New Business Model For Corporates Must Emerge
LAS VEGAS-This much is certain: Corporate credit unions will operate with a much-different business model in the near future.
Citing the conclusions of the joint CUNA/NAFCU Corporate Task Force, CUNA Chief Economist Bill Hampel noted "corporates can thrive in the future," but their emphasis will be on correspondent services, payments, clearing and settlements, and they will carry much smaller balance sheets."
The core issue, of course, is that "Corporates will have to recapitalize, and will have to cover operations from fees, not net income from the investment portfolio."
"The question going forward," noted Hampel, "is do corporates have sufficient fee income to operate. Their average fee income is 25 BPs, their average operating expense is 41BPs, creating a shortage of 16BPs. This is true regardless of asset size, although the largest corporates are closest (to closing the gap)."