Australian Unity will redouble its commitment to its wealth, insurance and health services arms, confirming an agreement to transfer its $1.6 billion banking business to mutual banking group Bank Australia.

The transfer will include the entirety of Australian Unity’s 25,000-member customer base, its loans and credit card portfolio (totalling $1.4 billion) and deposit accounts (totalling $1.6 billion).

Australian Unity said it foresees “no immediate changes for customers, employees, suppliers or stakeholders of the bank” resulting from the transfer, which is expected to be completed within the next 12 months.

Competitiveness in the banking market was cited as the key factor in Australian Unity’s decision to offload its banking arm, with the “comprehensive financial and wellbeing services” firm noting the considerable investment required, particularly in digital, to keep pace with peers – a factor frequently cited by mutual banks as a challenge to their sustainability, with many also noting the excessively high cost of compliance.

“Bank Australia can provide Australian Unity Bank customers a strengthened banking experience,” Australian Unity wrote in a statement.

“As a customer-owned bank, with aligned values and a shared commitment to creating positive impact, Bank Australia is a natural home for Australian Unity’s banking customers, and it is well positioned to support them on their continued impact-driven banking journey.”

Australian Unity made its first forays into banking with the acquisition of Big Sky Credit Union in 2012.

Rohan Mead, Australian Unity group managing director, said the transfer would provide customers of its bank “the benefits of Bank Australia’s larger customer service footprint, greater digital capability and increased scale, providing long-term sustainability”.

Australian Unity Bank chief executive said the transfer will ensure for customers a “positive banking experience as the industry continues to evolve, and our customers can have the confidence that we will be with them during every step of the transition process.

Australian Unity’s banking arm represents just a small fraction of its total business, which includes wealth management business, private health and general insurance, residential aged care, and home health services. In total, the company counts more than 370,000 members and over 700,000 customers.

Bank Australia, a B-Corp company boasting strong ESG credentials, reported in FY24 a pre-acquisition loan book of $9.3 billion, total deposits of $8.4 billion, and net assets of $11.7 billion. As well, its ‘impact assets’, which are loans and investments directed to green and sustainable bonds, reached $2.2 billion this year.

Despite a significant profit hit in FY24 (down from $52.3 million in FY23 to $26.8 last financial year), the mutual has delivered consistent growth in its assets, deposits and loan book over the last five years. The company counts more than 180,000 customers.

Earlier this year, Bank Australia signed an MOU with Qudos Bank to explore a potential merger, adding upwards of 99,000 customers and assets of $5.5 billion to its books if the pair proceed.