Hello, I’m Peter Russell and I'm responsible for our Mutuals sector, and I’m joined today by Claire Gilmartin the Manager responsible for the sector. Today we’re going to be talking about the results of the 2013 Mutuals survey.
The sector remains very well capitalised with capital levels greater than 17 percent, with over 14 Mutuals with capital greater than 20 percent, net assets grew by a touch over 6 percent. The key risks that the sector is facing include risk management as well as technology.
In relation to risk management, given the increasing property prices it means the sector needs to remain vigilant over the assessment of credit quality for residential lending, as well as understanding the systemic risk associated with this area. In relation to technology, in 2014 it is expected that 79 percent of Mutuals will spend more on technology and 34 percent will spend significantly more. In relation to social media, YouTube and Facebook remain the key areas that are being utilised by the sector.
Brand innovation presents a significant opportunity for the sector. Forty-two percent of respondents believe that the increase in mobile banking will drive down the relevance of the branch. Some Mutuals have multiple presences in the same areas which is presenting cost leakages.
Branch rationalisation and branch sharing arrangements are opportunities to be explored by the sector. In addition, cost management remains a key challenge for the sector with a 4.9 percent increase in operating costs during the year. This is also the result of the increase in the regulatory requirements which places significant pressure on resources particular for the smaller ADIs. Product diversification is key to future growth in the sector. E-conveyancing will force change in the sector, the major banks have already commenced implementation.
The Mutuals will need to act quickly to respond to the pace of this disruptive innovation. Mergers and acquisitions have continued during the year; shared service centres, shared back offices, shared processing are all areas we expect to see more of in the next years. There is a significant appetite for collaboration across the industry, with 90 percent expecting to see less than 80 Mutuals within a 5 year period.<
Customer satisfaction ratings for the Mutuals have always been high. The key challenge is converting high customer satisfaction into increased product penetration with the membership base. We see the investments in technology in 2013 providing a very successful platform to achieve greater product penetration.
Building momentum in the youth market is a key focus. Ninety percent of the Mutuals are targeting Gen Y, with only 35 percent of you experiencing success. Creative thinking is essential to driving growth in this space. Investment in the youth market is vital to the future of the Mutuals sector. With the right strategy, the Mutuals have the capabilities to penetrate the youth market effectively.
Overall, 2013 was a very successful year for the Mutuals sector. We see 2013 as the baseline for growth into 2014 and beyond.