The spread of community banks in Western Australia is continuing apace, with a prominent former Perth-based Citibank manager the surprise force behind the latest proposal.
The spread of community banks in Western Australia is continuing apace, with a prominent former Perth-based Citibank manager the surprise force behind the latest proposal.
Wilson Wu, who spent 10 years heading Citibank’s retail banking operations in WA, is pushing to establish a new community bank in the Melville area.
WA already has 29 community banks, each of which is jointly owned by Bendigo Bank and local shareholders, and eight further communities are pursuing plans to open their own bank.
However, the news is not entirely positive.
Ellenbrook recently joined the list of communities that have dropped plans for a community bank after concluding it would not be commercially viable.
And Town of Vincent mayor Nick Catania, who chairs the successful North Perth community bank, has expressed reservations about the spread of additional branches.
“Bendigo needs to ensure there are not so many branches that their very viability is tested,” he told WA Business News.
Mr Catania believes community banks need to rethink their structure as they mature.
This includes the radical possibility that five or six community banks in the metropolitan area may “clump together” ahead of a stock exchange listing and possibly even seek their own banking licence.
“They may be able to shed the linkages with Bendigo,” he said.
Australia’s first community bank opened seven years ago in rural Victoria, while WA’s first community bank opened in Kulin in 1999.
Initially the community banks opened in response to branch closures by the major banks, but now they are spreading into areas that are well serviced.
Groups in Melville, Fremantle, Albany, Port Kennedy, Augusta and Jurien Bay are all seeking to establish new community banks.
Mr Wu, who is also president of the WA China Chamber of Commerce, said the proposed Melville bank would combine a commercial focus with a strong community focus.
“It will be a commercial proposition but a lot of the profits will be channelled back into the community,” Mr Wu said.
He is planning a community forum next month to formally establish a committee, and will then seek pledges of at least $650,000 from local community members.
The planned Fremantle bank, which is being coordinated by Kevin Campbell, one of the founders of listed technology company QR Sciences, is more advanced.
It has already obtained pledges from about 400 people and will shortly issue a prospectus to raise $750,000 in capital.
Mr Campbell said community banks had a clear point of difference.
“Where we have the edge is that we are appealing to community spirit,” Mr Campbell said. “Part of the profit will stay in Fremantle.”
Collectively, the 29 community banks in WA have turnover (loans and deposits) of more than $1 billion.
The biggest is Bayswater, with turnover of nearly $100 million, followed by North Perth with turnover of $66 million.
Across Australia, community banks are generating substantial profits. Bendigo Bank said community banking contributed $3.8 million to its half-year net profit of $42.8 million.
Mr Catania said it was important to ensure that community banks remained profitable, so they could sustain appropriate services.
“If there are too many branches, we will be diluting the community banking concept,” he said.
Mr Catania said the reality was that ‘mums and dads’ customers, who were the primary focus of community banks, were not very profitable.
Some banks, such as that at North Perth, were able to boost their earnings by servicing local businesses but for most this was a “real challenge”.
Another challenge was the lack of a career path for managers in each of the community banks, Mr Catania said.
Bendigo’s community banking development officer in WA, Richard Grieve, said the issues raised by Mr Catania were being reviewed.
He said Bendigo Bank was encouraging community banks to list on the Bendigo Stock Exchange, with Rockingham and Halls Head already having done so.
COMMUNITY BANKS
- WA has 29 community banks.
- Loans and deposits are in excess of $1 billion.
- Eight more community banks are planned.
- Community banks face growth challenges as they mature.
