Credit unions hold record €18bn in assets

Total assets held at credit unions are at a record high, but challenges remain for the sector with investment returns constrained by low interest rates and savings continuing to grow more quickly than loans.

A new report from the Central Bank shows total sector assets now stand at €18 billion with member savings having risen from €11.8 billion in 2014 to €15 billion currently.

Some 55 credit unions, with balance sheets of at least €100 million, now account for 58 per cent of total assets under management.

The new report highlights improvements in the financial position of credit unions at a sectoral level, with a reversal in the decline in loan-to-asset ratios, which is seen as a critical driver of income generation.

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In addition, credit union boards continue to hold reserves in excess of minimum requirements, with an average reserve ratio of 16.5 per cent across the sector.

"It remains a challenging commercial environment for credit unions in the context of a rapidly-evolving external environment and in meeting member expectations for choice, access and speed of decision-making," said Patrick Casey, registrar of credit unions.

Changes

“Changes are required to the traditional credit union business model to meet those needs. The financial metrics presented in the financial conditions report should be considered in that context,” he added.

According to the study, loan-to-asset ratio declines across the sector are beginning to reverse but remain close to an historic low level, averaging 28 per cent.

The average cost-income ratio across the sector remains high at 78 per cent, highlighting the need for improved efficiencies, the Central Bank said.

It also said the pace of decline in return on assets across the sector was of concern given the current benign trading environment.

Average savings per member are in the region of €4,400, the report shows.