VANCOUVER, B.C., Canada-Central 1 CU, which is similar to a U.S. corporate and which serves all of British Columbia and most of Ontario, reported a net income of (C) $99.9 million in 2009, a 275% increase from the previous year when it reported $26.6 million.
The results allowed Central 1 to pay an extraordinary dividend of 10% on top of the 2% regular dividend and transfer $74 million to retained earnings; the central now has $262 million in retained earnings and 34.5% regulatory capital.
Art Chamberlain, spokesperson for the $11-billion institution, said Central 1 and many other Canadian corporates managed to avoid the crippling losses endured by many American corporates by simply being more conservative with their investment portfolios. "Some of the centrals in Canada did sustain some losses that were related to asset-backed commercial paper but the losses were not substantial," he added.
Canada's central credit unions are somewhat different from their corporate counterparts in the States. Like corporates they provide payment services, liquidity and investment opportunities for natural-person CUs, but they also perform other services reserved for CUSOs or vendors in America, such as building Internet banking platforms and providing them to both CU and non-CU financial institutions alike. Centrals are also responsible for acting as the trade organization and lobbyists at both the provincial and federal levels for the areas they service.
Chamberlin attributed Central 1's strong year to a bounce-back in the bond market early last spring. Heading into the year, many at the central anticipated tough times in the investment markets, but once they spied beaten down high-grade corporate and Canadian government bonds, they expected to make a good return.
"We felt that there were some strong assets that were severely underpriced and we generated a lot of profit from what we felt were conservative and low risk investments," said Chamberlin.
Both American and Canadian corporate systems are anticipating consolidation, but while many in the States will merge due to the steep losses they've taken and/or new regulations, Chamberlin said several centrals in Canada are simply looking for more operational efficiencies. Central 1 itself is the result of a 2008 merger between Credit Union Central of British Columbia and Credit Union Central of Ontario.
"We're quite confident looking forward," Chamberlin said. "We think the credit union system is well positioned to see strong growth over the next few years and there is a lot of opportunities for us and the services we provide CUs."
