This year may be a repeat of 2010's below-trend savings growth for credit unions as members continue to focus on paying down debt.
Low deposit yields, a modest uptick in consumer spending and a slightly more upbeat outlook in the equity markets are some of the factors which will likely keep savings growth below 5% in 2011, according to CUNA Mutual Group's February Credit Union Trends Report.
Credit unions finished 2010 with total savings growth at 4.5%, which is below the 10-year average annual rate of increase (7.7%) and results following the 2001 recession, the report's data showed.
"Some of the weak performance is attributable to member households reducing debt as a balance sheet alternative to building savings," said Dave Colby, chief economist at CUNA Mutual. "We believe the vast majority of the growth reduction can be traced back to deposit pricing."
Yields were already low at the end of 2009 and credit unions reduced them further, reflecting competitive market conditions, the desire to control deposit inflows and reduce their cost of funds, Colby said.
Over the course of 2010, money market yields declined 38% to 0.60%, CDs were down 32% to 1.2%, regular shares finished the year at 0.38% off 28% and share drafts yields declined 23% to finish 2010 at 0.32%, according to the report. Annual asset growth finished the year at just 3.2%. The $10.2 billion reduction in borrowings combined with reduced deposit inflows translated into total assets finishing 2010 up $29 billion to $933 billion.