24 March 2015

SBS the little bank with big plans

SBS Bank is a little bank with big plans to grow into a national brand.

Headquartered in Invercargill, SBS aims to become a household name in Auckland, Wellington, and towns all around the country.

With banking being an increasingly online affair, SBS chief executive officer Wayne Evans believes SBS can win more customers outside of its Southland heartland.

SBS, like the Cooperative Bank, is owned by its customers, or “members” as they are known.

Unlike the big Australian-owned banks, and even Kiwibank, it has no shareholders to keep happy.

SBS grew out of the former Southland Building Society. When it became a bank in 2008, it was the first building society in the world to make the transition, but it was only when Evans took up the reigns last year that it set its sights on serious expansion away from its Southland base.

“Historically we had a disadvantage because we had a very small physical footprint which was the South Island,” Evans said. “We were positioned in an area of low population density.”

But with customers increasingly doing their banking online SBS intends to exploit that.

A team of mobile mortgage managers and upgraded online banking system means SBS’s geographical disadvantage is fast vanishing and allowed it to launch a 4.99 per cent five-year fixed term mortgage rate nationwide early in March.

“We can deploy anywhere,” Evans says.

“Historically, our point of weakness was our small branch network, but we can now invest more heavily in the digital channel, mobile mortgage managers and brokers.”

SBS customers automatically become “members” of the mutual bank. While shareholders expect dividends, members expect value through service and sharp interest rates on deposit and loans.

Member-ownership is SBS’s one truly defensible marketing difference, Evans said. “It’s the only point of difference we can sustainably maintain.”

Bigger rivals can take aggressive stands on deposit and loan rates if they feel threatened by SBS, but shareholder-owned banks can never claim that they represent their customers.

It was fair to say there was a long way to go to getting that story out across New Zealand, Evans said.

SBS’s brand recognition was high in Southland, but virtually non-existent in Auckland, he said.

The bank has most of the services of the big banks, including an insurance company called Southsure, a finance company called FinanceNow, which provides consumer finance to The Warehouse, and a KiwiSaver and wealth management partnership with Staples Rodway.

But, it lacked a credit card and loyalty programme, and a smartphone banking app which would both be added soon, Evans said.

But, Evans said: “There’s an element of inertia that a small challenger bank like SBS has to overcome”.

SBS hopes its members will be its brand ambassadors to family and friends who live in cities like Auckland.

SBS had a loan book of just $2.33 billion at the end of December, including $1.77b in home loans, $276m in agri loans, $150m in consumer loans, and $154m in business loans.

And it’s been a conservative lender, and Evans says it will carry that conservatism to wherever it makes its loans.

The small executive team was able to put in place strategy and make changes quickly, he said.

“We have been travelling at a vast rate of knots,” says Evans, who was previously chief executive of GE Money and also set up Finance Now.