×

TEXT-S&P Report: Can Australian Mutuals Compete With Bigger Rivals?

(The following was released by the rating agency)

SYDNEY (Standard & Poor's) Oct. 3, 2012--Recent Australian government policy changes for banking included simplifying the ability for customers to switch banks. In Standard & Poor's view, while this is a positive for retail customers, it could disadvantage Australian credit unions, building societies, and mutual banks ("mutuals") that are not well placed to lead the evolution of financial products and services.

These financial institutions will need to be fast followers on all competitive fronts to avert losing customers to better-resourced large banks.

In a new report titled "How A Changed Competitive Environment Affects Australian Banking Mutuals' Niche Business Advantage," Standard & Poor's credit analyst Harry Hu looks at how the Australian major banks' strategies to capture more term deposits have resulted in a sustained squeeze on mutuals' interest margins.

"The major banks' increased focus on retail deposit funding has resulted in greater service competition, with larger players recently rolling out more convenient and efficient payment solutions than what the mutuals generally are providing at the moment," says Mr. Hu. "While some larger mutuals have made considerable investments in upgrading core banking systems and payment-service technologies--including the introduction of mobile banking and "electronic wallets", service linkages with social media, and real-time transaction services--the traditional niche business advantage of Australian banking mutuals is being diluted by greater service competition, with larger players recently rolling out more convenient and efficient payment solutions."

"How mutuals respond to these challenges can have long-term implications on their competitiveness and business positions," says Mr. Hu in the report.

"How A Changed Competitive Environment Affects Australian Banking Mutuals' Niche Business Advantage" is available to subscriber of RatingsDirect via . Members of the media may contact Richard Noonan for a copy.

Keywords: MARKETS RATINGS AUSTRALIANMUTUALS