WASHINGTON-Credit Union lending improved in the second quarter, while share growth declined. But the big story may be the strength of core checking deposits, an indication credit unions are taking advantage of big banks' pricing problems resulting from the new interchange rules.
That analysis was provided by Callahan & Associates during its 2Q Trendwatch webinar, which also suggested credit unions are doing a good job building deeper member relationships and leveraging loan recapture strategies, as well.
Over the last year, many analysts have emphasized the importance of CUs taking share from banks by grabbing loans as the market struggles to grow in the current economy.
Jay Johnson, Callahan & Associates EVP, noted that CU share growth stood at 3.9 percent at the end of the second quarter, down from 5.7 percent in 2010. But Johnson pointed out that CU share growth in recent years has primarily come from CDs, and now the activity is in core deposits, such as regular shares, MMA and checking.
"The rate in the growth of checking accounts (11 percent) is actually double membership growth. What this shows is credit unions are bringing over existing members' checking business they had somewhere else. This is one of the biggest opportunities out there-taking checking business from banks that are adding fees as a result of the Durbin Amendment."
Looking at loans, credit unions have experienced four straight quarters of increasing loan outstandings, and 8 percent growth in loan originations in the first half of the year compared with 2010. What is most promising in the numbers, according to Johnson, is the growth is not being primarily driven by mortgage refinancing, as has been the case in recent years.
"This year we see growth in consumer lending, a sign that the consumer is coming back." CU consumer loans are up 10 percent in the first half of the year compared with 2010.
While credit union auto lending share moved lower in the first quarter, it picked up in the second (15.2 percent), ending a five-month decline. "Credit unions benefited from growth in new car sales and are capturing share from competitors-they are competing with the 0 percent offers," said Callahan & Associates President Chip Filson.
Filson said the Callahan data also indicated another positive sign. "The consumer has come back, and to relatively normal levels. Consumers are spending their disposable income. So for your members who are employed, the macro level data suggests spending is normalized."
Filson indicated that consumer spending of disposable income has increased almost four percentage points above the six-year low in 2008 (88.1 percent), and that consumer credit outstanding is rising (4.3 percent), just 50 basis points off the level experienced in 2008 before consumers began heavy debt deleveraging.
