Chalk and Cheese

The proposed merger between Australian Central (ACCU) and Savings & Loans (S&L) credit unions has the perfect blend of localised customer base, but a large disparity in business models.

ACCU recently adopted a business model to operate more like a small bank, building alternate revenue streams in mortgage broking and mortgage management, which historically had not been a focus for mutuals.

The business model for the new credit union entity has not yet been finalised, and will be subject of discussion for the new board to choose the appropriate strategic direction moving forward, according to Peter Evers, chief executive officer of ACCU, who will remain in charge at the merged entity.

The merger of two South Australian credit unions will heavily skew the customer base, increasing risk if this state underperforms the national average, although Evers has a medium term strategic plan to help combat this, including a continued focus on Northern Territory and Victorian growth.

The potential new entity will place a higher emphasis on retail deposits according to Evers, which is still very difficult in the highly price competitive environment, with some wholesale funding lines in place with third party providers.

ACCU in the past had been heavily reliant on the securitisation of residential mortgages for growth, with the mutual recently receiving a cornerstone investment from the Australian Office of Financial Management (AOFM), with the funding strategy now changing for the merged entity.

Greg Connor, chief executive officer for Savings & Loans and a ten year veteran of mutual employment, will continue in the short term to help with the merger integration, and then leave to pursue other financial services opportunities.