MADISON, Wis. — An annual loan growth rate of 6.7% is the highest for credit unions in 4.5 years, according to CUNA Mutual Group's latest Trends Report.
The November Credit Union Trends Report, compiled by Dave Colby, CUNA Mutual chief economist, contains industry data through September 2013. The report said the budding loan growth translates into an additional $41 billion in loans on the books.
The primary drivers of loan growth continue to be vehicle loans and first mortgages. Colby said the sources of loan growth are consistent with figures posted a year ago, but the dollar amount is up 75% on a year-over-year basis and 83% year-to-date through September.
When looking at factors impacting future loan growth, Colby expects stronger member demand and greatly reduced financing subsidies from manufacturers as positives. But the end of the mortgage refinance boom, re-emerging credit card competition, and loan sales due to interest rate risk management, will restrain some growth potential.
"On balance, our forecast shows annual growth of 6.2% in 2013 and annual gains averaging 6.5% through 2015," he predicted.
Currently, member business loans (MBL) are up just 0.9% year-over-year after averaging 9.3% during the past three calendar years. Colby said he will wait for third quarter data revisions before commenting on MBL trends.
While CU credit card portfolios are up 6.6% year-over-year and the rest of the market is down 0.2%, he believes competition is "on the rise."
CU Consumer Installment Credit Up
Through the first three quarters of 2013, credit unions added $18.5 billion to CU consumer installment credit, the Trends Report noted. This translates into a 7.6% YTD increase and an annual gain of $25.9 billion (10.9%). At $262.5 billion, CUCIC is at a new record high and the year-over-year growth rate is at its highest level in almost 13 years (October 2000).
Vehicle loan portfolio growth accounted for almost 93% of the YTD gain, with credit cards and unsecured also making positive contributions. On a year-over-year basis, CUNA Mutual said vehicle portfolio expansion equaled 76% of the gain, credit cards 10% and unsecured 9%.
With CUCIC growing 5.3 percentage points faster than the rest of the market, the credit union share of this $3 trillion lending arena improved to almost 8.7% and accounted for 15% of the total market gain. After removing the $119 billion (20%) annual increase in government student loans (GSLs) the rest of the market is expanding at just 1.4%, Colby said.
Other highlights from the November report:
The CU market finished September with an estimated 6,865 institutions. This reflects a net decline of 205 CUs YTD and 279 during the past year.
- Despite payroll related outflows, savings deposits are up 4.3% year-over-year. CUs are continuing with their strategy of offering historically low deposit yields to manage their cost-of-funds and asset growth.
- Total industry assets were down during the month, but at $1.08 trillion, are up 4.6% since September 2012.
- The nation’s CUs added 1.5 million members in the third quarter, bringing the YTD gain up a record 2.8 million. At 98.7 million, CU memberships are up 5.2 million since Bank Transfer Day. "Expect a slight pull-back by year-end as fourth quarter numbers are usually weak," Colby predicted.
- 4.8% capital growth helped boost the capital-to-asset ratio to a healthy 10.4%.
- The loan-to-share ratio reached 70%, up 161 basis points during the past year.
- The loan delinquency ratio dropped below 1% for the first time since mid-2008.
