CU Confidence Index Plunges With Growing Corporate Bailout

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DALLAS – The confidence level among credit union CEOs sank back to new lows last quarter, weighed down by new concerns about the soaring cost of the corporate credit union bailout and losses at the National CU Share Insurance Fund, according to Southwest Corporate FCU’s CEO Confidence Index posted yesterday for the just-completed third quarter.

The overall index plummeted all the way to 10.97 for the third quarter, down from 20.73 at mid year, and the lowest since it was just 7.90 in the first quarter of 2009 – in the middle of the financial crisis.

Brian Turner, director of Southwest Corporate Investment Services' advisory service, said the third quarter findings mirror the overall sentiment felt by consumers. “CEOs apparently remained quite concerned about their members in light of a continued weak employment climate and falling household wealth due to stagnant wages and volatile home prices. This is easily reflected in the ‘Members Financial Condition’ chart,” he noted. “They apparently have recovered from their post-traumatic stress having successfully navigated through economic turmoil, corporate stabilization, falling loan demand and threats to capital formation.”

The third quarter survey covered the weeks after NCUA announced a $1.1 billion charge for the corporate credit union bailout, then a $933 million charge to replenish the National CU Share Insurance Fund, then the failure of three more corporates, including Southwest, which will add billions of dollars to the cost of the credit union-financed corporate bailout.

The CEOs’ outlook for the short-term condition of their credit union was very dim, reaching a new low of just 19.

Their outlook for their members’ financial condition was dreary too, falling to a new low of negative 2, which was the first time since the first quarter of 2009 it was below zero.

The outlook varied by region, but was lowest in the West with a negative 30 reading. CEOs in the Mid-Atlantic states had a negative 25 outlook and those in the Southeast a negative 5.6. Ironically, those in the Southwest, Southwest Corporate’s core territory, it was a positive 6, even as the failed corporate was about to be taken over by NCUA. CEOs in the Midwest registered a 4.17 on the confidence level.

The CEOs continued to predict low loan demand, near zero, and moderate share/deposit growth.

CEOs, according to Southwest’s Turner, aren't expecting a significant uptick in consumer loan demand, nor should they, until material improvement in employment and economic growth is seen. “This is a function of modest consumer spending and most deferring big ticket purchases such as cars, homes or appliances until they see evidence of improvement, especially in the nature of their own jobs. Until that time, share growth will continue to exceed loan growth,” he added.

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