G&C Mutual Bank Ltd.

The outlook on G&C is stable. Australia's economic prospects over the next two years are sound despite subdued GDP growth due to elevated interest rates and slowing economies of major trade partners. We forecast unemployment will increase somewhat but remain low in a historical context. We expect modest growth in house prices over the period. Strong immigration-driven population growth, along with limited new housing supply, should continue to support house prices. G&C's credit losses should remain low, at about 0.05% of customer loans, lower than the systemwide average. We believe the mutual bank will remain very well capitalized, with a RAC ratio of 20.5%-21.0% over the next two years. We see a low likelihood of a downgrade over the next

...We view G&C Mutual Bank Ltd.'s (G&C) capital position as a strength to its credit profile. We forecast our risk-adjusted capital (RAC) ratio for G&C will remain very strong over the next two years, at 20.5%-21.0%. As of June 30, 2024, our RAC ratio was 21.4%. G&C's secured residential mortgage book will support asset quality. We expect the mutual bank's credit losses will remain negligible over the next two years, in line with historical trends. G&C's small scale and modest profitability constrain its ability to compete. The mutual bank and the broader mutual sector are price takers in their key operation of funding mortgages with retail deposits in Australia. Consequently, we view mutual lenders, including G&C, as susceptible to price competition on both sides of the balance sheet from Australia's much larger major banks. Australia's small financial institutions, including G&C, are vulnerable to funding competition from the major banks. We believe the major banks could potentially bring...

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