Doubling in number of credit unions with €100m-plus in assets

Savings in sector grow by quarter to €14.6bn over five years

The Central Bank is consulting on proposals to remove existing longer-term lending limits for credit unions. Photograph: Collins

The Central Bank is consulting on proposals to remove existing longer-term lending limits for credit unions. Photograph: Collins

 

The number of credit unions in the Republic with more than €100 million in assets has doubled in the past five years to 54, following a period of rapid consolidation in the sector, according to a Central Bank report.

The credit unions accounted for 57 per cent of the total of €17.6 billion of assets in the sector as of the end of September, it said. The number of credit unions in the State have fallen to about 250 from almost 400 since 2013, according to a chart contained in the report.

Total savings in the sector have grown by 25 per cent over the five-year period to €14.6 billion, amounting to a compound annual growth rate of 5 per cent. However, loans have only grown at a 1 per cent annual rate to €4.8 billion.

Total return on assets continued to fall during the period, and stood at 0.95 per cent in September.

The Central Bank published a consultation paper in October on proposals to remove existing longer-term lending limits for credit unions, as well as the introduction of tiered concentration limits for house and commercial lending.

Credit unions are bound by a general ban on firms in the sector having more than 15 per cent of their loans with more than 10 years to final repayment.

While the credit union movement escaped forecasts at the height of the financial crisis that it would need a €1 billion bailout, its loans have slumped from almost 50 per cent of assets in 2007 to 28 per cent in September, as borrowers focused on repaying loans and the sector went through massive restructuring. A ratio of about 50 per cent is seen as sustainable.

Sectoral level

“At a sectoral level, improvements have been observed in the financial position of credit unions,” said Patrick Casey, registrar of credit unions in the Central Bank. “However, in terms of their underlying performance, credit unions continue to encounter difficulties with income generation and return on assets constrained by low interest rates, low loan to asset ratios and high cost income metrics.”

The Irish League of Credit Unions (ILCU), which represents 240 firms, said that the Central Bank report highlights challenges for the sector, including the fact that its returns on assets are constrained by low interest rates.

“Growing the loan book continues to be a priority,” the ILCU said. “To this end, the ILCU has recently set up the Home Loans CUSO service, which provides operational support to affiliated credit unions in the processing and fulfilment of residential mortgages, based on a standardised, consistent and reliable methodology.”

To date, 11 participating credit unions have gone live on the service, with mortgage applications being processed.