SCOTTSDALE, Ariz. - Economic uncertainty and concern about the subprime crisis affecting other lending and credit areas have credit union CEOs looking at collaborations and consolidation more seriously these days, one analyst said he is finding.
Steve Williams, a principal at Cornerstone Advisors, which works with 300 CUs nationally on strategic planning, process improvement, and technology issues, said the discussions he’s having today with credit union leaders have become much more “focused.”
“The real change I’ve seen recently is in CEOs’ tone,” Williams said. “What’s going on with the economy has opened a lot of folks’ eyes in the industry to the need to talk about mergers and collaborations more.”
Merger discussions are moving toward unions of equals, Williams explained, simply as a way to build size and survive.
“Historically mergers have been about fear,” Williams suggested. “I think now more than ever I see very competent, well-regarded CEOs having a gut feeling that the minimum size to stay in the game has increased because of a few forces: regulatory requirements, contingency planning, and the cost of technology. I get a sense that very astute CEOs are saying that just the fixed costs of being in this business have risen significantly. They feel there is a certain need to address critical mass now.”
While merger may be the answer for some, collaborations should be a necessity for all, Williams believes, adding that partnerships function best as working groups of equals.
“Look at Open Technology Solutions,” Williams said, referring to the Denver-based CUSO. “I think what’s interesting there is the equality of the model. It’s a collaborative governance structure. There are four credit unions with equal votes, and that’s rare. In the past it’s always been about egos and that’s changing. Credit unions are realizing that if they are serious about collaboration they’re going to have to give up a little power, and that’s a good thing.”
Williams pointed to another collaboration model he feels offers CUs a greater opportunity to succeed.
“Economies of scale are important. But collaborations should lead to better ideas and better ways of doing things. I call that creative collaboration. That’s when credit unions put their heads and money together and address R&D and developing new capabilities. That’s what’s going to be good for this industry long-term.”
For the near term, Williams predicts CUs will continue to wrestle with a tight economy through 2009.
“I do not believe 2009 will be a recovery year for our economy and the real estate market,” Williams said. “I think we will have a bit of malaise that goes on longer than people expect...For the industry as a whole, the biggest issue is getting our hands around risk exposure from the housing and economic downturns.
“Right now we are analyzing and digging deep to understand what our true exposure is–how much are members really robbing Peter to pay Paul, in terms of their debt, to keep things current. We’re working with credit unions to make addressing exposure a priority in their strategic plans.”(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
