Australians are increasingly abandoning the ‘big four’ banks, according to latest figures from the financial regulator.

Figures from Australian Prudential Regulation Authority confirm the customer-owned banking sector has increased the value of its housing loans by 8 per cent in the 12 months to March, while that of the major banks rose by just 2.6 per cent.

The APRA figures also showed that customer-owned banking institutions increased their assets by 1.6 per cent over the previous quarter, while the big banks’ assets declined by 0.4 per cent in the past quarter.

Chief executive of the Customer Owned Banking Association (COBA) Michael Lawrence said consumers were telling banks to either put customer interests ahead of shareholders, or they’ll walk.

“The latest figures from APRA paint a clear picture of a sector that is continuing to grow as more Australians begin considering who it they choose to bank with,” Mr Lawrence said.

Figures from comparison site Canstar also showed the non-major banks were on the march, increasing their loan books and market share by more than the majors.

In the year to May, the majors increased the value of their owner-occupier loan book by 3.75 per cent, while other banks’ lending was up 10.56 per cent in the same period.

Market share also dipped in the same period, with major banks’ falling 1.01 percentage points, shedding customers to smaller banks.

Month-on-month figures for the past five months also show other banks’ growth consistently outstripping that of the majors.

Canstar’s financial services executive Steve Mickenbecker said the figures were telling.

“Watching these figures over the years, you get used to them just crawling along, so a move of 1 percentage point is actually very significant,” Mr Mickenbecker said.

“The interesting thing is, these stats all tell the same story, and it’s not just year on year but every single month. They are very compelling stats.”

But the real picture may be even more dramatic as those figures don’t take into account the non-bank lending sector – institutions such as loans.com.au or Reduce Home Loans – which have consistently had the lowest mortgage rates over the past year, Mr Mickenbecker said.

The flight to smaller banks was not necessarily linked to the fallout from the 2018 banking royal commission, he said, but had started some time before that.

“We found that traffic to our site grew dramatically [before the commission] because the pricing of these non-bank lenders has been much better in the market for some time … and what we are seeing more and more is that second-tier Ienders [like U Bank, HSBC or ING] are getting very aggressive.”

Customer-owned bank makes assault on Sydney and Melbourne

The news comes as the customer-owned Heritage Bank, based at Toowoomba in Queensland, announced a foray into the Sydney and Melbourne markets.

Clearly seeing opportunity in increasing public unease over the big four, Heritage chief executive Peter Lock said the bank would open two branches in Castle Hill in Sydney’s outer north-west, and in Parramatta in the city’s west.

Mr Lock said the bank planned to open six branches in Sydney and do the same in Melbourne.

Heritage, which increased its loan book by 1.8 per cent in the past year, currently has 310,000 clients, and has set a target of 450,000 within 10 years, he said.

Mr Lock said despite the rise of digital banking, Heritage had complete faith in the branch model, which combined the “physical and digital experience” for customers.

Heritage is one of about 70 customer-owned banks in Australia that are gaining ground on the big four – something COBA’s Mr Lawrence put down to the royal commission’s revelations of behaviour by the big four.

“Australians want banking institutions they can trust to put their interests first and to do the right thing by them. After the findings of the Financial Services Royal Commission it’s no surprise people are looking beyond the ‘big four’,” he said.

“Consumers can see through the spin of the major banks. They know a leopard can’t change its spots. That’s why they’re taking their banking elsewhere.”