P&N Group Eyes Bank Australia Merger: Why Bank Consolidation Makes Non-Bank Lenders More Essential

P&N Group, the Perth-based mutual bank, has entered merger talks with Bank Australia — the third time in recent years it has explored a consolidation deal. The news comes amid a broader wave of consolidation across Australia's banking sector, raising an important question for borrowers: as banks merge and reduce product diversity, what options remain for those who don't fit the standard lending mould?

Bank Consolidation: A Quiet but Accelerating Trend

The Australian banking landscape has been contracting for over a decade. From more than 50 locally-incorporated banks in 2010, APRA's register today lists fewer than 35. Mutual banks, credit unions, and building societies — traditionally the lenders most willing to assess borrowers on individual merit — have consolidated at an even faster rate.

P&N Group's renewed interest in merging with Bank Australia follows a failed attempt in earlier years and signals that even well-capitalised mutuals face pressure to scale. When two lenders merge, the result is typically a single set of credit policies, a unified risk appetite, and a narrower range of products.

For borrowers who sit within the standard approval criteria — stable employment, two years of PAYG income, clean credit history — this consolidation has little practical impact. But for the growing segment of Australians who fall outside these parameters, fewer lenders means fewer options.

Who Gets Left Behind When Banks Merge

Consolidation tends to be most harmful for:

Self-employed borrowers. Each lender has its own approach to assessing irregular income. Fewer lenders means fewer interpretations of what "sufficient income" looks like for someone with BAS-based revenue or fluctuating business earnings.

New migrants and PR holders. Foreign income recognition, shorter Australian credit histories, and non-standard employment arrangements are areas where individual lenders exercise discretion. That discretion disappears in a merged entity optimising for scale.

Near-prime borrowers. Borrowers with a prior default, a recent business wind-down, or a credit impairment from COVID-era hardship arrangements often need lenders willing to look beyond a credit score. Consolidated lenders increasingly rely on automated decisioning that treats these borrowers as declines.

Why Non-Bank Lenders Fill the Gap

Non-bank lenders operate outside the ADI (authorised deposit-taking institution) framework regulated by APRA. They do not take deposits, do not face the same capital adequacy requirements, and are not subject to the same standardisation pressure that drives bank mergers.

This structural difference allows non-bank lenders to:

• Maintain dedicated Alt Doc and low-doc product lines
• Assess income using BAS statements, accountant letters, and business bank statements
• Exercise discretion in credit assessment rather than applying uniform automated rules
• Serve niche segments — self-employed, migrant, near-prime — that merged banks increasingly deprioritise

MPFG Capital, for example, has maintained its flexible lending criteria through multiple cycles of bank sector consolidation precisely because it is not subject to the same homogenising pressures.

What This Means for Borrowers Today

If you have been turned away by a bank — or are concerned about shrinking options — the non-bank sector offers a genuine and regulated alternative. Non-bank lenders are licensed under the National Consumer Credit Protection Act (NCCP) and are subject to responsible lending obligations. The flexibility in their credit assessment does not mean lower standards; it means different standards, tailored to non-standard income profiles.

As the bank merger trend continues, the role of non-bank lenders in providing credit access to underserved borrowers is likely to grow rather than diminish.

This article is general information only and does not constitute financial or lending advice. Loan eligibility depends on individual circumstances.