bankmecu adds value to the economy, customers, employees, strategic communities, suppliers and the public sector through operating expenditures and distributions.

Net interest margin

Net interest margin is a measurement of the difference between the interest income generated and the amount of interest paid out. bankmecu’s net interest margin grew by $8.1m during the year, reflecting growth in assets. The reduction in the ratio from 2.92% to 2.79% is the result of strong price competition in the marketplace as the banking sector replaced offshore borrowings with retail deposits, bankmecu’s ongoing commitment to maintain highly competitive loan and deposit rates for its customers, and decreased yields on investment of high quality liquid assets following regulatory tightening.

 Figure 4b: Net interest margin

Refer to Chapter 11 ‘Statutory Financial Report’ for a geographic breakdown of deposits and loans.

Reserves - customer owned funds

Capital reserves are predominantly retained profits. These funds belong to all customers. They form the prudential capital underwriting the business and are reinvested back into the core business for the benefit of all customers. Capital reserves increased by 10.91% compared to 2009/10 as a result of profit achieved in 2010/11. 

Figure 4c: Capital Reserves

Credit integrity

bankmecu’s responsible lending practices give customers confidence to invest money with their bank. They also support bankmecu’s long-term economic performance and have resulted in a low provision for impaired loans against a growing loan portfolio.

Figure 4d: Credit control – bad debt write-offs

2010/11 saw a continuing low delinquency result when compared to all industry benchmarks. The main reason for the increase over the 2009/10 result was additional provisioning to cover unrealised but potential future losses from flood damaged properties. bankmecu’s Credit Integrity team adheres to all relevant legislation and codes regarding the handling of bad debt recovery. They assist customers where possible to manage their credit responsibly. bankmecu continues to support customers who may experience financial hardship and assist them whereever possible.

Suppliers

As a practice, bankmecu sources all of its supplies in the Australian market. Suppliers are required to demonstrate ongoing compliance with all relevant Australian laws and regulations.

bankmecu’s five largest suppliers (based on supplier costs for the year) are listed in Figure 4e, together with the percentage of total operating expense they absorb.

Figure 4e: Primary suppliers

Cuscal is bankmecu’s provider of wholesale and transactional banking services and represents 11% of operational expenditure. In 2010/11, Cuscal costs decreased by 4% compared to 2009/10 mainly reflecting the absence of merger costs in previous years. bankmecu is a shareholder in Cuscal. 

Data Action, based in Adelaide, is bankmecu’s core banking and information technology bureau service provider and represents 6% of operational expenditure. In 2010/11, Data Action costs decreased by 36% compared to 2009/10, mainly as a result of the absence of costs resulting from mergers in 2009/10 with RegionalOne Credit Union and Maroondah Credit Union. bankmecu is a shareholder in Data Action. 

QBE Mortgage Insurance Services provides mortgage insurance services to bankmecu which represents 2% of operational expenditure. QBE costs decreased by 21% compared to 2009/10 reflecting a reduction in lending where loans exceed 80% of the value of security properties. 

Telstra provides PABX Phone Systems and maintenance services to bankmecu. In 2010/11, payments to them increased by 73% compared to 2009/10. This is a result of bankmecu purchasing approximately $300,000 in PABX Upgrades.

Hermes Precisa/Salmat provides statement mailing and other mail services to bankmecu. In 2010/11 payments to them decreased by 5.88% compared to 2009/10. This is a result of bankmecu’s ongoing database clean-up and increased customer take up of e-statements resulting in lower overall costs. 

In addition to cost efficiency in the supply chain, bankmecu has: 

• worked with suppliers to improve the environmental and social impact of bankmecu products
• encouraged suppliers to reduce their environmental impacts
• encouraged suppliers to constructively manage their social impacts
• purchased products that are environmentally and socially responsible; and
• reduced resource consumption through product usage.

bankmecu developed a supply chain management system as an outcome of implementing an Environmental Management System (EMS) in 2010/11. Refer to Chapter 8 ‘Environment’ for additional information about suppliers and sustainability.

Cost of materials and services purchased

The cost of materials and services purchased increased in 2010/11 by 2% as a result of capital expenditure on Service Centre fit-outs in Brisbane CBD and Eastland. 

Figure 4f: Cost of materials and services purchased

Payment of contracts

bankmecu actively monitors methods of payment.  bankmecu is continuing to reduce paper waste by using Electronic Funds Transfer (EFT) where possible to make payments to creditors, rather than by cheque.  bankmecu will continue to monitor and increase the use of EFT over cheque method where possible. 

Figure 4g: Payments made by EFT 

Payments to employees

Employee payroll and benefits paid increased by 0.08% from last year. The increase reflected ongoing efficiencies gained from post-merger synergies.

Salaries are determined using a range of external benchmarks, including the Australasian Mutuals Institute Salary Survey, and are reviewed annually to ensure they remain competitive with industry standards. Based on the findings of this review, the salary structure was updated in 2010/11 to reflect increases across all grades and levels. 

Figure 4h: Payroll and benefits

Subsidies

In 2010/11 bankmecu did not receive any subsidies.

Income tax

Income tax paid in 2010/11 increased by 38.91% due to the increase in bankmecu’s profits this year.

Figure 4i: Income tax