Banks have never been a source of much joy to the average person. With most banks adding fees for every service, it costs money to even get at your own savings. To make matters worse, the major banks have been closing branches, hitting rural and regional Australia hard. But it's not only these well-publicised withdrawals that have been taking place - even suburban areas have been hard hit.
A couple of weeks back, the Bendigo Bank opened a new Community Branch in Strathmore, in suburban Melbourne. Strathmore is not an underprivileged area - it's a prosperous middle class suburb. The streets are tree-lined, the lawns are manicured and the houses are substantial - yet the big banks were not interested in servicing the traders in the shopping strip and the people who want to do their banking locally.
Into the breach has stepped the Bendigo Bank. It says it's in the "value for money" segment of the market. In areas such as Strathmore - and throughout regional and rural Australia - the Bendigo Bank is opening branches where other bigger banks are closing theirs. The Community Banks are just that - owned by the community. The Bendigo Bank provides the know-how, and the people of the community provide the backbone of the bank. The community becomes shareholders in the Community Bank, and when profits start flowing, the money is distributed to the community shareholders and is also distributed to the community organisations - that way, the profits stay in the community.
Much more is at stake than just a bank. Experience shows that when the bank goes, it gets harder and harder to retain the basic services that keep a town alive. When professionals and traders have trouble even banking their takings and have to go miles to the nearest bank branch, not only does the money they make leave the community, but increasingly, these service providers leave too - and the town begins to die.
The Community Bank initiative recently passed the $1 billion mark in assets. Compared to the Big Four banks, it's only a drop in the bucket - but if your bucket is smaller, it makes a big difference. As they say - a billion here, a billion there, soon you're talking real money.
Community Banking can be compared to the ubiquitous McDonald's - it's a franchised operation that allows the owners - in this case, the community - to benefit from the success of their business, while drawing on the backing and expertise of a bigger partner.
Bendigo Bank is a listed company, trading on the Australian Stock Exchange (ASX) and is owned by more than 36,000 predominantly individual shareholders. The Bank has total assets of more than $6 billion, with branches from Western Australia to Tasmania. Bendigo Bank is also a partner in Elders Rural Banking, with Elders, the well-known rural agents. The Bank recently announced record profits of $33 million after tax, with the share price jumping by five per cent the day the result was announced.
How has the "People's Bank" initiative been working? Bendigo Bank is the first to admit that by concentrating on providing face to face service - where the other banks are relaying on technology to service major clients - it puts its costs up. But it's paying off. Customers like the old-fashioned service ethic. But that's not to say the bank is lagging.
Bendigo Bank also has its own Internet banking service, which is a great boon if you're at the end of a computer, miles from anywhere. You can pay your credit card over the Internet, pay bills and check on your account balances. Filling these gaps in the market has been commercially successful, as the recent record profit testifies.
Bendigo Bank is the only bank headquartered in regional Australia. The citizens of Bendigo, the gold mining town in central Victoria, who wished to build a stronger community, formed the company as a building society in 1858.
As Bendigo prospered, so did the building society, recording a profit every year, even during the Depressions of the 1890s and 1930s. In 1978, the Bendigo began a rapid expansion throughout regional Victoria and metropolitan Melbourne. By the time it converted to a bank in 1995, it was Australia's oldest - and Victoria's largest - building society. Now, the Bendigo's services are delivered by more than 500 branches and agencies in every state of Australia. The bank provides a full range of services, from insurance to investment advice.
Needless to say, the bank has its doubters. Some share market analysts compare its operating expenses - which due to its "face to face" services are higher than the Big Four banks - unfavourably to other, bigger banks.
At the moment, the Bendigo Bank concentrates on retail customers, but it is now looking at the logical next step, providing banking services to small business enterprises. In the longer term, there are still plenty of holes left by the withdrawal of larger banks from rural, regional and even suburban Australia.
As they say - "If you're on a good thing, stick to it".
Jeffry Babb is a shareholder in Bendigo Bank
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