Hampel Offers More Proof Bankers' Cries on Biz Lending Encroachment May be Unwarranted

SCOTTSDALE, Ariz. – Of the litany of statistics bandied about in the area of business lending comparisons between banks and credit unions, at least one really hammers home a point. While credit unions continue to make strides in business lending, they continue to remain nowhere near the amount of revenue banks are pulling in. Bill Hampel, senior vice president chief economist, CUNA & Affiliates, shared this reality with attendees at the Participation & Business Lending Symposium, sponsored by Business Partners, LLC and the California Credit Union League. Approximately 1,878 credit unions offered member business loans in 2005 with the average loan being $173,000. Credit unions that offer MBLs tend to grow faster and have stronger member growth, Hampel said. But with just 4.1% of the loan portfolio, Hampel questioned whether banks really have anything to worry about. “Gee, maybe in another 100 years (the credit union MBL percentage) may go up,” Hampel quipped. When it comes to business loan net chargeoffs, credit unions and banks pretty much ran neck-in-neck in 2005. Credit unions saw 0.05% while banks experienced roughly 0.4% in commercial and industrial loans. For bank customers, the charge-off rate was approximately 3.50% in 2005. Hampel offered credit unions some tongue-in-cheek advice. “You guys need to take more risks…no, I’m just kidding. You’re doing fine,” he said. Hampel also took the time to reiterate CUNA’s involvement with NCUA’s data collection efforts showing how credit unions are serving people of modest means. He said the move “is not a prelude to CRA but it could be” depending on what the final analysis shows. Still, CUNA is confident that the data will indeed show that credit unions serve those of modest means, he emphasized. Credit unions are already offering alternatives to payday loans and check cashing services, among other products and services, he added. “Congress likes us because we take care of their constituents and we take care of the little guy,” Hampel said. The problem, as has been widely reported, is defining “modest means,” he continued. Hampel said by no means is the data collection pilot a ploy to pit credit union against credit union to see which one is serving “modest means” persons better. Meanwhile, Hampel said credit unions tend to “put more pressure on the bottom line” than they need to. Ideally, having a target net worth ratio of 10%, target earnings of 100 basis points and target growth rate of 8% are only possible if a credit union is trying to meet two of them at the same time. His pick would be to aim for the net worth ratio and the growth rate. “Grow your net worth (but) since members aren’t depositing that much right now, it might be tough,” Hampel said. -