As a member-owned bank, our members are at the heart of everything we do.
In order to remain relevant, sustainable and strong in an environment of increasing competition and to attract more Australians to the benefits of customer-owned banking, we must continue to grow.
I am pleased to announce that an exciting opportunity has recently arisen for P&N to consider a merger with an east coast credit union, bcu.
bcu is a highly successful, financially strong northern NSW based credit union, with 21 branches, a loyal member base of 57,000 people, 200 staff and $1.7 billion in assets. bcu share the same member-owned model, member first ethos and community focus as P&N. They also have operations in southeast Queensland and have a clear appetite for growth to continue to improve the products and services that they provide their members.
While nothing will change for our members right now, merging with bcu would give us the potential to grow even stronger as a larger and even more competitive customer-owned banking organisation.
An example of the types of benefits that we foresee are:
I would like to assure our members that our Board would only recommend a merger if it is in the best interests of all P&N members. If the merger is implemented, we are committed to:
P&N and bcu have today signed a Memorandum of Understanding. This allows both organisations to move forward with a process of Due Diligence, to assess the other's operations and the full benefits and synergies that a potential merger could bring. This is likely to take several months. If the Boards believe the merger is in the best interests of their respective members, P&N and bcu would collectively seek the required regulatory approvals.
If approved, shareholding members would then be invited to consider the Board recommendation and vote on the merger proposal sometime later in 2019.
More information will be made available on our website over the coming months.
As always we welcome your feedback so, should you have any questions, please email [email protected] or call our Contact Centre on 13 25 77.
1. Who is bcu?
2a. Why should we consider this proposal?
We believe this potential merger could deliver significant benefit for our members. As a customer-owned bank with some 95,000 members, we exist only to serve our members and we want to be in a position to provide excellent services and benefits long into the future.
P&N has been investigating options for potential partnerships for some time to strengthen our core business. Partnering with a like-minded customer-owned organisation will allow us to provide enhanced service offerings for both sets of members in this highly competitive environment. The great news is that we have already established that, with this merger we would retain all the great things that our members love about P&N - our name, our people, our branch network and our WA based Head Office.
Should the Board recommend a merger, P&N can assure our members that they will have their chance to have their say sometime in 2019. A recommendation would only occur if it was in the best interests of members.
2b Why can't we stay small and remain in WA only?
With the increased cost of regulation, we will inevitably see the demise of smaller financial institutions. Consolidation of the industry will occur with or without us, and in an increasingly digital world, state boundaries are less relevant than they used to be. Increased scale and an expanded footprint would give us the capacity to deliver more competitive offerings to our members, as well as reduce our current concentration risk.
The cost of running a bank increases every year, particularly in this digital age, and where we can extract operational synergies as part of a larger organisation, it makes sense to do so. For example, sharing costs to align and invest in upgrades to our banking platforms, member communications channels and digital banking innovations will allow any savings we make to be channelled back to improve member experience, products and services.
3. Will we lose the P&N Head Office in WA and all that we love about P&N?
No. We remain committed to Western Australia and a Perth based Head Office. The P&N that you know and love will remain with our brand, our people and our existing branch network. Similarly, bcu will maintain their much-loved presence on the east coast.
4. Will we retain our customer-owned status?
Yes, it is part of our DNA and we are fully committed to maintaining our customer-owned model. Our members enjoy banking with a customer-owned bank. It is one of our core differences from the listed banks and we are well aware of the genuine alternative we offer those people who like the customer-owned model. Our customer advocacy is at a globally high standard and there would be no rationale for us to risk this.
5. Who is the larger organisation in this transaction?
A combined organisation would place us amongst the strongest customer-owned banks in Australia. Whilst P&N is larger than bcu, we intend to adopt the best of both businesses. bcu has significant business banking capability that would be of benefit to our members and equally P&N have strong digital and mobile technology that bcu would like to offer their members. Both P&N and bcu would retain their respective brands, people, branch networks and offices in their current regions.
6. Will we get a payment or a dividend?
No, this is not a demutualization and our customer-owned banking model will not change.
We are a customer-owned bank, unlike the major banks. Our customer-owned model has our members as our single focus and we do not focus on maximizing profits or paying dividends.
Listed banks have both shareholders and customers to satisfy. This can create tension between trying to make a profit for shareholders at the expense of positive customer outcomes as we've seen recently with the revelations of the Royal Commission.
Our shareholding members hold one share each. Each member, past and present, has contributed towards the pool of funds that help us operate our bank on behalf of all members.
7. Will we lose the ability to be agile?
No. Should a merger proceed, we would be a stronger organisation and have greater agility in responding to market conditions and member needs.
8. Won’t you be taken over if you get too big?
Whilst we don’t want to become a big bank, economies of scale are important in banking and a strong customer owned sector will provide Australians with more choice.
It would be incredibly difficult for a listed institution to takeover a customer-owned financial institution and we will continue to promote and protect the benefit of being member-owned.
The Board and management can only put proposals forward and ultimately under the Constitution, it is the members who are in control of any such decision.
We genuinely believe that we can deliver better products and services to our members if we are able to build some much needed scale and efficiency into the bank.
9. Won’t control move to the East Coast over time?
As the larger organisation, P&N will continue to have its Head Office and the majority of its staff based in Western Australia. In time we would expect to continue to grow the employment opportunities for West Australians.
10. Will the cost of services be increased?
No. The intent of Due Diligence is to determine if a potential merger would be in the best interests of all members. If that is determined, there will be synergies and economies of scale that we anticipate will benefit our members. The Board will make a decision whether to recommend a merger to members once all the facts have been fully established as part of the Due Diligence process.
11. What will happen if the members do not vote for this? What if P&N members vote yes to merge and bcu members vote no?
The proposed merger would not proceed.
12. What is Due Diligence and how long is it likely to take?
The first step is to complete the Due Diligence process which we need to get right. Both organisations will have the opportunity to conduct a deep dive into each other's business to fully understand the business and identify potential synergies and opportunities. The Board will then assess and decide whether to make a recommendation to merge. We expect DD to be completed in the first quarter of 2019.
13. When will members have the chance to vote?
Should the Board decide to recommend to members that a merger would be in their best interests, members could expect to receive an information pack sometime in mid-2019, ahead of a vote.
14. Whilst the Due Diligence process takes place, will I be able to continue operating my accounts the same way in the meantime?
Your banking relationship with P&N will not change. You can still chat to us over the phone, in branch or use our online services including Internet Banking and the Mobile App.
15. What about the Government Guarantee, if I have funds with both organisations?
If the merger is recommended and accepted by members, we would operate as one Authorised Deposit Taking Institution (ADI) and therefore the Government Guarantee would apply to the total amount of funds held with the combined ADI.
16. Where can I get more information?
There is little more information available until Due Diligence is completed. In announcing the Memorandum of Understanding, the intent was to be upfront and transparent to inform and include our members in our early deliberations. More information will be released over the coming months as it becomes available.
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