Annual Review - Victoria Teachers Mutual Bank

2012
Annual
Review
Head Office
117 Camberwell Road
Hawthorn East VIC 3123
PO Box 338
Camberwell VIC 3124
Branch Office
687 Mt Alexander Road
Moonee Ponds VIC 3039
PO Box 210
Moonee Ponds VIC 3039
victeach.com.au
1300 654 822
Victoria Teachers Limited
ABN 44 087 651 769
AFSL/Australian Credit Licence Number 240 960
CEO’s Report
Welcome to the new look Victoria Teachers
Mutual Bank’s 2012 Annual Review. Included
with this report is a special memento
celebrating our 40th Anniversary.
In last year’s report I referred to the Global
Financial Crisis, the effects of which are still
being felt, particularly in Europe. However the
Australian economy remains strong with a
positive bias, although there are sectors which
are under pressure. e Australian banking
sector remains resilient and strong and so
does your Mutual Bank. In many ways being
closely aligned to a stable education based
employment sector is a huge advantage to our
organisation.
Last year I also mentioned the opportunity
afforded by Government reforms for credit
unions that met qualification criteria to be
able to position themselves as mutual banks
owned by their customers. Members voted
in favour of the change at our November
2011 Annual General Meeting. I thank you
for your support and foresight in enabling
Victoria Teachers Mutual Bank to continue
to be relevant and provide value to future
generations.
At the time of writing, six credit unions and
building societies have chosen the mutual bank
path, two more have publicly announced it and
some others are expected to follow. ese
developments have also attracted interest
globally through the mutual sector’s association
with the World Council of Credit Unions (WOCCU),
with Canadian credit unions being particularly
interested and they will be following our progress.
e positive reaction from Members and their
families and friends to the Mutual Bank change
is heartening as is the fact that increasingly
the media is adopting the terminology ‘mutual
banking’ and ‘customer owned banking’.
As mentioned in the body of this Annual Review,
throughout this transition we have continued
to provide tangible financial value to Members.
We have also maintained our extraordinary track
record in customer satisfaction awards, industry
awards as a credit union and more recently
awards as a mutual bank. Remaining true to our
enduring values plays a big part in gaining such
recognition.
We continue to adhere to and support cooperative principles by collaborating with other
mutuals to build capacity for the sector to ensure
it can continue to compete in the marketplace.
e year ahead promises to be vibrant and
exciting for our people and our Members/
customers. Our new corporate brand, our 40th
Anniversary, and an updated history to include
the last 20 years, new building with state-of-theart technology and a modern environmentally
sensitive workplace. Our Board, Management and
Staff are looking forward to being under one roof
and seeing our Members at the new premises.
Executive Management Team
Left - Right
Glenn Borg - People & Culture
William Wolke - CEO
Rosemary Boissezon - Sales & Service
Mark omson - Technology
Elsbeth Torelli - Risk & Governance
Adam Alsbury - Strategy & Marketing
David Percival - Finance
William Wolke
Our financial performance has been solid with
exceptional asset and deposit growth but lower
profit due largely to interest margin pressure
arising from increased competition for deposits.
is scenario is expected to continue as Australian
financial institutions seek local deposit funding
rather than accessing overseas funds. is
has been one of the major structural changes
emanating from the (continuing) Global Financial
Crisis.
Over and above the reported financial results,
the Member dividend which measures the value
returned to Members increased substantially
(mentioned in the Members section).
e medium to long term financial outlook is very
positive as the Mutual Bank recalibrates itself in
response to market forces and works through the
transitional costs associated with moving to the
new building.
e initiatives outlined throughout will ensure
that Victoria Teachers Mutual Bank continues as a
caring, resilient, financial performing organisation
committed to co-operative principles and will be
relevant and attractive to future generations to
come.
I thank and congratulate Members, the Board of
Directors, Management and Staff for the excellent
outcomes and achievements this year as outlined
in the body of this Annual Review and particularly
for sustaining this performance over an extended
period of time.
William Wolke
Chair’s Report
40th Anniversary – 1972 to 2012
It is a great honour for myself and the Board,
Management and Staff to be associated with
Victoria Teachers Mutual Bank after 40 years
of providing financial services to Members of
the Education Community.
e vision and courage of the 48 founding
Members to establish a mutual organisation to
assist those working in education is applauded
and recognised by the many Members who
have benefited from this foresight.
I would like to make special mention of former
founding Directors Peter Leonard-Kanevsky
and Carl Ridgeway whom I have had the
pleasure to work with on the Board. I quote
the late Colin Laity, Chairman of the Board
in his foreword to ‘Apples for Teachers’,
published in 1994 as ‘a history of VTU Credit
Union Co-operative Limited’.
“Over 20 years ago (1972), a number of
teachers (Members of the Victorian Teachers
Union) were increasingly disenchanted
with the attitudes of banks and finance
companies. Whilst initially small in number,
it became increasingly apparent that they
could significantly improve their finances by
co-operation in both areas of savings and
lending.”
A large number of Members now share the
same disenchantment and have significantly
benefited not only from savings and lending
but many new products and services that
have been developed and provided at Victoria
Teachers Mutual Bank.
Victoria Teachers Mutual Bank – a name
change
e ‘VTU Credit Union Co-operative’ has now
grown to provide a full range of banking services
while still recognising the principles of mutual
ownership. e change to Victoria Teachers
Mutual Bank is aimed to provide asymmetry with
the services and nature of our organisation as
a Victorian mutual that serves teachers and the
Education Community with banking services. Our
appreciation goes to the Members who have
embraced the new name and the many hours
our Staff and Management have committed to
the transition. We look forward to a broader
awareness with Members in choosing their
primary banking provider.
Global Financial Crisis – an epilogue
In 2006 the growth in non-bank lenders and
mortgage brokers was exponential. As the various
dilemmas unfolded around the global financial
system the fortunes of the mutual structure were
recognised. By taking a longer term view the
positioning of the then Victoria Teachers Credit
Union allowed significant growth in assets, loans
and trading position.
Assets
Loans
Net interest margin
2006
2012
$789m
$565m
3.88%
$1,668m
$1,316m
2.46%
It is significant that in the past six years the
organisation has doubled in size and provided a
major financial benefit to Members in terms of the
interest margin between deposits and loans.
e new financial global regulations on capital
levels and with increased competition for funding,
the task is now to consolidate and prepare for
the next wave of financial challenges in a steady
growth economy.
Board of Directors
Back row
Greg Angelo, John Scarlett,
Michael Monester, David Temple,
Wendy Smith
Front row
Bernie Lloyd, Karen Starr,
Jonathan Hutchins (Chair)
Jonathan Hutchins
117 Camberwell Road
While we maintain our office in Moonee Ponds,
Staff from our two Camberwell offices will be
consolidated into one office at 117 Camberwell
Road. is will provide improvement in
communication and work flow and also a new hub
for our face to face Member services. I invite all
Members to the new offices and to experience
the improvement in space and modern facilities.
Appreciation
As the Chair of Victoria Teachers Mutual Bank I
am privileged to work with a committed group
of people at all levels of the organisation from
the Board, Management, Staff and suppliers.
However, one of the greatest benefits of this role
is being able to participate in a small way with
Members from the Education Community through
our efforts to support initiatives and programs in
schools. My sincere thanks to you all.
To all that have contributed to the success of
the last 40 years please accept the gratitude of
the Board and CEO in your efforts and we will
continue to strive to improve Members’ finances
through co-operative principles regardless of the
attitudes of banks and finance companies.
Jonathan Hutchins
Financial
Performance
Economic uncertainty continued both globally
and domestically over the past year with
on-going concerns over the sustainability of
sovereign debt obligations in Europe, the lack
of economic recovery in the United States
and the slowing of the pace of growth in
China. Locally, lower than expected inflation
was offset by concerns over unemployment,
economic growth, retail sales and business
confidence. As a result of these concerns the
Reserve Bank of Australia reduced the cash
rate by 1.25% between November 2011 and
June 2012 to 3.50%.
Despite this uncertainty and strong competition
for deposits the Mutual Bank delivered a solid
financial performance with a net profit result of
$9.0m for the year. Profit in 2011/12 was also
impacted by the decision to make a significant
investment in new premises at 117 Camberwell
Road. If we were to remove one-off costs
associated with this investment the net profit
result for the Mutual Bank in 2011/12 would
have been around $1m higher at $10.0m.
e purchase of 117 Camberwell Road will
deliver efficiencies and savings in future
years with the property of sufficient size
to consolidate current operations within
Camberwell and remove the need to lease
additional premises, while also allowing for the
future growth of the Mutual Bank. e use of
state of the art infrastructure, building systems
and technology will provide a modern and
efficient workplace for staff and help to reduce
the carbon footprint of the Mutual Bank.
e Mutual Bank continued to deliver value
to Members throughout the year with very
competitive rates being offered on both
deposits and loans. is was reflected in
deposit growth of $228.3m to $1.52b
(17.74% growth), and loan growth of $162.6m
to $1.32b (14.10% growth). Our secured
home loans continue to make up the majority
of our loan portfolio and the quality of the loan
portfolio is reflected by market indicators such
as total loans in arrears, bad debts written
off and loan provisions where our results are
low when compared to the financial services
industry.
Total assets increased by $237.8m to $1.67b
(16.6% growth), and total equity increased by
$8.9m to $132.7m (7.2% growth). is strong
growth enables the Mutual Bank to invest in
new and improved products and services for
the continued benefit of our Members.
Income Statement
Growth
(For the year ended 30 June 2012)
2012
$000’s
2011
$000’s
Interest revenue
100,932
Interest expense
62,830
Net interest income
38,102
Other operating income
9,919
Net operating income before expenses 48,021
Total operating expenses
34,150
Profit before income tax
13,871
Income tax expense
4,183
Profit after income tax
9,688
Other income
(661)
Total income
9,027
91,188
52,031
39,157
9,543
48,700
32,482
16,218
4,870
11,348
448
11,796
(As at 30 June 2012)
2012
$000’s
2011
$000’s
Assets
Cash and cash equivalents
Trade and other receivables
Investments - held to maturity
Loans and advances
Property, plant and equipment
Other assets
Total Assets
22,050
5,991
274,671
1,316,543
46,624
2,243
1,668,122
30,300
5,284
223,064
1,153,899
15,158
2,607
1,430,312
Liabilities
Deposits
Trade and other payables
Subordinated debt
Provisions
Total Liabilities
Net Assets
1,515,224
14,079
1,974
4,145
1,535,422
132,700
1,286,884
11,316
1,968
6,309
1,306,477
123,835
2,902
129,798
132,700
2,902
120,933
123,835
Loans
Deposits
2010
2011
Assets
1,600
1,400
1,200
1,000
800
600
400
200
0
$M
Statement of Financial Position
Equity
Redeemable Preference Shares
Reserves
Total Equity
1,800
2008
2009
2012
Profit After Tax/Assets
Profit After Tax/Assets
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
%
Jun 08
Jun 09
Jun 10
Jun 11
Jun 12
Members
An award winning financial institution
New name, same commitment
Your Mutual Bank was awarded the Mozo
Australia’s Best Credit Union (Peoples’
Choice Awards) and Roy Morgan’s Customer
Satisfaction Awards, Credit Union of the Year,
in 2011.
As approved by Members at the 2011 AGM, our
registered name changed to Victoria Teachers
Limited and we began trading as Victoria Teachers
Mutual Bank on 1 March 2012.
2012 was also a rewarding year. We received
CANSTAR’s Best Value Mutual Bank, in the
inaugural 2012 Mutual Bank Awards category.
We were a finalist in the Australian Lending
Awards and have received the Roy Morgan
Customer Satisfaction Monthly Award for the
months of April, May and June 2012, once
we became a Mutual Bank. We also featured
in the Money Magazine Awards top ten for
‘Bank of the Year’. Independent research by
CANSTAR indicates that our Members are
$169 p.a. on average better off banking with
us than the major banks.
Although we have changed name, we are still
committed to remaining a mutual and providing
Members with a fair deal and outstanding
customer service.

Our Mobile Lending service conducted over 350
visits.

Our Relationship Officers visited over 2,500
Government, Catholic and Independent Schools
assisting Members with various personal
financial needs.

Approximately 200,000 calls were received by
our Member Contact Centre during the course
of the year.
New products and access channels
Membership
Victoria Teachers Mutual Bank continues to
provide a wide range of products and services to
meet the needs of Members. roughout the year
we reviewed our products, services and fees to
ensure Members continue to receive a fair deal.
We continue to attract new Members from the
Education Community, as well as their families.
Over 4,000 new Members joined the Mutual
Bank, with most being under 30 years of age, a
trend we have been seeing for the past few years.
Additions and enhancements to our product range
and access channels included:
Market research

Rewards Package – consisting of a range of
money saving benefits for home buyers.

Contactless Cards (Visa payWave) – new card
technology to allow faster transactions at point
of sale.

Mobile Banking – providing Members with 24/7
access from mobile devices.

Phone a Loan – providing Members with an
easy way to apply for loans.

Web Loans – allowing Members to apply for
loans via our website 24/7.
Access channels
We remain committed to providing Members
with a range of access channels to match their
preferences. Some of these include:

Internet Banking – providing access to over
70,000 Members.

Our website received over 4.5 million visits
throughout the year.
We actively listen to our Members and value
feedback. Regular research is undertaken so we
can consistently deliver value and stay connected
to our Members. Our 95% satisfaction result was
again high in comparison to industry standards
and 94% of Members are likely or highly likely to
refer us to others.
Independent research such as the Roy Morgan
Customer Satisfaction awards are also testimony
that we are committed to providing outstanding
customer service to our Members.
Education
Community
Giving back
Schools and Preschools
Awards
As a key stakeholder in the Education
Community, we are committed to its
economic and social wellbeing. e financial
year saw us contribute in excess of $425,000
back into the Education Community, through
a range of programs and initiatives. is
contribution is in addition to our specially
designed banking packages for Schools and
Preschools, which pay highly competitive
rates to help make the most of funds.
e Mutual Bank assists Schools and Preschools
with financial management in a variety of ways.
Our highly competitive interest rates on Term
Deposits provide certain earnings and our
savings and transaction accounts offer fee-free
transactional banking. Schools also receive the
assistance of a dedicated School Banker, who
visits Schools on a daily basis.
We sponsor a range of awards within the
Education Community, including professional
development grants and awards for student
teachers, graduates, teachers and principals.
Sponsorships and donations
e Mutual Bank supports a range of events
within the Education Community, which includes
support for the Government, Catholic and
Independent sectors.
Our chosen charities within the Education
Community are:

State Schools’ Relief
Provision of clothing and footwear to
Government School children in need.

Early Childhood Education Foundation
Assistance for families who cannot afford
Preschool education.

Better Buddies
An anti-bullying program in Schools.

Natural Resources Conservation League
Educational programs on bio-links to the
environment.
Partnerships
We continue to build mutually beneficial
partnerships in the Education Community to
establish better outcomes in education. Some
of our partners include the Victorian Institute of
Teaching, the Victorian Principals’ Association,
Principals’ Association of Specialist Schools,
Australian Education Union, Independent
Education Union and the Department of
Education and Early Childhood Development.
We continue to support the DEECD Education
Excellence Awards and sponsor three major
categories for Teacher of the Year – Early
Childhood, Primary and Disability & Additional
Needs.
Teaching Initiatives Program
Our Mutual Bank program provides funding to
Schools and Preschools to implement activities
into their curriculum. Since the program’s
inception, we have awarded over $400,000 in
areas such as sustainability, skill development,
information technology and community
involvement. is year 22 Schools and Preschools
shared in an increased grant pool of $30,000.
Corporate
Citizenship
Financial literacy
Sustainability
Business practices
Your Mutual Bank is committed to educating
Members and the larger Education Community
about financial management throughout
various life stages.
e Mutual Bank is committed to implementing
environmentally friendly practices such as:
 eSlate (our monthly online newsletter) to
reduce our impact on the environment. Over
39,000 Members have opted to receive our
newsletter via email.
 eStatements - Members can receive
statements online rather than traditional post.
Over 31,000 Members are now subscribed.
 Online applications - for a range of products
and services.
 Our brochure range, newsletters and
promotional materials are printed on recycled
or carbon neutral stock, using vegetable based
dyes.
 We are using more electronic channels for our
promotions to reduce our paper usage.
 We purchase carbon offsets when producing
pocket diaries.
 Information is emailed to Members enquiring
about promotions and information.
 Member Satisfaction surveys are conducted
online to obtain feedback.
 e purchase of our new building at 117
Camberwell Road will also see us implement
more environmentally friendly business
practices such as better waste management,
use of recycled materials being incorporated
into design elements and enhanced
environmental functionality (such as lighting
and internal printing).
To ensure Members do not over-extend
themselves financially, we implement responsible
lending practices to ensure our Members can
comfortably afford a loan; which benefits both the
Members and the Mutual Bank in the long term.
As well as frequent financial literacy articles in our
newsletters, we educate Members and the wider
Education Community through seminars and one
on one consultations.
In partnership with the Victorian Institute
of Teaching, we provide financial literacy
sessions to all graduate teachers entering the
profession. Our aim is to help with the financial
transition from university to working life.
In the last year we conducted 6 First Home
Buyers’/Investment Property Seminars and
14 Financial Planning seminars throughout the
state, on a range of topics. ese seminars are
designed to increase the financial literacy of
Members and the Education Community.
eSlate continues to include financial literacy
articles tailored to various life stages. e
newsletter is designed to educate our
Members on a range of financial issues to
assist with economic wellbeing throughout the
journey of life.
Our Relationship Officer Team also conducts
sessions for the Education Community at
Schools and various events, to help people
make informed financial decisions.
Such initiatives have a positive impact in terms
of reducing our impact on the environment,
expediency and security in the delivery of
information, as well as cost savings which are
passed to Members through competitive pricing
of products and services.
We have dedicated Staff available to assist
Members experiencing financial hardship, who
approach this with an ethical and compassionate
manner. is free service is available through our
Service Centres in Hawthorn East and Moonee
Ponds.
e Mutual Bank is committed to the Mutual
Banking Code of Practice, outlining 10 key
promises to Members. We will:
 Be fair and ethical in our dealings.
 Focus on Members.
 Provide clear information about products and
services.
 Be responsible lenders.
 Deliver high customer service standards.
 Deal fairly with complaints.
 Recognise Member rights as owners.
 Comply with our legal and industry obligations.
 Recognise the impact on the wider community.
 Support and promote this code of practice.
Organisation
Information technology
Compliance
Safety and wellbeing
As a financial institution, robust information
technology and systems underpin our ability to
deliver products and services to our Members.
Financial Institutions operate within a heavily
regulated industry. Many legislative requirements
were implemented during the year, including:
We undertook server upgrades during the year
to ensure additional storage and improved
performance and efficiency of IT systems.

National Consumer Credit Protection Act
amendments.

Account switching reforms.
Our work environment is constantly reviewed to
ensure we are providing a safe, harmonious place
to work. An audit of our occupational health and
safety system and environment was conducted
and results demonstrated a very sound and
structured management system that adequately
supports the provision of a safe workplace.

National Personal Property Securities Register.
New business continuity software was
designed and developed to streamline
management of business continuity. A series
of enhancements were made to improve our
high levels of network security and internet
traffic volumes. A new telephony multi-media
software platform was implemented to
simplify our Contact Centre processes and
reduce infrastructure costs.
Learning and development
Being an education based financial institution, the
development and growth of our people is a strong
focus. Supplementing technical and compliance
based learning for the requirements of the various
roles, we also support Staff to further their
careers by undertaking role related study. Our
Learning and Development culture assists Staff to
provide high levels of customer service, ensuring
we continue to provide ethical and relevant advice.
Leadership development and
organisational coaching
Leadership behaviours have been embedded
into the culture of the organisation, underpinning
our corporate values. Emotional intelligence
development is our focus to ensure the
organisation has a highly skilled leadership team
to lead the performance of our award winning
financial institution.
rough our Coaching for Success Program, we
enhanced our leaders’ capabilities to develop their
people in the provision of outstanding customer
service.
ere has been more focus on Staff wellbeing
over the past 12 months, with programs and
information to assist Staff lead a healthy lifestyle,
which in turn assists with engagement and
productivity levels.
Our people
Our culture survey again produced excellent
results, demonstrating strong leadership, engaged
Staff and a positive work environment.
To recognise the important contribution our
people make to the organisation our online
performance management system, ePerform, is
utilised to assist with career progression and skill
development.