DALLAS - CUNA's Chief Economist Bill Hampel is offering up these predictions for credit unions through the end of 2009:
* Faster savings and asset growth-but with less of a boost than normal during a recession. "This is because banks are paying big premiums on CDs to get funds. This should resolve itself soon, meaning deposits should pick up."
* Slower organic loan growth-but more growth than normal in a recession-"because people can't get loans elsewhere," he noted.
* "Delinquencies tend to be concentrated in states with falling home values. There will be significant increases in loan delinquencies and losses, and therefore substantial downward pressure on net income and falling net worth ratios.
* Overall loan growth for CUs will be 8% for both 2008 and 2009-about the same as the last two years. "As long as the applications are strong, there is no reason not to make loans. If we take care of these people now, they will remember credit unions in the future.
The U.S. economy is in its current crisis because of a lack of foresight and consumers' buying into the so-called wealth effect of real estate appreciation, Hampel said.
"We weren't saving during the first five years of this decade because our homes were saving for us," he declared. "There have been huge drops in home values in many markets, including Las Vegas, Los Angeles, San Diego, San Francisco, Miami and D.C. Even conservative mortgage loans are underwater in those areas."
As a result of this and other factors, he continued, consumer confidence is down. In order to get out of this mess, he believes the problem is "more of an unknown solvency than a liquidity" issue.
"Confidence has to be restored among financial institutions to do business with each other," he said. "This includes the Troubled Assets Relief Plan and direct Treasury capital infusions."
Other possibilities may include guaranteeing debt of financial institutions and/or unlimited deposit insurance, he added.
CUs will be eligible to participate in the government's $700 billion relief plan, "even though the credit union system itself does not need a bailout," Hampel said. "Of course, some credit unions in certain locations in California or Florida are having problems on their balance sheets, so it is important for credit unions to have access to these funds in case things get really bad."
