Customer-owned banks can provide service for home loan borrowers at levels beyond their relative financial footprint, according to a study by KPMG.

The KPMG study, which was commissioned by the Customer Owned Banking Association (COBA), explored the contribution of customer-owned banks in local communities and national economy and highlighted their role in helping Australians achieve homeownership.

According to the study, customer-owned banks provide better service and pricing for mortgage borrowers, such as a significant lending rate subsidy to members.

Based on estimates, the subsidy equates to a 0.3% discount to the market interest rates. For a $500,000 mortgage, this discount shaves off $1,500 in interest annually.

Customer-owned banks represent a market share of over 5.5%, which is above-system growth.

Compared to other authorised deposit-taking institutions, customer-owned banks have a higher share of lending to owner-occupiers at 77% (versus 67%) and first-home buyers at 20% (16.5%).

“The sector has a deep heritage in and ongoing focus on mortgage lending, and it has a significant role helping Australians own the home they live in,” the report said.

Overall, of the $120.9bn worth of total lending customer-owned banks recorded for FY22, $112.7bn was for mortgage lending.

The report said customer-owned banks also punch above their weight outside the home loan market.

In fact, they are considered the primary financial institution of more than 10% of the adult population.

The sector was able to maintain a strong branch network, operating 720 branches that account for 18% of the total bank branches nationwide. More than a fifth of branches in regional areas are customer-owned banks.

When juxtaposed with the fact that the sector is only holding 3.5% of total bank assets, the strong branch network reflects customer-owned bank’s significant investment in in-person bank services.

Overall, the customer-owned banking sector contributes $2bn to the country’s economic output, considering the wages, profits, and taxes in the sector.

COBA CEO Michael Lawrence said the results of the study quantifies the impact of customer-owned banks.

“These findings provide strong empirical evidence of the extent to which our members put people before profits. Our sector has a large and growing footprint in Australia, as customers realise the benefits of banking with purpose.”


Photo by @enrykun on Canva.