Credit Union numbers fall by 40% amid income struggles

The number of credit unions in the Republic has fallen to 241 from 406 in 2011, as the industry succumbed to a wave of mergers as it grappled with a slump in lending and income pressures.

The sector's current combined loans amounted to 28 per cent of assets as of the end of September, according to a Central Bank report, published on Tuesday. That is down from 49 per cent in 2007, and ranks among the lowest across credit union movements worldwide. The optimal loan-to-assets ratio is widely viewed to be about 50 per cent.

Combined membership of the industry totals about 3.4 million, while total assets increased 31 per cent, from €14 billion to €18.3 billion, over the period 2011 to 2019, according to the Central Bank.

The regulator moved last month to ease restrictions on long-term lending by Credit Unions, effective from January, following years of lobbying by the industry.

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It has removed the maturity limits that cap the percentage of credit union lending that can be outstanding for periods of greater than five and 10 years. The limits have been replaced by new maximums for home mortgage and business loans expressed as a percentage of total assets.

Flexibility

The Central Bank said the changes provide financially strong and capable credit unions with the flexibility to undertake increased levels of longer-term lending.

The number of credit unions with more than €100 million of assets increased from 30 to 55 between 2011 and September 2019.

The movement escaped forecasts at the height of the financial crisis that it would need a €1 billion bailout.

"The trends highlighted in our latest financial conditions statistical release reflect the significant challenges that credit unions have faced over the 2011 to 2019 period, due to a changing nature of retail financial services and the low interest rate environment," said Patrick Casey, registrar of credit unions. "Going forward, as those challenges will likely persist, credit unions need to take greater ownership of their business model development in order to achieve sustainability for members."

Total investments by credit unions increased by 58 per cent over the 2011 to 2019 period to €12.5 billion, largely reflecting a continuing inflow of member savings. Average returns on investments have been in steady decline, decreasing to 0.9 per cent from 3.1 per cent over the period.