CUA reports strong FY2012 financial performance

13/09/2012

Financial highlights

• Reportable NPAT of $51.0 million, down 6.1% year-on-year
• Underlying NPAT increased to a record $48.1 million, from $46.2 million
• Total assets under management increased by 4.7% to a record $9.4 billion
• Retail deposits increased by 9.4%, from $6.1 billion to $6.6 billion
• Loan portfolio grew by $286.2 million to over $8 billion, up 3.7%
• Loans settled were down $356 million to $1.523 billion
• Net annual interest revenue of $188.0 million, up 8.5%
• Increased capital adequacy ratio to 14.71%

Credit Union Australia Ltd (“CUA”), Australia’s largest customer-owned financial institution, has today announced a record underlying net profit after tax (NPAT) of $48.1 million for the financial year to 30 June 2012, up 4.1% from 46.2 million.

Reportable net profit after tax (NPAT) of $51.0 million for the financial year to 30 June 2012, was down 6.1% year-on-year. This is due to lower mark-to-market profits on CUA’s interest rate swaps of $1.8 million compared to $6.1 million last year. CUA holds these swaps to maturity and therefore the mark-to-market profits and losses net off over the life of the instrument to unwind to a net zero position.

CUA delivered net annual interest revenue of $188.0 million, an increase of 8.7% year-on-year, and total assets under management grew to a record $9.4 billion, up 4.7%.

Total retail deposits grew by 9.4% to $6.6 billion with CUA increasing its capital adequacy ratio to 14.71%. While the total number of loans settled was down $356 million to $1.523 billion due to broader changes in current market lending growth, the overall loan portfolio grew by $256.2 million to over $8 billion.

CUA Chief Executive Officer, Chris Whitehead, said CUA has reported a strong financial performance achieved in a period of significant ongoing investment into the business, challenging economic conditions, slow housing growth and intense competition.

“While CUA remains in a period of investment into key areas of the business, including the new core banking system, we continue to grow and defend our market position, particularly with respect to retail deposits and assets under management. Our strong financial performance reinforces our long-term objective to invest in areas where we have core strengths and become a formidable and compelling competitor to the mainstream banks.

“Over the last year, a key focus for us has been to transform the experience that our customers receive and invest in new ways to better service them by upgrading our systems, processes, people and products.”

Mr Whitehead said that in recent months CUA has enjoyed month-on-month growth in excess of the industry system average, largely due to innovative product offerings and reentering the broker market.

“We have continued to set up the structure, capabilities and direction for our future, to ensure we are in a position to emerge from the current economic conditions with a solid platform for growth.

“Despite our ongoing significant investment into the business and the intense macro economic pressures we face, CUA has continued to grow. Our customer numbers increased to a record 425,233 this year, ensuring we remain the largest mutual in Australia.”

CUA’s FY12 Year in Review

Investment

CUA remains in a period of significant investment in key areas of the business to competitively position the company for future growth, including:

• Continued the implementation phase of its new core banking system to deliver enhanced products and services to customers
• Invested in technologies to enhance digital, online and mobile offerings
• Successfully relocated CUA’s data centre and back-up facilities
• Commenced planning for a new office for Brisbane staff members (scheduled for November 2012)
• Continued to invest in staff, including the sales team and leadership skills; enhanced the productivity of the mobile broker channel; and introduced three-year Enterprise Agreements for employees
• Further investment in human resources with the appointment of new Chief Financial Officer Tony Taylor, Chief Information Officer David Gee and two new independent non-executive directors, Nigel Ampherlaw and Paul Bedbrook
• Restated commitment to Cuscal as CUA’s primary provider of wholesale transactional payments products – providing scope for future innovations in
  payments

Transformation

CUA invested in new ways to better service customers, improve the customer experience and provide easier access to information, including:

• Commenced the transformation of CUA’s branch network to create a unique customer experience, new services and easier access to information, including a spectacular new concept store in Carindale
• Announced consolidation of eight branches in Queensland and Victoria, the majority of which were either inherited from previous mergers, located in areas that were too closely grouped together to provide an efficient branch footprint, or were experiencing declining use
• This branch consolidation will be accompanied by significant investment through the opening of a new concept store in Epping and a comprehensive upgrade and refurbishment of our existing Bundoora branch
• Launched vibrant ‘new-look’ website, enabling CUA to provide customers competitive online services
• Upgraded banking technology with the launch of a new banking app, enabling customers to bank anywhere at anytime
• Innovative use of social media via Facebook
• Expanded mortgage market reach by re-entering the broker channel
• Maintained a differential of at least 50 basis points on CUA’s Standard Variable Home Loan compared with the average of the ‘Big Four’ banks since April 2010
• Launched the CUA Rate Breaker Package – a new bundled home loan product that is one per cent lower than the average advertised Standard Variable Home Loan rate of the Big Four banks

Outlook

CUA remains in a strong financial position to deliver on its strategy, despite significant ongoing investment in the company and the challenging market conditions. Mr Whitehead said CUA will continue to invest in parts of the business that will transform the experience for customers and staff, and further enhance CUA’s position to be a compelling alternative to the big banks.

“We remain committed to increasing value for our members and improving all the channels, including our branch network, through which we serve our customers. This approach will be significantly supported by the implementation of our new core banking system that will be launched in 2013 and which will enable us to ultimately deliver enhanced products and services to customers.

“It has been a difficult marketplace during the last year for the financial services industry, with intense competition, and we believe there is every sign that this will be repeated during the next year. Despite this, we remain focused on our strategy and achieving on our main objective to be a compelling alternative. We also continue to be interested in pursuing growth via partner alliances and merger opportunities,” Mr Whitehead concluded.