LAS VEGAS -
That's unlikely, one analyst is suggesting.
"I don't think we're going to hear about another hostile takeover," said Peter Duffy of Sandler O'Neill & Partners, New York, in remarks before the National Directors Conference here. "It's really very simple; hostile takeovers don't work."
The real issue, said Duffy, who called the Wings/Continental fight "silly," is that it is detracting from the actual problem at hand for credit unions. Sandler O'Neill, which has been involved in credit union charter conversions in the past, was not involved with either Continental or Wings, said Duffy.
"We have issues. You take care of the member by growing it and adding more members. We are becoming insignificant and that's a problem."
Duffy urged credit unions to recognize that what hostile takeovers do in any industry is to cause both companies/institutions to "disenfranchise" the customer base, "and they both lose." He noted there has not been a hostile takeover in the banking industry in 15 years.
"One of the best things we can do going forward is travel," he recommended. "I try to get the word out that you need to travel more and try to understand what the obstacles are, put bright lights on the issue, and grow the franchise."
In a show of hands, most of the attendees raised their hands when Duffy asked how many had seen significant branch expansion and advertising in their respective markets by banks. "Banks are all over getting customers," he said.
He cited statistics showing that the top 100 mortgage originators in the U.S. make 83% of mortgages, leaving 16,000 banks and credit unions to fight over the remaining 17%. Similarly, the top 10 card issuers have 86% of the market, and the top 50 banks have 68% of deposits, he said.
"America is working through a slow, grinding through of balancing out the imbalance of supply and demand. There are more lenders than America needs. There are more manufacturers than America needs. You see the results every day," he told his audience of mostly volunteers. "Banks are adding branches at seven times the pace of credit unions. They have 10 branches per bank; the average CU has two. Consolidation is here to stay. Why did Wings do what they did? I can't speak to that. But industry forces are forcing all of us to think about where we are and where we're headed. The truth is the other guy has it a little easier, even though they pay a tax. In aggregate, credit unions of more than $100 million in assets lose 33 basis points before fees. Banks of the same size make 80 basis points before fees."
As he has in previous remarks, Duffy said the serious constraints upon the credit union business model are "not being addressed by leadership. We've got some good things going for us, but we've got to take it to the market and build the business. Your regulations have not evolved to help you compete, while the other guy's regulations have evolved, and that's affecting you."
According to Duffy, since the passage of the Credit Union Membership Access Act in 1998, credit unions have been averaging 2.5% annual growth, even though the number of potential members has risen significantly over that same time period.
