Planning Through The Year 2025

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WASHINGTON-A huge, long-term planning issue facing credit unions is how to make up for a lack of strong loan demand over the next 15 years.

CUNA Editorial Director Steve Rodgers, who produces the trade organization's Environmental Scan, told Credit Union Journal that CUs must examine strategies to address slow loan growth a priority. "(CUNA Chief Economist) Bill Hampel refers to the deleveraging of the household market. He says households have been taking on debt for the past 20 years and he anticipates it will take 15 more years for households to pay off some of that debt and get their balance sheets back in line," Rodgers. "So the question is: 'How do credit unions serve their members in ways other than meeting loan demand?' It will be a challenge."

Fortunately, the yield curve is expected to be fairly steep during the next few years, which will make lending more profitable, but won't do much to cover NCUA assessments that are eating up already "razor-thin" earnings. "Credit unions will have to look for other income sources," Rodgers said. "They will have to turn to fee income in one form or another, as distasteful as that sounds, because they are running out of options. They can't cut much more in expenses."

Credit unions also have to plan for additional expenses to cope with increased regulation and compliance, which may likely mean additional staff. With passage of financial reform, Rodgers predicted a "steady stream" of regs coming out of Washington in the next two years.

"It is kind of gloomy picture," Rodgers conceded. "But on the bright side, credit unions need to conduct more market research to figure out where the opportunities lie within their fields of membership. For some it might be business lending, and for others it could be serving Hispanics or providing services to younger members. It will be different for each credit union."

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