By Gareth Vaughan
As it sets off on pursuit of a banking licence, PSIS has all but ruled out merging with another New Zealand financial services provider. And rather than growing its membership per se, co-operative PSIS would rather nab all the banking done by its existing customer-members.
Mergers among New Zealand owned financial service providers have been a feature of the local market in the post global financial crisis world against a backdrop of higher funding costs. The mutually owned SBS Bank acquired Hastings Building Society last October in what it sees as its first step towards creating a national community bank. And Marac Finance, CBS Canterbury and Southern Cross Building Society have merged to create Heartland NZ, and plan to acquire PGG Wrightson Finance's good rural loans and chase bank registration from the Reserve Bank.
However PSIS, with total assets of only NZ$1.45 billion and a loan book of just NZ$1.16 billion, plans to go on alone.
Co-operative status 'non-negotiable'
Asked about merger possibilities after releasing the co-operative's financial results for the year to March, which showed a NZ$6 million, or 46%, drop in annual profit after tax to NZ$7.1 million, PSIS chief executive Girol Karacaoglu told interest.co.nz: "There is nothing going on in that space whatsoever."
"Over the years we've looked at all kinds of opportunities and options but the reality is we have now firmly decided to go it alone and there is not going to be any deviation on that for the foreseeable future," Karacaoglu said.
He did add, however, that over the long-term "you never know" as there was a "very compelling" case for marriages between various institutions of the same ilk.
"But it's not a trivial matter to achieve that."
And Karacaoglu did acknowledge that having wider and bigger scale would be nice.
"The reality is, however, that larger scale needs to bring us two or three things critical to add value. It's not just the size. It needs to diversify our income base, it needs to bring more membership, more capital and critically for us, and where I'm confident it will be very difficult to pursue, we are non-negotiable on our co-operative status," said Karacaoglu.
"And there is no other co-operative in the world we live in in New Zealand, that is the financial services world. There are other mutuals but none are co-operatives and that is a show stopper for us. That's a precondition and that's why I don't think it (a merger) will happen."
Former RBNZ staffer on board to help with bank aspiration
Having secured a BBB- investment grade credit rating from Standard & Poor's last month, Karacaoglu said PSIS, which has about 320 staff, had now crossed the first line in its pursuit of obtaining bank registration from the Reserve Bank. However, Karacaoglu said the co-operative wasn't pre-judging the outcome of its application and expected it to be a one to two year process costing several hundred thousand dollars.
Douglas Widdowson, a former adviser on domestic deposit taking oversight at the Reserve Bank, is now working for PSIS in risk and as a secretary to the co-operative's board. Karacaoglu said Widdowson was "certainly helping" with the push for bank registration.
"Registering as a bank is putting ourselves on a platform where we can differentiate ourselves from others," Karacaoglu said. "The differentiation strategy is very much about cooperativeness. Our differentiation is our cooperativeness."
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