Certainties, Uncertainties In Future For Corporates

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LAS VEGAS – Moving forward, corporates will need to focus on two things: effectiveness and efficiency. Less certain is what is to become of corporates’ “toxic assets.”

That’s the view of Brad Miller, CEO of Southeast Corporate FCU in Tallahassee, Fla., and the former president of the Association of Corporate Credit Unions for the past four years. Miller offered his insights during the 1 Credit Union Conference hosted by CUNA and WOCCU here.

“I think there are a lot of costs we can stream out of the system. We really do have to be at a point where our fee income covers operating expenses; clearly can’t rely on the investment side of the balance sheet…But if we can still generate maybe 30 points of spread income, too, that allows us to basically pay 15 BPs more than what you’re getting from any corporate today [with 15 BPs going to retained earnings].”

Miller believes the pending NCUA corporate rule will be close to the proposed rule and that the overall landscape will “dramatically shift.”

The big unanswered question remains what is to become of the “legacy” or “toxic” assets on corporate balance sheets. “If NCUA manages these assets, and they are going to come to you for funding, you may be left wondering how do I allocate my capital? Do I invest in that pool? Or do I recapitalize my corporate?”

CUNA’s Mary Dunn said the trade group expects the final corporate rule to be issued with NCUA’s Sept. 16 board meeting.

 

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