Member Balance Sheet Repairs May be Source of Loan Growth
Over the next 12 to 18 months, repairing members' balance sheets may be the primary source of loan growth for credit unions.
That's according to CUNA Mutual Group's August Credit Union Trends Report, which tracked data through June. Loan refinances and debt captures provides better financing terms for members, improves credit union spreads, and allows for growth, wrote CUNA Mutual Chief Economist Dave Colby.
"Since financed consumer spending has stalled, we must turn our attention to what consumers are doing," Colby said. "Without loan growth, we will be forced to turn away deposits and [manage] on razor-thin margins."
Colby acknowledged "we are desperately searching for some good news in lending." Total loans were down 0.9% year to date and 0.7% over the past year. The good news was a 0.4% gain in the second quarter, but this positive momentum will not carry through to the end of year, he said.
Still, member business loans, used vehicles, first mortgage and home equity loans have posted positive YTD result. Colby said these gains were more than offset by declines in new vehicles and second mortgages.
"After expanding just 1.2% in 2009, I believe credit unions will have a difficult time achieving 1.7% loan growth in 2010," Colby said. "Current lending strategies are not in sync with member financing needs or delivery-channel preferences."