Credit union assets reach record high but challenges remain

Arrears have fallen and reserves have increased, says Central Bank

Credit unions ‘benefit from a strong brand’, says registrar Patrick Casey.

Credit unions ‘benefit from a strong brand’, says registrar Patrick Casey.


Assets in Irish credit unions have reached a record high of €17.2 billion, but challenges remain for the sector, according to a new report by the Central Bank.

In its third report on the financial condition of Irish credit unions, the Central Bank said the sector was showing positive signs on new lending, while there has also been a reduction in reported arrears and an increase in overall reserves.

But while credit unions “benefit from a strong brand and have a high level of trust” among their members, the registrar of credit unions Patrick Casey said, “many significant challenges” remain.

These challenges include a deteriorating cost-to-income position, low loan-to-asset ratio and low return on assets.

Total sector loans amount to €4.5 billion, with lending having increased annually since 2015. However, outstanding gross loans have still not reached the €4.7 billion level reached in 2013.

Credit union loans tend to be bigger than they were four years ago. Some 14 per cent of credit union loans now fall in the €15,001-€25,000 band, compared to 10 per cent in 2014, while 9 per cent of loans are for €25,001-€50,000, up from 4 per cent. Loans of €50,001 or more now account for 4 per cent of credit union loans, up from 1 per cent.

A decline in the average level of arrears indicates “continuous improvement in sector wide credit quality”, the report notes.

Responding to the Central Bank data, Kevin Johnson, chief executive of credit union representative body CUDA said loan growth through social media now account for up to 20 per cent of all loan enquiries for some credit unions.

“Our digital loan services have seen participating credit unions experience a 10-fold increase in their interaction with younger adult members. Over 600,000 members are now using digital lending tools, which in turn has resulted in a significant upturn in lending volumes,” he said.

Mr Johnson said CUDA looked forward to a Central Bank consultation reviewing how loan limits operate in credit unions.


The Central Bank said savings continue to outpace loans, with sustained annual growth since 2014, and total savings across the sector now amount to €14.3 billion, up €2.7 billion on the figure five years earlier.

The average loan-to-asset ratio, a key measure of viability, has remained at 27 per cent since March 2016. However, it has fallen from the 35 per cent ratio that prevailed in March 2013.

Total sector reserves have reached €2.8 billion, up from €2 billion five years earlier. The average realised reserves ratio is 16.5 per cent, above the minimum regulatory requirement of 10 per cent.

However, three credit unions reported reserves of less than the 10 per cent minimum as of the end of March and have since been transferred to other credit unions under the transfer of engagements process.

Total sector loan interest income has decreased over the five-year period, while total investment income has dropped as a result of the prevailing low interest-rate environment.

While proposed dividends have fallen over the period, more credit unions are now proposing rebates on loan interest, the report shows.

There were 264 active credit unions as of the end of March 2018, and some 53 of these had assets of €100 million or more. These larger credit unions now account for 55 per cent of total sector assets.

This marks a change on the structure of the sector in 2013, when credit unions with assets of €100 million or more accounted for just 31 per cent of total sector assets.