INTERVIEW TRANSCRIPT

TG: We don’t think of our success necessarily in terms of how much market share we achieve but rather in terms of the new products and innovations that we bring to customers in the market. We’ve grown very fast over the last ten years. Our average annual growth rate has been well over 35% so we’ve been able to attract quite a bit of market share as a result of those acquisitions but our focus now is on core growth. Organic growth; and that means introducing new products that are going to appeal to customers. We think there’s a great opportunity to do that in Australia in credit cards, in mortgages and in personal loans.

MP: Aren’t there implications though for market share if you continue to grow at the pace you have been?

TG: Well naturally we will be taking market share but we see that as a function of what kind of value we can provide to customers. Customers in Australia are very discerning. They have been reluctant to switch in the past and it’s going to take extremely good products, extremely good value to make them to want to switch and we’re in the process of developing and rolling out those products.

MP: Is there any area that you don’t intend to roll out into?

TG: Well our focus right now is in those areas where we have built substantial positions over the last 10 years through acquisitions and organic growth, so that is motor finance, retail finance, credit cards, personal loans, mortgages and insurance. Those are the areas where we have positions right now. We have good distribution. We have a solid customer base and we’re planning to grow. In the future there’ll be other areas but those are really for the future.

MP: Short–term future or medium–term future? You have said you do intend to get a banking licence.

TG: Well we’ve already got a modified form of a banking license in the form of a specialised credit card issuing licence and that is technically an ADI, an Authorised Deposit Institution but we’re not allowed to take deposits. Now as we go forward we see deposits as a growth area for us. It gives us flexibility on funding. It gives us flexibility on product innovation and we already are prudentially regulated by APRA so we envision that we will go the further step and get a full banking licence in the market but it won’t be for two or three years.

MP: Only two or three years?

TG: For us that seems like an awful long time.

MP: And you won’t do this by acquisition?

TG: It’s not the intention right now. We’re already a bank in several other markets in Eastern Europe and in places like Hungary, the Czech Republic and Germany but in places in Asia we’ve gotten into banking greenfield by getting a licence and then building a bank around that. Such as in Thailand. That’s more the model that we’re envisaging at this point right now in Australia.

MP: Obviously continuing to take market share means eating into bank’s margins. How much fat have you identified is there for the taking?

TG: Part of the opportunity is that the banks forecast all their growth rates off of their existing foundation and so as we look at the market going forward, particularly in credit cards, the RBA has changed the landscape by reducing the intercharge revenues and that forced the banks to increase fees and lower the value of their reward programmes. We don’t have those constraints because we’re coming off of a new base. We’re a new entrant. We have the fixed costs already invested through our private label credit card programmes. We’re able to introduce general purpose credit card programmes, leveraging that fixed cost base. Every new credit card for us is incremental. We don’t have a historic foundation that we’re trying to grow off of. It’s all new for us. So therefore we can be more aggressive on price and still earn very satisfactory returns.

MP: You’re part of the chorus that would like to see positive credit reporting. It would allow more competitors in. The big four banks, they don’t really want that do they. They’re not really in favour of positive credit reporting?

TG: Well I don’t think it would necessarily allow others to come in. It depends on what form positive reporting takes and we don’t envisage that positive reporting in Australia would be exactly like it is in the US and in the UK where everybody has access to the data and can use it for marketing purposes. We envision that if positive reporting were to come to Australia it would be in a limited different type of form where it would be able to be used for underwriting but not for marketing purposes. And in that sense it wouldn’t help new entrants coming into the market. And we are very strong in support of positive reporting for use in underwriting because we think it will lead to better lending decisions. We’ll be able to test the capacity better and all of the banks, ourselves included will be able to lend to customers knowing full well what their total commitments are and therefore to reduce losses.

MP: So you’re part of the club already. You don’t want more competitors?

TG: Well I think there are plenty of entrants in the Australian market and we would certainly prefer not to see any more. So from that standpoint we would side with the banks but I think positive reporting will lead to better credit decisions, more responsible lending and ultimately a better outcome for both the lenders and the borrowers.

MP: How much damage do you think you’re doing to the banks?

TG: Well I think it’s all relative. We’ve certainly make some inroads but our size relative to the big banks is still very small so while it may be something that they notice on the margins I don’t think that it’s really struck at their core. We see an opportunity though for us to grow off of our base very significantly in the future.

ENDS