LAS VEGAS — They are suggestions that have been heard before but lately, the tone is less optional and more now or never–"marketing like mad men" and building strong shared branching alliances may determine which credit unions will survive.
That was the message conveyed by Peter Duffy, associate director of Sandler O'Neill & Partners, at NACUSO's annual conference.
Duffy spoke on credit union and bank performance metrics, emphasizing ways to leverage the credit union culture to improve overall performance. Sharing data on the credit unions with more than $100 million in assets, Duffy said net interest margin data showed members absolutely want the best rates, branches, ATMs and the correct answer the first time from credit union employees.
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"The imbalance of supply and demand is wreaking havoc on margins for many industries, including credit unions," Duffy said. "With the exception of business loans, the balance sheet of banks and credit unions is a commodity. So the question is how do you differentiate in a commodity business?"
In 1993, 56% of credit unions' business came from regular shares and drafts, he said. Today, it's 44%. It costs credit unions 72 to 79 cents to produce $1 of revenue today. For banks, it's 62 to 69 cents, Duffy pointed out.
Indirect lending, for instance, has not yielded long-term growth for some credit unions, Duffy said. As a result, it's no surprise that credit unions are relying more on fee income. In 1998, credit unions generated 7.75% in fee income. In 2007, that increased to 13.3%. Banks went from 7.37% to 5.01% for the same periods.
"Be ravenous pigs [to grow revenue] but not on the backs of members and market like mad men," Duffy advised. "Once upon a time, banks and credit unions did not have to forage for raw materials [customers and members]. Going forward, you have to know your market."
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