Government action essential to level the financial playing field

The Federal Government must act now to curb the unfair advantages that Australia’s big banks enjoy, if it is serious about making banking more competitive, Heritage Bank Chairman Mr Kerry Betros said today.

Mr Betros told today’s Heritage Bank Annual General Meeting that millions of Australians were effectively being shut out of a better deal on their banking because the big banks could sidestep hurdles that customer-owned competitors had to jump over.

Mr Betros applauded the Federal Government’s decision to set up the current Financial System Inquiry, and called for it to follow through with concrete action to address anti-competitive issues.

“Governments have talked up the benefits of competition for years. Now is the time to deliver real reform. The current Financial System Inquiry is the perfect opportunity to tackle the inequities.

“The big banks enjoy a huge advantage because they are authorised to use the internal ratings-based (IRB) approach to measuring the riskiness of their assets, which significantly reduces the amount of regulatory capital they have to hold.

“They also enjoy ‘too big to fail’ status, with the implicit guarantee that the Federal Government would bail them out if any of them got into trouble.

“Those factors give the big banks huge funding advantages that tilt the playing field against smaller customer-owned competitors such as Heritage.”

Mr Betros said it was vital for consumer choice that the Government maintained an environment where the customer-owned sector could continue to provide a viable alternative.

He said Heritage had reported another year of solid results in 2013/14. The pre-tax profit was $50.04 million, a 5.5% decrease on the previous year. However, after excluding an abnormal gain from the previous year, the underling pre-tax profit in 2013/14 actually increased by 0.1%, while the underlying after-tax profit increased by 2.2%.

Loan approvals reached a total $1.440 billion, an increase of 7.5% on the previous year. Heritage also grew its total consolidated assets marginally to $8.519 billion, an increase of 0.1%. This confirms Heritage’s standing as Australia’s largest customer-owned bank.

Mr Betros told the AGM that the massive shift to online banking was making fundamental changes to the sector. Heritage has responded with a five-year investment strategy to upgrade online and mobile banking services, improve data systems, and simplify processes.

“This investment in transforming our business for the digital age is non-negotiable – we must make these changes to stay relevant to our customers,” Mr Betros said.

Mr Betros also announced today that Professor Peter Swannell would be retiring from his role as Director at the conclusion of the AGM.

“I would like to acknowledge the huge contribution that Professor Peter Swannell has made to Heritage Bank. He joined Heritage as a Director in July 2003 and has been a wonderful asset to the Board for more than a decade. His wisdom, guidance and professionalism will be sorely missed.” Mr Betros said.

There will be no replacement for Professor Swannell’s position as Director at this stage.

* Home loan comparison rate based on a $150,000 loan over 25 years.  Fixed loan comparison rate applies only for loans with an LVR of 80% or less and a loan amount of $150,000 to $249,999.  WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Interest rates are on a per annum basis. Rates are correct as stated and subject to change without notice. Rates shown are for new loans and do not apply to switches or internal refinances.

Home Advantage Variable rates include discounts shown from the Standard Variable rate. Home Advantage Living Equity rates include discounts from the Living Equity rate. Discounts are based on total lending in the package. Discount Variable LVR rates are for new lending and include discounts from the Discount Variable Loan Rate.  Discounts are not available in conjunction with any other interest rate discount or special offer. All fixed rates are fixed for the period stated and revert to the variable rate applying at expiration of the fixed term. To approved applicants only. Conditions, criteria and fees apply.

Loan to Value Ratio (LVR) is the loan amount divided by the value of your security property (determined by Heritage Bank at assessment), multiplied by 100. Owner Occupied loans have a maximum LVR of 95%, Investment loans have a maximum LVR of 80% and Living Equity has a maximum LVR of 80%. Heritage is not accepting any new investment applications until further notice.

This advice has been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation or needs.

Generate a personalised Key Fact Sheet based on your loan amount, term and repayments. This tool is provided to help you compare home loans from Heritage with other financial institutions.