Some corporates are low-balling their members, paying below market dividends in an attempt to increase retained earnings, Corporate America Credit Union President/CEO Thomas Bonds told Credit Union Times today.
"If the NCUA goes ahead with a 5% capital ratio, corporates have three options," Bonds said. "You can shrink the balance sheet, issue new PIC, or increase retained earnings."
Corporates that can't raise member capital have resorted to paying low dividends, which Bonds said "makes it look like you're improving, but it's really just being sneaky."
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Corporate America's certificate rates are significantly higher than those offered by large corporates hit hard by investment losses, particularly for short terms.
The $2 billion corporate has raised $35.6 million in paid-in capital in four months, including nearly $8 million in June. Nearly all of it is new money, Bonds said.
"We're not sitting here thinking we're smarter than the average bear, playing these financial markets like we're experts," he said. "We know enough to make prudent calls on money that's not ours."
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