Despite concerns over the stability of the credit union sector in recent years, new figures show that confidence remains high, with savings and membership on the rise and arrears continuing to fall. However, a decline in lending levels is of concern.
According to new figures for the 12 months to June 2014 from the Irish League of Credit Unions ( ILCU), which represents 374 credit unions, the “vast majority” of credit unions are making a surplus. Overall, the total surplus at June 2014 was € 194 million, which is similar to June 2013. Total assets amounted to €12.7 billion, up from €12.47 billion in September 2013, and membership is up by almost 70,000.
Ed Farrell, ILCU acting CEO, said that the results point to two good news stories.
“The confidence of people is there because savings are still intact. The other good story is that credit unions have been working well with members over the past few difficult years and arrears are coming down like steps of stairs”.
It has been a turbulent time for credit unions with solvency issues of concern. Last year Permanent TSB took over the beleagured credit union Newbridge, and since the establishment of Rebo (The Credit Union Restructuring Board), there have been a number of additional mergers. For Farrell, the decline in gross loanarrears is one of the most encouraging aspects of the figures.
Arrears
Credit union loan arrears continue to fall, declining by €130 million, or 17 per cent, to €644 million in the year to June 2014. This compares with a peak of €925 million in December 2011, and indicates that about one in every six euro lent out is in arrears, up from one in five previously. Farrell expects arrears to continue to improve.
Loans
Credit unions’s loan books fell by 8.3 per cent, or €335 million year on year, down to €3.69 billion, although the data points to a slowdown in the trend - loans fell by 1.4 per cent in the quarter to June 2014 compared with a fall of 2.5 per cent in the previous quarter.
It is expected that credit unions will issue € 1.5 billion in new loans in 2014, with Dublin based credit unions leading the charge (€988m in loans), followed by Cork (€610m) .
The average new loan in 2014 is € 3,029 while the average loan outstanding is € 6,267, down from about €8,000 in 2010.
“The average loan size is getting smaller as people are borrowing more prudently,” says Farrell.
Savings
Credit union customers received an average dividend of almost 1 per cent in 2013, which is down slightly on previous years, and the ILCU is forecasting a similar rate for 2014, with about 90 per cent of credit unions expected to distribute a dividend to members. The range of dividend payments is from about 0.5 per cent to 1.75 per cent.
“Despite the declining dividend, the ILCU says that this is not impacting savings, which is possibly due to the fact that the banks are offering historically low returns on savings.
Credit union savings at the end of June 2014 were € 10.7 billion, up by € 222 million or 2.1 per cent year on year. Savings were up €71 million for the last quarter (April - June 2014), with some 288 credit unions reporting savings growth for the full year to date.
Northern Ireland
Figures for ILCU’s 96 Northern Ireland credit unions show increased membership, savings, assets and loans to members in the nine months from September 2013. Together, the credit unions have £453 million in loans to their membership, up by £4million (0.8%) on year-end figures from September 2013, while membership rose by 17,000 in the same period, bringing the total number of adult members to 442,000 members across the six counties. In addition, savings increased significantly by 5.4 per cent to £1,017 million, exceeding the billion pound mark for the first time.
