Newcastle Permanent, Greater Bank merger approved by members vote: Here's what it means for banking in Australia

The new institution will be known legally as the Newcastle Greater Mutual Group Ltd, with Greater Bank and Newcastle Permanent to retain their existing identities in a "multi-branding" strategy that will utilise customer loyalty and choice while putting the combined financial firepower to work.

The member vote easily passed the 75 per cent needed for approval, with thousands voting online and about 150 people, many of them staff, at respective "in person" meetings Wednesday.

Greater Bank chairman Wayne Russell - who will chair the new organisation with Newcastle Perm chair Jeff Eather as deputy - said here was no "absolutely no intention" to "do an NIB' and "demutualise" the organisation and turn it into a for-profit company on the stock exchange.

The Perm has 47 branches and the Greater 53, with about 1600 employees across the two. Existing branch networks will be maintained for at least two years, and Mr Russell and Mr Eather repeated previous promises there would be no forced redundancies during that time.

The pair pointed out that voluntary redundancies may be offered inside the two-year period, timed to start from the anticipated merger starting date of March 1, 2023.

Wednesday's "yes" votes were widely anticipated, with the two boards having formally endorsed the plan in March, after the two institutions negotiated a joint memorandum of understanding in August last year.

Letters: Herald readers have their say on merger of Greater Bank and Newcastle Permanent

Retail banking, which is where the Greater and The Perm largely operate, is led by the "Big Four" banks - Commonwealth, NAB, ANZ and Westpac.

The rest of the market comprises smaller banks, building societies and credit unions, with Mr Russell and Mr Eather acknowledging pressure to "get big or get out" in the financial sector.

While the banks are "for profit" institutions owned by their shareholders, the building societies are "mutuals", meaning their customers or account-holders are their owners.

Health insurer NIB has grown a successful and profitable company since demutualising in 2007 and listing on the stock exchange.

The two chairmen said their institutions were "rock solid" in their determination to remain as mutual organisations.

The pair said the Perm had about $12 billion in capital and the Greater $9 billion, with the combined $20-billion-plus size making Newcastle Greater Mutual Group Ltd close to the biggest mutual in Australia.

They pointed to another merger under way, between Queensland's Heritage Bank and South Australia's People's Choice Credit Union, which with 720,000 members and a capital base of $23 billion would make it a bit bigger than the Hunter pairing.

"We might have $20 billion when we merge but the Commonwealth Bank has a capitalisation of $1.2 trillion," Mr Eather said.

"So it's all relative, but the Perm and the Greater can both offer variable rate home loans at more attractive rates, about 20 basis points (or 0.2 per cent) below the Commonwealth, and offer 12 month fixed term deposits at better rates, because we don't have to pay a profit to shareholders.

"There are about 75 mutuals left in Australia and combined, they would make up the fifth biggest deposit taking organisation in the country. We have said from the start we need scale to continue, and this decision today sets us up for the future."

Although the merged entity plans to continue with its strong branch network, both chairs recognised the importance of the digital revolution in banking, with growing numbers of households and businesses doing most of their banking on the phone or online.

Mr Eather said it was accepted that the Greater had been farther along the path of its "digital transformation", and that the merger recognised this, with the Greater's digital offering becoming the basis of digital banking platforms across both brands.

The combined group will be run by present Perm CEO Bernadette Inglis, with Greater CEO Scott Morgan to be deputy CEO.

Although the Australian Prudential Regulatory Authority (APRA) still had to formally approve the merger, it had already approved proceedings to this point, as had the ACCC and Treasurer Jim Chalmers.

IN THE NEWS:

WHAT DO YOU THINK? We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on the Newcastle Herald website. Find out how to register so you can enjoy civil, friendly and engaging discussions. Sign up for a subscription here.