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CUNA officials have continued to downwardly revise economic projections for credit unions in 2020, for the most part, as the coronavirus has surged again in many parts of the country.
According to the most recent "CUNA Economic and Credit Union Forecast" report, economists appeared to accept the need for a COVID-19 vaccine before the economy can get back into positive territory.
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"We will learn to live and work with the virus, but a full economic recovery won't be in reach until a vaccine is widely available. That is not expected until 2021 at the earliest," the report said.
The most encouraging news for credit unions, and one that appears to be holding up overall lending forecast numbers in the positive area, comes from fixed-rate mortgages. According to the report, "Fixed-rate mortgages rose an incredible 12.9%, and we expect continued mortgage lending to support modest credit union loan and membership growth in the immediate future." The strength in fixed-rate mortgages helped sustain an overall lending growth of 2% through May.
But, the updated report showed negative signs for other lending areas through the first five months of 2020:
- Credit cards, -9/2%
- New auto loans, -3.0%
- Adjustable-rate mortgages, -3.0%
- HELOCs, -1.7%
- Commercial loans, -2.3%
According to the report, credit union savings balances continued to climb with a deposit increase of 12% year-to-date. "However, this rapid growth is largely due to the government stimulus checks that greatly magnified normal seasonal savings inflows." The CARES Act is set to expire this month and while lawmakers are expected to pass another stimulus bill, it's not expected to be as generous.
CUNA economists said they anticipate an increase in credit union delinquencies and charge-offs for the rest of this year and through 2021. "Delinquency and charge-off rates will increase to 1.50% and 0.75%, respectively, in 2020, before falling slightly to 1.25% and 0.90% in 2021," the report stated.
The report showed additional pressures on ROA for loan losses and decreased interchange income. "Our forecast shows ROA falling to 0.35% for 2020, a significant decline from 0.93% ROA in 2019, but well above the Great Recession low of 0.18% in 2009." Earnings are expected to fall even more to 0.10% in 2021 as losses climb and interest rate margins remain "extremely tight," according to the report.
CUNA economists warned that the forecasted economic numbers assume three things: Society will take preventative measures to stop the spread of the coronavirus, Congress and the Federal Reserve will take action to continue to support the economy, and no other major events will impact the economy, "such as significant natural disasters, new international conflicts or increased trade barriers."
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
