Discovery: Time To Adjust To New Normal
MADISON, Wis. – Credit unions can build a long-term, sustainable business model by adjusting to the “new normal,” according to one person.
John Lass, SVP-strategy and business development with CUNA Mutual Group, said during the online Discovery Conference hosted by the company that challenges to sustainability are plentiful and that in order to see the bigger picture, one first needs to look at macro-economic trends, particularly savings rates, household debt and interest rates.
Lass recommended credit unions look to the DuPont Sustainable Growth Model – a framework to measure and break down return on equity – as a plan of attack moving forward. “This sustainable growth model can help credit unions plan for growth, despite the head winds they face from the recession, loan losses, NCUA assessments and regulatory caps. This model can also help you understand changes to make your business grow faster.”
Lass cited “six levers credit unions can pull” to manage their business. The two primary revenue levers are spread and fee income. The two primary expense levers are loan loss and operating income, and then there are the asset turnover (asset utilization) and leverage (inverse of capital ratio) levers.
“The trick is to make those levers work in a harmonious fashion. You can’t manage just one lever; all of them must be managed. What credit unions need to ask is what variables do you have the most control over? Two of those levers might be operating expense and fee income.”