Credit union CUA has lifted first-half profit more than 10 per cent and expects a strong second half as the major banks push up borrowing rates amid rising funding costs.
CUA's made a net profit of $31.1 million for the six months to December 31 as a strong performance from its health insurance business offset weakness from its home loan business.
Chief executive Rob Goudswaard said CUA experienced a slowdown in lending activity during June to September as it held its interest rates steady while other banks cut theirs.
"We didn't play in that price game so the volume for us was not there during the first half," Mr Goudswaard told AAP.
But, he said, the cost of borrowing had increased since Donald Trump won the US presidency in November prompting the major banks to lift key interest rates.
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"Now, all of a sudden, we are more attractive to people, and since November we have experienced strong interest in our lending products and that's still happening now.
"Lending (activity) is stronger for us than what we would normally have around this time of the year."
Mr Goudswaard said the recent increase in new lending would boost CUA's second half performance.
However, low interest rates and strong competition in the home loans market and in attracting member deposits would continue to put pressure on CUA's margins.
The credit union added 5,012 new members in the first half, taking the total to 444,725.
CUA Health performed strongly, posting a first-half profit of $3.37 million while the credit union's core banking business profit fell 3.8 per cent to $29.7 million on the back of slowdown in lending activity.
Meanwhile, Mutual Marketplace, CUA's new joint venture with People's Choice Credit Union providing procurement and accounts payable services, is due to launch in April.
