SCOTTSDALE, Ariz.-One person has some advice that many credit unions haven't heard in awhile: Lending should pick up in 2012, meaning adequate deposits must be on hand to keep pace.
Predicting an uptick in CU lending, Bill McGuire, president of McGuire Performance Solutions (MPS), said as credit unions have seen a large deposit inflow in recent years, that same money could go back out once the economy improves and rates begin to rise. "The challenge on the ALM side is if you are going to be making more loans you have to maintain your lowest-cost base of deposits, and that will require focusing the value proposition on the deposit side."
McGuire recommended focusing on the "non-rate component" of the deposit value proposition-service, convenience, and all the products the credit union has. "Give members a sense of being well served and because of that they will take a lower rate on shares and share drafts. Members will look past rate, not 100%, but they will look past it. So you will end up with a lower cost of funds, more stable money supply, and a longer-life supply of funds. The credit union won't have to buy five-year CDs to fund car loans."
According to McGuire, loans will grow for credit unions in 2012 because the economy is slowly improving and members' balance sheets are in much better shape than two years ago. "But on the other side underwriting will be tight. And members will be required to have more skin in the game, such as large down payments. I call it old-school banking."
McGuire added that the best way to attract loans is to market the CU value proposition-member owned, a better place to bank-than hawking rate. "That, in the end, will attract more business your way."
