The last year has seen Savings & Loans experience some of the most difficult market conditions in our 60 years of operation. Disruption in the financial services industry and instability in the wider economy has impacted the Credit Union’s operations, but sound management has ensured we remain in a good financial position.
Savings & Loans has recorded an underlying of profit of $11.9 million over the year, down $2.5 million on our 2007/08 results. We incurred a number of one-off expenses during the year, including hedging costs which were not passed on to members and the costs of our merger with Melbourne-based Austral Credit Union. We also received a $1.8 million special dividend payment from Cuscal, a service aggregator of which Savings & Loans is a part owner. The dividend was to redistribute part of the proceeds Cuscal received from the change in shareholding structure of VISA. Our overall profit before tax for the 2008/09 year was $6.7 million.
The Credit Union’s stability and strength is evident in the growth of our cash reserves by $20 million to $161 million and our strong capital adequacy ratio of 11.44%. The increase in reserves is similar to that experienced in 2007/08.
Savings & Loans’ vision is to be the best member-owned financial institution for everyday Australians. This year, our major consideration was to ensure that we continued as a strong and viable financial institution, so we can meet our members’ needs into the future.
The events of the past year have challenged the organisation and the Board has faced some tough decisions. Throughout the year, the focus has been on securing the future of the Credit Union for its members.
Changes in the wider economy impacted on Savings & Loans’ performance during the year as demand for home and personal lending weakened. At the same time, funding costs increased.
Our reduced profit indicates that many of these costs were absorbed by the Credit Union, although we had to pass on some of these costs on to our members.
The Federal Government’s Deposit Guarantee Scheme, which began in October 2008, has guaranteed all deposits with Savings & Loans up to $1 million. This scheme will run until at least October 2011 and applies to all Authorised Deposit-taking Institutions (ADIs), including credit unions, mutual building societies and banks.
While members’ deposits with Savings & Loans have always been safe, the guarantee ensures that all deposits will be repaid in the unlikely event that any financial institution faces stress. The fact that the guarantee applies to all ADIs is an indicator of the strength and stability of the credit union sector and the wider Australian financial services industry.
Savings & Loans’ merger with Austral Credit Union was completed during November 2008, bringing 15,000 members, mainly based in Victoria, across to Savings & Loans. The merger supports our growth strategy within Victoria and led to the opening of our first branch in Melbourne’s central business district at the end of 2008.
Bringing the two credit unions together has provided former Austral members with access to a wider range of products and a larger branch network, while existing members are benefiting from increased economies of scale.
Though outside of the reporting period, Savings & Loans is also involved in a much larger merger – the planned union with Australian Central Credit Union. The proposed merger has the full support of both Australian Central and Savings & Loans, and it promises to deliver substantial benefits to members.
This is a merger of equals, with both credit unions committed to providing exceptional value to members and creating a strong alternative to the major banks. As member-owned financial institutions, our members will have the final say in any merger through a vote to be held in November.
The merger will cement our position as Australia’s second-largest credit union and allow us to provide better value for members through our increased size and efficiencies.
Given the current financial and economic climate, 2009/10 will see our growth rate drop slightly on previous years as we consolidate our position. At the same time, we are preparing for the inevitable upturn in the economy to ensure we’re in a position to take advantage of any opportunities.
Our partnership with NRMA Motoring & Services continues to deliver strong results, and this year we agreed to extend our involvement in NRMA Car Loans. This partnership is a great example of two member-owned groups working together to deliver benefits for everyone involved.
Savings & Loans joined the other Australian credit unions and mutual building societies to adopt the Mutual Banking Code of Practice during the year. The code outlines our obligations as a mutual financial institution and our members’ rights as both customers and owners.
The code will not mean any real changes in Savings & Loans’ operations or the way we interact with members, but it does formalise what members can expect from us.
Savings & Loans celebrated our 60th anniversary in April 2009, marking another milestone in our proud history. The Credit Union has changed considerably over this time, moving from a member base of 94 and operating from the Public Service Association office in Adelaide to an organisation that now has more than 190,000 members and 34 branches across the country.
And now, we are proposing the biggest change in Savings & Loans’ history, with a possible merger with Australian Central Credit Union. The merger, which has the full support of both credit unions’ boards, will let us create an even stronger alternative to the major banks and give us opportunities to show more people the benefits credit unions offer.
The community support and member focus of both Savings & Loans and Australian Central will be the cornerstones of the new credit union. I urge all members to participate and voice their views about the merger during the voting process in November.
Greg Connor, Savings & Loans’ Chief Executive Officer, will not be part of the new credit union and I would like to thank him for the dedication he has shown to our members over the last nine years. Greg has been a key to Savings & Loans’ success over the last decade and we wish him all the best for the future.
All of Savings & Loans’ staff are to be commended for their continued dedication to the Credit Union over the last 12 months. Their hard work and commitment to our values has helped Savings & Loans continue to deliver benefits to members during difficult economic times.
I look forward to the opportunities that the proposed merger will bring to Savings & Loans and assure you that our members will remain our first priority.
Bill Cossey Chairperson.