Update on the financial condition of the credit union sector

• Fourth report in the Financial Conditions of Credit Unions series released
• Positive trends in the areas of new lending, reduced arrears and strong overall reserves
• Challenges remain – savings continue to grow faster than lending

The Central Bank of Ireland today publishes its fourth report on the financial condition of the credit union sector.

The report highlights improvements in the financial position of credit unions at a sectoral level. There is evidence of a strong overall reserve position, continued growth in new lending and a sustained reduction in arrears. The loan to asset ratio, a key measurement of viability, has started to reverse its downward trend, with a slight increase in 2018. However, challenges remain, as savings continue to grow at a faster pace than lending. The resulting increase in investments has an impact on credit union surpluses, given low prevailing interest rates.

Total sector assets continue to rise, now standing at a record high of €17.6bn. 54 credit unions with assets of €100m or greater now account for 57 per cent of total sector assets. €4.8bn of loans are outstanding at September 2018, up from €4.5bn in September 2013.

Savings continue to outpace loans, with sustained annual growth since 2014. Total savings across the sector today amount to €14.6bn.

A new regional analysis of the sector shows that a high proportion of community credit union assets are in the eastern and southern regions of the country, with those areas representing 80% of the total assets of community credit unions.

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

“At a sectoral level, improvements have been observed in the financial position of credit unions. However, in terms of their underlying performance, credit unions continue to encounter difficulties with income generation and return on assets constrained by low interest rates, low loan to asset ratios and high cost income metrics. For 2019, focused engagement with the sector will remain a key priority for the Registry of Credit Unions. Through this ongoing prudential engagement, we continue to support credit unions in building strong core prudential foundations in the areas of governance, risk management and operational capability, so that they are better placed to achieve a sustainable business model and serve members’ needs.”

Notes

• The Central Bank is committed to producing regular reports on the financial condition of the credit union sector as one 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 performance alongside the sector and peers.
• Data in the report focuses on trends in the period 30 September 2013 to 30 September 2018. The report includes analysis by credit union asset size and common bond type. In addition, there is new analysis by region.
• Previous reports can be found here