Deal the largest of its kind for an Australian mutual
In a landmark deal, customer-owned bank Heritage and People’s Choice has raised $400 million from the capital markets via a three-year senior unsecured floating rate medium-term note transaction.
The transaction is the largest senior unsecured issue printed by a mutual bank in Australia, effectively establishing a new benchmark for the mutual banking sector.
The issue was priced at 3mBBSW + 160bps, with total bids by investors exceeding $600 million prior to the final sizing of the transaction.
Heritage and People’s Choice CEO Peter Lock (pictured above), said the $400 million deal was an excellent outcome that reflected the market’s resounding support of the bank’s strategy, and the “enormous opportunity ahead for our bank and the mutual sector more broadly”.
“In setting a new record for the sector, it’s clear investors are confident and excited about the new bank we are building and our compelling proposition as a national purpose-driven, customer-focused banking organisation,” Lock said.
Heritage Bank and People’s Choice will begin trading under the new name of People First Bank, following the merger of the two organisations, next month.
Heritage and People’s Choice was formed through the $23 billion merger of Heritage Bank and People’s Choice on March 1, 2023, creating Australia’s largest mutual bank. It has 730,000 customers, 2,000 employees, with 95 branches across South Australia, Victoria, NSW, Queensland, and the Northern Territory.
Nearly 60 investors participated in the capital-raising transaction, with more than half of the issue taken up by domestic fund managers.
It follows the bank’s successful inaugural residential mortgage-backed security (RMBS) transaction last August, which secured $1 billion from domestic investors.
“We have committed to being an annual issuer in both the senior and RMBS markets and we are extremely pleased to have had an exceptionally strong start across both programs,” Lock said.
The new funds will be used for general funding and liquidity and to assist in the repayment of the remaining Term Funding Facility due to the Reserve Bank through to mid-2024.
The merged mutual has enjoyed strong performances so far, with financial results for the year ending June 30, 2023, showing a net profit after tax of $32.1 million, with total loans and advances of $19.1 billion, up 5% from a combined $18.2bn. There was a 5.2% lift in the residential lending portfolio to $18.3bn.
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