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Member focus and strategic investments drive CUA financial results

couple working on laptop together

CUA today confirmed it had recorded solid asset and member growth, and improved its capital position, in a year which also saw the mutual deliver unprecedented support to members and the community.

  • CUA achieved positive member growth for the year and now provides banking and insurance to more than 568,000 Australians – a net increase of 19,259 people.
  • Consolidated assets were up 2.5 per cent, closing at $16.15 billion.
  • Capital adequacy increased 0.08 per cent to 14.38 per cent.
  • Retail deposits rose 4.7 per cent to a record $11.08 billion.
  • Loans under management increased 1.0 per cent to $13.58 billion.
  • CUA Group posted a consolidated Net Profit after Tax (NPAT) of $37.31 million, down just 1.2 per cent on the prior year.
  • CUA Health contributed favourably to the Group result, with an NPAT of $6.13 million.

Australia’s largest customer-owned banking organisation posted a consolidated Group Net Profit after Tax (NPAT) of $37.31 million for FY20, down just 1.2 per cent on the prior year. It also achieved solid growth in its balance sheet, across both lending and retail deposits, and net growth of more than 19,000 members.

“This year’s results reflect a deliberate focus on member value and sustainable profits, as you would expect in a customer-focused business approaching our 75th year,” CEO Paul Lewis said.

“Our organisational performance has remained positive, in a year marked by tough economic conditions, bushfires and the COVID-19 pandemic. This allowed us to continue to make long-term strategic investments for the benefit of our members. These investments – in our technology, our people and our processes - positioned us well to respond to the COVID-19 pandemic and ensure continuity in services to our members.”

As a mutual, supporting members and the community has been at the forefront in these challenging circumstances. More than 4,000 members benefitted from CUA’s financial assistance packages, with repayments paused on nearly $1 billion in lending. CUA also committed over $180,000 to bushfire relief and recovery efforts.

“We remain in a strong position to continue meeting the evolving needs of our existing members, while investing in the digital capability and scalability needed to introduce even more Australians to the benefits of customer-owned banking in the future,” he said.

CUA Group performance

Mr Lewis said the positive FY20 results had been delivered by growing transactional banking, stabilising margins and pursuing more moderate home lending volumes relative to system.

Consolidated assets closed higher at $16.15 billion, while loans under management increased to $13.58 billion. CUA issued $2.83 billion in new lending for the year, while retail deposits were up 4.7 per cent to $11.08 billion. Net interest income was up 3.3 per cent to $268.24 million. CUA further enhanced its capital position to a particularly strong 14.38 per cent.

Operating costs were up by 6.5 per cent, driven by increasing operational expenses linked to strategic investments in key projects, as well as by increasing regulatory and compliance costs. This was partially offset by downward pressure on wholesale funding costs. Bad debts written off decreased by 26.1 per cent to $6.5 million, reflecting a focus on quality lending and lower volumes of new loans being written.

Mr Lewis said the solid FY20 performance had ensured CUA was positioned to face the economic headwinds expected to persist into FY21.

“Across the finance sector the external environment remains one of record low interest rates and economic uncertainty,” he said.

“Despite these unprecedented challenges, we maintained sustainable profits, managed costs and grew our membership, all of which support our continued investment in improvements that will deliver value for customers today and into the future.”

Improving customer experience

Mr Lewis said throughout FY20, CUA had continued to invest in IT infrastructure to ensure secure, reliable and more seamless experiences for members. This included improvements to mobile and digital banking, a contact centre upgrade that positioned CUA to quickly and easily transition to remote working, enhanced cyber security controls, an investment in Open Banking, and a new home lending system.

“CUA is committed to helping Australians achieve the dream of home ownership and this is reflected in the fact mortgages make up around 95 per cent our lending,” he said.

“In FY20 we’re pleased to have started the transformation of our home lending system which will ultimately deliver faster decision making and a smoother digital journey for our members.

“Our decision to participate in the Australian Government’s First Home Loan Deposit Scheme has also proved a particularly successful way for us to help new generations into home ownership with $244 million in loan applications received by 30 June 2020.”

Mr Lewis said members had benefited from improvements across CUA’s product suite, including streamlined processes for personal loans and credit card applications. The features and benefits of the new Everyday Snap account – part of CUA’s transactional banking focus – have introduced CUA to new generations, with millennials making up half of all account holders. Meanwhile, the Youth eSaver Account is consistently rated as one of the best on the market.

“CUA’s strong customer focus is leading to strong increases in member advocacy,” he said.

“Our overall Net Promoter Score improved significantly and our Australian-based CUA Direct contact centre ended the year with one of the highest satisfaction scores amongst financial services providers nationally.

“This is a credit to our team members and also aligns to a three-year trend of rising culture and engagement scores across our workforce more broadly.”

Supporting members and communities

Mr Lewis said in FY20 CUA continued its tradition of supporting members and communities. CUA set aside an additional $11.6 million in provisions for COVID-19 and natural disaster impacts on the loan book. CUA Health set aside a further $8.1 million in provisions for deferred claims.

“We have approved more than 4,300 applications for financial assistance across the year, the majority of which were related to COVID-19, and we also extended support during the bushfires,” he said.

“Our Financial Assistance Packages included relief for customers with home loans, small businesses, deposits, personal loans and health insurance.”

“Around 95 per cent of home loan customers whose payment pause has expired have now returned to full repayments. This is a very positive sign as an increasing number of members are approaching their six-month reviews in the weeks ahead.”

Mr Lewis said CUA Health also deferred annual premium increases by six months and paused premium payments on almost 500 health policies for customers impacted by COVID-19.

CUA continued its longstanding commitment to supporting its communities, directing more than $1 million in FY20 to tackling socioeconomic challenges exacerbated by COVID-19, including family violence, digital exclusion and financial stress.

This included the launch of CUA’s Connected Future partnership with the Australian Red Cross and social enterprise Infoxchange to build Australians’ digital and financial skills.

CUA also donated more than $180,000 to bushfire disaster relief, including rural fire services in Victoria, NSW and Queensland, and the Red Cross Disaster Relief and Recovery Fund.

CUA Health

CUA Health made a significant contribution to the group result, posting $6.13 million in NPAT for the year. The result was down $1.75 million on the prior year, largely reflecting volatile economic conditions and the decision to defer the annual premium increases from April to October.

“CUA Health bucked the industry trend of declining private health insurance participation rates to post strong growth in new policies and overall member growth,” Mr Lewis said.

Strong demand saw CUA Health issue 6,500 in new policies during the year, down only slightly on the standout 2019 result. The digital channel was the fastest growing for new customers contributing to a 7.5 per cent increase in policies held by under 35s during the year.

CUA Health paid out $126 million in benefits, up 2.2 per cent on the year prior. Premium revenue for the period was up by 3.3 per cent to $148.63 million. More than $3.6 million was returned in savings to policy holders through CUA Health’s 4 per cent loyalty discount for those with both a CUA banking product and CUA Health insurance.

CUA Health also introduced cover for additional services for policy holders with extras cover – including flu vaccines and telehealth consultations across a range of allied health professionals. The insurer continued to invest in its mobile app, which was used to submit more than 33,000 claims throughout the year.

Independent recognition:

  • CUA was the winner of Mozo’s Best large Credit Union award for a third year running.
  • CUA’s Youth eSaver was the winner of Mozo’s Experts Choice Award for Best Pocket Money Saver.
  • CUA’s customer feedback program received a Judges’ Choice Award in the Confirmit 2020 ACE Awards.
  • CUA Health won the 2019 Finder Award for Best Health Insurance (Silver category), and the 2020 Product Review Health Insurance Fund of the Year, as voted by members.
  • The Diversity Council of Australia recognised CUA as one of its Inclusive Employers in 2019-20.