Service the key as United outlines its profit targets

United Credit Union last week completed the annual profit reports for Western Australia’s major non-bank financiers, posting a result that lagged its industry peers.

United reported a net profit of $1.7 million for the year to June 2004, down from the previous year’s $2.6 million profit.

Its result was well short of industry peers, which achieved both higher profits and higher returns on members’ funds.

StateWest Credit Society, under chief executive Greg Wall, led the sector with a net profit of $8.1 million (boosted by abnormal gains) and a return on equity of 13.0 per cent (see table).

It was followed by Home Building Society, which generates more profit from its land development activities than its financial services business.

Police & Nurses Credit Society, which is lifting its involvement in land development, reported a rare drop in profit last year to $7.7 million.

Trailing the sector was mortgage manager Homeloans, which runs a different business model from the credit unions but is included because it is a Perth-based home loan provider.

Its net profit of $1.1 million equated to a return on shareholders’ funds of just 2.9 per cent.

United chief executive Ian Williams said his goal over the next three years was to lift the after-tax return on members’ funds to 8.5 per cent.

In the interim, he acknowledges profit will be affected by a series of major investments, including in new technology and management systems.

United’s profit was also affected by a 15 per cent increase in staff numbers in its core credit union business.

Mr Williams said members clearly wanted to talk directly to a person when they contacted United.

“It might be the old-fashioned approach but it’s our promise to our members,” he said.

United members evidently appreciated the increased staffing – member surveys revealed a remarkably high satisfaction rating of 96 per cent.

United chairman Danny Cloghan made it clear member service was the top priority for the organisation.

“As a mutual, we put members before profit, which ensures the consistent delivery of a high standard of products and services for the benefit of members,” Mr Cloghan said.

United reported substantially higher lending growth than its industry peers last year.

Total loans under management rose by 20 per cent to $486 million, compared with lending growth of between six and 12 per cent achieved by its peers.

Mr Williams said he was particularly pleased by the 25 per cent growth in personal loans to $44 million.

A setback for United was the closure of its business travel venture, which serviced the Pilbara region, following a review by its joint venture partner Qantas.

Its travel business was also affected by a squeeze on retail margins.

As a result, the travel business posted a net loss of about $50,000 compared with a profit of $250,000 in the previous year.