WASHINGTON - These current market should be golden opportunity for credit unions, but one expert suggests it could be some time before CUs reap the rewards for being conservative, safe and sound during a time of crisis.
"It should be the case (that this is a real opportunity for credit unions) because I think traditional banks and credit unions with a history of safety and soundness and conservativism are often as more trustworthy, and this is as much a crisis of trust as anything else," said Mary Beth Sullivan, partner in Capital Performance Group. "But I'm not sure it will be, at least in the short term. There's a significant risk that our economy will deteriorate further and we will have a severe recessionary period, and to the extent that happens, people will be unwilling to take on a higher debt load, and credit unions make money off of loans."
But over the long term, Sullivan said she does expect to see credit unions strengthen their position in the retail space "Communicate with [members] continuously and directly about what's happening and what they can be doing to strengthen their own positions," she advised. "Clear up deposit insurance for them. Get out in front to communicate with your (members] and tell them, 'If you're concerned, come in to see us.'"
And it may come as a relief to credit unions that one of their growing competitors could end up being painted with the same dirty brush being applied to the investment banking industry: online-only banks. "This could be a real hit to some of the online banks," Sullivan observed. "Right now safety and soundness, security and trust are the big issues, and some 'cyber' bank may not have that same perception of solidity and trust."
Sullivan's Tips & Strategies
* Pricing for deposits will continue to be extremely aggressive, and lending pricing won't change, either.
* Try to do more business with existing members by bundling products and services and offering price breaks for doing more business with you.
* You may be able to afford to be less aggressive when pricing checking accounts and even Money Market Accounts, but not on CDs.
* Wells Fargo and Citi are scaling back branches and everyone is going into "no growth mode" right now, and so, probably, should CUs. "Hunker down and save your money for the next year or so.
* But watch for bargains. "Real estate may be a bargain, so if you see a bargain, and you've got the capital, go for it, but be prepared for a longer wait to profit off it. You are not going to see 12-month paybacks on new branches right now."(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
