‘Don’t tar all banks with same brush’

CUSTOMER-OWNED lender Heritage has warned about politicians fighting “to the bottom” in trying to crack down on all banks following horror stories emerging in the royal commission.

Toowoomba-based Heritage, a 60-branch lender, with branches at Southport, Mermaid Waters and Runaway Bay, is lobbying for any regulations to be laid down proportionally for institutions.

The pleas came as Heritage posted a rise in full-year profits from $39.6 million to $45 million. The rise was linked to improved funding costs in the year.

Heritage chief executive officer Peter Lock argued that smaller customer-owned lenders were not caught up in some of the scandals emerging at larger banks, which have included dead customers being charged fees.

But some regulations historically have been proposed uniformly on all lenders, he said. One example was the Productivity Commission last year recommending all banks employ a Principal Integrity Officer.

“That is to our mind overkill,” Mr Lock said.

One scenario he envisioned from the current commission was politicians battling each other to be tougher on banks and applying uniform additional restrictions on industry.

“We’re worried that there will be a fight to the bottom,” he said.

Such a move could “strangle the industry”, he argued.

His comments came as Morgan Stanley analysts predicted “the emphasis on governance will increase materially” for big stockmarketlisted banks following recent scandals and regulatory lawsuits.

A greater focus on social and governance factors “will have more influence on management decision making and a greater impact on share price performance”, the analysts said.

Heritage, which is not listed on the stockmarket, saw margins rise in the year from 1.73 per cent to 1.94 per cent as the bank pulled back on lending.

Mr Lock said this pullback was initially due to Heritage approaching regulatory caps on investor loan-growth in the year. Growth has since been subdued industrywide and Heritage finished the year with its loan book growing 2.4 per cent to $8.1 billion.

Heritage still lifted variable home-loan rates by 0.05 per cent in June, like other banks, and blamed increased funding costs that hit the sector earlier this year.

Mr Lock said even with that rate hike, Heritage was still absorbing some higher funding costs.

There were no plans now for additional rate hikes, but Heritage would have a “watching brief” on funding costs, he said.

According to Roy Morgan Research, Heritage’s customer satisfaction slightly improved in the year to July at 95.4 per cent.

Heritage also argued their customers received $68 million more in benefits than if they had used a stockmarket listed Big Bank.

Still, Heritage has gone backwards in some areas such as disclosure of how much directors and top brass are individually paid.

The lender had been required to do so until 2016 because some of its funding notes were listed on the stockmarket – accounts from then showed the non-executive chairman Kerry Betros was paid a healthy $362,000. With those funding notes now expired, Heritage no longer lists the individual amounts.

Mr Lock argued that listing the director wages was an example of additional regulatory burden.

Staffing levels slightly lifted to 766 and Heritage cited continued investment in digital technology, such as preparing for a new payments platform designed for speedy transactions.