RAB, Summerland merger will enhance their business stability: S&P

Their risk-adjusted capital ratio should remain above 15%.

The merger of Regional Australia Bank and Summerland Financial Services will enhance the combined entity’s scale and business stability.

On 16 October 2024, the two New South Wales-based mutual lenders announced their proposed merger. Should the merger go ahead, the combined entity will have assets under management of about $4.8b.

The proposed deal is just the latest of more frequent mergers in the Australian mutual sector, which already saw two other mergers with more in the pipeline. It’s possible that the consolidations ramp up until there are less than 10 mutual lenders remaining, S&P said in a separate report.

The key fundamentals of RAB and Summerland’s combined entity should remain broadly in line with expectations, with the combined entity maintaining a very strong risk-adjusted capital ratio above 15%.

Like most mutual lenders in Australia, RAB and Summerland both engage predominantly in residential mortgage lending.