Lending In Free Fall At CUs

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MADISON, Wis. – Lending at credit unions declined again in January, by 0.7%, falling for the fourth straight month, as consumers continue efforts to shed debt, according to CUNA.

Lending declined across the board in January, with every category showing a drop off: adjustable rate mortgages, fixed-rate mortgages, new and used auto, credit card, home equity and unsecured personal loans, according to CUNA. The slow start to the new year follows a decline in lending of 1.4% for 2010, the worst loan performance in three decades, according to CUNA.

Mike Schenk, senior economist for CUNA, said credit unions can expect sluggish loan demand for the coming months as consumers continue to de-leverage from historic debt loads. The household debt ratio is down from historic highs of around 1.25% of household income in 2008 to around 1.10%, but still has more to go before consumers are comfortable, he maintains.

The low demand will be even more pronounced during the next few months, which are typically a slow time for credit union lending, said Schenk. “People still have a lot of debt and are still worried about the debt they have, and they are continuing to pay it down,” he said.

But he said he expects lending to pick up in the second quarter and the CUNA economics staff is predicting loan growth of as much as 4% for the year.

The same trend has hit banks even more, said Schenk, noting the combination of household de-leveraging and efforts to trim bad-performing loan portfolios among banks.

Savings also declined, a troubling dual hit to credit unions, with share balances falling by 0.2% in January. Savings grew by 4.49% growth for 2010, less than half the 10.33% growth in 2009 and the lowest since 2006.

 

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