Update on the financial condition of the credit union sector

• Central Bank releases sixth issue in the Financial Conditions of Credit Unions series.
• Trends show challenges for credit unions in income generation due to current financial environment.
• The credit union sector continues to demonstrate a strong overall reserve position.

The Central Bank of Ireland today publishes its sixth issue of the report on the financial conditions of the credit union sector. For this edition, the main focus of the analysis is based on data over the period 30 September 2011 to 30 September 2019, which provides extended trend analysis of the sector. Supplementary analysis by region and county, and new analysis on credit union sector savings, has also been included.

While the number of credit unions overall has reduced, from 406 in 2011 to 241 in 2019, credit unions maintain an extensive footprint across the country. According to credit union sourced data, combined membership totals c.3.4 million. Sector total assets continue to expand – increasing 31 per cent  from €14.0 billion to €18.3 billion over the period 2011 to 2019. 

Credit unions continue to face financial challenges in terms of income generation and return on assets given the low interest rate environment and high cost metrics.  On a positive note, the sector continues to demonstrate a strong overall reserves position.
Total investments increased by 58 per cent over the 2011 to 2019 period to €12.5bn, largely reflecting a continuing inflow of member savings. Average returns on investments have been in steady decline, decreasing from 3.1 per cent at 30 September 2012 to 0.9 per cent at 30 September 2019.

There are signs of a shift in loan portfolio profiles, with increased levels of longer-term lending and a net increase in the total value of new loans advanced since late 2015. The current sector loan to asset (LTA) ratio averages 28 per cent, ranging from 12 per cent to 73 per cent across the sector. The sector’s cost-income ratio, excluding provisioning and non-recurring items, has risen from 46 per cent to 86 per cent between 2011 and 2019, an area for particular credit union focus.

Commenting on the report, Registrar of Credit Unions Patrick Casey said:

“The trends highlighted in our latest Financial Conditions statistical release reflect the significant challenges that credit unions have faced over the 2011 to 2019 period, due to a changing nature of retail financial services and the low interest rate environment. Going forward, as those challenges will likely persist, credit unions need to take greater ownership of their business model development in order to achieve sustainability for members.

“Irish credit unions continue to enjoy the loyal trust of members. This trust, coupled with the sector’s co-operative member-centric ethos, remains a competitive difference upon which to evolve business models and meet ongoing commercial and competitive challenges.”

Notes

• The Central Bank is committed to producing regular reports on the financial condition of the credit union sector, as one of its regulatory supports to the sector.
• The primary focus of this publication is to provide analysis of data to credit unions to support them in analysing their own performance alongside the sector and peers.
• Data in the report focuses on trends in the period 30 September 2011 to 30 September 2019. The report includes analysis by credit union asset size. In addition, the report contains regional analysis with a focus on loan to asset ratio and analysis on credit union sector savings.
• Credit unions with assets of at least €100 million can apply to the Central Bank for approval to increase individual member savings in excess of €100,000.
• Previous reports on Financial Conditions of Credit Unions.