People First Bank throws down gauntlet to big four banks

Australia’s largest mutual lender is throwing down the gauntlet to the big four banks, promising a new era of competition as it targets 1 million members.

Heritage and People's Choice chairman Michael Cameron and CEO Peter Lock

The head of Australia’s largest mutual lender is throwing down the gauntlet to the big four banks, promising a more aggressive customer acquisition strategy and more acquisitions in order to build the scale needed to keep up with critical investments in artificial intelligence and digital technologies.

A year since the merger of People’s Choice Credit Union and Heritage Bank, the merged group’s chief executive Peter Lock is overseeing the rollout of a new brand - People First Bank - before handing over the reins to Steve Laidlaw, who previously ran the People’s Choice business out of Adelaide.

Mr Lock, who headed up Heritage Bank for seven years before the merger last March, said the ambition was to create a “new iconic national mutual” that would compete head on with the dominant big four banks.

People First is Australia’s largest customer-owned lender, with 740,000 members and $24.6bn in assets.

Mr Lock said the goal was to reach 1 million members by 2030, as the organisation looked to scale up and provided a “counterbalance” to the big four banks.

“To go from 740,000 to a million, it can’t all be done organically - some of that has got to be done by merger and acquisition,” he said.

“There is going to be consolidation within the sector - there simply has to be because of the increased cost of digitisation, and the investment required in technology to have contemporary, modern and secure products. There’s an enormous amount of capital investment that’s required.

“Scale is an obvious answer to that, and you saw that argument being proffered by Suncorp with their sale to ANZ. It’s the same argument in the customer sector.”

With Heritage Bank’s roots in Queensland and People’s Choice’s footprint extending from South Australia into Northern Territory, Mr Lock said there were opportunities for the merged company to expand more aggressively into NSW, Victoria and Western Australia.

People’s First will release its first half-year results since the merger on Monday, reporting a net profit after tax of $31m in the six months to December.

Residential loans were up 3 per cent over the period to $18.9bn, contributing to a 2.7 per cent increase in total loans and advances to $19.6bn, and a 5.3 per cent increase in total assets to $24.6bn. Retail deposits rose by 5.2 per cent to $18.3bn, while the group increased net membership by 13,586 in what it described as “an extremely competitive operating environment”.

People First Bank CEO Peter Lock.

Mr Lock said that while higher interest rates and cost of living pressures were yet to cause material delinquencies across the lender’s mortgage book, the impact of the so-called mortgage cliff - where borrowers roll off historically low rates fixed during the pandemic - was yet to fully play out.

“There’s no doubt that there is a tightening of the belt, and we see that in discretionary spending and how we track that, but it has yet to transpire into any negative connotations across the credit health of our book,” he said.

“We see very minute - off a very low base - lift in arrears but it’s nothing that we are concerned about.

“However, the mortgage cliff - our view is that hasn’t fully hit yet. That’s still working its way through so we’re still monitoring that very closely. We’re probably hitting the bulk of that refinance around now - from October, November last year through to March and May is where it starts to hit so its still flowing through.”

People First is phasing out its two distinct retail brands, starting with People’s Choice by the end of this year, followed by the Heritage Bank brand after that.

Sponsorship arrangements are currently being transitioned, including Heritage Bank Stadium on the Gold Coast which has been renamed People First Stadium in time for the upcoming AFL season.

As part of the merger negotiations, People First will continue to operate from two head offices in Adelaide and Toowomba, while Mr Lock will hand over the reins as chief executive to Mr Laidlaw in August following an 18-month transition period.