NEW YORK — Following a major bailout and the seizure of two major corporate credit unions, the unanswered question remains: what does the future hold for corporate CUs?
The very role of corporates is being examined as part of an Advanced Notice of Proposed Rulemaking from NCUA, for which hundreds of comment letters were sent. Pete Duffy, associate director of Sandler O'Neill & Partners, is among those who believes a major overhaul to the system is likely.
"Consolidating the number of corporates probably plays a pretty big role for consideration [by NCUA]," he said.
All Eyes on the Corporates
Corporate credit union executives are well aware that all eyes are on them, noted former NCUA chairman Dennis Dollar. Dollar, now a principal partner at Birmingham, Ala.-based Dollar Associates, said corporate management must look at themselves and at their competitors to figure out the best way to go forward once NCUA issues its final rule.
"I think they have to be even more strategic in determining whether they can continue to meet their credit union member needs under the new structure, or whether some kind of merger would be better," he said.
Not everyone is forecasting widespread mergers as likely among corporate credit unions. Ron Nice, CEO of Kremmling, Colo.-based Nice Enterprises, said the failures of U.S. Central and WesCorp will have very little impact on the prospect of corporate mergers.
"Because the corporate business is one of scale, merging to gain scale for the benefit of their members is always on the minds of corporate CEOs and boards and a real strategic option - but an option based as much on people, personalities and plans as it is on simple business case," he explained.
Nice, who heads up a private firm that helps financial institutions in the process of merging, hedged himself by pointing out the many variables remain going forward. Merger decisions will be based on the impact new regulations have on the corporate system as well as how natural-person credit unions react to both the current crisis and the response to the crisis over the long haul.
One development Nice does not expect: mega-mergers among big corporates. "[Merger] is definitely an option that will be adopted by several corporates, continuing the longer-term trend of corporate consolidation," he said. "Based on NCUA's recent action, we actually may see more 'mid-size' mergers, staying away from mergers into very large corporates."
