Banking industry facing trust deficit across the board
Customer-owned banks have once again emerged the most trusted banks in Australia.
Based on Roy Morgan’s Risk Monitor survey of over 25,000 customers, COBs – including mutuals, credit unions, and building societies – earned the highest Net Trust Score in the banking sector for the second year running.
The data was crunched by the Customer Owned Banking Association (COBA), whose chief executive Michael Lawerence drew attention to the COBs’ “profit-for-purpose” ethos.
“Trust is something that is earned, and customer-owned banks’ people-first approach translates to competitive rates, innovative products, superior services, and a strong commitment to local communities,” Lawrence said.
“We’re owned by our customers, which means our purpose is to create long-term value for them and their communities. Unlike listed banks, financial performance is not our purpose – it enables our purpose.”
Being ranked as the most-trustworthy banks is not the biggest compliment in fairness. Roy Morgan data shows the banking industry as a whole is the 24th-most-trusted sector out of 27 polled industries.
But the results do highlight the growing trust divide between mutuals and traditional lenders – as a sub-industry, COBs ranked 7th on the table.
Still a niche segment
Despite winning on the trust front, COBs remain a small fragment of the mortgage lending market.
As of March 2023, mutuals comprised approximately 5.5% of the market. While more recent data is not readily available, KPMG’s Mutuals Industry Review 2024 showed a 7.88% year-on-year growth in total lending.
Nonetheless, COBs stand their ground in the hotly competitive mortgage market, with brokers regularly turning to them for specific deals.
Mortgage broker Gemma Piscioneri (pictured), of Perth-based brokerage G&T Finance, concurred with the Roy Morgan findings.
“Customer-owned banks are now equally matched with the majors in the areas that matter most to clients – product range, competitive rates, and everyday banking services,” she told MPA.
Piscioneri, who is in a good position to comment having previously worked as head of retail distribution at P&N Bank, continued: “Where they really stand out is in how they deliver it. As a broker, I see first-hand how these banks create a warmer, more human experience.
“When challenges arise, we’re not up against a wall of technology-based process – we’re dealing with real people who are solution-focused and genuinely want to help. That’s where trust is built.”
From Piscioneri’s experience, big lenders erode trust “when the only option feels like is to escalate, keep pushing or leave… Customer-owned banks work with us to make it happen for clients and they prioritise our relationship”.
Culture and connections
Executives from leading mutuals touted the operational and cultural differences inherent in the mutual banking sector.
Maria-Ann Camilleri, chief customer officer at People First Bank, said consistent action, rather than marketing, is what builds long-term trust. “Trust grows when customers see that your intentions are genuine – and that you follow through,” she said.
Great Southern Bank deputy chief executive Megan Keleher made the point that COBs are not beholden to institutional shareholders.
“Simply put - that means no shareholders, allowing our profits to go into creating new and clever ways to help customers manage their money,” said Keleher. “When we generate profits, they don't flow through the tension of shareholder dividends. Instead, our profits are reinvested back into the bank, allowing us to offer competitive rates, enhance our services, and support our communities.
“This cycle works to create tangible benefits for our customer-owners, particularly in their journey toward homeownership.”
David Marshall, chief executive of Beyond Bank Australia, stressed the role of community connection.
“Beyond Bank, now one of Australia’s largest customer-owned banks, was founded more than 60 years ago by people looking for a way to help others and many decades later, we remain mindful of this commitment to our customers,” Marshall said. “It guides all of our decision making, ensuring everything we do is in the best interests of our customers – because they are our owners.”
Mutual trends
In 2024, mutual banks delivered a mixed performance amid a complex economic landscape. While overall operating profit remained flat, both lending and deposit growth exceeded the previous year.
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Net interest margins improved on the back of sustained high interest rates, though rising cost-to-income ratios signalled pressure on operational efficiency.
Consolidation remained a dominant theme in the previous year, with newly merged People First Bank and Newcastle Greater Mutual Group emerging as the sector’s largest players.
Following decades of consolidation, the number of mutual banks in Australia has reduced from multiple hundreds to less than 60.
