VIENNA, Austria–During a session at WOCCU’s World CU Conference titled “Growth Strategies in an Ever-Evolving Environment: An International Perspective,” here’s how Dave Taylor of G&C Mutual Bank in Australia said his organization has approached growth.
Taylor, who is CEO of the organization, said that when talking about growth it’s important to have some clarity. The real question, he said, should be, “What will constitute profitable growth?”
“And I want to clarify what that means for us as we draw a distinction as mutuals,” he told the WOCCU meeting. “Unfortunately, the regulatory structure is such that we have to play by the same rules (as non-mutuals) and we must have a view through the lens of, ‘Will what we do be sufficiently profitable to self-capitalize the assets we bring onto the balance sheet?’”
Many mutuals and credit union in Australia have not successfully answered that question, he said, noting the country at one point had more than 800 credit unions and mutual banks; today, it has about 70.
To find the right growth mix, G&C Mutual Bank has partnered with a fintech called SocietyOne. That company is a P2P lender similar to Lending Club in the U.S.
“We spent a lot of time looking at other initiatives we could do ourselves, but for a range of reasons we found that, in particular with our personal lines, they were not generating the right return or growth,” said Taylor. “We started to work with SocietyOne two years ago. They are really Australia’s P2P lender. Increasingly, they have started to structure partnerships. In some ways, we saw it as a natural partnership, as we do after all quietly refer to ourselves as the original P2P lenders. And here was a new company with some pretty smart technology and levels of growth that we couldn’t achieve. So, we decided to see if we could work together.”
The mutual bank’s objectives, said Taylor were fivefold:
- Re-balance portfolio mix
- Diversify exposures by region, employer, and age. “Their age penetration was at the opposite end of (our) spectrum”
- Earn sufficient yield
- Leverage relationship for further growth
- Build a sustainable partnership
Taylor showed a trend line indicating a 20-year decline in the personal loans to total loans ratio at G&C Mutual Bank. Personal loans now make up about 11% of its balance sheet, after rebounding from a low of 6%.
The average yield on personal loans that come through the G&C channels is 10.37%, compared with,10.3% on loans through the SocietyOne channel. “And, obviously, there is not as much cost embedded in way we originate those loans via SocietyOne,” said Taylor.
The average exposure on personal loans through the G&C Channel is $17,451, compared with $2,159 through the SocietyOne Channel.
The number of loans generated through the G&C channel over the last 12 months has been 822, versus the 6,891 personal loans that have come via the SocietyOne channel.
As part of the partnership G&C Mutual Bank and three other Australian mutuals took a small shareholding in SocietyOne so that they now own about 10%. “We did that to assume we remained at their core as they built their model,” said Taylor.
He added the credit union is seeing far more diverse borrowers coming through the SocietyOne channel, especially geographically.
Asked whether those borrowers are taking other products, Taylor said the CU was so overwhelmed initially by response to credit cards that it has become a work in progress on how to manage the additional member contact.
Taylor said G&C Mutual has also done a merger with Quay Credit Union that was successful and that it would be interested in doing additional combinations. The Quay brand has been retained following the merger.