LAS VEGAS – ROA, the time-honored yardstick for credit union success, should be pushed aside for a new acronym just one vowel different – ROE, or “Return on Equity.”
That was the message from Peter Duffy and Lee Butke during separate educational sessions at the National Directors’ Convention here Thursday. Duffy, an associate director at investment bank Sandler O’Neill, said ROE, calculated by dividing income by capital, is “one of the best measurements to tell which company is growing more effectively by using capital. ROE makes a credit union, or any company, consider the sources and uses of capital. In a commodity business, growth is Job One,” Duffy added.
Butke, CEO of Columbus, Ohio-based Corporate One FCU, noted Duffy had raised the topic of ROE earlier in the day. “We didn’t compare notes before the conference,” Butke quipped. According to Butke, ROE measures how much is earned on the capital a CU’s members have given it to create value. “Why is this important? Because credit unions are overcapitalized based on common sense standards. Members have a more valuable institution in the end as ROE improves.”
Look for more coverage of the National Directors’ Convention in upcoming print issues of The Credit Union Journal.
