Credit Union investment increase belies income trouble
Rob Flynn
Staff Writer

Credit Union members are sure to keep a watchful eye on developments within the sector as its business model undergoes a re-evaluation.

A new report from the Central Bank has shown that Credit Unions continue to face financial uncertainty around income generation and a return on assets due to the current low-interest-rate environment and high costs.

The figures

Despite the difficulties the sector is facing, the Credit Unions continue to demonstrate a strong overall reserves position, with total investments increasing by 58% over the 2011 to 2019 period to €12.5bn, largely reflecting a continuing inflow of savings from members.

The report, however, outlined a marked and steady decline in the average return on investments, which decreased from 3.1% at 30 September 2012 to just 0.9% at 30 September 2019, outlining the challenges the sector faces in the current low-interest-rate environment. 

The report also shows signs of a change in loan portfolio profiles, with increased levels of longer-term lending and a net increase in the value of new loans issued to members since late 2015. 

The current sector loan-to-asset (LTA) ratio averages 28%, which is considered low, however the sector’s cost-income ratio is what’s more concerning, rising from 46% to 86% between 2011 and 2019.

The sector's total assets continue to expand, increasing by 31% from €14 billion in 2011 to €18.3 billion in 2019.

Fall in number of Credit Union branches

After the financial crash, several Credit Unions collapsed while many others merged to help improve their financial position. This is borne out by the report which shows that the total number of Credit Unions nationwide has reduced from 406 in 2011 to just 241 today. However membership remains high at around 3.4 million customers.  

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.”

New current account offering

In October, a number of Credit Unions around the country came together to roll out a new current account for members in a bid to diversify its offering and satisfy an increasing demand in the market. 

The move into the wider banking environment had been long overdue from the sector, and while increased choice is always positive for consumers, the pricing is not yet overly competitive. We took a look at the current account offering in more depth back in October, which you can read more about here.

And if you are considering opening a new current account you can compare the best options from all providers with our easy-to-use current account calculator.

Let's hear from you

Are you currently a member of a Credit Union? What do you think of the latest report?

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