Credit union lending up by €216 million in 2016 (ROI)
Media Release: 07 December 2016
- Credit union loans are up by €216 million (6.1%) in 2016 and were up €94 million alone in the last quarter before year end, September 2016.
- 68% of credit unions (192) have recorded growth in their loan books
- Loans have now been up for five out of the last six quarters.
- The credit union movement is extremely well capitalised, reserves have increased by 8.4% to €2.3 billion.
- Credit unions have €880 million in excess capital above the 10% minimum capital requirement.
- Total loan provisions (funds set aside for loan losses) now exceed total gross loan arrears by €170 million. This buffer is in addition to capital reserves of €2.3 billion.
- Gross loan arrears have fallen by 27% (€119 million) for the year to end September 2016, and are now at a ten year low.
- Arrears have fallen for 19 consecutive quarters.
The Irish League of Credit Unions (ILCU) has released very positive 2016 year-end figures showing that demand for loans across credit unions in the Republic is increasing steadily. Loans are up by a significant €216 million (6.1%) with 192 credit unions growing their loan books, compared with 141 for the same period last year, and 80 the previous year. In the quarter to September 2016, loans grew by a substantial €94 million. Lending has now been on the rise for five out of the last six quarters.
The increase in loans is being attributed to an overall increase in demand, proactive credit union advertising and marketing, and in some cases an easing of lending restrictions.
Savings increased by 7%, to now stand at €12 billion. In addition, assets also grew significantly, by over 7%, and now stand at slightly over €14 billion – up almost €1 billion (€999m) in the year to end September 2016.
The 2016 results once again show that the credit union movement is extremely well capitalised. Capital reserves increased by €179 million (8.4%) and now stand at €2.3 billion. Credit unions now have €880 million in excess capital above the 10% minimum capital requirement. 62% (173 credit unions) have capital ratios in excess of 15%.
In addition, total gross loan arrears are now almost back at September 2006 levels, following a 27% fall in 2016. The overall arrears ratio is now down to 8.8%.
Commenting on the year end results, ILCU CEO Ed Farrell said “These figures are hugely encouraging, especially with the healthy upward trend in lending. Credit unions have been very proactive in growing lending over the past year and this has been demonstrated by the fact that the vast majority are now reporting lending increases. The figures are reflective of a movement that continues to grow and strengthen, while confidence continues to be expressed by the steady growth in membership, which has now reached three million in the Republic alone. We are going into 2017 from a very positive position and will continue to succeed because we continue to change to meet members’ needs.”
The ILCU also outlined the increased focus on training and development within credit unions during the past year. With additional compulsory roles created within credit unions in recent times (such as Risk, Compliance and Internal Audit), and with all Board members being now subject to Fitness and Probity requirements, the demand for training continues to rise.
Mr Farrell continued “The ILCU has almost 3,000 people registered on our Continuing Professional Development (CPD) Scheme who we expect will carry out over 45,000 hours of CPD training this year. It has been acknowledged that the governance requirements on credit unions are now as comprehensive as those in place in the most advanced of credit union movements. Credit union personnel are fully committed to upskilling and development to be the best they can be for credit union members.”
Loans were up in five of the last six quarters. In total, loans were up €216 million (or 6.1%) for the year to Sept 2016, and up €94 million in the last quarter before year end September 2016. So far this year, 192 credit unions grew their loan books compared with 141 for same period last year and 80 the previous year.
Loan arrears peaked in credit unions in 2011, and have now fallen for 19 quarters in a row. Credit unions are driving down arrears, and as a result some loan provisions can be reversed (which has the effect of increasing surplus). The overall arrears ratio is now down to 8.8%.
Loan arrears are almost back at Sept 2006 levels, a 10 year low. Gross loan arrears fell by €119 million (or 27%) for the year to Sept 2016.
Loan provisions exceed loan arrears. Total provisions in September 2016 were €499 million, exceeding total gross loan arrears by €170 million. This buffer in loan provisions of €170 million is in addition to capital reserves of €2.3 billion.
As the arrears position continues to improve, credit unions have been able to reduce provisions, and total provisions are now back at June 2010 levels.
Savings and Assets
Savings and assets are both up over 7% for the year to September 2016 (2015:+5%, 2014:+2%). For the year to Sept 2016, 266 credit unions (or 95%) recorded growth in savings. Assets were up €999 million for year to Sept 2016, and now stand at €14.42 billion.
Credit unions affiliated to the ILCU now have 3.04 million members, an increase of 4.5% since September 2015. Ireland continues to have one of the highest levels of credit union membership per capita worldwide.
The average dividend paid in 2015 was 0.6%, which is down slightly on the 2014 figure of almost 0.8%. It is clear that reduced dividends are not impacting savings.
Given that market interest rates for savings are extremely low, the economic uncertainty regarding Brexit, and that credit unions savings have been growing rapidly, a dramatic increase in the average dividend rate to be paid is not expected as credit unions will continue to prioritise consolidation and growth, which requires investment in structures, technology, etc.
In recent years, many credit unions have paid a loan interest rebate instead of a high dividend in order to reward borrowers as well as savers. The average loan interest rebate paid in 2015 was 10.14%. Early indications from the 2016 year end accounts show credit unions are trending to pay higher loan interest rebates than in previous years.
Savings Protection Scheme and Transfer of Engagements
The Savings Protection Scheme (SPS) which is funded by ILCU affiliated credit unions, continues to serve the movement extremely well. Most of the financial support provided by the SPS was provided during 2011 and 2012. More recently SPS support has been provided to facilitate transfers of engagements. Enhanced services, extended opening hours and increased community investment have been a by-product of the 43 ‘transfer of engagements’ which have taken place so far this year. The merged credit unions will endeavour to deliver new and improved services to their members.