on members saw CUA Health awarded the 2019 Product Review Health Insurance Fund of the Year, as voted by members.
Mr Goudswaard noted CUA Health had now delivered $2 million in savings to members, since introducing a 4 per cent loyalty discount for members with CUA banking and health insurance.
CUA Health insured 75,235 Australians as at 31 December 2018. Premium revenue for the period was $71.73 million, with $60.71 million returned as benefits for policy holders, or around 84.6 cents in the dollar.
Credicorp Insurance posted a half-year NPAT of $0.57 million, up 1.8 per cent from the
1H18 result, with the subsidiary now providing insurance to 12,193 Australians.
CUA is Australia’s largest credit union, contributing to the financial wellbeing of around 530,000 Australians through our banking, insurance and health insurance offers. As a mutual, we were created by members for members and we care for them through the changes and challenges in their lives. Our growth and success enable us to reinvest in our business, deepen our relationships with members and build stronger communities. Visit www.cua.com.au
HIGHLIGHTS FOR 1H19
Financial & member highlights for half-year ended 31 December 2018:
- CUA Group consolidated Net Profit after Tax (NPAT) of $23.07 million. The result is down by 19.8 per cent on the prior first-half result, reflecting the challenging external environment.
- Retail deposits up 5.5 per cent for the period to a record $9.73 billion.
- $2.29 billion in new loans settled during the six-month period, up 78.9 per cent on the previous corresponding period.
- Loans under management reached $13.26 billion, up 7.8 per cent for the period.
- Consolidated assets closed at $15.41 billion, up 7.6 per cent for the half-year.
- CUA recorded net member growth of 16,996 additional CUA banking members, taking total members to a record 490,126.
Key achievements for 1H19:
- CUA rolls out instant messaging app iM CUA to Apple and Android users in November/ December 2018, following a successful pilot. The app is the first in Australia to allow members to choose their own personal banker and is the first innovation from an international collaboration with US bank Umpqua and Dutch bank de Volksbank.
- CUA introduces NPP fast payments into the CUA Mobile Banking app, after being one of the first banking providers in Australia to adopt the NPP earlier in the year.
- CUA opens its second Community Hub style branch in the growing Brisbane suburb of North Lakes. $10,000 in grants were awarded to local charities and community groups to celebrate the branch opening.
- CEO Rob Goudswaard is awarded CEO Magazine’s Financial Services Executive of the Year.
- CANSTAR recognises CUA as the 2018 Customer Owned Institution of the Year for savings.
- CUA Health is awarded the 2019 Product Review award for best health insurer, with a 4.5-star rating, earned through independent consumer reviews.
- CUA continues to partner with the Queensland Cricket Association and Brisbane Heat men’s and women’s cricket teams, including increasing its support of the women’s team as their Principal Partner. CUA also continues to partner with AFL club Carlton FC, to help increase CUA’s brand awareness in the growing Victorian market.
- CUA team members perform nearly 500 days of volunteering with charities and community groups across Australia, over the six-month period.