To the Editor:
I read with interest "As Big Banks Merge, Small See Peers as Major Threat" (March 26, page 1). The article reports on a recent Grant Thornton poll which found that while community banks are coming around to the realization that mutual fund companies, regional money-center banks, other nonbanks, and even other community banks are increasing competitive threats, they remain fixated on credit unions.
That fixation may be due in large part to misleading credit union growth figures vis-a-vis banks which some bankers and banking trade associations have been trumpeting the past few years. Here are some facts about the relative growth of the two institutions that you readers may not be aware of.
Last year, in just one year, banks grew nearly as much as credit unions did in their entire 86-year history in this country. Banks grew by more than $300 billion in 1995 and in 1994, too, for that matter. Compare that with total credit union assets at the end of 1995 - about $318 billion.
In the last 15 years, bank assets have grown nearly 10 times as much as credit union assets. The banking industry, with $4.3 trillion in assets, is more than 13 times the size of the credit union movement, and the average bank is more than 16 times the size of the average credit union, as measured by total assets.
And banks' profits sets yet another all-time record in 1995 - $48.8 billion. Stockholder dividends also rose to a record high, of $31 billion.
Given these figures, I cannot fathom why banks are so worried - even obsessed - about credit unions.
If banks feel competitors are taking their market share, they would do well to direct their attention to mutual funds, which are much more responsible for that trend than credit unions.
As impressive as the bank figures are, mutual fund growth has been even more spectacular.
In 1980, financial assets in mutual funds (including stock, bond, and money-market funds) were $135 billion - twice the size of credit unions, and only 7% the size of banks.
But in 1995, mutual funds grew to $2,820 billion, which amounted to 65% of bank assets and more than eight times the assets of credit unions.
There's no doubt that competition in the financial services arena has increased tremendously in recent years. Credit unions have managed to thrive and grow because they have remained true to their mission of service to members.
Banks would do well to follow credit unions' lead. Rather than continuing efforts to seek legal and legislative relief from competition from credit unions and others, they should seek to provide top-quality service to their customers.
Sincerely,
Pete Crear
Acting president, Credit Union National Association Madison, Wis.
