It could create one of Australia's largest customer-owned banks
The proposed merger would create one of Australia’s biggest member-owned banks, with around 720,000 members, $22.8bn in combined total consolidated assets, along with 1,900 combined mutual employees, the customer-owned bank said.
Heritage Bank has provided its members with a notice of meeting, and a member information booklet, to be distributed over the coming days. The member vote is to take place on Wednesday, November 16, in Toowoomba, Queensland.
In a statement released on October 13, Heritage Bank CEO Peter Lock (pictured above) described the merger with People’s Choice Credit Union as being in “the best interests of our members”, and the future of the bank.
As a mutual owned by members, People’s Choice Credit Union shares the same values and culture, making them “the perfect fit”, Lock said.
“We’ll gain the added strength needed to deliver more for our members, while staying true to our values and our people-first approach,” Lock said.
Within the member information booklet, to be distributed to members ahead of the voting date, Lock said it was becoming increasingly challenging for smaller financial firms to remain competitive within the Australian banking sector.
Lock referred to costs associated with technology and compliance, which he said placed a “particular burden” on smaller institutions. Since 2005, a series of mergers had seen the number of mutual financial institutions fall from over 170 to less than 65, he said.
“We believe the scale achieved through the merger will provide the foundations for the continuing strength and sustainability of the mutual banking sector,” Lock said.
Lock said there were no plans to reduce services or to shut any branches, and that the merger would support an increase in the bank’s customer offering.
The member information booklet outlines a summary of reasons for members to approve the merger, along with reasons to vote against it.
Among the reasons outlined by Heritage Bank to vote “yes” include securing the customer-owned bank’s future and ongoing success, employee and community benefits, and the creation of a member-owned national competitor to the big banks.
Among the reasons provided to vote “no” are that the merger may result in a loss of opportunity to explore an alternative corporate transaction, that anticipated benefits may not be realised, and that a combined mutual would have greater exposure to liabilities.
The merger would result in certain changes to members rights, the customer-owned bank said in the member information booklet. It would also impact the rights of a limited number of its members under the government’s financial claims scheme.
Members holding amounts on deposit with both Heritage Bank and People’s Choice of greater than $250,000 would lose the benefit of having two separate $250,000 guarantees.
“While member rights and obligations under the combined mutual will be materially similar to your rights and obligations under the Heritage constitution, there will be certain limited differences,” Heritage Bank said in the member information booklet.
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Under the combined mutual constitution, customers (except those who cannot legally hold combined mutual shares and other ADIs) are required to subscribe for a member share at a subscription price of $2 per share.
Membership rules require the full subscription price for the member share to be paid in cash, (or partly or wholly at the discretion of the board in the form of an obligation to pay in cash).
Lock would be appointed as the CEO of the combined mutual for 18 months following the merger date, and current People’s Choice CEO Steve Laidlaw would be appointed deputy CEO.
At the end of the 18-month period, Lock would retire, and Laidlaw would be appointed CEO.
Heritage constitution and transfer rules require at least 75% of the total number of votes cast by Heritage members at the general meeting, and at least 75% of the total number of votes cast by qualified members, for the merger resolution to be passed.
Heritage Bank encouraged members to appoint a “proxy” (a person appointed to vote on their behalf) in advance of the general meeting. The proxy is not required to be a Heritage member, and, for example, they can be the chair of the general meeting, the bank said.
Founded in 1875, Heritage Bank’s head office is in Toowoomba, with locations in NSW and Queensland. The customer-owned bank has 62 branches/lending advice centres, 330,000 members 1,000 employees, and contributes $7.2m annually to the community.
People’s Choice Credit Union was founded in 1949. Its head office in Adelaide, and is in South Australia, Northern Territory and Victoria. It has 390,000 members, 33 branches/lending advice centres and employs 900 people. Its annual community contribution is reported as $2.6m.
As outlined in the member information booklet, the combined mutual would have 95 branches/lending advice centres, and total assets of $22.8bn. It would contribute a minimum of $50m over five years.